Ayro Stock

AYRO, Inc. designs and manufactures compact, sustainable electric vehicles for closed campus mobility, low speed urban and community transport, local on-demand and last mile delivery and government use.

The company's four-wheeled purpose-built electric vehicles are geared toward commercial customers, including universities, business and medical campuses, last mile delivery services and food service providers. The company is updating its model year 2023 vehicle lineup in the support of the aforementioned markets.

Products

The company's vehicles provide the end user an environmentally friendly alternative to internal combustion engine vehicles (cars powered by gasoline or diesel oil), for light duty uses, including low-speed logistics, maintenance services, cargo services, and personal/group transport in a quiet, zero emissions vehicle with a lower total cost of ownership.

AYRO 411x

The AYRO 411x is an electric, four-wheel, compact, light-duty utility trucks sold exclusively through the company's contracted partner, Club Car, as part of a global multi-year sustainability solution development, sales and marketing agreement.

AYRO Vanish

In December 2021, the company began design and development of the Vanish, including updates to the company's supply chain evolution, the offshoring/onshoring mix, the company's manufacturing strategy and the company's annual model year refresh program. The company unveiled the first Vanish prototype in the fourth quarter of 2022. Pre-production was completed in December 2022 and the company expect to begin accepting pre-orders in the second quarter of 2023.

There will be three members of the AYRO Vanish fleet of vehicles (the 'AYRO Vanish Fleet'): The Vanish Cargo Van Box, a fully enclosed cargo box, which may be internally tailored for use; The Vanish Flatbed truck, which provides users with considerable versatility; and The Vanish Pickup truck, generally utilized for open air hauling.

Each member of the AYRO Vanish Fleet will be classified as a street legal low speed vehicle ('LSV') or non-LSV variant, defined as a four wheeled motor vehicle, other than an all-terrain vehicle, that is capable of reaching speeds of at least 20 miles per hour ('mph') but not greater than 25 mph. The AYRO Vanish Fleet is expected to have a maximum payload capacity of 1,500 pounds. The AYRO Vanish is 13 feet long and can use either a conventional 120V or 240V wall outlet or can be configured for a J1772 charger. The 'non-LSV' variant has a higher payload capacity of 1,800 pounds.

The AYRO Vanish Fleet will have an expected range of over 50 miles and an expected maximum speed of 25 mph. in line with the United States Department of Transportation regulations for LSVs and with most state statutes, which typically limit the speed of LSVs to 25 mph or 35 mph posted roads.

The company estimates that the AYRO Vanish Fleet's operating costs will be approximately 50% lower per year compared to similarly sized gas-powered trucks and vans. The vehicles are primarily sourced from North America and Europe, with vehicle final assembly and integration occurring in the company's Round Rock, Texas facility, thus ameliorating concerns regarding rising costs of trans-Pacific shipping, shipping times, import duties and quality.

Additional Models, Vehicles, Payloads and Infrastructure

The company continues to invest in expanding its existing all-electric vehicle technologies, reconfigurable cargo subsystems, onboard and web-based fleet support applications, driver support systems and applications, as well as architectural innovations that maximize subsystem commonality across the AYRO vehicle fleet. The company's product line roadmap contemplates growing its fleet of purpose-engineered vehicles and services with every passing model year, with a focus on the low-speed vehicle segment, last mile delivery of a plurality of payloads, and potential line extension into efficient, safe micro-mobility platforms.

The company is also in discussions with a key supply partner on positioning the model year 2023 Vanish for sale on the General Services Administration schedule ('GSA Schedule'). The GSA Schedule is a long-term government-wide contract with commercial companies that provides access to millions of commercial products and services at pre-negotiated prices. This would represent an increase of the total addressable market for the company and further represent a demand hedge to the cyclicality of markets addressed.

Manufacturing and Supply Chain

Manufacturing Agreement with Cenntro

In 2017, AYRO Operating partnered with Cenntro in a supply chain agreement to provide sub-assembly manufacturing services. Cenntro owns the design of the AYRO Club Car 411 and 411x ('AYRO 411 Fleet') vehicles and has granted the company an exclusive license to purchase the AYRO 411 Fleet vehicles for sale in North America.

Under the company's Manufacturing License Agreement with Cenntro (the 'Cenntro MLA'), in order for the company to maintain its exclusive territorial rights pursuant to the Cenntro MLA, the company must meet certain minimum purchase requirements.

The company imported semi-knocked-down vehicle kits from Cenntro for the AYRO 411x models comprising the company's model year 2022 lineup. The vehicle kits were received through shipping containers at the assembly facility of Karma Automotive LLC ('Karma'), the company's previous manufacturing partner in southern California, as well as at the company's customization, service and integration facility in Round Rock, Texas. The vehicles were then assembled with tailored customization requirements per order.

On May 31, 2022, the company received a letter from Cenntro purporting to terminate all agreements and contracts between the company and Cenntro. Although Cenntro's termination of the Cenntro MLA is valid, the company has determined to cease production of the AYRO 411x and focus the company's resources on the development and launch of the Vanish. The company has canceled all purchase orders and future builds with Cenntro and intend to only order replacement parts for vehicles from Cenntro in the future. The company expects to lose its exclusive license under the Cenntro MLA, in which case Cenntro could sell identical or similar products through other companies or directly to the company's customers, which could have a material adverse effect on the company's results of operations and financial condition.

The company intends for the new Vanish to utilize assemblies and products that will largely eliminate the company's dependency on Chinese imports and optimize the supply chain to rely primarily upon North American and European sources. Final assembly of the Vanish will occur in the company's Round Rock, Texas facilities.

Manufacturing Agreement with Linamar

On July 28, 2022, the company partnered with Linamar Corporation ('Linamar'), a Canadian manufacturer, in a manufacturing agreement (the 'Linamar MLA') to provide certain sub assembly and assembly parts, including the cabin frame and skate for the Vanish (collectively, the 'Products'). During the term of the Linamar MLA, Linamar has the exclusive right to supply the Products to the company, subject to certain exceptions.

The company is dependent on the Linamar MLA, and in the event of its termination the company's manufacturing operations and customer deliveries would be materially impacted.

Under the Linamar MLA, the company must commit to certain minimum purchases, to be determined by AYRO on a quarterly basis.

The company imports the Products from Linamar in Canada, and the company manufactures and assembles the Vanish at its customization, service, and integration facility in Round Rock, Texas. Over 98% of the vehicle assemblies, components, and products are from North American and European sources.

Supply Agreement with Gallery Carts

During 2020, the company entered into a supply agreement with Gallery Carts, a leading provider of food and beverage kiosks, carts, and mobile storefront solutions. Joint development efforts have led to the launch of the parties' first all-electric configurable mobile hospitality vehicle for 'on-the-go' venues across the United States. This innovative solution permits food, beverage and merchandising operators to bring goods directly to consumers.

The configurable Powered Vendor Box, in the rear of the vehicle, features long-life lithium batteries that power the preconfigured hot/cold beverage and food equipment is directly integrated with the 411x and will be directly integrated with the Vanish. The canopy doors, as well as the full vehicle, can be customized with end-user logos and graphics to enhance the brand experience. Gallery, with 40 years of experience delivering custom food kiosk solutions, has expanded into electric mobile delivery vehicles, as customers increasingly want food, beverages and merchandise delivered to where they are gathering. For example, a recent study conducted by Technomic found that a large majority of students, 77%, desired alternative mobile and to-go food options on campuses.

Gallery, a premier distributor of AYRO vehicles, has a diverse clientele throughout mobile food, beverage and merchandise distribution markets for key customer applications, such as university, corporate and government campuses, major league and amateur-level stadiums and arenas, resorts, airports and event centers. In addition to finding innovative and safe ways to deliver food and beverages to their patrons, reducing and ultimately eliminating their carbon footprint is a top priority for many of these customers.

Business Strategy

The company's business strategy are to scale up the company's operations to achieve growth; identify defined markets and use cases, which are under-served but represent sizable market opportunity sub-sets of the electric vehicle market and focus development efforts on purpose-built electric vehicles to address such markets; and invest in research and development and qualification of sensors, cameras, software and mobility services, seeking to enhance the value of using the company's electric vehicles and to derive incremental potential revenue streams for the company and the company's partner ecosystem.

Target Markets

The company's target market segment straddles the range of a converted golf cart to a small pickup truck. This 'hybrid' market allows for cannibalization of both adjacent markets by AYRO. The multipurpose applications and clean energy use of LSEVs make them popular across a wide array of industries and customers, including college and university campuses, resorts and hotels, corporate parks, hospitals, warehouses, individual consumers, last mile delivery service providers, municipalities, and the food service industry. A number of these market segments, and the company's competitive position within them, are discussed in greater detail below.

Universities. The AYRO Vanish Fleet will provide all of these benefits to university and college campuses. The company estimates that in the U.S., there are over 1,800 higher education campuses with over 10,000 students each with over 400 on-campus vehicles that are ideal targets for the AYRO Vanish Fleet as campuses transition from fossil-fueled campus fleet vehicles to LSEVs.

Food Delivery Services. Every major urban environment having a 35mph or less speed limit is a target market for the company's LSV fleet.

Last Mile Delivery Service. Last mile delivery provides retailers timelier and more convenient delivery options not offered by the main three shipping services in the U.S. (the U.S. Postal Service, FedEx, and UPS).

Municipalities. The company's LSEVs have both on and off-road capabilities, making them particularly versatile for municipalities.

On-Road and Personal Transportation. LSEVs offer a feasible and practical method of transportation, especially in urban centers. Because the company's LSEVs are street-legal, they offer city dwellers a more sustainable, cost-efficient, easily maneuverable, compact and light weight option compared to internal combustion engine vehicles. The company's LSEVs also offer a variety of specifications and equipment, meaning that consumers do not have to sacrifice comfort or convenience.

The company primarily focuses on the LSEV North American market. The company has examined various considerations with regard to the company's market impact, including cost comparisons to existing vehicles in the market, market validation and target commercial markets.

Intellectual Property

Patents

The company has the United States registrations for two design patents. Both were issued on February 11, 2020 and will expire on February 11, 2035. In addition to these issued patents, the company has numerous non-public patent applications on file with the United States Patent and Trademark Office ('USPTO').

The company has the United States applications for two design patents and two utility patents awaiting examination. Reference number 58929.11US01 was filed on March 10, 2022 for Electric Vehicle Structure. Reference number 58929.12US01 was filed on April 12, 2022 for Electric Vehicle Control Systems, Apparatus, and Methods. Reference number 58929.23US01 was filed on May 20, 2022 for Reconfigurable Vehicle Payload Architecture. Reference number 58929.25US01 was filed on June 21, 2022 for Systems and Methods for Residual Tire Track Shaping and Elimination.

Trademarks

The company has two granted trademark applications in the United States and abroad. The company registered the word 'AYRO' as United States Registration No. 88431321 on June 23, 2020. This registration was also filed in Canada, Mexico, and the European Union under the Madrid Protocol as Registration No. 1507096. The company logo was registered as United States Registration No. 88859276 on October 13, 2020. This logo was also registered in Canada, Mexico, and the European Union under the Madrid Protocol as Registration No. 1554092. The company's application for the color version of the company's Company logo was filed in the United States on October 9, 2020 as Serial No. 90245135 and is in prosecution with the USPTO.

The company has eight trademarks pending, including a logo refresh and the AYRO Valet, Vapor, and Vanish trademarks.

Government Regulations

The company's product programs are built on plug-in electric, zero emissions platforms. The company reports federal and state emissions data consistent with 10 CFR 474 and CARB requirements for Zero-Emission Vehicle certification.

Research and Development

The company's research and development expenses were $6.85 million for the year ended December 31, 2022.

Competition

The company's closest competitor in the LSEV industry is the WAEV, Inc.

History

Ayro, Inc., formerly known as AEV Technologies, Inc., was founded in 2017.