Executive Summary / Key Takeaways

• AYRO is undergoing a fundamental strategic pivot, transitioning from a legacy product and outsourced manufacturing model to an in-house, North American-sourced common core chassis platform centered around the AYRO Vanish electric utility vehicle.
• The Vanish features differentiated technology, including a modular payload system, aiming for significantly lower operating costs and higher quality compared to competitors, validated by recent design awards and a growing IP portfolio.
• Recent financial results for Q1 2025 show $0 revenue as the company paused manufacturing to re-engineer the Vanish for cost reduction, alongside significant cuts in operating expenses, resulting in a net income driven by non-cash gains.
• Despite expense controls, the company's cash position of $12.82 million as of March 31, 2025, is deemed insufficient to fund operations for the next twelve months, raising substantial doubt about its ability to continue as a going concern and highlighting an urgent need for additional capital.
• The investment thesis hinges on AYRO's ability to successfully complete the Vanish re-engineering, secure necessary funding, resume and scale production, and effectively leverage its technological advantages and multi-channel market strategy to capture market share against established and emerging competitors.

A Strategic Reinvention in the Low-Speed EV Landscape

AYRO, Inc. is not merely an electric vehicle manufacturer; it is a company in the midst of a profound strategic reinvention. Focused on environmentally conscious, minimal-footprint electric vehicles for specific commercial and institutional applications – think university campuses, last-mile delivery, resorts, and government use – AYRO has fundamentally shifted its operational and product development model. This pivot, initiated around 2022, marked a decisive move away from reliance on external manufacturing partners and a predominantly Asian supply chain towards developing in-house manufacturing capabilities in Round Rock, Texas, and establishing a new supply chain largely based in North America.

This strategic overhaul is centered on a new common core chassis platform, designed to underpin a family of vehicles. The first manifestation of this new era is the AYRO Vanish, a lightweight utility low-speed electric vehicle (LSEV). The Vanish is engineered with a lightweight architecture and adaptable bed configurations, aiming to serve both light and heavy-duty applications with zero emissions, making it suitable for both indoor and outdoor environments. It is designed to be street legal with a maximum speed of 25 mph.

A key differentiator for the Vanish and the broader platform is its technological foundation. The vehicle incorporates approximately 1,500 discrete components, with the vast majority sourced from North America. A core innovation is the new series of modular, highly reconfigurable payload systems. This system is designed to offer operators maximum flexibility, allowing for easy adaptation for different uses or even asset sharing across various time-of-day or seasonal needs. The company intends to invest resources specifically to advance these reconfigurable payload solutions.

Beyond the physical design, AYRO plans to enhance the value proposition through integrated technology. This includes investing in the qualification of sensors, cameras, software, and mobility services. The intention is to offer a web-based application alongside vehicles like the Vanish Fleet to optimize use cases, improve driver routing, user scheduling, and customer communication. Onboard sensors are planned to collect valuable data on vehicle health, location, route, payload, and environmental conditions, enabling post-hoc analysis of delivery efficiency. Management has even suggested the potential for a subscription service based on this data, potentially extending to non-AYRO vehicles, creating an incremental revenue stream.

The perceived quality and innovative design of the Vanish have already garnered external validation, receiving prominent design awards from Frost & Sullivan and Red Dot in early 2023. Furthermore, AYRO is actively building an intellectual property portfolio of both design and utility patents, which management believes will create a sustainable advantage over peers in the LSEV space and add enterprise value. This IP is intended to act as a moat, protecting the company's unique solutions which they describe as neither trivial nor obvious.

In the competitive landscape, AYRO positions the Vanish as a fundamentally higher-quality vehicle compared to what it terms "commodity golf cart standards" that currently dominate the low-speed utility space. Management highlights the difference in material quality, interior roominess, payload capacity, and overall finish. They claim the Vanish offers technological and ergonomic advantages, unparalleled payload flexibility, and significant total cost of ownership benefits over status quo products. Quantifiable benefits cited include a target of 50% lower annual operating costs compared to gas-powered counterparts. The vehicle is also designed to meet California CARB requirements for zero emissions, appealing to sustainability-focused customers.

Compared to publicly traded competitors like Arcimoto (FUV), Electrameccanica Vehicles (SOLO), and Lordstown Motors (RIDE), AYRO's focus on a robust, four-wheeled utility platform for institutional and commercial fleets differentiates it from FUV's three-wheeled urban mobility focus or SOLO's compact urban vehicles. While RIDE targets heavier-duty trucks, AYRO's Vanish competes in the lighter utility segment. AYRO's emphasis on North American sourcing and in-house manufacturing aims to improve supply chain control and margins compared to competitors potentially reliant on overseas production. However, AYRO acknowledges potential disadvantages in scale compared to larger players like RIDE and potentially slower innovation cycles compared to more agile competitors like FUV. The strategic intent is for the Vanish's quality, efficiency, and modularity, backed by IP, to provide a competitive edge despite scale differences.

Operational Transition and Recent Financial Performance

The transition to this new strategic direction has been a multi-year effort involving significant investment in R&D, manufacturing setup, and supply chain development. After completing internal testing and homologation certification in 2023, AYRO initiated low-rate initial production (LRIP) of the Vanish. The first revenue from the Vanish was recognized in the third quarter of 2023, marking a key milestone after the planned sunsetting of the legacy Club Car Current product, which resulted in minimal revenue in the first half of 2023. Early LRIP units were strategically placed with potential customers, distributors, and partners to generate sales leverage for 2024.

However, the path to scaling production has encountered challenges. The financial results for the three months ended March 31, 2025, reflect a significant operational pause. Revenue for the quarter was $0, a 100% decrease from $58,351 in the same period of 2024. This was primarily due to a temporary pause in manufacturing activities as the company focuses on re-engineering the Vanish. This re-engineering effort, led by Gilbert Villarreal, President of Ayro Operating Company, Inc., is specifically aimed at lowering the bill of materials (BOM) and overall manufacturing expenses, with the ultimate goal of reducing the manufacturer's suggested retail price (MSRP) of the Vanish.

Operating expenses saw substantial reductions in Q1 2025 compared to the prior year period, largely attributable to cost reduction initiatives implemented in late 2024 and early 2025, including headcount reductions as part of an internal restructuring. Total operating expenses decreased by $2.12 million, from $4.09 million in Q1 2024 to $1.97 million in Q1 2025. Research and development expense decreased by 60% to $307,730, although management expects R&D to increase in absolute dollars as the Vanish re-engineering continues. Sales and marketing expense was reduced to $0 as efforts were suspended pending the outcome of the re-engineering. General and administrative expenses decreased by 46% to $1.67 million, driven by lower personnel costs, depreciation, consulting fees, and other overheads.

Despite the $0 revenue, AYRO reported net income of $845,011 for Q1 2025, a significant improvement from a net loss of $3.64 million in Q1 2024. However, this net income was primarily a result of non-cash gains from changes in the fair value of the derivative liability ($1.53 million gain) and warrant liability ($1.08 million gain), influenced by factors including the decrease in the company's stock price and preferred stock redemptions. The gross loss was $0 in Q1 2025, compared to $1.12 million in Q1 2024, reflecting the absence of manufacturing and associated costs.

Liquidity and the Going Concern Challenge

The operational pause and ongoing investment in re-engineering have had a significant impact on the company's financial health. As of March 31, 2025, AYRO held $12.82 million in cash and cash equivalents, $109,215 in restricted cash, and $2.48 million in marketable securities. Net cash used in operating activities for the three months ended March 31, 2025, was $1.48 million, an improvement from $4.68 million used in the same period of 2024, primarily due to the reduced net loss (excluding non-cash items) and zero cash used in inventory procurement during the manufacturing pause. However, overall working capital decreased by $8.51 million during the quarter, partly due to payments related to Series H-7.00 Preferred Stock redemptions, which utilized $3.55 million in cash from financing activities.

Based on its existing cash position as of March 31, 2025, management has concluded that the funds will not be sufficient to cover operations for at least the next twelve months. This assessment raises substantial doubt about the company's ability to continue as a going concern for that period. The financial statements have been prepared on a going concern basis and do not include adjustments that might be necessary if the company is unable to continue.

To secure its future, AYRO will need to raise additional equity or debt capital. There is no assurance that the company will be successful in doing so. Failure to raise sufficient capital could necessitate delaying, reducing, or eliminating research and development programs or other operations, selling assets, or merging with another entity. This critical need for funding is the most significant immediate challenge facing the company.

Adding complexity to the financial structure is the Series H-7.00 Convertible Preferred Stock, which has redemption obligations payable in cash or shares (subject to limitations and potential cash premiums). The conversion price and warrant exercise price for this series were adjusted to $0.48 per share in April 2025 due to anti-dilution provisions triggered by stock option issuances. The preferred stock also includes triggering events that could mandate cash redemption at a premium, posing a potential liquidity risk.

Furthermore, the company's internal controls over financial reporting were deemed ineffective as of March 31, 2025, due to material weaknesses related to documentation, control activities, and segregation of duties, stemming from limited personnel and resources. Management is implementing remediation plans, including engaging external consultants, but this remains a key operational risk.

Outlook and the Path Forward

AYRO's outlook is heavily contingent on the successful completion of the Vanish re-engineering effort and the ability to secure necessary funding. The pause in manufacturing is a calculated risk, aiming to reduce the vehicle's cost structure and improve its market competitiveness and profitability potential. Management expects to recognize revenue upon the successful completion of this re-engineering and is exploring strategic partnerships to support scaling production and sales.

While earlier guidance from late 2023 indicated an expectation to reach breakeven during the second half of 2024, this target is now implicitly contingent on the timeline and success of the re-engineering and subsequent production ramp. The earlier plan to transition to full production targeting nine vehicles per day post-LRIP remains a stated goal for scaling, with potential for a second shift or utilizing an OEM partner for surge demand, but these plans are currently on hold pending the re-engineering outcome.

Beyond the Vanish, the company intends to resume development of its next vehicles, the Valet people mover and the Vapor personal transport vehicle, in 2024. The Valet, being a modification of the Vanish chassis, is expected to be relatively easier and lower cost to launch, with a debut anticipated in January 2024 (as stated in late 2023). Leveraging the common core chassis and shared components across the product line is expected to substantially shorten the time to market and reduce development costs for these subsequent vehicles.

In a recent strategic move, AYRO announced the launch of a new robotics division in February 2025, focused on AI-driven, automated manufacturing of EVs and accompanying accessories. This initiative, highlighted by a first purchase order for EV chargers requiring robotic assembly, suggests a long-term vision for manufacturing efficiency and quality control, potentially contributing to the goal of lowering production costs.

The company continues to pursue its multi-channel market strategy, building its dealer network (having signed many new dealers in 2023 and seeing strong interest), engaging with fleet customers and upfitters, and establishing a direct-to-consumer channel (with an e-commerce site and Florida location planned for launch in Q3 2023). The strategic placement of initial Vanish units is intended to translate into purchase orders once production resumes.

Key risks to the outlook include the successful execution of the Vanish re-engineering, the ability to raise sufficient capital to overcome the going concern issue, maintaining Nasdaq listing compliance (with a deadline in July 2025), and effectively addressing the identified material weaknesses in internal controls. Geopolitical and macroeconomic factors also remain potential headwinds.

Conclusion

AYRO is at a critical juncture, having made a significant strategic pivot to control its destiny through in-house development and manufacturing of a differentiated LSEV platform. The AYRO Vanish, with its modular design, focus on quality, and potential for lower operating costs, represents the core of this new strategy, supported by a growing IP portfolio and plans for integrated technology. However, the recent operational pause for re-engineering, reflected in the $0 revenue in Q1 2025, underscores the challenges of this transition phase.

The most pressing issue is the company's liquidity position, which raises substantial doubt about its ability to continue operations without securing additional capital. The investment thesis for AYRO is currently a high-stakes bet on management's ability to successfully navigate this period of re-engineering and financial constraint. Success hinges on securing funding, completing the cost-reduction efforts for the Vanish, resuming and scaling production, and effectively translating the vehicle's claimed technological and quality advantages into meaningful sales traction against competitors. Investors should closely monitor progress on capital raising, the timeline and outcome of the Vanish re-engineering, and any signs of renewed commercial momentum.