UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

☒         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

March 31, 2022

or

☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                  ______ to                 ______

 

Commission file number 1-34761

 

autoweb.jpg

auto_10qimg1.jpg

AutoWeb, Inc.

(Exact name of registrant as specified in its charter)

 

AutoWeb, Inc.Delaware

 (Exact name of registrant as specified in its charter)

Delaware

33-0711569

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

400 North Ashley Drive, Suite 300

Tampa, Florida 33602

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code:(949) 225-4500

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

AUTO

The Nasdaq Capital Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.             Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).             Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.           ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).             Yes  ☐    No  ☒

 

As of August 3, 2021,May 13, 2022, there were 13,465,87114,051,149 shares of the Registrant’s Common Stock, $0.001 par value, outstanding.

 



 

 

INDEX

 

 

 

Page

PART I. FINANCIAL INFORMATIONPage

 

ITEM 1.PART I. FINANCIAL INFORMATION

Financial Statements

 3

 

 

ITEM 1.

Financial Statements

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2021,March 31, 2022, and December 31, 20202021

3

1

 

Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30,March 31, 2022, and 2021 and 2020

4

2

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30,March 31, 2022, and 2021 and 2020

5

3

 

Unaudited Condensed Consolidated Statements of Cash Flows for the SixThree Months Ended June 30,March 31, 2022, and 2021 and 2020

7

4

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

5

 

 

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

17

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

27

ITEM 4.

Controls and Procedures23

27

PART II. OTHER INFORMATION

ITEM 1A.

Risk Factors

28

 

 

ITEM 6.4.

ExhibitsControls and Procedures

30

23

 

 

 

PART II. OTHER INFORMATION

ITEM 1A.

Risk Factors

24

ITEM 6.

Exhibits

25

 

Signatures

31

26

 
2

 

 

PART


PART I. FINANCIAL INFORMATION

 

Item 1.Financial Statements

 

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

 

 

June 30,

2021

 

 

December 31,

2020

 

 

March 31,

2022

  

December 31,

2021

 

Assets

Assets

     

(Audited)

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$10,849

 

$10,803

 

 $3,792  $7,315 

Restricted cash

 

4,309

 

4,304

 

 4,317  4,314 

Accounts receivable, net of allowances for bad debts and customer credits of $326 and $406 at June 30, 2021, and December 31, 2020, respectively

 

14,860

 

13,955

 

Accounts receivable, net of allowances for bad debts and customer credits of $49 and $101 at March 31, 2022 and December 31, 2021, respectively

 10,881  11,433 

Vehicle inventory

 480  1,076 

Prepaid expenses and other current assets

 

 

1,400

 

 

 

847

 

  631   998 

Total current assets

 

31,418

 

29,909

 

 20,101  25,136 

Property and equipment, net

 

3,537

 

2,953

 

 3,900  3,853 

Right-of-use assets

 

2,439

 

2,892

 

 1,822  1,993 

Intangible assets, net

 

3,929

 

4,733

 

 3,340  3,634 

Other assets

 

 

508

 

 

 

642

 

  474   516 

Total assets

 

$41,831

 

 

$41,129

 

 $29,637  $35,132 

Liabilities and Stockholders’ Equity

Liabilities and Stockholders Equity

        

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$8,459

 

$7,233

 

 $7,249  $7,705 

Borrowings under revolving credit facility

 

10,155

 

10,185

 

 9,108  10,001 

Current portion of the PPP Loan

 

0

 

1,384

 

Accrued employee-related benefits

 

2,025

 

2,123

 

 1,517  1,782 

Other accrued expenses and other current liabilities

 

945

 

538

 

 717  610 

Current portion of lease liabilities

 

951

 

1,015

 

 729  781 

Current portion of financing debt

 

 

64

 

 

 

65

 

  48   64 

Total current liabilities

 

22,599

 

22,543

 

 19,368  20,943 

Lease liabilities, net of current portion

 

1,763

 

2,191

 

  1,303   1,432 

Financing debt, net of current portion

 

 

28

 

 

 

60

 

Total liabilities

 

24,390

 

24,794

 

 20,671  22,375 

Commitments and contingencies (Note 10)

 

 

 

 

 

Commitments and contingencies (Note 9)

      

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value, 11,445,187 shares authorized,

 

 

 

 

 

Series A Preferred Stock, 2,000,000 shares authorized, none- issued and outstanding at June 30, 2021, and December 31, 2020

 

0

 

0

 

Common stock, $0.001 par value; 55,000,000 shares authorized, 13,465,871 and 13,169,204 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

13

 

13

 

Preferred stock, $0.001 par value, 11,445,187 shares authorized

 

Series A Preferred stock, 2,000,000 shares authorized, none issued and outstanding at March 31, 2022 and December 31, 2021, respectively.

 0  0 

Common stock, $0.001 par value; 55,000,000 shares authorized, 14,051,149 and 13,489,482 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 14  13 

Additional paid-in capital

 

367,187

 

366,087

 

 368,683  368,168 

Accumulated deficit

 

 

(349,759)

 

 

(349,765)  (359,731)  (355,424)

Total stockholders’ equity

 

 

17,441

 

 

 

16,335

 

  8,966   12,757 

Total liabilities and stockholders’ equity

 

$41,831

 

 

$41,129

 

 $29,637  $35,132 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3

Table of Contents
-1-

 

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (Amounts(Amounts in thousands, except per-share data)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

  

2021

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Lead generation

 

$15,225

 

$14,263

 

$29,411

 

$32,723

 

 $10,576  $14,186 

Digital advertising

 

 

3,511

 

 

 

2,770

 

 

 

7,205

 

 

 

8,782

 

 4,137  3,694 

Used vehicle sales

  4,351   0 

Total revenues

 

18,736

 

17,033

 

36,616

 

41,505

 

 19,064  17,880 

Cost of revenues

 

 

12,179

 

 

 

10,993

 

 

 

24,250

 

 

 

30,108

 

Cost of revenues – lead generation and digital advertising

 10,954  12,071 

Cost of revenues – used vehicles

  4,206   0 

Gross profit

 

6,557

 

6,040

 

12,366

 

11,397

 

 3,904  5,809 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

2,103

 

2,026

 

4,303

 

4,158

 

 2,650  2,200 

Technology support

 

1,271

 

1,786

 

2,638

 

3,643

 

 1,533  1,367 

General and administrative

 

3,089

 

2,901

 

6,221

 

6,844

 

 3,562  3,132 

Depreciation and amortization

 

 

196

 

 

 

559

 

 

 

400

 

 

 

1,281

 

  65   204 

Total operating expenses

 

 

6,659

 

 

 

7,272

 

 

 

13,562

 

 

 

15,926

 

 7,810  6,903 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(102)

 

(1,232)

 

(1,196)

 

(4,529) (3,906) (1,094)

Interest and other (expense) income:

 

 

 

 

 

 

 

 

 

 

Interest (expense) income, net

 

(248)

 

(204)

 

(498)

 

(1,036)

Other income

 

 

46

 

 

 

62

 

 

 

1,700

 

 

 

130

 

Interest expense, net

 (266) (251)

Other income (expense)

  (9)  1,655 

Income (loss) before income tax provision

 

(304)

 

(1,374)

 

6

 

(5,435) (4,181) 310 

Income tax provision

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

  126   0 

Net income (loss)

 

$(304)

 

$(1,374)

 

$6

 

 

$(5,435) $(4,307) $310 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share

 

$(0.02)

 

$(0.10)

 

$0.00

 

 

$(0.41) $(0.32) $0.02 

 

 

 

 

 

 

 

 

 

 

Diluted income (loss) per common share

 

$(0.02)

 

$(0.10)

 

$0.00

 

 

$(0.41) $(0.32) $0.02 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4

Table of Contents
-2-

 

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’STOCKHOLDERS EQUITY

(Amounts in thousands, except share data)

 

Three Months Ended June 30, 2020

 

 

Common Stock

 

 

Preferred Stock

 

 

Additional

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Amount

 

 

Number of

Shares

 

 

Amount

 

 

Paid-in-

Capital

 

 

 

Accumulated Deficit

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

 

 

13,146,831

 

 

$13

 

 

 

0

 

 

$0

 

 

$364,537

 

 

$(347,006)

 

$17,544

 

Share-based compensation

 

 

 

 

 

0

 

 

 

 

 

 

0

 

 

 

519

 

 

 

0

 

 

 

519

 

Net loss

 

 

 

 

 

0

 

 

 

 

 

 

0

 

 

 

0

 

 

 

(1,374) )

 

 

(1,374)

Balance at June 30, 2020

 

 

13,146,831

 

 

$13

 

 

 

 

 

$0

 

 

$365,056

 

 

$(348,380) )

 

$16,689

 

Three Months Ended March 31, 2022

 
  

Common Stock

  

Preferred Stock

  

Additional

  

 

     
  Number of     Number of     Paid-In-  Accumulated    
  

Shares

  

Amount

  

Shares

  

Amount

  Capital  Deficit  

Total

 
                             

Balance at December 31, 2021

  13,489,482  $13   0  $0  $368,168  $(355,424) $12,757 

Share-based compensation

     0      0   515   0   515 

Issuance of restricted stock

  575,000   1   0   0   0   0   1 

Cancellation of restricted stock

  (13,333)     0             

Net loss

     0      0   0   (4,307)  (4,307)

Balance at March 31, 2022

  14,051,149  $14   0  $0  $368,683  $(359,731) $8,966 

 

Three Months Ended June 30, 2021

 

 

Common Stock

 

 

Preferred Stock

 

 

Additional

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Amount

 

 

Number of

Shares

 

 

Amount

 

 

Paid-in-

Capital

 

 

 

Accumulated Deficit

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

13,443,909

 

 

$13

 

 

 

 

 

$0

 

 

$366,712

 

 

$(349,455)

 

$17,270

 

Share-based compensation

 

 

 

 

 

0

 

 

 

 

 

 

0

 

 

 

425

 

 

 

0

 

 

 

425

 

Issuance of common stock upon exercise of stock options

 

 

21,962

 

 

 

0

 

 

 

 

 

 

0

 

 

 

50

 

 

 

0

 

 

 

50

 

Net loss

 

 

 

 

 

0

 

 

 

 

 

 

0

 

 

 

0

 

 

 

(304)

 

 

(304)

Balance at June 30, 2021

 

 

13,465,871

 

 

$13

 

 

 

 

 

$0

 

 

$367,187

 

 

$(349,759)

 

$17,441

 

5

Table of Contents

Three Months Ended March 31, 2021

 
  

Common Stock

  

Preferred Stock

  

Additional

         
  Number of      Number of      Paid-In-  Accumulated     
  

Shares

  

Amount

  

Shares

  

Amount

  Capital  Deficit  

Total

 
                             

Balance at December 31, 2020

  13,169,204  $13   0  $0  $366,087  $(349,765) $16,335 

Share-based compensation

     0      0   499   0   499 

Issuance of common stock upon exercise of stock options

  54,705   0   0   0   126   0   126 

Issuance of restricted stock

  220,000      0             

Net income

     0      0   0   310   310 

Balance at March 31, 2021

  13,443,909  $13   0  $0  $366,712  $(349,455) $17,270 

 

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY CONTINUED

(Amounts in thousands, except share data)

Six Months Ended June 30, 2020

 

 

Common Stock

 

 

Preferred Stock

 

 

Additional

 

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Amount

 

 

Number of

Shares

 

 

Amount

 

 

Paid-in-

Capital

 

 

Accumulated Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

13,146,831

 

 

$13

 

 

 

 

 

$0

 

 

$364,028

 

 

$(342,945)

 

$21,096

 

Share-based compensation

 

 

 

 

 

0

 

 

 

 

 

 

0

 

 

 

1,028

 

 

 

0

 

 

 

1,028

 

Net loss

 

 

 

 

 

0

 

 

 

 

 

 

0

 

 

 

0

 

 

 

(5,435)

 

 

(5,435)

Balance at June 30, 2020

 

 

13,146,831

 

 

$13

 

 

 

 

 

$0

 

 

$365,056

 

 

$(348,380)

 

$16,689

 

Six Months Ended June 30, 2021

 

 

Common Stock

 

 

Preferred Stock

 

 

Additional

 

 

 

 

 

 

 

 

Number of

Shares

 

 

Amount

 

 

Number of

Shares

 

 

Amount

 

 

Paid-in-

Capital

 

 

Accumulated Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

13,169,204

 

 

$13

 

 

 

 

 

$0

 

 

$366,087

 

 

$(349,765)

 

$16,335

 

Share-based compensation

 

 

 

 

 

0

 

 

 

 

 

 

0

 

 

 

924

 

 

 

0

 

 

 

924

 

Issuance of common stock upon exercise of stock options

 

 

76,667

 

 

 

0

 

 

 

 

 

 

0

 

 

 

176

 

 

 

0

 

 

 

176

 

Issuance of restricted stock

 

 

220,000

 

 

 

0

 

 

 

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

Net income

 

 

 

 

 

0

 

 

 

 

 

 

0

 

 

 

0

 

 

 

6

 

 

 

6

 

Balance at June 30, 2021

 

 

13,465,871

 

 

$13

 

 

 

 

 

 

0

 

 

$367,187

 

 

$(349,759)

 

$17,441

 

6

Table of Contents

 AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$6

 

 

$(5,435)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,266

 

 

 

2,278

 

Provision for bad debts

 

 

(191)

 

 

94

 

Provision for customer credits

 

 

200

 

 

 

33

 

Forgiveness of PPP loan

 

 

(1,384)

 

 

0

 

Share-based compensation

 

 

924

 

 

 

1,028

 

Right-of-use assets

 

 

453

 

 

 

767

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(914)

 

 

9,245

 

Prepaid expenses and other current assets

 

 

(553)

 

 

(674)

Other assets

 

 

134

 

 

 

(84)

Accounts payable

 

 

950

 

 

 

(8,169)

Accrued expenses and other current liabilities

 

 

309

 

 

 

(147)

Lease liabilities

 

 

(492)

 

 

(805)

Net cash provided by (used in) operating activities

 

 

708

 

 

 

(1,869)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(770)

 

 

(388)

Net cash used in investing activities

 

 

(770)

 

 

(388)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings under PNC credit facility

 

 

0

 

 

 

28,564

 

Principal payments on PNC credit facility

 

 

0

 

 

 

(32,308)

Borrowings under CNC credit facility

 

 

35,471

 

 

 

33,201

 

Principal payments on CNC credit facility

 

 

(35,501)

 

 

(26,020)

Borrowings under PPP Note

 

 

0

 

 

 

1,384

 

Payments under financing agreement

 

 

(33)

 

 

0

 

Proceeds from exercise of stock options

 

 

176

 

 

 

0

 

Net cash provided by financing activities

 

 

113

 

 

 

4,821

 

Net increase in cash and cash equivalents

 

 

51

 

 

 

2,564

 

Cash and cash equivalents and restricted cash, beginning of period

 

 

15,107

 

 

 

5,946

 

Cash and cash equivalents and restricted cash, end of period

 

$15,158

 

 

$8,510

 

 

 

 

 

 

 

 

 

 

Reconciliation of cash and cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

$10,803

 

 

$892

 

Restricted cash at beginning of period

 

 

4,304

 

 

 

5,054

 

Cash and cash equivalents and restricted cash at beginning of period

 

$15,107

 

 

$5,946

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$10,849

 

 

$5,210

 

Restricted cash at end of period

 

 

4,309

 

 

 

3,300

 

Cash and cash equivalents and restricted cash at end of period

 

$15,158

 

 

$8,510

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$0

 

 

$0

 

Cash refunds for income taxes

 

$1

 

 

$381

 

Cash paid for interest

 

$435

 

 

$449

 

Supplemental disclosure of non-cash financing activities:

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for operating lease liabilities

 

$0

 

 

$1,485

 

Purchases on account related to capitalized software

 

$276

 

 

$0

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

7

Table of Contents

-3-

 

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

  

Three Months Ended

March 31,

 
  

2022

  

2021

 
         

Cash flows from operating activities:

        

Net income (loss)

 $(4,307) $310 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

        

Depreciation and amortization

  569   641 

Provision for bad debts and customer credits, net of recoveries

  (33)  (40)

Forgiveness of the PPP Loan

  0   (1,384)

Share-based compensation

  516   499 

Amortization of right-of-use assets

  241   224 

Deferred tax liability

  110   0 

Changes in assets and liabilities:

        

Accounts receivable

  585   79 

Prepaid expenses and other current assets

  367   157 

Vehicle inventory

  596   0 

Other assets

  42   91 

Accounts payable

  (569)  598 

Accrued expenses and other current liabilities

  (193)  (583)

Lease liabilities

  (251)  (242)

Net cash (used in) provided by operating activities

  (2,327)  350 

Cash flows from investing activities:

        

Purchases of property and equipment

  (209)  (66)

Purchase of intangible asset

  (75)  0 

Net cash used in investing activities

  (284)  (66)

Cash flows from financing activities:

        

Borrowings under CNC credit facility

  18,627   18,144 

Payments under CNC credit facility

  (19,520)  (18,121)

Proceeds from exercise of stock options

  0   126 

Payments under financing agreement

  (16)  (15)

Net cash (used in) provided by financing activities

  (909)  134 

Net (decrease) increase in cash and cash equivalents and restricted cash

  (3,520)  418 

Cash and cash equivalents and restricted cash, beginning of period

  11,629   15,107 

Cash and cash equivalents and restricted cash, end of period

 $8,109  $15,525 
         

Reconciliation of cash and cash equivalents and restricted cash

        

Cash and cash equivalents at beginning of period

 $7,315  $10,803 

Restricted cash at beginning of period

  4,314   4,304 

Cash and cash equivalents and restricted cash at beginning of period

 $11,629  $15,107 
         

Cash and cash equivalents at end of period

 $3,792  $11,218 

Restricted cash at end of period

  4,317   4,307 

Cash and cash equivalents and restricted cash at end of period

 $8,109  $15,525 
         

Supplemental disclosure of cash flow information:

        

Cash paid for interest

 $216  $215 

Supplemental disclosure of non-cash financing activities:

        

Right-of-use assets obtained in exchange for operating lease liabilities

 $70  $0 

Purchases on account related to capitalized software

 $113  $300 

See accompanying notes to unaudited condensed consolidated financial statements.

-4-

AUTOWEB, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1.Organization and Operations

 

AutoWeb, Inc. (“AutoWeb” or the “Company”) is a digital marketing company for thean automotive industry marketing and used vehicle acquisition and reselling company focused on being a “matchmaker” to better connect consumers seeking to acquire vehicles and vehicle sellers that can meet the consumers’ needs. The Company assists consumers in multiple aspects of the vehicle transaction, including providing content and information helpful to their next vehicle acquisition. The Company has also assisted consumers choosing to sell their current vehicle, which provides an added monetization opportunity in addition to the Company’s existing consumer offerings. The Company primarily generates revenue through automotive retail dealers (“Dealers”) and automotive manufacturers (“Manufacturers”) by helping them market and sell new and used vehicles to consumers through itsthe Company’s programs for online lead and traffic referrals, dealer marketing products and services, and online advertising. The Company also acquires used vehicles from consumers and sells those vehicles through third party wholesale auctions and directly to Dealers.

The Company primarily generates revenue through assisting Dealers and Manufacturers by marketing and selling new and used vehicles to consumers through the Company’s programs for online lead and traffic referrals, dealer marketing products and services, and online advertising.  The Company has also generated revenue through its used vehicle acquisition business by offering automotive consumers an option to sell their used vehicle outside of a dealership location through the Company’s wholly owned subsidiary, Tradein Expert, Inc., dba CarZeus. The Company resells these used vehicles indirectly to Dealers through wholesale auctions or through direct to Dealer sale.

 

The Company’s consumer-facing websites (“Company Websites”) provide consumers with information and tools to aid them with their automotive purchase decisions and the ability to submit inquiries requesting Dealers to contact consumers regarding purchasing or leasing vehicles (“Leads”). Leads are internally generated from Company Websites or acquired from third parties that generate Leads from their websites. 

 

The Company’s click traffic referral program provides consumers who are shopping for vehicles online with targeted offers based on make, model and geographic location. As these consumers conduct online research on Company Websites or on the site of one of the Company’s network of automotive publishers, they are presented with relevant offers on a timely basis and, upon the consumer clicking on the displayed advertisement, are sent to the appropriate website location of one of the Company’s Dealer, Manufacturer or advertising customers.

 

On July 31, 2021, the Company and Tradein Expert, Inc., (“Purchaser”) a Delaware corporation and wholly owned subsidiary of the Company, entered into and consummated an Asset Purchase Agreement (“Purchase Agreement”), by and among the Company, Purchaser, Car Acquisition, LLC, a Texas limited liability company dba CarZeus (“Seller”), Carzuz.com LLC, a Texas limited liability company, McCombs Family Partners, Ltd., a Texas limited partnership and Phil Kandera, an individual, pursuant to which Purchaser acquired specified assets of Seller’s San Antonio, Texas-based used vehicle acquisition platform that operates under the name CarZeus (“CarZeus Purchase Transaction”). CarZeus purchases vehicles directly from consumers and resells them through wholesale channels. The aggregate consideration of the CarZeus Purchase Transaction was $0.4 million in cash. This acquisition will provide the Company with the opportunity to purchase vehicles directly from consumers and resell them primarily through wholesale auctions, forming a complementary, retail-ready product line extension to the Company’s existing consumer offerings.

The Purchase Agreement contains representations, warranties, covenants and conditions that the Company believes are customary for a transaction of this size and type, as well as indemnification provisions subject to specified conditions, including a six-month holdback of approximately $0.1 million (“Holdback Amount”) of the purchase price as a source of security for any indemnification obligations. On August 2, 2021, the Company paid approximately $0.3 million of the purchase consideration, and, subject to any indemnification obligations arising, the Holdback Amount is payable to the Seller on January 31, 2022.

2.Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements are presented on the same basis as the Company’s Annual Report on Form 10-K10-K for the year ended December 31, 20202021 (“2020 2021Form 10-K10-K”) filed with the Securities and Exchange Commission (“SEC”). AutoWeb on March 24, 2022. The Company has made its disclosures in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q10-Q and Rule 8-038-03 of Regulation S-X.S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of Company management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included. The unaudited condensed consolidated statement of operations and cash flows for the period ended June 30, 2021, are not necessarily indicative of the results of operations or cash flows expected for the year or any other period. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the 20202021 Form 10-K.10-K.  

 

Certain amounts have been reclassified from the prior year presentation to conform to the current year presentation. References to amounts in the condensed consolidated financial statement sections are in thousands, except share and per share data, unless otherwise specified.

 

As of June 30, 2021, March 31, 2022, and December 31, 2020, 2021, restricted cash primarily consisted of pledged cash pursuant to the CIT Northbridge Credit LLC (“CNC Credit Agreement”) discussed in Note 9.11 of these Notes to Unaudited Condensed Consolidated Financial Statements.

- 5-

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

During the three-month period ended March 31, 2022, the Company incurred a net loss of $4.3 million and had net cash flows used in operating activities of $2.3 million. On March 31, 2022, the Company had $3.8 million in cash and cash equivalents and an accumulated deficit of $359.7 million. Based on current operating and cash forecasts, the Company does not believe that it currently has sufficient cash to sustain operations for the entire remainder of 2022. Other than the CNC Credit Agreement, which expires March 26, 2023, the Company currently has no committed source of funding from either debt or equity financings. Borrowings under the CNC Credit Agreement are dependent on, among other things, the level of the Company’s eligible accounts receivable. Given these factors, management believes that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued.

A Special Committee of the Company’s Board of Directors (“Special Committee”) has been created to explore strategic alternatives for the Company and will consider a full range of operational, financial, and other strategic alternatives (“Strategic Alternatives”). The Special Committee has retained Houlihan Lokey Capital, Inc. as its financial advisor to assist with this process. Strategic Alternatives that may be explored or evaluated as part of this process include, but are not limited to:

 

 
8

Continuing to seek debt or equity financing on terms and conditions acceptable to the Company;

Table

Evaluating potential sale/divestiture transactions, including a sale of Contentsthe Company or its assets;

Seeking partnering/licensing transactions; and

Restructuring the Company’s debt and operations, including the possibility that the Company may seek protection under the U.S. Bankruptcy Code.

 

The Company’s ability to continue to fund its operations for the entire remainder of 2022 is dependent upon Company management’s near-term operating plans to address the Company’s near-term cash and liquidity needs (“Near-Term Operating Plans”), which plans may include, but are not limited to:

Conducting a review of and reductions to the Company’s cost and expense structure, including reductions in employee expense (which may include furloughs and terminations);

Working with current and potential vendors to decrease costs and expenses;

Seeking bridge financing that may consist of debt, equity or a combination of the two;

Suspending investments in growth strategies and the Company's transformation from a digital media company to a transaction-enabled matchmaker;

Suspending capital expenditures; and

Suspending, or reducing the scope of or ceasing some or all of the Company’s operations. Management has already determined that it will immediately move to suspend operations of its used vehicle acquisition business.

The Company’s ability to continue as a going concern is contingent upon the successful execution of Strategic Alternatives and the Near-Term Operating Plans, but the Near-Term Operating Plans, may themselves have a material and adverse effect on the Company’s business, results of operations, financial condition, earnings per share, cash flow or the trading price of the Company’s stock (individually and collectively referred to as the Company’s “financial performance”). There can be no assurance that the Company will be successful in achieving either the Strategic Alternatives or Near-Term Operating Plans or that new financings or other transactions will be available to the Company on commercially acceptable terms, or at all. Additionally, any debt or equity financing that may be obtained may result in substantial shareholder dilution and could have a material and adverse impact on the Company’s financial performance.

The Special Committee and the Company’s management team, working with the Company’s financial, legal and other advisers, plan to proceed in a timely and orderly manner, but have not set a definitive timetable for completion of this process, nor has it made any decisions related to Strategic Alternatives at this time. The Company undertakes no obligation to provide further disclosure regarding developments or the status of the process, the Company’s efforts to pursue implementation of potential Strategic Alternatives or Near-Term Operating Plans, or a decision to seek bankruptcy protection under the U.S. Bankruptcy Code and does not intend to make such disclosure unless and until events warrant disclosure, the Company has filed for protection under the U.S. Bankruptcy Code, or further disclosure is legally required.

- 6-

3.Recent Accounting Pronouncements

 

The Company has reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact to its condensed consolidated financial statements.

 

4.Revenue Recognition

 

Revenue is recognized upon transfer of control of promised goods or services to the Company’s customers or when the Company satisfies any performance obligations under contract. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for respective goods or services provided. Further, under Accounting Standards Codification 606,Revenue from Contracts with Customers, (“ASC 606”606) contract assets or contract liabilities that arise from past performance but require a further performance before the obligation can be fully satisfied must be identified and recorded on the balance sheet until respective settlements have been met.

 

The Company has twothree main revenue sources – Lead generationGeneration, Digital Advertising and Digital advertising.Used Vehicle Sales. Accordingly, the Company recognizes revenue for each source as described below:

 

 

Lead generationGenerationpaid by Dealers and Manufacturers participating in the Company’s Lead programs and are comprised of Lead transaction and/or monthly subscription fees. Lead fees aregeneration is recognized in the period when service is provided.

 

 

Digital advertisingAdvertising – fees paid by Dealers, Manufacturers and third-partythird-party wholesale suppliers for (i) the Company’s click traffic program, (ii) display advertising on the Company’s websites and (iii) email and other direct marketing. Revenue is recognized in the period advertisements are displayed on the Company’s Websites or the period in which clicks have been delivered, as applicable. The Company recognizes revenue from the delivery of consumer interaction-basedaction-based advertisement (including email and other direct marketing) in the period in which a user takes the action for which the marketer contracted with the Company. For advertising revenue arrangements where the Company is not the principal, the Company recognizes revenue on a net basis.

 

Used Vehicle Sales – Used vehicles acquired by the Company are predominately resold at wholesale auctions or direct to Dealers. Revenue from the sale of these vehicles is recognized upon transfer of ownership of the vehicle to the wholesale customer.

Variable Consideration

 

Leads are generally sold with a right-of-return for services that do not meet customer requirements as specified by the relevant contract. Some leads are also are subject to pricing adjustments basedcontingent upon their subsequent conversion into vehicle sales. Rights-of-returnsales which may require pricing adjustments. Rights-of-returns and lead conversions are estimable, and provisions for these estimates are recorded as a reduction in revenue by the Company in the period revenue is recognized, and thereby accounted for as variable consideration. The Company includes the allowance for customer credits in its net accounts receivable balances on the Company’s balance sheet at period end. AllowanceThe Company did not have an allowance for customer credits as of March 31, 2022. The allowance for customer credits approximated $190,000 and $64,000$27,000 as of June 30, 2021, and December 31, 2020, respectively.2021.

 

Contract Assets and Contract Liabilities

 

Unbilled Revenue

 

Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when revenue is recognized prior to invoicing. From time to time, the Company may have balances on its balance sheet representing revenue that has been recognized by the Company upon satisfaction of performance obligations and earning a right to receive payment. These not-yet invoicednot-yet-invoiced receivable balances are driven by the timing of administrative transaction processing and are not indicative of partially complete performance obligations, or unbilled revenue. obligations.

 

Deferred Revenue

 

The Company defers the recognition of revenue when cash payments are received or due in advance of satisfying the Company’s performance obligations, including amounts which are refundable. Such activity is not typical for the Company. The Company had zerono deferred revenue included in its condensed consolidated balance sheets as of June 30, 2021, March 31, 2022, and December 31, 2020. 2021. Payment terms and conditions can vary by contract type. Generally, payment terms within the Company’s customer contracts include a requirement of payment within 30 to 60 days from date of invoice. Typically, customers make payments after receipt of invoice for billed services, and less typically, in advance of rendered services.

 

The Company has not made any significant changes in applying ASC 606 during the sixthree months ended June 30, 2021.March 31,2022.

 

9

Table of Contents
- 7-

Disaggregation of Revenue

 

The Company disaggregates revenue from contracts with customers by revenue source and has determined that disaggregating revenue into thethese categories listed below sufficiently depicts the differences in the nature, amount, timing and uncertainty of revenue streams.

 

The following table summarizes revenue from contracts with customers, disaggregated by revenue source, for the three and six months ended June 30, 2021,March 31,2022, and 2020.2021. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

  

2021

 

 

 

 

 

 

 

 

 

 

 

Lead generation

 

$15,225

 

$14,263

 

$29,411

 

$32,723

 

 $10,576  $14,186 

Digital advertising

 

 

 

 

 

 

 

 

 

 

Clicks

 

2,839

 

2,321

 

5,770

 

7,670

 

 3,656  2,932 

Display and other advertising

 

 

672

 

 

 

449

 

 

 

1,435

 

 

 

1,112

 

  481   762 

Total digital advertising

 

 

3,511

 

 

 

2,770

 

 

 

7,205

 

 

 

8,782

 

  4,137   3,694 

 

 

 

 

 

 

 

 

 

 

 

 

 

Used vehicle sales

  4,351   0 

Total revenues

 

$18,736

 

 

$17,033

 

 

$36,616

 

 

$41,505

 

 $19,064  $17,880 

 

5.Net LossIncome (Loss) Per Share

 

Basic net lossincome (loss) per share is computed using the weighted average number of common shares outstanding during the three-and-six-month periods reflected in the following table,period, excluding any unvested restricted stock. Diluted net lossincome (loss) per share is computed using the weighted average number of common shares, and if dilutive, potential common shares outstanding, as determined under the treasury stock and if-converted methods, during the period. Potential common shares consist of unvested restricted stock, and common shares issuable upon the exercise of stock options and the exercise of warrants.

 

The following are the share amounts utilized to compute the basic and diluted net lossincome (loss) per share for the three and six months ended June 30, 2021, March 31, 2022, and 2020:2021, respectively:

 

 

Three Months Ended

June 30,

 

Six Months Ended

 June 30,

 

 

Three Months Ended

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

  

2021

 

Basic Shares:

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

13,461,044

 

13,146,831

 

13,357,622

 

13,146,831

 

 13,843,260  13,253,050 

Weighted average unvested restricted stock

 

 

(220,000)

 

 

(13,333)

 

 

(148,370)

 

 

(13,333)  (548,463)  (75,944)

Basic Shares

 

 

13,241,044

 

 

 

13,133,498

 

 

 

13,209,252

 

 

 

13,133,498

 

  13,294,797   13,177,106 

 

 

 

 

 

 

 

 

 

 

Diluted Shares:

 

 

 

 

 

 

 

 

 

 

Basic shares

 

13,241,044

 

13,133,498

 

13,209,252

 

13,133,498

 

 13,294,797  13,177,106 

Weighted average dilutive securities

 

 

0

 

 

 

0

 

 

 

204,543

 

 

 

0

 

     140,281 

Diluted Shares

 

 

13,241,044

 

 

 

13,133,498

 

 

 

13,413,795

 

 

 

13,133,498

 

  13,294,797   13,317,387 

 

For the three months ended June 30, 2021, March 31, 2022, the Company’s basic and diluted net loss per share are the same because the Company generated a net loss for the period andperiod. As a result, potentially dilutive securities are excluded from diluted net loss per share because they have an anti-dilutive impact. For the sixthree months ended June 30,March 31, 2021, weighted average dilutive securities includeincluded dilutive options and restricted stock awards.

 

For the three and six months ended June 30, 2020, the Company’s basic March 31, 2022, and diluted net loss per share are the same because the Company generated a net loss for the period and potentially dilutive securities are excluded from diluted net loss per share because they have an anti-dilutive impact.

For the three and six months ended June 30, 2021, the Company had 4.6 0.1 million and 4.54.4 million, respectively, of potentially anti-dilutive securities related to common stock that have been excluded from the calculation of diluted net earnings per share.    For the three and six months ended June 30, 2020, the Company had 4.0 million of potentially anti-dilutive securities related to common stock that have been excluded from the calculation of diluted net earnings per share.

 

10

Table of Contents
- 8-

 

6.Share-Based Compensation

 

Share-based compensation expense is included in costs and expenses in the unaudited condensed consolidated statements of operations as follows:

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

  

2021

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense:

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

$32

 

$29

 

$63

 

$61

 

 $50  $30 

Technology support

 

8

 

28

 

19

 

55

 

 5  11 

General and administrative

 

 

385

 

 

 

462

 

 

 

842

 

 

 

912

 

  460   458 

Share-based compensation costs

 

 

425

 

 

 

519

 

 

 

924

 

 

 

1,028

 

 $515  $499 

 

 

 

 

 

 

 

 

 

Total share-based compensation costs

 

$425

 

 

$519

 

 

$924

 

 

$1,028

 

 

Service-Based Options.  The Company granted the following service-based options for the three and six months ended June 30, 2021, March 31, 2022, and 2020,2021, respectively:

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

  

2020

 

 

 

 

 

 

 

 

 

 

 

Number of service-based options granted

 

55,000

 

55,000

 

820,000

 

515,000

 

 500,000  765,000 

Weighted average grant date fair value

 

$1.94

 

$0.67

 

$1.83

 

$1.05

 

 $2.09  $1.82 

Weighted average exercise price

 

$2.75

 

$1.08

 

$2.61

 

$1.90

 

 $2.94  $2.60 

 

These options are valued using a Black-Scholes option pricing model. Options issued to employees generally vest one-thirdone-third on the first anniversary of the grant date and ratably over twenty-four months thereafter.  The vesting of these awards is contingent upon the employee’s continued employment with the Company during the vesting period and vesting may be accelerated under certain conditions, including upon a change in control of the Company and, in the case of certain officers of the Company, termination of employment by the Company without cause and voluntary termination of employment by such officer with good reason. Options issued to non-employee directors generally vest monthly over a 12-month12-month period and vesting may be accelerated under certain conditions, including upon a change in control of the Company and upon the termination of service as a director of the Company in the event such termination of service is due to resignation, failure to be re-elected, failure to be nominated for re-election, or without removal for cause. 

 

The grant date fair value of stock options granted during these periods was estimated using the following weighted average assumptions:

  

Three Months Ended

March 31,

 
  

2022

  

2021

 

Dividend yield

     0 

Volatility

  94.8

%

  94.4

%

Risk-free interest rate

  1.6

%

  0.7

%

Expected life (years)

  4.8   4.8 

Stock option exercises.  The following stock options were exercised during the three months ended March 31, 2022, and 2021, respectively:  

  

Three Months Ended

March 31,

 
  

2021

  

2020

 
         

Number of stock options exercised

     54,705 

Weighted average exercise price

 $0  $2.30 

- 9-

A summary of the Company’s outstanding stock options as of March 31, 2022, and changes during the three months then ended is presented below:

  

Number of

Options

  

Weighted

Average

Exercise Price

per Share

  

Weighted

Average

Remaining

Contractual

Term

  

Aggregate

Intrinsic

Value

 
          

(years)

  

(thousands)

 

Outstanding at December 31, 2021

  4,381,348  $3.85   4.3  $1,662 

Granted

  500,000   2.94       

Exercised

  0   0      0 

Forfeited or expired

  (185,826)  4.58       

Outstanding at March 31, 2022

  4,695,522  $3.73   4.3  $177 

Vested and expected to vest at March 31, 2022

  4,541,629  $3.76   4.3  $175 

Exercisable at March 31, 2022

  3,214,119  $4.15   3.6  $141 

Restricted Stock Awards.The Company granted an aggregate of 575,000 and 220,000 restricted stock awards (“RSAs”) in the first quarter of 2021 to certain executive officers of the Company.Company during the first quarter of 2022 and 2021, respectively. The RSAs are service-based and the forfeiture restrictions lapse with respect to one-thirdone-third of the restricted stock on each of the first, second and third anniversaries of the date of the award.  Lapsing of the forfeiture restrictions may be accelerated in the event of a change in control of the Company and will accelerate upon the death or disability of the holder of the RSAs.

 

The grant date fair value of stock options granted during these periods was estimated using the Black-Scholes option pricing model using the following weighted average assumptions:

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend yield

 

 

 

 

 

 

 

 

 

 

 

 

Volatility

 

 

95%

 

 

81%

 

 

94%

 

 

70%

Risk-free interest rate

 

 

0.9%

 

 

0.3%

 

 

0.8%

 

 

1.1%

Expected life (years)

 

 

4.7

 

 

 

4.6

 

 

 

4.8

 

 

 

4.6

 

11

Table of Contents

Stock option exercises7.. The following stock options were exercised during the three and six months ended June 30, 2021, and 2020, respectively:

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of stock options exercised

 

 

21,962

 

 

 

 

 

 

76,667

 

 

 

 

Weighted average exercise price

 

$2.30

 

 

$

 

 

$2.30

 

 

$

 

A summary of the Company’s outstanding stock options as of June 30, 2021, and changes during the six months then ended is presented below:

 

 

Number of

Options

 

 

Weighted

Average

Exercise Price

per Share

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Aggregate

Intrinsic

Value

 

 

 

 

 

 

 

(years)

 

 

(thousands)

 

Outstanding at December 31, 2020

 

 

3,758,670

 

 

$4.26

 

 

 

4.7

 

 

$270

 

Granted

 

 

820,000

 

 

 

2.61

 

 

 

 

 

 

 

 

 

Exercised

 

 

(76,667)

 

 

2.30

 

 

 

 

 

 

 

55

 

Forfeited or expired

 

 

(87,571)

 

 

8.87

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2021

 

 

4,414,432

 

 

$3.90

 

 

 

4.7

 

 

$1,020

 

Vested and expected to vest at June 30, 2021

 

 

4,232,627

 

 

$3.95

 

 

 

4.7

 

 

$945

 

Exercisable at June 30, 2021

 

 

2,666,343

 

 

$4.62

 

 

 

3.9

 

 

$340

 

 7. Selected Balance Sheet Accounts

 

Property and Equipment, net.  Property and equipment consist of the following:

 

 

June 30,

2021

 

 

December 31,

2020

 

 

March 31, 2022

  

December 31,

2021

 

 

 

 

 

 

 

Computer software and hardware

 

$4,965

 

$4,940

 

 $5,027  $5,008 

Capitalized internal use software

 

7,457

 

7,391

 

 8,378  8,362 

Furniture and equipment

 

1,105

 

935

 

 1,105  1,105 

Leasehold improvements

 

 

883

 

 

 

884

 

 883  883 

Capital projects-in-progress

 

 

1,588

 

 

 

805

 

Construction in progress

  1,766   1,478 

 

15,998

 

14,955

 

 17,159  16,836 

Less—Accumulated depreciation and amortization

 

 

(12,461)

 

 

(12,002)  (13,259)  (12,983)

Property and equipment, net

 

$3,537

 

 

$2,953

 

Property and Equipment, net

 $3,900  $3,853 

 

Intangible Assets, net.  Intangible assets, net consisted of the following (in thousands):

      

March 31, 2022

  

December 31, 2021

 

Definite-Lived

Intangible Asset

 

Estimated Useful Life (Years)

  

Gross

  

Accumulated Amortization

  

Net

  

Gross

  

Accumulated Amortization

  

Net

 
                             

Trademarks/trade names/licenses/ domains

  37  $16,589  $(16,393) $196  $16,589  $(16,372) $217 

Developed technology

  57   8,955   (8,411)  544   8,955   (8,138)  817 
      $25,544  $(24,804) $740  $25,544  $(24,510) $1,034 

   

March 31, 2022

  

December 31, 2021

 

Indefinite-Lived

Intangible Asset

Estimated Useful Life

 

Gross

  

Accumulated Amortization

  

Net

  

Gross

  

Accumulated Amortization

  

Net

 
                          

Domain

Indefinite

 $2,600  $  $2,600  $2,600  $  $2,600 

- 10-

The Company amortizes specifically identified definite-lived intangible assets using the straight-line method over the estimated useful lives of the assets.

Amortization expense is included in “Cost of revenues – lead generation and digital advertising” and “Depreciation and amortization” in the Unaudited Condensed Consolidated Statements of Operations. Amortization expense was $0.3 million and $0.4 million for the three months ended March 31, 2022, and 2021, respectively.

Amortization expense for the remainder of the year and for future years is as follows:

Year

 

Amortization Expense

 
     

2022 (remaining nine months)

 $609 

2023

  86 

2024

  45 
  $740 

Accrued Expenses and Other Current Liabilities.  Accrued expenses and other current liabilities consisted of the following:

  

March 31,

2022

  

December 31,

2021

 
         

Accrued employee-related benefits

 $1,517  $1,782 

Other accrued expenses and other current liabilities:

        

Other accrued expenses

  289   201 

Amounts due to customers

  64   77 

Other current liabilities

  364   332 

Total other accrued expenses and other current liabilities

  717   610 
         

Total accrued expenses and other current liabilities

 $2,234  $2,392 

Concentration of Credit Risk and Risks Due to Significant Customers.  Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are primarily maintained with high credit quality financial institutions in the United States. Deposits held by banks exceed the amount of insurance provided for such deposits.

 

Accounts receivable are primarily derived from fees billed to Dealers and Manufacturers. The Company generally requires no collateral to support its accounts receivables and maintains an allowance for bad debts for potential credit losses.

 

The Company has a concentration of credit risk with its accounts receivable balances. Approximately 64%53%, or $9.7$5.8 million, of gross accounts receivable at June 30, 2021, March 31, 2022, and approximately 46%30% of total revenues for the six monthsquarter ended June 30, 2021,March 31,2022, are related to Autodata Solutions, Urban Science Applications (which represents Acura, Honda, Subaru,several Manufacturer programs) and Volvo), Carat Detroit (General(which represents General Motors), Ford Direct and Autodata Solutions. For 2020, 60%.

  

% of

  

% of

 

Customers

 

Revenue

  

Accounts Receivable

 

Autodata Solutions

  9

%

  19

%

Urban Science Applications

  11

%

  18

%

Carat Detroit

  10

%

  16

%

Total

  30

%

  53

%

- 11-

During 2021, approximately 59%, or $8.9$8.3 million, of gross accounts receivable at June 30, 2020, March 31, 2021, and approximately 45%41% of total revenues for the six monthsquarter ended June 30, 2020,March 31,2021, are related to Urban Science Applications, Carat, Detroit,Autodata Solutions and Ford Direct and Autodata Solutions.Direct.

 

12

Table of Contents
  

% of

  

% of

 

Customers

 

Revenue

  

Accounts Receivable

 

Carat Detroit

  11

%

  17

%

Urban Science Applications

  10

%

  16

%

Autodata Solutions

  10

%

  16

%

Ford Direct

  10

%

  10

%

Total

  41

%

  59

%

 

On May 24, 2021, the Company received written notice from Direct Dealer LLC dba (“FordDirect”) that FordDirect decided to suspend its new vehicle lead marketing program for the near future and notified the Company that FordDirect was terminating its new vehicle leads program with the Company effective September 30, 2021. On June 11, 2021, the Company and FordDirect agreed to amend the Lead Agreement dated December 1, 2020, between the Company and FordDirect to provide for an early termination of the new vehicle leads program, with the early termination being effective June 30, 2021, in exchange for a lump sum payment of approximately $0.5 million from FordDirect to the Company.

Intangible Assets. 8.The Company amortizes specifically identified definite-lived intangible assets using the straight-line method over the estimated useful lives of the assets.

The Company’s intangible assets are amortized over the following estimated useful lives:

 

 

Estimated

 

June 30, 2021

 

 

December 31, 2020

 

Definite-lived Intangible Asset

 

Useful

Life

 

Gross

 

 

Accumulated Amortization

 

 

Net

 

 

Gross

 

 

Accumulated Amortization

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks/ trade names/ licenses/ domains

 

3 - 7 years

 

$16,589

 

 

$(16,221)

 

$368

 

 

$16,589

 

 

$(15,961)

 

$628

 

Developed technology

 

5 - 7 years

 

 

8,955

 

 

 

(7,594)

 

 

1,361

 

 

 

8,955

 

 

 

(7,050)

 

 

1,905

 

 

 

 

 

$25,544

 

 

$23,815

 

 

$1,729

 

 

$25,544

 

 

$(23,011)

 

$2,533

 

 

 

Estimated

 

June 30, 2021

 

 

December 31, 2020

 

Definite-lived Intangible Asset

 

Useful

Life

 

Gross

 

 

Accumulated Amortization

 

 

Net

 

 

Gross

 

 

Accumulated Amortization

 

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domain

 

Indefinite

 

$2,200

 

 

$0

 

 

$2,200

 

 

$2,200

 

 

$0

 

 

$2,200

 

Amortization expense is included in “Cost of revenues” and “Depreciation and amortization” in the Unaudited Consolidated Condensed Statements of Operations. Total amortization expense was $0.4 million and $0.8 million for the three and six months ended June 30, 2021, respectively. Amortization expense was $0.7 million and $1.6 million for the three and six months ended June 30, 2020, respectively.

Amortization expense for the remainder of the year and for future years is as follows:

Year

 

Amortization

Expense

 

 

 

 

 

2021 (remaining 6 months)

 

$695

 

2022

 

 

902

 

2023

 

 

86

 

2024

 

 

46

 

 

 

$1,729

 

13

Table of Contents

Accrued Expenses and Other Current Liabilities. Accrued expenses and other current liabilities consisted of the following:

 

 

June 30,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

Accrued employee-related benefits

 

$2,025

 

 

$2,123

 

Other accrued expenses and other current liabilities:

 

 

 

 

 

 

 

 

Other accrued expenses

 

 

552

 

 

 

143

 

Amounts due to customers

 

 

82

 

 

 

94

 

Other current liabilities

 

 

311

 

 

 

301

 

Total other accrued expenses and other current liabilities

 

 

945

 

 

 

538

 

 

 

 

 

 

 

 

 

 

Total accrued expenses and other current liabilities

 

$2,970

 

 

$2,661

 

8. Leases

 

The Company determines if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. The Company has lease arrangements for certain equipment and facilities that typically have original terms not exceeding five years and, in some cases, contain automatic renewal provisions that provide for multiple year renewal terms unless either party, prior to the then-expiring term, notifies the other party of the intention not to renew the lease. The Company’s lease terms may also include options to terminate the lease when it is reasonably certain that the Company will exercise such options. When readily determinable, the Company uses the implicit rate in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

 

Lease Liabilities.  Lease liabilities as of June 30,March 31, 2022, and December 31, 2021,respectively, consist of the following:

 

 

March 31, 2022

  

December 31, 2021

 

Current portion of lease liabilities

 

$951

 

 $729  $781 

Long term lease liabilities, net of current portion

 

 

1,763

 

Long-term lease liabilities, net of current portion

  1,303   1,432 

Total lease liabilities

 

$2,714

 

 $2,032  $2,213 

 

The Company’s aggregate lease maturities as of June 30, 2021, March 31, 2022, are as follows:

 

Year

 

 

 

   

2021 (remaining 6 months)

 

$601

 

2022

 

881

 

2022 (remaining nine months)

 $630 

2023

 

797

 

 831 

2024

 

528

 

 554 

2025

 

 

196

 

 204 

Total minimum lease payments

 

3,003

 

 2,219 

Less imputed interest

 

 

(289)  (187)

Total lease liabilities

 

$2,714

 

 $2,032 

 

Rent expense included in operating expenses and cost of revenuesrevenue was $0.3 million and $0.6 million for the three and six months ended June 30, 2021, respectively. The Company hadMarch 31,2022, with a weighted averageweighted-average remaining lease term of 3.22.7 years and a weighted averageweighted-average discount rate of 6.25%6.28%. Rent expense included in operating expenses and cost of revenuesrevenue was $0.4 million and $0.9$0.3 million for the three and six months ended June 30, 2020, respectively. The Company hadMarch 31,2021, with a weighted averageweighted-average remaining lease term of 4.02.8 years and a weighted averageweighted-average discount rate of 6.25%.

 

- 12-

9. DebtCommitments and Contingencies

 

On April 30, 2019, the Company entered into a $25.0 million Revolving Credit and Security Agreement (“PNC Credit Agreement”) with PNC Bank, N.A. (“PNC”) as agent, and the Company’s U.S. subsidiaries Car.com, Inc., Autobytel, Inc., and AW GUA USA, Inc. (“Company U.S. Subsidiaries”). The obligations under the PNC Credit Agreement were guaranteed by the Company’s U.S. subsidiaries and secured by a first priority lien on all of the Company’s and the Company U.S. subsidiaries’ tangible and intangible assets. The PNC Credit Agreement provided a subfacility of up to $5.0 million for letters of credit. The PNC Credit Agreement was to expire on April 30, 2022.

14

Table of Contents

The interest rates per annum applicable to borrowings under the PNC Credit Agreement were, at the Company’s option (subject to certain conditions), equal to either a domestic rate (“Domestic Rate Loans”) or a LIBOR rate for one, two, or three-month interest periods chosen by the Company (“LIBOR Rate Loans”), plus the applicable margin percentage of 2% for Domestic Rate Loans and 3% for LIBOR Rate Loans. The domestic rate for Domestic Rate Loans would be the highest of (i) the base commercial lending rate of the lender, (ii) the overnight bank funding rate plus 0.50%, or (iii) the LIBOR rate plus 1.00% so long as the daily LIBOR rate is offered, ascertainable and not unlawful. The PNC Credit Agreement also provided for commitment fees ranging from 0.5% to 1.5% applied to unused funds (with the applicable fee based on quarterly average borrowings) but with the fees fixed at 1.5% until September 30, 2019. Fees for letters of credit were to be equal to 3% for LIBOR Rate Loans, with a fronting fee for each Letter of Credit in an amount equal to 0.5% of the daily average aggregate undrawn amount of all letters of credit outstanding. The Company was required to maintain a $5.0 million pledged interest-bearing deposit account with the lender until the Company’s consolidated EBITDA is greater than $10.0 million.

On October 29, 2019, the Company, the Company’s U.S. subsidiaries, and PNC entered into a First Amendment to the PNC Credit Agreement (“PNC Credit Agreement First Amendment”) that provided for an amended financial covenant related to the Company’s minimum required EBITDA (as defined in the PNC Credit Agreement). This amended financial covenant required the Company to maintain its consolidated EBITDA (as defined in the PNC Credit Agreement) at stated minimum levels (i) of $0.7 million for the quarter ended September 30, 2019; (ii) $250,000for the month of October 2019; (iii) $600,000 for the two months ended November 30, 2019; and ranging from $3.6 million to $7.5 million for the later periods set forth in the PNC Credit Agreement First Amendment during the remaining term of the PNC Credit Agreement. In addition, the PNC Credit Agreement First Amendment added a new financial covenant requiring the Company to maintain at least a 1.20 to 1.00 Fixed Charge Coverage Ratio (as defined in the PNC Credit Agreement First Amendment) for the periods set forth in the PNC Credit Agreement First Amendment. If the Company failed to comply with the minimum EBITDA requirements or the Fixed Charge Coverage Ratio, the Company had the right to cure (“Cure Right”) through the application of the proceeds from the sale of new equity interests in the Company, subject to the conditions set forth in the PNC Credit Agreement First Amendment. The Cure Right could not be exercised more than three times during the term of the PNC Credit Agreement and any proceeds from a sale of equity interests could not be less than the greater of (i) the amount required to cure the applicable default; and (ii) $500,000.

On January 16, 2020, the Company received a notice of event of default and reservation of rights (“Default Notice”) from PNC Bank under the PNC Credit Agreement advising the Company that an event of default had occurred and was continuing under Section 10.3 of the PNC Credit Agreement by reason of the Company’s failure to deliver to PNC the financial statements and related compliance certificate for the month ended November 30, 2019. Although not covered by the Default Notice at the time, the Company also was not in compliance with the minimum EBITDA financial covenant under the PNC Credit Agreement. As a result of the Default Notice, PNC increased the interest rate under the PNC Credit Agreement by 2.0% per annum.

On March 26, 2020, the Company fully paid the PNC Credit Agreement, at which time it was terminated, and in conjunction with the termination of the PNC Credit Agreement, on March 26, 2020, the Company entered into a $20.0 million Loan, Security and Guarantee Agreement (“CNC Credit Agreement”) with CIT Northbridge Credit LLC, as agent (the “Agent”), and the Company’s U.S. subsidiaries. The CNC Credit Agreement provides for a $20.0 million revolving credit facility with borrowings subject to availability based primarily on limits of 85% of eligible billed accounts receivable and 75% against eligible unbilled accounts receivable. The obligations under the CNC Credit Agreement are guaranteed by the Company’s U.S. subsidiaries and secured by a first priority lien on all of the Company’s and the Company’s U.S. subsidiaries’ tangible and intangible assets. The CNC Credit Agreement has an average minimum borrowing usage requirement of an average of $10,000,000.

As of June 30, 2021, the Company had $10.2 million outstanding under the CNC Credit Agreement and approximately $2.2 million of net availability. To increase the borrowing base sufficient enough to meet the minimum borrowing usage requirement, the Company on June 29, 2020, placed $3.0 million into a restricted cash account that provided for greater availability under the CNC Credit Agreement. The Company placed an additional $1.0 million into the same restricted cash account in December 2020. The Company can borrow up to97.5% of the total restricted cash amount. The restricted cash accrues interest at a variable rate currently averaging 0.25% per annum.

Financing costs related to the CNC Credit Agreement, net of accumulated amortization, of approximately $0.3 million, have been deferred over the initial term of the loan and are included in other assets as of June 30, 2021. The interest rate per annum applicable to borrowings under the CNC Credit Agreement is the LIBO plus 5.5%. The LIBO Rate is equal to the greater of (i) 1.75%, and (ii) the rate determined by the Agent to be equal to the quotient obtained by dividing (1) the LIBO Base Rate (i.e., the rate per annum determined by Agent to be the offered rate that appears on the applicable Bloomberg page) for the applicable LIBOR Loan for the applicable interest period by (2) one minus the Eurodollar Reserve Percentage (i.e., the reserve percentage in effect under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement with respect to Eurocurrency funding for the applicable LIBOR Loan for the applicable interest period). If adequate and reasonable means do not exist for ascertaining or the LIBOR rate is no longer available, the Company and the Agent may amend the CNC Credit Agreement to replace LIBOR with an alternate benchmark rate. If no LIBOR successor rate is determined, the obligation of the lenders to make or maintain LIBOR loans will be suspended and the LIBO Base Rate component will no longer be utilized in determining the base rate. 

15

Table of Contents

If, due to any circumstance affecting the London interbank market, the Agent determines that adequate and fair means do not exist for ascertaining the LIBO Rate on any applicable date (and such circumstances that are identified in the next two paragraphs below are not covered or governed by such provisions below), then until the Agent determines that such circumstance no longer exists, the obligation of lenders to make LIBOR Loans will be suspended and, if requested by the Agent, the Company must promptly, at its option, either (i) pay all such affected LIBOR Loans or (ii) convert such affected LIBOR Loans into loans that bear reference to the Base Rate plus the Applicable Margin.

If the Agent determines that for any reason (i) dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable loan amount or applicable interest period, (ii) adequate and reasonable means do not exist for determining the LIBO Rate for the applicable interest period, or (iii) LIBOR for the applicable interest period does not adequately and fairly reflect the cost to the lenders of funding a loan, then the lenders’ obligation to make or maintain LIBOR Loans will be suspended to the extent of the affected LIBOR Loan or interest period until all such loans are converted to loans bearing interest at the Base Rate (as defined below) plus the Applicable Margin (as specified below).

However, if Agent determines that (i) adequate and reasonable means do not exist for ascertaining LIBOR for any requested interest period and such circumstances are unlikely to be temporary; (ii) the administrator of the LIBOR screen rate or a governmental authority having jurisdiction over the Agent has made a public statement identifying a specific date after which LIBOR or the LIBOR screen rate shall no longer be made available, or used for determining the interest rate of loans (“Scheduled Unavailability Date”); or (iii) syndicated loans currently being executed, or that include language similar to that contained in this paragraph are being executed or amended to incorporate or adopt a new benchmark interest rate to replace LIBOR, then Agent and the Company may amend the CNC Credit Agreement to replace LIBOR with an alternate benchmark rate (“LIBOR Successor Rate”) and any such amendment will become effective unless lenders holding more than 50% in value of the loans or commitments under the CNC Credit Agreement do not accept such amendment. If no LIBOR Successor Rate has been determined and the circumstances under clause (i) above exist or the Scheduled Unavailability Date has occurred, (x) the obligation of lenders to make or maintain LIBOR Loans will be suspended (to the extent of the affected LIBOR Loans or interest periods), and (y) the LIBO Base Rate component will no longer be utilized in determining the Base Rate. The Base Rate for any day is a fluctuating rate per annum equal to the highest of: (i) the Federal Funds Rate plus 1/2 of 1%; (ii) the rate of interest in effect for such day as publicly announced from time to time by JPMorgan Chase Bank, N.A. as its “prime rate” in effect for such day; or (iii) the most recently available LIBO Base Rate (as adjusted by any minimum LIBO Rate floor) plus 1%. The Applicable Margin is equal to 5.50%. The CNC Credit Agreement expires on March 26, 2023.

On July 30, 2021, the Company and the Agent entered into a Second Amendment to and Consent Under Loan, Security and Guarantee Agreement (“Credit Facility Amendment”). The Credit Facility Amendment provides for: (i) the Agent’s and lenders’ consent to the CarZeus Purchase Transaction; (ii) the inclusion of the Purchaser as a guarantor, obligor, and pledgor under the Credit Facility Agreement upon the satisfaction of certain conditions; and (iii) a new permitted use of borrowings under the Credit Facility Agreement that will allow Purchaser to acquire used vehicle inventories, which this new use of borrowings is limited in the amount of: (a) $1.5 million prior to Purchaser becoming a guarantor, obligor, and pledgor under the Credit Facility Agreement; and (b) $3.0 million subsequent to Purchaser becoming a guarantor, obligor, and pledgor under the Credit Facility Agreement.

On April 16, 2020, the Company received a Paycheck Protection Program loan (“PPP Loan”) in the amount of approximately $1.38 million from PNC pursuant to the PPP administered by the United States Small Business Administration (“SBA”) under the CARES Act.

On January 13, 2021, the Company received a notice from PNC Bank regarding forgiveness of the loan in the principal amount of approximately $1.38 million that was made to the Company pursuant to the SBA PPP under the CARES Act of 2020. The notice states that SBA has remitted to PNC a loan forgiveness payment equal to $1.39 million, which constitutes full payment and forgiveness of the principal amount of the PPP loan and all accrued interest. In January 2021, the Company recognized the forgiveness of the PPP Loan on its Unaudited Condensed Consolidated Statement of Operations.

            On June 10, 2020, the Company entered into a thirty-six-month equipment financing agreement (“Financing Agreement”) with Dimension Funding LLC. The Financing Agreement provides for an advance payment of approximately $170,000 to be used to secure furniture and fixtures for the Company’s new office location in Irvine, California. Payments of approximately $5,300 (inclusive of imputed interest) are made monthly under the Financing Agreement. As of June 30, 2021, the Company has paid approximately $78,000. The Financing Agreement will mature on December 31, 2022.

16

Table of Contents

The Company’s future commitments under the Financing Agreement as of June 30, 2021, are as follows:

Year

 

 

 

2021 (remaining 6 months)

 

 

28

 

2022

 

 

64

 

Total financing debt

 

$92

 

10. Commitments and Contingencies

Employment Agreements

 

The Company has employment agreements and severance benefits agreements with certain key employees. A number of these agreements require severance payments and continuation of certain insurance benefits in the event of a termination of the employee’s employment by the Company without cause or by the employee for good reason (as defined in these agreements). Stock option agreements and restricted stock award agreements with some key employees provide for acceleration of vesting of stock options and lapsing of forfeiture restrictions on restricted stock in the event of a change in control of the Company, upon termination of employment by the Company without cause or by the employee for good reason, or upon the employee’s death or disability.

 

Litigation

 

From time to time, the Company may be involved in litigation matters arising from the normal course of its business operations. Such litigation, even if not meritorious, could result in substantial costs and diversion of resources and management attention, and an adverse outcome in litigation could materially adversely affect its business, results of operations, financial condition, and cash flows. The Company assesses the likelihood of any adverse judgments or outcomes of these matters as well as potential ranges of probable losses. The Company records a loss contingency when an unfavorable outcome is probable, and the amount of the loss can be reasonably estimated. The amount of allowances required, if any, for these contingencies is determined after analysis of each individual case. The amount of allowances may change in the future if there are new material developments in each matter.  Gain contingencies are not recorded until all elements necessary to realize the revenue are present. Any legal fees incurred in connection with a contingency are expensed as incurred.

 

11. 10.Income Taxes

 

On an interim basis, the Company estimates what its anticipated annual effective tax rate will be and records a quarterly income tax provision in accordance with the estimated annual rate, adjusted accordingly by the tax effect of certain discrete items that arise during the quarter. As the year progresses, the Company refines its estimated annual effective tax rate based on actual year-to-date results. This process can result in significant changes to the Company's estimated effective tax rate. When such activity occurs, the income tax provision is adjusted during the quarter in which the estimates are refined and adjusted. As such, the Company’s year-to-date tax provision reflects the estimated annual effective tax rate. Therefore, these changes along with the adjustments to the Company’s deferred taxes and related valuation allowance may create fluctuations in the overall effective tax rate from period to period.

 

Due to overall cumulative losses incurred in recent years, the Company maintained a valuation allowance against its deferred tax assets as of June 30, 2021, March 31, 2022 and December 31, 2020. 2021. The Company’s effective tax rate for the sixthree months ended June 30, 2021, March 31, 2022, differed from the U.S. federal statutory rate primarily due to operating losses that receive no tax benefit as a result of a valuation allowance recorded against the Company's existing tax assets. The total amount of unrecognized tax benefits, excluding associated interest and penalties, was $0.2 million as of June 30, 2021,March 31,2022, all of which, if subsequently recognized, would have affected the Company’sCompany's tax rate.

 

As of June 30, 2021,March 31,2022 and December 31, 2020,2021, there were no0 accrued interest and penalties related to uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense, and the accrued interest and penalties are included in deferred and other long-term liabilities in the Company’s unaudited condensed consolidated balance sheets. There were no material interest or penalties included in income tax expense for the sixthree months ended June 30, 2021,March 31,2022, and 2020.2021.

 

The Company is subject to taxation in the U.S. and in various foreign and state jurisdictions. Due to expired statutes of limitation, the Company’s federal income tax returns for years prior to calendar year 2018 and 2017, respectively are not subject to examination by the U.S. Internal Revenue Service.Service (except for the use of tax losses generated prior to 2018 that may be used to offset taxable income in subsequent years). Generally, for the majority of state jurisdictions where the Company does business, periods prior to calendar year 20162017 are no longer subject to examination. The Company does not anticipate a significant change to the total amount of unrecognized tax benefits within the next twelve months.

17

Table of Contents

 

In response to the coronavirus pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020. The CARES Act liftedlifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act (“TCJA”). Corporate taxpayers may carryback net operating losses (“NOLs”) originating during 2018 through 2020 for up to five years, which was not previously allowed under the TCJA. The CARES Act in part also eliminatedprovides for an employee retention credit, which is a refundable tax credit against certain employment taxes equal to 50% of qualified wages an eligible employer pays to employees (“Employee Retention Credit”). In March 2022, we amended certain payroll tax filings in conjunction with the 80%Employee Retention Credit and are awaiting confirmation of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020.the credit from the IRS.

 

Taxpayers may generally deduct interest up to the sum

- 13-

 

The Consolidated Appropriations Act of 2021 (the “Act”) was signed into law on December 27, 2020. The Act enhanced and expanded certain provisions of the CARES Act. The Act permits taxpayers whose PPP Loan are forgiven to deduct the expenses relating to their loans to the extent they would otherwise qualify as ordinary and necessary business expenses. This rule was applied retroactively to the effective date of the CARES Act, so that expenses paid using funds from PPP loans previously issued under the CARES Act are deductible, regardless of when the loan was forgiven. The Company’s $1.4 million PPP loan was completely forgiven in January 2021 and the expenses are currently deductible on the Company’s 2020 federal tax return.

12. Subsequent Event11.Debt

 

On July 30, 2021, March 26, 2020, the Company entered into a $20.0 million Loan, Security and Guarantee Agreement (“CNC Credit Agreement”) with CIT Northbridge Credit LLC, as agent (the “Agent”), and the Company’s U.S. subsidiaries. The CNC Credit Agreement provides for a $20.0 million revolving credit facility with borrowings subject to availability based primarily on limits of 85% of eligible billed accounts receivable and 75% against eligible unbilled accounts receivable. The obligations under the CNC Credit Agreement are guaranteed by the Company’s U.S. subsidiaries and secured by a first priority lien on all of the Company’s and the Company’s U.S. subsidiaries’ tangible and intangible assets. 

As of March 31, 2022, the Company had $9.1 million outstanding under the CNC Credit Agreement and approximately $0.4 million of net availability. To increase the borrowing base sufficient enough to meet the minimum borrowing usage requirement, the Company on June 29, 2020, placed $3.0 million into a restricted cash account that provided for greater availability under the CNC Credit Agreement. The Company placed an additional $1.0 million into the same restricted cash account in December 2020. The Company can borrow up to 97.5% of the total restricted cash amount. The restricted cash accrues interest at a variable rate currently averaging 0.25% per annum.  

On July 30, 2021, the Company and the Agent entered into a Second Amendment to and Consent Under Loan, Security and Guarantee Agreement (“Credit Facility Second Amendment”). The Credit Facility Second Amendment provides for: (i) the Agent’s and lenders’ consent to the CarZeus Purchase Transaction; (ii) the inclusion of the Tradein Expert as a guarantor, obligor, and pledgor under the Credit Facility Agreement upon the satisfaction of certain conditions; and (iii) a new permitted use of borrowings under the Credit Facility Agreement that will allow Tradein Expert to acquire used vehicle inventories, which this new use of borrowings is limited in the amount of: (a) $1.5 million prior to Tradein Expert becoming a guarantor, obligor, and pledgor under the Credit Facility Agreement; and (b) $3.0 million subsequent to Tradein Expert becoming a guarantor and obligor under the Credit Facility Agreement, which occurred upon the Company and Agent entering into a Joinder Under Loan, Security and Guarantee Agreement and Pledge Agreement Supplement dated as of August 12, 2021. 

On September 13, 2021, the Company entered into a Third Amendment to Loan, Security and Guarantee Agreement (“Credit Facility Third Amendment”) with CNC to amend the Company’s existingCNC Credit Agreement to provide for, among other changes, a change in the available borrowing base calculation for the acquisition of used motor vehicle inventory by the Tradein Expert from up to (A) the lesser of (i) $3,000,000.00 and (ii) 85% of the value of eligible accounts receivable arising from the sale of used motor vehicles by Tradein Expert to (B) the lesser of (i) $3,000,000 and (ii) eighty percent (80%) of the purchase price (subject to certain limitations set forth in the Credit Facility Third Amendment) for eligible vehicles (as defined in the Credit Facility Third Amendment) in Tradein Expert’s  used motor vehicle inventory. The Credit Facility Third Amendment also reduces the minimum borrowing usage requirement from fifty percent (50%) to forty percent (40%) of the aggregate revolver amount, which is a minimum borrowing usage requirement reduction from $10,000,000 to $8,000,000.

Financing costs related to the CNC Credit Agreement, net of accumulated amortization, of approximately $0.2 million, have been deferred over the initial term of the loan and are included in other assets as of March 31, 2022. The interest rate per annum applicable to borrowings under the CNC Credit Agreement is the LIBO plus 5.5%. The LIBO Rate is equal to the greater of (i) 1.75%, and (ii) the rate determined by the Agent to be equal to the quotient obtained by dividing (1) the LIBO Base Rate (i.e., the rate per annum determined by Agent to be the offered rate that appears on the applicable Bloomberg page) for the applicable LIBOR Loan for the applicable interest period by (2) one minus the Eurodollar Reserve Percentage (i.e., the reserve percentage in effect under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement with respect to Eurocurrency funding for the applicable LIBOR Loan for the applicable interest period). If adequate and reasonable means do not exist for ascertaining or the LIBOR rate is no longer available, the Company and the Agent may amend the CNC Credit Agreement to replace LIBOR with an alternate benchmark rate. If no LIBOR successor rate is determined, the obligation of the lenders to make or maintain LIBOR loans will be suspended and the LIBO Base Rate component will no longer be utilized in determining the base rate.

- 14-

If, due to any circumstance affecting the London interbank market, the Agent determines that adequate and fair means do not exist for ascertaining the LIBO Rate on any applicable date (and such circumstances that are identified in the next two paragraphs below are not covered or governed by such provisions below), then until the Agent determines that such circumstance no longer exists, the obligation of lenders to make LIBOR Loans will be suspended and, if requested by the Agent, the Company must promptly, at its option, either (i) pay all such affected LIBOR Loans or (ii) convert such affected LIBOR Loans into loans that bear reference to the Base Rate plus the Applicable Margin.

If the Agent determines that for any reason (i) dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable loan amount or applicable interest period, (ii) adequate and reasonable means do not exist for determining the LIBO Rate for the applicable interest period, or (iii) LIBOR for the applicable interest period does not adequately and fairly reflect the cost to the lenders of funding a loan, then the lenders’ obligation to make or maintain LIBOR Loans will be suspended to the extent of the affected LIBOR Loan or interest period until all such loans are converted to loans bearing interest at the Base Rate (as defined below) plus the Applicable Margin (as specified below).

However, if Agent determines that (i) adequate and reasonable means do not exist for ascertaining LIBOR for any requested interest period and such circumstances are unlikely to be temporary; (ii) the administrator of the LIBOR screen rate or a governmental authority having jurisdiction over the Agent has made a public statement identifying a specific date after which LIBOR or the LIBOR screen rate shall no longer be made available, or used for determining the interest rate of loans (“Scheduled Unavailability Date”); or (iii) syndicated loans currently being executed, or that include language similar to that contained in this paragraph are being executed or amended to incorporate or adopt a new benchmark interest rate to replace LIBOR, then Agent and the Company may amend the CNC Credit Agreement to replace LIBOR with an alternate benchmark rate (“LIBOR Successor Rate”) and any such amendment will become effective unless lenders holding more than 50% in value of the loans or commitments under the CNC Credit Agreement do not accept such amendment. If no LIBOR Successor Rate has been determined and the circumstances under clause (i) above exist or the Scheduled Unavailability Date has occurred, (x) the obligation of lenders to make or maintain LIBOR Loans will be suspended (to the extent of the affected LIBOR Loans or interest periods), and (y) the LIBO Base Rate component will no longer be utilized in determining the Base Rate. The Base Rate for any day is a fluctuating rate per annum equal to the highest of: (i) the Federal Funds Rate plus 1/2 of 1%; (ii) the rate of interest in effect for such day as publicly announced from time to time by JPMorgan Chase Bank, N.A. as its “prime rate” in effect for such day; or (iii) the most recently available LIBO Base Rate (as adjusted by any minimum LIBO Rate floor) plus 1%. The Applicable Margin is equal to 5.50%. The CNC Credit Agreement expires on March 26, 2023. 

On April 16, 2020, the Company received a Paycheck Protection Program loan (“PPP Loan”) in the amount of approximately $1.38 million from PNC pursuant to the PPP administered by the United States Small Business Administration (“SBA”) under the CARES Act. In connection with the receipt of the PPP Loan, on May 18, 2020, the Company and the Agent entered into the First Amendment to Loan, Security and Guarantee Agreement with CNC initially entered into on March 26, 2020, as amended on May 18, 2020. Seeto accommodate the descriptionCompany’s receipt of the Credit Facility Amendment contained in Note 9 to these Notes to Unaudited Condensed Consolidated Financial Statements.PPP Loan.

 

On July 31,January 13, 2021, the Company received a notice from PNC Bank regarding forgiveness of the loan in the principal amount of approximately $1.38 million that was made to the Company pursuant to the SBA PPP under the CARES Act of 2020. The notice states that SBA has remitted to PNC a loan forgiveness payment equal to $1.39 million, which constitutes full payment and Purchaserforgiveness of the principal amount of the PPP loan and all accrued interest. In January 2021, the Company recognized the forgiveness of the PPP Loan as other income in the Consolidated Statements of Operations.

On June 10, 2020, the Company entered into a thirty-six-month equipment financing agreement (“Financing Agreement”) with Dimension Funding LLC. The Financing Agreement provides for an advance payment of approximately $170,000 to be used to secure furniture and consummatedfixtures for the Car Zeus Purchase Transaction.Company’s new office location in Irvine, California. Payments of approximately $5,300 (inclusive of imputed interest) are made monthly under the Financing Agreement. As of SeeMarch 31, 2022, the descriptionCompany has paid approximately $0.1 million. The Financing Agreement will mature on December 31, 2022.

- 15-

The Company’s future commitments under the Financing Agreement as of March 31, 2022, are as follows: 

Year

    

2022 (remaining nine months)

  48 

Total financing debt

 $48 

12.Segment Reporting

As a result of the CarZeus Purchase Transaction containedon August 1, 2021, the Company determined that operates in Note 1two reportable segments: Automotive digital marketing and used vehicle acquisition and resale through the Company’s Tradein Expert subsidiary. The automotive digital marketing segment consists of all aspects related to these Notes to Unaudited Condensed Consolidated Financial Statements.automotive digital marketing, whereas the used vehicle acquisition and resale segment consists solely of the used vehicle acquisition and wholesale reselling business. Revenues generated by the automotive digital marketing segment primarily represent lead generation and digital advertising, while revenues generated by the used vehicle acquisition and resale segment primarily represent used car vehicle sales.

 

18

Table of Contents

The segment performance is reviewed by the chief executive officer at the operating income (loss) level. The following table provides segment reporting of the Company for the three months ended March 31, 2022:

Three Months Ended March 31, 2022

 

(In thousands)

 

Automotive digital marketing

  

Used vehicle acquisition & resale

  

Total

 

Revenues

 $14,713  $4,351  $19,064 

Cost of sales

  10,954   4,206   15,160 

Gross profit

  3,759   145   3,904 

Operating loss

  (3,649)  (257)  (3,906)

Total assets

  28,236   1,401   29,637 

 

- 16-

Item2.Management’sManagements Discussion and Analysis of Financial Condition and Results of Operations

 

Cautionary NoteConcerning Forward-Looking Statements

 

The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,“could,“could,“may,” “estimates,” “expects,” “intends,“projects,“may,“intends,” “plans,” “projects,“believes,” “will” and words or phrases of similar substance used in connection with any discussion of future operations, or financial performance, plans, events, trends or circumstances can be used to identify some, but not all, forward-looking statements. In particular, statements regarding expectations and opportunities, industry trends, new product expectations and capabilities, and our outlook regarding our performance and growth are forward-looking statements. This Quarterly Report on Form 10-Q also contains statements regarding plans, goals and objectives. There is no assurance that we will be able to carry out our plans or achieve our goals and objectives or that we will be able to do so successfully on a profitable basis. These forward-looking statements are just predictions and involve significant risks and uncertainties, many of which are beyond our control, and actual results may differ materially from these statements. Factors that could cause actual outcomes or results to differ materially from those reflected in forward-looking statements include, but are not limited to, those discussed in this Item 2 (including in the section entitled “Overview” below), Part II, Item 1A of this Quarterly Report on Form 10-Q, and under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 20202021 (“2020 2021Form10-K”). filed with the SEC on March 24, 2022. Investors are urged not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date on which they were made. Except as may be required by law, we do not undertake any obligation, and expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained herein are qualified in their entirety by the foregoing cautionary statements.

 

The following discussion of our results of operations and financial condition should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the notes thereto in the 20202021 Form 10-K.

 

Our corporate website is located at www.autoweb.com. Information on our website is not incorporated by reference in this Quarterly Report on Form 10-Q. At or through the Investor Relations section of our website we make available free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to these reports as soon as practicable after the reports are electronically filed with or furnished to the SEC.

 

Unless the context otherwise requires, the terms “we”, “us”, “our”, “AutoWeb” and “Company” refer to AutoWeb, Inc. and its consolidated subsidiaries.

 

Basis of Presentation and Critical Accounting Policies

 

See Note 2, Basis orof Presentation, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

 

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and our actual results, our financial condition or results of operations may be affected. For a detailed discussion of the application of our critical accounting policies, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 20202021 Form 10-K. There have been no changes to our critical accounting policies since we filed our 20202021 Form 10-K.

 

Overview

 

Total revenuesCommencing in the first six months of 2021 were $36.6 million compared to $41.5 million in the first six months of 2020. The decline in total revenues was directly related to the impact of the coronavirus pandemic on vehicle sales and overall demand from our clients for our products. Offsetting this reduction is a one-time lump sum payment for the early termination of the new vehicle leads program by one of our manufacturing customers which approximated $0.5 million. Although our prior strategic focus often generated higher gross revenue, the margin profile and overall quality was lower, resulting in lower overall levels of gross profit and higher client churn. As a part of our strategic decisions, we also shifted focus to our core Leads, clicks and email products and services and away from non-core products and services, such as third-party party product offerings. This shift further negatively impacted total revenues. Generally lower retail Leads sales levels resulting from retail dealer participation attrition in the retail dealer network that occurred in part of 2020 was an additional factor that contributed to lower total revenues during the six months ended June 30, 2021.

19

Table of Contents

As a result of the continued impact of the coronavirus pandemic on vehicle sales, coupled with vehicle inventory and supply related issues, we have continued to intentionally operate at lower levels of media spend to match projected industry selling rates, which provides a more accurate reflection of true consumer demand. Dealers and consumers alike are still contending with broader macroeconomic uncertainty, and with this in mind, our objective is to provide the right mix of high-quality Leads and click traffic to our customers by staying aligned with automotive supply and demand dynamics. Finally, the disruption from the January 2020 malware attack on the Company’s systems also negatively impacted total revenues in 2020. In March 2021, we received an approximate $0.3 million insurance reimbursement related to the January 2020 malware attack, which is partially included in other income during the six months ended June 30, 2021.

As we continue to work with our traffic suppliers to optimize our SEM methodologies and further grow our high-quality traffic streams, we are also investing in and testing new traffic acquisition strategies and enhanced mobile consumer experiences. Further, we continue to invest in our pay-per-click approach to improve the consumer experience of that product. With a more efficient traffic acquisition model emerging, our plan for 2021 and beyond is to grow audience, improve conversion, improve Leads and clicks delivery rates, expand distribution, and increase retail Dealer Leads and clicks budget capacity. We believe that this focus, along with plans to develop or integrate new, innovative products and re-platforming existing experiences will create a more efficient process for how active vehicle shoppers with a vehicle in mind can be matched with sellers that can meet the shoppers’ needs, will create opportunities for improved quality of delivery and strengthen our position for revenue growth.

To maximize our growth potential as a matchmaker, we believe that we must continue to optimize our platform and products to facilitate more comprehensive matches between car buyer intent and transaction providers who can meet these buyers’ needs. These investments began with improvements to shop.car.com in the first quarter of 2021 and continued through the second quarter of 2021, spanning similar improvements to our additional properties. We have also made progress with layering additional retail-ready components into our platform through our strategic relationship with Credit IQ and the CarZeus Purchase Transaction.

At the beginning of June 2021, we announced our new strategic relationship with CreditIQ, an automotive retailing-focused software and service company that enables dealers to provide seamless digital retail experiences to consumers. This relationship allows shoppers using our search funnel to calculate car payments on a vehicle of interest, which streamlines the car buying process for both buyers and sellers. We believe that features like these not only enhance our platform’s user experience, but also enable us to create more tailored profiles of the buyers using our sites to understand what kind of shopping experience they’re seeking. We expect to expand both this base and the offerings of our platform even further through our recently announced acquisition of specified assets of CarZeus, which positions us to participate more meaningfully in the consumer used vehicle disposal market.

The CarZeus Purchase Transaction provides us the opportunity to purchase vehicles directly from consumers and resell them primarily through wholesale auctions, forming a complementary, retail-ready product line extension to our existing consumer offerings. We believe this acquisition will also allow us to increase our total addressable market by expanding our presence in the used car market, while giving us the opportunity to enhance the offerings and usefulness of our underutilized sites and monetize our traffic more effectively. We plan to use our traffic acquisition capabilities and operational efficiency to drive growth, improve financial performance and build scalable operating processes to enhance performance within CarZeus’ San Antonio market. With this foundation in place, we plan to prepare the business for broader geographic coverage in the long-term. We are not able at this time to provide any guidance related to CarZeus impact to our full year 2021 financial performance. See the description of the CarZeus Purchase Transaction contained in Note 1 to these Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

Our lead and click generation products have historically operated with limited visibility due to short sales cycles and a high rate of customer churn as clients are able to join and leave our platform with limited notice. Our advertising business is also subject to seasonal trends, with the first quarter of the calendar year typically showing sequential decline versus the fourth quarter. These factors have historically contributed to volatility in our revenues, cost of revenues, gross profit, and gross profit margin. We anticipate these trends will continue throughout 2021.

We anticipate that our remaining 2021 financial condition may be adversely impacted when compared to 2020 by (i) the continuing impact of the coronavirus pandemic on vehicle sales and on demand for our products and services; (ii) increased competitive pressure on cost of audience acquisition that may limit how much volume we will be able to profitably source and distribute to our customers; (iii) the costs and revenue impact associated with our efforts to optimize our clicks product; and (iv) the decision to shift our focus to our core leads, clicks and email products and services and away from non-core product and services. Many industry analysts have forecast improvement in new vehicle unit sales seasonally adjusted annual rate from 14.5 million units in 2020 to a range of 15.5-16.4 million units in 2021, or 7-13% growth. The pace of growth in 2021 is expected to be uneven. The first half of 2021 franchise dealer unit volume grew 29%, but inventory shortages have reduced growth to the lower end of the range and this slower growth is expected to continue until inventory supplies normalize.

In early 2020 and continuing as of the date of this Quarterly Report on Form 10-Q, the outbreak of coronavirus and emerging variants has led to quarantines, mask mandates, vaccination requirements and stay-at-home/work-from-home orders in a number of countries, states, cities and regions and the closure or limited or restricted access to public and private offices, businesses and facilities, worldwide, causing widespread disruptions to travel, economic activity, supply chains and financial markets. The pandemic has led our Manufacturer and Dealer customers to experience disruptions in the (i) supply of vehicle and parts inventories, (ii) ability and willingness of consumers to visit automotive dealerships to purchase or lease vehicles, and (iii) overall health, safety and availability of their labor force.In particular, Manufacturers have also shut down assembly plants, adversely impacting inventories of new vehicles. Volatility in the financial markets, concerns about exposure to the virus, governmental quarantines, stay-at-home/work-from-home orders, business closures and employment furloughs and layoffs have also impacted consumer confidence and willingness to visit dealerships and to purchase or lease vehicles. High unemployment rates and lower consumer confidence may continue even after stay-at-home/work-from-home orders and business closures have ended. These disruptions have impacted the willingness or desire of our customers to acquire vehicle Leads or other digital marketing services from us. We are also experiencing direct disruptions in our operations due to the overall health and safety of, and concerns for, our labor force and as a result of governmental “social distancing” programs, quarantines, travel restrictions and stay-at-home/work-from-home orders, leading to office closures, operating from employee homes and restrictions on our employees traveling to our various offices.

20

Table of Contents

In addition to the continued impact of the coronavirus pandemic on supply chains and vehicle inventories and sales, Manufacturers have also experienced significant disruption in the supply of semiconductor chips required for new vehicles due to a worldwide shortage of these chips. As a result, the ability of Manufacturers to maintain regular production output of certain vehicles, and the corresponding reduction in available new vehicle inventories, have adversely impacted vehicle sales. Further disrupting the automotive industry and the number of vehicles available for sale or lease are disruptions in the supply of seat foam and rubber, which is a key materialother components used in tiresvehicle manufacturing. These disruptions have impacted the willingness or desire of our Dealer and other customers to acquire vehicle Leads or other digital marketing services from us. While coronavirus restrictions have eased in 2022, consumer confidence and spending has declined as wella result of other factors, including macroeconomic conditions such as inflationary pressures and the global impact of Russia’s invasion of the Ukraine. Vehicle sales have declined, and we continue to experience cancellations, volume reductions or suspensions of purchases of Leads and other components of new vehicles.digital marketing services by our Dealer and other customers, which has, and may continue to materially and adversely impact our financial performance.

 

We are unable to predict the continuing extent, duration and impact of the pandemic and supply chain disruptionsforegoing factors on the automotive industry in general, andor on our business, operations and operations specifically. The spread of coronavirus variants and governmental responses thereto may prolong or increase the negative impacts of the pandemic. Vehicle sales have declined, and we continue to experience cancellations or suspensions of purchases of Leads and other digital marketing services by our customers, which could materially and adversely affect our future business, results of operations, financial condition, earnings per share, cash flow or the trading price of our stock (individually and collectively referred to as the Company’s “financial performance”). specifically. In light of the impact on us from the foregoing factors, as discussed in Note 2 of the pandemicnotes to the unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, due to our cash and liquidity position, we believe that there is substantial doubt about our ability to continue as a going concern for a period of one year after the date the financial statements contained in this Quarterly Report on Form 10-Q are issued. The Special Committee is exploring Strategic Alternatives and has retained Houlihan Lokey Capital, Inc. as its financial advisor to assist in this process. Our ability to continue funding operations is dependent upon the success in implementing Near-Term Operating Plans to address our near-term cash and liquidity needs. Our ability to continue as a going concern is contingent upon the successful execution of Strategic Alternatives and the Near-Term Operating Plans, but the Near-Term Operating Plans may themselves have a material and adverse effect on our financial performance. On May 16, 2022, we suspended our CarZeus operations and furloughed our employees within that segment in order to conserve cash. We are considering further actions and will implement these actions if and when appropriate to further conserve cash. There can be no assurance that we will be successful in achieving either the Strategic Alternatives or Near-Term Operating Plans or that new financing or other transactions will be available to us on commercially acceptable terms, or at all. Additionally, any debt or equity financing that may be obtained may result in substantial shareholder dilution and could have a material and adverse impact on our financial performance. We undertake no obligation to provide further disclosure regarding developments or the status of the process, our efforts to pursue implementation of potential Strategic Alternatives or Near-Term Operating Plans, or a decision to seek protection under the U.S. Bankruptcy Code and does not intend to make such disclosure unless and until events warrant disclosure, we have filed for protection under the U.S. Bankruptcy Code, or further disclosure is legally required.

Total revenues in the first three months of 2022 were $19.1 million compared to $17.9 million in the first three months of 2021. The increase in total revenues was largely driven by the addition of used vehicle sales revenue, a result of the CarZeus Purchase Transaction effective as of August 1, 2021. Partially offsetting the revenue increase is the continued negative impact of the supply chain disruptions,for new vehicle inventory and sales, coupled with declining consumer confidence and economic inflation. During these times, we have taken stepsworked to reduceshift our overallstrategy and to adapt to the changing market conditions within the automotive industry by increasing our focus to our core Leads, clicks and email products and services and away from non-core products and services, such as third-party product offerings. In addition, we have intentionally operated at lower levels of media spend in an attempt to match projected industry selling rates. We expect that the Company and its dealers and consumers alike will continue to contend with broader macroeconomic uncertainty, including uncertainties created by high inflation rates and the impact of Russia’s invasion of Ukraine.

-17-

As we continue to work with our traffic suppliers to optimize our search engine marketing ("SEM") methodologies and our high-quality traffic streams, we are also testing new traffic acquisition strategies and enhanced mobile consumer experiences. Further, we continue to improve the consumer experience of our pay per click product. Our plan is to continue to focus on growing audience, improving conversion, improving Leads and clicks delivery rates, expanding distribution, and increasing retail Dealer Leads and clicks budget capacity, subject to our efforts to conserve cash. We believe that this focus, will create a more efficient process for how active vehicle shoppers with a vehicle in mind can be matched with sellers that can meet the shoppers’ needs, which may create opportunities for improved quality of delivery and help strengthen our financial position.

Our lead and click generation effortsproducts have historically operated with limited visibility regarding future performance due to short sales cycles and corresponding costsa high rate of customer churn as customers are able to better alignjoin and leave our volumesplatform with industry demandlimited notice.  Our advertising business is also subject to seasonal trends, with the first quarter of the calendar year typically showing sequential decline versus the fourth quarter. These factors have historically contributed to volatility in our revenues, cost of revenues, gross profit, and consumer intent and abilitygross profit margin. We expect these trends to purchase or lease vehicles. We will continue to evaluate these and other cost reduction measures, and explore all options available to us, in order to minimizethrough the impactremainder of these events on us.

21

Table of Contents

Results of Operations2022.

 

 

-18-

Results of Operations

Three Months Ended June 30, 2021March 31, 2022 Compared to the Three Months Ended June 30, 2020December 31, 2021

 

The following table sets forth certain statement of operations data for the three-month periods ended June 30, 2021,March 31, 2022 and 2020 (certain balancesDecember 31, 2021. In accordance with Regulation S-K Item 303(c), as amended, we are providing a comparison of our March 31, 2022, period against the preceding quarter. We believe this comparison is useful for investors and calculations have been rounded for presentation):stakeholders, as it provides more clarity into our current year financial performance.

 

 

2021

 

 

% of

Total

Revenues

 

 

2020

 

 

% of

Total

Revenues

 

 

Change

 

 

% Change

 

 

2022

  

% of total

revenues

  

2021

  

% of total

revenues

  

$ Change

  

% Change

 

(Dollar amounts in thousands)

 

(Dollar amounts in thousands)

    

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lead generation

 

$15,225

 

81%

 

$14,263

 

84%

 

$962

 

7% $10,576  56

%

 $10,673  60

%

 $(97) (1

)%

Digital advertising

 

 

3,511

 

 

 

19

 

 

 

2,770

 

 

 

16

 

 

 

741

 

 

27

 

 4,137  21  3,415  19  722  21 

Used vehicle sales

  4,351   23   3,722   21   629   17 

Total revenues

 

18,736

 

100

 

17,033

 

100

 

1,703

 

10

 

 19,064  100  17,810  100  1,254  7 

Cost of revenues

 

 

12,179

 

 

 

65

 

 

 

10,993

 

 

 

65

 

 

 

1,186

 

 

 

11

 

Cost of revenues – lead generation and digital advertising

 10,954  58  10,770  61  184  2 

Cost of revenues – used vehicle sales

  4,206   22   3,508   20   698   20 

Gross profit

 

6,557

 

35

 

6,040

 

35

 

517

 

9

 

 3,904  20  3,532  19  372  11 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

2,103

 

11

 

2,026

 

12

 

77

 

4

 

 2,650  14  2,401  14  249  10 

Technology support

 

1,271

 

7

 

1,786

 

10

 

(515)

 

(29) 1,533  8  1,616  9  (83) (5)

General and administrative

 

3,089

 

17

 

2,901

 

17

 

188

 

6

 

 3,562  19  1,846  10  1,716  93 

Depreciation and amortization

 

 

196

 

 

 

1

 

 

 

559

 

 

 

3

 

 

 

(363)

 

 

(65)  65      74      (9)  (12)

Total operating expenses

 

 

6,659

 

 

 

36

 

 

 

7,272

 

 

 

42

 

 

 

(613)

 

 

(8)  7,810   41   5,937   33   1,873   32 

Operating loss

 

(102)

 

(1)

 

(1,232)

 

(7)

 

1,130

 

(92) (3,906) (21) (2,405) (14) (1,501) 62 

Interest and other income (expense), net

 

 

(202)

 

 

(1)

 

 

(142)

 

 

(1)

 

 

(60)

 

 

42

 

  (275)  (1)  (204)  (1)  (71)  (34)

Loss before income tax provision

 

(304)

 

(2)

 

(1,374)

 

(8)

 

1,070

 

(78) (4,181) (22) (2,609) (15) (1,572) 60 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  126            126   100 

Net loss

 

$(304)

 

 

(2)%

 

$(1,374)

 

 

(8)%

 

$1,070

 

 

 

(78)%

Net income (loss)

 $(4,307)  (22

)%

 $(2,609)  (15

)%

 $(1,698)  (65

)%

 

Lead generation.Lead generation revenues increased $1.0decreased $0.1 million, or 7%1%, in the secondfirst quarter of 2022 compared to the fourth quarter of 2021 compared to the second quarter of 2020 primarily asfrom a result of a one-time lump sum payment for the early termination of the new vehicle leads program by one of our manufacturing customers which approximated $0.5 million. Further contributing to this increase was an increasedecrease in the volume of automotive leads delivered to manufacturersManufacturers and other wholesale customers.

 

Digital advertising.Advertising. Digital advertising revenues increased $0.7 million, or 27%21%, in the secondfirst quarter of 2022 compared to the fourth quarter of 2021, a result of an increase in click revenue associated with increased click volume. The increase in click volume is attributed to a renewed focus on higher paying advertisers. 

-19-

Used vehicle sales. Used vehicle sales revenue increased $0.6 million, or 17%, in the first quarter of 2022 compared to the secondfourth quarter of 2020 primarily as a result of increased monetization of2021. The increase in used vehicle sales revenue is directly attributable to higher average sales prices for vehicles sold through our website traffic. Further contributing to this increase was our internal decision to reduce overall click generation efforts during the second quarter of 2020 to better align with industry demand.used vehicle acquisition business.

 

Cost of revenues. Revenues lead generation and digital advertising.  Cost of revenues consists of purchase request and traffic acquisition costs and other cost of revenues. Purchase request and traffic acquisition costs consist of payments made to our third-party purchase request providers, including internet portals and online automotive information providers. Other cost of revenues consists of SEM and fees paid to third parties for data and content, including search engine optimization activity, included on our websites; connectivity costs; development costs related to our websites; technology license fees; server equipment depreciation; and technology amortization directly related to our websites.Websites. Cost of revenues increased $1.2$0.2 million, or 11%2%, in the secondfirst quarter of 20212022 compared to the secondfourth quarter of 20202021 primarily due to increased SEM and traffic acquisition costs and click publisher costs.

 

Gross profit. Gross ProfitCost of revenues used vehicles. Used vehicle cost of revenue increased $0.5$0.7 million, or 9%20%, in the secondfirst quarter of 2022 compared to the fourth quarter of 2021. The increase in used vehicle cost of revenues is directly attributable to inefficiencies with staffing and inspection processes in our used vehicle acquisition segment during the first quarter of 2022 compared to the fourth quarter of 2021.

Gross Profit. Gross profit increased $0.4 million, or 11%, compared to the fourth quarter of 2021 comparedprimarily due to the second quarteraforementioned improvements in digital advertising. Partially offsetting the increase in gross profit is the increased cost of 2020. This was a direct result of our continued prioritization of gross profitability as opposed to the maximization ofrevenues for lead trafficgeneration and lead volume. Further contributing to this increase was the one-time lump sum payment for the early termination of the new vehicle leads program by one of our manufacturing customers which approximated $0.5 million.used vehicles.

 

Sales and marketing.Marketing.  Sales and marketing expense includeincludes costs for developing our brand equity, personnel costs and other costs associated with Dealer sales, website advertising and Dealer support. Sales and marketing expense in the secondfirst quarter of 20212022 increased $0.1$0.2 million, or 4%10%, compared to the secondfourth quarter of 2020 due2021 primarily tofrom an increase in SEM and advertising expense.employee expenses related to the expansion of CarZeus.

 

Technology support.Support. Technology support expense includes compensation, benefits, software licenses and other direct costs incurred by the Company to enhance, manage, maintain, support, monitor and operate the Company’s websites and related technologies, and to operate the Company’s internal technology infrastructure. Technology support expense in the secondfirst quarter of 20212022 decreased by $0.5$0.1 million, or 29%5%, compared to the secondfourth quarter of 2020, due to continued expense savings resulting2021 primarily from our internal cost reduction initiatives enacted as a result of the coronavirus pandemic on vehicle sales.decreased employee related expenses.

 

22

Table of Contents

General and administrative.Administrative. General and administrative expense consists of executive, financial, human resources and legal personnel and expenses, costs related to being a public company costs and bad debt expense. General and administrative expense in the secondfirst quarter of 2022 increased by $1.7 million, or 93%, from the fourth quarter of 2021 increased by $0.2 million, or 6%, from the second quarter of 2020 due primarily to thetiming of cost action initiatives taken in the second quarter of 2020 in responseaccruals related to the coronavirus pandemic. These prior-year cost reductions included reductionsCompany’s Annual Incentive Compensation plan as well as other increases in executive and board compensation, recruitment, and travel-relatedemployee related expenses.

 

Depreciation and amortization. Amortization.Depreciation and amortization expense in the secondfirst quarter of 2022 was comparable to the fourth quarter of 2021 decreased $0.4 million, or 65% from the second quarter of 2020 primarily dueas our property and equipment continues to assets that have been fully depreciated as compared to the same period in the prior year.depreciate.

 

Interest and Other Income (Expense), Net.Interest and other income (expense), net. Interestnet was ($0.3) million for the first quarter of 2022 compared to $(0.2) million for the fourth quarter of 2021. The increase in interest and other income (expense), was $0.2 is predominately attributable to the expiration of a licensing agreement in January 2022. The licensing agreement provided other income of $0.1 million of expense forduring the secondfourth quarter of 2021 compared to $0.1 million of expense in the second quarter of 2020.2021. Interest expense increased to $0.3 million in the second quarter of 2021 from $0.2 million in the second quarter of 2020, primarily due toincludes interest on outstanding borrowings under CNC Credit Agreement coupled withand the amortization of debt issuance costs.

 

Income taxes.Taxes. Income tax expense was zero$0.1 million in the secondfirst quarter of 2021 and 2020, respectively. Our2022. The Company did not have income tax rateexpense in the fourth quarter of 2021. Income tax expense for the second quarter of 2021ended March 31, 2022, differed from the federal statutory rate primarily due to operating losses that receive no tax benefit as a result of valuation allowance recorded for such losses.

 

 Six

-20-

Three Months Ended June 30, 2021March 31, 2022 Compared to the SixThree Months Ended June 30, 2020March 31, 2021

 

The following table sets forth certain statement of operations data for the six-monththree-month periods ended June 30,March 31, 2022 and 2021 and 2020 (certain amounts may not calculate due to rounding):

 

 

2021

 

 

% of

Total

Revenues

 

 

2020

 

 

% of

Total

Revenues

 

 

Change

 

 

% Change

 

 

2022

  

% of total

revenues

  

2021

  

% of total

revenues

  

$ Change

  

% Change

 

(Dollar amounts in thousands)

 

(Dollar amounts in thousands)

    

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lead generation

 

$29,411

 

80%

 

$32,723

 

79%

 

$(3,312)

 

(10)% $10,576  56

%

 $14,186  79

%

 $(3,610) (25

)%

Digital advertising

 

 

7,205

 

 

 

20

 

 

 

8,782

 

 

 

21

 

 

 

(1,577)

 

(18) 4,137  21  3,694  21  443  12 

Used vehicle sales

  4,351   23         4,351   100 

Total revenues

 

36,616

 

100

 

41,505

 

100

 

(4,889)

 

(12) 19,064  100  17,880  100  1,184  7 

Cost of revenues

 

 

24,250

 

 

 

66

 

 

 

30,108

 

 

 

73

 

 

 

(5,858)

 

 

(19)

Cost of revenues – lead generation and digital advertising

 10,954  58  12,071  68  (1,117) (9)

Cost of revenues – used vehicle sales

  4,206   22         4,206   100 

Gross profit

 

12,366

 

34

 

11,397

 

27

 

969

 

9

 

 3,904  20  5,809  32  (1,905) (33)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

4,303

 

12

 

4,158

 

10

 

145

 

3

 

 2,650  14  2,200  12  450  20 

Technology support

 

2,638

 

7

 

3,643

 

9

 

(1,005)

 

(28) 1,533  8  1,367  8  166  12 

General and administrative

 

6,221

 

17

 

6,844

 

16

 

(623)

 

(9) 3,562  19  3,132  18  430  14 

Depreciation and amortization

 

 

400

 

 

 

1

 

 

 

1,281

 

 

 

3

 

 

 

(881)

 

 

(69)  65      204   1   (139)  (68)

Total operating expenses

 

 

13,562

 

 

 

37

 

 

 

15,926

 

 

 

38

 

 

 

(2,364)

 

 

(15)  7,810   41   6,903   39   907   13 

Operating loss

 

(1,196)

 

(3)

 

(4,529)

 

(11)

 

3,333

 

(74) (3,906) (21) (1,094) (6) (2,812) (257)

Interest and other income (expense), net

 

 

1,202

 

 

 

3

 

 

 

(906)

 

 

(2)

 

 

2,108

 

 

 

(233)  (274)  (1)  1,404   8   (1,678)  (120)

Income (loss) before income tax provision

 

6

 

 

(5,435)

 

(13)

 

5,441

 

(100)

Loss before income tax provision

 (4,181) (22) 310  2  (4,490) (1,449)

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  126            126   100 

Net income (loss)

 

$6

 

 

—%

 

 

$(5,435)

 

 

(13)%

 

$5,441

 

 

 

(100)% $(4,307)  (22

)%

 $310   2

%

 $(4,617)  (1,489

)%

 

Lead generation.Lead generation revenues decreased $3.3$3.6 million, or 10%25%, in the first six monthsquarter of 20212022 compared to the first six monthsquarter of 20202021 primarily asfrom a resultdecrease in the volume of the impact of the coronavirus pandemic on vehicle sales. Thisautomotive leads delivered to Manufacturers and other wholesale customers. Further contributing to this decrease is partially offset by the one-time lump sum payment for the early termination of the new vehicle leads program by one of our manufacturingManufacturer customers which approximated $0.5 million.during the second half of 2021.

 

23

Table of Contents

Digital advertising.Advertising. Digital advertising revenues decreased $1.6increased $0.4 million, or 18%12%, in the first six monthsquarter of 20212022 compared to the first six monthsquarter of 2020 primarily2021, as a result of a decreasean increase in click revenue associated with decreasedfrom increased click volume. The decreaseincrease in click volume is attributed to the impacta renewed focus on higher paying advertisers. 

Used vehicle sales. As a result of the coronavirus pandemic.CarZeus Purchase Transaction that was effective on August 1, 2021, the Company recorded used vehicle sales of $4.4 million in the first quarter of 2022. The Company had no used vehicle sales in the first quarter of 2021.

 

Cost of revenues. Revenues lead generation and digital advertising.  Cost of revenues decreased $5.9 million, or 19%, in the first six monthsconsists of 2021 compared to the first six months of 2020 primarily due to decreased SEM, purchase requestsrequest and traffic acquisition costs and other costs of revenues. Partially offsetting this decrease was an increase in click publisher costs.

Gross profit. Gross Profit increased $1.0Purchase request and traffic acquisition costs consist of payments made to our third-party purchase request providers, including internet portals and online automotive information providers. Other cost of revenues consists of SEM and fees paid to third parties for data and content, including search engine optimization activity, included on our websites; connectivity costs; development costs related to our websites; technology license fees; server equipment depreciation; and technology amortization directly related to our websites. Cost of revenues decreased $1.1 million, or 9%, forin the first six monthsquarter of 20212022 compared to the first six monthsquarter of 2020. This was2021 in line with the decrease in lead generation revenues coupled with improved efficiencies in SEM, purchase request and traffic acquisition costs.

Cost of revenues used vehicles. As a direct result of our continued prioritization of gross profitability as opposed to the maximization of lead traffic and lead volume. Further contributing to this increaseCarZeus Purchase Transaction that was a reduction ineffective on August 1, 2021, used vehicle cost of revenues primarily driven by a reductionwas $4.2 million in cost-per-click.2022. The Company did not have any used vehicle cost of revenues in the first quarter of 2021.

 

Gross Profit. Gross profit decreased $1.9 million, or 33%, compared to 2021 due to generating lower levels of gross profit as a result of the used vehicle acquisition business, which did not exist in the prior year period.

-21-

Sales and marketing.Marketing.  Sales and marketing expense include costs for developing our brand equity, personnel costs and other costs associated with Dealer sales, website advertising and Dealer support. Sales and marketing expense in the first six monthsquarter of 20212022 increased $0.1$0.5 million, or 3%20%, compared to the first six monthsquarter of 20202021 primarily due primarily to an increase in SEM and advertising expense.headcount related to CarZeus coupled with an increase in marketing expenses.

 

Technology support.Support. Technology support expense includes compensation, benefits, software licenses and other direct costs incurred by the Company to enhance, manage, maintain, support, monitor and operate the Company’s websites and related technologies, and to operate the Company’s internal technology infrastructure. Technology support expense in the first six monthsquarter of 2021 decreased2022 increased by $1.0$0.2 million, or 28%12%, compared to the first six monthsquarter of 2020 due to continued expense savings resulting2021 primarily from our internal cost reduction initiatives enacted as a result of the coronavirus pandemic on vehicle sales.higher employee related expenses.

 

General and administrative.Administrative. General and administrative expense consists of executive, financial, human resources and legal personnel and expenses, public company costs and bad debt expense. General and administrative expense in the first six monthsquarter of 2022 increased by $0.4 million, or 14%, from the first quarter of 2021 decreased $0.6 million, or 9%, compared to the first six months of 2020 due primarily to reductions in recruitment, travel-related expenses, rent, severancefrom higher professional and consulting-related expenses.consulting fees.

 

Depreciation and amortization. Amortization.Depreciation and amortization expense in the first six monthsquarter of 2022 decreased by $0.1 million, or 68%, from the first quarter of 2021 decreased $0.9 million, or 69% compared to the first six months of 2020primarily due primarily to assets that have been fully depreciated as compared to the same period in the prior year.

 

Interest and Other Income (Expense), Net.Interest and other income (expense), net. Interest and other income (expense)net was $1.2$(0.3) million of income for the first six monthsquarter of 20212022 compared to $0.9$1.4 million of expense infor the first six monthsquarter of 2020.2021.  In the first quarter of 2021, we recorded $1.4 million of income associated with the forgiveness of our PPP Loan. Further contributing to the increasedecrease in interest and other income (expense) was an insurance reimbursement related to the January 2020 malware attack in which we recorded $0.2 million on our Unaudited Condensed Consolidated Statement of Operations. Interest expense decreased to $0.5 millionOperations in the first six monthsquarter of 2021 from $1.0 million in the first six months of 2020, due to the prior year write-off of our deferred financing fees associated with the revolving line of credit under the PNC Credit Facility.2021. Interest expense includes interest on outstanding borrowings and the amortization of debt issuance costs.

 

Income taxes.Taxes. Income tax expense was zero$0.1 million in the first quarter of 2022. The Company did not have income tax expense in the first quarter of 2021. Income tax expense for the first six months of 2021 and 2020, respectively. Our income tax rate for the first six months of 2021quarter ended March 31, 2022, differed from the federal statutory rate primarily due to operating losses that receive no tax benefit as a result of valuation allowance recorded for such losses.

 

Three Months Ended June 30, 2021 Compared to the Three Months Ended March 31, 2021

The following table sets forth certain statement of operations data for the three-month periods ended June 30, 2021, and March 31, 2021 (certain balances and calculations have been rounded for presentation). In accordance with Regulation S-K Item 303(c), as amended, we are providing a comparison of our June 30, 2021, period against the preceding quarter. We believe providing a sequential results-of-operations would be more useful for investors and stakeholders, as it will provide more clarity into our current year financial performance. For additional information related to the three months ended March 31, 2021, please refer to our first quarter Form 10-Q filed with the SEC on May 6, 2021.

24

Table of Contents

 

 

June 30,

2021

 

 

% of

Total

Revenues

 

 

March 31,

2021

 

 

% of

Total

Revenues

 

 

Change

 

 

%

Change

 

(Dollar amounts in thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lead generation

 

$15,225

 

 

 

81%

 

$14,186

 

 

 

79%

 

$1,039

 

 

 

7%

Digital advertising

 

 

3,511

 

 

 

19

 

 

 

3,694

 

 

 

21

 

 

 

(183)

 

 

(5)

Total revenues

 

 

18,736

 

 

 

100

 

 

 

17,880

 

 

 

100

 

 

 

856

 

 

 

5

 

Cost of revenues

 

 

12,179

 

 

 

65

 

 

 

12,071

 

 

 

68

 

 

 

108

 

 

 

1

 

Gross profit

 

 

6,557

 

 

 

35

 

 

 

5,809

 

 

 

32

 

 

 

748

 

 

 

13

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

2,103

 

 

 

11

 

 

 

2,200

 

 

 

12

 

 

 

(97)

 

 

(4)

Technology support

 

 

1,271

 

 

 

7

 

 

 

1,367

 

 

 

8

 

 

 

(96)

 

 

(7)

General and administrative

 

 

3,089

 

 

 

17

 

 

 

3,132

 

 

 

18

 

 

 

(43)

 

 

(1)

Depreciation and amortization

 

 

196

 

 

 

1

 

 

 

204

 

 

 

1

 

 

 

(8)

 

 

(4)

Total operating expenses

 

 

6,659

 

 

 

36

 

 

 

6,903

 

 

 

39

 

 

 

(244)

 

 

(4)

Operating loss

 

 

(102)

 

 

(1)

 

 

(1,094)

 

 

(6)

 

 

992

 

 

 

(91)

Interest and other income (expense), net

 

 

(202)

 

 

(1)

 

 

1,404

 

 

 

8

 

 

 

(1,606)

 

 

(114)

Income (loss) before income tax provision

 

 

(304)

 

 

(2)

 

 

310

 

 

 

2

 

 

 

(614)

 

 

(198)

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$(304)

 

 

(2)%

 

$310

 

 

 

2%

 

$(614)

 

 

(198)%

Lead generation. Lead generation revenues increased $1.0 million, or 7%, in the second quarter of 2021 compared to the first quarter of 2021 primarily as a result of a one-time lump sum payment for the early termination of the new vehicle leads program by one of our manufacturing customers which approximated $0.5 million. Further contributing to this increase was an increase in the volume of automotive leads delivered to manufacturers and wholesale customers when compared to the preceding quarter.

Digital advertising. Digital advertising revenues decreased $0.2 million, or 5%, in the second quarter of 2021 compared to the first quarter of 2021 primarily as a result of a decrease in click revenue associated with decreased click volume.

Cost of revenues. Cost of revenues increased $0.1 million, or 1%, in the second quarter of 2021 compared to the first quarter of 2021 primarily due to increased SEM, purchase requests and click publisher costs. Offsetting these increases was a decrease in traffic acquisition costs.

Gross profit. Gross Profit increased $0.7 million, or 13%, in the second quarter of 2021 compared to the first quarter of 2021. This was a direct result of the one-time lump sum payment for the early termination of the new vehicle leads program by one of our manufacturing customers which approximated $0.5 million.

Sales and marketing. Sales and marketing expense in the second quarter of 2021 decreased $0.1 million, or 4%, compared to the first quarter of 2021 due primarily to a decrease in commission related compensation.

Technology support. Technology support expense in the second quarter of 2021 decreased by $0.1 million, or 7%, compared to the first quarter of 2021 due primarily to a reduction in consulting related expenses.

General and administrative. General and administrative expense in the second quarter of 2021 did not materially change when compared to the first quarter of 2021.

Depreciation and amortization. Depreciation and amortization expense in the second quarter of 2021 did not materially change when compared to the first quarter of 2021.

Interest and other income (expense), net. Interest and other income (expense), was $0.2 million of expense for the second quarter of 2021 compared to $1.4 million of income in the first quarter of 2021. In the first quarter of 2021, we recorded $1.4 million of income associated with the forgiveness of our PPP Loan. Further contributing to the first quarter increase was an insurance reimbursement related to the January 2020 malware attack in which we recorded $0.2 million on our Unaudited Condensed Consolidated Statement of Operations.

25

Table of Contents

Income taxes. Income tax expense was zero in the second quarter of 2021 as well as the first quarter of 2021. Our income tax rate for the second quarter of 2021 differed from the federal statutory rate primarily due to operating losses that receive no tax benefit as a result of valuation allowance recorded for such losses.

Liquidity and Capital Resources

 

The table below sets forth a summary of our cash flows for the sixthree months ended June 30, 2021,March 31, 2022 and 2020:2021:

 

 

Six Months Ended

June 30,

 

 

Three Months Ended

March 31,

 

 

2021

 

 

2020

 

 

2022

  

2021

 

 

(In thousands)

 

 

(in thousands)

 

Net cash provided by (used in) operating activities

 

$708

 

$(1,869) $(2,327) $350 

Net cash used in investing activities

 

(770)

 

(388) (284) (66)

Net cash provided by financing activities

 

113

 

4,821

 

Net cash (used in) provided by financing activities

 (909) 134 

 

Our principal sources of liquidity are our cash and cash equivalent balances and borrowings under the CNC Credit Agreement.  Our cash and cash equivalents and restricted cash totaled $15.2$8.1 million as of June 30, 2021,March 31, 2022, compared to $15.1$11.6 million as of December 31, 2020.2021. As of June 30, 2021,March 31, 2022, we had a net incomeloss of approximately $6,000. The net income is primarily attributable to receiving approximately $1.4 million of PPP loan forgiveness coupled with $0.2 million of income associated with the insurance reimbursement related to the January 2020 malware attack.$4.3 million. We had cash provided byused in operations of $0.7$2.3 million for the sixthree months ended June 30, 2021.March 31, 2022. As of June 30, 2021,March 31, 2022, we had an accumulated deficit of $349.8$359.7 million and stockholders' equity of $17.4$9.0 million. 

 

We have developed a strategic plan focused on improving operating performance in the future that includes modernizing and upgrading our technology and systems, pursuing business objectives and responding to business opportunities, developing new or improving existing products and services and enhancing operating infrastructure.

Our objective is to achieve cash generation as a business; however, there is no assurance that we will be able to achieve this objective. TheWe have experienced significant historical operating losses and negative cash flows from operations. Additionally, other than the CNC Credit Agreement, is expected to be used to continue to partially fund operations.

which expires March 26, 2023, we have no committed source of funding from either debt or equity financings. Borrowings under the CNC Credit Agreement are dependent on, among other things, the level of our eligible accounts receivable We believe that given these factors, our current cash reservesposition and anticipated cash needs for continuing operating cash flows will be enoughactivities, there is substantial doubt about our ability to sustain operations for the next twelve months. If we are unsuccessful in meeting our objective to sustain cash generationcontinue as a business,going concern without obtaining additional sources of financing. Our ability to operate as a going concern is contingent upon the successful execution of the Strategic Alternatives and Near-Term Operating Plans (see Note 2 of the notes to these unaudited condensed financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q). On May 16, 2022, we may needsuspended our CarZeus operations and furloughed our employees within that segment in order to seekconserve cash. We are considering further actions and will implement these actions if and when appropriate to satisfy our future cash needs through private or public sales of securities, debt financings or partnering/licensing transactions; however, there isfurther conserve cash. There can be no assurance that we will be successful in satisfying our future cash needsachieving any Strategic Alternatives or the Near-Term Operating Plans. Further, there can be no assurances that new financings or other transactions will be available to continue operations.us on commercially acceptable terms, or at all.

-22-

 

Our future capital requirements will depend on many factors, including but not limited to, those discussed in this Item 2, Part II, Item 1A of this Quarterly Report on Form 10-Q and the risk factors set forth in Part I, Item 1A, “Risk Factors” of our 20202021 Form 10-K. To the extent that our existing sources of liquidity are insufficient to fund our future operations, we may need to engage in equity or additional or alternative debt financings to secure additional funds. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.

 

On July 30, 2021, we entered into a Credit Facility Amendment with CNC, to amend our existing Loan, Security and Guarantee Agreement with CNC initially entered into on March 26, 2020, as amended on May 18, 2020. For information concerning our CNC Credit Agreement, see Note 9 and Note 1211 included in the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

 

Net Cash (Used in) Provided by (Used in) Operating Activities.  Net cash used in operating activities in the three months ended March 31, 2022 of ($2.3) million resulted primarily from a net loss of ($4.3) million, a $0.6 million net decrease in net working capital, depreciation and amortization of $0.6 million, stock compensation expense of $0.5 million, amortization of right-of-use assets of $0.2 million and a $0.1 million change in deferred tax liabilities.

Net cash provided by operating activities in the sixthree months ended June 30,March 31, 2021 of $0.7$0.4 million resulted primarily from depreciation and amortization of $1.3$0.6 million, stock compensation expense of $0.9$0.5 million, and thenet income of $0.3 million, amortization of right-of-use assets of $0.5 million.$0.2 million, and $0.1 million net decrease in net working capital. Offsetting these non-cash chargesincreases was the forgiveness of the PPP loan of approximately $1.4 million coupled with a $0.6 million net increase in net working capital.million.

 

Net cash used in operating activities in the six months ended June 30, 2020, of $1.9 million resulted primarily from net loss of $5.4 million, offset by depreciation and amortization of $2.3 million, stock compensation expense of $1.0 million and a $0.2 million net increase in net working capital.

26

Table of Contents

Net Cash Used in Investing Activities.  Net cash used in investing activities was approximately $0.8 million induring the sixthree months ended June 30, 2021, which primarilyMarch 31, 2022, of $0.3 million was related to purchases of property and equipment and expenditures related to capitalized internal use software.of $0.2 million coupled with $0.1 million paid in conjunction with the acquisition of CarZeus. 

 

Net cash used in investing activities was approximately $0.4 million induring the sixthree months ended June 30, 2020, which primarilyMarch 31, 2021 of $0.1 million was related to purchases of property and equipment and expenditures related to capitalized internal use software.equipment. 

 

Net Cash (Used in) Provided by Financing Activities.  Net cash used in financing activities of ($0.9) million during the three months ended March 31, 202, primarily consisted of net borrowings on the Company’s credit facility.

Net cash provided by financing activities of $0.1 million during the sixthree months ended June 30,March 31, 2021 primarily consisted of $0.2 million of proceeds from the exercise of common stock offset by $0.1 million of net borrowings on the credit facility coupled with payments made under the financing agreement.options.

 

Net cash provided by financing activities of $4.8 million during the six months ended June 30, 2020, primarily consisted of $3.4 million net borrowings on the credit facility coupled with proceeds from a $1.4 million PPP Note.

ItemItem 3.Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

Item 4.Controls and Procedures

 

Our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively) have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Security Exchange Act of 1934, as amended, the “Exchange Act”Act) as of June 30, 2021,March 31, 2022, the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). They have concluded that, as of the Evaluation Date, these disclosure controls and procedures were effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities and would be disclosed on a timely basis. The Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed, and are effective, to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the rules and forms of the SEC.Securities and Exchange Commission. They have also concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act are accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

During the quarter ended June 30, 2021,March 31, 2022, there were no changes in our “internal control over financial reporting���reporting” (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materiallymaterial affect, our internal control over financial reporting.

 

27

Table of Contents

-23-

 

PART II. OTHER INFORMATION

 

Item 1A. Risk Factors

 

For information about the significant risks that could affect the Company's financial condition,Our future business, results of operations, liquidity,financial condition, earnings per share, cash flow or the trading price of our stock, individually and cash flows, see the sectioncollectively referred to as our (“financial performance,”) may be affected by a number of factors, including but not limited to those described in Part I, Item 1A of the 20202021 Form 10-K entitledunder the heading “Risk Factors,” as supplemented below,Factors” and under the sectionheading “Cautionary Note Concerning Forward-Looking Statements” in Part I, Item 2 of this quarterly report entitled “Forward-Looking Statements.”

Risks Associated with our Business OperationsQuarterly Report on Form 10-Q, any one or more of which could, directly or indirectly, cause the Company’s actual financial performance to vary materially from past, or from anticipated future, financial performance. Any of these factors, in whole or in part, could materially and Industry

We may be unable to increase Lead revenues and could continue to suffer declining revenues due to Dealer attrition or loss of Manufacturer customers.

We predominately derive our Lead revenues from Lead generation paid by Dealers and Manufacturers participating in our Lead programs. Our Lead generation revenues decreased $3.3 million, or 10%,adversely affect the Company’s financial performance. The risks described in the first sixth months of 2021 comparedForm 10-K are not the only risks we face. In addition to the first six months of 2020. Our abilityrisks set forth in the 2021 Form 10-K as well as the risks disclosed below, additional risks and uncertainties not currently known to increase revenues from sales of Leads is dependent on a mix of interrelated factors that include increasing Lead revenues by attracting and retaining Dealers and Manufacturers and increasing the number of high-quality Leads we sell to Dealers and Manufacturers. We are also focused on higher revenue Dealers that are more cost-effective to support. Our sales strategy is intended to result in more profitable relationships with our Dealers both in terms of cost to supply Leads and to support the Dealers. Dealer churn and termination of Manufacturer Lead programs impacts our revenues, and if our sales strategy does not mitigate the loss in revenues by maintaining the overall number of Leads sold by increasing sales to other Dealersus or Manufacturers while maintaining the overall margins we receive from the Leads sold, our revenues will decrease. We cannot provide any assurances that we willcurrently deem to be able to increase Lead generation revenues, prevent Dealer attrition or program terminations by Manufacturers or offset the revenues lost due to Dealer attrition or program terminations by Manufacturers by other means, and our failure to do so couldimmaterial may also materially and adversely affect our financial performance.

 

We may lose customers or quality Lead suppliers to our competitors.Financial, Accounting and Liquidity Risks

 

OurManagement has substantial doubt about the Companys ability to provide increased numbers of high-quality Leads to our customers is dependent on increasing the number of Internally Generated Leads and acquiring high-quality Non-Internally Generated Leads from third parties. Originating Internally Generated Leads is dependent on our ability to increase consumer traffic to our Company Websites by providing secure and easy to use websites with relevant and quality content for consumers and increasing visibility of our brands to consumers and by our SEM activities. We compete for Dealer and Manufacturer customers and for acquisition of Non-Internally Generated Leads with companies that maintain automotive Lead referral businesses that are very similar to ours. Many of these competitors are larger than us and have greater financial resources than we have. If we lose customers or quality Lead supply volume to our competitors, or if our pricing or cost to acquire Leads is adversely impacted, our financial performance will be materially and adversely affected.

We depend on Manufacturers, through our third-party sales channel and direct-to-Manufacturer wholesale programs, forcontinue as a significant amount of our revenues, andgoing concern. As a result, we may not be able to maintainfund operations unless we are able to obtain additional cash through private or grow these relationships.public sales of securities, debt financings or partnering/licensing transactions.

 

We dependAs of March 31, 2022, we had cash and cash equivalents of $3.8 million and restricted cash of $4.3 million. For the three months ended March 31, 2022, we had a net loss of $4.3 million and had net cash used in operations of $2.3 million. As of March 31, 2022, we had an accumulated deficit of $359.7 million and stockholders’ equity of $9.0 million. Based on Manufacturers,current cash forecasts, the Company does not believe that it currently has sufficient cash to sustain operations through our third-party sales channel and direct-to-Manufacturer wholesale programs for a significant amountthe entire remainder of our revenues. A decline in2022. Other than the CNC Credit Agreement, which expires March 26, 2023, the Company currently has no committed source of funding from either debt or equity financings. Borrowings under the CNC Credit Agreement are dependent on, among other things, the level of advertisingthe Company’s eligible accounts receivable.

As discussed in Part 1, Item 2 and in Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on our websites, reductionsForm 10-Q, as a result of the Company’s cash and liquidity position and other factors, the Company’s management believes that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date the financial statements contained in advertising rates, terminationsthis Quarterly Report on Form 10-Q are issued. The Special Committee is exploring Strategic Alternatives and the Company’s ability to fund its operations through the entire remainder of their third-party Lead programs by Manufacturers or any significant failure2022 is dependent upon success in implementing the Near-Term Operating Plans to develop additional sourcesaddress the Company’s near-term cash and liquidity needs. The Company’s ability to continue as a going concern is contingent upon the successful execution of advertising would cause our advertising revenues to decline, which couldStrategic Alternatives and the Near-Term Operating Plans, but the Near-Term Operating Plans may themselves have a material and adverse effect on ourthe Company’s financial performance. We periodically negotiate revisionsperformance and ability to existing agreements and these revisions could decrease our wholesale program revenues in future periods. A number of our third-party sales channel agreements and Manufacturer agreements may be terminated at any time without cause or upon expiration of the current term of the agreement. We may not be able to maintain our relationships with sales channel third parties or Manufacturers on favorable terms or find alternative comparable relationships capable of replacing revenues on terms satisfactory to us. If we cannot do so, our revenues would decline, which could haveoperate as a material adverse effect on our financial performance.

A reduction in the availability or access to inventory could adversely affect our business by increasing the costs of vehicles purchased.

Tradein Expert, Inc. (dba CarZeus) (“Tradein Expert”) acquires used vehicles primarily from individual consumers.going concern. There can be no assurance that sufficient inventory of used vehiclesthe Company will continue tobe successful in achieving either the Strategic Alternatives or Near-Term Operating Plans. Further, there can be no assurance that new financings or other transactions will be available to Tradein Expert, Inc.the Company on commercially acceptable terms, or at all. If we are unable to obtain additional debt or equity financing, we may be required to significantly reduce or cease operations and may seek protection under the U.S. Bankruptcy Code. 

Risks Associated with Ownership of Our Securities

You may experience future dilution as a result of future equity or convertible debt offerings.

As discussed in Part 1, Item 2 and in Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, in order for us to continue as a going concern, we will need to obtain additional debt or equity financing. If we raise additional funds through the sale of equity or convertible debt securities, the issuance of the securities will result in dilution to our stockholders, which dilution may be availablesubstantial. We may sell shares or other securities in any offering at prices acceptable to Tradein Expert. Tradein Expert might have to absorb a portion of any cost increases in inventory without being able to pass those increases to vehicle purchasers. Any reductionprice per share that is less than the price per share paid by investors in the availability of used vehicle inventorypast, and investors purchasing shares or increasesother securities in the costfuture could have rights superior to existing stockholders. The price per share at which we sell additional shares of vehicles could adversely affect Tradein Expert’s financial performance.

28

Table of Contents

The retailour common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the price per share paid in the past. In addition, if we were to issue securities in connection with our acquisition of complementary businesses, products or technologies, our stockholders would also experience dilution. In November 2020, we filed a shelf registration statement on Form S-3, which may be used vehicle industry is fragmented and highly competitive, whichto raise additional capital in the future through a variety of equity or debt offerings that could result in increased costsdilution to acquire vehicles, lower sales prices dueexisting stockholders. In addition, we have reserved shares for issuance under our equity-based incentive plans. The issuance and subsequent sale of these shares will be dilutive to competitive pressure.our existing stockholders and the trading price of our common stock could decline.

 

Tradein Expert competes principally with (i) the used vehicle retail operations

-24-

 

Risks Associated with Regulatory LawsItem6.Exhibits

 

Automotive Dealer/ Broker and Vehicle Advertising Laws.

All states comprehensively regulate vehicle sales and lease transactions, including strictlicensure requirements for automotive dealers (and, in some states, brokers) and vehicle advertising. But for Tradein Expert, our used vehicle buying and selling service that is licensed as a motor vehicle dealer in the State of Texas, we do not sell motor vehicles in any state. However, state regulatory authorities or third parties could take the position that some of the regulations applicable to dealers or to the manner in which motor vehicles are advertised and sold generally are directly applicable to our digital marketing and consumer referrals business. We believe that most of these laws and regulations specifically address only traditional vehicle purchase and lease transactions, not internet-based digital marketing and consumer referral programs such as our programs. If we determine that the licensing or other regulatory requirements in a given state are applicable to our digital marketing and consumer referrals business or to a particular marketing services program, we may elect to obtain required licenses and comply with applicable regulatory requirements. However, if licensing or other regulatory requirements are overly burdensome, we may elect to terminate operations or particular marketing services programs in that state, elect to not operate or introduce particular marketing services programs in that state or modify the service to comply with applicable law without being subjected to licensing requirements. In some states we have modified our marketing programs or pricing models to reduce uncertainty regarding our compliance with local laws.

29

Table of Contents

Item 6. Exhibits

 

Number

Description

2.1‡

Asset Purchase Agreement dated as of July 31, 2021, by and among Company, Tradein Expert, Inc., Car Acquisition, LLC, Carzuz.com LLC, McCombs Family Partners, Ltd., and Phil Kandera, incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on August 2, 2021 (SEC File No. 001-34761).

3.1

3.1

Seventh Amended and Restated Certificate of Incorporation of AutoWeb, Inc. (filed with the Secretary of the State of Delaware on June 22, 2020), incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on June 23, 2020 (SEC File No. 001-34761).

3.2

Seventh Amended and Restated Bylaws of AutoWeb, Inc. dated as of October 9, 2017, incorporated by reference to Exhibit 3.5 to the Current Report on Form 8-K filed with the SEC on October 10, 2017 (SEC File No. 001-34761) and Amendment No. 1 to Seventh Amended and Restated Bylaws of AutoWeb, Inc, effective upon expiration of the term of the Board of Directors’ Class III Directors upon commencement of the 2022 Annual Meeting of Stockholders of AutoWeb, Inc., incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on April 21, 2022 (SEC File No. 001-34761).

4.1

Tax Benefit Preservation Plan dated as of May 26, 2010, by and between Company and Computershare Trust Company, N.A., as rights agent, together with the following exhibits thereto: Exhibit A – Form of Right Certificate; and Exhibit B – Summary of Rights to Purchase Shares of Preferred Stock of Company, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on June 2, 2010 (SEC File No. 000-22239); Amendment No. 1 to Tax Benefit Preservation Plan dated as of April 14, 2014, between Company and Computershare Trust Company, N.A., as rights agent, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on April 16, 2014 (SEC File No. 001-34761); Amendment No. 2 to Tax Benefit Preservation Plan dated as of April 13, 2017, between Company and Computershare Trust Company, N.A., as rights agent, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on April 14, 2017 (SEC File No. 001-34761); Amendment No. 3 to Tax Benefit Preservation Plan dated as of March 31, 2020, between Company and Computershare Trust Company, N.A., as rights agent, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on April 2, 2020 (SEC File No. 001-34761); and Certificate of Adjustment Under Section 11(m) of the Tax Benefit Preservation Plan, incorporated by reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q for the Quarterly Period ended September 30, 2012 filed with the SEC on November 8, 2012 (SEC File No. 001-34761).

10.131.1*

Tax Benefit Preservation Plan Exemption Agreement dated as of May 12, 2021, by and between Company and Global Value Investment Corp., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on May 17, 2021 (SEC File No. 001-34761).

10.2

Irrevocable Proxy dated as of May 12, 2021, by and between Company and Global Value Investment Corp., incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on May 17, 2021 (SEC File No. 001-34761).

10.3

Second Amendment to and Consent Under Loan, Security and Guarantee Agreement dated as of July 30, 2021, by and between Company and CIT Northbridge Credit LLC, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on August 2, 2021 (SEC File No. 001-34761).

31.1*

Chief Executive Officer Section 302 Certification of Periodic Report dated August 5, 2021.May 16, 2022.

31.2*31.2*

Chief Financial Officer Section 302 Certification of Periodic Report dated August 5, 2021.May 16, 2022.

32.1*32.1*

Chief Executive Officer and Chief Financial Officer Section 906 Certification of Periodic Report dated August 5, 2021.May 16, 2022.

101.INS

XBRL Instance Document.Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Document.

Linkbase

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as(embedded within the Inline XRBL with applicable taxonomy extension information containedXBRL Document and include in Exhibit 101)

*

Filed or Furnished herewith.

Certain attachments to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K because the information contained therein is not material and is not otherwise publicly disclosed. AutoWeb will furnish supplementally copies of such attachments to the SEC or its staff upon request.

30

Table of Contents

 

SIGNATURES

-25-

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

AutoWeb, Inc.

 

 

 

 

 

Date: August 5, 2021

By:

/s/ Michael Sadowski

 

 

Michael Sadowski

Executive Vice President, Chief Financial Officer

(Principal Financial Officer)

 

 

 

 

Date: August 5, 2021May 16, 2022

By:

/s/ Cheray DuranCarlton Hamer

 

 

Cheray DuranCarlton Hamer

 

 

Executive Vice President, Corporate ControllerChief Financial Officer

 

 

(Principal Financial Officer)

Date: May 16, 2022

By:

/s/ Josh Barsetti

Josh Barsetti

Vice President, Controller

(Principal Accounting Officer)

 

31

 

-26-