- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------

FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2000

[_] 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 0-25577

----------------

AUTOWEB.COM, INC.
(Our exact name as specified in our charter)

Delaware 77-0412737
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3270 Jay Street, Santa Clara, CA 95054
(Address of principal executive offices)

(408) 970-9100
(Registrant's telephone number, including area code)

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

None

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

Common Stock, $0.001 Par Value
(Title of Class)

----------------

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 a shorter period if required), and
(2) has been subject to filing requirements for the past 90
days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based on the closing price as reported on the Nasdaq National
Market at March 22, 2001, was approximately $6.5 million.

The number of shares of the Registrant's Common Stock outstanding at March
22, 2001 was approximately 29,526,453 million shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement to be used in connection with
the Registrant's 2001 Annual Meeting of Stockholders are incorporated by
reference in Part III of this Form 10-K.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

TABLE OF CONTENTS

Page No.
--------

PART I

Item 1. Business.................................................. 3

Item 2. Properties................................................ 10

Item 3. Legal Proceedings......................................... 10

Item 4. Submission of Matters to a Vote of Security Holders....... 10

PART II

Item 5. Market for the Registrant's Common Equity and Related 11
Stockholder Matters......................................

Item 6. Selected Financial Data................................... 12

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 13

Item 7A. Quantitative and Qualitative Disclosures About Market 25
Risk.....................................................

Item 8. Financial Statements and Supplemental Data................ 27

Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure...................... 27

PART III

Item 10. Directors and Executive Officers of the Registrant........ 28

Item 11. Executive Compensation.................................... 28

Item 12. Security Ownership of Certain Beneficial Owners and 28
Management...............................................

Item 13. Certain Relationships and Related Transactions............ 28

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on 29
Form 8-K.................................................

Signatures................................................ 49

PART I

Item 1. Business

This Annual Report on Form 10-K, including the discussion of the Company's
business, contains forward-looking statements, within the meaning of Section
21E of the Securities Exchange Act of 1934, and Section 27A of the Securities
Act of 1933. Forward-looking statements involve risks and uncertainties that
could cause actual results to differ from anticipated results. In particular,
factors that could cause different results include the Company's failure to
remain in compliance with Nasdaq's other listing requirements in addition to
the minimum bid requirement, a Company decision not to pursue continued
listing on the Nasdaq National Market, a decision by the Nasdaq Listing
Qualifications Panel to delist the Company's common stock from the Nasdaq
National Market, and the Company's inability to find any strategic options to
maximize shareholder value. Other risks and uncertainties include changes in
competitive behavior or market forces, uncertainties regarding response from
the vehicle manufacturers, changes in the legal or regulatory environment,
changes or lack of changes in consumer preferences over time, technological
challenges and an inability to forecast future traffic and transactions. All
these forward-looking statements are based on information available to us on
the date hereof, and we assume no obligation to update any such forward-
looking statements. Other factors that could cause actual results to differ
from those projected in these forward-looking statements include without
limitation those discussed below in "Factors That May Affect Future Results."
Readers are urged to carefully review and consider the various disclosures
made by us in this report, and those detailed from time to time in our reports
and filings with the Securities and Exchange Commission, that attempt to
advise interested parties of the risks and factors that are likely to affect
our business.

Overview

Autoweb.com, Inc. ("Autoweb" or the "Company" or "we" or "us") is a leading
consumer automotive Internet service. Our Web site centralizes an extensive
collection of automotive-related commerce, content and community offerings to
assist consumers in researching, evaluating and buying vehicles and
automotive-related products and services such as insurance and financing. In
addition, we provide automotive content, Web hosting and development services
and sales automation services to vehicle manufacturers, dealers and online
partners. We were incorporated in California on October 3, 1995 as Downtown
Web, Inc. and reincorporated in Delaware on March 16, 1999 as Autoweb.com,
Inc. Our principal executive offices are located at 3270 Jay Street,
Santa Clara, California 95054, and our telephone number is (408) 970-9100.

The Autoweb.com site and purchase process are designed to provide consumers
with dedicated customer care, choice and the means to execute their buying
decisions through a process that we believe is faster, better and easier than
traditional alternatives. During 2000, we delivered approximately 1.6 million
vehicle inquiries to member dealers and 1.5 million purchase inquiries to
automotive-related vendors ("category partners"). We believe we have a
scalable business model characterized by diverse revenue sources and synergy
with online category, infrastructure and advertising partnerships.

Through our acquisition of Automotive Information Center ("AIC") in 1999,
we also provide consumers and automotive professionals with Autosite.com, a
20,000-page online vehicle buyer's guide and a rich suite of related services
information and original automotive editorial content.

Benefits to Consumers

Convenient Purchase Process. The Autoweb.com purchase process provides an
environment that allows consumers to research, compare and select new or pre-
owned vehicles conveniently in the privacy of their home or office. From our
Web site, a consumer can submit a purchase inquiry to up to two member dealers
in a geographic area. The consumer is contacted by a member dealer, usually
within 24 hours of submitting their request and; given information on the
vehicle of their choice and up-front pricing over the phone or via e-mail.

Informed Purchase Decision. Consumers obtain online access to a wide range
of comprehensive, objective, up-to-date information about vehicle models,
options and dealer costs at no charge. Information such as vehicle
specifications and other information provided by AIC's comprehensive database,
Kelley Blue Book pre-owned vehicle values and reviews from Autoweb's
Professional Review are available in a centralized location. Our tools aid
consumers in finding a vehicle by offering the ability to search for a vehicle
by features (i.e., price, category, safety features, interior features).
Consumers can look at a variety of photographs of each vehicle and do a side
by side comparison of look, specifications and vehicle options. Additionally,
at Autosite.com, consumers have access to a 20,000-page online vehicle buyer's
guide, services and information.

Availability of Automotive-Related Products and Services. Our Web site
offers consumers convenient access to a wide range of automotive-related
products and services, such as financing, insurance and maintenance, before
and after the purchase of a vehicle.

Benefits to Member Dealers

Efficient Marketing and Sales Process. By joining our member dealer
network, member dealers gain access to a large number of purchase-minded
consumers who have, in many instances, already chosen the vehicle they wish to
purchase. As a result, member dealers can complete the sales process more
quickly and efficiently, potentially enabling them over time to reduce their
labor and overhead costs. Also, through its SalesEnhancer tool, Autoweb.com
provides sales automation tools to help member dealers (and non-member
dealers) manage sales, especially those sales related to their Internet
marketing efforts.

Flexible Automotive eSolutions. Autoweb.com has designed a flexible package
of services that assists dealerships in targeting on-line customers, improving
management of their online sales department and improve their on-line buying
service effectiveness. Dealers can choose from two different pricing models to
fit their needs. Under our "pay-for-performance" program, dealers pay only
when we provide a qualified purchase inquiry to them. In addition, our program
permits member dealers to customize the geographic radius from which they
receive purchase inquiries based on their evaluation of which purchase
inquiries will be most likely to result in vehicle sales. Under our "flat fee"
program, dealers set a customized geographic radius from which they receive a
number of purchase inquiries and pay a flat rate for a 90 day period. The flat
rate is based on a number of leads to be received per month.

Purchase Inquiry Verification. We verify and append additional useful
information to over 2/3rds of the purchase inquiries processed through our Web
site. We filter out unsubstantiated purchase inquiries prior to sending them
on to our member dealers. This saves our dealer partners valuable time and
resources in tracking down dead-end leads or bad information.

Benefits to Others

Vehicle Manufacturers. Autoweb.com provides vehicle manufacturers with
access to a large number of purchase-minded consumers from an attractive
demographic base. Using the targeted nature of Internet advertising,
manufacturers can advertise their brand image effectively to specific subsets
of Autoweb.com consumers. Vehicle manufacturers can deliver advertisements to
consumers who are researching vehicles of direct competitors, thereby
increasing the likelihood of influencing their purchase decisions.
Furthermore, vehicle manufacturers can sponsor packaged Autoweb.com services
provided to member dealers to improve sales of given vehicle makes and models.
In addition, AIC, provides automotive manufacturers with the data, tools and
services used for internal planning, competitive analysis and development and
for re-publication on their Web sites.

Category Partners. We provide category partners with access to a large
number of purchase-minded consumers in the process of researching vehicles and
automotive-related products and services. Consumers seeking to purchase a
vehicle may wish to buy direct or may also require insurance, financing, car
accessories or related services from one of our online category partners.
Consumers seeking automotive information are also

often interested in or specifically researching competitive providers for
their current automotive-related services. Category partners can advertise to
these consumers or integrate their product with our Web site.

Portals and Publishers. Integrating content and decision tools with diverse
commerce choices and lifecycle offerings, Autoweb.com provides partners with
co- and ingredient-branded automotive Web modules and turnkey destinations.
AIC data and comparison tools are the basis for online new car buying sites,
media sites and search engine buying services, providing these partners with
high quality data and service cost efficiencies.

Strategy

Our objective is to be a leading consumer automotive Internet service. Our
strategy is to leverage our consumer focus, traffic volume, information
expertise (automotive data, content and tools) and collaborative partnerships
with dealers, vehicle manufacturers, portals and category partners to create a
robust, dynamic automotive site.

Consumer Focus

Optimize Consumer Experience. We provide the consumer with the data and
tools to research, compare and locate the car of their choice from a central
Web location.

Traffic Volume

Increase Consumer Traffic. As part of our efforts to increase our consumer
traffic, we continue to focus our online advertising on a variety of high
traffic Web sites. The Autoweb.com Affiliates program launched in the second
quarter of 1998, had approximately 3,000 Web sites participating in the
Program in 2000. Under this program, affiliated Web sites are paid a fee to
provide us with additional traffic to our purchase request process. We also
have revenue-sharing arrangements with companies such as America Online,
iWon.com, Homestore.com and Lycos relating to purchase inquiries submitted by
consumers through links between our Web site and the other company's Web
sites. We intend to expand our revenue-sharing and affiliate programs with
other selected Web sites in an effort to drive additional consumer traffic to
our site.

Information Expertise

Enhance and Broaden Content Offerings. We provide high quality content
which facilitates consumer buying decisions related to and including the
purchase of a vehicle. We work with leading automotive content providers to
provide consumers with expert advice and information on our Web site. We have
strong relationships with the majority of vehicle manufacturers, such as
General Motors and Ford, including data licensing and on-going Web-based
project using development of the AIC competitive comparison product database.
Furthermore, AIC currently has commercial relationships to support its data
licensing efforts with Yahoo!, Excite, and Lycos. We intend to broaden the
resources and services available to consumers by developing relationships with
other leading automotive content providers.

Increase Brand Awareness. Autoweb.com brand awareness is critical to our
being a leading consumer automotive Internet service. Our consumer branding
efforts are primarily focused on online advertising and infrastructure
partnerships with quality high traffic Web sites. We currently have long-term
marketing arrangements with America Online and Lycos and shorter term
advertising relationships with others. We ended a long-term marketing
relationship with Yahoo!, but continue to advertise on their Web site. Our
strategy is to increase our brand awareness further through continued online
advertising, co- and ingredient-branded infrastructure partnerships,
traditional media advertising and automotive industry focused media, ongoing
public relations efforts and expanded affiliate arrangements.

Expand and Enhance Member Dealer Network. We believe that enhancing the
quality and franchise distribution of our member dealer network is critical to
our success. Our objective is to have at least one member dealer representing
each vehicle manufacturer make within a reasonable driving distance of every
consumer in the United States, with most consumers given a choice of several
dealers within a given area. We also offer limited service in Canada.

Services

We currently offer the following services on our Web sites.

Name of Service Description
--------------- -----------

Commerce Services

Autoweb.com New Vehicle Program . Buy a new vehicle from our
network of certified member
dealers

Autoweb.com Pre-Owned Vehicle Program . Buy a vehicle listed in our
database of pre-owned inventory,
either from one of our member
dealers or from another consumer

Autoweb.com Sell Your Vehicle Program . List a pre-owned vehicle for sale

Autoweb.com Vehicle Insurance . Obtain insurance quotes and
purchase online with Insweb
Insurance service

Autoweb.com Vehicle Financing . Obtain finance quotes from ProAct

Advertising . Advertisers can advertise or
participate in sponsorships on
Autoweb.com and Autosite.com

Autosite.com Commerce Partners . Buy automotive and related
products and services from high
quality commerce partners

SalesEnhancer.com . A sales automation tool to help
member dealers (and non-member
dealers) manage sales from walk-
ins and those related to their
Internet marketing efforts

Autoweb.com Extended Warranty . Obtain extended vehicle warranty
quotes from Warranty Gold and
Warrantybynet.com

Autoweb.com Parts and Accessories . Obtain parts and accessories from
CarParts.com and a parts catalog
from JC Whitney

Autoweb.com Credit Reports . Purchase a personal credit report

Autoweb.com Lemon Check . Get a car screening and purchase
a Lemon Check report through
CarFax

Autoweb.com Service Center . Schedule vehicle service
appointments online in Atlanta,
Minneapolis/St. Paul, and Seattle

Content Services

Autosite.com . A 20,000-page online vehicle
buyer's guide and a rich source
of related services, information
and original automotive editorial
content

AutoSite Pro . An extensive source of
competitive and product
information for auto
manufacturers

AutoSite Pro Lite . A product information source and
data distribution point for print
and electronic media

Autoweb.com Vehicle Research . Identify a specific vehicle and
get the facts on the vehicle you
want. Get prices, specifications
and photos. Compare different
cars and price different options
. Browse vehicles by various
financial, geographic and class
criteria. Let Autoweb.com help
you decide on your next car. Get
prices, specifications and
photos. Compare different cars
and price different options

Name of Service Description
--------------- -----------

Autoweb.com Pre-Owned Vehicle Prices . Obtain Kelley Blue Book pre-owned
vehicle values

Autoweb.com Reviews . Obtain consumer reviews and
professional reviews from Autoweb
Professional Review, New Car Test
Drive and The Car Connection

Autoweb.com Automotive News . Read about the latest automotive
news from Reuters

Autoweb.com Automotive Guides . Use our troubleshooting guide to
pinpoint the symptoms your car is
exhibiting and learn possible
causes
. Use our maintenance and repair
section to obtain automotive tips
and hints provided by ASE
. Use our selling vs. trading-in
guide
. Use our selling checklist to
prepare your car for sale and
help you get your full asking
price

Autoweb.com Maintenance & Repair . Obtain automotive tips and hints
provided by ASE. Also reference
maintenance guide and repair
index

Autoweb.com Recalls & Service Bulletins . Obtain vehicle recall information
and technical service bulletins

Autoweb.com Loan/Lease Calculator . Calculate your monthly auto
expenses or compare loan vs lease
payments

Autoweb.com Weekly Publication ("Fast . Read weekly automotive editorials
Lane") from industry experts

Autoweb.com Interior 360(degrees) . View 360(degrees) photos of the
interiors of the top 200 vehicles
through IPIX.

Sales

Sales to Dealers. We believe that the quality and franchise distribution of
our member dealer network is critical to our success. Our sales force seeks to
ensure that our member dealer network provides coverage such that consumers
are always within a reasonable driving distance of at least one member dealer.
Our regional specialists analyze purchase inquiries from areas not currently
covered by our member dealer network and target dealers within these areas to
join our program. Dealers are chosen based on their ability to meet this
unsatisfied demand and their agreement to adhere to the Autoweb.com purchase
process. Regional Account Managers are compensated based on building
successful, long-term dealer relationships. The same sales force is
responsible for both the New and Pre-Owned Vehicle Programs, since our Pre-
Owned Vehicle Program is also primarily targeted to franchised dealers, as
opposed to independent dealers.

Sales to Vehicle Manufacturers and Category Partners. The Autoweb.com
business development group is responsible for expanding our commerce services
in the vehicle and automotive-related markets. Category partners are selected
based on their ability to provide relevant, quality services online that
enhance our value to consumers. Business development is focused on expanding
existing service categories and adding new consumer categories. Additionally,
AIC has a business development group focused on Autosite.com online commerce
partnerships and a sales group focused on vehicle manufacturer products and
services.

Sales to Advertisers. Our advertising sales effort is primarily targeted to
vehicle manufacturers and automotive-related mass market consumer vendors.
Campaign specifications are typically negotiated with the advertising agency
or directly with the manufacturer or automotive-related vendor.

Marketing

Our marketing strategy includes the following key points:

Build Our Brand. To date, we have focused primarily on online promotions
and print media. In addition, our regular advertising in the leading
automotive trade publications has helped to build dealer brand awareness.

Spend Efficiently on Advertising. Broad consumer interest in the automotive
category allows us to use a versatile advertising strategy. As a result, we
have been able to build our brand effectively through the efficient use of
online advertising and consumer promotional events including high profile,
high traffic Web sites such as America Online (and related properties), Yahoo!
and Lycos.

Increase Revenue Per Visitor. To increase revenue per visitor, we must
enhance and expand the content and increase the services available on our Web
site. We continue to expand our research content and tools and to add products
and services to aid consumers throughout the car ownership cycle.

Develop Strategic Relationships. In addition to our advertisements, we have
created revenue-sharing relationships with brand leaders such as America
Online, iWon.com and Lycos. We intend to continue to develop strategic
relationships that will provide not only brand exposure but also valuable
content for our Web site.

Expand the Autoweb.com Affiliates Program. The Autoweb.com Affiliates
Program allows other Web sites to link with the Autoweb.com Web site. The
affiliates receive a commission for traffic and consumers delivered to the
Autoweb.com site. This program generates brand awareness and revenue for a
lower relative cost. We intend to expand this program in the future.

Technology

We believe that we have built a robust, scalable user interface, a content
delivery and transaction processing system that is designed around industry
standard architectures and internally-developed proprietary software. Our
system records and collects operational data records regarding franchised
dealers, billing information, pre-owned vehicle listings and new and pre-owned
vehicle purchase inquiries. Our system also handles other aspects of the new
and pre-owned vehicle buying process, including submitting XML, e-mail and
facsimile copies of consumer purchase inquiries to member dealers and
submitting insurance and finance inquiries, as well as other inquiries to our
affiliated partners.

We have an online system available for member dealers, advertisers and
category partners to access relevant information. For example, member dealers
can access an Autoweb.com Web site to manage their pre-owned car inventory by
adding, modifying or updating their listings, as well as uploading pictures of
pre-owned cars. Member dealers can view their customer information and
generate reports based on their customers' survey responses. Autoweb.com
affiliates can also use our extranet to view activity summaries of their
account.

The Autoweb.com service provides 24 hour a day, seven day a week
availability, subject to occasional short maintenance periods and power
outages. The State of California is suffering an energy crisis and has
periodically implemented rolling black outs throughout the state. It is
anticipated that the energy crisis will continue into the near future
resulting in continued shortages of electricity and power outages. Our system
hardware is hosted and located at Exodus Communications, Inc. in Santa Clara,
California. Exodus provides for an independent back up power source in order
to prevent a break in service to the Internet. Our network is protected by a
firewall from Checkpoint. We have engineered redundancy into our systems. Both
firewalls and load balances are set up with "hot fail" switchover, minimizing
service impact if systems fail. Our system consists of Dell database servers
running Microsoft SQL and several Pentium-based Microsoft Internet servers
running on Windows NT operating systems. We use Allaire Cold Fusion for most
of our Web application development and delivery.

Competition

The market for the purchase of vehicles and automotive-related products and
services is intensely competitive, and we expect competition to increase
significantly, particularly on the Internet. Barriers to entry on the Internet
are relatively low, and we face competitive pressures from numerous companies.
Currently, we believe our most significant competitors are MSN CarPoint and
Autobytel.com. There are also a number of Web sites that offer vehicles,
particularly vehicle manufacturers' own Web sites and sites for electronic
classified ads. Additionally, there are numerous Web sites that offer vehicle
information and other content, as well as community offerings, directly to the
vehicle buying consumer or targeted audiences such as car collectors. We also
face competition from large dealer groups and traditional media companies,
such as newspaper, television and radio companies, many of which currently
operate a Web site. In addition to direct competitors, we also compete
indirectly with vehicle brokerage firms, discount warehouse clubs and
automobile clubs. Several auction Web sites auction vehicles on the Internet.
We also compete with a variety of automotive data, vehicle manufacturer and
dealer services companies.

We believe that the principal competitive factors in attracting consumers
to our Web site are:

. a positive vehicle purchasing experience for the consumer;

. brand awareness and loyalty;

. breadth of selections;

. ease of use;

. having adequate geographic coverage of member dealers;

. Web site functionality, responsiveness and information; and

. quality of content, service offerings and customer service.

We believe that the principal competitive factors in attracting member
dealers, category partners and advertisers include:

. the volume of our Web site traffic;

. our brand awareness and loyalty;

. the demographics of our consumers;

. the cost effectiveness of purchase inquiries we deliver; and

. the cost effectiveness of advertising on our Web site.

Many of our existing and potential competitors have longer operating
histories in the Internet market, greater name recognition, larger consumer
bases and significantly greater financial, technical and marketing resources
than we do. These competitors may be able to undertake more extensive
marketing campaigns for their brand, products and services, adopt more
aggressive pricing policies and make more attractive offers to potential
employees. Furthermore, our existing and potential competitors may develop
offerings that equal or exceed the quality of our offerings, or achieve
greater market acceptance, than ours. We cannot assure you that we will be
able to compete successfully against our current or future competitors or that
competition will not have a material adverse effect on our business, results
of operations and financial condition.

Proprietary Rights

We regard our patents, trademarks, trade secrets, and similar intellectual
property, including our rights to certain domain names, as critical to our
success. We rely upon trademark, patent and copyright law, trade secret
protection and confidentiality or license agreements with our employees,
customers, partners, and others to protect our proprietary rights. For
example, we have obtained trademark registration for Autoweb and

Autoweb.com. We attempt to ensure that the quality of our brand is maintained
by our licensees, however, our licensees may take actions that could
materially adversely affect the value of our proprietary rights or the
reputation of our products. Protection of the distinctive elements of
Autoweb.com may not be available under the law. We cannot guarantee that the
steps we have taken to protect our proprietary rights will be adequate.

We believe that issues relating to privacy and use of personal information
relating to Internet users are becoming increasingly important as the Internet
expands and its commercial use increases. We have adopted and posted to the
Web site a privacy policy concerning how we use information about our consumer
visitors and the extent to which others may have access to this information.
We use information about our consumer visits for internal purposes in order to
improve marketing and promotional efforts to analyze Web site usage
statistically and to improve content, product offerings and Web site layout.
Any refinements of our privacy policy will be clearly disclosed to our Web
site visitors.

Employees

As of December 31, 2000, we had 152 full-time employees, including 48 in
sales and marketing and 104 in general and administration. We have never had a
work stoppage, and no employees are represented under collective bargaining
agreements.

Item 2. Properties

Our principal administrative, marketing and product development facilities
are located in approximately 23,880 square feet of office space in Santa
Clara, California. The lease for this space expires on August 1, 2004 and does
not provide for a renewal option. We also lease office space in Westborough,
Massachusetts, Los Angeles, California and Detroit, Michigan. We believe that
these spaces will be adequate to meet our needs in the foreseeable future.

Item 3. Legal Proceedings

The Company is not aware of any pending or threatened legal proceedings
against it that, individually or in the aggregate, would have a material
adverse effect on its business, results of operations, or financial condition.
We may in the future be party to litigation arising in the course of our
business.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our security holders during the
fourth quarter of the year ended December 31, 2000.

PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

(a) Market for Registrant's Common Equity. The principal market for the
Company's common stock is the Nasdaq National Stock Market, where it is traded
under the symbol "AWEB." The Company's initial public offering of its common
stock was declared effective on March 22, 1999. The following table sets forth
for the periods indicated the high and low sales prices of our Common Stock as
reported by the Nasdaq National Stock Market:

High Low
------ -------

1999:
First Quarter (from March 23, 1999) ........................ $50.00 $ 19.63
Second Quarter.............................................. 41.25 11.50
Third Quarter............................................... 18.31 8.06
Fourth Quarter.............................................. 14.13 8.25

2000:
First Quarter .............................................. $12.00 $ 5.50
Second Quarter.............................................. 7.38 2.00
Third Quarter............................................... 2.75 1.03
Fourth Quarter.............................................. 1.75 0.19

2001:
First Quarter (through March 22, 2001, the latest
practicable trading date).................................. $0.56 $ 0.19

On March 22, 2001, the last reported sales price of the Company's common
stock on the Nasdaq National Stock Market was $0.22 per share. As of March 22,
2001, there were approximately 340 holders of record of the Common Stock.
Brokers and other financial institutions hold many such shares on behalf of
stockholders. We estimate the total number of stockholders represented by
these record holders to be approximately 9,400.

We have never declared or paid any cash dividends on our capital stock. We
currently anticipate that we will retain all future earnings for use in our
business and do not anticipate paying any cash dividends in the foreseeable
future.

(b) The Company did not make any unregistered sales of the Company's common
stock during the fourth quarter of fiscal 2000.

Item 6. Selected Financial Data

The following selected financial data should be read in conjunction with
Autoweb.com's financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Form 10-K.

Years Ended December 31,
---------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- ------- ------
(In thousands, except per share amounts)

Statements of operations data:
Net revenues................... $ 52,280 $ 32,792 $ 13,041 $ 3,492 $ 307
Loss from operations........... (36,863) (20,214) (11,425) (2,971) (835)
Net loss attributable to common
stockholders.................. (38,370) (18,153) (12,374) (3,196) (853)
Net loss per share attributable
to common stockholders:
Basic and diluted............ $ (1.36) $ (0.85) $ (1.58) $ (0.41) $(0.11)
Weighted average shares--
basic and diluted........... 28,291 21,425 7,850 7,794 7,497

December 31,
---------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- ------- ------
(In thousands)

Balance sheet data:
Cash, cash equivalents and
short-term investments........ $27,137 $30,284 $ 2,714 $ 1,819 $ 11
Restricted cash................ -- 2,550 -- -- --
Working Capital................ 40,021 39,607 800 773 (761)
Total assets................... 60,144 71,677 7,185 3,294 261
Long-term obligations, less
current portion............... -- 361 654 17 81
Mandatorily redeemable
convertible preferred stock... -- -- 12,969 5,261 158
Total stockholders' equity
(deficit)..................... 54,361 60,686 (11,661) (4,030) (884)

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Overview

Autoweb.com is a leading consumer automotive Internet service. Our Web site
centralizes an extensive collection of automotive-related commerce, content
and community offerings to assist consumers in researching, evaluating and
buying vehicles and automotive-related products and services such as insurance
and financing. In addition, we provide automotive content, Web hosting and
development services and sales automation services to vehicle manufacturers,
dealers and online partners. Through our acquisition of Automotive Information
Center ("AIC") in 1999, we now provide consumers and automotive professionals
with Autosite.com, a 20,000-page online vehicle buyer's guide and a rich suite
of related services information and original automotive editorial content.

We began selling our services to automobile dealers and launched the
Autoweb.com Web site for consumer use in October 1995. Currently our network
of member dealers (where each franchise and pre-owned location for a
particular vehicle manufacturer is defined as a member dealer) is
approximately 4700. We currently derive approximately 65% of our revenues from
fees charged to our member dealers in exchange for qualified purchase
inquiries. The revenue related to each fee is recognized in the month the
qualified purchase inquiry is provided to the member dealer. We also provide
online advertising space on the Autoweb.com site. Revenues from advertising
contracts, which typically have terms of less than three months, are
recognized as the contracts are fulfilled. In addition, we offer automotive-
related services on the Autoweb.com site through agreements with third-party
category partners. We derive revenues from third parties for the right to
provide its consumer services, such as automobile financing and insurance, on
our Web site. Revenues from these agreements are generally recognized ratably
over the terms of the agreements.

We incurred net losses of $38.4 million, $18.2 million and $11.5 million in
2000, 1999 and 1998, respectively. Our limited operating history makes it
difficult to forecast future operating results. We cannot be certain that net
revenues will increase at a rate sufficient to achieve and maintain
profitability. Even if we were to achieve profitability in any period, we
might fail to sustain or increase that profitability on a quarterly or annual
basis.

During 1999, the company acquired technology and other assets from
SalesEnhancer for approximately $3.7 million in cash. SalesEnhancer is an
internet based sales management application for the automotive industry. Also
during 1999, the company acquired certain assets and liabilities of AIC, a
division of the Gale Group, Inc., for 363,636 shares of common stock valued at
$3.3 million and $16.0 million in cash.

Results of Operations

Reclassification

Stock-based compensation expense has been reclassified to the relevant
functional expense categories in the years ended December 31, 1999 and 1998 to
conform with the presentation for the year ended December 31, 2000. The
reclassification has no impact on the previously reported operating loss or
net loss.

Net Revenues

Net revenues were $52.3 million, $32.8 million, and $13.0 million for the
years ended December 31, 2000, 1999, and 1998, respectively. The increase in
net revenues from 1999 to 2000 was primarily driven by increased net dealer
revenue fees which accounted for 63% of the increase, the fact that the fiscal
year ended December 31, 2000 contained twelve months of revenues from AIC
which accounted for 24% of the increase, with the majority of the remaining
increase driven by advertising. The increase in net revenues from 1998 to 1999
was driven by increased net dealer revenue fees which accounted for 58% of the
increase and increases in revenues from advertising accounting for a majority
of the remaining increase. The increases in net dealer fee revenues in 2000
and 1999 are primarily the result of increases in the number of purchase
inquiries that we provided to our member dealers and automotive-related
vendors ("category partners").

Cost of Net Revenues

Cost of net revenues were $6.7 million, $3.3 million, and $842,000 for the
years ended December 31, 2000, 1999, and 1998, respectively. The increase in
cost of revenues from 1999 to 2000 was primarily driven by increases in
partner lead fees which accounted for 58% of the increase and Web site
operation costs which accounted for a majority of the remaining increase. The
increase in cost of revenues from 1998 to 1999 was driven by increases in
partner lead fees, which accounted for 42% of the increase, web site
operations, which accounted for 42% of the increase and providing site content
information which accounted for a majority of the remaining increase. The
increases in 2000 and 1999 partner lead fees are related to the expansion in
the number of co-branded sites and affiliate relationships which has increased
the number of consumer purchase inquiries.

Sales and Marketing

Sales and marketing expenses were $53.6 million, $34.7 million, and $16.6
million for the years ended December 31, 2000, 1999, and 1998, respectively.
The increase in sales and marketing costs from 1999 to 2000 was primarily the
result of increases in on-line advertising which accounted for 81% of the
increase, increases in personnel costs, which accounted for 14% of the
increase as well as the fact that the year ended December 31, 2000 contained
twelve months of AIC sales and marketing costs. The increase in sales and
marketing costs from 1998 to 1999 was primarily driven by increases in on-line
advertising which accounted for 81% of the increase, and to a lesser extent,
increases in public relations costs, advertising in traditional media, trade
shows, and other promotions. Sales and marketing expenses include $525,000,
$1.5 million and $3.0 million of stock based compensation expense for the
years 2000, 1999 and 1998, respectively.

Product Development

Product development expenses were $8.9 million, $5.7 million, and $1.8
million for the years ended December 31, 2000, 1999, and 1998, respectively.
The increase in product development costs from 1999 to 2000 and from 1998 to
1999 increased primarily as a result of increased hiring of product
development personnel and, to a lesser extent, as a result of increased
occupancy costs. Product development expenses include ($26,000), $571,000 and
$1.2 million of stock based compensation expense for the years 2000, 1999 and
1998, respectively.

General and Administrative

General and administrative expenses were $13.0 million, $7.4 million, and
$5.3 million for the years ended December 31, 2000, 1999, and 1998,
respectively. The increase in general and administrative costs from 1999 to

2000 was primarily driven by the fact that general and administrative costs
for the year ended December 31, 2000, contained twelve months of AIC costs
which accounted for approximately 65% of the increase, the remaining increase
was primarily due to twelve months of SalesEnhancer costs. The increase in
general and administrative costs from 1998 to 1999 was driven by higher
personnel costs resulting from the hiring of administrative personnel which
accounted for 37% of the increase, higher information technology support
related to administrative functions, higher occupancy costs, and increases in
professional consulting fees. General and administrative expenses include $1.1
million, $207,000, and $1.5 million of stock based compensation expense for
the years 2000, 1999 and 1998, respectively.

Amortization of Intangible Assets

Amortization of intangible assets was $7.0 million and $1.9 million, for
the years ended December 31, 2000 and 1999, respectively. The increase in
amortization from 1999 to 2000 was primarily driven by twelve months
amortization related to the acquisition of AIC which accounted for 88% of the
increase with the remaining increase due to the acquisition of SalesEnhancer.
The amortization in 1999 was related to the acquisition of AIC which accounted
for 87% of the amortization, with SalesEnhancer accounting for the remaining
portion.

Interest and Other Income (Expense), Net

Interest and other income (expense), net were $1.6 million, $2.1 million,
and ($59,000), for the years ended December 31, 2000, 1999, and 1998,
respectively. The decrease in interest and other income (expense) net from
1999 to 2000 is primarily the result of a lower average investment balance
during 2000 driven primarily by our net loss for the year, partially offset by
the issuance of common stock for a total of $29.8 million. The increase in
interest and other income (expense), net from 1998 to 1999 was primarily
driven by a higher average investment balance during 1999 as a result of net
proceeds from our initial public offering.

Loss on investment

The loss on investment of $3.1 million in 2000 relates to an impairment
write-down of an investment in the equity securities of a private company.

Income Taxes

We recorded a net loss of $38.4 million, $18.2 million, and $11.5 million
for the years ended December 31, 2000, 1999, and 1998, respectively.
Accordingly, no provision for income taxes was recorded in any of these years.
The resulting tax deferred asset, representing primarily such net operating
loss carry forwards, has been reduced in full by a valuation allowance as it
is more likely than not that the deferred tax asset will not be realized.

Liquidity and Capital Resources

Net cash used in operating activities was $31.1 million, $24.2 million, and
$4.6 million for the years ended December 31, 2000, 1999, and 1998,
respectively. Net cash used in operating activities in 2000 was primarily due
to the net loss for the year of $38.4 million, partially offset by
amortization of intangible assets of $7.0 million related to the acquisitions
of AIC and SalesEnhancer. Net cash used in operating activities in 1999 was
primarily due to the net loss for the year, the increase in prepaid expenses
and other current assets, accounts receivable and restricted cash. Net cash
used in operating activities in 1998 was primarily due to net losses for the
year offset in part by the amortization of stock-based compensation.

Net cash (used in) provided by investing activities was $18.8 million,
($40.8) million, and ($1.2) million for the years ended December 31, 2000,
1999, and 1998, respectively. The increase in cash provided by investing
activities from 1999 to 2000 was primarily due to the maturity of short-term
investments purchased in 1999 which accounted for $41.8 million of the
increase while cash used of $16.0 million to purchase AIC in 1999

accounted for a majority of the remaining variance. The increase in cash used
in investing activities from 1998 to 1999 is primarily the result of the
purchase of short-term investments as well as cash paid in 1999 for the
acquisition of AIC.

Net cash provided by financing activities was $30.0 million, $71.7 million,
and $6.7 million for the years ended December 31, 2000, 1999, and 1998,
respectively. The decrease in cash provided by financing activities from 1999
to 2000 is primarily the result of net proceeds of $71.7 million received in
1999 from the issuance of common stock in our initial public offering. During
2000 the company issued common stock to both Lycos, Inc. and CarsDirect for a
total of $29.8 million in cash.

During the fourth quarter of 2000 we announced two initiatives to focus
resources and exercise fiscal control. First, during the fourth quarter we
reduced our workforce by approximately 25% in an effort to focus on content
and technology offerings, order fulfillment and customer relationship
management for the automotive industry. The annual savings from the reduced
workforce is estimated to be approximately $10 million. Second, we commenced
efforts to reduce our marketing costs through the restructure of certain
marketing agreements. These efforts are crucial if the Company is to reduce
its future operating loss. In this regard, we paid $13.3 million in March 2001
so that as of March 31, 2001 we have reduced our future marketing cash
obligations to $22.0 million, from $56.8 million at December 31, 2000. As our
marketing agreements are restructured, it is critical to our success that we
are able to replace any reduced or lost traffic.

We had no material commitments for capital expenditures at December 31,
2000. As of that date, we had total minimum lease obligations of $3.6 million
under certain non-cancelable operating leases. We believe that our current
cash and cash equivalents will be sufficient to meet our anticipated needs for
working capital and capital expenditures for at least the next 12 months.
Depending on our rate of growth and cash requirements, we may require
additional equity or debt financing to meet future working capital or capital
expenditure needs. There can be no assurance that such additional financing
will be available, or if available, that such financing can be obtained on
terms satisfactory to us.

At December 31, 2000, the total of our cash, cash equivalents, and short-
term equivalents were $27.1 million before the payment of the $13.3 million in
March 2001 associated with the restructuring of certain marketing agreements.
Our failure to raise capital when needed could have a material adverse effect
on our business, financial condition and operating results. Our future
liquidity may be impacted if our shares are delisted from the NASDAQ National
Market as discussed more fully below in "Factors That May Affect Future
Results".

Factors That May Affect Future Results

We have a limited operating history under our current business model

As part of our business strategy, we acquired AIC in 1999. As a result of
the acquisition, approximately 40% of our employees are now based outside of
our Santa Clara headquarters. If we are unable to effectively manage a large
and geographically dispersed group of employees, our business will be
adversely affected. In addition, we have a limited operating history and
unproven business model as a combined company. A number of risks and
challenges accompany our model, including:

. the difficulty of continuing to assimilate the operations and personnel
of the combined entities;
. the impairment or integration of relationships with employees or
customers as a result of any integration of the combined companies;
. the ability of the combined company to continue to generate revenue
streams from fees for consumer inquiries, advertising, automotive
content and technology;
. the difficulty in maintaining a consumer, dealer, OEM, and affiliate or
category partner customer base.

We may not be successful in addressing these risks or any other problems
encountered in connection with our current business model.

If we are unable to maintain our Nasdaq National Market Listing, the
liquidity of our common stock would be seriously limited.

On March 1, 2001, the Company received a Nasdaq Staff Determination
indicating that the Company has failed to comply with the minimum bid price
requirement for continued listing, and is subject to delisting from the Nasdaq
National Market. The Company has filed a request for a hearing before the
Nasdaq Qualifications Panel ("Panel") to review the staff determination. The
hearing date is currently scheduled for April 12, 2001.

There can be no assurance that the Panel will decide to allow the Company
to remain listed or that the Company's actions will prevent the delisting of
its common stock. The Company will not be notified until the Panel makes a
formal decision. Until then, the Company's shares will continue to trade on
the Nasdaq National Market. In the event the Company's shares are delisted
from the Nasdaq National Market, we will attempt to have our common stock
traded on the NASD over-the counter Bulletin Board.

If our common stock is delisted, it would seriously limit the liquidity of
our common stock and limit our potential to raise future capital through the
sale of our common stock, which could have a material adverse effect on our
business.

Our operating results are likely to fluctuate significantly

Our results of operations have varied widely in the past, and we expect
that they will continue to vary significantly from quarter to quarter due to a
number of factors described below and elsewhere in this Form 10-K.

Our revenue growth rates, if any, may not be sustainable. Any shortfall in
our revenues would immediately increase our operating losses and would
adversely affect the market price of our common stock. We continue to be
substantially dependent on member dealer fees. Therefore, our quarterly
revenues and operating results are likely to be particularly affected by the
level of member dealer fees in each quarter. If revenues fall below our
expectations, we will not be able to reduce our spending rapidly in response
to such a shortfall. This will adversely affect our operating results.

We believe that we may experience seasonality in our business. The seasonal
patterns of Internet usage and vehicle purchasing do not completely overlap.
Internet usage typically declines during the summer and certain holiday
periods, while vehicle purchasing in the United States is strongest in the
late spring and summer months. We cannot predict which seasonal pattern, if
any, will dominate.

Due to the foregoing factors and factors described elsewhere in this Form
10-K, we believe that quarter-to-quarter comparisons of our results of
operations are not a good indication of our future performance. It is likely
that our results of operations in some future quarter may be below the
expectations of public market analysts and investors. In this event, the price
of our common stock is likely to decline.

We have a history of net losses and expect net losses for the foreseeable
future

We have incurred net losses in each fiscal year since our inception,
including a net loss of $38.4 million in 2000. We had an accumulated deficit
of $74.2 million as of December 31, 2000. The size of future net losses will
depend, in part, on the rate of growth in our revenues from member dealer
fees, category partners fees, advertising sales and other e-commerce
activities. It is critical to our success that we continue to expend financial
and management resources to develop Autoweb.com brand awareness and loyalty
through marketing and promotion, expansion of our member dealer network,
development of our online content and expansion of our other services. As a
result, a significant portion of our operating expenses for the next several
years will continue in sales and marketing. With these expenses, we will need
to generate significant additional revenues to achieve profitability. As a
result, we may never achieve or sustain profitability, and, if we do achieve
profitability in any period, we may not be able to sustain or increase
profitability on a quarterly or annual basis.

Our business is dependent on the economic strength of the automotive industry

The economic strength of the automotive industry significantly impacts the
revenues we derive from our member dealers, vehicle manufacturers and category
partners, advertising revenues and consumer traffic to our Web site. The
automotive industry is cyclical, with vehicle sales fluctuating due to changes
in national and global economic forces. Vehicle sales in the United States
have been declining in the latter part of 2000. We cannot assure you that
vehicle sales will increase or stay at their current levels. A further
decrease in the current level of vehicle sales could have a material adverse
effect on our business, results of operations and financial condition.

We currently rely heavily on member dealers

We derive the majority of our revenues from member dealer fees (payments
from member dealers for each purchase inquiry that we provide to them), and we
expect to continue to do so for the foreseeable future. Member dealer fees
represented approximately 65%, 66%, and 78% of our net revenues in 2000, 1999,
and 1998 respectively. Consequently, our business is highly dependent on
consumers' use of Autoweb.com to purchase vehicles so that member dealers will
achieve a satisfactory return on their investment in the Autoweb.com program.

The success of our business strategy depends on our member dealers'
adherence to the Autoweb.com purchase process, including responding to
consumer purchase inquiries within 24 hours, providing a competitive, firm
quote to consumers during the initial communication, explaining the
Autoweb.com purchase process to the consumer and answering any consumer
questions. We devote significant efforts and resources to certifying and
supporting participating member dealers in these practices that are intended
to increase consumer satisfaction. Our inability to certify and support member
dealers effectively, or member dealers' failure to adopt such practices,
respond rapidly and professionally to vehicle purchase inquiries, or sell
vehicles in accordance with our marketing strategies, could result in low
consumer satisfaction and materially adversely affect our business, results of
operations and financial condition.

To maintain and increase our network of member dealers, we must reduce the
rate of turnover of our member dealers. Commencing in February 1998, we
introduced a new "pay for performance" pricing model and began actively to
convert our existing member dealers to this model. Prior to that time, all of
our member dealers were on a subscription model under which they paid a fixed
amount per month regardless of the number of purchase inquiries that we
provided to them. During 1998, we lost approximately 60% of the member dealers
that we had at the beginning of the year and converted approximately 30% to
the new pricing model. During 1998, we lost approximately 22% of the
performance-based member dealers that we converted or with which we first
entered into a contract in 1998. During 1999, we lost approximately 31% of the
performance-based member dealers that we had at the beginning of the year or
first entered into a contract during the year. During 2000, we lost
approximately 49% of the performance-based member dealers that we had at the
beginning of the year.

Attrition remains high and there is increased competition from the
automobile manufacturers and dealers entering this market on their own. We
cannot assure you that we will be able to reduce the level of this attrition,
and our failure to do so could materially and adversely affect our business,
results of operation and financial condition.

We must leverage our current technology assets and develop our information
services business.

Information and technology has a high value to our customers and potential
customers that may generate significant additional revenue. In order to
capitalize on this revenue stream, we must build on our existing data and
technology business and develop our information services. This undertaking
must be executed rapidly and is likely to be expensive and complex and require
additional technical expertise. Also, as we acquire users who rely upon us for
a wide variety of services, it becomes more technologically complex and costly
to retrieve, store and integrate data that will enable us to track each user's
preferences. Any loss of traffic, increased costs, inefficiencies or failures
to adapt our existing and new technologies and the associated adjustment to
our business plan would have a material effect on our business.

We need to build strong brand loyalty

We believe that maintaining and expanding the Autoweb brand is critical to
attracting consumers, member dealers, vehicle manufacturers, category partners
and advertisers. Furthermore, we believe that the importance of brand loyalty
will increase as low barriers to entry encourage the proliferation of Web
sites. We have spent considerable monies and resources on the establishment
and maintenance of the Autoweb brand and will continue to do so in the form of
online advertising campaigns, print media, and other forms of traditional
advertising. We may not be able to successfully maintain or enhance consumer
awareness of our brand and, even if we are successful in our branding efforts,
such efforts may be costly. If we are unable to maintain or enhance customer
awareness of the Autoweb brand in a cost-effective manner, our business,
operating results and financial condition would be materially and adversely
affected.

We depend on third-party relationships

We have entered into agreements with various category partners, some of
which require us to feature them exclusively in certain sections of our Web
site. Existing and future exclusive arrangements may prevent us from entering
into other content agreements, advertising or sponsorship arrangements or
other commercial relationships. Many companies that we may pursue for a
commercial relationship may also offer competing services. As a result, these
competitors may be reluctant to enter into commercial relationships with us.
Our business could be adversely affected if we do not maintain our existing
commercial relationships on terms as favorable as currently in effect, if we
do not establish additional commercial relationships on commercially
reasonable terms or if our commercial relationships do not result in the
expected increased use of our Web site.

Additionally, our sale of automotive content, Web hosting and development
services and sales automation services to vehicle manufacturers and online
partners is dependent upon a few primary relationships, including competitive
online automotive car buying services and various vehicle manufacturers.

We also depend on establishing and maintaining a number of commercial
relationships with high-traffic Web sites to increase traffic on Autoweb.com.
We currently have agreements with major Internet portals, such as America
Online and its related properties and Lycos. There is intense competition for
placements on these sites, and in the future we may not be able to enter into
distribution relationships on commercially reasonable terms or at all. Even if
we enter into distribution relationships with these Web sites, they themselves
may not attract significant numbers of consumers. Therefore, our Web site may
receive less than the number of additional consumers we expect from these
relationships. Moreover, we may have to pay significant fees to establish or
renew these relationships.

We also depend on establishing and maintaining a number of commercial
relationships with other companies. Our current relationships include:

. New Car Test Drive and ASE, under which we purchase content for use by
our consumers;

. America Online's Digital City, iWon.com, AutoNation, Carsdirect and
Carprices, under which we share the revenue generated from automotive
and related purchase inquiries submitted by consumers and directed to
our Web site through links between our Web site and the other company's
Web site; and

. members of the Autoweb.com Affiliates Program, each of which receives a
commission from us for traffic or vehicle purchase inquiries delivered
to us through a link to the affiliate's Web site.

We cannot assure you that we will be able to establish new agreements or
maintain existing agreements or that the above agreements can be renewed on
commercially acceptable terms.

We also may not be able to maintain relationships with third parties that
supply us with software or products that are crucial to our success, and the
vendors of these software or products may not be able to sustain any third-
party claims or rights against their use. Furthermore, we cannot assure you
that the software, services or products of those companies that provide access
or links to our services or products will achieve market

acceptance or commercial success. In addition, we cannot assure you that our
existing relationships will result in sustained business arrangements,
successful service or product offerings or the generation of significant
revenues for us. Failure of one or more of our relationships to achieve or
maintain market acceptance or commercial success or the termination of one or
more relationship could have a material adverse effect on our business,
results of operations and financial condition.

We need to continue to develop Autoweb.com content and service offerings

To remain competitive, we must continue to enhance and improve the ease of
use, responsiveness, functionality and features of the Autoweb.com site and
develop new services in addition to continuing to improve the consumer
purchasing experience. These efforts may require the development or licensing
of increasingly complex technologies. We may not be successful in developing
or introducing new features, functions and services, and these features,
functions and services may not achieve market acceptance or enhance our brand
loyalty. If we fail to develop and introduce new features, functions or
services effectively, it could have a material adverse effect on our business,
results of operations and financial condition.

We are dependent on certain key personnel

Our future success is substantially dependent on our senior management and
key technical personnel. If one or more of our key employees decided to leave
us, join a competitor or otherwise compete directly or indirectly with us,
this could have a material adverse effect on our business, results of
operations and financial condition. During the third and fourth quarters of
2000, we had several senior management changes. Meri E. Glade joined the
company in August 2000, as our Vice President, Legal Affairs and General
Counsel and Steve Cottrell joined the company in August 2000 as Vice
President, Sales. Samuel Hedgpeth, our President and Chief Executive Officer
resigned and was replaced by Jeffrey Schwartz, as President and Chief
Executive Officer. Mr. Schwartz had formerly served as our Vice President,
Strategic Development. Michael Schmidt joined the company in December 2000 as
our Chief Financial Officer. Any inability to reduce senior management
turnover could have a material adverse impact on our business, results of
operations and financial condition.

In addition, our future success depends on our continuing ability to retain
and attract highly qualified technical and managerial personnel. As of
December 31, 2000, we had 152 full-time employees. Wages for managerial and
technical employees are increasing and are expected to continue to increase in
the foreseeable future due to the competitive nature of the current employment
market, particularly in Northern California, the location of our headquarters.
We may be unable to retain key technical and managerial personnel or to
attract and retain additional highly qualified technical and managerial
personnel in the future. We have experienced difficulty from time to time
attracting the personnel necessary to support the growth of our business, and
we may experience similar difficulty in the future. Inability to attract and
retain the technical and managerial personnel necessary to support the growth
of our business could have a material adverse effect upon our business,
results of operations and financial condition.

We face risks associated with possible regulation under state or federal
franchise and brokering laws

In May 1998, the Texas Department of Transportation notified us that, in
their opinion, our performance-based pricing model is illegal, because it
makes us a broker as defined under Texas law. They have taken the position
that the fee paid to us by member dealers for each qualified purchase inquiry
is equivalent to a broker's fee and that we are arranging for two persons to
meet and enter into a transaction that involves the sale of a motor vehicle.
In September 1999 the Texas Department of Transportation sent a letter to the
same effect to our Texas member dealers, and as a result one of our largest
member dealer groups severed its business relationship with us. Shortly after
the Department's letter was sent to our Texas member dealers, we modified our
pricing model. To date the Department has taken no other action against us or
our member dealers based on our pricing model. A proposal to modify the
regulations governing how the Texas brokering law is enforced passed in
February 2000. We have received written notice from the Texas Department of
Transportation that our newly revised pricing model conforms to the new
regulations.

Other states, substantially all of which have laws that broadly define
brokerage activities, could determine that we are acting as a broker. If this
occurs, we may be required to comply with burdensome licensing requirements or
terminate our operations in those states. In either case, our business,
results of operations and financial condition could be materially and
adversely affected. We believe that our service does not qualify as a vehicle
brokerage activity and therefore that state broker licensing requirements do
not apply to us.

In addition, government authorities may take the position that motor
vehicle dealer franchise laws or related consumer protection or product
liability laws apply to aspects of our business, including advertising
vehicles on the Internet. We do not believe our present business is subject to
these laws, however, we have not sought a legal opinion regarding whether our
service complies with the laws and regulations regarding motor vehicle dealer
franchises in each state.

We generally face risks associated with possible regulation under vehicle
insurance, financing or other laws

State regulatory requirements may also include us within an industry-
specific regulatory scheme, such as those for the vehicle insurance or vehicle
financing industries. In the event that individual states' regulatory
requirements change or additional requirements are imposed on us, we may be
required to modify aspects of our business in those states in a manner that
might undermine the attractiveness of the Autoweb.com purchase process to
consumers, member dealers, vehicle manufacturers, category partners or
advertisers or require us to terminate operations in that state, either of
which could have a material adverse effect on our business, results of
operations and financial condition.

Government authorities may take the position that state or federal
insurance licensing laws apply to aspects of our business. As we introduce new
services and expand our operations to other countries, we will need to comply
with additional licensing and regulatory requirements.

We are subject to U.S. government regulation of the Internet, the impact of
which is difficult to predict.

There are currently laws and regulations directly applicable to the
Internet. Some of these laws are currently in flux. The applications of
existing laws and regulations to Autoweb.com relating to issues such as user
privacy, defamation, pricing, taxation, promotions, content regulation,
intellectual property ownership and infringement can be unclear. In addition,
we expect to be subject to new laws and regulations directly applicable to our
activities. Any existing or new legislation applicable to us could expose us
to substantial liability, including significant expenses necessary to comply
with such laws and regulations.

Several recently passed federal laws could have an impact on our affiliate
and other programs. The Digital Millennium Copyright Act is intended to limit
the liability of online services for listing or linking to third-party Web
sites that may include materials that infringe the copyrights or other rights
of others.

We adhere to industry privacy policies and practices concerning the use and
disclosure of user data. There are a large number of legislative proposals
before the United States Congress and various state legislative bodies
regarding privacy issues related to our business. It is not possible to
predict whether or when such legislation may be adopted, and whether certain
proposals, if adopted, could materially and adversely affect our business.

We depend on increased use of the Internet

Our future success and revenue growth depends substantially upon continued
growth in the use of the Internet. Consumers and businesses will likely widely
accept and adopt the Internet for conducting business and exchanging
information only if the Internet provides these consumers and businesses with
greater efficiencies and improvements in commerce and communication. In
addition, e- commerce generally, and the purchase of automotive and automotive
related products and services on the Internet in particular, must become
widespread. The Internet may prove not to be a viable commercial marketplace
generally, or, in particular, for vehicles and related products and services.
If use of the Internet does not continue to increase, our business, results of
operations and financial condition would be materially and adversely affected.

We depend on continued improvements in our systems and the Internet
infrastructure

Our ability to retain and attract consumers, member dealers, vehicle
manufacturers, category partners and advertisers, and to achieve market
acceptance of our services and our brand, depends significantly upon the
performance of our systems and network infrastructure. Any system or network
failure that causes interruption or slower response time of our services could
result in less traffic to our Web site and, if sustained or repeated, could
reduce the attractiveness of our services to consumers, member dealers,
category partners and advertisers. An increase in the volume of our Web site
traffic could strain the capacity of our technical infrastructure, which could
lead to slower response times or system failures. This would cause the number
of purchase inquiries, advertising impressions, other revenue producing e-
commerce offerings and our information and community offerings to decline, any
of which could hinder our revenue growth and our brand loyalty. In addition,
if traffic increases, we cannot assure you that our technical infrastructure,
such as a reliable network backbone with the necessary speed and data capacity
and the development of complementary products such as high-speed modems, will
be able to increase accordingly, and we face risks related to our ability to
scale up to expected consumer levels while maintaining performance. Further,
security and authentication concerns regarding the transmission of
confidential information over the Internet, such as credit card numbers, may
continue. Any failure of our
server and networking systems ability to handle current or higher volumes of
traffic would have a material adverse effect on our business, results of
operations and financial condition.

The recent growth in Internet traffic has caused frequent periods of
decreased performance, requiring Internet service providers and users of the
Internet to upgrade their infrastructures. If Internet usage continues to
increase rapidly, the Internet infrastructure may not be able to support the
demands placed on it by this growth and its performance and reliability may
decline. If outages or delays on the Internet occur frequently, overall
Internet usage or usage of our Web site could increase more slowly or decline.
Our ability to increase the speed with which we provide services to consumers
and to increase the scope of such services is limited by and dependent upon
the speed and reliability of the Internet. Consequently, the emergence and
growth of the market for our services is dependent on future improvements to
the entire Internet.

In addition, our operations depend upon our ability to maintain and protect
our computer systems, some of which are located at our corporate headquarters
in Santa Clara, California. We do have a backup disaster recovery program and
fully redundant systems for our service at an off-site location hosted by
Exodus Communications, Inc. While this offsite location does provide a
significant amount of security and scalability there is no guarantee that the
system is not vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures and similar events. Although we maintain insurance
against fires, floods, earthquakes and general business interruptions, the
amount of coverage may not be adequate in any particular case. The occurrence
of such an event could have a material adverse effect on our business, results
of operations and financial condition.

The Internet industry is characterized by rapid technological change

Rapid technological developments, evolving industry standards and consumer
demands, and frequent new product introductions and enhancements characterize
the market for Internet products and services. These market characteristics
are exacerbated by the emerging nature of the market and the fact that many
companies are expected to introduce new Internet products and services in the
near future. Our future success will significantly depend on our ability to
continually improve the vehicle purchasing experience, the addition of new and
useful services and content to our Web site, and the performance, features and
reliability of our Web site. In addition, the widespread adoption of
developing multimedia-enabling technologies could require fundamental and
costly changes in our technology and affect the nature, viability and
measurability of Internet- based advertising, which could adversely affect our
business, results of operations and financial condition.

We could face liability for information retrieved from or transmitted over
the Internet and liability for products sold over the Internet

We could be exposed to liability with respect to third-party information
that may be accessible through our Web site, links or car review services.
Such claims might assert, among other things, that, by directly or indirectly

providing links to Web sites operated by third parties, we should be liable
for copyright or trademark infringement or other wrongful actions by such
third parties through such Web sites. It is also possible that, if any third-
party content information provided on our Web site contains errors, consumers
could make claims against us for losses incurred in reliance on such
information.

We also enter into agreements with other companies under which any revenue
that results from the purchase of services through direct links to or from our
Web site is shared. Such arrangements may expose us to additional legal risks
and uncertainties, including local, state, federal and foreign government
regulation and potential liabilities to consumers of these services, even if
we do not provide the services ourselves. We cannot assure you that any
indemnification provided to us in our agreements with these parties, if
available, will be adequate.

Even to the extent such claims do not result in liability to us, we could
incur significant costs in investigating and defending against such claims.
The imposition upon us for potential liability of information carried on or
disseminated through our system could require us to implement measures to
reduce our exposure to such liability, which might require the expenditure of
substantial resources or limit the attractiveness of our services to
consumers, member dealers, category partners and others.

Our general liability insurance and our communications liability insurance
may not cover all potential claims to which we are exposed and may not be
adequate to indemnify us for all liability that may be imposed. Any imposition
of liability that is not covered by insurance or is in excess of insurance
coverage could have a material adverse effect on our business, results of
operations and financial condition.

Our intellectual property protection may be inadequate

Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and we can give no assurance regarding the
future viability or value of any of our proprietary rights. Despite the
precautions we have taken, it may be possible for a third party to copy or
otherwise obtain and use our proprietary information without authorization or
to develop similar technology independently.

We have registered in the United States the "Autoweb" and "Autoweb.com"
trademarks associated with the services we provide and have registered the
mark "Autoweb" in a foreign jurisdiction. We are aware, however, that another
party has registered the "Autoweb" mark internationally. We cannot guarantee,
therefore, that we will be able to continue to use the name "Autoweb" or
"Autoweb.com" worldwide in the future. If we were required to change our name
and adopt a new trademark, we would incur significant expenses related to
marketing a replacement trademark, and such a change would likely have a
material adverse effect on our business, results of operations and financial
condition.

We face risks associated with litigation

Litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets or trademarks or to determine
the validity and scope of the proprietary rights of others. Such litigation
might result in substantial costs and diversion of resources and management
attention. Furthermore, our business activities may infringe upon the
proprietary rights of others and other parties may assert infringement claims
against us, including patent claims or claims that arise from directly or
indirectly providing hyperlink text links to Web sites operated by third
parties. Moreover, from time to time, we may be subject to claims of alleged
infringement by us or our member dealers of the trademarks, service marks,
patents and other intellectual property rights of third parties. Such claims
and any resultant litigation, should it occur, might subject us to significant
liability for damages, might result in invalidation of our proprietary rights
and, even if not meritorious, could result in substantial costs and diversion
of resources and management attention and have a material adverse effect on
our business, results of operations and financial condition.

We depend on third party technology

We currently license from third parties certain technologies and
information incorporated into our Web site. As we continue to introduce new
services that incorporate new technologies and information, we may be required
to license additional technology and information from others. We cannot assure
you that these third-party technology and information licenses will continue
to be available to us on commercially reasonable terms, if at all.
Additionally, we cannot assure you that the third parties from which we
currently license our technology and information will be able to defend their
proprietary rights successfully against claims of infringement. Any failure to
obtain any of these technology and information licenses could result in delays
or reductions in the introduction of new features, functions or services. It
could also adversely affect the performance of our existing services until
equivalent technology or information can be identified, obtained and
integrated.

We may particularly be affected by general economic conditions

Purchases of new vehicles are typically discretionary for consumers and may
be particularly affected by negative trends in the general economy. The
success of our operations depends to a significant extent upon a number of
factors relating to discretionary consumer spending, including economic
conditions (and perceptions by consumers) affecting disposable consumer income
(such as employment, wages and salaries, business conditions, interest rates,
availability of credit and taxation) for the economy as a whole and in
regional and local markets where we operate. In addition, because the purchase
of a vehicle is a significant investment and is relatively discretionary, any
reduction in disposable income in general may affect us more significantly
than companies in other industries. In addition, our business strategy relies
on advertising by and agreements with other Internet companies. Any
significant deterioration in general economic conditions that adversely
affects these companies could also have a material adverse effect on our
business, results of operations and financial condition.

We have security risks

On occasion, some experienced programmers ("hackers") have attempted to
penetrate our network security. We expect that these attempts, some of which
have succeeded, will continue to occur from time to time. Because a hacker who
penetrates our network security could misappropriate proprietary information
or cause interruptions in our services, we might be required to expend
significant capital and resources to protect against, or to alleviate,
problems caused by hackers. Additionally, we may not have a timely remedy
against a hacker who is able to penetrate our network security. In addition to
purposeful security breaches, the inadvertent transmission of computer viruses
could expose us to litigation or to a material risk of loss. Such security
breaches and inadvertent transmissions could have a material adverse effect on
our business, results of operations and financial condition.

In offering certain online payment services, we may increasingly rely on
technology licensed from third parties to provide the security and
authentication necessary to effect secure transmission of confidential
information, such as consumer credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments may result in a compromise or breach of the algorithms that we
use to protect our consumers' transaction data or our software vendors'
products. Any well-publicized compromise of security could deter use of the
Internet in general or use of the Internet to conduct transactions that
involve transmitting confidential information or downloading sensitive
materials.

Power shortages in California may adversely affect us.

We conduct most of our operations in the state of California and rely on a
continuous power supply to conduct operations. California's current energy
crisis could substantially disrupt our operations and increase our expenses.
California has recently implemented, and may in the future continue to
implement, rolling blackouts throughout the state. Although state lawmakers
are working to minimize the impact, if blackouts interrupt our power supply,
we may be temporarily unable to continue operations at our facilities. Any
such interruption in

our ability to continue operations at our facilities could delay the
development of our products and disrupt communications with our customers,
suppliers or manufacturing operations. Future interruptions could damage our
reputation and could result in lost revenue, either of which could
substantially harm our business and results of operations. Furthermore,
shortages in wholesale electricity supplies have caused power prices to
increase. If wholesale prices continue to increase, our operating expenses
will likely increase which will have a negative effect on our operating
results.

We have risks associated with international operations and expansions

A part of our long-term strategy is to establish Autoweb.com and AIC in
international markets. However, the Internet, or our commerce, content and
community services model, may not become widely accepted in any market. In
addition, we expect that the success of any additional foreign operations we
initiate will be substantially dependent upon our member dealers, category
partners and content services. We may experience difficulty in managing
international operations as a result of failure to identify an effective
foreign partner, competition, technical problems, local laws and regulations,
distance and language and cultural differences. Our international partners may
not be able to successfully market and operate our community model in foreign
markets. There are also certain risks inherent in doing business
internationally, including:

. cultural and business practices differences;

. fluctuations in currency exchange rates;

. political issues;

. legal and economic instability;

. seasonal reductions in business activity in certain other parts of the
world; and

. potentially adverse tax consequences.

One or more of such factors could have a material adverse effect on our
future international operations and, consequently, on our business, results of
operations and financial condition.

Recent Accounting Pronouncements

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for all fiscal
quarters of all years beginning after June 15, 1999. SFAS No. 133 requires
that all derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it is, the type
of hedge transaction. In June 1999, the FASB issued SFAS No. 137, which
delayed the effective date of SFAS No. 133 to fiscal years beginning after
June 15, 2000. The adoption of SFAS No. 133 did not have a material impact on
our financial statements.

Item 7A. Quantitative And Qualitative Disclosures About Market Risk

We considered the provisions of Financial Reporting Release No. 48,
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and
Qualitative Information about Market Risk Inherent in Derivative Financial
Instruments, Other Financial Instruments and Derivative Commodity
Instruments." We had no holdings of derivative financial or commodity
instruments at December 31, 2000. However, we are exposed to financial market
risks, including changes in foreign currency exchange rates and interest
rates. The majority of our revenue, expenses and capital expenditures are
transacted in U. S. dollars.

The objectives of our investment policy are the safety and preservation of
invested funds, and liquidity of investments that is sufficient to meet cash
flow requirements. Our policy is to place our cash, cash equivalents, and
investments available for sale with high credit quality financial
institutions, commercial companies, and government agencies in order to limit
the amount of credit exposure. Our investment policy also provides that our
investment portfolio must not have an average portfolio maturity of beyond one
year and that we must maintain liquidity positions. Our investment policy
prohibits investments in industries and speculative activities and requires
investments be denominated in U.S. dollars.

Item 8. Financial Statements And Supplemental Data

The Company's Financial Statements and Notes thereto are set forth in Part
IV, Item 14 of this Form 10-K.

Quarterly Financial Data

The following tables summarize the quarterly financial data for the last two
fiscal years (in thousands, except per share data):

Fiscal Year 2000 Quarter Ended
----------------------------------------------
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------

Net revenues................... $15,794 $15,193 $ 11,509 $ 9,784
Loss from operations........... (7,546) (6,463) (11,179) (11,675)
Net loss....................... (7,228) (6,000) (10,779) (14,363)
Basic and diluted net loss per
share......................... (0.28) (0.21) (0.37) (0.50)

Fiscal Year 1999 Quarter Ended
----------------------------------------------
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------

Net revenues................... $ 5,744 $ 7,021 $ 8,422 $ 11,605
Loss from operations........... (2,479) (3,745) (5,154) (8,836)
Net loss....................... (2,440) (2,954) (4,350) (8,409)
Basic and diluted net loss per
share......................... (0.25) (0.12) (0.18) (0.30)

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this item is incorporated by reference from our
definitive Proxy Statement to be filed in connection with our 2001 Annual
Meeting of Stockholders pursuant to Regulation 14A.

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements

INDEX TO FINANCIAL STATEMENTS

Page
----

Report of Independent Accountants.......................................... 30
Balance Sheets............................................................. 31
Statements of Operations................................................... 32
Statements of Stockholders' Equity (Deficit)............................... 33
Statements of Cash Flows................................................... 35
Notes to Financial Statements.............................................. 36

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Stockholders of Autoweb.com, Inc.

In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Autoweb.com, Inc.
at December 31, 2000 and 1999 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of Autoweb.com,
Inc.'s management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Jose, California
January 22, 2001, except for
Note 6 as to which the date
is March 21, 2001.

AUTOWEB.COM, INC

BALANCE SHEETS
(In thousands, except share and per share amounts)

December 31,
-----------------
2000 1999
-------- --------

ASSETS
------

Current assets:
Cash and cash equivalents................................. $ 27,137 $ 9,387
Restricted cash........................................... -- 2,550
Short-term investments.................................... -- 20,897
Accounts receivable, net of allowance for doubtful
accounts of $926 and $1,176 in 2000 and 1999,
respectively............................................. 8,518 8,415
Prepaid expenses and other current assets................. 10,149 8,988
-------- --------
Total current assets.................................. 45,804 50,237
Property and equipment, net................................. 2,285 2,462
Purchased technology and other intangible assets, net....... 11,878 18,448
Deposits and other assets................................... 177 530
-------- --------
Total assets.......................................... 60,144 71,677
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Accounts payable and other accrued expenses............... $ 3,705 $ 6,787
Accrued payroll and related expenses...................... 991 2,582
Deferred revenue.......................................... 773 935
Current portion of notes payable.......................... 314 326
-------- --------
Total current liabilities............................. 5,783 10,630
Notes payable, net of current portion....................... -- 361
-------- --------
Total liabilities..................................... 5,783 10,991
Commitments (Note 6)
Stockholders' equity:
Preferred stock, $0.001 par value:
Authorized: 5,000,000 shares
Issued and outstanding: none in 2000 and 1999........... -- --
Common stock, $0.001 par value:
Authorized: 60,000,000 shares
Issued and outstanding: 29,539,682 shares in 2000 and
25,584,025 shares in 1999 ............................. 26 22
Additional paid-in capital................................ 131,761 104,233
Notes receivable from stockholder......................... (786) (786)
Unearned stock-based compensation......................... (2,489) (7,002)
Accumulated deficit....................................... (74,151) (35,781)
-------- --------
Total stockholders' equity ........................... 54,361 60,686
-------- --------
Total liabilities and stockholders' equity............ $ 60,144 $ 71,677
======== ========

The accompanying notes are an integral part of these financial statements.

AUTOWEB.COM, INC.

STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

Years Ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------

Net revenues ................................... $ 52,280 $ 32,792 $ 13,041
Cost of net revenues ........................... 6,670 3,290 842
-------- -------- --------
Gross profit ............................... 45,610 29,502 12,199
-------- -------- --------
Operating expenses:
Sales and marketing .......................... 53,620 34,668 16,592
Product development .......................... 8,892 5,674 1,762
General and administrative ................... 12,988 7,431 5,270
Amortization of intangible assets ............ 6,973 1,943 --
-------- -------- --------
Total operating expenses ................... 82,473 49,716 23,624
-------- -------- --------
Loss from operations ........................... (36,863) (20,214) (11,425)
Interest and other income (expense), net ....... 1,561 2,061 (59)
Loss on investment.............................. (3,068) -- --
-------- -------- --------
Net loss ................................... (38,370) (18,153) (11,484)
Accretion of mandatorily redeemable convertible
preferred stock to redemption value ........... -- -- (890)
-------- -------- --------
Net loss attributable to common stockholders ... $(38,370) $(18,153) $(12,374)
======== ======== ========
Net loss per share:
Basic and diluted ............................ $ (1.36) $ (0.85) $ (1.58)
Weighted average shares--basic and diluted.... 28,291 21,425 7,850

The accompanying notes are an integral part of these financial statements.

AUTOWEB.COM, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
for the years ended December 31, 2000, 1999 and 1998
(In thousands)

Mandatorily
Redeemable
Convertible
Preferred Notes Total
Stock Common Stock Additional Receivable Unearned Stockholders'
--------------- ------------- Paid-in From Stock-Based Accumulated Equity
Shares Amount Shares Amount Capital Stockholders Compensation Deficit (Deficit)
------ ------- ------ ------ ---------- ------------ ------------ ----------- -------------

Balances, January 1,
1998 .................. 5,466 $ 5,261 7,812 $ 2 $ 111 $ -- $ -- $ (4,143) $ (4,030)
Accretion of Series A
mandatorily redeemable
convertible preferred
stock to redemption
value ................ 32 (32) (32)
Accretion of Series B
mandatorily redeemable
convertible preferred
stock to redemption
value ................ 499 (499) (499)
Issuance of Series C
mandatorily redeemable
convertible preferred
stock, net of costs of
$50 .................. 2,370 4,965
Accretion of Series C
mandatorily redeemable
convertible preferred
stock to redemption
value ................ 317 (317) (317)
Issuance of Series D
mandatorily redeemable
convertible preferred
stock, net of costs of
$93 .................. 860 1,942
Accretion of Series D
mandatorily redeemable
convertible preferred
stock to redemption
value ................ 42 (42) (42)
Repurchase of Series A
mandatorily redeemable
convertible preferred
stock................. (628) (89) (1,111) (1,111)
Exercise of stock
options .............. 205 57 57
Issuance of common
stock in exchange for
intangible assets .... 15 13 13
Issuance of common
stock in exchange for
services ............. 15 50 50
Issuance of common
stock in exchange for
services ............. 16 54 54
Issuance of warrant to
purchase common stock
...................... 79 79
Unearned stock-based
compensation ......... 11,007 $(11,007)
Amortization of
unearned stock-based
compensation ......... 5,601 5,601
Net loss .............. (11,484) (11,484)
------ ------- ------ --- -------- ----- -------- -------- --------
Balances, December 31,
1998 .................. 8,068 $12,969 8,063 $ 2 $ 11,371 $-- $ (5,406) $(17,628) $(11,661)
------ ------- ------ --- -------- ----- -------- -------- --------

The accompanying notes are an integral part of these financial statements.

AUTOWEB.COM, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)--(Continued)
for the years ended December 31, 2000, 1999, and 1998
(In thousands)

Mandatorily
Redeemable
Convertible Notes Total
Preferred Stock Common Stock Additional Receivable Unearned Stockholders'
---------------- -------------- Paid-in From Stock-Based Accumulated Equity
Shares Amount Shares Amount Capital Stockholders Compensation Deficit (Deficit)
------ -------- ------ ------ ---------- ------------ ------------ ----------- -------------

Balances, December 31,
1998 ................. 8,068 $ 12,969 8,063 $ 2 $ 11,371 $ -- $(5,406) $(17,628) $(11,661)
Issuance of common
stock for cash
pursuant to the
Initial Public
Offering, net of
offering expenses
of $1,142 ........... 5,550 6 71,113 71,119
Issuance of Series D
mandatorily
redeemable
convertible preferred
stock pursuant to
exercise of stock
option .............. 396 938 (686) (686)
Exercise of common
stock option for cash
and note receivable
..................... 350 1 174 (100) 75
Net exercise of common
stock warrants ...... 146
Issuance of common
stock pursuant to the
conversion of
mandatorily
redeemable
convertible preferred
stock ............... (8,464) (13,907) 10,891 11 13,896 13,907
Issuance of common
stock in conjunction
with the purchase of
the assets of The
Automotive
Information Center
..................... 363 1 3,327 3,328
Exercise of stock
options ............. 221 1 513 514
Unearned stock-based
compensation ........ 3,839 (3,839)
Amortization of
unearned stock-based
compensation ........ 2,243 2,243
Net loss ............. (18,153) (18,153)
------ -------- ------ --- -------- ----- ------- -------- --------
Balances, December 31,
1999 ................. -- -- 25,584 22 104,233 (786) (7,002) (35,781) 60,686
Issuance of common
stock for cash....... 3,785 4 29,781 29,785
Issuance of common
stock pursuant to the
employee stock
purchase plan........ 157 547 547
Exercise of stock
options.............. 43 83 83
Repurchase of unvested
stock options........ (29) (11) (11)
Unearned stock-based
compensation,
cancellations........ (2,872) 2,872
Amortization of
unearned stock-based
compensation, net.... 1,641 1,641
Net loss.............. (38,370) (38,370)
------ -------- ------ --- -------- ----- ------- -------- --------
Balances, December 31,
2000.................. -- $ -- 29,540 $26 $131,761 $(786) $(2,489) $(74,151) $ 54,361
====== ======== ====== === ======== ===== ======= ======== ========

The accompanying notes are an integral part of these financial statements.

AUTOWEB.COM, INC.

STATEMENTS OF CASH FLOWS
(In thousands)

Years Ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ $(38,370) $(18,153) $(11,484)
Adjustments to reconcile net loss to net cash
used in operating activities:
Issuance of common stock in exchange for
services..................................... -- -- 133
Depreciation and amortization of tangible
assets....................................... 1,892 1,139 551
Amortization of intangible assets............. 6,975 1,943 --
Write down of intangible assets............... -- -- 13
Provision for doubtful accounts............... (255) 678 433
Amortization of stock-based compensation...... 1,641 2,243 5,601
Change in assets and liabilities:
Restricted cash............................. 2,550 (2,550) --
Accounts receivable......................... (156) (5,617) (2,130)
Prepaid expenses and other current assets... (859) (7,797) (612)
Deposits and other assets................... 354 (530) --
Accounts payable and other accrued
expenses................................... (3,081) 4,294 1,741
Accrued payroll and related expenses........ (1,591) 1,570 460
Deferred revenue............................ (162) (1,428) 740
-------- -------- --------
Net cash used in operating activities...... (31,062) (24,208) (4,554)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments.............. -- (20,897) --
Maturity of short-term investments.............. 20,897
Acquisition of property and equipment........... (1,717) (2,205) (1,238)
Acquisition of purchased technology............. (398) (1,707) --
Cash paid for The Automotive Information
Center......................................... -- (16,000) --
-------- -------- --------
Net cash provided by (used in) investing
activities................................ 18,782 (40,809) (1,238)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease
obligations and notes payable.................. (373) (270) (61)
Proceeds from borrowings under long-term debt
facility....................................... -- -- 934
Proceeds from issuance of mandatorily redeemable
convertible preferred stock.................... -- 252 6,957
Proceeds from issuance of common stock, net of
issuance costs................................. 30,403 71,708 57
Repurchase of mandatorily redeemable convertible
preferred stock................................ -- -- (1,200)
-------- -------- --------
Net cash provided by financing activities.. 30,030 71,690 6,687
-------- -------- --------
Net increase in cash and cash equivalents........ 17,750 6,673 895
Cash and cash equivalents, at beginning of year.. 9,387 2,714 1,819
-------- -------- --------
Cash and cash equivalents, at end of year........ $ 27,137 $ 9,387 $ 2,714
-------- -------- --------
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of preferred stock to common stock... $ -- $ 13,907 $ --
Unearned stock-based compensation related to
stock option grants (cancellations)............ (2,872) 3,839 11,007
Accretion of mandatorily redeemable convertible
preferred stock................................ -- -- 890
Revenue and advertising expense from barter
transactions................................... 139 773 733
Acquisition of intangibles in exchange for
common stock................................... 13
Issuance of common stock warrant/common stock in
exchange for services.......................... -- -- 50
Net issuance of common stock warrants........... -- 221 --
Issuance of Series D mandatorily redeemable
convertible preferred stock pursuant to
exercise of option for note receivable......... -- 686 --
Issuance of common stock pursuant to exercise of
option for note receivable..................... -- 100 --
Investment in equity securities................. 3,068 -- --
Impairment of investment........................ (3,068) -- --
Liabilities assumed in connection with
acquisition of The Automotive Information
Center:
Fair value of assets acquired................. $ 20,270
Cash paid..................................... (16,000)
Common stock issued........................... (3,328)
--------
Liabilities assumed........................... $ 942
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for interest.......... $ 87 $ 155 $ 101
Taxes paid during the year...................... -- 1 1

The accompanying notes are an integral part of these financial statements.

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS

1--The Company

Autoweb.com, Inc. (the "Company") was incorporated in California on October
3, 1995 as Downtown Web, Inc. and reincorporated in Delaware on March 16,
1999. The Company provides a consumer automotive Internet service, whereby its
Web site enables consumers to select new or pre-owned vehicles from member
dealers, and the Company also offers services that enable consumers to
purchase automotive-related products and services such as insurance and
financing. The Company also provides, through its division AIC, automotive and
on-line research tools for automotive manufacturers, major web portals and
other industries. The Company markets and sells it's services primarily in
North America and operates in one business segment.

The Company sold 5,550,000 shares of common stock at $14.00 per share upon
completing its initial public offering on March 26, 1999 and raised $71.1
million, net of underwriting discounts and commissions and offering expenses.

The Company has sustained net losses and negative cash flows from
operations since its inception. The Company's ability to meet its obligations
in the ordinary course of business is dependent on its ability to achieve
profitable operations and/or raise additional financing through public or
private equity financings or other sources of financing to fund operations.
However, there is no assurance that the Company will achieve profitable
operations or that it will be able to raise adequate financing from other
sources. Management believes that its current funds will be sufficient to
enable the Company to meet its planned expenditures through at least December
31, 2001. If anticipated operating results are not achieved, management has
the intent and it believes that it has the ability to delay or reduce
expenditures so as not to require additional financial resources, if such
resources were not available on terms acceptable to the Company.

2--Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
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. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents, restricted
cash, short-term investments and accounts receivable. Cash, cash equivalents,
restricted cash, and short-term investments are deposited with seven high
quality financial institutions in the United States. The Company maintains
allowances for potential credit losses and such losses have been within
management's expectations. The Company's accounts receivable are derived from
revenues earned primarily from customers located in the United States and the
Company performs ongoing credit evaluations of its customers' financial
condition. The Company generally requires no collateral from its customers and
maintains an allowance for doubtful accounts receivable based on the expected
collectability. There was no customer which represented 10% or more of the net
revenues for the years ended December 31, 2000, 1999 and 1998 or which
represented 10% or more of accounts receivable at December 31, 2000 and 1999.

Fair Value of Financial Instruments

Carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, restricted cash, short-term investments,
accounts receivable, accounts payable and other accrued liabilities,
approximate fair value due to their relatively short maturities.

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original
maturities or remaining maturities at the time of purchase of three months or
less to be cash equivalents. Cash equivalents consist primarily of deposits in
money market funds.

Investments

The Company considers all investments purchased with an original maturity
or remaining maturities at the balance sheet date of less than twelve months
to be short-term investments. At December 31, 2000, the Company had no short-
term or long-term investments. The Company classifies, at the time of
acquisition, its investments into categories in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." The Company classifies
its investments as available-for-sale, which are reported at fair market
value. Unrealized gains and losses at December 31, 1999 were not material.
Realized gains and losses, declines in value of securities judged to be other
than temporary, and interest and dividends on all securities are included in
interest and other income.

Property and Equipment

Property and equipment are stated at cost and are depreciated on a straight
line basis over the estimated useful lives of the assets, generally two years.
Maintenance and repairs are charged to expense when incurred. When assets are
sold or retired, the cost and related accumulated depreciation are removed
from the accounts and any resulting gain or loss is included in operations.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets in accordance
with statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed of" ("SFAS No. 121"). SFAS 121
requires recognition of impairment of long-lived assets in the event of the
net book value of such assets exceeds the future undiscounted cash flows
attributable to such assets.

During 2000, the Company recorded an impairment charge of $3.1 million
related to declines in the value of equity securities in a private company
which was deemed to be other than temporary.

Intangible Assets

Intangible assets include acquired technology, trade names, assembled
workforce and customer base. Goodwill resulting from acquisitions is recorded
based upon the excess of the purchase price and the net tangible and
intangible assets acquired. The fair value of intangible assets has been
determined by an independent appraiser. Intangible assets are amortized on a
straight-line basis over periods ranging from three to four years.

Revenue Recognition

Revenues are derived primarily from fees charged to member dealers for each
qualified purchase inquiry provided to them by the Company. The revenue
related to the fee is recognized at the time the qualified purchase inquiry is
forwarded to the member dealer provided that no significant obligations for
the Company remain and collection of the resulting receivable is probable. The
Company initially charged member dealers on a "subscription" model basis,
whereby each member dealer paid an initial set-up fee and/or a flat monthly
fee in exchange for receiving qualified purchase inquiries from the Company.
Under the former subscription model, revenue from both the initial and/or
monthly fee was initially deferred and then recognized ratably over the term
of the agreement, generally one year. Revenue from the former subscription
model largely ceased in 1999.

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Company also derives revenues from the data, tools and services it
provides to automotive manufacturers, major Web portals and other industries.
Revenue is recognized ratably over the period the tools and services are made
available to the customer.

The Company also derives revenues from the sale of banner advertisements,
which is recognized ratably in the period in which the advertisement is
displayed, provided that no significant obligations for the Company remain and
collection of the resulting receivable is probable. To the extent that minimum
guarantee page deliveries are not met, the Company defers recognition of the
corresponding revenues until the guaranteed page deliveries are achieved.
Barter advertisement transactions are recorded at their estimated fair value
based on the Company's historical experience of selling similar advertising
for cash. Barter revenue represented 0.3%, 2.4% and 5.6% of net revenues for
the year ended December 31, 2000, 1999 and 1998, respectively.

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 or SAB 101, Revenue Recognition in Financial
Statements, which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements filed with the Commission. SAB
101 outlines the basic criteria that must be met to recognize revenue and
provides guidance for disclosures related to revenue recognition policies. On
March 24, 2000 and June 26, 2000, the SEC issued Staff Accounting Bulletin No.
101A and No. 101B, respectively, which extended the transition provisions of
SAB 101 until no later than the fourth quarter of fiscal years beginning after
December 15, 1999. The Company has reviewed its revenue recognition policies
and determined that it is in compliance with SAB 101.

Product Development Costs

Product development costs are expensed as incurred. Costs incurred in the
design, creation and maintenance of content, graphics and user interface of
the Company's Web site are expensed as incurred in accordance with SOP 98-1
"Accounting for the Costs of Computer Software Development or Obtained for
Internal Use." Costs incurred in the development of application and
infrastructure of the Web sites are capitalized and amortized over the useful
life of the web sites. In 2000 and 1999, the costs that could be capitalized
were insignificant.

Advertising

Advertising costs are expensed as incurred and totaled $36.1 million, $20.6
million and $5.8 million during the years ended December 31, 2000, 1999 and
1998, respectively and have been included in sales and marketing expense in
the statements of operations.

Stock-Based Compensation

In 1997, the company adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company has elected to continue
accounting for stock-based compensation issued to employees using Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees" Under APB No. 25, and related interpretations, including Financial
Interpretation No. 44, compensation expense is based on the difference, if
any, on the date of the grant between the fair value of the Company's stock
and the exercise price. Stock issued to non-employees has been accounted for
in accordance with SFAS No. 123 and valued using the Black-Scholes model.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." This statement prescribes the use of the
liability method whereby deferred tax assets and liability account balances
are calculated at the balance sheet date using current tax laws and rates in
effect. Valuation allowances

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

are established when necessary to reduce deferred tax assets where it is more
likely than not that the deferred tax asset will not be realized.

Net Loss Per Share

The Company computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share" and SEC Staff Accounting Bulletin ("SAB") 98. Under the
provision of SFAS No. 128, basic net loss per share is computed by dividing
the net loss attributable to common stockholders for the period by weighted
average number of common shares outstanding during the period. Diluted net
loss per share is computed by dividing the net loss for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent shares, composed of common shares
issuable upon the exercise of stock options and warrants and upon conversion
of Series A, Series B, Series C and Series D mandatorily redeemable
convertible preferred stock, are included in the diluted net loss per share
computation to the extent such shares are dilutive.

Years ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------
(In thousands, except per
share amounts)

Numerator:
Net loss ...................................... $(38,370) $(18,153) $(11,484)
Accretion of mandatorily redeemable convertible
preferred stock to redemption value:
Series A .................................... -- -- (32)
Series B .................................... -- -- (499)
Series C .................................... -- -- (317)
Series D .................................... -- -- (42)
-------- -------- --------
Net loss attributable to common stockholders
.............................................. $(38,370) $(18,153) $(12,374)
======== ======== ========
Denominator:
Weighted average shares--basic and diluted .... 28,291 21,425 7,850
-------- -------- --------
Net loss per share--basic and diluted ......... $ (1.36) $ (0.85) $ (1.58)
-------- -------- --------
Antidilutive securities, including options,
warrants and mandatorily redeemable preferred
stock .......................................... 2,300 5,610 1,400
======== ======== ========

Business Segments

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information." SFAS No. 131 requires publicly held
companies to report financial and other information about key revenue segments
of the entity for which such information is available and is utilized by the
chief operation decision maker. SFAS No. 131 is effective for the fiscal years
commencing December 15, 1997. The Company conducts its business within one
business segment within North America. Revenues from customers outside of the
United States were less than 10% of net revenues for all periods represented
in the accompanying statements of operations.

Comprehensive Income

Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 requires companies to
classify items of other comprehensive income and its components in financial
statements and display the accumulated balance of other comprehensive income

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

separately from retained earnings in the equity section of a statement of
financial position. The Company's total comprehensive loss was the same as its
net loss for the years ended December 31, 2000, 1999, and 1998.

Recent Accounting Pronouncements

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for all fiscal
quarters of all years beginning after June 15, 1999. SFAS No. 133 requires
that all derivative instruments be recorded on the balance sheet at fair
market value. Changes in the fair value of derivatives are recorded each
period in the current earnings or other comprehensive income, depending on
whether a derivative is designed as part of a hedge transaction and, if it is,
the type of hedge transaction. In June 1999, the FASB issued SFAS No. 137,
which delayed the effective date of SFAS No. 133 to fiscal years beginning
after June 15, 2000. The adoption of SFAS No. 133 did not have a material
impact on our financial statements.

3--Restricted Cash

At December 31, 1999, the Company had $2.6 million on deposit with a bank
that was held as collateral for a letter of credit with a vendor. There was no
restricted cash at December 31, 2000.

4--Balance Sheet Components:

December 31,
----------------
2000 1999
------- -------
(In thousands)

Short-Term Investments:
Government obligations .................................. $ -- $ 1,989
Commercial Paper ........................................ -- 18,908
------- -------
$ -- $20,897
======= =======
Prepaid Expenses and Other Current Assets:
Prepaid on-line advertising ............................. $ 9,506 $ 5,683
Prepaid expenses and other current assets ............... 643 3,305
------- -------
$10,149 $ 8,988
======= =======
Property and Equipment:
Computer equipment and software ......................... $ 3,920 $ 2,584
Office equipment ........................................ 619 452
Furniture and fixtures .................................. 1,527 1,315
------- -------
6,066 4,351
Less accumulated depreciation and amortization ............ (3,781) (1,889)
------- -------
$ 2,285 $ 2,462
======= =======
Purchased Technology and Other Intangible Assets:
Acquired technology/database ............................ $ 2,809 $ 2,809
Trade name .............................................. 480 480
Assembled workforce ..................................... 1,728 1,728
Customer base ........................................... 5,727 5,727
Goodwill ................................................ 10,039 9,647
------- -------
20,783 20,391
Less accumulated amortization ............................. (8,905) (1,943)
------- -------
$11,878 $18,448
======= =======

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

5--Notes Payable

The Company had $314,000 outstanding under notes payable at December 31,
2000. The notes bear interest at an annual rate of 18.4%, mature in 2001, and
are collateralized by specific equipment.

Future minimum principal payments are as follows (in thousands):

Year Ending December 31,:
-------------------------

2001.............................................................. $ 314

6--Commitments

Operating Leases

The Company leases its offices under non-cancelable operating leases which
expire through May, 2005.

The future minimum lease payments under non-cancelable operating leases are
(in thousands).

Year Ending December 31,:
-------------------------

2001.............................................................. $ 918
2002.............................................................. 922
2003.............................................................. 942
2004.............................................................. 694
2005.............................................................. 120
------
$3,596
======

Facility rent expenses for the years ended December 31, 2000, 1999, and
1998, was $1,283,000, $843,000 and $597,000, respectively.

Marketing Agreements

During 2000, the Company had agreements with three global Internet media
companies to maintain certain exclusive promotional rights and linkage with
the media companies and to provide certain advertising. During the year ended
December 31, 2000, the Company paid $29.4 million under the terms of these
agreements. At December 31, 2000, and subsequent to December 31, 2000, one of
these agreements was no longer in effect. The commitments under the two
remaining agreements were restructured to reduce the commitments from
$56.8 million to $35.3 million, of which $13.3 million was paid in March 2001.
These agreements expire in March and April 2004. The remaining $22.0 million
is payable as follows:

2001................................................................. $ 6,612
2002................................................................. 8,816
2003................................................................. 6,612
-------
$22,040
=======

The Company also has multi-year agreements with other Internet advertisers
and automotive information providers that make available to consumers vehicle
research data over the Internet. Such agreements require that the Company pay
fees to these companies based on the volume of referrals received by the
Company from these services. The Company expenses these amounts as the
services are provided.

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

Litigation

From time to time, the Company may be involved in litigation arising out of
claims in the normal course of business. Based upon the information presently
available, including discussion with outside legal counsel, management
believes that there are no claims or actions pending or threatened against the
Company, the ultimate resolution of which will have a material adverse effect
on the Company's financial position, liquidity or results of operations.

7--Mandatorily Redeemable Convertible Preferred Stock

All mandatorily redeemable convertible preferred stock was converted into
common stock in March 1999 immediately prior to the Company's initial public
offering.

In December 1998, the company granted an option to the Chairman to purchase
up to 395,661 shares of the Company's Series D mandatorily redeemable
convertible preferred stock at $2.37 per share. The fair value of the option
grant was estimated to be $1.7 million using the intrinsic value method, and
was included in the stock-based compensation charge in the year ended
December 31, 1998. In January 1999, the option was exercised for 395,661
shares of Series D mandatorily redeemable convertible preferred stock in
exchange for $252,000 in cash together with an interest-free full recourse
promissory note in the amount of $686,000 from the Chairman collateralized by
the stock. The note is due and payable on the third anniversary of date of
issuance of the stock. These shares of Series D mandatorily redeemable
convertible preferred stock subsequently converted into 395,661 shares of
common stock immediately prior to the Company's initial public offering in
March 1999.

8--Common Stock

The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue 60,000,000 shares of common stock. Each share of common stock
has the right to one vote. The holders of common stock are also entitled to
receive dividends whenever funds are legally available and when declared by
the Board of Directors, subject to the prior rights of all classes of stock at
the time outstanding having priority rights as to dividends.

9--Employee Benefit Plans

401(k) Savings Plan

The Company has a savings plan (the "Savings Plan") that qualifies as a
deferred salary arrangement under Section 401 (k) of the Internal Revenue
Code. Under the Savings Plan, participating employees may defer a percentage
(not to exceed 25%) of their eligible pretax earnings up to the Internal
Revenue Service's annual contribution limit. All employees of the Company are
eligible to participate in the Savings Plan. The Company is not required to
contribute to the Savings Plan and has made no contribution since the
inception of the Savings Plan.

Employee Stock Purchase Plan

In 1999, the Company's Board of Directors adopted and the stockholders
approved the 1999 Employee Stock Purchase Plan (the "Purchase Plan") and
reserved a total of 400,000 shares of common stock for issuance thereunder in
addition to an automatic increase on January 1st of each year by an amount
equal to 1% of the shares of common stock outstanding on the immediately
preceding December 31. On January 1, 2000 and January 1, 2001, the automatic
increases in the shares reserved were 255,840 and 295,268, respectively. In
2000, the Company's Board of Directors approved an additional 255,840 shares
of common stock to be reserved and

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

available under the Employee Stock Purchase Plan. Under the Purchase Plan,
eligible employees will be permitted to acquire shares of the Company's common
stock through payroll deductions (not to exceed 15%). The purchase price for
the Company's common stock purchased under the Purchase Plan is 85% of the
lesser of the fair market value of the Company's common stock on the first day
or the last day of the purchase period. All employees of the Company are
eligible to participate in the Purchase Plan.

1997 Stock Option Plan

In April 1997, the Company's Board of Directors adopted the 1997 Stock
Option Plan ("1997 Plan"). The 1997 Plan provides for the granting of stock
options to employees and consultants of the Company (including officers and
directors who are also employees.)

Options under the 1997 Plan may be granted for periods of up to ten years
and at prices no less than 85% of the estimated fair value of the shares on
the date of the grant as determined by the Board of Directors, provided,
however, that ( i ) the exercise price of an Incentive Stock Option ("ISO")
may not be less than 100% of the estimated fair value of the shares on the
date of the grant, and ( ii ) the exercise prices of an ISO granted to a 10%
stockholder may not be less than 110% of the estimated fair value of the
shares on the date of grant. Options are exercisable immediately, subject to
repurchase rights held by the Company that generally lapse over a period of
four years.

1999 Equity Incentive Plan

In 1999, the Company's Board of Directors adopted and the stockholders
approved the 1999 Equity Incentive Plan (the "Equity Plan") and reserved a
total of 2,800,000 shares of common stock for issuance thereunder. These
shares are in addition to shares under the 1997 Plan not issued. The Equity
Plan provides for the grant of both "ISOs" and nonqualified stock options
("NQSOs"). ISOs may be granted only to employees of the Company and NQSOs may
be granted to employees and consultants of the Company (including officers and
directors).

Options under the Equity Plan may be granted for periods of up to ten years
and at prices no less than 85% of the estimated fair value of the shares on
the date of the grant as determined by the Board of Directors, provided,
however, that (i) the exercise price of an ISO may not be less than 100% of
the estimated fair value of the shares on the date of the grant, and (ii) the
exercise price of an ISO granted to a 10% stockholder may not be less than
110% of the estimated fair value of the shares on the date of grant. The
exercise price of NQSOs must be at least equal to 85% of the fair market value
of the Company's common stock on the date of grant. Options may be exercisable
only as they vest and the vesting period is generally four years.

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

The following summarizes activity under the 1997 Stock Option Plan and the
1999 Equity Incentive Plan (together "the Plans") for the years ended December
31, 2000, 1999 and 1998 (in thousands except per share amounts):

Options Outstanding
--------------------------
Weighted
Shares Number Average Aggregate
Available of Exercise Exercise
For Grant Shares Price Price
--------- ------ -------- ---------

Outstanding, January 1, 1998.............. 290 363 $0.1770 $ 64
Additional shares reserved ............. 2,300
Granted................................. (1,934) 1,934 $0.5000 967
Exercised............................... (205) $0.2767 (57)
Cancelled............................... 261 (261) $0.3202 (83)
------ ------ --------
Outstanding, December 31, 1998............ 917 1,831 $0.4866 891
Additional shares reserved.............. 2,950
Granted................................. (3,121) 3,121 $8.4143 26,261
Exercised............................... (571) $1.2067 (689)
Cancelled............................... 612 (612) $6.6225 (4,053)
------ ------ --------
Outstanding, December 31, 1999............ 1,358 3,769 $5.9459 22,410
Additional shares reserved.............. 2,350
Granted................................. (2,819) 2,819 $3.3242 9,371
Exercised............................... (43) $1.8903 (83)
Repurchased............................. 29
Cancelled............................... 2,839 (2,839) $6.4440 (18,293)
------ ------ --------
Outstanding, December 31, 2000............ 3,757 3,706 $3.617 $ 13,405
------ ------ --------

The following table summarizes information concerning outstanding and
exercisable options at December 31, 2000, (in thousands except per share
amounts):

Options Outstanding Options Exercisable
--------------------------------- --------------------
Weighted
Average Weighted Weighted
Number of Remaining Average Number of Average
Shares Contractual Exercise Shares Exercise
Exercise Price Outstanding Life (Years) Price Exercisable Price
- -------------- ----------- ----------- -------- ----------- --------

$0.20-$ 0.87............. 1,266 8.23 $ 0.54 551 $ 0.50
$1.56-$ 3.25............. 1,167 9.51 $ 2.48 158 $ 2.42
$3.33-$ 9.00............. 1,110 8.83 $ 7.11 394 $ 8.47
$9.13-$16.25............. 163 8.87 $11.35 37 $13.56
----- -----
3,706 1,140
===== =====

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

Fair Value Disclosures

The Company calculated the fair value of each option grant and each stock
purchase right on the date of grant or issuance using the Black-Sholes option
pricing model with the following assumptions:

Stock Options ESPP
------------------------------ --------
Year Ended December 31,
----------------------------------------
2000 1999 1998 2000
--------- --------- -------- --------

Risk-free interest rates............ 5.3%- 6.7% 4.6%- 6.2% 5.5% 5.8%-6.6%
Expected lives...................... 2 4 5 .6
Dividend yield...................... 0 0 0 0
Volatility.......................... 100% 100% -- 100%

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the option's vesting period on a straight line
basis. The Company's pro forma information is as follows:

Years ended December 31,
------------------------------
2000 1999 1998
--------- --------- --------

Net loss as reported................ $ (38,370) $ (18,153) $(11,484)
Accretion of mandatory redeemable
convertible preferred stock........ -- -- (890)
--------- --------- --------
Net loss attributable to common
stockholders....................... $ (38,370) $ (18,153) $(12,374)
========= ========= ========
Net loss--FAS 123 adjusted.......... $ (38,458) $ (19,180) $(12,521)
========= ========= ========
Net loss per share -- as reported
(Note 2)
Basic and diluted................. $ (1.36) $ (0.85) $ (1.58)
========= ========= ========
Net loss per share -- FAS 123
adjusted basic and diluted......... $ (1.36) $ (0.90) $ (1.60)
========= ========= ========

In 1999, the Board approved the Employee Stock Purchase Plan ("ESPP") and
reserved 400,000 shares of common stock. Under the plan, employees are granted
the right to purchase shares of common stock at a price per share that is 85%
of the lessor of the fair market value at the beginning of the offering period
or the end of the offering period. In 2000, 156,986 shares were issued at an
average price of $3.47 per share. For pro forma purposes, had compensation
cost for the ESPP been determined based on fair value at the issue date
consistent with the provisions of SFAS 123, the Company's net loss and net
loss per share for 2000 would have been $38.5 million and $1.36 respectively.

Unearned Stock-Based Compensation

In connection with certain stock option grants during the years ended
December 31, 1999, and 1998, the Company recorded unearned stock-based
compensation totalling $3.8 million and $11.0 million, respectively, which is
being amortized over the vesting periods of the related options which is
generally four years. In the year ended December 31, 2000 the Company reversed
$2.9 million of unearned stock-based compensation for options which were
cancelled. Amortization of this stock-based compensation recognized during the
years ended December 31, 2000, 1999 and 1998 totalled approximately $1.6
million, $2.2 million and $5.6 million, respectively. The 1998 amortization
reflects accelerated vesting associated with approximately 1.4 million options
of common stock granted to the Chairman and the immediate vesting of the
option for 395,661 shares of Series D mandatorily redeemable convertible
preferred stock granted to the Chairman (Note 7).

AUTOWEB.COM

NOTES TO FINANCIAL STATEMENTS--(Continued)

10--Income Taxes

The principal items accounting for the difference between income taxes
computed at the U.S. statutory rate and the provision for income taxes are as
follows:

December 31,
---------------------------
2000 1999 1998
-------- -------- -------

U.S. statutory rate ........................... 34.0% 34.0% 34.0 %
Operating losses not benefited ................ (34.0) (34.0) (34.0)
-------- -------- -------
-- % -- % -- %
======== ======== =======

The Company's net deferred tax asset is comprised as follows (in
thousands):

December 31,
---------------------------
2000 1999 1998
-------- -------- -------

Net operating loss carryforwards .............. $ 20,131 $ 7,404 $ 2,608
Other ......................................... 5,693 2,999 956
-------- -------- -------
25,824 10,403 3,564
Valuation allowance ........................... (25,824) (10,403) (3,564)
======== ======== =======
Net deferred tax asset ........................ $ -- $ -- $ --
======== ======== =======

As of December 31, 2000, the Company had net operating loss carryforwards
available to reduce its future taxable income of approximately $54.5 million
for federal and $27.5 million for state income tax purposes, respectively. The
net operating loss carryforwards expire between 2010 and 2020 for federal and
between 2003 and 2005 for state income tax purposes.

Utilization of net operating losses may be subject to an annual limitation
due to the ownership change limitations provided by the Internal Revenue Code
and similar state provisions. The annual limitation may result in the
expiration of net operating loss carryforwards before utilization.

11--Net Revenue Components

Net revenue can be further analyzed as follows:

2000 1999 1998
-------- -------- -------

Dealer Sales................................... $ 33,891 $ 21,608 $10,221
Data & Research Tools.......................... 5,168 1,493 --
Other.......................................... 13,221 9,698 2,821
-------- -------- -------
$ 52,280 $ 32,799 $13,042
======== ======== =======

12--Related Party Transactions

At December 31, 2000 and 1999, the Company had full recourse promissory
notes receivable in the amount of $960,000 from two stockholders who are also
related parties. Of this amount, $174,000 is included in "prepaid expenses and
other current assets" and $786,000 is included in stockholders' equity as
"notes receivable from stockholders." Notes receivable totaling $922,000 are
interest free and collateralized by 395,661 shares of common stock and the
remaining note receivable for $38,000 bears interest at a rate of 5.59% per
annum and is collateralized by 177,012 shares of common stock.

During 2000, the Company paid a stockholder who is also a related party
$7.2 million for advertising agreements. The Company also recorded revenue
from this party in the amount of $1.0 million during 2000.

2. Financial Statement Schedules

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of Autoweb.com, Inc.

Our audits of the financial statements referred to in our report dated
January 22, 2001, except for note 6 as to which the date is March 21, 2001,
appearing in the 2000 Annual Report to Stockholders of Autoweb.com, Inc. as of
December 31, 2000 and 1999, and for each of the three years in the period
ended December 31, 2000, also included an audit of the financial statement
schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.

PricewaterhouseCoopers LLP

San Jose, California
March 30, 2001

VALUATION AND QUALIFYING ACCOUNTS

Balance at Balance
Beginning Additions at End of
of Year (Reductions) Write-offs Year
---------- ------------ ---------- ---------
(In thousands)

Allowance for doubtful accounts:
Year ended December 31, 1998
.............................. $ 65 $ 429 $ 4 $ 498
Year ended December 31, 1999
.............................. 498 1,028 (350) 1,176
Year ended December 31, 2000... 1,176 1,903 (2,153) 926
Valuation allowance for deferred
tax assets:
Year ended December 31, 1998
.............................. 1,185 2,379 0 3,564
Year ended December 31, 1999
.............................. 3,564 6,839 0 10,403
Year ended December 31, 2000... 10,403 5,120 0 15,523

3. Exhibits

The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as part of this Form 10-K and the Exhibit Index is
incorporated in this filing by reference. Exhibits 10.01, 10.30, 10.32 and
10.38 through and including 10.40 listed on the accompanying Exhibit Index
identify management contracts or compensatory plans or arrangements required
to be filed as exhibits to this report, and this listing is incorporated in
this filing by reference.

(b) Reports on the Form 8-K:

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, we have duly caused this Report to be signed on our
behalf by the undersigned, thereunto duly authorized.

AUTOWEB.COM, INC.

/s/ Michael F. Schmidt
By: _________________________________
Michael F. Schmidt
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on our behalf and in the
capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Dean A. DeBiase Chairman of the Board April 2, 2001
____________________________________
Dean A. DeBiase

/s/ Jeffrey A. Schwartz President and Chief April 2, 2001
____________________________________ Executive Officer
Jeffrey A. Schwartz (Principal Executive
Officer)

/s/ Michael F. Schmidt Chief Financial Officer April 2, 2001
____________________________________ (Principal Financial
Michael F. Schmidt Officer)
/s/ Lawrence W. Lepard Director April 2, 2001
____________________________________
Lawrence W. Lepard

Director
____________________________________
Jay C. Hoag

/s/ Mark R. Ross Director April 2, 2001
____________________________________
Mark R. Ross

EXHIBIT INDEX

Number Exhibit Title
------ -------------

2.01 Agreement and Plan of Merger between Autoweb.com, Inc., a California
corporation and Registrant.*
2.02 Asset Purchase Agreement dated as of July 9, 1999, among Autoweb.com,
Inc., Sales Enhancer.com, LLC, a Georgia limited liability company
("SE"), Solutions Management, Inc., a Georgia corporation and the sole
member of SE ("SMI"), Interactive Monitoring Systems, Inc., a Georgia
corporation ("IMS") and Jeffrey Bennett, the sole shareholder of SMI
and IMS (incorporated herein by reference to Exhibit 2.01 to
Registrant's Periodic Report on Form 8-K filed July 23, 1999).
2.03 Asset Purchase Agreement dated as of September 8, 1999, among
Autoweb.com, Inc., The Gale Group, Inc., a Delaware corporation
("Seller"), Thomson Information Licensing Corporation, a Delaware
corporation ("TILC") and THI (U.S.) Inc., a Delaware corporation
("THI") (incorporated herein by reference to Exhibit 2.01 to
Registrant's Periodic Report on Form 8-K filed October 21, 1999, as
amended December 22, 1999).
3.01 Registrant's Certificate of Incorporation.*
3.02 Registrant's Bylaws.*
3.03 Registrant's Certificate of Retirement of preferred stock.*
3.04 Registrant's Certificate of Designation of preferred stock.*
4.01 Form of Specimen Certificate for Registrant's common stock.*
4.02 Amended and Restated Rights Agreement dated October 16, 1998 between
Registrant and certain stockholders named therein.*
4.03 Registration Rights Agreement dated as of September 8, 1999 by and
between Autoweb.com, Inc. and The Gale Group, Inc. (incorporated herein
by reference to Exhibit 4.01 to Registrant's Periodic Report on Form 8-
K filed October 21, 1999, as amended December 22, 1999).
4.04 Stock Purchase Agreement dated April 7, 2000 between Registrant and
Lycos, Inc. (incorporated herein by reference to Exhibit 10.35 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 2000 File No. 000-25577).
10.01 Form of Indemnity Agreement between Registrant and each of its
directors and executive officers.*
10.13 Lease Agreement dated August 27, 1997 by and among Boyd C. Smith,
Trustee, Louis B. Sullivan, Trustee and Registrant (related to
Registrant's facilities at 3270 Jay Street).*
10.14 Loan Agreement and Commercial Security Agreement, each dated December
15, 1997, between Registrant and CivicBank of Commerce.*
10.15 Form of Senior Loan and Security Agreement dated March 20, 1998 between
Registrant and Phoenix Leasing Incorporated.*
10.20 Registrant's 1997 Stock Option Plan and related documents.*
10.21 Registrant's 1999 Equity Incentive Plan and related documents.*
10.22 Registrant's 1999 Directors Stock Option Plan and related documents.*
10.23 Registrant's 1999 Employee Stock Purchase Plan.*
10.24 Promissory notes from Dean DeBiase to Registrant.*
10.28 Advertising and Promotion Agreement dated June 14, 1999 between
Registrant and Yahoo! Inc. (incorporated herein by reference to Exhibit
10.28 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.)**
10.29 Advertising and Promotion Agreement dated June 30, 1999 between
Registrant and America Online, Inc. (incorporated herein by reference
to Exhibit 10.29 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.)**
10.30 Offer Letter dated October 8, 1999 by Registrant to Jeffrey A. Schwartz
(incorporated herein by reference to Exhibit 10.30 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1999 File
No. 000-25577).
10.31 Amendment No. 1 To Lease dated August 6, 1999 by and between A&P Family
Investments and Registrant (related to Registrant's facilities at 3270
Jay Street) (incorporated herein by reference to Exhibit 10.31 to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1999 File No. 000-25577).

Number Exhibit Title
------ -------------

10.32 Employment Agreement dated November 5, 1999 between Registrant and Sam
Hedgpeth (incorporated herein by reference to Exhibit 10.32 to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1999 File No. 000-25577).
10.33 Strategic Co-Marketing dated March 16, 2000 between Registrant and
CarsDirect.com, Inc. (incorporated herein by reference to Exhibit 10.33
to Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000 File No. 000-25577)**
10.34 Agreement dated March 26, 2000 between Registrant and Lycos, Inc.
(incorporated herein by reference to Exhibit 10.33 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 File
No. 000-25577)**
10.35 Stock Purchase Agreement dated April 7, 2000 between Registrant and
Lycos, Inc. (incorporated herein by reference to Exhibit 10.35 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended March
31, 2000 File No. 000-25577)
10.36 Amendment Number 1 to Interactive Marketing Agreement dated April 19,
2000 between Registrant and America Online, Inc. (incorporated herein
by reference to Exhibit 10.36 to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000 File No. 000-25577)**
10.37 Amended and Restated Strategic Co-Marketing Agreement dated June 30,
2000 between Registrant and CarsDirect.com, Inc. (incorporated herein
by reference to Exhibit 10.37 to Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000 File No. 000-25577)**
10.38 Offer Letter dated May 31, 2000 by Registrant to Nadyne G. Edison,
Ph.D.
10.39 Offer Letter dated August 22, 2000 by Registrant to Steve Cottrell.
10.40 Offer Letter dated December 4, 2000 by Registrant to Michael Schmidt.
10.41 General Release of Claims dated November 17, 2000 between Registrant
and Yahoo! Inc.***
23.01 Consent of PricewaterhouseCoopers LLP.

- --------
* Incorporated herein by reference to the exhibit of like number filed with
Registrant's Form S-1 Registration Statement, File No. 333-71177, on
January 26, 1999 or with an amendment thereto.
** Confidential treatment was granted with regard to certain portions of this
document. These portions were filed separately with the Securities and
Exchange Commission.
*** Confidential treatment has been requested with regard to certain portions
of this document. These portions were filed separately with the Securities
and Exchange Commission.