UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
☒         
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
☐    
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number 001-38248
 
RumbleOn, Inc.
(Exact
 (Exact name of registrant as specified in its charter)
Nevada 46-3951329
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
4521 Sharon Road, Suite 370901 W Walnut Hill Lane
Charlotte, North CarolinaIrving TX
 2821175038
(Address of principal executive offices) (Zip Code)
 (469) 250-1185 
 (704) 448-5240(Registrant's telephone number, including area code) 
 
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class B Common Stock, $0.001 par valueRMBLThe NASDAQ Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ Yes☐No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☒☐ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company,”" and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ☐
Non-accelerated filer ☒
☐
Accelerated filer
☐
Non-accelerated filer☐  (Do not check if a smaller reporting company)
Smaller reporting company
☒
Emerging growth company
☒
☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☐☒ No ☒
 
The number of shares of Class B Common Stock, $0.001 par value, outstanding on November 7, 2017June 26, 2020 was 11,928,541 2,179,407shares. In addition, 1,000,00050,000 shares of Class A Common Stock, $0.001 par value, were outstanding on November 7, 2017.June 26, 2020.


 
RUMBLEON, INC.
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2020
Table of Contents to Report on Form 10-Q
Page
PART I - FINANCIAL INFORMATION
Page
Item 1.
Financial Statements.Statements
1
Item 2.
Management’s
Management's Discussion and Analysis of Financial Condition and Results of Operations.Operations
1921
Item 3.
Quantitative and Qualitative Disclosure About Market Risk.Risk
3246
Item 4.
Controls and Procedures.Procedures
3246
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings.Proceedings
3347
Item 1A.
Risk Factors.Factors
3347
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds
3347
Item 3.
Defaults Upon Senior Securities.Securities
3347
Item 4.
Mine Safety Disclosures.Disclosures
3347
Item 5.
Other Information.Information
3347
Item 6.
Exhibits
3347
SIGNATURES
48

 
 
PART I - FINANCIALFINANCIAL INFORMATION
 
Item 1.
Financial Statements.Statements
RUMBLEON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 
ASSETS
 
Balance at
 
 
 
September 30, 2017
 
 
December 31, 2016
 
Current assets:
 
 
 
 
 
 
Cash
 $656,220 
 $1,350,580 
Accounts Receivable
  320,575 
  - 
Vehicle Inventory
  1,244,658 
  - 
Prepaid expense
  123,513 
  1,667 
Other
  174,419 
  - 
Total current assets
  2,519,385 
  1,352,247 
 
    
    
Property and Equipment - Net of Accumulated Depreciation
  2,166,326 
  - 
Goodwill
  3,240,000 
  - 
Intangible Assets, net
  121,765 
  45,515 
 
    
    
Total assets
 $8,047,476 
 $1,397,762 
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
 
    
    
Current liabilities:
    
    
Accounts payable and accrued liabilities
 $ 1,902,543 
 $ 219,101 
Accrued interest payable
  17,998 
  - 
Current portion of long term debt
  1,510,274 
  - 
Other current liabilities
  - 
  - 
Total current liabilities
  3,430,815 
  219,101 
 
    
    
Long term liabilities:
    
    
Notes payable
  1,414,937 
  1,282 
Accrued interest payable - related party
  21,736
 
  5,508 
Deferred tax liability
  - 
  78,430 
Total long-term liabilities
  1,436,673
 
  85,220 
 
    
    
Total liabilities
  4,867,488
 
  304,321 
 
    
    
Commitments and Contingencies
    
    
 
    
    
Stockholders' equity:
    
    
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of September 30, 2017 and December 31, 2016
  - 
  - 
Common A stock, $0.001 par value, 1,000,000 shares authorized, 1,000,000 shares issued and outstanding as of September 30, 2017 and none outstanding at December 31, 2016
  1,000 
  - 
Common B stock, $0.001 par value, 99,000,000 shares authorized, 9,018,541 and 6,400,000 shares issued and outstanding as of September 30, 2017 and December 31, 2016
  9,019 
  6,400 
Additional paid in capital
  8,749,566 
  1,534,015 
Subscriptions receivable
  (1,000)
  (1,000)
Accumulated deficit
  (5,578,597)
  (445,974)
Total stockholders' equity
  3,179,988
 
  1,093,441 
 
    
    
Total liabilities and stockholders' equity
 $8,047,476 
 $1,397,762 
RumbleOn, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
As of
March 31, 2020
 
 
As of
December 31, 2019
 
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash
 $2,484,169 
 $49,660 
Restricted cash
  5,502,322 
  6,676,622 
Accounts receivable, net
  8,242,025 
  8,482,707 
Inventory
  55,408,531 
  57,381,281 
Prepaid expense and other current assets
  1,369,648 
  1,210,474 
Total current assets
  73,006,695 
  73,800,744 
 
    
    
Property and equipment, net
  6,172,886 
  6,427,674 
Right-of-use asset
  5,815,328 
  6,040,287 
Goodwill
  26,886,563 
  26,886,563 
Other assets
  82,648 
  237,823 
Total assets
 $111,964,120 
 $113,393,091 
 
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
 
    
    
Current liabilities:
    
    
Accounts payable and other accrued liabilities
 $10,235,472 
 $12,421,094 
Accrued interest payable
  1,183,623 
  749,305 
Current portion of convertible debt
  1,156,911 
  1,363,590 
Current portion of long-term debt
  62,799,557 
  59,160,970 
Total current liabilities
  75,375,563 
  73,694,959 
 
    
    
Long-term liabilities:
    
    
Note payable
  - 
  1,924,733 
Convertible Debt
  26,082,706 
  20,136,229 
Derivative liabilities
  137,488 
  27,500 
Other long-term liabilities
  4,968,931 
  4,722,101 
Total long-term liabilities
  31,189,125 
  26,810,563 
 
    
    
Total liabilities
  106,564,688 
  100,505,522 
 
    
    
Commitments and contingencies (Notes 4, 7, 8, 9, 13, 18)
    
    
 
    
    
Stockholders' equity:
    
    
Class B Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 and 0 shares issued and outstanding as of March 31, 2020 and December 31, 2019
  - 
  - 
Common A stock, $0.001 par value, 50,000 shares authorized, 50,000 shares issued and outstanding as of March 31, 2020 and December 31, 2019
  50 
  50 
Common B stock, $0.001 par value, 4,950,000 shares authorized, 2,151,166 and 1,111,681 shares issued and outstanding as of March 31, 2020 and December 31, 2019
  2,151 
  1,112 
Additional paid in capital
  106,817,379 
  92,268,213 
Accumulated deficit
  (101,420,148)
  (79,381,806)
Total stockholders' equity
  5,399,432 
  12,887,569 
 
    
    
Total liabilities and stockholders' equity
 $111,964,120 
 $113,393,091 
 
See Notes to the Condensed Consolidated Financial Statements.
 

RUMBLEON, INC.RumbleOn, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCondensed Consolidated Statements of Operations
(unaudited)(Unaudited)
 
 
 
Three-months ended
September 30,
 
 
Nine-months ended
September 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Revenue:
Used vehicle sales:
 
 
 
 
 
 
 
 
 
 
 
 
Consumer
 $1,626,864 
 $ - 
 $1,626,864 
 $ - 
Dealer
  1,745,948 
  - 
  1,745,948 
  - 
Auction
  171,560 
  - 
  253,500 
  - 
Other sales and revenue
  134,573 
  - 
  134,573 
  - 
Subscription and other fees
  27,197 
  - 
  100,668 
  - 
Total Revenue
  3,706,142 
  - 
  3,861,553 
  - 
 
    
    
    
    
Cost of Revenue
  3,478,124 
  - 
  3,627,455 
  - 
Selling, general and administrative
  2,326,043 
  36,706 
  4,690,216 
  58,135 
Depreciation and amortization
  129,277 
  475 
  302,697 
  1,425 
Total expenses
  5,933,444 
  37,181 
  8,620,368 
  59,560 
 
    
    
    
    
Operating loss
  (2,227,302)
  (37,181)
  (4,758,815)
  (59,560)
 
    
    
    
    
Interest expense
  90,201 
  2,878 
  373,808 
  7,431 
 
    
    
    
    
Net loss before provision for income taxes
  (2,317,503)
  (40,059)
  (5,132,623)
  (66,991)
 
    
    
    
    
Benefit for income taxes
  - 
  - 
  - 
  - 
 
    
    
    
    
Net loss
 $(2,317,503)
 $(40,059)
 $(5,132,623)
 $ (66,991)
 
    
    
    
    
Weighted average number of common shares outstanding – basic and fully diluted
  10,018,541 
  5,500,000 
  9,105,429 
  5,500,000 
 
    
    
    
    
Net loss per share – basic and fully diluted
 $(0.23)
 $(0.01)
 $(0.56)
 $(0.01)
 
 
Three Months Ended March 31,
 
 
 
2020
 
 
2019
 
Revenue:
 
 
 
 
 
 
Pre-owned vehicle sales:
 
 
 
 
 
 
Powersports
 $23,139,080 
 $26,929,159 
Automotive
  114,198,079 
  190,907,188 
Transportation and vehicle logistics
  7,087,591 
  5,341,412 
Total revenue
  144,424,750 
  223,177,759 
 
    
    
Cost of revenue
    
    
Powersports
  20,558,286 
  23,949,556 
Automotive
  108,353,505 
  181,495,112 
Transportation
  5,088,059 
  3,742,022 
Cost of revenue before impairment loss
  133,999,850 
  209,186,690 
Impairment loss on automotive inventory
  11,738,413 
  - 
Total cost of revenue
  145,738,263 
  209,186,690 
 
    
    
Gross profit (loss)
  (1,313,513)
  13,991,069 
 
    
    
Selling, general and administrative
  18,056,426 
  20,440,016 
 
    
    
Depreciation and amortization
  522,995 
  382,225 
 
    
    
Operating loss
  (19,892,934)
  (6,831,172)
 
    
    
Interest expense
  (2,216,757)
  (1,445,133)
 
    
    
Loss in derivative liability
  (116,815)
  - 
 
    
    
Gain on early extinguishment of debt
  188,164 
  - 
 
    
    
Net loss before provision for income taxes
  (22,038,342)
  (8,276,305)
 
    
    
Benefit for income taxes
  - 
  - 
 
    
    
Net loss
 $(22,038,342)
 $(8,276,305)
 
    
    
Weighted average number of common shares outstanding - basic and fully diluted
  2,046,423 
  1,024,221 
 
    
    
Net loss per share basic and fully diluted
 $(10.77)
 $(8.08)
 
See Notes to the Condensed Consolidated Financial Statements.
 

RUMBLEON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE-MONTHS ENDED SEPTEMBER 30, 2017
(unaudited)
 
 
 
Preferred Shares
 
 
Common A Shares
 
 
 
 
Common B Shares
 
   
   
   
   
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Additional Paid in Capital
 
 
Subscriptions Receivable
 
 
Accumulated Deficit
 
 
Total Stockholders' Equity
 
Balance, December 31, 2016
  - 
 $- 
  - 
 $- 
  6,400,000 
 $6,400 
 $1,534,015 
 $(1,000)
 $(445,974)
 $1,093,441 
 
    
    
    
    
    
    
    
    
    
    
Exchange of common stock
  - 
  - 
  1,000,000 
  1,000 
  (1,000,000)
  (1,000)
  - 
  - 
  - 
  - 
 
    
    
    
    
    
    
    
    
    
    
Issuance of common stock in connection with acquisition
  - 
  - 
  - 
  - 
  1,523,809 
  1,524 
  2,665,142 
  - 
  - 
  2,666,666 
 
    
    
    
    
    
    
    
    
    
    
Issuance of stock in private placements
    
    
  - 
  - 
  657,500 
  658 
  2,629,342 
  - 
    
  2,630,000 
 
    
    
    
    
    
    
    
    
    
    
Issuance of common stock in connection with loan agreement
  - 
  - 
  - 
  - 
  1,161,920 
  1,162 
  1,348,878 
  - 
  - 
  1,350,040 
 
    
    
    
    
    
    
    
    
    
    
Issuance of common stock in connection with conversion of a Note Payable-related party, net of debt discount
  - 
  - 
  - 
  - 
  275,312 
  275 
  284,639 
  - 
  - 
  284,914 
 
    
    
    
    
    
    
    
    
    
    
Stock-based compensation
  - 
  - 
  - 
  - 
  - 
  - 
  287,550 
  - 
  - 
  287,550 
 
    
    
    
    
    
    
    
    
    
    
Net loss
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (5,132,623)
  (5,132,623)
 
    
    
    
    
    
    
    
    
    
    
Balance, September 30, 2017
  - 
 $- 
  1,000,000 
 $1,000 
  9,018,541 
 $9,019 
 $8,749,566 
 $(1,000)
 $(5,578,597)
 $3,179,988
RumbleOn, Inc.
Condensed Consolidated Statement of Stockholders' Equity
(Unaudited)
 
 
Preferred Shares
 
 
Class A Common Shares
 
 
Class B Common Shares
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Additional Paid In
Capital
 
 
Accumulated Deficit
 
 
Total Stockholders'
Equity
 
Balance, as of December 31, 2019
  - 
 $- 
  50,000 
 $50 
  1,111,681 
 $1,112 
 $92,268,213 
  (79,381,806)
 $12,887,569 
Issuance of common stock, net of issuance cost
  - 
  - 
  - 
  - 
  1,035,000 
  1,035 
  10,779,045 
  - 
  10,780,080 
Issuance of common stock for restricted stock units
  - 
  - 
  - 
  - 
  4,485 
  4 
  (4)
  - 
  - 
Convertible note exchange
  - 
  - 
  - 
  - 
  - 
  - 
  2,923,755 
  - 
  2,923,755 
Stock-based compensation
  - 
  - 
  - 
  - 
  - 
  - 
  846,370 
  - 
  846,370 
Net loss
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (22,038,342)
  (22,038,342)
Balance as of March 31, 2020
  - 
 $- 
  50,000 
 $50 
  2,151,166 
 $2,151 
 $106,817,379 
 $(101,420,148)
 $5,399,432 
 
 
Preferred Shares
 
 
Class A Common Shares
 
 
Class B Common Shares
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Shares
 
 
Amount
 
 
Additional Paid in Capital
 
 
Accumulated Deficit
 
 
Total Stockholders' Equity
 
Balance, as of December 31, 2018
  1,317,329 
 $1,317 
  50,000 
 $50 
  874,315 
 $874 
 $65,016,379 
  (34,201,114)
 $30,817,506 
Cumulative effect of accounting change (see Note 1)
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (3,639)
  (3,639)
Issuance of common stock for restricted stock units exercised
  - 
  - 
  - 
  - 
  350 
  - 
  - 
  - 
  - 
Beneficial conversion feature on convertible notes
  - 
  - 
  - 
  - 
  - 
  - 
  495,185 
  - 
  495,185 
Conversion of preferred shares to common stock
  (1,317,329)
  (1,317)
  - 
  - 
  65,866 
  66 
  1,251 
  - 
  - 
Issuance of common stock
  - 
  - 
  - 
  - 
  63,825 
  64 
  6,525,710 
  - 
  6,525,774 
Stock-based compensation
  - 
  - 
  - 
  - 
  - 
  - 
  689,121 
  - 
  689,121 
Net loss
  - 
  - 
  - 
  - 
  - 
  - 
  - 
  (8,276,305)
  (8,276,305)
Balance as of March 31, 2019
  - 
 $- 
  50,000 
 $50 
  1,004,356 
 $1,004 
 $72,727,646 
 $(42,481,058)
 $30,247,642 
 
See Notes to the Condensed Consolidated Financial Statements.
 

RumbleOn, Inc.
RUMBLEON, INC.Condensed Consolidated Statements of Cash Flows
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)(Unaudited)
 
 
 
Nine-months ended
September 30,
 
 
 
2017
 
 
2016
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net loss
 $(5,132,623)
 $(66,991)
Adjustments to reconcile net income
    
    
to net cash used in operating activities:
    
    
Depreciation and amortization
  302,697 
  1,425 
Amortization of debt discount
  91,877 
  - 
Interest expense on conversion of debt
  196,076 
  - 
Share based compensation expense
  287,550 
  - 
Changes in operating assets and liabilities:
    
    
Increase in prepaid expenses
  (121,846)
  (4,167)
Increase in inventory
  (1,244,658)
    
Increase in accounts receivable
  (320,575)
  - 
Increase in other current assets
  (174,419)
  - 
Increase in accounts payable and accrued liabilities
  1,683,442
 
  18,095 
Increase in accrued interest payable - related party
  43,351
 
  (10,478)
 
    
    
Net cash used in operating activities
  (4,389,128)
  (62,116)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
Cash used for acquisitions
  (750,000)
  - 
Technology development
  (435,097)
  - 
Purchase of property and equipment
  (600,175)
  - 
 
    
    
Net cash used in investing activities
  (1,785,272)
  - 
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Proceeds from note payable
  2,167,000 
  214,358
 
Repayments for note payable - related party
  -
 
  (158,000)
Proceeds from sale of common stock
  3,313,040 
  7,000 
 
    
    
Net cash provided by financing activities
  5,480,040 
  63,358 
 
    
    
NET CHANGE IN CASH
  (694,360)
  1,242
 
 
    
    
CASH AT BEGINNING OF PERIOD
  1,350,580 
  3,713 
 
    
    
CASH AT END OF PERIOD
 $656,220 
 $4,955 
 
 
Three Months Ended March 31,
 
 
 
2020
 
 
2019
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net loss
 $ (22,038,342)
 $(8,276,305)
Adjustments to reconcile net loss to net cash used in operating activities:
    
    
Depreciation and amortization
  522,995 
  382,225 
Amortization of debt discounts
  627,755 
  211,725 
Share based compensation
  846,370 
  689,121 
Impairment loss on inventory
  11,738,413 
  - 
Impairment loss on fixed assets
  177,626 
  - 
Loss from change in value of derivatives
  116,815 
  - 
Gain on early extinguishment of debt
  (188,164)
  - 
Changes in operating assets and liabilities:
    
    
(Increase) decrease in prepaid expenses and other current assets
  (159,175)
  324,689 
(Increase) decrease in inventory
  (9,765,663)
  2,106,138 
Decrease (Increase) in accounts receivable
  240,682 
  (1,200,058)
(Increase) decrease in other assets
  155,175 
  - 
Decrease in accounts payable and accrued liabilities
  (2,176,064) 
  (806,848)
Increase in accrued interest payable
  434,318 
  92,573 
Net cash used in operating activities
  (19,467,259)
  (6,476,740)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
Cash used for acquisitions; net of cash received
  - 
  (835,000)
Purchase of property and equipment
  (132,366)
  - 
Proceeds from sales of property and equipment
  - 
  40,620 
Technology development
  (290,376)
  (879,829)
Net cash used in investing activities
  (422,742)
  (1,674,209)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Proceeds from notes payable
  8,272,375 
  - 
Net proceeds (repayments) on line of credit
  2,097,755 
  (3,241,603)
Net Proceeds from sale of common stock
  10,780,080 
  6,525,775 
Net cash provided by financing activities
  21,150,210 
  3,284,172 
 
    
    
NET CHANGE IN CASH
  1,260,209 
  (4,866,777)
 
    
    
CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD
  6,726,282 
  15,784,902 
 
    
    
CASH AND RESTRICTED CASH AT END OF PERIOD
 $7,986,491 
 $10,918,125 
 
See Notes to the Condensed Consolidated Financial Statements.
 

 
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
NOTE 1 ––DESCRIPTION OF BUSINESS DESCRIPTIONAND SIGNIFICANT ACCOUNTING POLICIES
 
Organization
 
RumbleOn, Inc. (along with its consolidated subsidiaries, the “Company”) was incorporated in October 2013 under the laws of the State of Nevada, as Smart Server, Inc. (“Smart Server”). On February 13, 2017, the Company changed its name from Smart Server, Inc. to RumbleOn, Inc. The Company refers to the Company and its subsidiaries.
 
NatureDescription of OperationsBusiness
 
Smart Server was originally formed to engage in the business of designing and developing mobile application payment software for smart phones and tablet computers. After Smart Server ceased its technology development activities in 2014, it had no operations and nominal assets, meeting the definition of a “shell company” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and regulations thereunder.Overview
 
In July 2016, Berrard Holdings Limited Partnership (“("Berrard Holdings”Holdings") acquired 99.5% of the common stock of the Company from the principal stockholder. Shortly after the Berrard Holdings common stock purchase, the Company began exploring the development of a capital light e-commerce platform facilitating the ability of both consumers and dealers to Buy-Sell-Trade-Finance pre-owned recreation vehicles in one online location.location and in April 2017, the Company launched its platform. The Company’sCompany's goal is forto transform the platform to be widely recognized as the leading online solution for the sale, acquisition,way pre-owned vehicles are bought and distribution of recreation vehiclessold by providing users with the most efficient, timely and transparent transaction experience. The Company’sWhile the Company's initial focus is the market for 601cccustomer facing emphasis through most of 2018 was on motorcycles and larger on road motorcycles, particularly those concentrated in the “Harley-Davidson” brand. The Company will look to extend to other brands and additional vehicle types and products as the platform matures.
The Company’s business plan is currently driven by a technology platform it acquired on February 8, 2017 from NextGen Dealer Solutions, LLC (“NextGen”), whichpowersports, the Company ownscontinues to enhance its platform to accommodate nearly any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and operates throughtrucks, and via its wholly-owned subsidiary NextGen Pro, LLC (“NextGen Pro”acquisition of Wholesale, Inc. ("Wholesale"). The NextGen platform provides vehicle appraisal, inventory management, customer relationship management in October 2018, the Company is making a concerted effort to grow its cars and lead management, equity mining, and other key services necessary to drive the online marketplace. For additional information, see Note 3 - “Acquisitions.”light truck categories.
 
Serving both consumers and dealers, through ourits online marketplace platform, we makethe Company makes cash offers for the purchase of their vehicles and intend to provide them the flexibility to trade, list, or auction their vehicle through our website and mobile applications.pre-owned vehicles. In addition, we offerthe Company offers a large inventory of usedpre-owned vehicles for sale along with third-party financing and associated products. OurThe Company's operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with dealer partners. We utilize dealerits regional partners, which are primarily auctions. The Company utilizes regional partners in the acquisition of motorcycles as well aspre-owned vehicles to provide inspection, reconditioning and distribution services. Correspondingly, we earn fees and transaction income, and dealerThese regional partners will earn incremental revenue and enhance profitability through increased sales, leads, and fees from inspection, reconditioning and distribution programs.
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESOur business model is driven by our proprietary technology platform. Our initial platform was acquired in February 2017, through our acquisition of substantially all of the assets of NextGen Dealer Solutions, LLC ("NextGen"). Since that time, we have expanded the functionality of that platform through a significant number of high-quality technology development projects and initiatives. Included in these new technology development projects and initiatives are modules or significant upgrades to the existing platforms for: (i) Retail online auction; (ii) native IOS and Android apps; (iii) new architecture on website design and functionality; (iv) RumbleOn Marketplace; (v) redesigned cash offer tool;(vi) deal-jacket tracking tool; (vii) inventory tracking tool; (viii) CRM and multiple third-party integrations; (ix) new analytics and machine learning initiatives; and (x) IT monitoring infrastructure.

Acquisitions
On February 3, 2019, the Company completed the acquisition (the "Autosport Acquisition") of all of the equity interests of Autosport USA, Inc. ("Autosport"), an independent pre-owned vehicle distributor, pursuant to a Stock Purchase Agreement, dated February 1, 2019 (the "Stock Purchase Agreement"), by and among RMBL Express, LLC (the "Buyer"), a wholly owned subsidiary of Company, Scott Bennie (the "Seller"), and Autosport. Aggregate consideration for the Autosport Acquisition consisted of (i) a closing cash payment of $600,000, plus (ii) a fifteen-month $500,000 promissory note (the "Promissory Note") in favor of the Seller, plus (iii) a three-year $1,536,000 convertible promissory note (the "Convertible Note") in favor of the Seller, plus (iv) contingent earn-out payments payable in the form of cash and/or the Company's Class B Common Stock (the "Earn-Out Shares") for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection with the Autosport Acquisition, the Buyer also paid outstanding debt of Autosport of $235,000 and assumed additional debt of $257,933 pursuant to a promissory note payable to Seller (the "Second Convertible Note").
 
Basis of Presentation
 
The accompanying Condensed Consolidated Financial Statementsunaudited condensed consolidated financial statements of the Company as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and March 31, 2019, have been prepared in accordance with accounting principles generally accepted in the United States generally accepted accounting principlesof America (“U.S. GAAP”) for interim financial information and in accordance with the instructions toon Form 10-Q and Rule 10-01 of Regulation S-X promulgated bypursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”(“SEC”). All of the Company’s subsidiaries are wholly owned. The condensed consolidated financial statements include the accounts of RumbleOn Inc. and therefore do notits wholly owned subsidiaries. In accordance with those rules and regulations, the Company has omitted certain information and notes required by U.S. GAAP for annual consolidated financial statements. In the opinion of management, the condensed consolidated financial statements contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company’s Condensed Consolidated Financial Statements reflect all adjustments, (consisting only of normal recurring adjustments) management believes areexcept as otherwise noted, necessary for the fair presentation of the Company’s financial condition,position and results of operations and cash flows for the periods presented. Certain prior period amounts have been reclassified to conform to the current year’s presentation.  Amounts and percentages may not total due to rounding.The information at December 31, 2016 in the Company’s Condensed Consolidated Balance Sheets included in this quarterly reportyear-end condensed balance sheet data was derived from the audited Consolidated Balance Sheets included in the Company’s 2016 Annual Report on Form 10-K filed with the SEC on February 14, 2017. The Company’s 2016 Annual Report on Form 10-K, together with the information incorporated by reference into such report, is referred to in this quarterly report as the “2016 Annual Report.” This quarterly reportfinancial statements. These condensed consolidated financial statements should be read in conjunction with the 2016Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report.Report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2019. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results expected for the entire fiscal year. All intercompany accounts and material intercompany transactions have been eliminated.
 

Year-endLiquidity
 
In October 2016,We have incurred losses and negative cash flow from operations since inception through March 31, 2020 and expect to incur additional losses and negative cash flow in the future. As we continue to expand our business, build our brand name and awareness, and continue technology and software development efforts, we may need access to additional capital, including through debt and equity financing. Historically, we have raised additional capital to fund our expansion through equity issuances or debt instruments; refer to Note 8 — Notes Payable and Lines of Credit, Note 9 - Convertible Notes, and Note 11 — Stockholders Equity. Also, we have historically funded vehicle inventory purchases through our Line of Credit-Floor Plans. Due to the impact of COVID-19 on the economy, we have a strong focus on preserving liquidity. Our primary liquidity sources are available cash and cash equivalents, amounts available under the NextGear Credit Line (as defined below), proceeds from the Paycheck Protection Program loan, monetization of our retail loan portfolio and through rationalizing costs and expenses, including laying off 169 employees. Although we have experienced a decrease in revenue as a result of the impact of the COVID-19 pandemic, as of June 26, 2020, the Company changedhas approximately $9,700,000 of cash of which $5,500,000 is restricted, approximately $19,900,000 of remaining availability under the NextGear Credit Line and $1,200,000 of availability under the $1,500,000 RumbleOn Finance Facility (as described below). The Company expects to receive recovery of its fiscal year-endinsured losses, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered or when such amounts, if any, will be recovered.
The worldwide spread of the COVID-19 outbreak has resulted in a global slowdown of economic activity which decreased demand for a broad variety of goods and services, while also disrupting sales channels, marketing activities and supply chains for an unknown period of time until the outbreak is contained. This is impacting the Company's business and the powersport and automotive industries as a whole. The Company has positioned its business today to be lean and flexible in this period of lower demand and higher uncertainty with the goal of preparing the Company for a strong recovery as the crisis is contained. The Company believes its online business model allows it to quickly respond to market demand or changes in the businesses it operates as the COVID-19 pandemic continues.
The Company’s condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. Although the Company believes that it will be able to generate sufficient liquidity from November 30the measures described above, its current circumstances including uncertainties due to December 31.COVID-19 pandemic raise substantial doubt about the Company's ability to operate as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 
Use of Estimates
 
The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. Certain accounting estimates involve significant judgments, assumptions and estimates by management that affecthave a material impact on the reported amountscarrying value of certain assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities inand the financial statementsreported amounts of revenue and accompanying notes. Estimatesexpenses during the reporting period, which management considers to be critical accounting estimates. The judgments, assumptions and estimates used by management are used for,based on historical experience, management's experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates. In particular, the novel COVID-19 pandemic and the resulting adverse impacts to global economic conditions, as well as the Company's operations, may impact future estimates including, but not limited to inventory valuation, depreciable lives, carrying value of intangible assets, sales returns, receivables valuation, restructuring-related liabilities, taxes, and contingencies. Actual results could differ materially from those estimates.
Earnings (Loss) Per Share
The Company follows the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, Earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Revenue Recognition
Revenue is derived from two primary sources:(1)the Company’s online marketplace, which is our largest source of revenue and includes: (i) the sale of used vehicles through consumer, dealers and auction sales channels; (ii) online listing and sales fees; (iii) retail merchandise sales; (iv) vehicle financing; and (v) vehicle service contracts;and (2) subscription and other fees relating to the RumbleOn software solution, which includes: (i) a vehicle appraisal process; (ii) inventory management system; (iii) customer relationship and lead management program; and (iv) equity mining.
The Company recognizes revenue when all of the following conditions are satisfied: (i) there is persuasive evidence of an arrangement; (ii) the product or service has been provided to the customer; (iii) the amount to be paid by the customer is fixed or determinable; and (iv) the collection of the Company’s payment is probable.
Used Vehicle Sales
The Company sells used vehicles to consumers, dealers and at auctions. The source of these vehicles is primarily from the Company’s Sell Us Your VehicleProgram and customers who trade-in their existing vehicles when making a used vehicle purchase.  Revenue from used vehicle sales is recognized when the vehicle is delivered to a consumer, dealer or auction, a sales contract is signed,and the purchase price has either been received or collectability has been established. We guarantee the vehicles we sell with a 3-day, money-back guarantee. Used vehicle sales revenue is recognized net of a reserve for returns, which is based on historical experience and trends.
Online Listing and Sales Fees
The Company charges a non-refundable fee for sellers to list their vehicle on the RumbleOn website. During the listing period, the Company manages all sales leads, handles all the documentation necessary to complete a sale, accepts a buyer’s trade and provides financing through third-party providers to the potential buyer, if necessary. Upon a successful sale, the seller pays a fee which is based on the difference between the actual retail sales price of the vehicle sold and the net proceeds agreed to be paid by RumbleOn to the seller when the listing agreement was signed. Revenue from non-refundable online listing fees is recognized once the listing agreement is signed, the vehicle is listed for sale and the listing fee has been received. Revenue for selling fees is recognized upon delivery of the vehicle to the customer, when the sales contract is signed, and the purchase price has either been received or collectability has been established.
Retail Merchandise Sales
The Company recognizes sales revenue, net of sales taxes at the time it sells the merchandise or in the case of online sales when the merchandise is delivered to the customer and payment has been received.

Vehicle Financing
Consumers can pay for their vehicle using cash or the Company offers a range of finance options through unrelated third-parties such as banks or credit unions. These third-party providers generally pay the Company afee either in a flat amount or in an amount equal to the difference between the interest rates charged to customers over the predetermined interest rates set by the financial institution.The Company may be charged back for commissions in the event a contract is prepaid, defaulted upon, or terminated.Revenue for these finance fees are recognized upon delivery of the vehicle to the customer, when the sales contract is signed, and the financing has been arranged.
Vehicle Service Contracts
At the time of vehicle sale, the Company provides customers, on behalf of unrelated third parties who are the primary obligors, a range of other related products and services, including extended protection plan (“EPP”) products and vehicle appearance protection. EPP products include extended service plans (“ESPs”) that are designed to cover unexpected expenses associated with mechanical breakdowns and guaranteed asset protection (“GAP”), which is intended to cover the unpaid balance on a vehicle loan in the event of a total loss of the vehicle or unrecovered theft. Vehicle appearance protection includes products aimed at maintaining vehicle appearance. The Companyreceives commissions from the sale of these product and service contracts andhas no contractual liability to customers for claims under these products.  The EPPs and vehicle appearance protection currently offered to consumers provide coverage up to 60 months (subject to mileage limitations), while GAP covers the customer for the term of their finance contract. 
Commission revenue is recognized at the time of sale, net of a reserve for estimated contract cancellations. The reserve for cancellations is estimated based upon historical industry experience and recent trends and is reflected as a reduction of other sales revenue in the accompanying Consolidated Statements of Operations and a component of accounts payable and accrued liabilities in the accompanying Consolidated Balance Sheets. Our risk related to contract cancellations is limited to the revenue that we receive. 
Subscription Fees
Subscription fees are generated from dealer partners, under a license arrangement that provides access to our software solution and ongoing support. Select and Appraisal Dealers pay a monthly subscription fee for access to and ongoing support for portions of the RumbleOn software solution which includes: (i) a vehicle appraisal process; (ii) inventory management system; (iii) customer relationship and lead management program; and (iv) equity mining. Dealers may also be charged an initial software installation and training fee. Dealers do not have the contractual right to take possession of the software and may cancel the license for these products and services by providing a 30-day notice. Installation and training do not have value to the user without the license and ongoing support and maintenance. Because the dealer partner has the right to cancel the license with 30 days’ notice, revenue for installation and training is recognized when complete, acceptance has occurred, and collectability of a determinable amount is probable. Revenue recognition of monthly subscription fees commences upon completion of installation, acceptance has occurred, and collectability of a determinable amount is probable.
Purchase Accounting for Business Combinations
The Company accounts for acquisitions by allocating thevaluations, fair value of the consideration transferred to the fair value of the assets acquired and liabilities assumed on the date of the acquisition and any remaining difference is recorded as goodwill. Adjustments may be made to the preliminary purchase price allocation when facts and circumstances that existed on the date of the acquisition surface during the allocation period subsequent to the preliminary purchase price allocation, not to exceed one year from the date of acquisition. Contingent consideration is recorded at fair value based on the facts and circumstances on the date of the acquisition and any subsequent changes in the fair value are recorded through earnings each reporting period.
Goodwill
Goodwill is not amortized but rather tested formeasurements, asset impairment at least annually. The Company tests goodwill for impairment annually during the fourth quarter of each year. Goodwill will also be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Impairment testing for goodwill is done at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment (also known as a component). A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available, and management regularly reviews the operating results of that component. The Company has concluded that currently it has one reporting unit.
Determining fair value includes the use of significant estimates and assumptions. Management utilizes an income approach, specifically the discounted cash flow analysis as a means for estimating fair value. This discounted cash flow analysis requires various assumptions including those about future cash flows, transactional and customer growth ratescharges and discount rates. Expected cash flows are based on historical customer growth and the growth in transactions, including attrition, future strategic initiatives and continued long-term growth of the business. The discount rates used for the analysis reflect a weighted average cost of capital based on industry and capital structure adjusted for equity risk and size risk premiums. These estimates can be affected by factors such as customer and transaction growth, pricing, and economic conditions that can be difficult to predict.

Intangible Assets
Included in “Intangible Assets” on the Company’s Condensed Consolidated Balance Sheets are identifiable intangible assets including customer relationships, non-compete agreements, trademarks, trade names and internet domain names. The estimated fair value of these intangible assets at the time of acquisition are based upon various valuation techniques including replacement cost and discounted future cash flow projections. Trademarks, trade names and internet domain names are not amortized. Customer relationships are amortized on a straight-line basis over the expected average life of the acquired accounts, which are based upon several factors, including historical longevity of customers and contracts acquired and historical retention rates. Non-compete agreements are amortized on a straight-line basis over the term of the agreement, which will generally not exceed three years. The Company reviews the recoverability of these assets if events or circumstances indicate that the assets may be impaired and periodically reevaluates the estimated remaining lives of these assets.
Trademarks, trade names and internet domain names are considered to be indefinite lived intangible assets unless specific evidence exists that a shorter life is more appropriate. Indefinite lived intangible assets are tested for impairment, at a minimum, on an annual basis using an income approach or sooner whenever events or changes in circumstances indicate that an asset may be impaired.
Long-Lived Assets
Property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used are measured by a comparison of the carrying amount of an asset to the future net cash flows expected to be generated by the asset. If such assets or asset groups are considered to be impaired, the impairment to be recognized will be measured by the amount by which the carrying amount of the assets or asset groups exceeds the related fair values. The Company also performs a periodic assessment of the useful lives assigned to the long-lived assets.
Technology Development Costs
Technology development costs are accounted for pursuant to ASC 350, Intangibles — Goodwill and Other. Technology development costs include internally developed software and website applications that are used by the Company for its own internal use and to provide services to its customers, which include consumers, dealer partners and ancillary service providers. Under the terms of these customer arrangements the Company retains the revenue generating technology and hosts the applications on its servers and mobile applications. The customer does not have a contractual right to take possession of the software during the term of the arrangement and are not permitted to run the software itself or contract with another party unrelated to the entity to host the software. Technology development costs consist principally of (i) development activities including payroll and related expenses billed by a third-party contractor involved in application, content, production, maintenance, operation, and platform development for new and existing products and services, (ii) technology infrastructure expenses, and (iii) costs of Company employees devoted to the development and maintenance of software products. Technology and content costs for design, maintenance and post-implementation stages of internal-use software and general website development are expensed as incurred. For costs incurred to develop new website functionality as well as new software products and significant upgrades to existing internally used platforms or modules, capitalization begins during the application development stage and ends when the software is available for general use. Capitalized technology development is amortized on a straight-line basis over periods ranging from 3 to 7 years. The Company will perform periodic assessment of the useful lives assigned to capitalized software applications. Additionally, the Company from time-to-time may abandon additional development activities relating to specific software projects or applications and charge accumulated costs to technology development expense in the period such determination is made.
Vehicle Inventory
Vehicle inventory is accounted for pursuant to ASC 330, Inventory and consists of the cost to acquire and recondition a used vehicle. Reconditioning costs are billed by third-party providers and includes parts, labor, and other repair expenses directly attributable to a specific vehicle. Transportation costs are expensed as incurred. Inventory is stated at the lower of cost or net realizable value. Vehicle inventory cost is determined by specific identification. Net realizable value is the estimated selling price less costs to complete, dispose and transport the vehicles. Selling prices are derived from historical data and trends, such as sales price and inventory turn times of similar vehicles, as well as independent market resources. Each reporting period, the Company recognizes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value through cost of sales in the accompanying Condensed Consolidated Statements of Operations.

Valuation Allowance for Accounts Receivable
The Company estimates the allowance for doubtful accounts for accounts receivable by considering a number of factors, including overall credit quality, age of outstanding balances, historical write-off experience and specific account analysis that projects the ultimate collectability of the outstanding balances. Ultimately, actual results could differ from theserate assumptions.
Cash and Cash Equivalents
The Company considers all cash accounts and all highly liquid short-term investments purchased with an original maturity of three months or less to be cash or cash equivalents. As of September 30, 2017 and 2016, the Company did not have any investments with maturities greater than three months.
Property and Equipment, Net
Property and equipment is stated at cost less accumulated depreciation and amortization and consists of capitalized technology development costs, furniture and equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful life of the assets. Costs of significant additions, renewals and betterments, are capitalized and depreciated. Maintenance and repairs are charged to expense when incurred.
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2017. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, prepaid expenses and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
ASC Topic 820, Fair Value Measurement, establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs are from sources independent of the Company, whereas unobservable inputs reflect the Company’s assumptions about the inputs market participants would use in pricing the asset or liability developed on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. Inputs other than quoted market prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, are Level 2 inputs.
Level 3: If inputs from Levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date.” Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
Beneficial Conversion Feature
From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the guidelines established by the ASC Topic 470-20, Debt with Conversion and Other Options. The Beneficial Conversion Feature (“BCF”) of a convertible security is normally characterized as the convertible portion or feature of certain securities that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible security when issued and also records the estimated fair value of any conversion feature issued with those securities. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.
The BCF of a convertible note is measured by allocating a portion of the note’s proceeds to the conversion feature, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The Company calculates the fair value of the conversion feature embedded in any convertible security using either a) the Black Scholes valuation model or b) a discount cash flow analysis tested for sensitivity to key Level 3 inputs using Monte Carlo simulation.

Cost of Revenue
Cost of vehicle sales includes the cost to acquire vehicles and the reconditioning and transportation costs associated with preparing the vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles the Company acquires, the source of those vehicles, and supply and demand dynamics in the vehicle market. Reconditioning costs are billed by third-party providers and include parts, labor, and other repair expenses directly attributable to specific vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition or delivery. Cost of sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.
Cost of subscription and other fee revenue includes the (i) various data feeds from third parties; (ii) hosting of the customer facing website; (iii) commissions for new sales; and (iv) implementation and training of new and existing customers. These costs and expenses are charged to cost of revenue as incurred.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses primarily include compensation and benefits, advertising and marketing, professional fees, technology development expenses, rent and other occupancy costs, insurance, travel and other administrative expenses.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and are included in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. Advertising and marketing expenses were $775,456 and $1,071,398, respectively for the three and nine-month periods ended September 30, 2017. There were no advertising and marketing costs incurred for the same periods in 2016.
Stock-Based Compensation
On January 9, 2017, the Company’s Board of Directors approved, subject to stockholder approval, the RumbleOn, Inc. 2017 Stock Incentive Plan (the “Plan”) under which restricted stock units (“RSUs”) and other equity awards may be granted to employees and non-employee members of the Board of Directors. On June 30, 2017, the Plan was approved by the Company's stockholders at the 2017 Annual Meeting of Stockholders. The Company estimates the fair value of awards granted under the Plan on the date of grant. The fair value of an RSU is based on the average of the high and low market prices of the Company’s Class B Common Stock on the date of grant and is recognized as an expense on a straight-line basis over its vesting period; to date, the Company has only issued RSUs that vest over a three-year period utilizing the following vesting schedule: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. During the nine-month period ended September 30, 2017, the Company granted 560,000 RSUs under the Plan to members of the Board of Directors, officers and employees. Compensation expense associated with RSU grants for the three and nine-month periods ended September 30, 2017 was $157,763 and $287,550, respectively and is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
Income Taxes
The Company follows ASC Topic 740, Income Taxes, for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by the taxing authorities. As of September 30, 2017, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a fifty percent likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.

The Company classifies tax-related penalties and net interest as income tax expense. As of September 30, 2017, no income tax expense has been incurred.
 
Recent Pronouncements
 
Adoption of New Accounting Standards
In June 2016, the FASB issued Accounting Standards Update No. 2016-13 "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," ("ASU 2016-13"), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses, otherwise known as "CECL". In addition, this guidance changes the recognition for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk and requires additional disclosures. On November 15, 2019, the FASB issued ASU No. 2019-10 "Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)" ("ASU 2019-10"), which provides a framework to stagger effective dates for future major accounting standards and amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. ASU 2019-10 amends the effective dates for ASU 2016-13 for smaller reporting companies with fiscal years beginning after December 15, 2022, and interim periods within those years. The Company is evaluating the level of impact adopting ASU 2016-13 will have on the Company’s condensed consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that the rights and obligations created by leases with a duration greater than 12 months be recorded as assets and liabilities on the balance sheet of the lessee. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company has adopted Accounting Standards Update 2015-11 Inventorythis standard as of January 1, 2019 using the modified retrospective approach for all leases entered into before the effective date. The Company has also elected the option, as permitted in ASU 2018-11, Leases (Topic 330), Simplifying842): Targeted Improvements, whereby initial application of the Measurement of Inventory, which requires inventory to be statednew lease standard would occur at the loweradoption date and a cumulative-effect adjustment, if any, would be recognized to the opening balance of cost or net realizable value. Vehicle inventory cost is determined by specific identification. Net realizable value isretained earnings in the estimated selling price less costs to complete, dispose and transport the vehicles. Selling prices are derived from historical data and trends, such as sales price and inventory turn timesperiod of similar vehicles, as well as independent, market resources. Each reporting periodadoption. For comparability purposes, the Company recognizes any necessary adjustmentswill continue to reflect vehicle inventory at the lower of cost or net realizable value through cost of revenuecomply with previous disclosure requirements in accordance with existing lease guidance for all periods presented in the accompanying Condensed Consolidated Statementsyear of Operations.adoption. The Company has elected the practical expedients permitted under the transition guidance which enabled the Company: (1) to carry forward the historical lease classification; (2) not to reassess whether expired or existing contracts are or contain leases; and (3) not to reassess the treatment of initial direct costs for existing leases. In addition, the Company has made an accounting policy election to keep leases with an initial term of 12 months or less off the balance sheet. Upon adoption of this standard on January 1, 2019, the Company recognized a total operating lease liability in the amount of $3,118,038, representing the present value of the minimum rental payments remaining as of the adoption date and a right-of-use asset in the amount of $3,114,399. The cumulative effect of this accounting change of $3,639 is included in the accumulated deficit for the three-months ended March 31, 2019. The standard did not have a material impact on the Company's condensed consolidated statements of operations or statements of cash flows.
NOTE 2 –ACCOUNTS RECEIVABLE, NET
Accounts receivable consists of the following as of:
 
 
March 31, 2020
 
 
December 31, 2019
 
Trade
 $9,279,635 
 $9,369,733 
Finance
  41,755 
  147,893 
Other
  750 
  - 
 
  9,322,140 
  9,517,626 
Less: allowance for doubtful accounts
  1,080,115 
  1,034,919 
 
 $8,242,025 
 $8,482,707 

 
NOTE 3 – INVENTORY
Inventory consists of the following as of:
 
 
March 31, 2020
 
 
December 31, 2019
 
Pre-owned vehicles:
 
 
 
 
 
 
Powersport vehicles
 $6,639,846 
 $10,365,050 
Automobiles and trucks
  57,980,858 
  47,599,433 
 
  64,620,704 
  57,964,483 
Less: Reserve
  9,212,173 
  583,202 
 
 $55,408,531 
 $57,381,281 
Included in the inventory reserve at March 31, 2020 is an impairment loss on automotive inventory of $7,284,638 for vehicles partially damaged at the Company's facilities in Nashville, Tennessee by the tornado on March 3, 2020. In addition, the Company recorded an impairment of $4,453,775 for the write-down of vehicles that were declared a total loss from the tornado. The total impairment on inventory related to the tornado was $11,738,413 and is recorded as part of cost of revenue on the statement of operations for the three-months ended March 31, 2020. See Note 13 – Loss Contingencies and Insurance Recoveries.
NOTE 4 – ACQUISITIONS
 
On February 8, 2017,3, 2019, the Company acquired substantially allcompleted the Autosport Acquisition pursuant to the Stock Purchase Agreement. Aggregate consideration for the Autosport Acquisition consisted of (i) a closing cash payment of $600,000, plus (ii) the Promissory Note in favor of the assetsSeller, plus (iii) the Convertible Note in favor of NextGenthe Seller, plus (iv) contingent earn-out payments payable in exchange for $750,000 inthe form of cash plus 1,523,809 unregistered shares ofand/or the Company's Class B Common Stock for up to an additional $787,500 if Autosport achieves certain performance thresholds. In connection with the Autosport Acquisition, the Buyer also paid outstanding debt of Autosport of $235,000 and assumed debt of $257,933 pursuant to the Company, which were issued at a negotiatedSecond Convertible Note. The fair value of $1.75 per sharethe contingent earn-out payment was considered immaterial at the date of acquisition and a subordinated secured promissory note issued bywas excluded from the Company in favorpurchase price allocation. As of NextGen inMarch 31, 2020, there have been no payments earned under the amountperformance threshold. See Note 1 – Description of $1,333,334 (the “NextGen Note”). The NextGen Note maturesBusiness and Significant Accounting Policies for additional information on the third anniversary of the closing date (the “Maturity Date”).Autosport Acquisition.
 
The following table presentssummarizes the final allocation of the purchase price considerationbased on the estimated fair value of the acquired assets and assumed liabilities of Autosport as of September 30, 2017:December 31, 2019:
 
Issuance of sharesPurchase price consideration:
Cash
 $2,666,666
Debt
1,333,334
Cash paid
750,000
$4,750,000835,000 
 
    
Net tangible assets acquired:
Technology development$1,536,000 convertible note
  $1,400,0001,536,000 
Customer contracts$500,000 promissory note
  10,000500,000 
Non-compete agreements$257,933 Promissory note
  100,000
Tangible assets acquired
1,510,000
Goodwill
3,240,000257,933 
Total purchase price consideration
 4,750,000$3,128,933 
Less: Issuance of shares
(2,666,666)
Less: Debt issued
(1,333,334)
 
    
Cash paidEstimated fair value of assets:
Accounts receivable
3,177,660
Inventory
2,862,004
6,039,664
Estimated fair value of accounts payable and other
5,875,009
Excess of assets over liabilities
164,655
Goodwill
2,964,278
Total net assets acquired
 $750,0003,128,933 
 
Supplemental pro forma unaudited information
The results of operations of NextGen since the acquisition date are included in the accompanying Condensed Consolidated Financial Statements. (unaudited)
 
The following unaudited supplemental pro forma information presents the financial results as if the acquisition of NextGenAutosport Acquisition was made as of January 1, 2017 for both the three and nine-month periods ended September 30, 2017 and on January 1, 2016 for both the three and nine-month periods ended September 30, 2016.
Pro forma adjustments2019 for the nine-month periodthree-months ended September 30, 2017 and 2016 primarily include adjustments to reflect additional depreciation and amortization of $29,866 and $48,788, respectively, related to technology development and identifiable intangible assets recorded as part of the acquisition, and interest expense related to the NextGen Note of $27,353 and $42,833, respectively.March 31, 2019.
 

 
 
 
Three-Months Ended
September 30,
 
 
Nine-Months Ended
September 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Pro forma revenue
 $3,706,142 
 $45,606 
 $3,868,079 
 $100,006 
Pro forma net loss
 $(2,317,503)
 $(567,401)
 $(5,237,814)
 $(1,625,690)
Loss per share - basic and fully diluted
 $(0.23)
 $(0.08)
 $(0.58)
 $(0.23)
Weighted-average common shares and common stock equivalents outstanding basic and fully diluted
  10,018,541 
  7,023,809 
  9,105,429 
  7,023,809 
Pro forma adjustments for the three-months ended March 31, 2019 primarily include adjustments to reflect the: (i) amortization of stock compensation expense of $17,722 and (ii) interest expense of $19,793.
 
Three-Months Ended
March 31, 2019
Unaudited
Pro forma revenue
$229,496,368
Pro forma net loss
$(8,387,927)
Loss per share - basic and fully diluted
$(7.90)
Weighted-average common shares and common stock equivalents outstanding basic and fully diluted
1,061,344
NOTE 45 – PROPERTY AND EQUIPMENT, NET
 
The following table summarizes property and equipment, net of accumulated depreciation and amortization as of September 30, 2017March 31, 2020 and December 31, 2016:2019:
 
September 30,
2017
December 31,
2016
Vehicles
$472,870
$-
Furniture and equipment
127,306
-
Technology development
1,835,097
-
Total property and equipment
2,435,273
-
Less: accumulated depreciation and amortization
268,947
-
Property and equipment, net
$2,166,326
$-
 
 
March 31, 2020
 
 
December 31, 2019
 
Vehicles
 $323,477 
 $158,327 
Furniture and equipment
  191,047 
  448,074 
Technology development and software
  9,153,623 
  8,863,247 
Leasehold improvements
  180,618 
  246,135 
Total property and equipment
  9,848,765 
  9,715,783 
Less: accumulated depreciation and amortization
  3,675,879 
  3,288,109 
Total
 $6,172,886 
 $6,427,674 
 
Amortization and depreciation on Property and Equipment is determined on a straight-line basis over the estimated useful lives ranging from 3 to 5 years.
At September 30, 2017,March 31, 2020, capitalized technology development costs were $1,835,097,$8,945,613, which includes $1,400,000$2,900,000 of software acquired in the NextGen transaction. For additional information, see Note 3 - “Acquisitions.”transaction and is included in Technology development and software in the table above. Total technology development costs incurred for the nine-month periodthree-months ended September 30, 2017 were $713,766,March 31, 2020 was $911,210 of which $435,097$290,376 was capitalized and $278,669$620,834 was charged to expense in the accompanying Condensed Consolidated Statements of Operations. TheDepreciation expense for the three-months ended March 31, 2020 was $522,995, which included the amortization of capitalized technology development costs for the three and nine-month periods ended September 30, 2017 was $89,429 and $219,374, respectively. There were noof $437,943. Total technology development costs incurred for the three-months ended March 31, 2019 was $1,372,542 of which $879,829 was capitalized and no$492,713 was charged to expense in the accompanying Condensed Consolidated Statements of Operations. Depreciation expense for the three-months ended March 31, 2019 was $382,225, which included the amortization of capitalized technology development costs for the same periods in 2016. Depreciation expense on vehicles, furniture and equipment for the three and nine-month periods ended September 30, 2017 was $28,598 and $49,573, respectively. Depreciation on furniture and equipment for the three and nine-month periods ended September 30, 2016 was $475 and $1,425, respectively.
NOTE 5 – INTANGIBLE ASSETS, NET
Intangible assets, net consist of the following at September 30, 2017 and December 31, 2016:
September 30,
2017
Amortized Identifiable Intangible Assets:
Customer agreements
Balance at December 31, 2016
$$291,746.-
Customers acquired
10,000
Amortization
(3,750)
Balance at September 30, 2017
$6,250
Non-compete agreements
Balance at December 31, 2016
$ -
Agreements
100,000
Amortization
(30,000)
Balance at September 30, 2017
$70,000
Unamortized Identifiable Intangible Assets:
Domain names
Balance at December 31, 2016
$45,515
Domain names acquired
-
Impairment or write down
-
Balance at September 30, 2017
$45,515
Intangible assets, net at September 30, 2017
$121,765

Amortization expense related to intangible assets for the three and nine-month periods ended September 30, 2017 was $11,250 and $33,750, respectively. The estimated future amortization expenses related to identifiable intangible assets is as follows:
Remainder through December 31, 2017
 $11,250 
2018
  45,000 
2019
  20,000 
 
 $76,250 
 
NOTE 6 – GOODWILL AND INTANGIBLE ASSETS
The following is a summary of the changes in the carrying amount of goodwill and other indefinite-lived asset as of December 31, 2019 and the three-months ended March 31, 2020. Due to the significant decline in the Company’s stock price and the economic effect of COVID-19, the Company determined a triggering event for Goodwill impairment existed. As a result, the Company performed a quantitative impairment analysis for the Automotive segment. The Company’s impairment test indicated no impairment existed as the estimated fair value of the reporting unit exceeded its carrying value at March 31, 2020.
 
 
Goodwill
 
 
Indefinite Lived Intangible Assets
 
Balance at December 31, 2019
 $26,886,563 
 $45,515 
Impairment
  - 
  - 
Balance at March 31, 2020
 $26,886,563 
 $45,515 
NOTE 7 – ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES
 
The following table summarizes accounts payable and other accrued liabilities as of September 30, 2017March 31, 2020 and December 31, 2016:2019:
 
 
 
September 30,
2017
 
 
December 31,
2016
 
Accounts payable
 $1,539,572 
 $219,101 
Sales taxes
  296 
  - 
Accrued compensation and benefits
  354,790 
  - 
Other
  7,885 
  - 
Total accounts payable and accrued liabilities
 $1,902,543 
 $219,101 
 
 
March 31, 2020
 
 
December 31, 2019
 
Accounts payable
 $4,968,709 
 $8,730,624 
Operating lease liability-current portion
  1,414,054 
  1,423,610 
Accrued payroll
  792,177 
  715,658 
State and local taxes
  745,643 
  912,062 
Other accrued expenses
  2,314,889 
  639,140 
Total
 $10,235,472 
 $12,421,094 

 
NOTE 78 – NOTES PAYABLE AND LINES OF CREDIT
 
Notes payable and lines of credit consisted of the following as of September 30, 2017March 31, 2020 and December 31, 2016:2019:
 
 
 
September 30,
2017
 
 
December 31,
2016
 
Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is February 8, 2020.
 $1,333,334 
 $- 
Notes payable-private placement dated March 31, 2017. Interest is payable at maturity and accrues at 6.5% through March 31, 2019 and 8.5% through maturity which is March 31, 2020.
  667,000 
  - 
Convertible note payable-related party dated July 13, 2016. Interest rate of 6.0% which is accrued and paid at maturity. Note matures on July 26, 2026. Note is convertible into common stock, in whole at any time before maturity at the option of the holder at $.75 per share.
  - 
  197,358 
Senior Secured Promissory Notes dated September 5, 2017. Interest rate of 5.0% through December 31, 2017 and a rate of 10% through maturity which is accrued and paid at maturity. Note matures on September 5, 2018.
  1,650,000 
    
Less: Debt discount
  (725,123)
  (196,076)
 
 $ 2,925,211
 
 $ 1,282
 
Current portion (net of $139,726 of debt discount)
  1,510,274
 
  -
 
Long-term portion
 $ 1,414,937
 
 $ 1,282
 
 
 
March 31, 2020
 
 
December 31, 2019
 
Notes payable-NextGen dated February 8, 2017. Interest is payable semi-annually at 6.5% through February 9, 2019 and 8.5% through maturity which is January 31, 2021.
 $833,333 
 $1,333,334 
 
    
    
Notes payable-private placement dated March 31, 2017 and exchanged January 14, 2020. Interest is payable semi-annually at 6.5% through September 30, 2019 and 8.5% through maturity which is January 31, 2021.
  669,175 
  667,000 
 
    
    
Line of credit-floor plan-Ally dated February 16, 2018. Facility provides up to $25,000,000 of available credit secured by vehicle inventory and other assets. Principal and interest are payable on demand.
  - 
  8,419,897 
 
    
    
Line of credit-floor plan-NextGear dated October 30, 2018. Secured by vehicle inventory and other assets. Interest rate at March 31, 2020 was 6.25%. Principal and interest is payable on demand.
  61,297,049 
  50,741,073 
 
    
    
Less: Debt discount
  - 
  (75,601)
Total notes payable and lines of credit
  62,799,557 
  61,085,703 
Less: Current portion
  62,799,557 
  59,160,970 
 
    
    
Long-term portion
 $- 
 $1,924,733 
 
Convertible Note Payable-Related PartyLine of Credit-Floor Plan-NextGear
 
On July 13, 2016,October 30, 2018, Wholesale, as borrower, entered into a floorplan vehicle financing credit line (the "NextGear Credit Line") with NextGear Capital, Inc. ("NextGear"). As of the date of this filing, based on on-going discussions with NextGear, at some future date advances under the NextGear Credit Line for Wholesale and Autosport will be limited to $55,000,000.Advances under the NextGear Credit Line require Wholesale to maintain at least $5,500,000 cash collateral in a reserve account in favor of NextGear, which amount is subject to change in NextGear's sole discretion.Advances under the NextGear Credit Line will bear interest at an initial per annum rate of 5.25%, based upon a 360-day year, and compounded daily, and the per annum interest rate will vary based on a base rate, plus the contract rate, which is currently negative 2.0%, until the outstanding liabilities to NextGear are paid in full.  Interest expense on the NextGear Credit Line for the three-months ended March 31, 2020 was $458,528.
Line of Credit-Floor Plan-Ally
On February 16, 2018, the Company, through its wholly-owned subsidiary RMBL MO, entered into an unsecured convertible noteInventory Financing and Security Agreement (the “BHLP Note”"Credit Facility") with Berrard Holdings, an entity ownedAlly Bank ("Ally") and controlled byAlly Financial, Inc., a current officer and director, Mr. Berrard,Delaware corporation ("Ally" together with Ally Bank, the "Lender"), pursuant to which the Lender may provide up to $25,000,000 in financing, or such lesser sum which may be advanced to or on behalf of RMBL MO from time to time, as part of its floorplan vehicle financing program. Advances under the Credit Facility require that the Company was required to repay $191,858 on or before July 13, 2026 plusmaintain 10.0% of the advance amount as restricted cash. Advances under the Credit Facility will bear interest at 6%a per annum. The BHLP Note was also convertible into common stock,annum rate designated from time to time by the Lender and will be determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. Advances under the Credit Facility, if not demanded earlier, are due and payable for each vehicle financed under the Credit Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged, transferred, or otherwise disposed of. Interest under the Credit Facility is due and payable upon demand, but, in whole, atgeneral, in no event later than 60 days from the date of request for payment. Upon any time before maturity at the optionevent of default (including, without limitation, RMBL MO's obligation to pay upon demand any outstanding liabilities of the holderCredit Facility), the Lender may, at its option and without notice to the greaterRMBL MO, exercise its right to demand immediate payment of $0.06 per share or 50%all liabilities and other indebtedness and amounts owed to Lender and its affiliates by RMBL MO and its affiliates. The Credit Facility is secured by a grant of a security interest in the vehicle inventory and other assets of RMBL MO and payment is guaranteed by the Company pursuant to a guaranty in favor of the price per share of the next qualified financing which is defined as $500,000 or greater. Effective August 31, 2016, the principal amount of the BHLP Note was amended to include an additional $5,500 loaned toLender and secured by the Company pursuant to a General Security Agreement. Interest expense on the same terms. On November 28, 2016, the Company completed its qualified financing at $1.50 per share which established the conversion price per shareCredit Facility for the BHLP Note of $0.75 per share, resulting in the principal amount of the BHLP Note being convertible into 263,144 shares of Class B Common Stock. As such, November 28, 2016 became the “commitment date” for determining the value of the BHLP Note conversion feature. Because there had been no trading in the Company’s common stock since July 2014, other than the purchase by Berrard Holdings of 99.5% of the outstanding shares in a single transaction, the Company used the Monte Carlo simulation to determine the intrinsic value of the conversion feature of the BHLP Note, which resulted in a value in excess of the principal amount of the BHLP Note. Thus, the Company recorded a note discount of $197,358 with the corresponding amount as an addition to paid in capital. This note discount was amortized to interest expense until the scheduled maturity of the BHLP Note in July 2026 or until it was converted using the effective interest method. Onthree-months ended March 31, 2017, the Company issued 275,312 shares of Class B Common Stock upon full conversion of the BHLP Note, having an aggregate principal amount, including accrued interest, of $206,484 and a conversion price of $0.75 per share. In connection with the conversion of the BHLP Note, the remaining debt discount of $196,0762020 was charged to interest expense$79,694. The Credit Facility ended in the Condensed Consolidated Statements of Operations and the related deferred tax liability was credited to additional paid in capital in the Condensed Consolidated Balance Sheets.February 2020.
 

   
Note Payable-NextGenLoan Agreement-Hercules Capital Inc.
 
On May 14, 2019, the Company made a payment to Hercules Capital Inc. ("Hercules") of $11,134,695, representing the principal, accrued and unpaid interest, fees, costs and expenses outstanding under its Loan and Security Agreement (the "Loan Agreement") with Hercules dated April 30, 2018 (the "Hercules Indebtedness"). Upon the payment, all outstanding indebtedness and obligations of the Company owed to Hercules under the Loan Agreement were paid in full, and the Loan Agreement was terminated. The Company used a portion of the net proceeds from the Note Offering (described below) to pay the Hercules Indebtedness. In accordance with the guidance in ASC 470-50, Debt, the Company accounted for the extinguishment of the Loan Agreement as an extinguishment and recognized a loss on early extinguishment of debt of $1,499,250 for the year ended December 31, 2019. The loss on early extinguishment consisted primarily of the prepayment penalty paid to Hercules and unamortized debt discounts including the remaining portion of warrant values and debt issuance costs. There was no interest expense on the Hercules loan for the three-months ended March 31, 2020. For the three-months ended March 31, 2019, interest expense on the Hercules loan was $483,491 and included $131,997 of debt issuance cost amortization.
Notes Payable
NextGen
On February 8, 2017, in connection with the acquisition of NextGen, the Company issued a subordinated secured promissory note in favor of NextGen (which note was subsequently assigned to Halcyon Consulting LLC ("Halcyon") in February 2018) in the amount of $1,333,334. Interest accrues and will be paid semi-annually (i) at a rate of 6.5% annually from the closing date through the second anniversary of such date and (ii) at a rate of 8.5% annually from the second anniversary of the closing date through the Maturity Date.January 31, 2021 maturity date (the "NextGen Note"). Upon the occurrence of any event of default, the outstanding balance under the NextGen Notenote shall become immediately due and payable upon election of the holder. The Company’sCompany's obligations under the NextGen Note are secured by substantially all the assets of NextGen Pro, LLC, the Company's wholly-owned subsidiary ("NextGen Pro"), pursuant to an Unconditional Guaranty Agreement (the “Guaranty Agreement”"Guaranty Agreement"), by and among NextGen and NextGen Pro, and a related Security Agreement between the parties, each dated as of February 8, 2017. Under the terms of the Guaranty Agreement, NextGen Pro has agreed to guarantee the performance of all the Company’sCompany's obligations under the NextGen Note. Interest expense on the NextGen NotesNote for the threethree-months ended March 31, 2020 was $21,927 as compared to $21,370 for the same period of 2019. In connection with the Investor Note Exchange Agreement (described below), in January 2020, $500,000 of the NextGen Note was paid down and nine-month periods ended September 30, 2017the NexGen Note was $21,370 and $54,849, respectively.exchanged for a New Investor Note (as defined below).
 
Notes Payable-PrivatePrivate Placement
 
On March 31, 2017, the Company completed funding of the second tranche of thea private placement commenced in 2016 (the "2016 Private Placement (as defined below)Placement"). The investors were issued 1,161,92058,096 shares of Class B Common Stock of the Company and promissory notes (the “Private"Private Placement Notes”Notes") in the amount of $667,000, in consideration of cancellation of loan agreements having an aggregate principal amount committed by the purchasers of $1,350,000. Under the terms of the Private Placement Notes, interest shall accrue on the outstanding and unpaid principal amounts until paid in full. The Private Placement Notes mature on MarchJanuary 31, 2020.2021. Interest accrues at a rate of 6.5% annually from the closing date through the second anniversary of such date and at a rate of 8.5% annually from the second anniversary of the closing date through the maturity date. Upon the occurrence of any event of default, the outstanding balance under the Private Placement Notes shall become immediately due and payable upon election of the holders. Based on the relative fair values attributed to the Class B Common Stock and promissory notes issued in the 2016 Private Placement, the Company recorded a debt discount on the promissory notes of $667,000 with the corresponding amounts recorded as an addition to paid inpaid-in capital. The debt discount iswas amortized to interest expense until the scheduled maturity of the Private Placement Notes in March 2020 using the effective interest method. Thean effective interest rate at September 30, 2017 wasof 26.0%. Interest expense on the Private Placement Notes for the threethree-months ended March 31, 2020 was $91,893 and nine-month periods ended September 30, 2017 was $94,885 and $184,943, respectively, which included $75,601 of debt discount amortization as compared to interest expense of $41,979 and $81,603, respectively$73,328 which included $59,348 of debt discount amortization for the three and nine-month periods ended September 30, 2017.same period of 2019. In connection with the Investor Note Exchange Agreement (described below) the Private Placement Notes were exchanged for New Investor Notes (as defined below).
 
Exchange of Notes Payable-Senior Secured Promissory NotesPayable
 
On September 5, 2017,Certain of the Company's investors extended the maturity of outstanding promissory notes, and exchanged such notes for new notes (the "New Investor Notes"), pursuant to that certain Note Exchange Agreement, dated January 14, 2020 (the "Investor Note Exchange Agreement"), by and between the Company executed Senior Secured Promissory Notesand each investor thereto (the “Notes”"Investors") in favor of several investors,, including certain executive officers and directorsHalcyon, an entity affiliated with Kartik Kakarala, a director of the Company, in thesuch New Investor Note for an aggregate principal amount of $1,650,000 (“Principal Amount”$833,333 (after taking account of a $500,000 pay down of the NextGen Note), Blue Flame Capital, LLC ("Blue Flame"), an entity affiliated with Denmar Dixon, a director of the Company, such New Investor Note for an aggregate principal amount of $99,114, and Mr. Dixon, individually, such New Investor Note for an aggregate principal amount of $272,563. The New Investor Notes, having an aggregate principal amount of approximately $1,500,000, will mature on January 31, 2021, and will be convertible at any time at the Investor's option at a price of $60.00 per share. Interest under the New Investor Notes accrue on the outstanding and unpaid principal amount at the rate of 10.0% per annum and shall be paid quarterly in arrears on the last day of each of the Company's fiscal quarters beginning on March 30, 2020, and, if applicable, on the January 31, 2021 maturity date.

NOTE 9 – CONVERTIBLE NOTES
As of March 31, 2020, the outstanding convertible promissory notes net of debt discount and issue costs are summarized as follows:
 
 
Principal
Amount
 
 
Debt
Discount
 
 
Carrying
Amount
 
Convertible senior notes
 $38,750,000 
 $13,109,986 
 $25,640,014 
Convertible notes-Autosport
    
    
    
$1,536,000 unsecured note
  1,472,000 
  370,902 
  1,101,098 
$500,000 unsecured note
  500,000 
  1,495 
  498,505 
 
  40,722,000 
  13,482,383 
  27,239,617 
Less: Current portion
  1,268,000 
  111,089 
  1,156,911 
Long-term portion
 $39,454,000 
 $13,371,294 
 $26,082,706 
Convertible Senior Notes
On May 9, 2019, the Company entered into a purchase agreement (the "Purchase Agreement") with JMP Securities LLC ("JMP Securities") to issue and sell $30,000,000 in aggregate principal amount of its 6.75% Convertible Senior Notes due 2024 (the "Old Notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act") (the "2019 Note Offering"). The Company paid JMP Securities a fee of 7.0% of the gross proceeds in the 2019 Note Offering. The proceeds for the 2019 Note Offering after deducting the initial purchaser's discounts, advisory fees, and related offering expenses, were approximately $27,385,500.
The Old Notes were issued on May 14, 2019 pursuant to an Indenture (the "Old Indenture") by and between the Company and Wilmington Trust, National Association, as trustee (the "Trustee"). The Purchase Agreement included customary representations, warranties and covenants by the Company and customary closing conditions. Under the terms of the Purchase Agreement, the Company agreed to indemnify JMP Securities against certain liabilities. The Old Notes bore interest at 6.75% per annum, payable semiannually on May 1 and November 1 of each year, beginning on November 1, 2019. The Old Notes could bear additional interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the Old Indenture or if the Old Notes were not freely tradeable as required by the Old Indenture. The Old Notes would have matured on May 1, 2024, unless earlier converted, redeemed or repurchased pursuant to their terms.
The initial conversion rate of the Old Notes was 8.6956 shares of Class B Common Stock, per $1,000 principal amount of the Old Notes, subject to adjustment (which is equivalent to an initial conversion price of approximately $115.00 per share, subject to adjustment). The conversion rate was subject to adjustment in some events but would not have been adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the Old Indenture), the Company would, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elected to convert its Old Notes in connection with such make-whole fundamental change.
The Old Notes were not redeemable by the Company prior to the May 6, 2022. The Company could have redeemed for cash all or any portion of the Old Notes, at its option, on or after May 6, 2022 if the last reported sale price of the Company's Class B Common Stock had been at least 150.0% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund was provided for the Old Notes. If redeemed, the Company would have made an interest make-whole payment to the converting holder equal to the sum of the present values of the scheduled payments of interest that would have been made on the Old Notes to be converted had such Old Notes remained outstanding from the conversion date through the earlier of the date that is two years after the conversion date and June 15, 2022.
In connection with the 2019 Note Offering, the Company entered into a registration rights agreement with JMP Securities, pursuant to which the Company agreed to file with the SEC a resale shelf registration statement providing for the resale of the Old Notes and the shares of Class B Common Stock issuable upon conversion of the Old Notes.

On January 10, 2020, the Company entered into a Note Exchange and Subscription Agreement, as amended by a Joinder Agreement (together, the "New Note Agreement"), with the investors in the 2019 Note Offering, pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000,000 of the Old Notes would be cancelled in exchange for a new series of 6.75% Convertible Senior Notes due 2025 (the "New Notes," and together with the Old Notes, the "Notes") and (ii) the issuance of additional New Notes in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering (the "2020 Note Offering"). On January 14, 2020, the Company closed the 2020 Note Offering. The proceeds for the 2020 Note Offering after deducting for payment of accrued interest on the Old Notes and offering-related expenses were approximately $8,272,375.
The New Notes were issued on January 14, 2020 pursuant to an Indenture (the "New Indenture"), by and between the Company and the Trustee. The New Note Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The New Notes bear interest at 6.75% per annum, payable semiannually on January 1 and July 1 of each year, beginning on July 1, 2020. The New Notes may bear additional interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the New Indenture or if the New Notes are not freely tradeable as required by the New Indenture. The New Notes mature on January 1, 2025, unless earlier converted, redeemed or repurchased pursuant to their terms.
The initial conversion rate of the New Notes is 25 shares of Class B Common Stock per $1,000 principal amount of New Notes, which is equal to an initial conversion price of $40.00 per share. The conversion rate is subject to adjustment in certain events as set forth in the New Indenture but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a "make-whole fundamental change" (as defined in the New Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its New Notes in connection with such make-whole fundamental change. Before July 1, 2024, the New Notes will be convertible only under circumstances as described in the New Indenture. No adjustment to the conversion rate as a result of conversion or a make-whole fundamental change adjustment will result in a conversion rate greater than 62.0 shares per $1,000 in principal amount.
The New Indenture contains a "blocker provision" which provides that no holder (other than the depositary with respect to the notes) or beneficial owner of a New Note shall have the right to receive shares of the Class B Common Stock upon conversion to the extent that, following receipt of such shares, such holder or beneficial owner would be the beneficial owner of more than 4.99% of the outstanding shares of the Class B Common Stock.
The New Notes are not redeemable by the Company before the January 14, 2023. The Company may redeem for cash all or any portion of the New Notes, at its option, on or after January 14, 2023 if the last reported sale price of the Class B Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100.0% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the New Notes.
The New Notes rank senior in right of payment to any of the Company's indebtedness that is expressly subordinated in right of payment to the New Notes; equal in right of payment to any of the Company's unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company's secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities of current or future subsidiaries of the Company (including trade payables).
The New Notes are subject to events of default typical for this type of instrument. If an event of default, other than an event of default in connection with certain events of bankruptcy, insolvency or reorganization of the Company or any significant subsidiary, occurs and is continuing, the Trustee by notice to the Company, or the holders of at least 25% in principal amount of the outstanding New Notes by notice to the Company and the Trustee, may declare 100.0% of the principal of and accrued and unpaid interest, if any, on all the New Notes then outstanding to be due and payable.
In connection with the 2020 Note Offering, on January 14, 2020, the Company entered into a registration rights agreement with the Note Investors, pursuant to which the Company has agreed to file with the SEC a shelf registration statement registering the sale, on a continuous or delayed basis, of all of the New Notes and to use its commercially reasonable efforts to cause the shelf registration statement to become or be declared effective under the Securities Act no later than May 29, 2020 (which date has been adjusted for certain intervening events, including the COVID-19 pandemic).
As of March 31, 2020, the conditions allowing holders of the New Notes to convert have not been met and therefore the New Notes are not yet convertible.

The Company accounted for the exchange of the Old Notes and the issuance of the New Notes in accordance with the conversion guidance in ASC 470-20 “Debt – Debt with Conversion and Other Option” (ASC 470-20) and determined that the exchange of the Old Notes for the New Notes required derecognition of the Old Notes given that the difference in the fair value of the embedded the conversion feature of the New Notes relative to the Old Notes was in excess of 10 percent of the Old Notes conversion feature fair value. In derecognizing the Old Notes, the Company recognized a gain of $188,164 equal to difference between the fair value of the Old Notes liability immediately prior to extinguishment and the carry amount of the liability component of the Old Notes, including any all unamortized debt issuance costs. The remaining consideration of $2,593,163 was allocated to the reacquisition of the equity component and recognized as a reduction of stockholder’s equity.
The New Notes were accounted for in accordance with FASB ASC 470, Debt and ASC 815, Derivatives and Hedging, which includesrequired bifurcation of the liability and equity components. The Company determined the carrying amount of the liability component was $25,280,430 and represents the present value of the New Notes cash flows using an aggregate original issueimplied discount rate of $150,000. The18.7%, which is a yield applicable to similar debt instruments that do not have the conversion feature.After allocation of the initial proceeds to the Company fromliability components, the Notes, net of original issuance discount,remaining amount was $1,500,000. The Notes are secured by an interest in all the Company’s Collateral, as such term is defined in the Notes.The Notes mature on September 5, 2018 and bear interest at a rate equal to 5% per annum through December 31, 2017, and a rate of 10% per annum thereafter. Interest is payable monthly in arrears. Upon the occurrence of any event of default, the outstanding balance under the Notes shall become immediately due and payable upon election of the holders.The Principal Amount and any unpaid interest accrued thereon may be prepaid by the Company at any time priorallocated to the maturity date without premium or penalty upon five days prior written noticeequity component and recorded as additional paid in capital. The Company recorded $13,529,141 in total debt discount related to the noteholder. If the Company consummates in one or more transactions financingNew Notes, and includes $59,571 of any nature resulting in net proceeds available to the Company of $5,000,000 or more, then the noteholders may require the Company to prepay the Notes on thirty (30) days prior written notice to the Company.debt issuance costs. The original issueThis debt discount is amortized to interest expense untilover the scheduled maturityterm of the New Notes in September 2018 using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. The Company further valued a derivative liability in connection with the interest make-whole provision at $20,673 at issuance based on a lattice model. This amount was recorded as a debt discount and is amortized to interest expense over the term of the New Notes using the effective interest rate. The derivative liability is remeasured at each reporting date with the increase in value of $116,815being recorded in other income for the three-months ended March 31, 2020. The value of the derivative liability as of March 31, 2020 was $137,488. 

The Company allocates transaction costs related to the issuance of the New Notes to the liability and equity components using the same proportions as the initial carrying value of the New Notes. Transaction costs attributable to the debt component were $59,571 and are being amortized to interest expense using the effective interest method over the term of the New Notes. Transaction costs attributable to the equity component were $40,669and are netted with the equity component of the New Notes in stockholders' equity.
The interest expense recognized with respect to the Convertible Notes was as follows:
Three-Months Ended
March 31, 2020
Contractual interest expense
$566,719
Amortization of debt discounts
$346,029
Total
$912,748
Convertible Notes-Autosport USA
On February 3, 2019, in connection with the Autosport Acquisition, the Company issued (i) the Promissory Note and (ii) the Convertible Note in favor of the Seller. In connection with the Autosport Acquisition, the Buyer also assumed additional debt of $257,933 pursuant to the Second Convertible Note.
The $500,000 Promissory Note has a term of fifteen months and will accrue interest at a simple rate of 5.0% per annum. Interest under the Promissory Note is payable upon maturity. In June 2020, principal payments of $128,000 were made and the promissory note maturity date was extended to October 1, 2020 and the remaining principal balance of $372,000 will be repaid in four equal principal plus interest payments beginning July 1, 2020 through maturity. Any interest and principal due under the Promissory Note is convertible, at September 30, 2017the Buyer's option into shares of the Company's Class B Common Stock at a conversion price equal to the weighted average trading price of the Company's Class B Common Stock on the Nasdaq Stock Exchange for the twenty (20) consecutive trading days preceding the conversion date. The number of shares of the Company's Class B Common Stock issuable pursuant to the Promissory Note is indeterminate at this time.
The $1,536,000 Convertible Note matures on January 31, 2022 and accrues interest at a rate of 6.5% per annum. Interest under the Convertible Note is payable monthly for the first 12 months, and thereafter monthly payments of amortized principal and interest will be due. Any interest and principal due under the Convertible Note is convertible into shares of the Company's Class B Common Stock at a conversion price of $115.00 per share, (i) at the Seller's option, or (ii) at the Buyer's option, on any day that (a) any portion of the principal of the Convertible Note remains unpaid and (b) the weighted average trading price of the Company's Class B Common Stock on Nasdaq for the twenty (20) consecutive trading days preceding such day has exceeded $140.00 per share. The maximum number of shares issuable pursuant to the Convertible Note is 15,962 shares of the Company's Class B Common Stock.
The Second Convertible Note had a term of one year and accrued interest at a simple rate of 5.0% per annum. The note was 10.0%. Interestrepaid in full during the three-months ended March 31, 2020.
For the three months ended March 31, 2020, interest expense on the Notes for the threeconvertible notes was $51,560 and nine-month periods ended September 30, 2017 was $15,925 which included $10,274$19,693 of original issuedebt discount amortization.On October 23, 2017, the Company completed a public offering and used approximately $1,661,075 of the net proceeds of the offering for the repayment of the Notes in the aggregate principal amount of $1,650,000, plus accrued interest, which resulted in the termination of the Notes. For additional information, see Note 15 “Subsequent Events.”
 

 
NOTE 810 – STOCKHOLDERS’ EQUITYEQUITY-BASED COMPENSATION
 
On November 28, 2016, the Company completed a private placement with certain purchasers, with respect to the sale of an aggregate of 900,000 shares of common stock of the Company at a purchase price of $1.50 per share for total consideration of $1,350,000 (the “2016 Private Placement”). In connection with the 2016 Private Placement, the Company also entered into loan agreements, pursuant to which the purchasers would loan to the Company their pro rata share of up to $1,350,000 in the aggregate upon the request of the Company at any time on or after January 31, 2017 and before November 1, 2020. On March 31, 2017, the Company completed the second tranche of the 2016 Private Placement. For additional information, see Note 7 - “Notes Payable.”Share-Based Compensation
 
On January 9, 2017, the Company’s Board of Directors approved, subject to stockholder approval, the adoption of the Plan. On June 30, 2017, the Company's shareholders approved a Stock Incentive Plan was approved by(the "Plan") reserving for issuance under the Company’s stockholders atPlan in the 2017 Annual Meetingform of Stockholders. The purposesrestricted stock units ("RSUs"), stock options ("Options"), Performance Units, and other equity awards (collectively "Awards") for the Company's employees, consultants, directors, independent contractors and certain prospective employees who have committed to become an employee (each an "Eligible Individual") of up to 12% of the shares of Class B Common Stock outstanding from time to time. On June 25, 2018, the Company's shareholders approved an amendment to the Plan are to attract, retain, reward and motivate talented, motivated and loyal employees and other service providers (“Eligible Individuals”) by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effortnumber of shares authorized for issuance under the growth and successPlan from 12.0% of the Company, so as to strengthen the mutuality of the interests between such persons and the stockholders of the Company. The Plan will allow the Company to grant a variety of stock-based and cash-based awards to Eligible Individuals. Twelve percent (12%) of the Company’sCompany's issued and outstanding shares of Class B Common Stock from time to time are reserved for issuance under the Plan. As of September 30, 2017, 9,018,541 shares are issued and outstanding, resulting in up to 1,082,225 shares available for issuance under the Plan. As of September 30, 2017, the Company has granted 560,000 RSUs under the Plan to certain officers and employees of the Company. The aggregate fair value of the RSUs was $2,103,500. The RSUs vest over a three-year period as follows: (i) 20% on the first anniversary of the grant date; (ii) 30% on the second anniversary of the grant date; and (iii) 50% on the third anniversary of the grant date. The fair value of the grant is amortized over the period from the grant date through the vesting dates. Compensation expense recognized for these grants for the three and nine-month periods ended September 30, 2017 was $157,763 and $287,550, respectively. The Company has approximately $1,605,600 in unrecognized stock-based compensation, with an average remaining vesting period of three years.
On January 9, 2017, the Company’s Board of Directors and stockholders holding 6,375,000 of the Company’s issued and outstanding shares of common stock approved an amendment to the Company’s Articles of Incorporation (the “Certificate of Amendment”), to change the name of the Company to RumbleOn, Inc. and to create an additional class of common stock of the Company, which was effective on February 13, 2017 (the “Effective Date”).
Immediately before approving the Certificate of Amendment, the Company had authorized 100,000,000 shares of common stock, $0.001 par value (the “Authorized Common Stock”), including 6,400,000 issued and outstanding shares of common stock (the “Outstanding Common Stock, and together with the Authorized Common Stock, the “Common Stock”). Pursuant to the Certificate of Amendment, the Company designated 1,000,000 shares of Authorized Common Stock as Class A Common Stock (the “Class A Common Stock”), which Class A Common Stock ranks pari passu with all of the rights and privileges of the Common Stock, except that holders of the Class A Common Stock are entitled to ten votes per share of Class A Common Stock issued and outstanding, and all other shares of Common Stock, including all shares of Outstanding Common Stock shall be deemed Class B Common Stock (the “Class B Common Stock”), which Class B Common Stock is identical to the Class A Common Stock in all material respects, except that holders of the Class B Common Stock are entitled to one vote per share of Class B Common Stock issued and outstanding.
Also on January 9, 2017, the Company’s Board of Directors and stockholders holding 6,375,000 of the Company’s issued and outstanding shares of common stock approved the issuance to (i) Marshall Chesrown of 875,000 shares of Class A Common Stock in exchange for an equal number of100,000 shares of Class B Common Stock held by Mr. Chesrown, and (ii) Steven R. Berrard(the "First Plan Amendment"). On May 20, 2019, the Company's stockholders approved another amendment to the Plan to increase the number of 125,000 shares of Class A Common Stock in exchangeauthorized for an equal number ofissuance under the Plan from 100,000 shares of Class B Common Stock held by Mr. Berrard, effective at the time the Certificate of Amendment was filed with the Secretary of State of Nevada.
On the Effective Date, the Company filed the Certificate of Amendment with the Secretary of State of the State of Nevada changing the Company’s name to RumbleOn, Inc. and creating the Class A and Class B Common Stock. Also on the Effective Date, the Company issued an aggregate of 1,000,000 shares of Class A Common Stock to Messrs. Chesrown and Berrard in exchange for an aggregate of 1,000,000200,000 shares of Class B Common Stock held by them. Also (the "Second Plan Amendment"). To date, the vesting of RSU and Option awards for most employees is service/time based. Substantially all service/time based RSU and Option awards issued typically vest over a three-year period with the following vesting schedule: (i)20.0% vesting anywhere from eight-months to thirteen month after grant date, (ii) an additional 30.0% during the subsequent twelve months of the initial vesting,and (iii) the final 50.0% during the following twelve months. In 2019 the Company granted to certain members of management an aggregate of (i) 12,213 performance-based awards that vest after two consecutive quarters of $1.00 or greater operating income and trailing four quarter revenue of $900,000,000 at any time through September 30, 2020, and (ii) 36,938 market-based awards; these awards were terminated on May 27, 2020 and the entire fair-value of the market based awards was recognized in 2019. The Company estimates the fair value of awards granted under the Plan on the Effective Date,date of grant. Stock-based compensation expense is recognized as an expense on a straight-line basis over the Company amended its bylaws to reflectvesting periods described above and is recognized in Selling, General and Administrative expense.A summary of equity-based compensation expense recognized during the name change to RumbleOn, Inc.three months ended March 31, 2020 and to reflect the Company’s primary place of business2019 is as Charlotte, North Carolina.follows (in thousands):

 
 
Three-Months Ended
March 31,
 
 
 
2020
 
 
2019
 
Restricted Stock Units
 $831,079 
 $689,121 
 
    
    
Options
  15,291 
  - 
 
    
    
Total stock-based compensation
 $846,370 
 $689,121 
 
OnAs of March 31, 2017,2020, the total unrecognized compensation expense related to outstanding equity awards was approximately $4,535,354, which the Company expects to recognize over a weighted-average period of approximately 0.9 years. Total unrecognized equity-based compensation expense will be adjusted for actual forfeitures.
NOTE 11 – STOCKHOLDER EQUITY
2019 Offerings
On February 11, 2019, the Company completed the salean underwritten public offering of 620,00063,825 shares of its Class B Common Stock par value $0.001, at a price of $4.00$111.00 per share for aggregatenet proceeds of $2,480,000 in the private placement (the “2017 Private Placement”). Officers and directors ofto the Company acquired 175,000 shares of Class B Common Stock in the 2017 Private Placement. In May 2017, the Company$6,543,655. The completed the sale of an additional 37,500 shares of Class B Common Stock in the 2017 Private Placement. Proceeds from the 2017 Private Placement were used to complete the launch of the Company’s website, www.rumbleon.com, acquire vehicle inventory, continue development of the Company’s platform, and for working capital purposes.
On June 30, 2017, the Company filed a Registration Statement on Form S-1 (the “Registration Statement”) with the SEC covering the resale of 8,993,541offering included 8,325 shares of Class B Common Stock issued upon the underwriter's exercise in full of its over-allotment option.
On May 9, 2019, the Company entered into a Securities Purchase Agreement with certain accredited investors pursuant to which the Company agreed to sell in a private placement (the "Private Placement") an aggregate of 95,000 shares of its Class B Common Stock, at a purchase price of $100.00 per share. JMP Securities served as the placement agent for the Private Placement. The Company paid JMP Securities a fee of 7.0% of the gross proceeds in the NextGen acquisition and the 2017Private Placement. The Private Placement closed on May 17, 2019. The proceeds for the Private Placement,after deducting commissions and otherrelated offering expenses,were $8,665,000.
2020 Public Offering
On January 14, 2020, pursuant to an underwritten public offering, the Company issued 900,000 shares previously held by our stockholders, including our officers and directors. The SEC declaredof Class B Common Stock at a public price of $11.40 per share (the "2020 Public Offering"). On January 16, 2020, the Registration Statement effective on July 7, 2017. In connection with the filingCompany received notice of the Registration Statement, ourUnderwriters' intent to exercise the over-allotment option in full (the "Over-allotment Exercise"). On January 17, 2020, the Company issued an additional 135,000 shares of Class B Common Stock and closed the Over-allotment Exercise. The Over-allotment Exercise increased the aggregate number of shares sold in the 2020 Public Offering to 1,035,000. Including the Over-allotment Exercise, net proceeds from the 2020 Public Offering, after deducting the 8.0% underwriter’s commission and $75,000 for underwriter expenses, were $10,780,080. Certain of the Company's officers and directors participated in the 2020 Public Offering.
The Company intends to use the net proceeds of the 2020 Public Offering for working capital and certain stockholders entered into a lock-up agreement restricting, through December 31, 2017,general corporate purposes, which may include further technology development, increased spending on marketing and advertising and capital expenditures necessary to grow the resale of an aggregate of 6,848,800 shares of our common stock held by them and subject tobusiness. Pending these uses, the Registration Statement.Company may invest the net proceeds in short-term interest-bearing investment grade instruments.
 

 
NOTE 912 – SELLING, GENERAL AND ADMINISTRATIVE
 
The following table summarizes the detail of selling, general and administrative expense for the threethree-months ended March 31, 2020 and nine-month periods ended September 30, 2017 and 2016:2019:
 
 
Three-months ended
September 30,
 
 
Nine-months ended
September 30,
 
 
Three-Months Ended
March 31,
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
 
2020
 
 
2019
 
Selling, general and administrative:
 
 
 
Compensation and related costs
 $1,028,819 
 $- 
 $1,951,911 
 $- 
 $8,180,100 
 $7,054,263 
Advertising and marketing
  752,017 
  - 
  1,060,195 
  - 
  2,948,155 
  5,491,572 
Professional fees
  192,041 
  34,044 
  724,486 
  49,017 
  842,703 
  650,444 
Technology development
  91,967 
  - 
  278,668 
  - 
  622,144 
  492,713 
General and administrative
  261,199 
  2,662
  674,956 
  9,118 
  5,463,324 
  6,751,024 
 $2,326,043 
 $36,706 
 $4,690,216 
 $58,135 
 $18,056,426 
 $20,440,016 
 
NOTE 13 – LOSS CONTINGENCIES AND INSURANCE RECOVERIES
On March 3, 2020, a severe tornado struck the greater Nashville area causing significant damage to the Company's facilities including contents and inventory held for sale.  The Company maintains insurance coverage for damage to its facilities and inventory, as well as business interruption insurance. The Company continues in the process of reviewing damages and coverages with its insurance carriers. The loss comprises three components: (1) inventory loss, currently assessed by the insurance carrier at approximately $13,000,000; (2) building and personal property loss, primarily impacting the Company's leased facilities, currently assessed by the insurance carrier at $3,801,203; and (3) loss of business income, for which the Company has coverage in the amount of $6,000,000. All three components of the Company's loss claim have been submitted to its insurers. The Company's inventory claim is subject to a dispute with the carrier as to the policy limits applicable to the loss. The insurer has agreed to pay $2,778,000 on the building and personal property loss, reflecting limits of $2,783,000 net of a $5,000 deductible and has made an interim payment on the building and personal property loss of $2,269,507 to the landlord. Currently, there is an outstanding balance of $508,493 which will be paid to the landlord when replacement is finished, which is expected to be sometime during 2021. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250,000 against the final settlement. The Company believes there will be a recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered or when any such recoveries will be made.
As a result of the damage caused by the tornado, the Company has concluded that the utility of the inventory damaged by the storm is impaired as a result of physical damage sustained. Whether the impairment is caused by physical destruction or an adverse change in the utility of the inventory, entities should assess whether an inventory impairment or write-off is required in accordance with ASC 330-10-35-1 through 35-11, which address adjustments of inventory balances to the lower of cost or net realizable value and requires that when there is evidence that the utility of goods will be less than cost, the difference is recognized as a loss in the current period.  For the three-months ended March 31, 2020, the Company has recorded an impairment loss on inventory of $11,738,413 comprised of $4,453,775 for vehicles that are a total loss and $7,284,638 of value for vehicles that were partially damaged and will require repair. The impairment loss is reported in cost of revenue in the March 31, 2020 condensed consolidated statements of operations. The Company has not recorded any recoveries that are expected to be received from the insurance carrier since the final amount and timing of the recovery has not been determined. Any such recovery would be reported as a separate component of income from continuing operations in the period in which such recovery is recognizable.
During the three-months ended March 31, 2020, the Company expensed $177,626 of the net book value of the property and equipment destroyed by the tornado. The Company has not recorded any recoveries that are expected to be received from the insurance carrier since the final amount and timing of the recovery has not been determined.

NOTE 1014 – SUPPLEMENTAL CASH FLOW INFORMATION
 
The following table includes supplemental cash flow information, including noncash investing and financing activity for the nine-month periodsthree-months ended September 30, 2017March 31, 2020 and 2016.2019:
 
 
 
Nine-Months Ended
September 30,
 
 
 
2017
 
 
2016
 
Cash paid for interest
 $42,502 
 $- 
 
    
    
Note payable issued on acquisition
 $1,333,334 
 $- 
 
    
    
Conversion of notes payable-related party
 $206,484
 $- 
 
    
    
Issuance of shares for acquisition
 $2,666,666 
 $- 
 
 
Three-Months Ended
March 31,
 
 
 
2020
 
 
2019
 
Cash paid for interest
 $1,588,030 
 $1,140,835 
 
    
    
Convertible notes payable issued in acquisition
 $- 
 $2,293,933 
 
    
    
The following table provides a reconciliation of cash and restricted cash reported within the accompanying condensed consolidated balance sheets that sum to the total of the same amounts shown in the accompanying condensed consolidated statements of cash flows as of March 31:
 
 
March 31,
 
 
 
2020
 
 
2019
 
Cash and cash equivalents
 $2,484,169 
 $49,660 
Restricted cash (1)
  5,502,322 
  6,676,622 
Total cash, cash equivalents, and restricted cash
 $7,986,491 
 $6,726,282 
                                   '
(1)            
Amounts included in restricted cash represent the deposits required under the Company's lines of credit.
 
NOTE 1115 – INCOME TAXES
 
CARES Act
In projectingMarch 2020, the Company’sCoronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in response to the COVID-19 pandemic. The Company does not expect the provisions of the legislation to have a significant impact on the effective tax rate or income tax expensepayable and deferred income tax positions of the Company.
No current provision for Federal income taxes was recorded for the yearthree-months ended DecemberMarch 31, 2017,2020 and 2019 due to the Company's operating losses. The Company has provided a valuation allowance on the net deferred tax assets. In assessing the recovery of the net deferred tax assets, management has concludedconsiders whether it is more likely than not likely to recognizethat some portion or all the benefit of its deferred tax asset, netassets will not be realized. The ultimate realization of deferred tax liabilities,assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and as a result a full valuation allowance will be required. As such, no income tax benefit has been recorded for the three and nine-month periods ended September 30, 2017 or 2016.planning strategies in making this assessment.
 
NOTE 12 —16 – LOSS PER SHARE
 
Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. The computation ofCompany computes basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. Under the two-class method, basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighed-average number of shares of common stock outstanding during the period. The diluted net loss per share attributable to common stockholders is computed giving effect to all potential dilutive common stock equivalents outstanding for the three-month and nine-month periods ended September 30, 2017 did not include 560,000period. For purposes of restrictedthis calculation, 119,096 of RSUs, 4,351 of stock unitsoptions, 16,530 of warrants to purchase shares of Class B Common Stock and 2,389,026 shares of Class B Common Stock issuable in connection with convertible debt are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their inclusion would bethe effect is antidilutive. There were no restricted stock units outstanding for the three and nine-month periods ended September 30, 2016.
 

 
In connection with the Company's acquisition of Wholesale, the Company issued 1,317,329 shares of Series B Non-Voting Convertible Preferred Stock. The rights of the holder of the Series B Preferred and Class A and Class B Common Stock are identical, except with respect to voting. The Series B Preferred automatically converted to Class B Common Stock 21 days after the mailing of the definitive information statement prepared in accordance with Regulation 14C of the Exchange Act, without further action on the part of the Company. The conversion of the Series B Preferred to Class B Common was effected on March 4, 2019. The Company applies the two-class method of calculating earnings per share, but as the rights of the Series B Preferred and Class A and Class B Common Stock are identical, except in respect of voting, basic and diluted earnings per share are the same for all classes. Weighted average number of shares outstanding of Class A Common Stock, Class B Common Stock, and Series B Preferred at March 31, 2020 were 50,000, 2,046,423, and 0, respectively.
NOTE 1317 – RELATED PARTY TRANSACTIONS
 
As of December 31, 2015, the Company had loans of $141,000 and accrued interest of $13,002 due to an entity that is owned and controlled by a family member of an officer and director of the Company. Interest expense on these loans for the three and nine-month period ended September 30, 2016 was $2,878 and $7,431, respectively. All convertible notes and related party notes outstanding as of July 13, 2016 were paid in full in July 2016.
As of December 31, 2016, the Company had the BHLP Note payable of $197,358 and accrued interest of $5,508 due to an entity that is owned and controlled by a current officer and director of the Company. On March 31, 2017, the Company issued 275,312 shares of Class B Common Stock upon full conversion of the BHLP Note. The accrued interest is included in accrued interest under Long-term liabilities in the Condensed Consolidated Balance Sheets. For additional information, see Note 7 - “Notes Payable.”
On March 31, 2017, the Company completed the sale of 620,000 shares of Class B Common Stock in the 2017 Private Placement. Officers and directors of the Company acquired 175,000 shares of Class B Common Stock in the 2017 Private Placement. In May 2017, the Company completed the sale of an additional 37,500 shares of Class B Common Stock in the 2017 Private Placement. For additional information, see Note 8 - “Stockholders’ Equity.”
A key component of the Company’s business model is to use dealer partners in the acquisition of motorcycles as well as utilize these dealer partners to provide inspection, reconditioning and distribution services. Correspondingly, the Company will earn fees and transaction income, and the dealer partner may earn incremental revenue and enhance profitability through increased sales, leads, and fees from inspection, reconditioning and distribution programs. In connection with the development of the dealer program, the Company tested various aspects of the program by utilizing a dealership (the “Test Dealer”) to which Mr. Chesrown, the Company’s Chief Executive Officer has provided financing in the form of a $400,000 convertible promissory note. The note matures on May 1, 2019, interest is payable monthly at 5% per annum and can be converted into a 25% ownership interest in the Test Dealer at any time. The Test Dealer is expected to be named a Select Dealer by an agreement with the same material terms as the Company’s other Select Dealer agreements. Revenue generated by the Company from the Test Dealer for the three and nine-month periods ended September 30, 2017 was $924,069 and $946,824, respectively. Included in accounts receivable at September 30, 2017 is $264,464 owed to the Company by the Test Dealer.
In connection with the NextGen acquisition, the Company entered into a Consulting Agreement (the “Consulting Agreement”) with Kartik Kakarala, who formerly served as the Chief Executive Officer of NextGen and now serves as a director of the Company. Pursuant to the Consulting Agreement, Mr. Kakarala serves as a consultant to the Company. The Consulting Agreement may be cancelled by either party, effective upon delivery of a written notice to the other party. Mr. Kakarala’s compensation pursuant to the Consulting Agreement is $5,000 per month. For the three and nine-month periods ended September 30, 2017, the Company paid $15,000 and $35,000, respectively under the Consulting Agreement. These amounts are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. For additional information, see Note 3 - “Acquisitions.”
In connection with the NextGen acquisition, the Company entered into a Services Agreement (the “Services Agreement”) with Halcyon Consulting, LLC (“Halcyon”), to provide development and support services to the Company. Mr. Kakarala currently serves as the Chief Executive Officer of Halcyon. Pursuant to the Services Agreement, the Company will pay Halcyon hourly fees for specific services, set forth in the Services Agreement, and such fees may increase on an annual basis, provided that the rates may not be higher than 110% of the immediately preceding year’s rates. The Company will reimburse Halcyon for any reasonable travel and pre-approved out-of-pocket expenses in connection with its services to the Company. For the three and nine-month periods ended September 30, 2017 the Company paid $221,400 and $678,766, respectively under the Services Agreement.
As of September 30, 2017,2020, the Company had promissory notes of $370,556$370,556 and accrued interest of $12,076$23,731 and $7,939, respectively, due to Blue Flame, an entity controlled by a director and to theDenmar Dixon, a director of the Company. The promissory notes were issued in connection with the completion of the 2016 Private Placement on March 31, 2017.2017 and exchanged in January 2020 for New Investor Notes. Interest expense on the promissory notes due to Blue Flame, for the threethree-months ended March 31, 2020 and nine-month periods ended September 30, 20172019 was $29,392$91,844 and $63,416,$40,738, respectively, which included debt discount amortization of $23,321$42,001 and $45,335, respectively for the three and nine-month periods ended September 30, 2017.$32,971, respectively. The interest was charged to interest expense in the Condensed Consolidated Statements of Operations and included in accrued interest under long-term liabilities in the Condensed Consolidated Balance Sheets.Operations.
 
On September 5, 2017, the Company executed Senior Secured PromissorySee Note 8 – Notes (the “Notes”) in favorPayable and Lines of several investors, including certain executive officers and directorsCredit for a discussion of the Company, in the aggregate principal amount of $1,650,000 (“Principal Amount”), which includes an aggregate original issue discount of $150,000. As of September 30, 2017, the Company had Notes of $1,214,144 and accrued interest of $4,144 due to certain executive officers and directors of the Company. Interest expense on the Notes due to certain executive officers and directors for the three and nine-month periods ended September 30, 2017 was $11,678, which included $7,534 of original issue discount amortization. On October 23, 2017, the Company completed a public offering and used $1,661,075 of the net proceeds of the offering for the repayment of the Notes in the aggregate principal amount of $1,650,000, plus accrued interest, which resulted in the termination of the Notes. For additional information, see Note 7 - “Notes Payable” and Note 15 “Subsequent Events.”NextGen Note.
 

NOTE 1418 – COMMITMENTS AND CONTINGENCIES
 
Lease Commitments
The Company determines whether an arrangement is subjecta lease at inception and whether such leases are operating or financing leases. For each lease agreement, the Company determines its lease term as the non-cancellable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. The Company uses these options in determining its right-of-use assets and lease liabilities. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. As the Company's leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at commencement date in determine the present value of the lease payments.
Operating lease expense is recognized on a straight-line basis over the lease term. Total operating lease expenses for the three-months ended March 31, 2020 and 2019 was $527,044 and $237,256, respectively. The current portion of the Company's operating lease liabilities as of March 31, 2020 is $1,414,054 and is included in accounts payable and accrued liabilities. The long-term portion of the Company's operating lease liabilities as of March 31, 2020 is $4,529,790 and is included in other liabilities.
The weighted-average remaining lease term and discount rate for the Company's operating leases are as follows:
March 31, 2020
Weighted-average remaining lease term
4 Years
Weighted-average discount rate
7.0%
Supplemental cash flow information related to operating leases for the three-months ended March 31, 2020 was as follows:
March 31, 2020
Cash payments for operating leases
$440,506
The following table summarizes the future minimum payments for operating leases at March 31, 2020 due in each year ending December 31,
2020
 $1,365,387 
2021
  1,785,519 
2022
  1,920,543 
2023
  744,370 
2024
  310,200 
Thereafter
  498,200 
Total lease payments
  6,624,219 
Less imputed interest
  (680,375)
Present value of lease liabilities
 $5,943,844 
Legal Matters
From time to time, the Company is involved in various claims and legal proceedings and claims whichactions that arise in the ordinary course of its business. Although occasional adverse decisions (or settlements) may occur,the results of litigation and claims cannot be predicted with certainty, as of March 31, 2020 and December 31, 2019, the Company believesdoes not believe that the final dispositionultimate resolution of such mattersany legal actions, either individually or in the aggregate, will nothave a material adverse effect on its financial position, results of operations, liquidity, and capital resources.
Future litigation may be necessary to defend the Company by determining the scope, enforceability and validity of third party proprietary rights or to establish its own proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
NOTE 19 – CONCENTRATIONS
The Company is dependent on third-party providers of wholesale vehicle auctions. The Company is dependent on their ability to provide services on a timely basis and at favorable pricing terms. The loss of these principal providers or a significant reduction in service availability could have a material adverse effect on the Company’s financial position, results of operations or cash flows.Company. The Company believes that its relationships with these providers are satisfactory.
 
NOTE 20 - SEGMENT REPORTING
Business segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing operating performance. The Company's operations are organized by management into operating segments by line of business. The Company has determined that it has three reportable segments as defined in U.S. GAAP for segment reporting: (1) powersports, (2) automotive, and (3) vehicle logistics and transportation. The Company's powersports and automotive segments consist of the distribution of pre-owned vehicles. The powersports segment consists of the distribution principally of motorcycles, while the automotive segment distributes cars and trucks. Our vehicle logistics and transportation service segment provides nationwide automotive transportation services between dealerships and auctions. The accounting policies of the segments are the same and are described in Note 1 – Description of Business and Significant Accounting Policies.
The following table summarizes revenue, operating income (loss), Depreciation and Amortization and interest expense which are the measure by which management allocates resources to its segments to each of our reportable segments.


 
 
Powersports
 
 
Automotive
 
 
Vehicle Logistics and Transportation
 
 
Eliminations(1)
 
 
Total
 
Three Months Ended March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 $54,583,357 
 $75,520,584 
 $8,470,887 
 $(26,610,708)
 $111,964,120 
Revenue
 $23,139,080 
 $114,198,079 
  8,990,181 
 $(1,902,590)
 $144,424,750 
Operating income (loss)
 $(7,189,585)
 $(13,360,432)
 $657,083 
 $- 
 $(19,892,934)
Depreciation and amortization
 $462,537 
 $58,607 
 $1,851 
 $- 
 $522,995 
Interest expense
 $(1,464,627)
 $(751,834)
 $(296)
 $- 
 $(2,216,757)
Loss in derivative liability
 $(116,815)
 $- 
 $- 
 $- 
 $(116,815)
Gain on early extinguishment of debt
 $188,164 
 $- 
 $- 
 $- 
 $188,164 
 
    
    
    
    
    
Three Months Ended March 31, 2019
    
    
    
    
    
Total assets
 $67,091,591 
 $67,387,321 
 $6,403,729 
 $(25,339,418)
 $115,543,223 
Revenue
 $26,929,159 
 $190,907,188 
 $8,176,010 
 $(2,834,598)
 $223,177,759 
Operating income (loss)
 $(8,376,724)
 $(999,163)
 $546,389 
 $- 
 $(6,831,172)
Depreciation and amortization
 $321,374 
 $59,000 
 $1,851 
 $- 
 $382,225 
Interest expense
 $799,961 
 $645,172 
 $- 
 $- 
 $1,445,133 
(1)            
Intercompany investment balances related to the acquisitions of Wholesale and Wholesale Express, LLC ("Wholesale Express") and receivables and other balances related intercompany freight services of Wholesale Express are eliminated in the Condensed Consolidated Balance Sheets. Revenue and costs for these intercompany freight services have been eliminated in the Condensed Consolidated Statements of Operations.
NOTE 1521 – SUBSEQUENT EVENTS
 
Reverse Stock Split
On October 23, 2017,May 18, 2020, the Company completed an underwritten public offeringfiled a Certificate of 2,910,000Change to the Company’s Articles of Incorporation with the Secretary of State of the State of Nevada to effect a one-for-twenty reverse stock split of its issued and outstanding Class A Common Stock and Class B Common Stock (the “Reverse Stock Split”). The Reverse Stock Split was effective at 12:01 a.m., Eastern Time, on May 20, 2020. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would have resulted from the Reverse Stock Split were rounded up to the nearest whole share. The authorized preferred stock of the Company was not impacted by the Reverse Stock Split. Following the Reverse Stock Split, on May 20, 2020, the Company has outstanding 50,000 shares of Class A Common Stock and approximately 2,162,696 shares of Class B common stock at a public offering price of $5.50 per share for net proceeds toCommon Stock. On May 20, 2020, the Company of approximately $14,500,000 after deducting the underwriting discount and offering fees and expenses payable by the Company (the “Offering”). The Company also granted the underwriters a 30-day option, which expires on November 19, 2017, to purchase up to an additional 436,500 shares of Class B common stock to cover over-allotments.
The Company used $1,661,075 of the net proceeds of the Offering for the repayment of the Senior Secured Promissory Notes in the aggregate principal amount of $1,650,000, plus accrued interest, which resulted in the termination of the Senior Secured Promissory Notes.  The Company intends to use the remaining net proceeds of the Offering for working capital and general corporate purposes, which may include purchases of additional inventory held for sale, increased spending on marketing and advertising and capital expenditures necessary to grow the business.
In connection with the Offering, on October 23, 2017, the Company issued to the representatives of the underwriters warrants to purchase 218,250 shares of Class B common stock, which is equal to 7.5% of the aggregate number of shares of Class B common stock sold in the Offering (the “Representatives’ Warrants”). The Representatives’ Warrants are exercisable at a per share price of $6.325, which is equal to 115% of the Offering price per share of the shares sold in the Offering. The Representatives’ Warrants are exercisable at any time and from time to time, in whole or in part, during the four-year period commencing one year from the effective date of the registration statement related to the Offering.
Also, in connection with the Offering, on October 19, 2017, theCompany’s Class B Common Stock uplistedcommenced trading on the Nasdaq Capital Market on a split-adjusted basis. The Company has retrospectively adjusted the per share and share amounts included in this Quarterly Report on Form 10-Q for the Reverse Stock Split.
PPP Loan
On May 1, 2020, the Company, and its wholly-owned subsidiaries Wholesale and Wholesale Express (together, the “Subsidiaries,” and with the Company, the “Borrowers”), each entered into loan agreements and related promissory notes (the “SBA Loan Documents”) to receive U.S. Small Business Administration Loans (the “SBA Loans”) pursuant to the Paycheck Protection Program (the “PPP”) established under the CARES Act, in the aggregate amount of $5,176,845 (the “Loan Proceeds”). The Borrowers received the Loan Proceeds on May 1, 2020. Under the SBA Loan Documents, the SBA Loans have a fixed interest rate of 1%, repayment begins six months from the OTCQBdate of disbursement of each SBA Loan, and began tradingthe SBA Loans mature two years from the date of first disbursement. There is no prepayment penalty.
Pursuant to the terms of the SBA Loan Documents, the Borrowers may apply for forgiveness of the amount due on the SBA Loans in an amount equal to the sum of the following costs incurred by the Borrowers during the eight-week period (or any other period that may be authorized by the U.S. Small Business Administration) beginning on the date of first disbursement of the SBA Loans: payroll costs, any payment of interest on a covered mortgage obligation, payment on a covered rent obligation, and any covered utility payment. The NASDAQ Capital Marketamount of SBA Loan forgiveness shall be calculated in accordance with the requirements of the PPP, including the provisions of Section 1106 of the CARES Act, although no more than 40% of the amount forgiven can be attributable to non-payroll costs. No assurance is provided that forgiveness for any portion of the SBA Loans will be obtained.

The promissory notes evidencing the SBA Loans contain customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory notes. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Borrowers, and filing suit and obtaining judgment against the Borrowers.
Form 10-Q Extension
On May 14, 2020, the Company filed a Current Report on Form 8-K to announce that the Company’s operations and business continued to experience disruption due to the unprecedented conditions surrounding the coronavirus (COVID-19) pandemic spreading throughout the United States, and management was unable to timely review and prepare the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. As a result, the Company indicated its intent to delay the filing of the Quarterly Report in reliance on the SEC March 25, 2020 Order (which extended and superseded a prior order issued on March 4, 2020), pursuant to the Order, which allows for the delay of certain filings required under the symbol “RMBL.”Securities Exchange Act of 1934, as amended. The Company relied on the Order for the filing of this Quarterly Report on Form 10-Q.
 
RumbleOn Finance Loan

On November 2, 2017,June 23, 2020, RumbleOn Finance, LLC, a wholly owned subsidiary of the Company through its wholly-owned subsidiary RMBL Missouri, LLC (the “Borrower”("RumbleOn Finance"), entered into a floor plan line of creditloan agreement providing for up to $1,500,000 in proceeds (the "Credit Line""RumbleOn Finance Facility") with NextGear Capital, Inc.CL Rider Finance, L.P. (the “Lender”"CL Rider") in the amount of $2,000,000, or such lesser sum which may be advanced to or on behalf of the Borrower from time to time, pursuant to that certain Demand Promissory Note and Loan and Security Agreement. Any advance under the Credit Line bears interest on a per annum basis from the date of the request of such advance (or date of the financed receivable, as applicable), based upon a 360-day year, and such interest shall be compounded daily until such outstanding advances are paid in full at a rate of interest set forth in schedules publishedevidenced by the Lender. Asloan commitment dated as of November 2, 2017,June 17, 2020. In connection with the effective rate of interest is 6.5%. Advancesloan agreement, RumbleOn Finance pledged its assets to CL Rider to secure the RumbleOn Finance Facility and interest under the Credit Line are due and payable upon demand, but, in general, in no event later than 150 days from the date of request for the advance (or the date of purchase in the case ofexecuted a universal funding agreement), or of the receivable, as applicable. Upon any event of default (including, without limitation, the Borrower’s obligation to pay upon demand any outstanding liabilities of the Credit Line), Lender may, at its option and without notice to the Borrower, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to Lender and its affiliates by the Borrower and its affiliates. The Credit Line is secured by a grant of a security interest in the vehicle inventory and other assets of the Borrower and payment is guaranteed by the Company pursuant to a guarantypromissory note in favor of the Lender and its affiliates.CL Rider pursuant to which the RumbleOn Finance Facility will accrue interest at an initial rate of 4.0% per annum. The RumbleOn Finance Facility is payable on demand by CL Rider.
 

 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Unless the context requires otherwise, references in this report to "RumbleOn," the "Company," "we," "us," and "our" refer to RumbleOn and its consolidated subsidiaries. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This QuarterlyOperations ("MD&A") is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A included in our most recent Annual Report on Form 10-Q contains forward-looking statements. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. The words “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions identify some of the forward-looking statements. Forward-looking statements are not guarantees of performance or future results and involve risks, uncertainties and assumptions. The factors discussed elsewhere in this Form 10-Q and in subsequent Quarterly Reports on Form 10-Q, Annual Reportsfiled on Form 10-K, as well as our condensed consolidated financial statements and Current Reports onthe accompanying notes included in Item 1 of this Form 8-K could also cause actual results to differ materially from those indicated by the Company’s forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law.10-Q.
 
OVERVIEWOverview
We are a technology driven, motor vehicle dealer and e-commerce platform provider disrupting the vehicle supply chain using innovative technology that aggregates, processes and distributes inventory in a faster and more cost-efficient manner.
 
We operate a capital light disruptive e-commercean infrastructure-light platform facilitatingthat facilitates the ability of bothall participants in the supply chain, including RumbleOn, other dealers and consumers and dealers to Buy-Sell-Trade-FinanceBuy-Sell-Trade-Finance-Transport pre-owned motorcycle and other power sport and recreation vehicles (“power/recreation vehicles”) in one online location.vehicles. Our goal is to transform the way motorcycles and other power/recreationVIN-specific pre-owned vehicles are bought and sold by providing users with the most comprehensive, efficient, timely and transparent transaction experience. Ourexperiences. While our initial focuscustomer facing emphasis through most of 2018 was on motorcycles and other powersports vehicles, we continue to enhance our platform to accommodate nearly any VIN-specific vehicle including motorcycles, ATVs, boats, RVs, cars and trucks. Since our acquisition of Wholesale, Inc. ("Wholesale") in October 2018, we have significantly increased our sales of cars and light trucks ("automotive"). Of the 7,420 vehicles we sold during the three-months ended March 31, 2020, 4,603 (62.0%) were automotive and 2,817 (38.0%) were powersports vehicles. For the three-months ended March 31, 2019, we sold 12,103 vehicles of which 8,805 (72.8%) were automotive and 3,298 (27.2%) were powersports vehicles.
COVID-19 Update
COVID-19 is having an impact on businesses nationwide, with local governments, businesses, and consumers increasingly limiting commercial activity and capital markets experiencing instability. The worldwide spread of the marketCOVID-19 outbreak has resulted in a global slowdown of economic activity which decreased demand for 601cca broad variety of goods and larger on-road motorcycles.services, while also disrupting sales channels, marketing activities and supply chains for an unknown period of time until the outbreak is contained. This is impacting our business and the powersport and automotive industries as a whole. We will lookhave positioned our business today to extend to additional power/recreation vehicle typesbe lean and productsflexible in this period of lower demand and higher uncertainty with the goal of preparing the Company for a strong recovery as the platform matures, including ATVs, personal watercraft, snowmobiles, side-by-sides, boats,crisis is contained. To this end, we have temporarily reduced discretionary growth expenditures on new hiring, travel, facilities, and both towableinformation technology investments. We have significantly reduced our staffing by laying off 169 associates during the first quarter of 2020, we have applied and motor coach RVs.
Serving both consumersreceived PPP loan funds of $5,176,845, and dealers, throughadjusted purchasing levels to align with demand and market conditions, while closely monitoring key metrics to determine when and how quickly to adjust. We believe our 100% online platform, we make cash offers for the purchase of their vehicles and intendbusiness model allows us to provide them the flexibilityquickly respond to trade, list,market demand or auction their vehicle through our website and mobile applications. In addition, we offer a large inventory of used vehicles for sale along with third-party financing and associated products. Our operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with dealer partners. We utilize dealer partnerschanges in the acquisition of motorcyclesbusinesses we operate as well as to provide inspection, reconditioning and distribution services. Correspondingly, we earn fees and transaction income, and dealer partners will earn incremental revenue and enhance profitability through increased sales, leads, and fees from inspection, reconditioning and distribution programs.the COVID-19 pandemic continues.
 
Our most important priority is the well-being of our employees and customers. We have taken several steps to provide a healthy working environment, including implementing work from home policies for employees who are able to work remotely, eliminating all non-essential travel and group meetings and implementing social distancing policies. For many customers, selling or buying a vehicle is an important component of their business or transportation needs. We believe our online model for buying and selling, which allows dealers and consumers to sell or buy a vehicle without ever coming into physical contact with another person, is driven bythe safest way to sell or buy a technology platform we acquired in February 2017, throughvehicle. Our touchless buying and selling processes allows dealers and consumers to sell or shop for a vehicle from their business or home, complete their transaction on their phone or laptop, and have the vehicle picked up or delivered without coming into physical contact with our acquisition of substantially all of the assets of NextGen. The acquired system provides integrated vehicle appraisal, inventory management, customer relationship and lead management, equity mining, and other key services necessary to drive the online marketplace. Over the past 16 years, the developers of the software have designed and built, for large multi-national clients, a number of dealer and, what we believe to be, high quality applications solutions.personnel.
 
Our financial statements reflect estimates and assumptions made by management that affect the carrying values of the Company’s assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, including as a result of the COVID-19 pandemic, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations. We will continue to evaluate the nature and extent of the impact to our business combinesand our results of operations and financial condition as conditions evolve as a comprehensive online buying and selling experience with a vertically-integrated supply chain that allows us to buy and sell vehicles to consumers and dealer partners transparently and efficiently at a value-oriented price. Using our website or mobile application, consumers and dealers can complete most phasesresult of a used vehicle transaction. Our online buying and selling experience allows consumers to:the COVID-19 pandemic.
 
● 
Sell us a vehicle.We addressOur operational and financial performance will depend on future developments related to the lack of liquidity available incontinuously evolving COVID-19 pandemic. Future developments include the market for a cash sale of a vehicle by dealersduration, scope and consumers through our Sell Us Your Vehicle Program. Dealers and consumers can sell us a vehicle independent of a purchase. Using our free online or mobile appraisal tool, consumers and dealers can complete a short appraisal form and receive a haggle-free, guaranteed 3-day firm cash offer for their vehicle within minutes and, if accepted, receive payment in a few days or less. Our cash offer to buy is based on the use of extensive used retail and wholesale vehicle market data. When a consumer accepts our offer, we ship their vehicles to our closest dealer partner where the vehicle is inspected, reconditioned and stored pending sale. We believe buying used vehicles directly from consumers will be the primary driver of our source of supply for sale and a key to our ability to offer competitive pricing to buyers. By being oneseverity of the few sources for consumerspandemic, the actions taken to receive cash for their vehicle, we have a significant opportunitycontain or mitigate its impact, the development of treatments or vaccines, the resumption of widespread economic activity, and changes in consumer sentiment. Due to buy product at a lower cost since dealer and auction markup is eliminated from these consumer purchases. In addition, we believe our willingness to appraise and purchase a customer’s vehicle, whether or not the customer is buying a vehicle from us, provides a competitive sourcing advantage for vehicles.
● 
List a vehicle.The current market for listing motorcycles and other power sport vehicles is inefficient and ineffective in that a majorityinherent uncertainty of the transactionsunprecedented and rapidly evolving situation, we are conducted through peer-to-peer transactions, which do not facilitate making cash offers, accepting trades or providing financingunable to predict the buyer. Our listing options and comprehensive transaction support addressesimpact of the shortcomings that currently exist in the market for listing a vehicle for sale while allowing dealers and consumers an opportunity to utilize a simple, efficient and effective process. Consumers who do no not acceptCOVID-19 pandemic will have on our cash offer can pay a fee to list their vehicle on RumbleOn.com and other available listing sites. During the listing period, our cash offer is extended, and we manage all sales leads, handle all the documentation necessary to complete a sale and accept a buyer trade and provide a range of third-party finance options and vehicle service contracts to the buyer, if necessary. Upon the sale of a listed vehicle, we earn a fee separate and apart from the listing fee. Dealer partners do not pay a fee to list their vehicles.
future operations.
 

  
Outlook
● 
Purchase a used vehicle.Our 100% online approach to retail and wholesale distribution addresses the many issues currently facing the retail and wholesale distribution marketplace for power/recreation vehicles, a marketplace we believe is primed for a disruptive change. We believe the issues facing the marketplace include: (i) heavy use of inefficient listing sites, (ii) a highly fragmented dealer network; (iii) a limited selection of used vehicles for sale; (iv) negative consumer perception of the current buying experience; and (v) a massive consumer shift to online retail. We offer dealers and consumers a large selection of vehicles at a value-oriented price that can be purchased in a seamless transaction in minutes. In addition to a transparent buying experience,the general business pressures resulting from the shelter-in-place orders and broader economic uncertainty, our no haggle pricing, coupled with an inspected, reconditioned and certified vehicle, backed by a fender-to-fender warranty and a 3-day money back guarantee, addresses consumer dissatisfaction with the current buying processes in the marketplace. As of October 31, 2017, including vehicles of our dealer partners, we have approximately 550 vehicles listed for sale on our website, where consumers can select and purchase a vehicle, including arranging financing, directly from their desktop or mobile device. Selling used vehicles to dealers and consumers is the key driver of our business.
● 
Finance a purchase.Customers can pay for their vehicle using cash or we will provide a range of finance options from unrelated third parties such as banks or credit unions. Customers fill out a short online application form, and, if approved, apply the financing to their purchase in our online checkout process.
● 
Protect a purchase.Customers have the option to protect their vehicle with unrelated third-party branded EPPs and vehicle appearance protection products as part of our online checkout process. EPPs include extended service plans which are designed to cover unexpected expenses associated with mechanical breakdowns and guaranteed asset protection, which is intended to cover the unpaid balance on a vehicle loan in the event of a total loss of the vehicle or unrecovered theft. Vehicle appearance protection includes products aimed at maintaining vehicle appearance.
To enable a seamless dealer and consumer experience, we are building a vertically-integrated used vehicle supply chain, supported by proprietary software systems and data which include the following attributes:
● 
Vehicle sourcing and acquisition.We acquire a significant percentage of our used vehicle inventory directly from consumers and dealers through our Sell Us Your Vehicle Program. We also, to a lesser extent, acquire vehicles from auctions and directly from used vehicle suppliers, including franchise and independent dealers and finance and leasing companies. Using used retail and wholesale vehicle market data obtainedbusiness was further impacted from a variety of internaltornado that struck Nashville on March 3, 2020. Business in January and external sources, we evaluate a significant number of vehicles daily to determine their fit with consumer demand, internal profitability targets and our existing inventory mix. The supply of used vehicles is influenced by a variety of factors, including: the total number of vehicles in operation; the rate of new vehicle sales, which in turn generate used vehicle trade-ins; and the number of used vehicles sold or remarketed through retail channels, wholesale transactions and at auctions. Based on the large number of vehicles remarketed each year, consumer acceptance of our online vehicle appraisal process, our experience and success in acquiring vehicles from auctions and other sources and the large size of the United States market relative to our needs, we believe that sources of used vehicles will continue to be sufficient to meet our current and future needs.
● 
Inspection, reconditioning and logistics. After acquiring a vehicle, we transport it to one of our dealer partners who is paid to perform an inspection and to recondition the vehicle to meet “RumbleOn Certified” standards. High quality photographs are then taken, the vehicle is listed for sale on Rumbleon.com and the dealer partner stores the vehicle pending delivery to the buyer. This process is supported by a custom used vehicle inventory management system, which tracks vehicles through each stage of the inspection, reconditioning and logistic process. The ability to leverage and provide a high margin source of incremental revenue to the existing network of dealer partners in return for providing inspection, reconditioning, logistics and distribution support reduces our need for any significant investment in retail or reconditioning facilities.
Our Strategy
Our strategy is to provide a complete online, direct, pre-owned motorcycle and power/recreation vehicle marketplace solution for both consumers and dealers, while providing dealers access to additional software solutions and services allowing them to earn incremental revenue and enhance profitability through increased sales leads, and fees earned from inspection, reconditioning and distribution programs. The recognition of the need for our solutions is the result of our management team gaining a clear understanding of the key drivers of complete supply chain solutions necessary to create a different and disruptive way to both acquire and distribute cars and trucks online from their deep experience in the automotive sector with disruptive businesses such as: AutoNation, Auto America, and Vroom. We believe that there is a significant opportunity to disrupt the pre-owned marketplace in recreational vehicles as it suffers from many of the same negative consumer sentiments and dealer practices that existed in the automotive sector prior to the advent of and the significant influx of new entrants with improved business models. In addition, the power/recreation vehicle segment lacks the significant competition that exists in the automotive sector due to its fragmented dealer network, relative size and the niche nature of its products. Management believes consumers prefer to purchase and sell through a well-designed online/mobile solution, with a broad selection of vehicles at highly competitive prices. We believe that our applications will provide appraisal, cash-offer, vehicle listing, financing options, and logistics/delivery solutions designed to provide an exceptional consumer experience. We intend to replicate and improve upon the positive attributes of the various “sell us your car” and other related programs that have proven successful in automotive retail for entities such as AutoNation, CarMax, Carvana, Vroom and others.

Our dealer strategy is focused on creating a synergistic relationship wherein dealers will have the ability to leverage the RumbleOn marketplace and dealer services offerings to drive increased revenue through the purchase or sale of vehicles via the online platform and the ability to earn fees from inspection, reconditioning and distribution programs. Dealer partners will have the ability to show the complete RumbleOn vehicle inventory on their website and will have access to preferred pricing on the acquisition of vehicles. Management believes that partners utilizing the platform will significantly enhance their existing online retail strategies. We have agreed to add dealers to our network and are in discussions with other dealers regarding joining the network. We believe that our operations, designed to be both capital and infrastructure light, will leverage the dealer network to provide inspection, reconditioning and distribution, thus minimizing the number of warehouse locations, reconditioning centers and logistics facilities we operate. We plan to primarily operate a centralized headquarter, call center, and limited number of strategically located warehouses as needed.
Our initial focus on pre-owned Harley-Davidson motorcycles provides a targeted, identifiable segment to establish the functionality of the platform and the RumbleOn brand. Harley-Davidson is a highly regarded and dominant brand (representing approximately 50% market share of new 601cc+ on-road motorcycles according to both Harley-Davidson public filings and the Motorcycle Industry Council) in the motorcycle market, with a base of over three million pre-owned motorcycles registered for use in the United States. According to Harley-Davidson, as disclosed in their 2017 investor meeting presentation, and management estimates, each year approximately 400,000 pre-owned Harley-Davidsons are sold, with Harley-Davidson dealers selling approximately 125,000 units, 250,000 units sold in private consumer and independent dealer transactions, and 25,000 sold via other means. Further, as Harley-Davidson discussed in its 2017 investor meeting presentation, their objective is to build two million new Harley-Davidson riders in the United States in the next 10 years, principally, we believe, via brand marketing and product development, estimated at $70 million in 2016, dealer hosted experiences and the Harley-Davidson Riding Academy. We believe such efforts will benefit us as, per Harley-Davidson’s 2017 investor meeting presentation, there are 2.4 million owners of non-Harley-Davidson motorcycles, and 15.0 million people who don’t currently own a motorcycle, who have an interest in Harley-Davidson and are planning to purchase a motorcycle within three years. Further, Harley-Davidson’s estimates that there are 7.8. million motorcycle license holders who do not currently own a motorcycle and that the sale of used Harley-Davidson motorcycles to young adults (ages 18-34)February was three times the sale of new Harley-Davidson motorcycles to the same age group. These statistics support our contention that there is expected to be a growing market for used Harley-Davison transactions and a more informed buyer.
We believe that we may potentially enjoy a halo effect from Harley-Davidson’s advertising as not all young new buyers will purchase new motorcycles. Our extension into the “metric” brands (Honda, Yamaha, Kawasaki, Suzuki, etc.) essentially doubles the available market and is a natural extension as these vehicles are often sold or traded for Harley-Davidson vehicles. The metric market and dealer profile closely mirror that of the Harley-Davidson market although it is more highly fragmented. In addition, many of the metric dealers also retail ATVs, UTVs, snowmobiles and personal watercraft providing the next organic product extension leveraging existing dealer relationships.
Our Growth Strategy
We intend to transform the way recreational vehicles are bought and sold and thereby significantly grow our business and gain market share by targeting the large number of private consumer peer to peer transactions driven by listing only sites such as Craigslist. Management estimates the market for annual used motorcycle sales today at approximately 800,000 units sold, or approximately $7.5 billion of sales. Management believes approximately 50% or morestrong, but the combination of these transactions are completed on a peer to peer basis. We believe these transactions are highly inefficient and consumers view the process as cumbersome. Our online consumer direct sourcing strategy, wherein we make a cash offer to a consumer or dealer utilizingevents reduced our website or mobile application allows us to deliver value pricing on our vehicles for sale. We believe our large-scale inventory of vehicles for sale, coupled with our online platform, transparent selling process, certified and reconditioned vehicles and ability to offer financing and ancillary products provides a unique customer experienceMarch revenue by 51.7% as compared to current alternatives when purchasing a vehicle.February of this year.  We believe we can aggressively drive RumbleOn brand recognition and awareness at a relatively low expense by utilizing digital, social media and guerrilla marketing techniques, as there are few national competitors and consumers are very brand focused and loyal. For example, approximately 15 key motorcycle events, such as Daytona Bike Week and the Sturgis Bike Rally attract millions of attendees annually, many of whom are both motorcycle enthusiasts and Harley-Davidson consumers. We intend to have a significant presence at these events, with onsite advertising and sales facilities to build brand awareness. In addition, we anticipate engaging with or sponsoring motorcycle groups, providing us a targeted audience to which to market RumbleOn and showcase the ease with which they can buy, sell, or trade motorcycles. Once motorcycle enthusiasts have sampled our website, we believe the unique experience will be compelling and drive organic growth. Over time, management believes we will build a proprietary database of customers and their interests, which will facilitate customer retention and cross sell activities.

Our Market
experienced We operate in a market with significant scale and breadth of products. The Motorcycle Industry Council estimates that in 2014, 9.2 million people owned 10.1 million motorcycles in the United States. 87% of these were on-highway models, our initial targeted segment. According to the Powersports Business 2016 Market Data Book, or the 2016 Market Datebook, used motorcycle registrations were 1.1 million units in 2015 with new unit sales of approximately 573,000 or approximately $7 billion in new vehicle sales. The owner demographic is favorable to the market outlook as millennials and baby boomers are maturing into the median ranges. The owner group is characterized by brand loyal riding enthusiasts. According to the Motorcycle Industry Council, in 2014 the median owner age was 47 years with a median income of $62,200 which is approximately 10% above the United States’ average. The dealer market is fragmented with an estimated 4,600 retail outlets authorized to sell new motorcycles, scooter, and all-terrain vehicles.
The ATV, UTV/side-by-side, snowmobile and personal watercraft vehicle, or PWC, markets, are a logical next extension for our platform, as there is significant overlap in the motorcycle dealer base with dealers of these products. According to data from Power Product Marketing and the 2016 Market Data Book, there were approximately 630,000 sales of ATV/UTV/Side-by-sides in 2015. There are approximately 1.2 million snowmobiles registered in the United States (another 600,000 in Canada) and in 2016, approximately 95,000 snowmobiles were sold in the United States and Canada. Lastly, according the National Marine Manufacturers Association and the Personal Watercraft Industry Association, in 2015 there were more than 54,000 new PWCs sold in the United States and there are currently approximately 1.2 million PWCs registered in the United States.
As we look to further extend the platform, the two largest adjacent segments are represented by the recreational boating and recreational vehicle (motor vehicle or trailer equipped with living space and amenities found in a home) industries. According to the National Marine Manufacturers Association, there were approximately 15.7 million recreational boats in the United States in 2014, and there were approximately 940,000 sales of pre-owned boats in 2014. Correspondingly, the Recreational Vehicle Industry Association estimates that currently more than 8.9 million households own an RV and in 2017 there will be over 470,000 shipments of RVs from manufacturers to dealers.
Competition
We face competition in all our business segments. The United States used recreational vehicle marketplace is highly fragmented, and we face competition from franchised dealers, who sell both new and used vehicles; independent dealers; online and mobile sales platforms; and private parties. We believe that the principal competitive factors in our industry are delivering an outstanding consumer experience, competitive sourcing of vehicles, breadth and depth of product selection, and value pricing. Our competitors vary in size and breadth of their product offerings. We believe that our principal competitive advantages in used vehicle retailing will include our ability to provide a high degree of customer satisfaction with the buying experience by virtue of our low, no-haggle prices and our online platform including our website and mobile application and our ability to make a cash offer to purchase a vehicle or offer listing alternatives coupled with our customer-friendly sales process and our breadth of selection of the most popular makes and models available on our website. In addition, we believe our willingness to appraise and purchase a customer’s vehicle, whether or not the customer is buying a vehicle from us, provides a competitive sourcing advantage for retail vehicles allowing us to offer value-oriented pricing.  We believe the principal competitive factors for our ancillary products and services include an ability to offer a full suite of products at competitive prices delivered in an efficient manner to the customer. We will compete with a variety of entities in offering these products including banks, finance companies, insurance and warranty providers and extended vehicle service contract providers. We believe our competitive strengths in this category will include our ability to deliver products in an efficient manner to customers utilizing our technology and our ability to partner with key participants in each category to offer a full suite of products at competitive prices. Lastly, additional competitors may enter the businesses in which we will operate.
Seasonality
Historically, the industry has been seasonal with traffic and sales strongest in the spring and summer quarters which tracks closely with the timing of regional riding seasons.  Sales and traffic are typically slowest in the fall quarter but increase in February and March, coinciding with tax refund season.
Key Operation Metrics
As our business expands we will regularly review a number of metrics, to evaluate our business, measure our progress, and make strategic decisions. Our key operating metrics reflect what we believe will bewas the key driversbottom of the downturn in mid-April, with the largest unit sales decline and our growth, including increasing brand awareness, maximizinglowest level of inventory acquisition during the opportunity to sourcequarter. By the purchaseend of low cost used vehicles from consumersApril conditions began improving slowly and dealers while enhancing the selection of vehicles we make available to our customers. Our key operating metrics also demonstrate our ability to translate these drivers into sales and to monetize these retail sales through a variety of product offerings.

 
 
Three-Months Ended
September 30,
 
 
Nine- Months Ended
September 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Units sold:
 
 
 
 
 
 
 
 
 
 
 
 
Consumer
  106 
  - 
  106 
  - 
Dealer
  165 
  - 
  175 
  - 
Auction
  42 
  - 
  42 
  - 
 
  313 
  - 
  323 
  - 
Number of Dealers
  3 
  - 
  3 
  - 
Average monthly unique users
  71,180 
  - 
  42,670 
  - 
Inventory units available on website
  588 
  - 
  588 
  - 
Average days to sale
  39 
  - 
  38 
  - 
Total average gross margin per unit$
 $ 760 
 $- 
 $736 
 $- 
Units Sold
We define units soldramping quicker as the numbermonth of used vehicles sold to consumers, dealers and at auctions in each period, net of returns under our three-day return policy. We view units sold as a key measure of our growth for several reasons. First, units sold is the primary driver of our revenue and, indirectly, gross profit, sinceMay progressed. Total unit sales enable multiple complementary revenue streams, including financing, vehicle service contractsfor the month of April were down 66% from January levels. The velocity of the rebound in May and trade-ins. Second, growth in units sold increasesthus far through June has been higher than expected and with the basereturn of available customers for referrals and repeat sales. Third, growth in units sold is an indicator ofdemand, our ability to successfully scale our logistics, fulfillment, and customer service operations.
Number of Dealers
Our operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with dealer partners who we refer to as either Select or Appraisal Dealers. We utilize these dealer partners in the acquisition of motorcycles as well as to provide inspection, reconditioninginventory has accelerated. In May, unit sales increased more than 22% from April’s lows, and distribution services. Correspondingly, we earn fees and transaction income, and dealer partners will earn incremental revenue and enhance profitability through increased sales, leads, and fees from inspection, reconditioning and distribution programs. We choose Select or Appraisal Dealers based on their geographic location and abilities asinitial June month-to-date results we are expecting at least a dealer. As Select and Appraisal Dealers are added throughout the U.S. the cost and time associated with distribution programs will be significantly reduced as the pickup and delivery of motorcycles will become more localized thus lower shipping costs and reduce the average days to sale for vehicles.
Average Monthly Unique Users
We define a monthly unique user as an individual who has visited our website within a calendar month, based on data provided by Google Analytics. We calculate average monthly unique users as the sum of monthly unique users in a given period, divided by the number of months in that period. We view average monthly unique users as a key indicator of the strength of our brand, the effectiveness of our advertising and merchandising campaigns and consumer awareness.
Inventory Units Available on Website
We define inventory units available on Website as the number of vehicles listed for sale on our website on the last day of a given reporting period. Until we reach an optimal pooled inventory level, we view inventory units available as a key measure of our growth. Growth in inventory units available increases the selection of vehicles available to consumers and dealers on a nationwide basis, which we believe will allow us to increase the number of vehicles we sell
Average Days to Sale
We define average days to sale as the average number of days between vehicle acquisition by us and delivery to a customer for all used units sold in a period. However, this metric does not include any used units that remain unsold at period end. We view average days to sale as a useful metric due to its impact on used vehicle average selling price. We anticipate that that average days to sale will26% increase in future periods untilmonth-over-month unit sales in June as compared to April. Though we reach an optimal pooled inventory levelare still below the monthly unit volumes experienced in January and fully scaleFebruary, our acquisition and sales channel processes.
Total Average Gross Margin per Unit
We define total average gross margin per unit as the aggregate gross margin in a given period divided by units sold in that period. Total gross margin per unit is driven by sales of used vehicles which, in many cases generates finance and vehicle service contracts revenue. We believe gross margin per unit is a key measure of our growth and long-term profitability.

COMPONENTS OF RESULTS OF OPERATIONS
Revenue
Revenue is derived from two primary sources: (1) our online marketplace, which is our largest source of revenue and includes: (i) the sale of used vehicles through consumer, dealers and auction sales channels; (ii) online listing and sales fees; (iii) retail merchandise sales; (iv) vehicle financing; and (v) vehicle service contracts; and (2) subscription and other fees.
The Company recognizes revenue when all of the following conditions are satisfied: (i) there is persuasive evidence of an arrangement; (ii) the product or service has been provided to the customer; (iii) the amount to be paid by the customer is fixed or determinable; and (iv) the collection of the Company’s payment is probable.
See Note 2 – “Summary of Significant Accounting Policies – Revenue Recognition” for a further description of the Company’s revenue recognition.
Used Vehicle Sales
We sell used vehicles through consumer, dealers and auction sales channels. These multiple sales channels provide us the opportunity to maximize profitability through increased sales volume and lower average days to sale by selling to the channel where the opportunity based on customer demand, market conditions or inventory availability is the greatest at any given time. The number of used units sold to any given channel may vary from period to period based on customer demand, market conditions and available inventory.
Used vehicle sales represent the aggregate sales of used vehicles to consumers and dealers through our website and sales at auctions. We generate gross profit on used vehicle sales from the difference between the vehicle selling price and our cost of sales associated with acquiring the vehicle and preparing it for sale. We expect used vehicle sales to increase as we begin to utilize a combination of brand building as well as direct response channels to efficiently source and scale our addressable markets while expanding our suite of product offerings to consumers who may wish to trade-in or to sell us their vehicle independent of a retail sale. Factors affecting used vehicle sales include the number of retail units sold and the average selling price of these vehicles. At this stage of our development, changes in both retail units sold and in average selling price will drive changes in revenue.
The number of used vehicles we sell depends on our volume of website traffic, our inventory selection, the effectiveness of our branding and marketing efforts, the quality of our customer sales experience, our volume of referrals and repeat customers, the competitiveness of our pricing, competition and general economic conditions. On a quarterly basis, the number of used vehicles we sell is also affected by seasonality, with demand for used vehicles reaching the high point in the first half of each year, commensurate with the timing of tax refunds, and diminishing through the rest of the year, with the lowest relative level of used vehicle sales expected to occur in the fourth calendar quarter.
Our average retail selling price depends on the mix of vehicles we acquire and hold in inventory, retail market prices in our markets, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of supply or demand imbalances, which could temporarily lead to average selling prices increasing or decreasing.
The number of vehicles sold at auctions are determined based on a number of factors including: (i) filling auction sales channel market demand opportunities to maximize sales and gross margin; (ii) a need to balance the Company’s overall inventory mix and quantity levels against days to sales targets; and (iii) a need to liquidate those units that do not meet the Company’s quality standards to list or be sold through Rumbleon.com.
Other Sales and Revenue
We generate other sales and revenue primarily through: (i) online listing and sales fees; (ii) retail merchandise sales; (iii) vehicle financing; and (iv) vehicle service contracts.
● 
Online Listing and Sales Fees. We charge a non-refundable fee for sellers to list their vehicle on the RumbleOn website. During the listing period, we manage all sales leads, handles all the documentation necessary to complete a sale, accepts a buyer’s trade and provides financing through third-party providers to the potential buyer, if necessary. Upon a successful sale, the seller pays a fee based on the difference between the actual retail sales price of the vehicle sold and the net proceeds agreed to be paid by RumbleOn to the seller when the listing agreement was signed.
● 
Retail Merchandise Sales. We sell branded and other merchandise and accessories.

● 
Vehicle Financing.Customers can pay for their vehicle using cash or we offer a range of finance options through unrelated third-parties such as banks or credit unions. These third-party providers generally pay us a fee either in a flat amount or in an amount equal to the difference between the interest rates charged to customers over the predetermined interest rates set by the financial institution. We may be charged back for commissions in the event a contract is prepaid, defaulted upon, or terminated.
● 
Vehicle Service Contracts. At the time of vehicle sale, we provide customers, on behalf of unrelated third parties who are the primary obligors, a range of other related products and services, including extended protection plan (“EPP”) products and vehicle appearance protection. EPP products include extended service plans (“ESPs”), which are designed to cover unexpected expenses associated with mechanical breakdowns and guaranteed asset protection (“GAP”), which is intended to cover the unpaid balance on a vehicle loan in the event of a total loss of the vehicle or unrecovered theft. Vehicle appearance protection includes products aimed at maintaining vehicle appearance. We receive commissions from the sale of these product and service contracts and have no contractual liability to customers for claims under these products.  The EPPs and vehicle appearance protection currently offered to consumers provides coverage up to 60 months (subject to mileage limitations), while GAP covers the customerpreliminary results for the termmonth of their finance contract. At that time commission revenue will be recognized at the time of sale, net of a reserve for estimated contract cancellations. The reserve for cancellations will be estimated based upon historical industry experience and recent trends and will be reflected as a reduction of other sales revenue in the accompanying Condensed Consolidated Statements of Operations and a component of accounts payable and accrued liabilities in the accompanying Condensed Consolidated Balance Sheets. Our risk related to contract cancellations is limited to the revenue that we receive. 
Subscription and other fees
We generate subscription fees from dealer partners under a license arrangement that provides access toJune show our software solution and ongoing support. Select or Appraisal Dealers pay a monthly subscription fee for access to and ongoing support for portions of the RumbleOn software solution, which includes: (i) a vehicle appraisal process; (ii) inventory management system; (iii) customer relationship and lead management program; and (iv) equity mining. Dealers may also be charged an initial software installation and training fee. Dealers do not have the contractual right to take possession of the software and may cancel the license for these products and services by providing a 30-day notice. Installation and training do not have value to the user without the license and ongoing support and maintenance.
Cost of Revenue
Cost of revenue is comprised of: (i) cost of vehicle sales and (ii) costs of subscription and other fees.
Cost of vehicle sales to consumers, dealers and auctions, includes the cost to acquire vehicles and the reconditioning and transportation costs associated with preparing the vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles we acquire, the source of those vehicles, and supply and demand dynamics in the vehicle market. Reconditioning costs are billed by third-party providers and include parts, labor, and other repair expenses directly attributable to specific vehicles. Transportation costs consisted of costs incurred to transport the vehicles from the point of acquisition or delivery. Cost of vehicle sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.
Cost of subscription fee revenue includes the (i) various data feeds from third parties; (ii) hosting of the customer-facing website; (iii) commissions for new sales; and (iv) implementation and training of new and existing dealers.
Vehicle Gross Margin
Gross margin is generated on used vehicle sales from the difference between the vehicle selling price and our cost of sales associated with acquiring the vehicle and preparing it for sale. The aggregate dollar gross margins achieved from the consumer, dealer and auction sales channels are different. Units sold to consumers through our website generally have the highest dollar gross margin since the unit is sold directly to the consumer. Vehicles sold to dealers are sold at a price below the retail price offered to consumers, thus the dealer and RumbleOn are sharing the gross margin. The dollar gross margin on units sold at auction are usuallyin our history and significant operating income improvement from prior periods. We don't believe the lowest due to auction fees. Factors affectingJune levels of gross margin from periodwill continue over the long term, and we expect vehicle margins will stabilize as demand levels. Nevertheless, we expect the new normal to period includebe an impressive improvement in gross profit per unit going forward reflecting the mixprogress we are making on our objective of vehiclesa more disciplined approach to sales volume as we acquire and hold in inventory, retail market prices,take prescriptive steps to achieve our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantagegoal of supply or demand imbalances in our sales channels, which could temporarily lead to average selling prices and gross margins increasing or decreasing in any given channel.accelerating profitability.
 

Nashville Tornado
 
Selling, GeneralOn March 3, 2020, a severe tornado struck the greater Nashville area causing significant damage to the Company's facilities in Nashville. The Company maintains insurance coverage for damage to its facilities and Administrative Expense
Selling, general and administrative (“SG&A”) expenses include costs and expenses for compensation and benefits, advertising to consumers and dealers, development and operating our product procurement and distribution system, managing our logistics system, establishing our dealer partner arrangements, and other corporate overhead expenses, including expenses associated with technology development, legal, accounting, finance, and business development. Selling, general and administrative expenses will increase substantially as we continue to execute and aggressively expand our business through increased marketing spending and the addition of management and support personnel to ensure we adequately develop and maintain operational, financial and management controlsinventory, as well as our reporting systemsbusiness interruption insurance. The Company continues in the process of reviewing damages and procedures. SG&A expenses excludecoverages with its insurance carriers. The loss comprises three components: (1) inventory loss, currently assessed by the costsinsurance carrier at approximately $13,000,000; (2) building and personal property loss, currently assessed by the insurance carrier at $3,801,203; and (3) loss of inspecting, reconditioningbusiness income, for which the Company has coverage in the amount of $6,000,000.
All three components of the Company's loss claim have been submitted to its insurers. The Company's inventory claim is subject to a dispute with the carrier as to the policy limits applicable to the loss. The insurer has agreed to pay $2,778,000 on the building and transportationpersonal property loss, reflecting limits of vehicles,$2,783,000 net of a $5,000 deductible and has made an interim payment on the building and personal property loss of $2,269,507 to the landlord. Currently, there is minimally an outstanding balance of $508,493 which will be paid when replacement is finished, which is expected to be sometime during 2021. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250,000 against the final settlement. The Company believes there will be a recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered or when any such recoveries will be made.
Acquisition of Autosport
On February 3, 2019 (the "Autosport Acquisition Date"), the Company completed the acquisition (the "Autosport Acquisition") of all of the equity interests of Autosport USA, Inc. ("Autosport"), an independent pre-owned vehicle distributor, pursuant to a Stock Purchase Agreement, dated February 1, 2019 (the "Stock Purchase Agreement"), by and among RMBL Express, LLC (the "Buyer"), a wholly owned subsidiary of Company, Scott Bennie (the "Seller") and Autosport. The results of operations of Autosport are included in cost of sales.
Depreciation and Amortization
Depreciation and amortization is comprised of the: (i) amortization of capitalized and acquired technology development; (ii) amortization of identifiable intangible assets; and (iii) depreciation of vehicle, furniture and equipment. Depreciation and amortization will continue to increase as continued investments are made in connection with the expansion and growth of the business.
Interest Expense
Interest expense includes interest incurred on notes payable and other long-term debt, which was used to fund, startup costs and expenses, technology development, inventory, our transportation fleet, property and equipment and the acquisition of NexGen.
Results of Operations
The following table provides our results of operationsCompany's Condensed Consolidated financial statements for the three and nine-month periodsthree-months ended September 30, 2017 and September 30, 2016, respectively. This financial information should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
 
 
For the three-months ended
September 30,
 
 
For the nine-months ended
September 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Revenue:
Used Vehicle Sales:
 
 
 
 
 
 
 
 
 
 
 
 
Consumer
 $1,626,864 
 $ - 
 $1,626,864 
 $- 
Dealer
  1,745,948 
  - 
  1,745,948 
  - 
Auction
  171,560 
  - 
  253,500 
  - 
Other sales and revenue
  134,573 
  - 
  134,573 
  - 
Subscription and other fees
  27,197 
  - 
  100,668 
  - 
Total Revenue
  3,706,142 
  - 
  3,861,553 
  - 
 
    
    
    
    
Cost of revenue
  3,478,124 
  - 
  3,627,455 
  - 
Selling, General and administrative
  2,326,043 
  36,706 
  4,690,216 
  58,135 
Depreciation and amortization
  129,277 
  475 
  302,697 
  1,425 
Total Expenses
  5,933,444 
  37,181 
  8,620,368 
  59,560 
 
    
    
    
    
Operating loss
  (2,227,302)
  (37,181)
  (4,758,815)
  (59,560)
 
    
    
    
    
Interest expense
  90,201 
  2,878 
  373,808 
  7,431 
 
    
    
    
    
Net loss before provision for income taxes
 $(2,317,503)
 $(40,059)
 $(5,132,623)
 $(66,991)
 
    
    
    
    
Benefit for income taxes
  - 
  - 
  - 
  - 
 
    
    
    
    
Net loss
 $(2,317,503)
 $(40,059)
 $(5,132,623)
 $(66,991)

Results of Operations for the Three and Nine-month periods ended September 30, 2017 and September 30, 2016
Revenue
Online Marketplace
Total revenue for the three and nine-month periods ended September 30, 2017 increased by $3,706,142 and $3,861,553, respectively as compared to the same periods in 2016. The increase in revenue was primarily due to an increase in the number of used vehicles sold to consumers, dealers and at auctions. The increase in unit sales was driven by the launch of the RumbleOn website, expanded inventory selection, enhanced social media, aggressive event marketing efforts, increased brand awareness and customer referrals. We anticipate that unit sales will continue to grow as we expand our units of available inventory, while continuing to efficiently source and scale our addressable markets of consumers and dealers through brand building and direct response marketing.
Sales of used vehicles to consumers, dealers and auctions for the three and nine-month periods ended September 30, 2017 increased by $3,544,372 and $3,626,312, respectively as compared to the same periods in 2016. This increase was driven by the sale of 313 and 323 used units to consumers, dealers and at auctions during the three and nine-month period ending September 30, 2017, respectively. The average selling price of the used units sold for the three and nine-month periods ended September 30, 2017 was $11,324 and $11,227, respectively. The average selling price of used units sold will fluctuate from period to period as a result of changes in the sales mix to consumers, dealers and at auctions in any given period. There were no sales of used vehicles to consumers, dealers or auctions for the three and nine-month periods ended September 30, 2016.
Other sales and revenuefor the three and nine-month periods ended September 30, 2017 increased by $134,573 as compared to the same periods in 2016.This increase was primarily driven by the increase in retail units sold which led to an increase in loans originated and sold, and vehicle service contracts and retail merchandise sales. There were no online listing and sales fee revenue for thethree and nine-month periods ended September 30, 2016.
Subscription and other fees
Subscription and other fee revenue for the three and nine-month periods ended September 30, 2017 increased by $27,197 and $100,668, respectively as compared to the same periods in 2016. There were no subscription or other fee revenue for the three and nine-month periods ended September 30, 2016.
Expenses
Cost of Revenue
Total cost of revenue for the three and nine-month periods ended September 30, 2017 increased by $3,478,124 and $3,627,455, respectively as compared to the same periods in 2016. This increase was driven by the: (i) sale of used units to consumers, dealers and at auctions; and (ii) sale of related products in connection with unit sales to consumers during the three and nine-month period ending September 30, 2017, respectively as compared to the same periods in 2016.
Cost of vehicle sales for the three and nine-month periods ended September 30, 2017 increased by $3,404,480 and 3,489,446, respectively as compared to the same periods in 2016. This increase was driven by the sale of 313 and 323 used units to consumers, dealers and at auctions during the three and nine-month period ending September 30, 2017, respectively as compared to the same periods in 2016. The average cost of the used units sold for the three and nine-month periods ended September 30, 2017 was $10,769 and $10,696, respectively.
Cost of other sales and revenue for the three and nine-month periods ended September 30, 2017 increased by $53,754 as compared to the same periods in 2016.This increase was primarily driven by the increase in units sold to consumers which led to an increase in loans originated and sold, vehicle service contracts.
Cost of subscription and other fee revenue, included the (i) various data feeds from third parties; (ii) hosting of the customer facing website; (iii) commissions for new sales; and (iv) implementation and training of new and existing dealers. These costs and expenses are charged to cost of revenue as incurred. Cost of subscription and other fee revenue for the three and nine-month periods ended September 30, 2017 increased by $19,890 and $84,255, respectively as compared to the same periods in 2016. 

Selling, General and Administrative
 
 
For the three-months ended
September 30,
 
 
For the nine-months ended
September 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
Selling, General and Administrative:
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and related costs
 $ 1,028,819 
 $ - 
 $ 1,951,911 
 $ - 
Advertising and Marketing
  752,017 
  - 
  1,060,195 
  - 
Professional Fees
  192,041 
  34,044 
  724,486 
  49,017 
Technology Development
  91,967 
  - 
  278,668 
  - 
General and Administrative
  261,199 
  2,662
 
  674,956 
  9,118 
Total Selling, General and Administrative
 $2,326,043 
 $36,706 
 $4,690,216 
 $58,135 
Selling, general and administrative expenses for the three and nine-month periods ended September 30, 2017 increased by $2,289,337 and $4,632,081, respectively as compared to the same periods in 2016. The increase is a result of the significant expansion of our businesses associated with the launch of our website and mobile application which resulted in: (i) an increase in expenses associated with advertising and marketing; (ii) increase headcount associated with the development and operating our product procurement and distribution system, managing our logistics system; (iii) continued investment in technology development; and (iv) other corporate overhead costs and expenses, including legal, accounting, finance, and business development.
Compensation and related costs, which includes all payroll and related costs, including benefits, payroll taxes, and stock-based compensation, for the three and nine-month periods ended September 30, 2017 increased by $1,028,819 and $1,951,911 as compared to the same periods in 2016. The increase was driven by the growth in headcount and related compensation and benefits at our Dallas operations center, and included new hires in our marketing, product and inventory management, accounting, finance, information technology, and administration departments. As our business continues to grow these expenses will increase as we add headcount in all areas of the business.
Advertising and marketing for the three and nine-month periods ended September 30, 2017 increased by $752,017 and $1,060,195 as compared to the same periods in 2016. The increase consists of cost associated with the launch of our website and mobile application, aggressive event marketing and further development of a multi-channel approach to consumers and dealers. We have begun to utilize a combination of brand building as well as direct response channels to efficiently source and scale our addressable markets. Our paid advertising efforts include advertisements through search engine marketing, inventory site listing, retargeting, organic referral, display, direct mail and branded pay-per-click channels. We believe our strong consumer and dealer focus ensures loyalty which will drive both high participation in the buy and selling process while increasing referrals. In addition to our paid channels, we intend to attract new customers through increased media spending and public relations efforts and further investing in our proprietary technology.
Professional fees consist primarily of legal and accounting fees and costs associated with: (i) financing activities; (ii) general corporate matters; (iii) the NextGen acquisition; (iv) the preparation of quarterly and annual financial statements; and (v) the filing of regulatory reports required of the Company for public reporting purposes. Professional fees for the three and nine-month periods ended September 30, 2017 increased by $157,997 and $675,469, respectively as compared to the same periods in 2016. This increase was primarily a result of legal, accounting and other professional fees and expenses incurred in connection with the: (i) NextGen acquisition; (ii) 2017 Private Placement; (iii) second tranche of 2016 Private Placement; (iv) Senior Secured Promissory Notes; (v) the Offering (as defined below); (vi) our Nasdaq listing; and (vii) various corporate matters resulting from the growth and expansion of the RumbleOn business plan.March 31, 2019. For additional information, see Note 3 - “Acquisitions,” Note 7 - “Notes Payable,” Note 8 - “Stockholders’ Equity,” and Note 15 - “Subsequent Events” in the accompanying Notes to the Condensed Consolidated Financial Statements.

Technology development costs consist principally of (i) development activities including payroll and related expenses billed by a third-party contractor involved in application, content, production, maintenance, operation, and platform development for new and existing products and services, (ii) technology infrastructure expenses, and (iii) costs of Company employees devoted to the development and maintenance of software products. Technology development expenses for the three and nine-month periods ended September 30, 2017 increased by $91,967 and $278,668, respectively as compared to the same period in 2016. Total technology costs and expenses incurred for the three and nine-month periods ended September 30, 2017 were $236,400 and $713,766 of which $144,433 and $435,097, respectively were capitalized.  For the three and nine-month periods ended September 30, 2017, a third-party contractor billed $221,400 and $678,766 respectively, of the total technology development costs. The amortization of capitalized technology development costs for the three and nine-month periods ended September 30, 2017 was $89,429 and $219,374, respectively. There were no technology development costs incurred and no amortization of capitalized development costs for the same periods in 2016. Technology development costs are accounted for pursuant to ASC 350, Intangibles — Goodwill and Other. Technology development costs include internally developed software and website applications that are used by the Company for its own internal use and to provide services to its customers, which include consumers, dealer partners and ancillary service providers. Under the terms of these customer arrangements the Company retains the revenue generating technology and hosts the applications on its servers and mobile applications. The customer does not have a contractual right to take possession of the software during the term of the arrangement and is not permitted to run the software itself or contract with another party unrelated to the entity to host the software. Technology development costs consist principally of (i) development activities including payroll and related expenses billed by a third-party contractor involved in application, content, production, maintenance, operation, and platform development for new and existing products and services, (ii) technology infrastructure expenses, and (iii) costs of Company employees devoted to the development and maintenance of software products. Technology and content costs for design, maintenance and post-implementation stages of internal-use software and general website development are expensed as incurred. For costs incurred to develop new website functionality as well as new software products and significant upgrades to existing internally used platforms or modules, capitalization begins during the application development stage and ends when the software is available for general use. Capitalized technology development is amortized on a straight-line basis over periods ranging from 3 to 7 years. The Company will perform periodic assessment of the useful lives assigned to capitalized software applications. Additionally, the Company from time-to-time may abandon additional development activities relating to specific software projects or applications and charge accumulated costs to technology development expense in the period such determination is made. We expect our technology development expenses to increase as we continue to upgrade and enhance our technology infrastructure, invest in our products, expand the functionality of our platform and provide new product offerings. We also expect technology development expenses to continue to be affected by variations in the amount of capitalized internally developed technology.
General and administrative expenses for the three and nine-month periods ended September 30, 2017 increased by $258,537 and $665,838 as compared to the same periods in 2016. The increase is a result of the cost and expenses associated with the continued progress made in the development of our business, the establishment of our Dallas operations center and meeting the requirements of being a public company. General and administrative costs and expenses include: (i) insurance; (ii) advisor and various filing fees for equity transactions; (iii) office supplies and process application software; (iv) public and investor relations and (v) travel.
Depreciation and Amortization
Depreciation and amortization is comprised of the: (i) amortization of capitalized technology development; (ii) amortization of identifiable intangible assets; and (iii) depreciation of vehicle, furniture and equipment. Depreciation and amortization for the three and nine-month periods ended September 30, 2017 increased by $131,128 and $303,598, respectively, as compared to the same period in 2016. The increase in depreciation and amortization is a result of the investments made in connection with the expansion and growth of the business which for the three and nine-month periods ended September 30, 2017 included: (i) capitalized technology acquisition and development costs of $144,433 and $435,097, respectively; and (ii) the purchase of vehicles, furniture and equipment of $106,587 and $600,175, respectively. For the three and nine-month periods ended September 30, 2017 amortization of: (i) capitalized technology development was $89,429 and $219,374, respectively; (ii) amortization of identifiable intangible was $11,250 and $33,750, respectively; and (iii) depreciation and amortization on vehicle, furniture and equipment was $28,598 and $49,573, respectively. Depreciation and amortization on furniture and equipment for the same periods in 2016 was $475 and $1,425, respectively.
Interest Expense
Interest expense consists of interest on the: (i) BHLP Note; (ii) NextGen Note; (iii) Private Placement Notes; and (iv) Senior Secured Promissory Notes. Interest expense for the three and nine-month periods ended September 30, 2017 increased by $87,323 and $366,377, respectively, as compared to the same periods in 2016. The increase resulted from: (i) interest on a higher level of debt outstanding; (ii) the conversion of the BHLP Note; (iii) the amortization of the beneficial conversion feature on the Private Placement Notes; and (iv) the amortization of the original issue discount on the Senior Secured Promissory Notes. The conversion of the BHLP Note resulted in a $196,076 charge to interest expense for the remaining balance of the beneficial conversion feature, net of deferred taxes and is included in interest expense for the nine-month period ended September 30, 2017. Interest expense on the Private Placement Notes for the three and nine-month periods ended September 30, 2017 was $94,855 and $183,943, respectively which included $41,979 and $81,603 of debt discount amortization for the three and nine-month periods ended September 30, 2017, respectively. Interest expense on the NextGen Notes for the three and nine-month periods ended September 30, 2017 was $21,370 and $54,849 respectively. Interest expense on the Senior Secured Promissory Notes for the three and nine-month periods ended September 30, 2017 was $15,925 which included $10,274 of original issue discount amortization. For additional information, see Note 7 - “Notes Payable”4 – "Acquisitions" in the accompanying Notes to the Condensed Consolidated Financial Statements.
 

Reportable Segments
 
LiquidityReportable segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and Capital Resourcesin assessing operating performance. Our operations are organized by management into operating segments by line of business. We have determined that we have three reportable segments as defined in generally accepted accounting principles for segment reporting: (1) powersports, (2) automotive and (3) vehicle logistics and transportation. Our powersports and automotive segments consist of the distribution of pre-owned vehicles. The powersports segment consists of the distribution of principally motorcycles, while the automotive segment distributes cars and trucks. Our vehicle logistics and transportation service segment provides nationwide automotive transportation services primarily between dealerships and auctions.
 
The following table sets forth a summary of our cash flows for the nine-month period ended September 30, 2017 and 2016:
 
 
For the Three-months Ended March 31, 2020
 
 
For the Three-months Ended March 31, 2019
 
 
 
Revenue
 
 
Revenue%
 
 
Gross Profit
 
 
GP%
 
 
Revenue
 
 
Revenue%
 
 
Gross Profit
 
 
GP%
 
Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Powersports
  23,139,080 
  16.0%
  2,580,794 
  11.2%
  26,929,159 
  12.1%
  2,979,603 
  11.1%
Automotive
  114,198,079 
  79.1%
  5,844,574 
  5.1%
  190,907,188 
  85.5%
  9,412,076 
  4.9%
Transportation
  7,087,591 
  4.9%
  1,999,532 
  28.2%
  5,341,412 
  2.4%
  1,599,390 
  29.9%
Gross profit before impairment loss
  144,424,750 
  - 
  10,424,900 
  7.2%
  223,177,759 
  - 
  13,991,069 
  - 
Impairment loss (1)
  - 
  - 
  (11,738,413)
  (8.1)%
  - 
  - 
  - 
  - 
 
  144,424,750 
  100.0%
  (1,313,513)
  (0.9)%
  223,177,759 
  100.0%
  13,991,069 
  6.3%
                                   
 
 
Nine-months ended
September 30,
 
 
 
2017
 
 
2016
 
Net cash used in operating activities
 $(4,389,128)
 $(62,116)
Net cash used in investing activities
  (1,785,272)
  - 
Net cash provided by financing activities
  5,480,040 
  63,358 
Net change in cash
 $(694,360)
 $1,242
(1)            
Impairment Loss resulting from the Nashville Tornado.
 
Operating Activities
Net cash used in operating activities increased $4,327,012 to $4,389,128 for the nine-month period ended September 30, 2017, as compared to the same period in 2016. The increase in net cash used is primarily due to a $5,065,632 increase in our net loss offset by an increase in the net change operating assets and liabilities of $138,153 and a $876,775 increase in non-cash expense items. The increase in the net loss for the nine-month period ended September 30, 2017 was a result of the continued expansion and progress made on our business plan, including a significant increase in marketing and advertising spend in connection the launch of the Company’s website, www.rumbleon.com, acquire vehicle inventory, continue development of the Company’s business and for working capital purposes.
Investing Activities
Net cash used in investing activities increased $1,785,272 for the nine-month period ended September 30, 2017, as compared to the same period in 2016. The increase in cash used for investment activities was primarily for the purchase of NextGen, $435,097 in costs incurred for technology development and the purchase of $600,175 of vehicles, furniture and equipment.
On February 8, 2017, the Company acquired substantially all of the assets of NextGen in exchange for $750,000 in cash, plus 1,523,809 unregistered shares of Class B Common Stock of the Company and a subordinated secured promissory note issued by the Company in favor of NextGen in the amount of $1,333,334. The NextGen Note matures on the third anniversary of the closing date. Interest accrues and will be paid semi-annually (i) at a rate of 6.5% annually from the closing date through the second anniversary of such date and (ii) at a rate of 8.5% annually from the second anniversary of the closing date through the Maturity Date. In connection with the closing of the acquisition, certain investors of the Company accelerated the funding of the second tranche of their investment totaling $1,350,000. The investors were issued 1,161,920 shares of Class B Common Stock and promissory notes in the amount of $667,000. For additional information, see “Financing Activities” in Management’s Discussion and Analysis and Note 7 - “Notes Payable” in the accompanying Notes to the Condensed Consolidated Financial Statements.
Financing Activities
Net cash provided by financing activities increased $5,416,681 to $5,480,040 for the nine-month period ended September 30, 2017, compared with net cash provided by financing activities of $63,358 for the same period in 2016. This increase is primarily a result of the: (i) 2017 Private Placement of $2,630,000 in Class B Common Stock at a price of $4.00 per share; (ii) second tranche of the 2016 Private Placement of $683,040 in Class B Common Stock and $667,000 in promissory notes; and (iii) Senior Secured Promissory Notes proceeds of $1,500,000. Proceeds from the 2017 Private Placement, the second tranche of the 2016 Private Placement and the Senior Secured Promissory Notes were used to complete the launch of the Company’s website, www.rumbleon.com, acquire vehicle inventory, continue development of the Company’s business and for working capital purposes.
On March 31, 2017, the Company completed funding of the second tranche of the 2016 Private Placement. The investors were issued 1,161,920 shares of Class B Common Stock of the Company and the Private Placement Notes in the amount of $667,000, in consideration of cancellation of loan agreements having an aggregate principal amount committed by the purchasers of $1,350,000. Under the terms of the Private Placement Notes, interest shall accrue on the outstanding and unpaid principal amount until paid in full. The Private Placement Notes mature on March 31, 2020. Interest accrues at a rate of 6.5% annually from the closing date through the second anniversary of such date and (ii) at a rate of 8.5% annually from the second anniversary of the closing date through the maturity date. Upon the occurrence of any event of default, the outstanding balance under the Private Placement Notes shall become immediately due and payable upon election of the holder. Based on the relative fair values attributed to the Class B Common Stock and promissory notes issued in the 2016 Private Placement the Company recorded a debt discount on the promissory notes of $667,000 with the corresponding amounts as addition to paid in capital. The debt discount will be amortized to interest expense over the life of the notes using the effective interest method. For additional information, see Note 7 - “Notes Payable” in the accompanying Notes to the Condensed Consolidated Financial Statements.

On July 13, 2016, the Company entered into the BHLP Note with Berrard Holdings, an entity owned and controlled by a current officer and director, Mr. Berrard, pursuant to which the Company was required to repay $191,858 on or before July 13, 2026 plus interest at 6% per annum. The BHLP Note was also convertible into common stock, in whole, at any time before maturity at the option of the holder at the greater of $0.06 per share or 50% of the price per share of the next qualified financing which is defined as $500,000 or greater. Effective August 31, 2016, the principal amount of the BHLP Note was amended to include an additional $5,000 loaned to the Company, on the same terms. On November 28, 2016, the Company completed its qualified financing at $1.50 per share which established the conversion price per share for the BHLP Note of $0.75 per share, resulting in the principal amount of the BHLP Note being convertible into 263,144 shares of Class B Common Stock. As such, November 28, 2016 became the “commitment date” for determining the value of the BHLP Note conversion feature. Because there had been one trade in January 2016 in the Company’s common stock since July 2014, other than the purchase by Berrard Holdings of 99.5% of the outstanding shares in a single transaction, the Company used the Monte Carlo simulation to determine the intrinsic value of the conversion feature of the BHLP Note, which resulted in a value in excess of the principal amount of the BHLP Note Thus, the Company recorded a note discount of $197,358 with the corresponding amount as an addition to paid in capital. This note discount is amortized to interest expense until the scheduled maturity of the BHLP Note in July 2026 or until it is converted using the effective interest method. The effective interest rate at March 31, 2017 was 7.4%. Interest expense on the BHLP Note for the three-month period ended March 31, 2017 was $2,920 and the amortization of the beneficial conversion feature was $3,558. On March 31, 2017, the Company issued 275,312 shares of Class B Common Stock upon full conversion of the BHLP Note, having an aggregate principal amount, including accrued interest, of $206,484 and a conversion price of $0.75 per share. In connection with the conversion of the BHLP Note, the remaining debt discount of $196,076 was charged to interest expense in the Condensed Consolidated Statements of Operations and the related deferred tax liability was credited to additional paid in capital in the Condensed Consolidated Balance Sheets. For additional information, see Note 7 - “Notes Payable” in the accompanying Notes to the Condensed Consolidated Financial Statements.Seasonality
 
On September 5, 2017Absent the Company executed Senior Secured Promissory Notes (the “Notes”) in favorimpact of COVID-19, the volume of vehicles sold will generally fluctuate from quarter-to-quarter. This seasonality is caused by several investors,factors including certain executive officersweather, the timing of pre-owned vehicles available for sale from selling consumers, the availability and directorsquality of vehicles, holidays, and the seasonality of the Company, inretail market for pre-owned vehicles. As a result, revenue and operating expenses related to volume will fluctuate accordingly on a quarterly basis. The fourth calendar quarter typically experiences lower used vehicle auction accessibility as well as additional costs associated with the aggregate principal amount of $1,650,000 (“Principal Amount”), which includes an aggregate original issue discount of $150,000. The proceeds to the Company from the Notes, net of original issuance discount, was $1,500,000. The Notes are secured by an interest in all the Company’s Collateral, as such term is defined in the Notes.The Notes mature on September 15, 2018holidays and bear interest at a rate equal to 5% per annum through December 31, 2017, and a rate of 10% per annum thereafter. Interest is payable monthly in arrears. Upon the occurrence of any event of default, the outstanding balance under the Notes shall become immediately due and payable upon election of the holders.The Principal Amount and any unpaid interest accrued thereon may be prepaid by the Company at any time prior to the Maturity Date without premium or penalty upon five days prior written notice to the Noteholder. If the Company consummates in one or more transactions financing of any nature resulting in net proceeds available to the Company of $5,000,000 or more, then the Noteholders may require the Company to prepay the Notes on thirty (30) days prior written notice to the Company. The original issue discount is amortized to interest expense until the scheduled maturity of the Notes in September 2018 using the effective interest method. The effective interest rate at September 30, 2017 was 10.0%. Interest expense on the Notes for the three and nine-month periods ended September 30, 2017 was $15,925 which included $10,274 of original issue discount amortization. On October 23, 2017, the Company completed a public offering and used $1,661,075 of the net proceeds of the Offering for the repayment of the Notes in the aggregate principal amount of $1,650,000, plus accrued interest, which resulted in the termination of the Notes. For additional information, see Note 8 - “Stockholders Equity” and Note 15 – “Subsequent Events” in the accompanying Notes to the Condensed Consolidated Financial Statements.winter weather.
 

 
Investment in Growth
 
As a result of September 30, 2017, the Company had a total of $656,220 in available cash. Our cash requirements for the next twelve months are significant asCOVID-19 pandemic we have beguntemporarily reduced discretionary growth expenditures, however, as the impact of COVID-19 abates over time, and unit sales return to aggressively investor exceed levels experienced in the growthJanuary and February of our business and2020, we expect thiswill take a measured approach to resuming investment to continue. We plan to invest heavily in inventory, marketing, technology and infrastructure to support the growth of the business. These anticipated investments are expected to increase our negative cash flow from operations and operating losses at least in the near term, and there is no guarantee that we will be able to realize the return on our investments. Since inception, we have financed our cash flow requirements through debt and equity financing and on October 23, 2017, the Company completed a public offering of 2,910,000 shares of Class B common stock at a public offering price of $5.50 per share (the "Offering") and received approximately $14,500,000 in proceeds, net of underwriting discounts and commissions and offering expenses. The Companyused $1,661,075 of the net proceeds of the Offering for the repayment of the Senior Secured Promissory Notes in the aggregate principal amount of $1,650,000 plus accrued interestand intend to use the remaining net proceeds of the Offering for working capital and general corporate purposes, which may include purchases of additional inventory held for sale, increased spending on marketing and advertising and capital expenditures necessary to grow the business. Also, on November 2, 2017, we entered into a floor plan line of credit through our subsidiary, RMBL Missouri, LLC, in the amount of $2,000,000. For additional information on the Offering and floor plan line of credit, see Note 15 – “Subsequent Events” in the accompanying Notes to the Condensed Consolidated Financial Statements.However, our limited operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, including the impact of COVID-19, expenses and difficulties frequently encountered by companies that are early in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include an evolving business model, advancement of technology and the management of growth. To address these risks, we must, among other things, continue our development of relevant applications, stay abreast of changes in the marketplace, as well as implement and successfully execute our business and marketing strategy. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
 
Liquidity
Critical Accounting Policies
We have incurred losses and negative cash flow from operations since inception through March 31, 2020 and expect to incur additional losses and negative cash flow in the future. As we continue to expand our business, build our brand name and awareness, and continue technology and software development efforts, we may need access to additional capital, including through debt and equity financing. Historically, we have raised additional capital to fund our expansion through equity issuances or debt instruments; refer to Note 8 — Notes Payable and Lines of Credit, Note 9 — Convertible Notes, and Note 10 — Stockholders Equity. Also, we have historically funded vehicle inventory purchases through our Line of Credit-Floor Plans. Due to the impact of COVID-19 on the economy, we have a strong focus on preserving liquidity. Our primary liquidity sources are available cash and cash equivalents, amounts available under the NextGear Credit Line (as defined below), proceeds from the Paycheck Protection Program loan, monetization of our retail loan portfolio and through rationalizing costs and expenses, including laying off 169 employees. Although we have experienced a decrease in revenue as a result of the impact of the COVID-19 pandemic, as of June 26, 2020, the Company has approximately $9,700,000 of cash of which $5,500,000 is restricted, approximately $19,900,000 of remaining availability under the NextGear Credit Line and $1,200,000 of availability under the $1,500,000 RumbleOn Finance Facility. The Company expects to receive recovery of its insured losses, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered or when such amounts, if any, will be recovered.
 
The worldwide spread of the COVID-19 outbreak has resulted in a global slowdown of economic activity which decreased demand for a broad variety of goods and services, while also disrupting sales channels, marketing activities and supply chains for an unknown period of time until the outbreak is contained. This is impacting the Company's business and the powersport and automotive industries as a whole. The Company has positioned its business today to be lean and flexible in this period of lower demand and higher uncertainty with the goal of preparing the Company for a strong recovery as the crisis is contained. The Company believes its online business model allows it to quickly respond to market demand or changes in the businesses it operates as the COVID-19 pandemic continues.
The Company’s condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which assumes the continuity of operations, the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. Although the Company believes that it will be able to generate sufficient liquidity from the measures described above, its current circumstances including uncertainties due to COVID-19 pandemic raise substantial doubt about the Company's ability to operate as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Key Operation Metrics - Powersports and Automotive Segments
We regularly review a number of metrics, to evaluate our vehicle distribution business, measure our progress, and make strategic decisions. Our key operating metrics reflect what we believe will be the key drivers of our business, including increasing brand awareness, maximizing the opportunity to source the purchase of low cost pre-owned vehicles from consumers and dealers while enhancing the selection of vehicles we make available to our customers. Our key operating metrics also demonstrate our ability to translate these drivers into sales and to monetize these retail sales through a variety of product offerings.

 
 
Three Months Ended March 31,
 
Powersports:
 
2020
 
 
2019
 
Vehicles sold
  2,817 
  3,298 
Average days to sale
  43 
  37 
Total vehicle revenue
 $23,139,080 
 $26,929,159 
Gross Profit
 $2,926,263 
 $3,165,796 
 
 
Three Months Ended March 31,
 
Automotive(1):
 
2020
 
 
2019
 
Vehicles sold
  4,603 
  8,805 
Average days to sale
  31 
  26 
Total vehicle revenue
 $113,632,267 
 $190,907,188 
Gross Profit
 $6,348,968 
 $9,435,365 
(1)            
Excludes the Impairment Loss resulting from the Nashville Tornado and other insignificant indirect costs.
Vehicles Sold
We define vehicles sold as the number of pre-owned vehicles sold to consumers and dealers in each period, net of returns under our various return policies. We view vehicles sold as a key measure for several reasons. First, vehicles sold is the primary driver of our revenue and, indirectly, gross profit, since vehicle sales enable multiple complementary revenue streams, including financing, vehicle service contracts and trade-ins. Second, vehicles sold increases the base of available customers for referrals and repeat sales. Third, vehicles sold is an indicator of our ability to successfully scale our logistics, fulfillment, and customer service operations.
Regional Partners
Our operations are designed to be scalable by working through an infrastructure and capital light model that is achievable by virtue of a synergistic relationship with regional partners. We utilize these regional partners to provide inspection, reconditioning and distribution services. These regional partners earn incremental revenue and enhance profitability through fees from inspection, reconditioning and distribution programs. As regional partners are added throughout the U.S., the cost and time associated with distribution programs will be significantly reduced as the pickup and delivery of pre-owned vehicles will become more localized thus reducing shipping costs and the average days to sale for pre-owned vehicles.
Average Days to Sale
We define average days to sale as the average number of days between vehicle acquisition by us and delivery to a customer for all pre-owned vehicles sold in a period. However, this metric does not include any pre-owned vehicles that remain unsold at period end. We view average days to sale as a useful metric due to its impact on pre-owned vehicle average selling price.
Revenue
Revenue is primarily comprised of pre-owned vehicle sales. We sell pre-owned vehicles through consumer and dealer sales channels. These multiple sales channels provide us the opportunity to maximize profitability through increased sales volume and lower average days to sale by selling to the channel where the opportunity is the greatest at any given time based on customer demand, market conditions or inventory availability. The number of pre-owned vehicles sold to any given channel may vary from period to period based on customer demand, market conditions and available inventory. Subject to the impact of COVID-19 on our results, as discussed elsewhere in this MD&A, we expect pre-owned vehicle sales to increase as we begin to utilize a combination of brand building as well as direct response channels to efficiently source and scale our addressable markets while expanding our suite of product offerings to consumers who may wish to trade-in or to sell us their vehicle independent of a retail sale. Factors primarily affecting pre-owned vehicle sales include the number of retail pre-owned vehicles sold and the average selling price of these vehicles.

Gross Profit
Gross profit is generated on pre-owned vehicle sales from the difference between the vehicle selling price and our cost of revenue associated with acquiring the vehicle and preparing it for sale. The aggregate dollar gross profit achieved from the consumer and dealer sales channels are different. Pre-owned vehicles sold to consumers through our website generally have the highest dollar gross profit since the vehicle is sold directly to the consumer. Pre-owned vehicles sold to dealers through our website are sold at a price below the retail price offered to consumers, thus the dealer and RumbleOn are sharing the gross profit. Pre-owned vehicles sold to dealers through auctions are sold at market. Factors affecting gross profit from period to period include the mix of pre-owned vehicles we acquire and hold in inventory, retail market prices, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of supply or demand imbalances in our sales channels, which could temporarily lead to average selling prices and gross profits increasing or decreasing in any given channel.
Key Operations Metrics – Powersports
 
 
Three Months Ended March 31,
 
 
 
2020
 
 
2019
 
Key Operation Metrics:
 
 
 
 
 
 
Vehicles sold
  2,817 
  3,298 
 
    
    
Total Powersports Revenue
 $23,139,080 
 $26,929,159 
Gross Profit
 $2,926,263 
 $3,165,796 
Gross Profit per vehicle
 $1,039 
 $960 
Gross Margin
  12.6%
  11.8%
Average selling price
 $8,214 
 $8,165 
 
    
    
Consumer:
    
    
Vehicles sold
  280 
  283 
 
    
    
Total Consumer Revenue
 $2,656,880 
 $2,147,022 
Gross Profit
 $646,412 
 $480,583 
Gross Profit per vehicle
 $2,309 
 $1,698 
Gross Margin
  24.3%
  22.4%
Average selling price
 $9,489 
 $7,587 
 
    
    
Dealer:
    
    
Vehicles sold
  2,537 
  3,015 
 
    
    
Total Dealer Revenue
 $20,482,200 
 $24,782,137 
Gross Profit
 $2,279,850 
 $2,685,213 
Gross Profit per vehicle
 $899 
 $891 
Gross Margin
  11.1%
  10.8%
Average selling price
 $8,073 
 $8,220 

Key Operations Metrics – Automotive(1)
 
 
Three Months Ended March 31,
 
 
 
2020
 
 
2019(2)
 
Key Operation Metrics:
 
 
 
 
 
 
Total vehicles sold
  4,603 
  8,805 
 
    
    
Total Automotive Revenue
 $113,632,267 
 $190,907,188 
Gross Profit
 $6,348,968 
 $9,435,365 
Gross Profit per vehicle
 $1,379 
 $1,072 
Gross Margin
  5.6%
  4.9%
Average selling price
 $24,687 
 $21,682 
 
    
    
Consumer:
    
    
Vehicles sold
  646 
  863 
 
    
    
Total Consumer Revenue
 $17,584,737 
 $21,565,124 
Gross Profit
 $2,108,722 
 $2,232,856 
Gross Profit per vehicle
 $3,264 
 $2,587 
Gross Margin
  12.0%
  10.4%
Average selling price
 $27,221 
 $24,989 
 
    
    
Dealer:
    
    
Vehicles sold
  3,957 
  7,942 
 
    
    
Total Dealer Revenue
 $96,047,530 
 $169,342,064 
Gross Profit
 $4,240,245 
 $7,202,509 
Gross Profit per vehicle
 $1,072 
 $907 
Gross Margin
  4.4%
  4.3%
Average selling price
 $24,273 
 $21,322 
(1)            
Excludes the impairment loss resulting from the Nashville Tornado.
(2)            
Inclusive only from the Autosport Acquisition Date.
Key Operation Metrics - Vehicle Logistics and Transportation Services Segment
We regularly review a number of metrics, to evaluate our vehicle logistics and transportation business, measure our progress, and make strategic decisions. Our key operating metrics reflect what we believe will be the key drivers of our business, including increasing brand awareness, and maximizing the opportunity to drive increased transportation and logistics unit volume. Our key operating metrics also demonstrate our ability to translate these drivers into revenue and profitability.
 
 
Three Months Ended March 31,
 
 
 
2020
 
 
2019
 
Revenue
 $8,990,181 
 $8,176,010 
 
    
    
Vehicles Delivered
  21,027 
  20,471 
 
    
    
Gross Profit
 $1,999,532 
 $1,599,390 
 
    
    
Gross Profit Per Vehicle Delivered
 $95 
 $78 
Revenue
Revenue is derived from freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The transaction price is based on the consideration specified in the customer's contract. The freight brokerage agreements are fulfilled by independent third-party transporters who are obligated to meet our performance obligations and standards. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms. Revenue is recognized as risks and rewards of transportation of the vehicle is transferred to the owner during delivery. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. As a result, revenue is recorded gross. In the normal course of operations, Wholesale Express also provides transportation services to Wholesale.

Vehicles Delivered
We define vehicles delivered as the number of vehicles delivered from a point of origin to a designated destination under freight brokerage agreements with dealers, distributors, or private party individuals. Vehicles delivered is the primary driver of revenue and in turn profitability in the vehicle logistics and transportation services segment.
Gross Profit
Gross profit is generated on the difference between the price received from a customer under a freight brokerageagreement for the transport of a vehicle from a point of origin to a designated destination minus our cost to contract an independent third-party transporter to fulfill our obligation under the freight brokerage agreement with the customer. We define gross profit per vehicle delivered as the aggregate gross profit in a given period divided by the number of pre-owned vehicles delivered in that period.
COMPONENTS OF RESULTS OF OPERATIONS
Revenue
Revenue for our powersports and automotive segments is derived from our online marketplace and auctions and primarily includes the sale of pre-owned vehicles to consumer and dealers.
Revenue from our vehicle logistics and transportation service segment is derived by providing automotive transportation services between dealerships and auctions throughout the United States.
The Company recognizes revenue using the modified retrospective method. ASC 606 prescribes a five-step model that includes: (1) identify the contract; (2) identify the performance obligations; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) performance obligations are satisfied. Based on the manner in which we historically recognized revenue, the adoption of ASC 606 did not have a material impact on the amount or timing of our revenue recognition, and we recognized no cumulative effect adjustment upon adoption.
Pre-owned Vehicle Sales
We sell pre-owned vehicles through consumer and dealer sales channels. These multiple sales channels provide us the opportunity to maximize profitability through increased sales volume and lower average days to sale by selling to the channel where the opportunity is the greatest at any given time based on customer demand, market conditions or inventory availability. The number of pre-owned vehicles sold to any given channel may vary from period to period based on customer demand, market conditions and available inventory.
Pre-owned vehicle sales represent the aggregate sales of pre-owned vehicles to consumers and dealers through our website or at auctions. We expect pre-owned vehicle sales to increase as we begin to utilize a combination of brand building as well as direct response channels to efficiently source and scale our addressable markets while expanding our suite of product offerings to consumers who may wish to trade-in or to sell us their vehicle independent of a retail sale. Factors affecting pre-owned vehicle sales include the number of retail pre-owned vehicles sold and the average selling price of these vehicles.
The number of pre-owned vehicles we sell depends on our volume of website traffic, volume of cash offers made, our inventory levels and selection, the effectiveness of our branding and marketing efforts, the quality of our customer sales experience, our volume of referrals and repeat customers, the competitiveness of our pricing, competition and general economic conditions. On a quarterly basis, the number of pre-owned vehicles we sell is also affected by seasonality, with demand for pre-owned vehicles reaching the high point in the first half of each year, commensurate with the timing of tax refunds, and diminishing through the rest of the year, with the lowest relative level of pre-owned vehicle sales expected to occur in the fourth calendar quarter. Seasonality trends have been impacted by the COVID-19 pandemic, which has resulted in a significant decline in the pre-owned powersports and automotive industry, including our business and results of operations.
Our average retail selling price depends on the mix of pre-owned vehicles we acquire and hold in inventory, retail market prices in our markets, our average days to sale, and our pricing strategy. We may choose to shift our inventory mix to higher or lower cost pre-owned vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of supply or demand imbalances, which could temporarily lead to average selling prices increasing or decreasing.

The number of pre-owned vehicles sold to dealers at auctions is determined based on a number of factors including: (i) filling auction sales channel market demand opportunities to maximize sales and gross margin; (ii) a need to balance the Company's overall inventory mix and quantity levels against days to sales targets; and (iii) a need to liquidate those pre-owned vehicles that do not meet the Company's quality standards to be sold through Rumbleon.com. The auction market has also been adversely impacted by the COVID-19 pandemic resulting from practices implemented to combat COVID-19, such as social distancing and shelter-in-place policies as well as the broader economic slowdown.
Vehicle Logistics and Transportation Services
Vehicle logistics and transportation services revenue is generated primarily by entering into freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The transaction price is based on the consideration specified in the customer's contract. A performance obligation is created when the customer under a transportation contract submits a bill of lading for the transport of goods from origin to destination. These performance obligations are satisfied as the shipments move from origin to destination. The freight brokerage agreements are fulfilled by independent third-party transporters. While the Company is primarily responsible for fulfilling to customers, these transporters are obligated to meet our performance obligations and standards. Performance obligations are short-term, with transit days less than one week. Generally, customers are billed either upon shipment of the vehicle or on a monthly basis, and remit payment according to approved payment terms, generally not to exceed 30 days. Revenue is recognized as all risks and rewards of transportation of the vehicle are transferred to the owner during delivery.
Cost of Revenue – Pre-owned Vehicles Sales
Cost of pre-owned vehicle sales to consumers and dealers primarily consists of the cost to acquire pre-owned vehicles and the reconditioning and transportation costs associated with preparing these vehicles for resale. Vehicle acquisition costs are driven by the mix of vehicles we acquire, the source of those vehicles and supply and demand dynamics in the vehicle market. Reconditioning costs are billed by third-party providers and include parts, labor, and other repair expenses directly attributable to specific pre-owned vehicles. Transportation costs consist of costs incurred to transport the vehicles from the point of acquisition. Cost of pre-owned vehicle sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.
Cost of Revenue – Vehicle Logistics and Transportation Services
Cost of vehicle transportation and logistics services primarily include the costs of independent third-party transporters to deliver a vehicle from a point of origin to a designated destination.
Selling, General and Administrative Expense
Selling, general and administrative expenses include costs and expenses for compensation and benefits, advertising and marketing, development and operating our product procurement and distribution system, managing our logistics system, establishing our dealer partner arrangements, and other corporate overhead expenses, including expenses associated with technology development, legal, accounting, finance, and business development. Selling, general and administrative expenses also include the transportation cost associated with selling vehicles but excludes the cost of reconditioning, inspecting, and auction fees which are included in Cost of revenue. Subject to the impact of the COVID-19 pandemic and our efforts to preserve liquidity as described elsewhere in this MD&A, we expect selling, general and administrative expenses will continue to increase substantially in future periods as we execute and aggressively expand our business through increased marketing spending and the addition of management and support personnel to ensure we adequately develop and maintain operational, financial and management controls as well as our reporting systems and procedures, but we anticipate selling, general and administrative expenses will decline as a percentage of sales revenue.
Depreciation and Amortization
Depreciation and amortization is comprised of the: (i) amortization of capitalized and acquired technology development; and (ii) depreciation of vehicles, leasehold improvements, furniture and equipment. Depreciation and amortization will continue to increase as continued investments are made in connection with the expansion and growth of the business.
Interest Expense
Interest expense includes interest incurred on notes payable and other long-term debt, which was used to fund startup costs and expenses, technology development, inventory, our transportation fleet, property and equipment and the acquisition of NextGen.


Seasonality
The volume of vehicles sold will generally fluctuate from quarter-to-quarter. This seasonality is caused by several factors including weather, the timing of pre-owned vehicles available for sale from selling consumers, the availability and quality of vehicles, holidays, and the seasonality of the retail market for pre-owned vehicles. As a result, revenue and operating expenses related to volume will fluctuate accordingly on a quarterly basis. The fourth calendar quarter typically experiences lower used vehicle auction accessibility as well as additional costs associated with the holidays and winter weather. Seasonality trends have been impacted by the COVID-19 pandemic, which has resulted in a significant decline in the pre-owned powersports and automotive industry, including our business and results of operations.
RESULTS OF OPERATIONS
The following table provides our results of operations for the three-months ended March 31, 2020 and 2019, including key financial information relating to our business and operations. This financial information should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. In this Management's Discussion and Analysis of Financial Condition and Results of Operations, no comparable information is discussed with respect to Autosport for periods before the Autosport Acquisition Date.
 
 
For the Three Months ended March 31, 2020
 
 
 
Powersports
 
 
Automotive(1)
 
 
Vehicle Logistics and Transportation Services
 
 
Elimination(2)
 
 
Total
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-owned Vehicle Sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Powersports
 $23,139,080 
 $- 
 $- 
 $- 
 $23,139,080 
Automotive
  - 
  114,198,079 
  - 
  - 
  114,198,079 
Transportation and Vehicle Logistics
  - 
  - 
  8,990,181 
  (1,902,590)
  7,087,591 
Total Revenue
  23,139,080 
  114,198,079 
  8,990,181 
  (1,902,590)
  144,424,750 
 
    
    
    
    
    
Cost of Revenue:
    
    
    
    
    
Powersports
  20,558,286 
  - 
  - 
  - 
  20,558,286 
Automotive
  - 
  108,353,505 
  - 
  - 
  108,353,505 
Transportation
  - 
  - 
  6,990,649 
  (1,902,590)
  5,088,059 
Impairment loss
  - 
  11,738,413 
  - 
  - 
  11,738,413 
Total Cost of Revenue
  20,558,286 
  120,091,918 
  6,990,649 
  (1,902,590)
  145,738,263 
 
    
    
    
    
    
Gross Profit
 $2,580,794 
 $(5,893,839)
 $1,999,532 
 $- 
 $(1,313,513)
(1)            
Inclusive only from the Autosport Acquisition Date.
(2)            
Intercompany freight services from Wholesale Express are prepared in conformity with accounting principles generally acceptedeliminated in the United States. condensed consolidated financial statements.
 
 
For the Three Months ended March 31, 2019
 
 
 
Powersports
 
 
Automotive(1)
 
 
Vehicle Logistics and Transportation Services
 
 
Elimination(2)
 
 
Total
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-owned Vehicle Sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Powersports
 $26,929,159 
 $- 
 $- 
 $- 
 $26,929,159 
Automotive
  - 
  190,907,188 
  - 
  - 
  190,907,188 
Transportation and Vehicle Logistics
  - 
  - 
  8,176,010 
  (2,834,598)
  5,341,412 
Total Revenue
  26,929,159 
  190,907,188 
  8,176,010 
  (2,834,598)
  223,177,759 
 
    
    
    
    
    
Cost of Revenue:
    
    
    
    
    
Powersports
  23,949,556 
  - 
  - 
  - 
  23,949,556 
Automotive
  - 
  181,495,112 
  - 
  - 
  181,495,112 
Transportation
  - 
  - 
  6,576,620 
  (2,834,598)
  3,742,022 
Total Cost of Revenue
  23,949,556 
  181,495,112 
  6,576,620 
  (2,834,598)
  209,186,690 
 
    
    
    
    
    
Gross Profit
 $2,979,603 
 $9,412,076 
 $1,599,390 
 $- 
 $13,991,069 
(1)            
Inclusive only from the Autosport Acquisition Date.
(2)            
Intercompany freight services from Wholesale Express are eliminated in the condensed consolidated financial statements.
Powersports and Automotive Segments
The following table provides our results of operations for the three-months ended March 31, 2020 and 2019 for powersports and automotive segments, including key financial information relating to these segments. Our powersports and automotive segments consists of the distribution of powersports and automotive vehicles, as further described below. This financial information should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. In this Management's Discussion and Analysis of Financial Condition and Results of Operations, no comparable information is discussed with respect to Autosport for periods before the Autosport Acquisition Date.

 
 
For the Three Months Ended
March 31,
 
 
 
2020
 
 
2019
 
Revenue:
 
 
 
 
 
 
Pre-owned Vehicle Sales:
 
 
 
 
 
 
Powersports
 $23,139,080 
 $26,929,159 
Automotive (1)
  114,198,079 
  190,907,188 
Total vehicle revenue
  137,337,159 
  217,836,347 
 
    
    
Cost of Revenue:
    
    
Powersports
  20,558,286 
  23,949,556 
Automotive(1)
  108,353,505 
  181,495,112 
Impairment loss on vehicle inventory
  11,738,413 
  - 
Total cost of revenue
  140,650,204 
  205,444,668 
 
    
    
Gross Profit
  (3,313,045)
  12,391,679 
 
    
    
Selling, General and Administrative
  16,571,828 
  19,388,866 
 
    
    
Depreciation and Amortization
  521,144 
  380,374 
 
    
    
Operating loss
  (20,406,017)
  (7,377,561)
 
    
    
Interest expense
  (2,216,460)
  (1,445,133) 
 
    
    
Increase in derivative liability
  (116,815)
  - 
 
    
    
Gain on early extinguishment of debt
  188,664 
  - 
 
    
    
Net loss before provision for income taxes
  (22,550,628)
  (8,822,694)
 
    
    
Benefit for income taxes
  - 
  - 
 
    
    
Net loss
 $(22,550,628)
 $(8,822,694)
(1)            
Inclusive only from the Autosport Acquisition Date.
Three-Months Ended March 31, 2020 Versus 2019
Total revenue decreased by $80,499,188 to $137,337,159 for the three-months ended March 31, 2020 compared to $217,836,347 for the same period of 2019. The decrease in sales was primarily due to a decrease in the total number of pre-owned vehicles sold to 7,420 for the three-months ended March 31, 2020 as compared to 12,103 for the same period of 2019, which was partially offset by an increase in the average selling price per unit sold to $8,214 from $8,165 for powersports and $24,687 from $21,682 for automotive. The decrease in vehicles sold and increase in average selling price per unit in our powersports and automotive segments was a result of: (i) continued implementation of our previously disclosed disciplined approach to sales volume as we take prescriptive steps to accelerate profitability; (ii) the adverse impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; (iii) the significant damage to the Company's operating facilities and automotive inventory held for sale in Nashville as a result of the March 3, 2020 tornado; and (iv) reduced per vehicle advertising expenditures.As the impact of COVID-19 abates over time, we anticipate that unit sales will return to or exceed levels experienced in January and February of 2020 as we increase penetration in existing markets and launch new markets, however we can provide no assurance as to when and how quickly COVID-19 impacts will abate.

Total cost of revenue decreased $64,794,464 to $140,650,915 for the three-months ended March 31, 2020 compared to $205,444,668 for the same period of 2019. The decrease was primarily due to the decrease in the number of pre-owned vehicles sold for the three-months ended March 31, 2020 as compared to the same period of 2019 offset by a $12,808,618 adjustments to reflect the write down of vehicle inventory to the lower of cost or net realizable value at March 31, 2020 resulting from the the significant damage to the Company's operating facilities and automotive inventory held for sale in Nashville as a result of the March 3, 2020 tornado and the negative impact on our sales channels from COVID-19 and related effects of sheltering-in-place and significantly reduced commercial activity. The decrease in total vehicles sold in our powersports and automotive segments was a result of: (i) continued implementation of our more disciplined approach to sales volume; (ii) the adverse impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; and (iii) the significant damage to the Company's operating facilities and automotive inventory held for sale in Nashville as a result of the March 3, 2020 tornado. Powersports total cost of revenue decreased by $3,391,270to $20,558,286for the three-month period ended March 31, 2020 compared to $23,949,556for the same period in 2019. Automotive total cost of revenue decreased by $73,141,607to $108,353,505for the three-month period ended March 31, 2020 compared to $181,495,112for the same period in 2019.
Powersports
The following table provides the results of operations for the three-months ended March 31, 2020 and 2019 for our powersports business segment, including key financial information relating to the powersports business. This financial information should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
 
 
For the Three-Months Ended
March 31,
 
 
 
2020
 
 
2019
 
Powersports
 
 
 
 
 
 
 
 
 
 
 
 
 
Vehicle revenue:
 
 
 
 
 
 
Consumer
 $2,656,880 
 $2,147,022 
Dealer
  20,482,200 
  24,782,137 
Total vehicle revenue
 $23,139,080 
 $26,929,159 
 
    
    
Vehicle gross Profit:
    
    
Consumer
 $646,412 
 $480,583 
Dealer
  2,279,850 
  2,685,213 
Total vehicle gross profit
 $2,926,262 
 $3,165,796 
 
    
    
Vehicles sold:
    
    
Consumer
  280 
  283 
Dealer
  2,537 
  3,015 
Total vehicles sold
  2,817 
  3,298 
 
    
    
Gross profit per vehicle:
    
    
Consumer
 $2,309 
 $1,698 
Dealer
 $899 
 $891 
Total
 $1,039 
 $960 
 
    
    
Gross margin per vehicle:
    
    
Consumer
  24.3%
  22.4%
Dealer
  11.1%
  10.8%
Total
  12.6%
  11.8%
 
    
    
Average vehicle selling price:
    
    
Consumer
 $9,489 
 $7,587 
Dealer
 $8,073 
 $8,220 
Total
 $8,214 
 $8,165 

Powersports Vehicle Revenue
Total powersports vehicle revenue decreased by $3,790,079 to $23,139,080 for the three-months ended March 31, 2020 compared to $26,929,159 for the same period of 2019. The decline in powersports revenue was primarily due to the decrease in the number of pre-owned vehicles sold to 2,817 for the three-months ended March 31, 2020 compared to 3,298 for the same period of 2019, which was partially offset by an increase in the average selling price per vehicle to $8,214 for the three-months ended March 31, 2020 from $8,165 for the same period of 2019. The decrease in vehicles sold and increase in average selling price per unit was a result of: (i) our more disciplined approach to sales volume as we take prescriptive steps to accelerate profitability; (ii) the adverse impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; and (iii) reduced per vehicle advertising expenditures. As the impact of COVID-19 abates over time, we anticipate that unit sales will return to or exceed levels experienced in January and February of 2020 as we increase penetration in existing markets and launch new markets, however we can provide no assurance as to when and how quickly COVID-19 impacts will abate.
Powersports Cost of Revenue
Powersport cost of vehicle revenue decreased by $3,391,270 to $20,558,286 for the three-months ended March 31, 2020 and consisted of (i) 2,817 pre-owned vehicles at an average acquisition cost of $6,830; (ii) reconditioning cost of $215,139; (iii) transportation costs of $757,683; (iv) other cost of sales of $345,469 not attributed to a specific vehicle sold during the quarter; which included $340,268of adjustments to reflect the write down of vehicle inventory to the lower of cost or net realizable value at March 31, 2020 resulting from the negative impact on our sales channels from COVID-19 and related effects of sheltering-in-place and significantly reduced commercial activity.For the three-month period ended March 31, 2019, the $23,949,556 cost of vehicle revenue consisted of: (i) the acquisition cost of vehicles sold to consumers and dealers of $22,939,333 from the sale of 3,298 pre-owned vehicles to consumers and dealers that had an average acquisition cost of $6,956; (ii) reconditioning costs of $239,678; and (iii) transportation costs of $584,352; and (iv) other cost of sales of $186,193 not attributable to a specific vehicle sold during the quarter.
Powersports Gross Profit
Powersport vehicle gross profit decreased by $398,898 to $2,580,794for the three-month period ended March 31, 2020 compared to $2,979,603for the same period in 2019. The decrease was primarily due to a decrease in the number of vehicles sold partially offset by an increase in gross profit per unit sold to $1,039 or a gross margin of 12.6% compared to $960, or a gross margin of 11.8% for the same period in 2019. While we did experience a negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity, the increase in gross profit and the increase in: (i) gross profit per unit; and (ii) gross margin per unit for the three months ended March 31, 2020 as compared to the same period of 2019 was a result of: (i) our more disciplined approach to sales volume; and (ii) a shift in inventory mix available for sale resulting in higher average sales prices. 

Automotive
The following table provides the results of operations for the three-months ended March 31, 2020 and 2019 for the automotive segment, including key financial information relating to the automotive business. Our automotive distribution business was added on the Acquisition Date in connection with the acquisitions of Wholesale and Autosport. This financial information should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. In this Management's Discussion and Analysis of Financial Condition and Results of Operations, no comparable information is discussed with respect to Autosport for periods before the Autosport Acquisition Date.
 
 
For the Three-Months Ended
March 31,
 
 
 
2020
 
 
2019(1)
 
Automotive
 
 
 
 
 
 
 
 
 
 
 
 
 
Vehicle revenue:
 
 
 
 
 
 
Consumer
 $18,150,549 
 $21,565,124 
Dealer
  96,047,530 
  169,342,064 
Total vehicle revenue
  114,198,079 
  190,907,188 
 
    
    
Gross Profit(2):
    
    
Consumer
 $2,469,250 
 $2,232,856 
Dealer
  3,375,325 
  7,202,509 
Total vehicle gross profit
 $5,844,574 
 $9,435,365 
 
    
    
Vehicles sold:
    
    
Consumer
  646 
  863 
Dealer
  3,957 
  7,942 
Total vehicles sold
  4,603 
  8,805 
 
    
    
Gross profit per vehicle:
    
    
Consumer
 $3,822 
 $2,587 
Dealer
 $853 
 $907 
Total
 $1,270 
 $1,072 
 
    
    
Gross margin per vehicle:
    
    
Consumer
  13.6%
  10.4%
Dealer
  3.5%
  4.3%
Total
  5.1%
  4.9%
 
    
    
Average selling price:
    
    
Consumer
 $28,097 
 $24,989 
Dealer
 $24,273 
 $21,322 
Total
 $24,809 
 $21,682 
(1)            
Inclusive only from the Autosport Acquisition Date.
(2)            
Excluding the Impairment Loss resulting from the Nashville Tornado.
Automotive Revenue
Total automotive revenue decreased by $76,709,109 to $114,198,079 for the three-months ended March 31, 2020 compared to $190,907,188 for the same period of 2019. The decline in automotive revenue was primarily due to the decrease in the number of vehicles sold to 4,603 for the three-months ended March 31, 2020 compared to 8,805 for the same period of 2019, which was partially offset by an increase in the average selling price per vehicle to $24,809 for the three-months ended March 31, 2020 from $21,682 for the same period of 2019. The decrease in vehicles sold and increase in average selling price per unit was a result of: (i) our more disciplined approach to sales volume; (ii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; (iii) a reduction in unit sales resulting from the significant damage to the Company's operating facilities and inventory held for sale in Nashville as a result of the March 3, 2020 tornado; and (iv) reduction in per vehicle advertising expenditures. As the impact of COVID-19 abates over time, we anticipate that unit sales will return to or exceed levels experienced in January and February of 2020 as we increase penetration in existing markets and launch new markets, however we can provide no assurance as to when and how quickly COVID-19 impacts will abate.

Total automotive revenue from the sale to consumers decreased by $3,414,575 to $18,150,549 for the three-months ended March 31, 2020 compared to $21,565,124 for the same period of 2019. The decline in automotive revenue was primarily due to the decrease in the number of vehicles sold to 646 for the three-months ended March 31, 2020 compared to 863 for the same period of 2019, which was partially offset by an increase in the average selling price per vehicle to $28,097 for the three-months ended March 31, 2020 from $24,989 for the same period of 2019. The decrease in vehicles sold and increase in average selling price per unit was a result of: (i) our more disciplined approach to sales volume; (ii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; (iii) a reduction in unit sales resulting from the significant damage to the Company's operating facilities and inventory held for sale in Nashville as a result of the March 3, 2020 tornado; (iv) reduction in per vehicle advertising expenditures; and (v) a shift in inventory mix available for sale resulting in higher average sales prices.
Total automotive revenue from the sale to dealers decreased by $73,294,534 to $96,047,530 for the three-months ended March 31, 2020 compared to $169,342,064 for the same period of 2019. The decline in automotive revenue was primarily due to the decrease in the number of vehicles sold to 3,957 for the three-months ended March 31, 2020 compared to 7,942 for the same period of 2019, which was partially offset by an increase in the average selling price per vehicle to $24,273 for the three-months ended March 31, 2020 from $21,322 for the same period of 2019. The decrease in vehicles sold and increase in average selling price per unit was a result of: (i) our more disciplined approach to sales volume; (ii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; (iii) a reduction in unit sales resulting from the significant damage to the Company's operating facilities and inventory held for sale in Nashville as a result of the March 3, 2020 tornado; and (iv) reduction in per vehicle advertising expenditures.
Automotive Cost of Revenue
Total automotive cost of vehicle revenue decreased by $61,379,905 to $120,091,918 for the three-months ended March 31, 2020 compared to $181,495,112 for the same period of 2019. The decrease was primarily due to a decrease in vehicles sold, partially offset by an increase in the unit cost per unit of vehicles sold for the three-month period ended March 31, 2020 compared to the same period of 2019, and net realizable value adjustments to March 31, 2020 inventory of $12,616,955 to reflect: (i) impairment loss on inventory of $11,738,413 comprised of $4,453,775 for vehicles that were a total loss and $7,284,638 for loss in value of vehicles partially damaged and subject to repair; and (ii) $878,542 for the write down of vehicle inventory to the lower of cost or net realizable value at March 31, 2020 resulting from the negative impact on our sales channels from COVID-19 and related effects of sheltering-in-place and significantly reduced commercial activity. Total automotive cost of vehicle revenue for the three-months ended March 31, 2020 consisted of: (i) the acquisition cost of vehicles sold to consumers and dealers of $105,000,816 from the sale of 4,603 pre-owned vehicles at an average acquisition cost of $22,811; (ii) reconditioning cost of $627,752; (iii) transportation costs of $1,654,731; (iv) other cost of sales of $12,808,618, which included $12,616,955 of net realizable value adjustments to the March 31, 2020 inventory to reflect: (i) impairment loss on inventory of $11,738,413 comprised of $4,453,775 for vehicles that were a total loss and $7,284,638 for loss in value of vehicles partially damaged and subject to repair; and (ii) $878,542 adjustments to reflect the write down of vehicle inventory. For the three-month period ended March 31, 2019, the $181,495,112 cost of vehicle revenue consisted of: (i) the acquisition cost of vehicles sold to consumers and dealers of $178,001,101 from the sale of 8,805 pre-owned vehicles to consumers and dealers that had an average acquisition cost of $20,216; (ii) reconditioning costs of $966,542; (iii) transportation costs of $2,504,180; and (iv) other cost of sales of $23,289.
The cost of vehicle revenue from unit sales to consumers decreased by $3,856,253 to $15,476,015 for the three-month period ended March 31, 2020 compared to $19,332,268 for the same period of 2019. The decrease was primarily due to an decrease in both the number of and the unit cost of vehicles sold for the three-month period ended March 31, 2020 compared to the same period of 2019, and a net realizable value adjustments to March 31, 2020 inventory to reflect the: (i) impairment loss on inventory for vehicles that were a total loss and for loss in value of vehicles partially damaged and subject to repair; and (ii) write down of vehicle inventory to the lower of cost or net realizable value at March 31, 2020 resulting from the negative impact on our sales channels from COVID-19 and related effects of sheltering-in-place and significantly reduced commercial activity. Total cost of vehicle revenue for units sold to consumers for the three-months ended March 31, 2020 consisted of: (i) the acquisition cost of vehicles sold to consumers of $15,034,392 from the sale of 646 pre-owned vehicles at an average acquisition cost of $23,273; (ii) reconditioning cost of $174,984; (iii) transportation costs of $266,639; and (iv) other cost of sales of $0. For the three-month period ended March 31, 2019 the $19,332,268 cost of vehicle revenue sold to consumers consisted of: (i) the acquisition cost of vehicles sold to consumers of $17,968,692 from the sale of 8,805 pre-owned vehicles to consumers that had an average acquisition cost of $21,871; (ii) reconditioning costs of $173,602; (iii) transportation costs of $283,131; and (iv) other cost of sales of $0.

The cost of vehicle revenue from unit sales to dealers decreased by $70,332,270 to $91,807,285 for the three-month period ended March 31, 2020 compared to $162,139,555 for the same period of 2019. The decrease was primarily due to an decrease in both the number of and the unit cost of vehicles sold for the three-month period ended March 31, 2020 compared to the same period of 2019 and a net realizable value adjustments to the March 31, 2020 inventory to reflect the: (i) impairment loss on inventory for vehicles that were a total loss and for loss in value of vehicles partially damaged and subject to repair; and (ii) write down of vehicle inventory to the lower of cost or net realizable value at March 31, 2020 resulting from the negative impact on our sales channels from COVID-19 and related effects of sheltering-in-place and significantly reduced commercial activity. Total cost of vehicle revenue sold to dealers for the three-months ended March 31, 2020 consisted of: (i) the acquisition cost of vehicles sold to dealers of $89,966,425 from the sale of 4,603 pre-owned vehicles at an average acquisition cost of $22,736; (ii) reconditioning cost of $452,768; (iii) transportation costs of $1,388,092; and (iv) other cost of sales of $1,070,205, which included $878,542 of adjustments to reflect the write down of vehicle inventory to the lower of net realizable value at March 31, 2020, resulting from the negative impact on our sales channels from COVID-19 and related effects of sheltering-in-place and significantly reduced commercial activity. For the three-month period ended March 31, 2019 the $162,139,555 cost of vehicle revenue for units sold to dealers consisted of: (i) the acquisition cost of vehicles sold to consumers of $159,117,768 from the sale of 7,942 pre-owned vehicles to consumers that had an average acquisition cost of $20,035; (ii) reconditioning costs of $792,940; (iii) transportation costs of $2,228,847; and (iv) other cost of sales of $23,289.
Automotive Gross Profit
Excluding the $11,738,413 impairment loss discussed above, total automotive vehicle gross profit decreased by $3,567,502 to $5,844,574for the three-month period ended March 31, 2020 compared to $9,412,076for the same period in 2019. The decrease was primarily due to a decrease in the number of vehicles sold partially offset by an increase in gross profit per unit sold of $308 or a gross margin of 5.6% compared to $1,072, or a gross margin of 4.9% for the same period in 2019. The decrease in gross profit and the increase in: (i) gross profit per unit; and (ii) gross margin per unit for the three months ended March 31, 2020 as compared to the same period of 2019 was a result of: (i) our more disciplined approach to sales volume;(ii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; and (iii) a shift in inventory mix available for sale resulting in higher average sales prices.
Total automotive vehicle gross profit from sales to consumers increased by $250,015 to $2,482,871for the three-month period ended March 31, 2020 compared to $2,232,856for the same period in 2019. The increase was primarily due to an increase in gross profit per unit sold of $677 or a gross margin of 12.0% compared to $2,587, or a gross margin of 10.4% for the same period in 2019. The increase in total gross profit from the sale to consumers was offset by a decline in the number of units sold for the three-months ended March 31, 2020 as compared to the same period in 2019. The increase in gross profit, gross margin per unit and decrease in unit sales for the three months ended March 31, 2020 as compared to the same period of 2019 was a result of: (i) our more disciplined approach to sales volume; (ii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; (iii) a reduction in unit sales resulting from the significant damage to the Company's operating facilities and inventory held for sale in Nashville as a result of the March 3, 2020 tornado; and (iv) a shift in inventory mix available for sale resulting in higher average sales prices.
Total automotive vehicle gross profit from sales to dealers decreased by $3,817,516 to $3,361,704for the three-month period ended March 31, 2020 compared to $7,179,220for the same period in 2019. The decrease was in part due to a decrease in the number of vehicles sold partially offset by an increase in gross profit per unit sold of $165 or a gross margin of 4.4% compared to $907, or a gross margin of 4.3% for the same period in 2019. In addition, other cost of sales included $878,542 of adjustments to reflect the write down of vehicle inventory to the lower of cost or net realizable value at March 31, 2020, resulting from the negative impact on our sales channels from COVID-19 and related effects of sheltering-in-place and significantly reduced commercial activity. The decrease in gross profit and the increase in: (i) gross profit per unit; and (ii) gross margin per unit for the three months ended March 31, 2020 as compared to the same period of 2019 was a result of: (i) our more disciplined approach to sales volume; (ii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; (iii) a reduction in unit sales resulting from the significant damage to the Company's operating facilities and inventory held for sale in Nashville as a result of the March 3, 2020 tornado; and (iv) a shift in inventory mix available for sale resulting in higher average sales prices.

Vehicle Logistics and Transportation Services Segment
The following table provides our results of operations for the three-months ended March 31, 2020 and 2019 for our vehicle logistics and transportation services segment, including key financial information relating to this segment. This financial information should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and Notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
 
 
For the Three-Months Ended
March 31,
 
 
 
2020
 
 
2019
 
Vehicle Logistics and Transportation Services
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenue
 $8,990,181 
 $8,176,010 
 
    
    
Cost of revenue
  6,990,649 
  6,576,620 
 
    
    
Gross profit
  1,999,532 
  1,599,390 
 
    
    
Selling, general and administrative
  1,340,598 
  1,051,150 
 
    
    
Depreciation and Amortization
  1,851 
  1,851 
 
    
    
Operating income
  657,083 
  546,389 
 
    
    
Interest Expense
  296 
  - 
 
    
    
Net Income before income tax
 $656,787 
 $546,389 
 
    
    
Vehicles delivered
  21,027 
  20,471 
 
    
    
Revenue per delivery
 $428 
 $399 
 
    
    
Gross profit per delivery
 $95 
 $78 
 
    
    
Gross margin per delivery
  22.2%
  19.5%
Vehicle Logistics and Transportation Services Revenue
Total revenue increased by $814,171 to $8,990,181 for the three-months ended March 31, 2020 compared to $8,176,010 for the same period of 2019. The increase in total revenue for the three-month period ended March 31, 2020 resulted from the transport of21,027vehicles at an average revenue per vehicle delivered of $428compared to revenue from the transport of20,471vehicles at an average revenue per vehicle delivered of $399for the same period of 2019. The increase in vehicles transported and increase in average revenue per vehicle delivered was a result of: (i) our more disciplined approach to sales volume as we take prescriptive steps to accelerate profitability; (ii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; and (iii) increased emphasis on sales through implementation of sales performance improvement plans. Following COVID-19, we anticipate that unit sales will return to or exceed levels experienced in January and February of 2020 as we increase penetration in existing markets and launch new markets, however we can provide no assurance as to when and how quickly COVID-19 impacts will abate.
In the normal course of operations, the Company utilizes transportation services of Wholesale Express. For the three-months ended March 31, 2020 and 2019 intercompany freight services provided by Express to the Company were $1,902,590 and $2,834,598, respectively and was eliminated in the condensed consolidated financial statements.
Vehicle Logistics and Transportation Services Cost of Revenue
Total cost of revenue increased by $414,029 to $6,990,649 for the three-months ended March 31, 2020 compared to $6,576,620 for the same period of 2019. The increase in total cost of revenue for the three-month period ended March 31, 2020 resulted from the transport of 21,027 vehicles at an average cost per vehicle delivered of $333 compared to the cost to transport 20,008 vehicles at an average cost per vehicle delivered of $321 for the same period of 2019. The increase in vehicles transported and increase in cost per vehicle delivered was a result of: (i) our more disciplined approach to sales volume as we take prescriptive steps to accelerate profitability; (ii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity; and (iii) additional costs and expenses associated providing expanding logistic and transportation services to new markets.

Included in cost of revenue for the three months ended March 31, 2020 and 2019 31, 2019 was freight services purchases by the Company from Wholesale Express of $1,902,590 and $2,834,598, respectively and was eliminated in the condensed consolidated financial statements.
Vehicle Logistics and Transport Services Gross Profit
Total gross profit for the three-months ended March 31, 2020 was $1,999,533 or $95 per unit transported as compared to $1,599,390 or $78 per unit for the same period in 2019. All amounts related to transport services provided by Wholesale Express to the Company have been eliminated upon consolidation.
Selling, General and Administrative
 
 
For the Three-Months Ended
March 31,
 
 
 
2020
 
 
2019
 
Selling general and administrative:
 
 
 
 
 
 
Compensation and related costs
 $8,180,100 
 $7,054,263 
Advertising and marketing
  2,948,155 
  5,491,572 
Professional fees
  842,703 
  650,444 
Technology development
  622,144 
  492,713 
General and administrative
  5,463,324 
  6,751,024 
 
 $18,056,426 
 $20,440,016 

Selling, general and administrative expenses decreased by $2,383,590 to $18,056,426 for the three-months ended March 31, 2020 compared to $20,440,016 for the same period of 2019. The decrease was a result of: (i) our continued approach to taking prescriptive steps to accelerate profitability, which resulted in the sale of fewer vehicles and a corresponding reduction in related selling expenses and marketing spend for the three-month ended March 31, 2020 as compared to the same period of 2019;(ii) a reduction in automotive vehicle sales resulting from the significant damage to the Company's operating facilities and inventory held for sale in Nashville as a result of the March 3, 2020 tornado;(iii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity, resulting in a temporary reduction in discretionary growth expenditures on new hiring, travel, facilities, and information technology investments. In addition we reduced our staffing and applied and adjusted purchasing levels to align with demand and market conditions.

Compensation and related costs increased by $738,887 to $7,793,150 for the three-months ended March 31, 2020 compared to $7,054,263 for the same period of 2019. The increase is primarily due to additional headcount associated with our finance group. The company had 258 employees at March 31, 2020 as compared to 241 employees on March 31, 2019.

In response to the impact of COVID-19 on our business, in early April 2020 we significantly reduced our staffing by laying off 169 associates in an effort to position our business to be lean and flexible in this period of lower demand and higher uncertainty with the goal of preparing the Company for a strong recovery as the crisis is contained. As the impact of COVID-19 abates over time, and unit sales return to or exceed levels experienced in January and February of 2020 we will take a measured approach to increasing our headcount, which will result in an increase in selling and marketing expenses in absolute dollar terms but a decrease in these expenses as a percentage of total revenue. However we can provide no assurance as to when and how quickly COVID-19 impacts will abate.

Advertising and marketing decreased by $2,543,417 to $2,948,155 for the three-months ended March 31, 2020 compared to $5,491,572 for the same period of 2019. The decrease was a result of: (i) our continued approach to taking prescriptive steps to accelerate profitability, which resulted in the sale of fewer vehicles and a corresponding reduction in related selling expenses and marketing spend for the three-month ended March 31, 2020 as compared to the same period of 2019; (ii) a reduction in automotive vehicle sales resulting from the significant damage to the Company's operating facilities and inventory held for sale in Nashville as a result of the March 3, 2020 tornado; (iii) the negative impact in March 2020 of COVID-19 resulting from sheltering-in-place and significantly reduced commercial activity, resulting in a temporary reduction in discretionary marketing expenditures. As the impact of COVID-19 abates over time, and unit sales return to or exceed levels experienced in January and February of 2020 we will take a measured approach to increasing our marketing spend, which will result in an increase in marketing expenses in absolute dollar terms but a decrease in marketing expense as a percentage of total revenue. However we can provide no assurance as to when and how quickly COVID-19 impacts will abate.

As we continue to gain share in our addressable market, we expect advertising and marketing spending will continue to increase in absolute dollar terms but will decrease as a percentage of total revenue.
Professional fees increased by $192,259 to $842,703 for the three-months ended March 31, 2020 compared to $650,444 for the same period of 2019. The increase was primarily a result of professional fees and costs incurred in connection with our insurance claims and other matters attributed to the Nashville Tornado, and legal, accounting and other professional fees and expenses incurred in connection with the activities associated with the expansion of the business. Fees and expenses were incurred for: (i) equity financings; (ii) debt financings; (iii) general corporate matters; (iv) the preparation of quarterly and annual financial statements; and (v) the preparation and filing of regulatory reports required of the Company for public reporting purposes For additional information, see Note 4 – "Acquisitions," Note 8 - "Notes Payable and Lines of Credit," Note 9 –"Convertible Notes," and Note 11 - "Stockholders' Equity," in the accompanying Notes to the Condensed Consolidated Financial Statements.
Technology development expenses increased $129,431 to $622,144 for the three-months ended March 31, 2020 compared to $492,713 for the same period of 2019. The increase was a result of a significant increase in headcount and third-party contractors to meet an increase level of technology development projects and initiatives. Total technology costs and expenses incurred for three-months ended March 31, 2020 were $911,210 of which $290,376 was capitalized. Total technology costs and expenses incurred for the three-months ended March 31, 2019 were $1,372,542 of which $879,829 was capitalized. For the three-months ended March 31, 2020, a third-party contractor billed $241,757 of the total technology development costs as compared to $717,719 for the same period of 2019. The amortization of capitalized technology development costs for the three-months ended March 31, 2020 was $437,943 as compared to $291,746 for the same period of 2019. In response to the impact of COVID-19 on our business in early April 2020 we temporarily reduced discretionary growth expenditures which included information technology investments. As the impact of COVID-19 abates over time, and unit sales return to or exceed levels experienced in January and February of 2020 we will take a measured approach to increasing our technology development expenses as we continue to upgrade and enhance our technology infrastructure, invest in our products, expand the functionality of our platform and provide new product offerings. We also expect technology development expenses to continue to be affected by variations in the amount of capitalized internally developed technology. However we can provide no assurance as to when and how quickly COVID-19 impacts will abate.
General and administrative expenses decreased by $1,287,701 to $5,463,324 for the three-months ended March 31, 2020 compared to $6,751,024 for the same period of 2019. The decrease was primarily a result of the sale of fewer vehicle for the three-months ended March 31, 2020 as compared to the same period of 2019, which resulted in a reduction of $801,886 in auction and floor plan fees for the three-months ended March 31, 2020 as compared to the same period of 2019. The decrease in vehicle sales was primarily a result of our continued approach to taking prescriptive steps to accelerate profitability, the impact of the ongoing COVID-19 pandemic, and the significant damage to the Company's operating facilities and inventory held for sale in Nashville as a result of the March 3, 2020 tornado. In addition, travel and other related business expenses, including office supplies decreased $761,241 and rent and lease expense increased $275,425 for the three-months ended March 31, 2020 as compared to the same period of 2019. As the impact of COVID-19 abates over time, and unit sales return to or exceed levels experienced in January and February of 2020 we will take a measured approach to increasing general and administrative spending, which will result in an increase in in general and administrative expenses in absolute dollar terms but decrease as a percentage of total revenue. However we can provide no assurance as to when and how quickly COVID-19 impacts will abate.
Depreciation and Amortization
Depreciation and amortization increased by $140,770 to $522,995 for the three-months ended March 31, 2020 compared to $382,225 for the same period of 2019. The increase in depreciation and amortization is a result of the cumulative investments made in connection with the expansion and growth of the business which for the three-months ended March 31, 2020 included capitalized technology acquisition and development costs of $290,376. For the three-months ended March 31, 2020, amortization of capitalized technology development was $437,943 as compared to $291,746 for the same period of 2019. Depreciation and amortization on vehicle, furniture, equipment and leasehold improvements was $85,052 as compared to $90,479 for the same period of 2019.
Interest Expense
Interest expense increased by $771,624 to $2,216,757 for the three-months ended March 31, 2020 compared to $1,445,133 for the same period of 2019. Interest expense consists of interest on the: (i) Hercules Loan; (ii) Private Placement Notes; (iii) the subordinated secured promissory note issued to NextGen (the "NextGen Note"); (iv) the Credit Facility and the NextGear Credit Line (each as defined below) (together, the "Line of Credit-Floor Plans"); (v) Notes;and (vi) the notes issued in connection with the Autosport Acquisition (the "Convertible Notes-Autosport"). The increase resulted from: (i) interest on a higher level of debt outstanding; (ii) the amortization of the beneficial conversion feature on the Private Placement Notes; (iii) the amortization of the debt issuance costs on Notes and Convertible Notes-Autosport; and (iv) amortization of transaction costs on the Notes. Interest expense on the Private Placement Notes for the three-months ended March 31, 2020 was $91,893 and included $75,601 of debt discount amortization as compared to interest expense of $73,328 which included $59,348 of debt discount amortization for the same period of 2019. Interest expense on the NextGen Note for the three-months ended March 31, 2020 was $21,927 as compared to $21,370 for the same period of 2019. Interest expense on the Line of Credit-Floor Plans for the three-months ended March 31, 2020 was $777,552 as compared to $827,199 for the same period of 2019. For the three months ended March 31, 2020, interest expense on convertible notes was $51,560 and included $19,693 of debt discount amortization as compared to interest expense of $39,745 which included $20,380 of debt discount amortization for the same period of 2019. There was no interest expense on the Hercules loan for the three-months ended March 31, 2020. For the three-months ended March 31, 2019 interest expense on the Hercules loan was $483,491 and included $131,997 of debt issuance cost amortization. On May 14, 2019, the Company made a payment to Hercules Capital Inc. ("Hercules") of $11,134,696, representing the principal, accrued and unpaid interest, fees, costs and expenses outstanding under its Loan and Security Agreement (the "Loan Agreement") with Hercules. In accordance with the guidance in ASC 470-50, Debt, the Company accounted for the extinguishment of the Hercules Loan Agreement as an extinguishment and recognized a loss on early extinguishment of debt of $1,499,250 for the year ended December 31, 2019 in the Consolidated Statements of Operations included in the Company’s Form 10-K for the year ended December 31, 2019.

Loss Contingencies and Insurance Recoveries
On March 3, 2020, a severe tornado struck the greater Nashville area causing significant damage to the Company's facilities including contents and inventory held for sale.  The Company maintains insurance coverage for damage to its facilities and inventory, as well as business interruption insurance. The Company continues in the process of reviewing damages and coverages with its insurance carriers. The loss comprises three components: (1) inventory loss, currently assessed by the insurance carrier at approximately $13,000,000; (2) building and personal property loss, primarily impacting our leased facilities, currently assessed by the insurance carrier at $3,369,087; and (3) loss of business income, for which the company has coverage in the amount of $6,000,000. All three components of the Company's loss claim have been submitted to its insurers. The Company's inventory claim is subject to a dispute with the carrier as to the policy limits applicable to the loss. The building insurer has agreed the total building and personal property loss is valued at $3,801,203. The insurer has agreed to pay $2,778,000 on the building and personal property loss, reflecting limits of $2,783,000 net of a $5,000 deductible. The insurer has made an interim payment on the building and personal property loss of $2,269,507. Currently, there is minimally an outstanding balance of $508,493 which will be paid when replacement is finished, which is expected to be sometime during of 2020. The loss of business income claim is ongoing and remains in the process of negotiation, however, the insurer has advanced $250,000 against the final settlement. The Company believes there will be a recovery of all three loss components, however no assurance can be given regarding the amounts, if any, that will be ultimately recovered.
As a result of the damage caused by the tornado the Company has concluded that the utility of the inventory damaged by the storm is impaired as a result of physical damage sustained. Whether the impairment is caused by physical destruction or an adverse change in the utility of the inventory, entities should assess whether an inventory impairment or write-off is required in accordance with ASC 330-10-35-1 through 35-11, which address adjustments of inventory balances to the lower of cost or market and requires that when there is evidence that the utility of goods will be less than cost, the difference is recognized as a loss of the current period.  For the three-months ended March 31, 2020 the Company has recorded an impairment loss on inventory of $11,738,413 comprised of $4,453,775 for vehicles that are a total loss and $7,284,638 in loss in value for vehicle partially damaged and subject to repair. The impairment loss is reported in cost of revenue in the March 31, 2020 condensed consolidated statements of operations. The Company has not recorded any recoveries that are expected to be received from the insurance carrier since the final amount and timing of the recovery has not been determined. Any such we are required to make certain estimates, judgments and assumptions that we believe are reasonable based uponrecovery would be reported as a separate component of income from continuing operations in the information available. These estimates and assumptions affectperiod in which such recovery is recognizable or when any such recoveries will be made.
Derivative Liability
In connection with the reported amountsissuance of assets and liabilitiesthe Old Notes, a derivative liability was recorded at issuance with an interest make-whole provision of $1,330,000. The derivative liability is remeasured at each reporting date with any change in value being recorded in the Statement of Operations; as of December 31, 2019, the derivative liability was valued at $27,500. On January 14, 2020, the Company completed the 2020 Note Offering whereby the $30,000,000 of Old Notes were cancelled and exchanged for $30,000,000 New Notes. Also, in the 2020 Note Offering, the Company sold an additional $8,875,000 of New Notes yielding the Company net proceeds of $8,272,375. Pursuant to ASC 470 the Company accounted for the exchange as a note extinguishment where $27,500 remaining liability was written off and the Company recorded a new $20,673 Make Whole Derivative Liability as calculated under the Lattice Model. The Make Whole Derivative is evaluated at the end of each reporting period and adjustment to value are reflected on the Statement of Operations, value of the derivative liability as of March 31, 2020 is $137,488. The lattice model used using a “with-and-without method,” where the value of the convertible senior notes including the embedded derivative, is defined as the “with”, and the value of the convertible senior notes excluding the embedded derivative, is defined as the “without”; the inputs used include a range of prices around the Company’s stock price on the date of valuation ($0.73 on January 14, 2020 and $0.23 on March 31, 2020), as well as the Note conversion rate, maturity date, U.S. Treasury risk-free interest rates over the entire 10-year yield curve, and estimated stock price volatility (55% on January 14, 2020 and 95% on March 31, 2020).
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior to U.S. GAAP.

Adjusted EBITDA is defined as net loss adjusted to add back interest expense including debt extinguishment and depreciation and amortization, and certain charges and expenses, such as non-cash compensation costs, acquisition related costs, derivative income, financing activities, litigation expenses, severance, new business development costs, technology implementation costs and expenses, and facility closure and lease termination costs, as these charges and expenses are not considered a part of our core business operations and are not an indicator of ongoing, future company performance.
Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial statementsperformance of our business. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe it is helpful in highlighting trends in our operating results, because it excludes, among other things, certain results of decisions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments.
The following tables reconcile Adjusted EBITDA to net loss for the periods presented:
 
 
Three Months Ended
March 31,
 
 
 
2020
 
 
2019   
 
Net loss
 $(22,038,342)
 $(8,276,305)
Add back:
    
    
Interest expense (including debt extinguishment)
  2,028,593 
  1,445,133 
Depreciation and amortization
  522,995 
  382,225 
Increase in derivative liability
  116,815 
  - 
EBITDA
  (19,369,939)
  (6,448,947)
Adjustments
    
    
Impairment loss on automotive inventory
  11,738,413 
  - 
Non-cash-stock-based compensation
  846,370 
  689,121 
Litigation expenses
  277,995 
  24,446 
Technology implementation costs and expenses
  - 
  215,643 
Other non-recurring costs
  - 
  845,248 
Adjusted EBITDA
 $(6,507,161)
 $(4,674,489)
Liquidity and Capital Resources
We generate cash from the sale of used retail vehicles, the sale of wholesale vehicles, and providing vehicle logistics and transportation services for used vehicles. We generate additional cash flows through our financing activities including our short-term revolving inventory floor plan facilities, the issuance of long-term notes, and new issuances of equity. Historically, cash generated from financing activities has funded growth and expansion and strategic initiatives and we expect this to continue in the future.
Our ability to service our debt and fund working capital, capital expenditures, and business development efforts will depend on our ability to generate cash from operating and financing activities, which is subject to our future operating performance, as well as to general economic, financial, competitive, legislative, regulatory, and other conditions, some of which may be beyond our control. Our future capital requirements will depend on many factors, including our rate of revenue growth, our expansion of our various lines of business and the reported amountstiming and extent of revenueour spending to support our technology and expenses duringsoftware development efforts.
We had the reporting period. We routinely evaluate our estimates based on historical experiencefollowing liquidity resources available as of March 31, 2020 and on various other assumptions that management believes are reasonableDecember 31, 2019:
 
 
March 31, 2020
 
 
December 31, 2019
 
Cash and cash equivalents
 $2,484,169 
 $49,660 
Restricted cash (1)
  5,502,322 
  6,676,622 
Total cash, cash equivalents, and restricted cash
  7,986,491 
  6,726,282 
Availability under short-term revolving facilities
  8,702,952 
  35,839,030 
Committed liquidity resources available
 $16,689,443 
 $42,565,652 
(1)            
Amounts included in restricted cash represent the deposits required under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. DuringCompany's short-term revolving facilities.
On January 14, 2020, the nine-month period ended September 30, 2017, we did not experience any significant changesCompany closed a public offering at a public price of $11.40 per share (the "2020 Public Offering"). On January 16, 2020, the Company received notice of the Underwriters' intent to exercise the over-allotment option in estimates or judgments inherentfull (the "Over-allotment Exercise"). On January 17, 2020, the Company closed the Over-allotment Exercise. The Over-allotment Exercise increased the aggregate number of shares sold in the preparation2020 Public Offering to 1,035,000. Including the Over-allotment Exercise, proceeds from the 2020 Public Offering, after deducting the 7.0% underwriter’s commission and $75,000 for underwriter expenses, were $10,898,070.

Also on January 10, 2020, the Company entered into a Note Exchange and Subscription Agreement, as amended by the Joinder Agreement, with the investors in the 2019 Note Offering (as defined below), pursuant to which the Company agreed to complete (i) a note exchange pursuant to which $30,000,000 of the Old Notes (as defined below) would be cancelled in exchange for a new series of 6.75% Convertible Senior Notes due 2025 (the "New Notes"), and (ii) the issuance of additional New Notes in a private placement in reliance on the exemption from registration provided by Rule 506 of Regulation D of the Securities Act as a sale not involving any public offering. On January 14, 2020, the Company closed the 2020 Note Offering. The proceeds for the 2020 Note Offering, after deducting for the payment of accrued interest and offering-related expenses, but exclusive of company costs were $8,272,375.
As of March 31, 2020, and December 31, 2019, excluding operating lease liabilities and the derivative liability, the outstanding principal amount of indebtedness was $90,039,174 and $82,585,522, respectively, summarized in the table below. See Note 8 — Notes Payable and Lines of Credit, Note 9 –Convertible Notes, and Note 11 – Stockholders’ Equity to our condensed consolidated financial statements. Astatements included above.
Asset-Based Financing:
 
March 31, 2020
 
 
December 31, 2019
 
Inventory
 $61,297,048 
 $59,160,970 
Convertible senior notes
  39,583,334 
  31,333,334 
Senior unsecured notes
  2,641,175 
  2,568,843 
Total debt
  103,521,557 
  93,063,147 
Less: unamortized discount and debt issuance costs
  (13,482,383)
  (10,477,625)
Total debt, net
 $90,039,174 
 $82,585,522 
The following table sets forth a summary of our significant accounting policiescash flows for the three-months ended March 31, 2020 and 2019:
 
 
Three-Months Ended
March 31,
 
 
 
2020
 
 
2019
 
Net cash used in operating activities
 $ (19,467,259)
 $(6,476,740)
Net cash used in investing activities
  (422,742)
  (1,674,209)
Net cash provided by financing activities
  21,150,210 
  3,284,172 
Net (decrease) increase in cash
 $1,260,209 
 $(4,866,777)
Operating Activities
Net cash used in operating activities increased $12,990,519 to $19,467,259 for the three-months ended March 31, 2020, as compared to the same period in 2019. The increase in net cash used is contained in Note 1primarily due to our financial statements includeda $13,762,037 increase in our 2016 Annual Report.net loss offset by a $12,558,739 increase in non-cash expense items less a decrease in net operating assets and liabilties of $11,787,221. The increase in the net loss for the three-months ended March 31, 2020 was primarily a result of a net realizable value adjustments to March 31, 2020 inventory of $12,616,955 to reflect a non-cash impairment loss on damaged and totaled inventory and a write down of vehicle inventory to the lower of cost or net realizable value at March 31, 2020.
Investing Activities
Net cash used in investing activities decreased $1,251,467 to $422,742 for the three-months ended March 31, 2020, as compared to the same period in 2019. The decrease in cash used for investment activities was primarily due to a decrease of $835,000 in cash used for acquisitions, and a decrease in costs incurred for technology development of $589,453 and increased property and equipment purchases of $132,366.
Financing Activities
Net cash provided by financing activities increased $17,866,038 to $21,150,210 for the three-months ended March 31, 2020, as compared to the same period in 2019. This increase is primarily a result of the net proceeds of $8,272,375 received from the exchange of the $30,000,000 of Old Notes for the $30,000,000 of New Notes and the issuance of an additional $8,750,000 of New Notes, and the 2020 Public Offering of 1,035,000 shares of the Company's Class B stock that resulted in net proceeds to the company of $10,780,080. The proceeds from these transactions were used to continue the development of the Company's business and for working capital purposes.

 
Off-Balance Sheet Arrangements
 
As of September 30, 2017,March 31, 2020, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
 
Emerging Growth CompanySubsequent Events
 
Reverse Stock Split
On May 18, 2020, the Company filed a Certificate of Change to the Company’s Articles of Incorporation with the Secretary of State of the State of Nevada to effect a one-for-twenty reverse stock split of its issued and outstanding Class A Common Stock and Class B Common Stock (the "Reverse Stock Split"). The Reverse Stock Split was effective at 12:01 a.m., Eastern Time, on May 20, 2020. No fractional shares were issued as a result of the Reverse Stock Split. Any fractional shares that would have resulted from the Reverse Stock Split were rounded up to the nearest whole share. The authorized preferred stock of the Company was not impacted by the Reverse Stock Split. Following the Reverse Stock Split, the Company has outstanding 50,000 shares of Class A Common Stock and approximately 2,162,696 shares of Class B Common Stock. On May 20, 2020, the Company’s Class B Common Stock commenced trading on the Nasdaq Capital Market on a split-adjusted basis. The Company has retrospectively adjusted the 2019 condensed consolidated financial statements for loss per share and share amounts as a result of the Reverse Stock Split.
PPP Loan
On May 1, 2020, the Company, and its wholly owned subsidiaries Wholesale, Inc. and Wholesale Express, LLC (together, the "Subsidiaries," and with the Company, the "Borrowers"), each entered into loan agreements and related promissory notes (the "SBA Loan Documents") to receive U.S. Small Business Administration Loans (the "SBA Loans") pursuant to the Paycheck Protection Program (the "PPP") established under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), in the aggregate amount of $5,176,845 (the "Loan Proceeds"). The Borrowers received the Loan Proceeds on May 1, 2020. Under the SBA Loan Documents, the SBA Loans have a fixed interest rate of 1.0%, repayment begins six months from the date of disbursement of each SBA Loan, and the SBA Loans mature two years from the date of first disbursement. There is no prepayment penalty.
Pursuant to the terms of the SBA Loan Documents, the Borrowers may apply for forgiveness of the amount due on the SBA Loans in an amount equal to the sum of the following costs incurred by the Borrowers during the eight-week period (or any other period that may be authorized by the U.S. Small Business Administration) beginning on the date of first disbursement of the SBA Loans: payroll costs, any payment of interest on a covered mortgage obligation, payment on a covered rent obligation, and any covered utility payment. The amount of SBA Loan forgiveness shall be calculated in accordance with the requirements of the PPP, including the provisions of Section 1106 of the CARES Act, although no more than 40% of the amount forgiven can be attributable to non-payroll costs. No assurance is provided that forgiveness for any portion of the SBA Loans will be obtained.
The promissory notes evidencing the SBA Loans contain customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory notes. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Borrowers, and/or filing suit and obtaining judgment against the Borrowers.
Form 10-Q Extension
On May 14, 2020, the Company filed a Current Report on Form 8-K to announce that the Company’s operations and business continued to experience disruption due to the unprecedented conditions surrounding the coronavirus (COVID-19) pandemic spreading throughout the United States, and management was unable to timely review and prepare the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. As a result, the Company indicated its intent to delay the filing of the Quarterly Report in reliance on the SEC March 25, 2020 Order (which extended and superseded a prior order issued on March 4, 2020), pursuant to the Order, which allows for the delay of certain filings required under the Exchange Act. The Company relied on the Order for the filing of this Form 10-Q.
Critical Accounting Policies and Estimates
Refer to Note 1 — Description of Business and Significant Accounting Policies, included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for accounting pronouncements and material changes to our critical accounting policies since December 31, 2019. There have been no other material changes to our critical accounting policies and use of estimates from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our most recent Annual Report on Form 10-K.

Forward-Looking and Cautionary Statements
This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as "anticipate," "believe," "envision," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," "ongoing," "contemplate," and other similar expressions, although not all forward-looking statements contain these identifying words. Examples of forward-looking statements include, among others, statements we make regarding:
●
We have a limited operating history and we cannot assure you we will achieve or maintain profitability;
●
Our annual and quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline;
●
The initial development and progress of our business to date may not be indicative of our future growth prospects and, if we continue to grow rapidly, we may not be able to manage our growth effectively;
●
There is substantial doubt about our ability to continue as a going concern; 
●
We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If capital is not available on terms acceptable to us or at all, we may not be able to develop and grow our business as anticipated and our business, operating results and financial condition may be harmed;
●
We may fail to maintain our listing on The Nasdaq Stock Market;
●
The success of our business relies heavily on our marketing and branding efforts, especially with respect to the RumbleOn website and our branded mobile applications, and these efforts may not be successful;
●
The failure to develop and maintain our brand could harm our ability to grow unique visitor traffic and to expand our regional partner network;
●
We rely on Internet search engines to drive traffic to our website, and if we fail to appear prominently in the search results, our traffic would decline, and our business would be adversely affected;
●
A significant disruption in service on our website or of our mobile applications could damage our reputation and result in a loss of consumers, which could harm our business, brand, operating results, and financial condition;
●
We may be unable to maintain or grow relationships with information data providers or may experience interruptions in the data feeds they provide, which may limit the information that we are able to provide to our users and regional partners as well as adversely affect the timeliness of such information and may impair our ability to attract or retain consumers and our regional partners and to timely invoice all parties;
●
If we are unable to provide a compelling vehicle buying experience to our users, the number of transactions between our users, RumbleOn and dealers will decline, and our revenue and results of operations will suffer harm;
●
If key industry participants, including powersports and recreation vehicle dealers and regional auctions, perceive us in a negative light or our relationships with them suffer harm, our ability to operate and grow our business and our financial performance may be damaged;
●
The growth of our business relies significantly on our ability to increase the number of regional partners in our network such that we are able to increase the number of transactions between our users and regional partners. Failure to do so would limit our growth;
●
Our ability to grow our complementary product offerings may be limited, which could negatively impact our development, growth, revenue and financial performance;

●
We rely on third-party financing providers to finance a portion of our customers' vehicle purchases;
●
Our sales of powersports/recreation vehicles may be adversely impacted by increased supply of and/or declining prices for pre-owned vehicles and excess supply of new vehicles;
●
We rely on a number of third parties to perform certain operating and administrative functions for the Company;
●
We participate in a highly competitive market, and pressure from existing and new companies may adversely affect our business and operating results;
●
Seasonality or weather trends may cause fluctuations in our unique visitors, revenue and operating results;
●
We collect, process, store, share, disclose and use personal information and other data, and our actual or perceived failure to protect such information and data could damage our reputation and brand and harm our business and operating results;
●
Failure to adequately protect our intellectual property could harm our business and operating results;
●
We may in the future be subject to intellectual property disputes, which are costly to defend and could harm our business and operating results;
●
We operate in a highly regulated industry and are subject to a wide range of federal, state and local laws and regulations. Failure to comply with these laws and regulations could have a material adverse effect on our business, results of operations and financial condition;
●
We provide transportation services and rely on external logistics to transport vehicles. Thus, we are subject to business risks and costs associated with the transportation industry. Many of these risks and costs are out of our control, and any of them could have a material adverse effect on our business, financial condition and results of operations;
●
We depend on key personnel to operate our business, and if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed;
●
We may acquire other companies or technologies, which could divert our management's attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results;
●
The recent outbreak of COVID-19 will likely have a significant negative impact on our business, sales, results of operations, financial condition, and liquidity;
●
We may be unable to realize the anticipated synergies related to the Acquisitions, which could have a material adverse effect on our business, financial condition and results of operations;
●
We may be unable to successfully integrate the Wholesale Entities' business and realize the anticipated benefits of the Acquisitions;
●
Our business relationships, those of the Wholesale Entities or the combined company may be subject to disruption due to uncertainty associated with the Acquisitions;
●
If we are unable to maintain effective internal control over financial reporting for the combined companies, we may fail to prevent or detect material misstatements in our financial statements, in which case investors may lose confidence in the accuracy and completeness of our financial statements;
●
The Wholesale Entities may have liabilities that are not known, probable or estimable at this time;
●
As a result of the Acquisitions, we and the Wholesale Entities may be unable to retain key employees;
●
The trading price for our Class B Common Stock may be volatile and could be subject to wide fluctuations in per share price;

●
Our principal stockholders and management own a significant percentage of our stock and an even greater percentage of the Company's voting power and will be able to exert significant control over matters subject to stockholder approval;
●
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline;
●
Because our Class B Common Stock may be deemed a low-priced "penny" stock, an investment in our Class B Common Stock should be considered high risk and subject to marketability restrictions;
●
We do not currently or for the foreseeable future intend to pay dividends on our common stock;
●
We are subject to reduced reporting requirements so long as we are considered a "smaller reporting company" and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors;
●
If we fail to maintain an “emerging growth company” undereffective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the federaltrading price of our common stock;
●
Anti-takeover provisions may limit the ability of another party to acquire us, which could cause our stock price to decline;
●
Although the Notes are referred to as convertible senior Notes, the Notes are effectively subordinated to any of our future secured debt and structurally subordinated to any liabilities of our subsidiaries;
●
The Notes are our obligations only and a substantial portion of our operations are conducted through, and a substantial portion of our consolidated assets are held by, our subsidiaries;
●
Operating our business requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay the Notes and any other debt;
●
Recent and future regulatory actions and other events may adversely affect the trading price and liquidity of the Notes;
●
The trading price for our Class B Common Stock may be volatile and could be subject to wide fluctuations in per share price which could adversely impact the trading price of the Notes;
●
We may incur substantially more debt in the future or take other actions which would intensify the risks discussed in these risk factors;
●
We may not have the ability to raise the funds necessary to settle the Notes in cash on a conversion, to repurchase the Notes on a fundamental change, or to repay the Notes at maturity. In addition, the terms of our future debt may contain limitations on our ability to pay cash on conversion or repurchase of the Notes;
●
Redemption may adversely affect the return on the Notes;
●
The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results;
●
Conversion of the Notes may dilute the ownership interest of our stockholders or may otherwise depress the market price of our Class B Common Stock;
●
Future sales of our Class B Common Stock or equity-linked securities lawsin the public market could lower the market price for our Class B Common Stock and adversely impact the trading price of the Notes;

●
Holders of Notes are not entitled to any rights with respect to our Class B Common Stock, but they will be subject to reduced public company reporting requirements. In addition, Section 107all changes made with respect to them to the extent our conversion obligation includes shares of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing not to take advantage of the extended transition period for complying with new or revised accounting standards.our Class B Common Stock;
 
●
The conditional conversion feature of the Notes could result in holders receiving less than the value of our Class B Common Stock into which the Notes would otherwise be convertible;
●
On conversion of the Notes, holders may receive less valuable consideration than expected because the value of our Class B Common Stock may decline after holders exercise their conversion rights but before we settle our conversion obligation;  
●
The increase in the conversion rate for Notes converted in connection with a make-whole fundamental change or a notice of redemption may not adequately compensate holders for any lost value of their Notes as a result of such transaction or redemption;
●
The conversion rate of the Notes may not be adjusted for dilutive events;
●
Some significant restructuring transactions may not constitute a fundamental change, in which case we would not be obligated to offer to repurchase the Notes;
●
Certain provisions in the indenture governing the Notes may delay or make it more expensive for a third party to acquire us;
●
Holders of Notes are not entitled to receive any shares of our Class B Common Stock otherwise deliverable upon conversion of the Notes to the extent that such receipt would cause such holders to become, directly or indirectly, a beneficial owner of shares of our Class B Common Stock in excess of 4.99% of the total number of the shares of our Class B Common Stock then issued and outstanding;
●
We cannot assure you that an active trading market will develop for the Notes;
●
Any adverse rating of the Notes may cause their trading price to fall; and
●
Other statements regarding our future operations, financial condition and prospects, and business strategies.
Item 3.
QuantitativeQuantitative and Qualitative Disclosure About Market Risk.Risk
 
This item is not applicable as we are currently considered a smaller reporting company.
 
Item 4.
ControlsControls and Procedures.Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2017.March 31, 2020. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
 
Based on the evaluation of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), the Company’sCompany's Chief Executive Officer and Chief Financial Officer concluded that the Company’sCompany's disclosure controls and procedures were effective as of September 30, 2017.March 31, 2020.
 
Changes in Internal Control Over Financial Reporting
 
Since the acquisition of NextGen, the Company is evaluating its internal control over financial reporting; however, thereThere were no changes in our internal control over financial reporting that occurred during our most recent fiscalthe quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the potential impact of COVID-19 on our internal control to minimize the impact on their design and operating effectiveness.
 
Limitations on Effectiveness of Controls and Procedures
 
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
 


PART II - OTHER INFORMATION
 
Item 1.
LegalLegal Proceedings.
 
We are not a party to any material legal proceedings.
 
Item 1A.
RiskRisk Factors.
 
Our business, financial condition, operating results, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our Annual Report on 10-K for the year ended December 31, 2016,2019, filed on February 14, 2017,May 29, 2020, the occurrence of any one of which could have a material adverse effect on our actual results.
 
There have been no material changes to the Risk Factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.2019.
 
Item 2.
UnregisteredUnregistered Sales of Equity Securities and Use of Proceeds.
 
None.
 
Item 3.
DefaultsDefaults Upon Senior Securities.
 
None.
 
Item 4.
MineMine Safety Disclosures.
 
Not applicable.
 
Item 5.
OtherOther Information.
 
None.On June 23, 2020, RumbleOn Finance, LLC, a wholly owned subsidiary of the Company ("RumbleOn Finance"), entered into a loan agreement providing for up to $1,500,000 in proceeds (the "RumbleOn Finance Facility") with CL Rider Finance, L.P. (the "CL Rider") as evidenced by the loan commitment dated as of June 17, 2020. In connection with the loan agreement, RumbleOn Finance pledged its assets to CL Rider to secure the RumbleOn Finance Facility and executed a promissory note in favor of the CL Rider pursuant to which the RumbleOn Finance Facility will accrue interest at an initial rate of 4.0% per annum.The RumbleOn Finance Facility is payable on demand by CL Rider.
 
Item 6.
ExhibitsExhibits.
 
Exhibit No.
Description
10.14.1
Form of Senior Secured Promissory Note,Indenture, dated September 5, 2017 (incorporatedJanuary 14, 2020, between RumbleOn, Inc. and Wilmington Trust National Association. (Incorporated by reference to Exhibit 10.14.1 in the Company’s Current Report on Form 8-K, filed September 11, 2017)on January 16, 2020).
4.2Form of 6.75% Convertible Senior Note due 2025 (included as Exhibit A to the Indenture filed as Exhibit 4.1).
10.24.3
Registration Rights Agreement, dated May 14, 2019, between the Company and JMP Securities LLC (Incorporated by reference to Exhibit 4.1 in the Company’s Current Report on Form 8-K, filed on January 16, 2020). 
Amendment to Amended and Restated Stockholders’
10.1
Form of Note Exchange & Subscription Agreement, of RumbleOn, Inc., dated September 29, 2017 (incorporatedJanuary 10, 2020. (Incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K, filed on October 5, 2017)January 16, 2020).
31.1
10.2
Form of Joinder & Amendment, dated January 10, 2020 (Incorporated by reference to Exhibit 10.2 in the Company’s Current Report on Form 8-K, filed on January 16, 2020). 
10.3
Form of Investor Note Exchange Agreement (Incorporated by reference to Exhibit 10.3 in the Company’s Current Report on Form 8-K, filed on January 16, 2020).
10.4
Form of New Investor Note (Incorporated by reference to Exhibit 10.4 in the Company’s Current Report on Form 8-K, filed on January 16, 2020).
10.5
Form of Security Agreement, dated January 14, 2020 (Incorporated by reference to Exhibit 10.5 in the Company’s Current Report on Form 8-K, filed on January 16, 2020).
31.1
Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2
Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1
Certifications of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.2
Certifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INSXBRL Instance Document*
101.SCHXBRL Taxonomy Extension Schema*
101.CALXBRL Taxonomy Extension Calculation Linkbase*
101.DEFXBRL Taxonomy Extension Definition Linkbase*
101.LABXBRL Taxonomy Extension Label Linkbase*
101.PREXBRL Taxonomy Extension Presentation Linkbase*
 
*
Filed herewithherewith.
**
Furnished herewith.herewith.

 

SIGNATURESSIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 RumbleOn,RUMBLEON, INC.
   
Date: June 29, 2020By:  
/s/ Date: November 9Marshall Chesrown, 2017
By:/s/ Marshall Chesrown
  Marshall Chesrown
  
Chief Executive Officer
(Principal Executive Officer)
 
 
   
Date: November 9, 2017
June 29, 2020		By:
/s/ Steven R. Berrard
  Steven R. Berrard
  
Chief Financial Officer and Secretary
(Principal Financial Officer and Principal Accounting Officer)

 
 
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