SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~[X]~~

[X]

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

~~[ ]~~

[ ]

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

(Exact name of registrant as specified in its charter)

(Registrant’s telephone number, including area code)

Large accelerated filer ~~[ ]~~☐	Accelerated filer ~~[X]~~☐
Non-accelerated filer ~~[ ]~~☐	Smaller reporting company ~~[X]~~ ☒
	Emerging growth company ~~[ ]~~☐

As of ~~November 5, 2018,~~May 6, 2019, there were ~~12,948,950~~13,145,331 shares of the Registrant’s Common Stock ~~$0.001 par value,~~issued and outstanding.

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Table of Contents

PART I. ~~FINA~~FINNA~~CIAL~~NCIAL INFORMATION

Item 1. Financial Statements

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED ~~CONDENSED~~ BALANCE SHEETS

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

	September 30, 2018	March 31, 2019	December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$15,824	$24,993	$10,733	$13,600
Short-term investment	257	254
Accounts receivable, net of allowances for bad debts and customer credits of $615 and $892 at September 30, 2018 and December 31, 2017, respectively	25,267	25,911
Accounts receivable, net of allowances for bad debts and customer credits of $571 and $566 at March 31, 2019 and December 31, 2018, respectively		23,085	26,898
Prepaid expenses and other current assets	1,268	1,805	1,181	1,245
Total current assets	42,616	52,963	34,999	41,743
Property and equipment, net	3,614	4,311	2,809	3,181
Investments	—	100
Right-of-use assets		3,780	—
Intangible assets, net	13,487	29,113	10,618	11,976
Goodwill	—	5,133
Long-term deferred tax asset	—	692
Other assets	853	601	510	516
Total assets	$60,570	$92,913	$52,716	$57,416
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$10,386	$7,083	$16,549	$17,572
Accrued employee-related benefits	2,921	2,411	1,934	3,125
Other accrued expenses and other current liabilities	7,983	7,252	1,296	2,204
Current portion of lease liabilities		1,626	—
Current convertible note payable	1,000	—	—	1,000
Total current liabilities	22,290	16,746	21,405	23,901
Convertible note payable	—	1,000
Borrowings under revolving credit facility	—	8,000
Lease liabilities, net of current portion		2,298	—
Total liabilities	22,290	25,746	23,703	23,901
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value, 11,445,187 shares authorized	—
Series A Preferred stock, none issued and outstanding	—		—
Common stock, $0.001 par value; 55,000,000 shares authorized, and 12,948,950 and 13,059,341 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively	13
Common stock, $0.001 par value; 55,000,000 shares authorized and 13,116,462 and 12,960,450 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively		13
Additional paid-in capital	360,698	356,054	362,076	361,218
Accumulated deficit	(322,431)	(288,900)	(333,076)	(327,716)
Total stockholders’ equity	38,280	67,167	29,013	33,515
Total liabilities and stockholders’ equity	$60,570	$92,913	$52,716	$57,416

See accompanying notes to unaudited condensed consolidated ~~condensed~~ financial statements.

UNAUDITED CONDENSED CONSOLIDATED ~~CONDENSED~~ STATEMENTS OF OPERATIONS

AND COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(Amounts in thousands, except per-share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

March 31,

Cost of revenues – impairment

Long-lived asset impairment

Interest and other income (expense), net

Income tax provision

See accompanying notes to unaudited condensed consolidated ~~condensed~~ financial statements.

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AUAUTTO~~OWEB,~~WEB, INC.

UNAUDITED CONDENSED CONSOLIDATED ~~CONDENSED~~ STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY

(~~Amounts~~ in ~~thousands)~~thousands, except share data)

Nine Months Ended
September 30,

2018

2017

Cash flows from operating activities:

Net (loss) income and comprehensive (loss) income
$(33,531)
$876
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:


Depreciation and amortization
  6,534
  5,499
Goodwill impairment
  5,133
  —
Intangible asset impairment
  9,014
  —
Provision for bad debts
  216
  294
Provision for customer credits
  177
  29
Share-based compensation
  4,365
  2,918
Gain on investment
  (25)
  —
Loss on disposal of assets
  —
  7
Long-lived asset impairment
  1,968
  —
Change in deferred tax asset
  692
  119
Changes in assets and liabilities:


Accounts receivable
  251
  5,808
Prepaid expenses and other current assets
  532
  (392)
Other assets
  (615)
  132
Accounts payable
  3,303
  290
Accrued expenses and other current liabilities
  1,243
  (3,112)
Net cash (used in) provided by operating activities
  (743)
  12,468
Cash flows from investing activities:


Purchases of property and equipment
  (828)
  (1618)
Purchase of intangible asset
  —
(600)
Proceeds from sale of investment
  125
  —
Net cash used in investing activities
  (703)
  (2,218)
Cash flows from financing activities:


Payments on term loan borrowings
  —
  (3,938)
Payment on revolving credit facility
  (8,000)
  —
Repurchase of common stock
  —
  (1,196)
Proceeds from issuance of common stock
  200
  —
Proceeds from exercise of stock options
  77
  1,068
Net cash used in financing activities
  (7,723)
  (4,066)
Net (decrease) increase in cash and cash equivalents
  (9,169)
  6,184
Cash and cash equivalents, beginning of period
  24,993
  38,512
Cash and cash equivalents, end of period
$15,824
$44,696



Supplemental disclosure of cash flow information:


Cash paid for income taxes
$—
$445
Cash paid for interest
$103
$648

Three Months Ended March 31, 2019
					Additional
	Common Stock		Preferred Stock		Paid-In-	Accumulated
	Number of Shares	Amount	Number of Shares	Amount	Capital	Deficit	Total

Balance at December 31, 2018	$12,960,450	13	—	$—	$361,218	$(327,716)	$33,515
Share-based compensation	—	—	—	—	551	—	551
Issuance of common stock upon exercise of stock options	156,012	—	—	—	307	—	307
Net loss	—	—	—	—	—	(5,360)	(5,360)
Balance at March 31, 2019	13,116,462	13	—	$—	$362,076	$(333,076)	$29,013

Three Months Ended March 31, 2018
					Additional
	Common Stock		Preferred Stock		Paid-In-	Accumulated
	Number of Shares	Amount	Number of Shares	Amount	Capital	Deficit	Total

Balance at December 31, 2017	13,059,341	$13	—	$—	$356,054	$(288,900)	$67,167
Share-based compensation	—	—	—	—	1,627	—	1,627
Issuance of common stock upon exercise of stock options	15,217	—	—	—	73	—	73
Cancellation of restricted stock	(178,333)	—	—	—	—	—	—
Net loss	—	—	—	—	—	(10,279)	(10,279)
Balance at March 31, 2018	12,896,225	13	—	$—	$357,754	$(299,179)	$58,588

See accompanying notes to unaudited condensed consolidated ~~condensed~~ financial statements.

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AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	Three Months Ended March 31,
	2019	2018

Cash flows from operating activities:
Net loss and comprehensive loss	$(5,360)	$(10,279)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,787	2,179
Provision for bad debts	41	69
Provision for customer credits	74	65
Share-based compensation	551	1,626
Right-of-use assets	445	—
Lease liabilities	(446)	—
Change in deferred tax asset	—	692
Goodwill impairment	—	5,133
Changes in assets and liabilities:
Accounts receivable	3,698	753
Prepaid expenses and other current assets	64	137
Other assets	6	(668)
Accounts payable	(1,023)	(1,355)
Accrued expenses and other current liabilities	(1,954)	(9)
Net cash used in operating activities	(2,117)	(1,657)
Cash flows from investing activities:
Purchases of property and equipment	(57)	(250)
Net cash used in investing activities	(57)	(250)
Cash flows from financing activities:
Proceeds from exercise of stock options	307	73
Payment on convertible note	(1,000)	—
Payments on revolving credit facility	—	(8,000)
Net cash used in financing activities	(693)	(7,927)
Net decrease in cash and cash equivalents	(2,867)	(9,834)
Cash and cash equivalents, beginning of period	13,600	24,993
Cash and cash equivalents, end of period	$10,733	$15,159

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$1	$—
Cash paid for interest	$20	$73

See accompanying notes to unaudited condensed consolidated financial statements.

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Table of Contents

~~AUTOWE~~ABU,TOWEB, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED ~~CONDENSED~~ FINANCIAL STATEMENTS

Organization and Operations

AutoWeb, Inc. (“AutoWeb” or the “Company”) is a digital marketing company for the automotive industry that assists automotive retail dealers (“Dealers”) and automotive manufacturers (“Manufacturers”) market and sell new and used vehicles to consumers by utilizing the Company’s digital sales enhancing products and services.

The Company’s consumer-facing automotive websites (“Company Websites”) provide consumers with information and tools to aid them with their automotive purchase decisions and ~~gives in-market consumers~~ the ability to connect with Dealers regarding purchasing or leasing ~~vehicles. These consumers are connected to Dealers via the Company’s various programs for online lead referrals~~vehicles (“Leads”). Leads are internally-generated from our Company Websites or acquired from third parties that generate Leads from their websites.The ~~AutoWeb~~® ~~“click traffic” consumer~~Company’s click traffic referral ~~product engages~~program provides consumers who are shopping for vehicles online with ~~car buyers from AutoWeb’s~~targeted offers based on make, model and geographic location. As these consumers conduct online research on Company Websites or on the site of one of our network of automotive ~~websites~~publishers, they are presented with relevant offers on a timely basis and, ~~uses~~upon the consumer clicking on the displayed advertisement, are sent to the appropriate website location of one of the Company’s proprietary technology to present them with highly relevant offers based on their make and model of interest and their geographic location. The Company then directs these in-market consumers to key areas of a Dealer’sDealer, Manufacturer or ~~Manufacturer’s website to maximize conversion for sales or other products or services.~~
advertising customers.

The Company was incorporated in Delaware on May 17, 1996. Its principal corporate offices are located in Irvine, California. The Company’s common stock is listed on The ~~NASDAQ~~Nasdaq Capital Market under the symbol AUTO.

On October 9, 2017, the Company changed its name from Autobytel Inc. to AutoWeb, Inc., assuming the name of AutoWeb, Inc., which was the name of the company that the Company acquired in October 2015. In connection with this name change, the Company changed its stock ticker symbol from “ABTL” to “AUTO” on The NASDAQ Capital Market.

Basis of Presentation

The accompanying unaudited condensed consolidated ~~condensed~~ financial statements are presented on the same basis as the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (“~~2017~~2018 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”). AutoWeb has made its disclosures in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included. ~~Certain amounts have been reclassified from the prior year presentation to conform to the current year presentation.~~ The unaudited condensed consolidated ~~condensed statements~~statement of operations and comprehensive ~~income (loss)~~loss and cash flows for the ~~periods~~period ended ~~September 30, 2018 and 2017~~March 31, 2019 are not necessarily indicative of the results of operations or cash flows expected for the year or any other period. The ~~Company had no items of comprehensive income or loss for any of the periods presented. The~~ unaudited condensed consolidated ~~condensed~~ financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the ~~2017~~2018 Form 10-K.

Certain amounts have been reclassified from the prior year presentation to conform to the current year presentation.

References to amounts in the consolidated financial statement sections are in thousands, except shares and per share data, unless otherwise specified.

Recent Accounting Pronouncements

Issued but not yet adopted by the Company

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, “Fair Value Measurement - Disclosure Framework” (Topic 820). The updated guidance improves the disclosure requirements for fair value measurements. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company ~~considers~~is currently evaluating the ~~applicability and~~ impact of ~~all~~adopting the updated provisions.

In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting ~~Standards Updates (~~for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract”“ (“ASU” 2018-15”). ASU 2018-15 was issued byto align the ~~Financial Accounting Standards Board~~ (“~~FASB~~”)requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ~~ASUs~~The Company is currently evaluating the impact of adopting the updated provisions which are effective for annual periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. The Company does not ~~listed below were assessed and determined to be either not applicable or are expected~~expect the adoption of this guidance to have ~~minimal~~a material impact on the ~~Company’s consolidated result~~Consolidated Financial Statements.

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Table of ~~operations, financial position and cash flows.~~
Contents

Recently adopted by the Company

Accounting Standards Codification (“ASC”) 220 “Comprehensive Income.” In February 2018, the FASB issued ASU No. 2018-02, ~~“Reclassification~~“Reclassification of Certain Tax Effects from Accumulated Other Comprehensive ~~Income.~~Income.” The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (“~~TCJA~~”) and will improve the usefulness of information reported to financial statement users. ~~The~~On January 1, 2019, the Company adopted ASU ~~will take effect for all entities for fiscal years,~~No. 2018-02 and ~~interim periods within those fiscal years, beginning after December 15, 2018. The Company believes this ASU will~~it did not have a material effect on the consolidated financial statements and related disclosures.

Accounting Standards Codification 842 ~~“Leases.~~“Leases”(“ASC 842”)In February 2016, ~~the FASB issued~~ ASU No. 2016-02, “Leases (Topic 842)~~, “Leases.~~” ~~Topic 842 provides guidance on accounting for leases which requires~~was issued. This ASU was issued to increase transparency and comparability among organizations by requiring lessees to (i) recognize ~~most leases~~right-of-use (“ROU”) assets and lease liabilities on ~~their~~the balance ~~sheets~~sheet to represent the right to use the leased asset for the ~~rights~~lease term and ~~obligations created by those leases. The~~the obligation to make lease payments and (ii) disclose key information about leasing arrangements. Some changes to the lessor accounting guidance ~~requires enhanced disclosures regarding~~were made to align both of the ~~amount, timing,~~following: (i) the lessor accounting guidance with certain changes made to the lessee accounting guidance and ~~uncertainty~~(ii) key aspects of ~~cash flows arising from leases that will be effective for interim and annual periods beginning after December 15, 2018,~~the lessor accounting model with ~~early adoption permitted.~~ revenue recognition guidance.

The Company ~~expects to adopt~~adopted the ~~requirements of the new standard~~ASU effective January 1, 2019 ~~and elect~~utilizing the modified retrospective approach for adoption for all leases that existed at or commenced after the date of initial application with an option to use certain ~~available transitional~~ practical expedients. The package of practical expedients allowed the Company to not reassess: (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases, and (iii) initial direct costs for any expired or existing leases. The Company also used (i) hindsight when evaluating contractual lease options, (ii) the practical expedient that allows lessees to treat lease and non-lease components of leases as a single lease component, and (iii) the portfolio approach which allows similar leased assets to be grouped and accounted for together. In addition, the Company implemented additional internal controls to evaluate future transactions in accordance with the standard.

~~In July 2018,~~The adoption of ASC 842 had a material impact on the ~~FASB issued updated guidance which allows an additional transition method to adopt the new leases standard at the adoption date, as compared~~consolidated balance sheet due to the ~~beginning~~recognition of ROU assets and lease liabilities. The adoption of this ASU did not have a material impact on the ~~earliest period presented and~~consolidated statement of operations or the consolidated statement of cash flows. The Company did not recognize a ~~cumulative-effect~~material cumulative effect adjustment to the ~~beginning~~opening balance ofsheet retained earnings ~~in the period of adoption. The Company expects to elect this transition method at the adoption date of~~on January 1, 2019. ~~The~~Because the modified retrospective approach was elected, the ASU was not applied to periods prior to adoption and did not have an impact on previously reported results. At adoption, the Company ~~continues to analyze its~~recognized operating lease ~~portfolio~~ROU assets and lease liabilities that reflect the present value of the future payments. As the rate implicit in the lease could not be determined for any of the Company’s leases, an estimated incremental borrowing rate of 5.5% was used to determine the present value of lease payments. Based on the impact ~~that~~of ASC 842 on the ~~new standard will have on its consolidated financial statements. Further,~~lease population, the Company isrecorded $4.4 million in lease liabilities and $4.2 million for ROU assets based upon the ~~process of reviewing and updating our business processes, as necessary, to assist in our ongoing~~ lease ~~data collection and analysis. Additionally, the Company is updating its accounting policies and internal controls that would be impacted by the new guidance, to ensure readiness~~liabilities adjusted for ~~adoption in the first quarter of 2019.~~
deferred rent. See Note 8 for additional information on leases.

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SEC Release No. 33-10532, Disclosure Update and Simplification. In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and ~~Simplification”~~Simplification”, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of ~~stockholders'~~stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule isbecame effective on November 5, ~~2018. The~~2018, and the Company ~~will adopt~~adopted the requirements ~~of the new standard for the interim reporting of~~in the first quarter of 2019.

~~Recently adopted by the Company~~

~~Accounting Standards Codification 606 “Revenue from Contracts with Customers.”~~ ~~In May 2014, ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” was issued.~~ ~~The new standard sets forth a single comprehensive model for recognizing and reporting revenue~~ ~~and requires the use~~ See “Unaudited Condensed Consolidated Statements of a five-step methodology to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ~~Additionally,~~ ~~ASU No. 2014-09 requires enhanced disclosure regarding revenue recognition.~~ On January 1, 2018, the Company adopted ASC 606 using the modified retrospective transition method, which had no material impact on operations, and required no cumulative adjustment to be made to beginning retained earnings on January 1, 2018. Therefore, results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted. ~~See Note 4 for further discussion.~~Stockholders’ Equity.”

~~Accounting Standards Codification 805 “Business Combinations.”~~ In January 2017, ASU No. 2017-01, “Clarifying the Definition of a Business” was issued. ASU No. 2017-01 provides a more robust framework to use in determining when a set of assets and activities is a business. The Company adopted ASU No. 2017-01 on January 1, 2018, and it did not have a material effect on the consolidated financial statements.

Revenue Recognition

~~Accounting Standards Codification 718 “Compensation – Stock Compensation.”~~ In May 2017, ASU No. 2017-09, “Scope of Modification Accounting” was issued. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should apply ASU No. 2017-09 on a prospective basis for an award modified on or after the adoption date for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Additionally, in June 2018, FASB issued ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” The update largely aligns the accounting for share-based payment awards issued to employees and nonemployees, particularly with regards to the measurement date and the impact of performance conditions. Under the new guidance, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing). The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The Company adopted ASU No. 2017-09 and ASU No. 2018-07 in the current year and, therefore, ~~results for reporting periods beginning after January 1, 2018 are presented under ASU No. 2017-09 and ASU No. 2018-07, while prior period amounts have not been adjusted.~~ ~~See Note 6 for further discussion.~~

~~4. Revenue Recognition~~

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

~~The Company performs the following steps in order to properly determine revenue recognition and identify relevant contract assets and contract liabilities:~~

●

~~identify the contract with a customer;~~

●

~~identify the performance obligations in the contract;~~

●

~~determine the transaction price;~~

●

~~allocate the transaction price to the performance obligations in the contract; and~~

●

~~recognize revenue when, or as, the Company satisfies a performance obligation.~~

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The Company earns revenue by providing leads, advertising, and mobile products and services used by Dealers and Manufacturers in their efforts to market and sell new and used vehicles to consumers. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The Company records revenue on distinct performance obligations at a single point in time, when control is transferred to the customer.

The Company has three main revenue sources – Lead fees, advertising, and other revenue. Accordingly, the Company recognizes revenue for each source as described below:

●

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

●

Advertising - – fees paid by Dealers and Manufacturers for (i) the Company’s click traffic program and (ii) display advertising on the Company’s ~~websites and (ii) fees from the Company’s click traffic program.~~websites. Revenue is recognized in the period advertisements are displayed on the Company’s websites or the period in which clicks have been delivered, as applicable. The Company recognizes gross revenue from the delivery of action-based advertisements in the period in which a user takes the action for which the marketer contracted for with the Company. For advertising revenue arrangements where the Company is not the principal, the Company recognizes revenue on a net basis.

●

Other revenues - – consists primarily of revenues from the Company’s mobile products and revenues from the Company’s Reseller Agreement with SaleMove, Inc. Revenue is recognized in the period in which products or services are sold.

Variable Consideration

~~The Company’s products, namely~~ Leads are generally sold with a right-of-return for services that do not meet customer requirements as specified by the relevant contract. Rights-of-return are estimable, and provisions for estimated returns are recorded as a reduction in revenue by the Company in the period revenue is recognized, and thereby accounted for as variable consideration. The Company includes the allowance for customer credits in its net accounts receivable balances on the Company’s balance sheet at period end. Allowance for customer credits totaled ~~$133,000~~$132,000 and ~~$213,000~~$121,000 as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively.

~~See further discussion below on significant judgments exercised by the Company in regards to variable consideration.~~

Contract Assets and Contract Liabilities

Unbilled Revenue

Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when revenue is recognized prior to invoicing. From ~~time-to-time,~~time to time, the Company may have balances on its balance sheet representing revenue that has been recognized by the Company upon satisfaction of performance obligations and earning a right to receive payment. These not-yet invoiced receivable balances are driven by the timing of administrative transaction processing, and are not indicative of partially complete performance obligations, or unbilled ~~revenue~~.revenue. Unbilled revenue represents revenue that is partially earned, whereby control of promised services has not yet transferred to the customer, and for which the Company has not earned the complete right to payment. The Company had zero unbilled revenue included in its consolidated balance sheets as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~

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2018.

Deferred Revenue

The Company defers the recognition of revenue when cash payments are received or due in advance of satisfying its performance obligations, including amounts which are refundable. Such activity is not a common practice of operation for the Company. The Company had zero deferred revenue included in its consolidated balance sheets as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~

2018. Payment terms and conditions can vary by contract type. Generally, payment terms within the Company’s customer contracts include a requirement of payment within 30 to 60 days from date of invoice. Typically, customers make payments after receipt of invoice for billed services, and less typically, in advance of rendered services.

~~Practical Expedients and Exemptions~~

~~The Company excludes from the transaction price all sales taxes related to revenue producing transactions collected from the customer for a governmental authority.~~

The Company applies the new revenue standard requirements to a portfolio of contracts (or performance obligations) with similar characteristics for transactions where it is expected that the effects of applying the revenue recognition guidance to the portfolio would not differ materially on the financial statements from that of applying the same guidance to the individual contracts (or performance obligations) within that portfolio.

The Company generally expenses incremental costs of obtaining a contract when incurred because the amortization period would be less than one year. These costs primarily relate to sales commissions and are recorded in selling, marketing, and distribution expense.

~~Significant Judgments~~

The Company provides Dealers and Manufacturers with various opportunities to market their vehicles to potential vehicle buyers, namely via consumer lead and click traffic referrals and online advertising products and services. Proper revenue recognition of digital marketing activities, as well as proper recognition of assets and liabilities related to these activities, requires management to exercise significant judgment with the following items:

●

~~Arrangements with Multiple Performance Obligations~~ -

The Company enters into contracts with customers that often include multiple products and services to a customer. Determining whether products and/or services are distinct performance obligations that should be accounted for singularly or separately may require significant judgment.

●

~~Variable Consideration and Customer Credits~~ -

The Company’s products are generally sold with a right-of-return. Additionally, the Company will sometimes provide customer credits or sales incentives. These items are accounted for as variable consideration when ~~determining the allocation of the transaction price to performance obligations under a contract.~~The allowance for customer credits is an estimate of adjustments for services that do not meet customer requirements. Additions to the estimated allowance for customer credits are recorded as a reduction of revenues and are based on the Company’s historical experience of: (i) the amount of credits issued; (ii) the length of time after services are rendered that the credits are issued; (iii) other factors known at the time; and (iv) future expectations. Reductions in the estimated allowance for customer credits are recorded as an increase in revenues.

~~As specific customer credits are identified, they are charged against this allowance with no impact on revenues.~~Returns and credits are measured at contract inception, with respective obligations reviewed each reporting period or as further information becomes available, whichever is earlier, and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. The allowance for customer credits is included in the net accounts receivable balances of the Company’s balance sheets as of September 30, 2018 and December 31, 2017.

The Company has not made any significant changes ~~to judgments~~ in applying ASC 606 during the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019

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Table of Contents

Disaggregation of Revenue

~~The Company disaggregates~~We disaggregate revenue from contracts with customers by revenue source and ~~has~~have determined that disaggregating revenue into these categories sufficiently depicts the differences in the nature, amount, timing and uncertainty of ~~its~~ revenue streams. The Company has three main sources of revenue: ~~lead fees,~~Leads, advertising and other revenues.

~~-7-~~

~~Table of Contents~~

The following table summarizes revenue from contracts with customers, disaggregated by revenue source, for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended March 31,
	2018	2017	2018	2017	2019	2018
	(in thousands)
Lead fees	$24,986	$27,711	$71,277	$83,149	$25,698	$24,080
Advertising
Clicks	5,559	7,436	18,020	20,403
Click traffic					5,059	6,691
Display and other advertising	1,047	1,510	3,623	4,511	819	1,396
Total Advertising					5,878	8,087

Other revenues	103	215	416	741	28	182
Total revenue	$31,695	$36,872	$93,336	$108,804	$31,604	$32,349

Net ~~Earnings (Loss)~~Loss Per Share and Stockholders’ Equity

warrants. The ~~Company used~~following are the ~~following~~ share amounts utilized to compute the basic and diluted net ~~(loss) earnings~~loss per share for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~2018:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

March 31,

~~For the three~~2018, 4.1 million and ~~nine months ended September 30, 2018, 4.0 and 4.3~~3.0 million, respectively, of potentially anti-dilutive securities related to common stock have been excluded from the calculation of diluted net earnings per share, respectively. For the three and nine months ended September 30, 2017, 3.9 and 3.1 million of potentially anti-dilutive securities related to common stock have been excluded from the calculation of diluted net earnings per share.

~~On September 6, 2017, the Company announced that its board of directors authorized the Company to repurchase up to $3.0 million of the Company’s common stock.~~ Under the repurchase program, the Company may repurchase common stock from time to time on the open market or in private transactions. This authorization does not require the Company to purchase a specific number of shares, and the board of directors may suspend, modify or terminate the program at any time. The Company anticipates that it would fund future repurchases, if any, through the use of available cash. No shares were repurchased during the three and nine months ended September 30, 2018. As of September 30, 2018, $2.3 million remains available for the Company to repurchase common stock.

On June 22, 2017, the Company obtained stockholder approval for the issuance of shares of the Company’s common stock upon (i) the conversion of the Company’s then outstanding Series B Preferred Stock; and (ii) the conversion of shares of Series B Preferred Stock that would be issued upon exercise of the warrant to purchase up to 148,240 shares of Series B Preferred Stock issued in connection with the acquisition of AWI (“~~AWI Warrant~~”). Upon obtaining stockholder approval for the conversion, each outstanding share of Series B Preferred Stock was automatically converted into 10 shares of the Company’s common stock, which resulted in the outstanding shares of Series B Preferred Stock being converted into 1,680,070 shares of the Company’s common stock, and the AWI Warrant converted into warrants to acquire up to 1,482,400 shares of the Company’s common stock.

~~Warrants.~~ ~~The warrant to purchase 69,930 shares of the Company’s common stock issued in connection with the acquisition of AutoUSA was valued at $7.35 per share for a total value of $0.5 million (“AutoUSA Warrant~~”). The Company used an option pricing model to determine the value of the AutoUSA Warrant. Key assumptions used in valuing the AutoUSA Warrant are as follows: risk-free interest rate of 1.6%, stock price volatility of 65.0% and a term of 5.0 years. The AutoUSA Warrant was valued based on long-term stock price volatilities of the Company. The exercise price of the AutoUSA Warrant is $14.30 per share (as may be adjusted for stock splits, stock dividends, combinations, and other similar events). The AutoUSA Warrant became exercisable on January 13, 2017 and expires on January 13, 2019.

The AWI Warrant was valued at $1.72 per share for a total value of $2.5 million. The Company used an option pricing model to determine the value of the AWI Warrant. Key assumptions used in valuing the AWI Warrant were as follows: risk-free interest rate of 1.9%, stock price volatility of 74.0% and a term of 7.0 years. The AWI Warrant was valued based on long-term stock price volatilities of the Company’s common stock. On June 22, 2017, the Company received stockholder approval which resulted in the automatic conversion of the AWI Warrant into warrants to acquire up to 1,482,400 shares of the Company’s common stock at an exercise price of $18.45 per share of common stock. The AWI Warrant became exercisable on October 1, 2018, subject to the following vesting conditions: (i) with respect to the first one-third (1/3) of the warrant shares, if at any time after the issuance date of the AWI Warrant and prior to the expiration date of the AWI Warrant the weighted average closing price of the Company’s common stock for the preceding 30 trading days (adjusted for any stock splits, stock dividends, reverse stock splits or combinations of the Company’s common stock occurring after the issuance date) (“~~Weighted Average Closing Price~~”) is at or above $30.00; (ii) with respect to the second one-third (1/3) of the warrant shares, if at any time after the issuance date of the AWI Warrant and prior to the expiration date the Weighted Average Closing Price is at or above $37.50; and (iii) with respect to the last one-third (1/3) of the warrant shares, if at any time after the issuance date of the AWI Warrant and prior to the expiration date the Weighted Average Closing Price is at or above $45.00. The AWI Warrant expires on October 1, 2022

6. Share-Based Compensation

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

March 31,

General and administrative(1)

Less amount capitalized to internal use software:

During the ~~nine~~three months ended ~~September 30,~~March 31, 2018, the Company recorded $0.8 million of expense related to the acceleration of certain awards which were modified ~~or accelerated~~ in connection with the termination of ~~employment of certain~~the Company’s former ~~officers~~Chief Executive Officer. The vesting accelerated in accordance with the terms of the ~~Company. In accordance with guidance provided under ASC 718 and related ASU No. 2017-09 and ASU No. 2018-07, the Company recognized~~applicable award modification and acceleration expenses related to these events in the period incurred. Modification expense was determined by using the Black-Scholes option pricing model to estimate the fair value of the modified awards as of the new measurement date and respective fair value assumptions. As reflected in the table above, the Company recognized award modification and acceleration expense of $1.2 million and $2.1 million in the three and nine months ended September 30, 2018, respectively. There were no modification or acceleration expenses recognized in 2017.
agreements.

Service-Based Options. The Company granted the following service-based options for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017, respectively:~~ 2018:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

March 31,

~~In April 2018, the Company entered into an Inducement Stock Option Award Agreement with the Company’s CEO, Jared Rowe (“Rowe Option Award Agreement~~”~~). Pursuant to the Rowe Option Award Agreement, Mr. Rowe was granted stock options to purchase 1,000,000 shares of common stock (~~“~~Rowe Employment Options~~”), which shall vest monthly in 36 monthly installments on the first day of each calendar month following the date of grant. These options have an exercise price of $3.26 per share and a term of seven years from the date of grant. Uponunder certain conditions, including upon a change in control of the Company, ~~or in the event of a~~ termination ~~of Mr. Rowe’s employment by the Company~~ without cause orof an employee and voluntary termination by ~~Mr. Rowe~~an employee with good reason, all unvested options will vest. In the event of a termination of Mr. Rowe’s employment with the Company by reason of Mr. Rowe’s death or disability, the lesser of: (i) 1/3rd of the total number of these options and (ii) the total number of unvested options will vest upon the date of termination.

~~Market Condition Options.~~ ~~On January 21, 2016, the Company granted 100,000 stock options to its former chief executive officer (“FormerCEO”) with an exercise price of $17.09 and grant date fair value of $1.47 per option, using a Monte Carlo simulation model (“FormerCEO Market Condition Options~~”). The Former CEO Market Condition Options were previously valued at $2.94 per option but were revalued when the requisite stockholder approval for the Company’s Amended and Restated 2014 Equity Incentive Plan was obtained in June 2016. The Former CEO Market Condition Options were subject to both stock price-based and service-based vesting requirements that must be satisfied for the Former CEO Market Condition Options to vest and become exercisable. On April 12, 2018, pursuant to the stock option award agreement, vesting of the Former CEO Market Condition Options was accelerated with the termination of employment of the Former CEO, resulting in the recognition of approximately $0.8 million of non-recurring share-based compensation expense during the first quarter of 2018. The Former CEO Market Condition Options may be exercised at any time on or before April 13, 2020.

~~Stock option exercises.~~ ~~The following stock options were exercised during the three and nine months ended September 30, 2018 and 2017, respectively:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2018

2017

2018

2017

Number of stock options exercised
  1,000
  15,000
  16,967
  191,074
Weighted average exercise price
$1.75
$4.20
$4.51
$5.58

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

March 31,

~~Restricted~~ Stock ~~Awards~~option exercises. The ~~Company granted an aggregate of 125,000 restricted~~following stock ~~awards (“RSAs”) on April 23, 2015 in connection with the promotion of one of its executive officers. Of these 125,000 RSAs, 25,000~~options were service-based and 100,000 were performance-based. The forfeiture restrictions of the service-based RSAs lapse with respect to one-third of the restricted stock on each of the first, second, and third anniversaries of the date of the award. Forfeiture restrictions lapsed on 8,333 shares and 8,333 shares of restricted stock on April 23, 2016 and April 23, 2017, respectively. During the nine months ended September 30, 2018, 8,333 of the foregoing service-based RSAs and 100,000 of the performance-based RSAs were forfeited upon the resignation of this executive officer.

The Company granted an aggregate of 345,000 RSAs on September 27, 2017 to senior officers of the Company. These RSAs are service- based and the forfeiture restrictions lapse with respect to one-third of the restricted stock on each of the first, second, and third anniversaries of the date of the award. During the nine months ended September 30, 2018, 80,000 shares of RSAs were forfeited upon the resignation of two executive officers, the forfeiture restrictions on 175,000 shares of RSA lapsed upon the termination of employment of the former CEO and three officers of the Company, and the forfeiture restrictions of 40,000 shares of RSAs were modified upon the entry into a consulting agreement with a former executive officer. Duringexercised during the three months ended ~~September 30,~~March 31, 2019 and 2018, the forfeiture restrictions on 90,000 shares of RSAs lapsed in connection with the termination of employment of three officers of the Company. Accordingly, the Company recognized expenses of $364,000 and $787,000 related to the acceleration of vesting and modification of RSAs in the three and nine months ended September 30, 2018, respectively. As of September 30, 2018, 60,000 shares of RSAs remain unvested.

~~The Company’s investments at September 30, 2018 and December 31, 2017 consisted primarily of investments in SaleMove and GoMoto, Inc.,a Delaware corporation (“GoMoto”).~~respectively:

In September 2013, the Company entered into a Convertible Note Purchase Agreement with SaleMove in which AutoWeb invested $150,000 in SaleMove in the form of an interest bearing, convertible promissory note. In November 2014, the Company invested an additional $400,000 in SaleMove in the form of an interest bearing, convertible promissory note. Upon closing of a preferred stock financing by SaleMove in July 2015, these two notes were converted in accordance with their terms into an aggregate of 190,997 Series A Preferred Stock, which shares were previously classified as a long-term investment on the consolidated balance sheet. The Company recorded an impairment charge of $0.6 million in SaleMove in the three months ended December 31, 2017. On June 5, 2018, the Company sold its shares of Series A Preferred stock back to SaleMove for $125,000. The gain of $125,000 is recorded in Interest and other income (expense) on the Unaudited Consolidated Condensed Statement of Operations and Comprehensive Income (Loss) for the nine months ended September 30, 2018.

In October 2013, the Company entered into a Reseller Agreement with SaleMove to become a reseller of SaleMove’s technology for enhancing communications with consumers. SaleMove’s technology allows Dealers and Manufacturers to enhance the online shopping experience by interacting with consumers in real-time, including live video, audio, and text-based chat or by phone. The Company and SaleMove share equally in revenues from automotive-related sales of the SaleMove products and services. In connection with this reseller arrangement, the Company advanced $1.0 million to SaleMove to fund SaleMove’s 50% share of various product development, marketing and sales costs and expenses. These previously advanced funds are repaid to the Company from SaleMove’s share of net revenues and expenses from the Reseller Agreement each reporting period. During the three months ended September 30, 2018, the Company performed a qualitative review of the agreement with SaleMove and, based on several factors related to the trend in operating results from this reseller arrangement and costs being incurred by the Company, the parties agreed to allow the arrangement to expire November 30, 2018, one month earlier than the original expiration date of December 31, 2018. Upon expiration of the Reseller Agreement, the remaining outstanding advances are no longer recoverable from SaleMove, and, accordingly, the Company has impaired the remaining balance of $364,000 of advances due from SaleMove. The impairment charge is included in “Long-lived asset impairment” in the Unaudited Consolidated Condensed Statement of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2018.

	Three Months Ended March 31,
	2019		2018

Number of stock options exercised		156,012		15,217
Weighted average exercise price	$	1.97	$	4.80

~~-11-~~

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Table of Contents

In December 2014, the Company entered into a Series Seed Preferred Stock Purchase Agreement with GoMoto in which the Company paid $100,000 for 317,460 shares of Series Seed Preferred Stock, $0.001 par value per share. The $100,000 investment in GoMoto was recorded at cost because the Company does not have significant influence over GoMoto. In October 2015 and May 2016, the Company invested an additional $375,000 and $375,000, respectively, in GoMoto in the form of convertible promissory notes (“~~GoMoto Notes~~”). The GoMoto Notes accrue interest at an annual rate of 4.0% and are due and payable in full upon demand by the Company or at GoMoto’s option ten days’ written notice unless converted prior to the repayment of the GoMoto Notes. The GoMoto Notes will be converted into preferred stock of GoMoto in the event of a preferred stock financing by GoMoto of at least $1.0 million prior to repayment of the GoMoto Notes. At September 30, 2018 and 2017, both the GoMoto Notes and related interest receivable are fully reserved on the Unaudited Consolidated Condensed Balance Sheets because the Company believes the amounts are not recoverable. Further, the three months ended September 30, 2018, represented the third consecutive quarter of declining operating results for GoMoto and, as such, the Company performed a qualitative review of its investment in GoMoto. Based on continuing deterioration in GoMoto’s financial position, the Company believes that uncertainty exists in the recoverability of its remaining investment of $100,000 in GoMoto and, accordingly, recognized a loss on the investment during the three months ended September 30, 2018 which has been recorded in “Interest and other income (expense)” on the Unaudited Consolidated Condensed Statement of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2018.

8. Selected Balance Sheet Accounts

Property and ~~equipment~~Equipment. Property and equipment consists of the following:

Computer software and hardware

Capitalized internal use software

Furniture and equipment

Leasehold improvements

Less—Accumulated depreciation and amortization

Property and Equipment, net

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

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

The Company has a concentration of credit risk with its automotive ~~industry-related~~industry related accounts receivable ~~balances, particularly with~~balances. Approximately 37%, or $8.6 million, of gross accounts receivable at March 31, 2019, and approximately 28% of total revenues for the quarter ended March 31, 2019, are related to Urban Science Applications (which represents Acura, ~~Audi,~~ Honda, Nissan, Infiniti, Subaru, Toyota ~~Volkswagen,~~ and Volvo)~~, Trilogy,~~ and General ~~Motors and Media.net Advertising. During the first nine months of~~Motors. For 2018, approximately ~~42% of the Company’s total revenues was derived from these four customers, and approximately 51%~~45%, or ~~$13.2~~$11.6 million, of gross accounts receivables ~~related to these four customers~~ at ~~September 30, 2018. During the first nine months~~March 31, 2018, and approximately 38% of ~~2017, approximately 33% of the Company’s~~ total revenues ~~was derived from~~for the quarter ended March 31, 2018, is related to Urban Science Applications, General Motors and Media.net ~~and approximately 43%, or $12.2 million of gross accounts receivables, related to these three customers at September 30, 2017.~~

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

September 30,
2018

December 31,
2017

(in thousands)

Other accrued expenses
$7,154
$6,307
Amounts due to customers
  392
  438
Other current liabilities
  437
  507
Total other accrued expenses and other current liabilities
$7,983
$7,252

~~Convertible Notes Payable. In connection with the acquisition of AutoUSA, the Company issued a convertible subordinated promissory note for $1.0 million (“AutoUSA Note~~”) to AutoNationDirect.com, Inc. The fair value of the AutoUSA Note as of the AutoUSA acquisition date was $1.3 million. This valuation was estimated using a binomial option pricing method. Key assumptions used by the Company’s outside valuation consultants in valuing the AutoUSA Note included a market yield of 1.6% and stock price volatility of 65.0%. As the AutoUSA Note was issued with a substantial premium, the Company recorded the premium as additional paid-in capital. Interest is payable at an annual interest rate of 6% in quarterly installments. The entire outstanding balance of the AutoUSA Note is to be paid in full on January 31, 2019. The holder of the AutoUSA Note may at any time convert all or any part, but at least 30,600 shares, of the then outstanding and unpaid principal of the AutoUSA Note into fully paid shares of the Company’s common stock at a conversion price of $16.34 per share (as adjusted for stock splits, stock dividends, combinations, and other similar events). In the event of default, the entire unpaid balance of the AutoUSA Note will become immediately due and payable and will bear interest at the lower of 8% per year or the highest legal rate permissible under applicable law.

~~9. Long-Lived Assets and Impairment~~Advertising.

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

Definite-lived

Intangible Asset

Estimated Useful Life

Accumulated Amortization

Estimated Useful Life

Accumulated Amortization

Developed technology

		March 31, 2019			December 31, 2018
Indefinite-lived Intangible Asset	Estimated Useful Life	Gross	Accumulated Amortization	Net	Gross	Accumulated Amortization	Net

Domain	Indefinite	$2,200	$—	$2,200	$2,200	$—	$2,200

September 30, 2018

December 31, 2017

Indefinite-lived
Intangible Asset

Estimated Useful Life

Gross

Accumulated Amortization

Net

Gross

Accumulated Amortization

Net

Domain Indefinite
$2,200
$—
$2,200
$2,200
$—
$2,200

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

Year	Amortization Expense

2019	$3,514
2020	2,371
2021	1,499
2022	902
2023	86
Thereafter	46
��	$8,418

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

Amortization Expense

Convertible Notes Payable.In connection with the acquisition of AutoUSA, LLC on January 13, 2014, the Company issued a convertible subordinated promissory note for $1.0 million (“AutoUSA Note”) to AutoNationDirect.com, Inc. with interest is payable at an annual interest rate of 6% in quarterly installments. The entire outstanding balance of the AutoUSA Note plus accrued interest was paid in full on January 31, 2019.

Lease Liabilities. Lease liabilities as of March 31, 2019 consist of the following:

Current portion of lease liabilities	$	1,626
Long term lease liabilities, net of current portion		2,298
Total lease liabilities	$	3,924

~~-13-~~

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Table of Contents

	~~(in thousands)~~
~~Goodwill as of December 31, 2017~~	$~~5,133~~
~~Impairment charge~~	~~(5,133~~)
~~Goodwill as of September 30, 2018~~	$—

~~Impairment Testing of Intangible Assets~~

~~On October 5, 2017, the Company and DealerX Partners, LLC, a Florida limited liability company (“DealerX”), entered into a Master License and Services Agreement (“DealerX License Agreement”). Pursuant to the terms of the DealerX License Agreement, AutoWeb was granted a perpetual license to access and use DealerX’s proprietary platform and technology for targeted, online marketing.~~

~~The transaction consideration consisted of: (i) $8.0 million in cash paid to DealerX upon execution of the DealerX License Agreement and (ii) the right to 710,856 shares of the~~ Company’s ~~common stock, par value $0.001 per share, representing approximately five percent of the Company’s outstanding Common Stock as of the date the parties entered into the DealerX License Agreement (“Market Capitalization Shares~~”) if on or before October 5, 2022: (i) AutoWeb’s market capitalization averaged at least $225.0 million over a consecutive 90 day period or (ii) there occurred a change in control of AutoWeb that reflected a market capitalization of at least $225.0 million. If the Market Capitalization Shares were issued to DealerX, DealerX’s obligations to continue to support the platform (“~~Platform Support Obligations~~”) would continue in perpetuity. Alternatively, upon the occurrence of certain events prior to the issuance of the Market Capitalization Shares, AutoWeb could elect to make an additional lump-sum payment of $12.5 million (“~~Alternative Cash Payment~~”) in order to extend DealerX’s Platform Support Obligations in perpetuity. If the Alternative Cash payment was made, DealerX’s contingent right to receive the Market Capitalization Shares would be terminated. The fair value of the Market Capitalization Shares was calculated at $2.5 million. At the transaction date the Company recorded approximately $10.5 million as a definite-lived intangible asset which was amortized over its expected useful life of 7 years.

The Company makes judgments about the recoverability of purchased intangible assets with definite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with definite lives is measured by comparing the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. In the third quarter of 2018, the Company performed an analysis of its planned future use of two intangible assets in the licenses and customer relationships asset groups. As a result of realignment activities finalized in the third quarter, the Company made a determination that the Company's use of certain assets would not be continued as originally planned. Accordingly, the Company performed further analysis to quantitatively determine the amount of impairment for each of these intangible assets as of September 30, 2018.

A structured test was performed with the DealerX license intangible asset, whereby lead generation and acquisition cost, amongst other things, was compare to alternate sources of lead generation available to the Company. As a result of the Company’s analysis, the Company concluded that the effectiveness of the platform was not in-line with the enhanced consumer-to-client matchmaking that the Company is seeking and made the decision in the third quarter to terminate DealerX’s Platform Support Obligations, significantly impacting the usability of the asset by the Company. Accordingly, the Company recorded impairment charges of $9.0 million in connection with the impairment of this long-lived asset with the expense recorded in Cost of revenues-impairment on the Company’s Unaudited Consolidated Condensed Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2018.

A quantitative analysis was performed by the Company on its customer relationship intangible assets, whereby it examined available data, namely historical activity and cash flows resulting from the customer relationships of previous acquisitions, in concert with projected future use of acquired customer relationships within the parameters of the Company’s future strategic plans. As a result of this analysis, the Company determined there to be impairment of $1.6 million related to customer relationship intangible assets acquired in a 2015 acquisition for which projected cash flows did not support the carrying values. Additionally, the Company determined that the estimated useful life of these customer relationship intangible assets had changed from 10 years to 5 years. This change in estimate has no impact on the current period but will impact amortization expense in future periods as amortization will be accelerated over the remaining estimated useful life of this asset due to the change in estimate.

~~10. Credit Facility~~

The Company and MUFG Union Bank, N.A. entered into a Loan Agreement dated February 26, 2013, as amended on September 10, 2013, January 13, 2014, May 20, 2015, June 1, 2016, June 28, 2017, and December 27, 2017 (the original Loan Agreement, as amended, is referred to collectively as the “~~Credit Facility Agreement”). The Credit Facility Agreement provided for (i) a $9.0 million term loan; (ii) a $15.0 million term loan; and (iii) an $8.0 million working capital revolving line of credit (“Revolving Loan”). The term loans were fully paid as of December 31, 2017. The Revolving Loan was fully paid~~aggregate lease maturities as of March 31, ~~2018.~~
2019 are as follows:

~~11.~~

Year
2019 (remaining 9 months)	$1,348
2020	1,332
2021	513
2022	459
2023	472
Thereafter	199
Total minimum lease payments	4,323
Less imputed interest	(399)
Total lease liabilities	$3,924

Commitments and Contingencies

Employment Agreements

~~12.~~

10.

Income Taxes

~~ASC 740 “Income Taxes~~” , requires the effects of changes in tax laws to be recognized in the period in which the legislation is enacted. However, due to the complexity and significance of the TCJA's provisions, the SEC staff issued Staff Accounting Bulletin 118 (“~~SAB 118~~”), which provides guidance on accounting for the tax effects of the TCJA. SAB 118 provides a measurement period that should not extend beyond one year from the TCJA enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the TCJA for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.

At September 30, 2018 and December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the TCJA; however, the Company has made a reasonable estimate of the effects of the TCJA’s change in the federal rate and revalued its deferred tax assets based on the rates at which they are expected to reverse in the future, which is generally the new 21% federal corporate tax rate plus applicable state tax rate. For the year ended December 31, 2017, the Company recorded a decrease in deferred tax assets and deferred tax liabilities of $11.7 million and $0.0 million, respectively, with a corresponding net adjustment to deferred income tax expense of $11.7 million. In addition, in 2017, the Company recognized a deemed repatriation of $0.6 million of deferred foreign income from its Guatemala subsidiary, which did not result in any incremental tax cost after application of foreign tax credits. The Company’s provisional estimates will be adjusted during the measurement period defined under SAB 118, based upon ongoing analysis of data and tax positions along with the new guidance from regulators and interpretations of the law. On an interim basis, the Company estimates anwhat its anticipated annual effective tax rate will be and records a quarterly income tax provision in accordance with the estimated annual rate, adjusted accordingly by the tax effect of certain discrete items that arise during the quarter. As the ~~fiscal~~ year progresses, the Company refines its estimated annual effective tax rate based on actual year-to-date ~~results recognized for the year-to-date.~~results. This process can result in significant changes to the Company's estimated effective tax rate. When such activity occurs, the income tax provision is adjusted during the quarter in which the estimates are refined and adjusted. As such, the ~~Company’s~~Company's year-to-date tax provision reflects the estimated annual effective tax rate. ~~These~~Therefore, these changes along with the adjustments to the Company's deferred taxes and related valuation allowance, may create ~~fluctuation~~fluctuations in the overall effective tax rate from period to period.

During 2017, management assessed available evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative losses incurred over the three-year period ended DecemberAt March 31, 2017. The Company was projecting pre-tax income for 2017 until the three months ended December 31, 2017, in which the Company incurred a significant pre-tax loss due to the impairment of goodwill. The Company experienced increased costs of providing services to its customers, as well as decrease in market share resulting from increased competition. Additionally, the Company also projects that 2018 pre-tax profits, if any, may not offset the cumulative three-year pre-tax loss as of December 31, 2017. Based on this evaluation, the Company recorded an additional valuation allowance of $16.7 million against its deferred tax assets during the year ended December 31, 2017. At September 30, 20182019, and December 31, ~~2017,~~2018, the Company has recorded a valuation allowance of ~~$21.3~~$28.7 million against its deferred tax assets.

11.

Subsequent Event

On April 30, 2019, the Company entered into a $25.0 million Revolving Credit and Security Agreement ("Credit Agreement") with PNC Bank, N.A. (“PNC”) as agent, and the Company’s U.S. subsidiaries Car.com, Inc., Autobytel, Inc., and AW GUA USA, Inc., as Guarantors, (“Company Subsidiaries”). The initial draw down on the Credit Agreement was approximately $8.0 million. The obligations under the Credit Agreement are guaranteed by the Company Subsidiaries and secured by a first priority lien on all of the Company’s and the Company Subsidiaries’ tangible and intangible assets. The Credit Agreement provides a subfacility of up to $5.0 million for letters of credit. The Credit Agreement expires on April 30, 2022.

The interest rates per annum applicable to borrowings under the Credit Agreement will be, at the Company’s option (subject to certain conditions), equal to either a domestic rate (“Domestic Rate Loans”) or a LIBOR rate for one, two, or three-month interest periods chosen by the Company (“LIBOR Rate Loans”), plus the applicable margin percentage of 2% for Domestic Rate Loans and 3% for LIBOR Rate Loans. The domestic rate for Domestic Rate Loans will be the highest of (i) the base commercial lending rate of Lender, (ii) the overnight bank funding rate plus 0.50%, or (iii) the LIBOR rate plus 1.00%. The Credit Agreement also provides for commitment fees ranging from 0.5% to 1.5% applied to unused funds (with the applicable fee based on quarterly average borrowings), but with the fees fixed at 1.5% until June 30, 2019. Fees for Letters of Credit are equal to 3% for LIBOR Rate Loans, with a fronting fee for each Letter of Credit in an amount equal to 0.5% of the daily average aggregate undrawn amount of all Letters of Credit outstanding.

The Credit Agreement contains customary representations and warranties and covenants that restrict the Company and the Company Subsidiaries from engaging in or taking various actions, including, among other things (but except as otherwise permitted by the Credit Agreement): (i) incurring or guaranteeing additional indebtedness; (ii) making any loans, investments or acquisitions; (iii) selling or otherwise transferring or disposing of assets other than in the ordinary course of business; (iv) engaging in transactions with affiliates;or (v) declaring or making distributions on their stock or other equity interests. In addition, the Credit Agreement contains financial covenants that require the Company to maintain its consolidated EBITDA (as defined in the Credit Agreement) at stated minimum levels ranging from ($2,900,000) to $7,500,000 for various periods during the term of the Credit Agreement. The Company is also required to maintain a $5,000,000 pledged deposit account with Lender until the Company’s consolidated EBITDA is greater than $10,000,000.

Item 2. ~~Management’s Disc~~Mua~~ssion~~nagement’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Concerning Forward-Looking Statements

The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “could,” “may,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes,” “will” and words of similar substance used in connection with any discussion of future operations or financial performance identify forward-looking statements. In particular, statements regarding expectations and opportunities, industry trends, new product expectations and capabilities, and our outlook regarding our performance and growth are forward-looking statements. This Quarterly Report on Form 10-Q also contains statements regarding plans, goals and objectives. There is no assurance that we will be able to carry out our plans or achieve our goals and objectives or that we will be able to do so successfully on a profitable basis. These forward-looking statements are just predictions and involve significant risks and uncertainties, many of which are beyond our control, and actual results may differ materially from these statements. Factors that could cause actual outcomes or results to differ materially from those reflected in forward-looking statements include, but are not limited to, those discussed in this Item 2, Part II, Item 1A of this Quarterly Report on Form 10-Q, and under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, ~~2017~~2018 (“~~2017~~2018 Form 10-K”). Investors are urged not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date on which they were made. Except as may be required by law, we do not undertake any obligation, and expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained herein are qualified in their entirety by the foregoing cautionary statements.

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

Basis of Presentation and Critical Accounting Policies

See Note 2, Basis of Presentation, to the accompanying unaudited condensed consolidated ~~condensed~~ financial statements.

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America, (“~~GAAP”),~~ which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and our actual results, our financial condition or results of operations may be affected. For a detailed discussion of the application of our critical accounting policies, see Note 2 of the “Notes to Consolidated Financial Statements” in Part II, Item 8 “Financial Statements and Supplementary Data” in the ~~2017~~2018 Form 10-K. ~~There~~Except as disclosed in Note 8 to the Unaudited Condensed Consolidated Financial Statements, pertaining to our adoption of Accounting Standards Codification 842,Leases, there have been no changes to our critical accounting policies since we filed our ~~2017~~2018 Form 10-K.

Total revenues in the first three months of 2019 were $31.6 million compared to $32.3 million in the first three months of 2018. The decline in total revenues was primarily due to a traffic acquisition focus on quality and margin as opposed to raw lead volume, a decrease in click revenue caused by lower revenue per click, and a decrease in display advertising revenue. We continue to invest in new traffic acquisition strategies and enhanced mobile consumer experiences. Further, we continue to invest in click approach changes to improve the consumer, customer, and financial performance of that product. We do not expect display advertising to be a major area of focus for us in the future, as it represents a secondary, not primary, revenue stream.

~~-16-~~

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Table of Contents

~~We are a digital marketing services company that assists automotive retail dealers (“Dealers”) and automotive manufacturers (“Manufacturers~~”) market and sell new and used vehicles to consumers through our programs for online lead referrals, Dealer marketing products and services, online advertising and consumer traffic referral programs, and mobile products.

~~Our consumer-facing automotive websites (“Company Websites~~”) provide consumers with information and tools to aid them with their automotive purchase decisions and the ability to submit inquiries requesting Dealers to contact the consumers regarding purchasing or leasing vehicles (“~~Leads~~”) ~~. Leads are internally-generated from our Company Websites (“Internally-Generated Leads”) or acquired from third parties (“Non-Internally-Generated Leads~~”) that generate Leads from their websites. Our AutoWeb® consumer traffic referral product provides consumers who are shopping for vehicles online with targeted offers based on make, model and geographic location. As these consumers conduct online research on a Company Website or on the site of one of our network of automotive publishers, they are presented with relevant offers on a timely basis and, upon the consumer clicking on the displayed advertisement, are sent to the appropriate website location of one of our Dealer, Manufacturer or advertising customers.

Our business, results of operations and financial condition are impacted by the volume and quality of our Leads. We measure Lead quality by the conversion of Leads to actual vehicle sales, which we refer to as the “buy rate.” Buy rate is the percentage of the consumers submitting Leads that we delivered to our customers represented by the number of these consumers who purchased vehicles within ninety days of the date of the Lead submission. We rely on detailed feedback from Manufacturers and wholesale customers to confirm the performance of our Leads. Our Manufacturer and other wholesale customers each match the Leads we deliver to our customers against vehicle sales to provide us with information about vehicle purchases by the consumers who submitted Leads that we delivered to these customers. AutoWeb also obtains vehicle registration data from a third-party provider. This information, together with our internal analysis allows us to estimate the buy rate for the consumers who submitted the Internally Generated Leads that we delivered to our customers. Based on the most current information and our internal analysis, we have estimated that, on average, consumers who submit Internally-Generated Leads that we deliver to our customers have an estimated buy rate of approximately 17%. Buy rates that individual Dealers may achieve can be impacted by factors such as the strength of processes and procedures within the dealership to manage communications and follow up with consumers.

Total revenues in the first nine months of 2018 were $93.3 million compared to $108.8 million in the first nine months of 2017. The decline in revenue was primarily due to less efficient traffic acquisition and lower retail dealer count and lead volumes. We believe that a large part of the inefficiency in traffic acquisition was the result of increased traffic acquisition costs as we invest in new traffic acquisition strategies, as well as the consumers shift to mobile and our ability to efficiently convert traffic to leads.

During the third quarter of 2018, we completed a comprehensive review of our products, traffic acquisition, pricing policies, distribution channels, technology infrastructure, strategic positioning and organizational capabilities. This review involved a significant change in key management and organizational structure.

We ~~move~~moved into the fourth quarter of 2018 with a plan that ~~will be executed strategically.~~we began to execute strategically in the first quarter of 2019. We will continue to work with our traffic partners to optimize our search engine marketing (“SEM”) methodologies and rebuild our high-quality traffic streams. We also expect to invest in new product development and technology infrastructure, and to continue to restructure our organization to better align with our revised strategy, which will likely result in ~~significant costs.~~ material expenses. We have begun to deploy various initiatives to address these issues, which began with addressing our lead generation capabilities to stabilize the declines in the largest part of our business, integrating our products to create a unified solution of leads, clicks and emails, and building out the team to execute on our strategy.

We cannot provide an exact timeframe for resolution of these issues, as we are early in the implementation of our revised strategy. However, our plan is designed to enable us to grow impressions, improve conversion, expand distribution, and increase capacity. ~~This~~We believe that this focus, along with plans to develop new, innovative products, will create opportunities for improved quality of delivery and strengthen our position for revenue growth. We now have our full senior leadership team in place which we believe will increase the pace of change and improve operational execution. During 2018, we focused on stabilizing the leads business as it comprises the majority of our revenue. For 2019, we will be focusing on our click traffic product.

Starting in 2018, we began to mobile-enable our core new car lead generation websites. This will be a considerable area of focus for us in 2019 as we evolve our sites to deliver a better experience for consumers to drive conversion. We anticipate that we will mobile-enable the rest of our lead generation sites throughout 2019. We also recently developed an approach to mobile-enable our click traffic product and is a critical step in our mobile enablement plan. The click product allows us to more effectively monetize visits to our websites. Further, it provides our clients with a unique opportunity to engage consumers with relevant messaging in a unique format. We began testing of the mobile enablement of our click traffic product in the first quarter of 2019. However, there is still work to be done with the display and algorithm as we expect to see some benefits to revenue per click, but not our click through rate. Ultimately, mobile optimization of our websites and products is the goal, and we still have a good bit of work to do in this area.

Expanding on the automotive industry at large, we expect total vehicle sales and the seasonally-adjusted annual rate to be down in 2019. LMC Automotive has forecasted 2019 U.S. total light vehicle sales and retail light-vehicle sales at 17.0 million and 13.7 million, respectively, representing declines in U.S. total light vehicle sales and retail light-vehicle sales of 1.9% and 1.5%, respectively, over 2018 sales. AutoNews has reported that light vehicle sales are off to the slowest start for a year since 2014, with year-to-date sales down about 3%. We believe it will be difficult for Manufacturers to maintain their historic volumes due to affordability challenges with interest rates and overall less Manufacturer incentives. However, we continue to believe we can operate well in this environment as we believe Dealers will seek out their highest return on investment marketing channels to drive sales. And with our detailed attribution and product quality improvements, we believe we will continue to have a strong place in their marketing budgets as we believe we are one of the most efficient marketing channels they have.

Although we are not able at this time to disclose any guidance as to 2019 financial performance with detail or accuracy, we do anticipate some level of volatility in our total revenues, cost of revenues, gross profit, and gross margin for 2019. We expect incremental cash burn to continue in the first half of 2019 as we invest in our people, products and technology. Our plan is to improve our liquidity and balance sheet through non-dilutive measures, including use of the $25 million revolving credit facility we entered into on April 30, 2019.

~~-17-~~

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Table of Contents

For the three and nine months ended September 30, 2018, our business, results of operations and financial condition were affected, and may continue to be affected in the future, by general economic, employment and market factors, conditions in the automotive industry, the markets for Leads, and online advertising services, including, but not limited to, the following:

●

~~Pricing, interest rates and purchase incentives for vehicles;~~

●

~~The expectation that consumers will be purchasing fewer vehicles overall during their lifetime as a result of better quality vehicles and longer warranties;~~

●

~~The impact of fuel prices on demand for the number and types of vehicles;~~

●

~~Increases or decreases in the number of retail Dealers or in the number of Manufacturers and other wholesale customers in our customer base;~~

●

~~The effect of changes in search engine algorithms and methodologies on our Lead generation and website advertising activities and margins;~~

●

~~Volatility in spending by Manufacturers and others in their marketing budgets and allocations;~~

●

~~The competitive impact of consolidation in the online automotive referral industry;~~

●

~~The effect of changes in transportation policy, including the potential increase of public transportation options; and~~

●

~~The effect of fewer vehicles being purchased as a result of new business models and changes in consumer attitudes regarding the need for vehicle ownership.~~

Three Months Ended ~~September 30, 2018~~March 31, 2019 Compared to the Three Months Ended ~~September 30, 2017~~March 31, 2018

2018

% of total revenues

2017

% of total revenues

$ Change

% Change

(Dollar amounts in thousands)

Revenues:

Lead fees
$24,986
  79%
$27,711
  75%
$(2,725)
  (10)%
Advertising
  6,606
  21
  8,946
  24
  (2,340)
  (26)
Other revenues
  103
  —
  215
  1
  (112)
  (52)
Total revenues
  31,695
  100
  36,872
  100
  (5,177)
  (14)
Cost of revenues
  26,278
  83
  25,786
  70
  492
  2
Cost of revenues - impairment
  9,014
  28
  —
  —
  9,014
  N/A
Gross (loss) profit
  (3,597)
  (11)
  11,086
  30
  (14,683)
  N/A
Operating expenses:






Sales and marketing
  3,333
  11
  3,692
  10
  (359)
  (10)
Technology support
  4,303

  14
  3,141
  9
  1,161
  37
General and administrative
  3,639
  11
  2,818
  7

  821
  29
Depreciation and amortization
  1,172
  4
  1,192
  3
  (20)
  (2)
Goodwill Impairment
  —
  —
  —
  —
  —
  —
Long-lived asset impairment
  1,968
  6
  —
  —
  1,968
  N/A
Total operating expenses
  14,415
  45
  10,843
  29

  3,572
  33
Operating (loss) income
  (18,012)
  (57)
  243
  1
  (18,255)
  N/A
Interest and other income (expense), net
  (24)
  —
  (93)
  —
  69
  (74)
(Loss) Income before income tax provision
  (18,036)
  (57)
  150
  —
  (18,186)
  N/A
Income tax provision
  —
  —
  81
  —
  (81)
  N/A
Net (loss) income
$(18,036)
  (57)%
$69
  —%
$(18,105)
  N/A

(Dollar amounts in thousands)

Lead ~~fees~~fees. . Lead fees revenues ~~decreased $2.7~~increased $1.6 million, or ~~10%~~7%, in the ~~third~~first quarter of 2019 compared to the first quarter of 2018 ~~compared to the third quarter of 2017~~ primarily ~~due to less efficient traffic acquisition and~~ ~~lower retail dealer count and lead volumes~~.

~~Advertising. Advertising revenues decreased $2.3 million, or 26%, in the third quarter of 2018 compared to the third quarter of 2017~~ as a result of a ~~decrease~~$2.9 million increase in ~~$1.9~~revenue from Manufacturers, offset by declines in retail lead fee revenues.

Advertising.Advertising revenues decreased $2.2 million, ~~decrease~~or 27%, in the first quarter of 2019 compared to the first quarter of 2018 as a result of a decline in click revenue associated with decreased ~~pricing per~~ click ~~coupled with a $0.4 million decrease in display advertising traffic on our website.~~
volume and pricing.

Other ~~Revenues~~Revenues. . Other revenues consist primarily of revenues from our mobile products and revenues from our Reseller Agreement with ~~SaleMove.~~ SaleMove, Inc., which expired in November 2018.Other revenues decreased to ~~$0.1 million~~$28,000 in the ~~third~~first quarter of ~~2018~~2019 from ~~$0.2 million~~$182,000 in the ~~third~~first quarter of ~~2017~~2018 primarily due to lower customer utilization of the mobile product and SaleMove product. ~~The SaleMove Reseller Agreement will expire November 30, 2018.~~

Cost of Revenues.Cost of revenues consists of purchase request and traffic acquisition costs and other cost of revenues. Purchase request and traffic acquisition costs consist of payments made to our purchase request providers, including internet portals and online automotive information providers. Other cost of revenues consists of SEM and fees paid to third parties for data and content, including search engine optimization activity, included on our websites, connectivity costs, development costs related to our websites, compensation related expense and technology license fees, server equipment depreciation and technology amortization directly related to the Company Websites. ~~SEM, sometimes referred to as paid search marketing, is the practice of bidding on keywords on search engines to drive traffic to a website.~~ Cost of revenues increased ~~$0.5~~$1.2 million, or 2%5%, in the first quarter of 2019 compared to the first quarter of 2018 primarily due to increased traffic acquisition costs, offset by a decrease in amortization expense from intangibles written off in the third quarter of 2018 ~~compared~~and costs related to a headcount which was shifted to operational roles at the ~~third quarter~~beginning of ~~2017 primarily due~~2019. The Company analyzed and concluded these roles were no longer directly tied to ~~increased traffic acquisition costs.~~revenue generation.

~~Cost of Revenues-Impairment.~~ Cost of revenues-impairment consists of impairment charges on definite-lived intangible assets which are directly related to websites or technology that generate revenue for the Company. The Company makes judgments about the recoverability of purchased intangible assets with definite lives whenever events or changes in circumstances indicate that an impairment may exist. Recoverability of purchased intangible assets with definite lives is measured by comparing the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. In the third quarter of 2018, the Company made a decision to terminate the platform support provision of an existing perpetual license used to support the Company’s websites, significantly impacting the usability of the asset by the Company. As a result, in the quarter ended September 30, 2018, the Company recorded charges of approximately $9.0 million in connection with the impairment of this long-lived asset to cost of revenues-impairment. The Company did not have a comparable charge in the same period for 2017.

~~Gross Profit~~. Gross profit in the third quarter of 2018 decreased $14.7 million from the third quarter of 2017 due to decreased revenue and increased cost of revenues as mentioned above. A major contributor to the increased cost of revenues was the one-time impairment charge related to the DealerX license of $9.0 million that was charged to cost of revenues. As a percentage of net revenue, our gross profit was (11%) and 30% for the three months ended September 30, 2018 and 2017, respectively. The decrease was significantly impacted by the $9.0 million impairment charge related to DealerX, which as a percentage of net revenue, was 28%.

Sales and ~~Marketing~~Marketing.. Sales and marketing expense includes costs for developing our brand equity, personnel costs and other costs associated with Dealer sales, website advertising, Dealer support and ~~dealer support.~~bad debt expense. Sales and marketing expense in the ~~third~~first quarter of ~~2018~~2019 decreased ~~$0.4~~$0.8 million, or ~~10%~~22%, compared to the ~~third~~first quarter of ~~2017~~2018 due primarily to ~~lower media spend,~~a decrease in SEM and tradeshow expense, partially offset by ~~increased head-count costs.~~compensation and benefits expense related to headcount previously included in Cost of revenues. Further, the 2019 period does not include severance related costs which were incurred in the 2018 period.

Technology ~~Support~~Support.. Technology support expense includes compensation, benefits, software licenses and other direct costs incurred by the Company to enhance, manage, maintain, support, monitor and operate the Company’s websites and related technologies, and to operate the Company’s internal technology infrastructure. Technology support expense in the ~~third~~first quarter of ~~2018 increased~~2019 decreased by ~~$1.2~~$0.6 million, or ~~37%~~18%, compared to the ~~third~~first quarter of ~~2017~~2018 due primarily to ~~severance and other headcount-related~~lower headcount related costs, ~~coupled with~~partially offset by an increase in consulting ~~costs associated with the management realignment of the information technology function in September 2018.~~fees.

General and ~~Administrative~~Administrative.. General and administrative expense consists of executive, financial and legal personnel expenses and costs related to being a public company. General and administrative expense in the ~~third~~first quarter of ~~2018 increased~~2019 decreased by ~~$0.8~~$0.3 million, or ~~29%~~6%, from ~~the third quarter of 2017 due primarily to increased compensation-related costs and increased professional fees.~~

~~Depreciation and Amortization. Depreciation and amortization expense in the third quarter of 2018 decreased $20,000 from the third quarter of 2017 primarily due to normal amortization.~~

~~Long-Lived Asset Impairment.~~ The Company records impairment losses on long-lived assets when events and circumstances indicate that the assets might be impaired. Events that may indicate that the assets might be impaired include, but are not limited to, a significant downturn in the economy, a loss of a major customer or group of customers or a significant decrease in the market value of an asset. During the third quarter of 2018, the Company recorded an impairment of approximately $0.4 million related to the impairment of asset advances to SaleMove which were determined to be non-recoverable at September 30, 2018. In addition, approximately $1.6 million was recorded as an impairment on customer relationships acquired in a 2015 acquisition after an analysis showed that a significant percentage of the acquired customers were no longer part of the dealer base.

~~Other Income (Expense), Net~~. Other income (expense), net increased $0.1 million from the third quarter of 2017 due to a decrease in interest expense of $0.2 million due to payoff of term loans and revolving line of credit in the fourth quarter of 2017 and the first quarter of 2018 ~~and the gain on the sale of our investment in SaleMove, offset by the write-down of our GoMoto investment in the third quarter of 2018.~~

~~Income Taxes.~~Income tax expense was zero in the third quarter of 2018 compared to income tax expense of $81,000 in the third quarter of 2017. Income tax expense quarter over quarter differed from the federal statutory rate primarily due to operating losses that receive no tax benefit as a result of valuation allowances placed on accrued tax assets for such losses.

~~Nine Months Ended September 30, 2018 Compared to the Nine Months Ended September 30, 2017~~

~~The following table sets forth certain statement of operations data for the nine-month periods ended September 30, 2018 and 2017 (certain balances and calculations have been rounded for presentation):~~

(Dollar amounts in thousands)

Cost of revenues - impairment

Long-lived asset impairment

Total operating expenses

Interest and other income (expense), net

Income tax provision

~~Lead Fees. Lead fees revenues decreased $11.9 million, or 14%, in the first nine months of 2018 compared to the first nine months of 2017 primarily due to less efficient traffic acquisition and~~ ~~lower retail dealer count and lead volumes~~.

~~Advertising.~~ Advertising revenues decreased $3.3 million, or 13%, in the first nine months of 2018 compared to the first nine months of 2017 due to a decrease in click revenue of $2.4 million associated with decreased pricing per click coupled with a decrease of $0.9 million associated with display advertising traffic on our website.

~~Other Revenues~~. Other revenues decreased to $0.4 million in the first nine months of 2018 from $0.7 million in the first nine months of 2017 primarily due to lower customer utilization of the mobile product and SaleMove product. The SaleMove Reseller Agreement will expire November 30, 2018.

~~Cost of Revenues~~. Cost of revenues increased $0.5 million in the first nine months of 2018 compared to the first nine months of 2017 primarily due to increased traffic acquisition costs associated with both lead and click volume.

~~Cost of Revenues-Impairment. Cost of revenues-impairment expense of $9.0 million incurred in the nine months ended September 30, 2018 is due to the Company’s decision to~~ ~~terminate the platform support provision of an existing perpetual license used to support the Company’s websites, significantly impacting the usability of the asset by the Company~~ ~~and resulting in an impairment charge to the related intangible asset. The Company did not have a comparable charge in the same period for 2017.~~

~~Gross Profit~~. Gross profit decreased $25.0 million in the first nine months of 2018 compared to the first nine months in 2017 due to decreased revenue and increased cost of revenues as mentioned above. A major contributor to the increased cost of revenues was the one-time impairment charge related to the DealerX license of $9.0 million that was charged to cost of revenues. As a percentage of net revenue, our gross profit was 10% and 32% for the nine months ended September 30, 2018 and 2017, respectively. The decrease was significantly impacted by the $9.0 million impairment charge related to DealerX, which as a percentage of net revenue, was 10%.

~~Sales and Marketing~~. Sales and marketing expense in the first nine months of 2018 decreased $0.6 million, or 6%, compared to the first nine months of 2017 due primarily to lower headcount-related costs and media spend, offset by severance costs.

~~Technology Support. Technology support expense in the first nine months of 2018 increased by $1.1 million, or 11%, compared to the first nine months of 2017~~ due primarily to severance ~~and other headcount-related~~ costs ~~coupled with consulting costs associated with the management realignment of the information technology function in September 2018.~~

~~General and Administrative. General and administrative expense~~ in the ~~first nine months of 2018 increased $2.9 million, or 33%, from the first nine months of 2017 due primarily~~prior year period related to ~~$1.4 million in severance-related costs associated with~~ the termination of the Company’s former ~~CEO~~chief executive officer, offset by an increase in ~~April 2018, coupled with increased compensation-related costs and~~ professional ~~fees.~~fees during the current year period.

Depreciation and Amortization.Depreciation and amortization expense in the first ~~nine months~~quarter of ~~2018 decreased $0.1 million to $3.5~~2019 was $1.2 million compared to ~~$3.6~~$1.2 million in the first ~~nine months~~quarter of ~~2017 primarily due to normal depreciation and amortization.~~2018.

Goodwill impairment. The Company evaluated enterprise goodwill for impairment ~~in the first nine months~~as of March 31, 2018 due to the Company’s decreased stock price since its ~~prior~~ annual goodwill impairment analysis on October 1, 2017. As of March 31, 2018, the carrying value of ~~AWI~~AutoWeb was higher than its fair value based on market capitalization at that date. As a result, a non-cash impairment charge of $5.1 million was recording during the ~~nine~~three months ended ~~September 30,~~March 31, 2018.

~~Long-lived asset impairment.~~ ~~The Company records impairment losses on long-lived assets when events~~Interest and circumstances indicate that the assets might be impaired. Events that may indicate that the assets might be impaired include, but are not limited to, a significant downturn in the economy, a loss of a major customer or group of customers or a significant decrease in the market value of an asset. During the third quarter of 2018, the Company recorded an impairment of approximately $0.4 million related to the impairment of asset advances to SaleMove which were determined to be non-recoverable at September 30, 2018. In addition, approximately $1.6 million was recorded as an impairment on customer relationships acquired in a 2015 acquisition after an analysis showed that a significant percentage of the acquired customers were no longer part of the dealer base.

Other Income (Expense), Net. ~~Other~~Interest and other income (expense), net ~~increased $0.5 million to $0.2 million~~was $70,000 for the first ~~nine months~~quarter of 2018 compared to ~~$(0.3) million~~zero for the first quarter of 2018. Interest expense decreased to $5,000 in the first ~~nine months~~quarter of ~~2017 primarily to a decrease~~2019 from $88,000 in ~~Interest expense~~the first quarter of ~~$0.5 million~~2018 due to the payoff of ~~term loans and~~our revolving line of credit ~~in the fourth quarter of 2017~~ and convertible note during the first quarter of ~~2018.~~2018 and first quarter of 2019, respectively. Other income for the quarter ended March 31, 2019 was $75,000 compared to $88,000 in the prior year period.

Income Taxes. Income tax expense was zero in the first quarter of 2019 compared to expense of $4,000 in the first ~~nine months~~quarter of ~~2018 compared to income tax expense of $0.5 million in the first nine months of 2017.~~2018. Income tax expense for the ~~first nine months of 2018~~quarter ended March 31, 2019 differed from the federal statutory rate primarily due to operating losses that receive no tax benefit as a result of valuation ~~allowances placed on tax assets~~allowance recorded for such losses.

Liquidity and Capital Resources

Nine Months Ended

September 30,

Three Months Ended

March 31,

Our principal sources of liquidity are our cash and cash equivalents balances ~~totaling $15.8~~and borrowings under the $25 million ~~at September~~revolving credit facility we entered into on April 30, ~~2018,~~2019 (“Credit Facility”). Our cash and ~~our cashflows generated from operations. While we~~cash equivalents totaled $10.7 million as of March 31, 2019 compared to $15.2 million as of March 31, 2018.

We believe that our ~~existing sources of liquidity will~~cash and cash equivalents, cashflows from operations and available borrowings under the Credit Facility should be sufficient to ~~fund~~meet our ~~operations~~working capital requirements for the next ~~twelve months, our~~12 months. Our future capital requirements will depend on many factors, including but not limited to, implementing new strategic plans, modernizing and upgrading our technology and systems, pursuing business objectives and responding to business opportunities, challenges or unforeseen circumstances, developing new or improving existing products or services, enhancing our operating infrastructure and acquiring complementary businesses and technologies. If we continue to experience losses and cannot comply with financial covenants in the Credit Facility, we may be unable to borrow funds under the Credit Facility. To the extent that our existing sources of liquidity isare insufficient to fund our future activities, we may need to engage in equity or additional or alternative debt financings to secure additional funds. ~~However,~~There can be no assurance that additional funds ~~may not~~will be available when ~~we need them,~~needed from any source or, if available, will be available on terms that are acceptable to ~~us, or at all.~~us.

For information concerning the Company’s previously announced share repurchase authorization, see Note 5, Notes to Unaudited Consolidated Condensed Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We did not repurchase any shares during the nine months ended September 30, 2018 and 2017.

~~Credit Facility and Term Loan. For information concerning our term and revolving bank loans, see Note 9, Notes to Unaudited Consolidated Condensed Financial Statements included in Part I, Item 1~~-17-

Table of ~~this Quarterly Report on Form 10-Q.~~Contents

Net Cash Provided by (Used in) Operating Activities. Net cash used in operating activities ~~totaled $0.7 million for~~in the ~~nine~~three months ended ~~September 30, 2018, as compared to~~March 31, 2019 of $2.1 million resulted primarily from net loss of $5.4 million, offset by depreciation and amortization of $1.8 million, stock compensation expense of $0.6 million, other non-cash charges of $0.1 million, and a $0.8 million net increase in net working capital.

Net Cash Used in Investing Activities. Net cash used in investing activities was ~~$0.7~~$0.1 million in the ~~nine~~three months ended ~~September 30,~~March 31, 2019 related to purchases of property and equipment.

Net cash used in investing activities was $2.2 million in the nine months ended September 30, 2017, which primarily related to purchases of property and equipment and expenditures related to capitalized internal use software.

Net Cash Used inIn Financing Activities. Net cash used in financing activities of ~~$7.7~~$0.7 million in the ~~nine~~three months ended ~~September 30,~~March 31, 2019 primarily related to $1.0 million repayment of the AutoUSA Note, offset by proceeds of $0.3 million from the exercise of stock options.

Net cash used in financing activities of $4.1 million primarily related to payments of $3.9 million made against the term loan borrowings and $1.2 million used to repurchase Company common stock in the first nine months of 2017.facility. In addition, stock options for ~~191,074~~15,217 shares of the Company’s common stock were exercised in the first ~~nine~~three months of ~~2017~~2018 resulting in ~~$1.1~~$0.1 million cash inflow.

Off-Balance Sheet Arrangements

Delaware		33-0711569
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

18872 MacArthur Boulevard, Suite 200, Irvine, California		92612
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	AUTO	The Nasdaq Capital Market

	INNDEX
		Page
	PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Unaudited Condensed Consolidated ~~Condensed~~ Balance Sheets as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018	1

	Unaudited Condensed Consolidated ~~Condensed~~ Statements of Operations and Comprehensive ~~Income (Loss)~~Loss for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	2

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2019 and 2018	3

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	34

	Notes to Unaudited Condensed Consolidated ~~Condensed~~ Financial Statements	45

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1614

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2318

ITEM 4.	Controls and Procedures	2318

	PART II. OTHER INFORMATION

ITEM 1A.	Risk Factors	2519

ITEM 6.	Exhibits	2720

	Signatures	2821

	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended March 31,
	2018	2017	2018	2017	2019	2018
Basic Shares:
Weighted average common shares outstanding	12,948,150	12,881,812	12,959,666	11,729,181	12,984,592	13,010,948
Weighted average unvested restricted stock	(161,413)	(119,584)	(249,084)	(115,574)	(60,001)	(393,890)
Weighted average common shares repurchased	—	(60,230)	—	(20,297)
Basic Shares	12,786,737	12,701,998	12,710,582	11,593,310	12,924,591	12,617,058

Diluted Shares:
Basic shares	12,786,737	12,701,998	12,710,582	11,593,310	12,924,591	12,617,058
Weighted average dilutive securities	—	498,587	—	621,449	—
Incremental shares from convertible preferred stock	—			1,064,660
Diluted Shares	12,786,737	13,200,585	12,710,582	13,279,419	12,924,591	12,617,058

	Three Months Ended September 30,		Nine Months Ended September 30,		Three Months Ended March 31,
	2018	2017	2018	2017	2019	2018
	(in thousands)
Share-based compensation expense:
Cost of revenues	$2	$20	$21	$59	$—	$15
Sales and marketing	520	409	904	1,222	72	225
Technology support	886	138	1,213	401	41	153
General and administrative(1)	388	397	2,228	1,238	438	1,234
Share-based compensation costs	1,796	964	4,366	2,920	551	1,627

Less amount capitalized to internal use software:	—	1		2
Amount capitalized to internal use software					—	1
Total share-based compensation costs	$1,796	$963	$4,365	$2,918	$551	$1,626

	September 30, 2018	December 31, 2017
	(in thousands)
Other accrued expenses	$7,154	$6,307
Amounts due to customers	392	438
Other current liabilities	437	507
Total other accrued expenses and other current liabilities	$7,983	$7,252

		September 30, 2018 (in thousands)			December 31, 2017 (in thousands)				March 31, 2019			December 31, 2018
Definite-lived Intangible Asset	Estimated Useful Life	Gross	Accumulated Amortization	Net	Gross	Accumulated Amortization	Net	Estimated Useful Life	Gross	Accumulated Amortization	Net	Gross	Accumulated Amortization	Net
Trademarks/trade names/licenses/domains	3 -7 years	$16,589	$(14,734)	$1,855	$16,589	$(4,037)	$12,552
Software and publications	3 years	1,300	(1,300)	—	1,300	(1,300)	—

Trademarks/trade names/licenses/ domains								3 – 7 years	$16,589	$(15,053)	$1,536	$16,589	$(14,914)	$1,675
Customer relationships	2 - 10 years	19,563	(14,485)	5,078	19,563	(10,555)	9,008	2 - 5 years	19,563	(16,491)	3,072	19,563	(15,544)	4,019
Employment/non-compete agreements	1 - 5 years	1,510	(1,510)	—	1,510	(1,493)	17
Developed technology	5 - 7 years	8,955	(4,601)	4,354	8,955	(3,619)	5,336	5 - 7 years	8,955	(5,145)	3,810	8,955	(4,873)	4,082
		$47,917	$(36,630)	$11,287	$47,917	$(21,004)	$26,913		$45,107	$(36,689)	$8,418	$45,107	$(35,331)	$9,776

		September 30, 2018			December 31, 2017
Indefinite-lived Intangible Asset	Estimated Useful Life	Gross	Accumulated Amortization	Net	Gross	Accumulated Amortization	Net
Domain	Indefinite	$2,200	$—	$2,200	$2,200	$—	$2,200

	2018	% of total revenues	2017	% of total revenues	$ Change	% Change
	(Dollar amounts in thousands)
Revenues:
Lead fees	$24,986	79%	$27,711	75%	$(2,725)	(10)%
Advertising	6,606	21	8,946	24	(2,340)	(26)
Other revenues	103	—	215	1	(112)	(52)
Total revenues	31,695	100	36,872	100	(5,177)	(14)
Cost of revenues	26,278	83	25,786	70	492	2
Cost of revenues - impairment	9,014	28	—	—	9,014	N/A
Gross (loss) profit	(3,597)	(11)	11,086	30	(14,683)	N/A
Operating expenses:
Sales and marketing	3,333	11	3,692	10	(359)	(10)
Technology support	4,303	14	3,141	9	1,161	37
General and administrative	3,639	11	2,818	7	821	29
Depreciation and amortization	1,172	4	1,192	3	(20)	(2)
Goodwill Impairment	—	—	—	—	—	—
Long-lived asset impairment	1,968	6	—	—	1,968	N/A
Total operating expenses	14,415	45	10,843	29	3,572	33
Operating (loss) income	(18,012)	(57)	243	1	(18,255)	N/A
Interest and other income (expense), net	(24)	—	(93)	—	69	(74)
(Loss) Income before income tax provision	(18,036)	(57)	150	—	(18,186)	N/A
Income tax provision	—	—	81	—	(81)	N/A
Net (loss) income	$(18,036)	(57)%	$69	—%	$(18,105)	N/A

~~2.1~~‡ Number	Asset Purchase and Sale Agreement dated as of December 19, 2016 by and among AutoWeb, Inc., Car.com, Inc., a Delaware corporation, and Internet Brands, Inc., a Delaware corporation, incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on December 21, 2016 (SEC File No. 001-34761)Description

3.1	Sixth Restated Certificate of Incorporation of AutoWeb, Inc., incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K filed with the SEC on October 10, 2017 (SEC File No. 001-34761) (“(“October 2017 Form 8-K”)

3.2	Seventh Amended and Restated Bylaws of AutoWeb, Inc. dated October 9, 2017, incorporated by reference to Exhibit 3.5 to the October 2017 Form 8-K

4.1	Tax Benefit Preservation Plan dated as of May 26, 2010 between Company and Computershare Trust Company, N.A., as rights agent, together with the following exhibits thereto: Exhibit A – Form of Right Certificate; and Exhibit B – Summary of Rights to Purchase Shares of Preferred Stock of Company, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on June 2, 2010 (SEC File No. 000-22239), Amendment No. 1 to Tax Benefit Preservation Plan dated as of April 14, 2014, between Company and Computershare Trust Company, N.A., as rights agent, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on April 16, 2014 (SEC File No. 001-34761), Amendment No. 2 to Tax Benefit Preservation Plan dated as of April 13, 2017, between Company and Computershare Trust Company, N.A., as rights agent, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on April 14, 2017 (SEC File No. 001-34761)

4.2	Certificate of Adjustment Under Section 11(m) of the Tax Benefit Preservation Plan, incorporated by reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 filed with the SEC on November 8, 2012 (SEC File No. 001-34761)

10.1 ■	~~10.1~~■*	Offer of Employment between Daniel Ingle and Company dated ~~as of October 2,~~November 26, 2018, ~~between Company and Sara Partin~~incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 16, 2019 (SEC File No. 001-34761).

10.2 ■	~~10.2~~■*	Inducement Stock Option Award Agreement dated as of ~~October 22,~~January 16, 2019 between Daniel Ingle and Company, incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K for the Year Ended December 31, 2018 (SEC File No. 001-34761).

10.3 ■	Severance Benefits Agreement dated January 16, 2019 between ~~Company~~Daniel Ingle and ~~Sara Partin~~Company, incorporated by reference to Exhibit 10.26 to the Annual Report on Form 10-K for the Year Ended December 31, 2018 (SEC File No. 001-34761).

10.4	Revolving Credit and Security Agreement by and among PNC Bank, National Association, as Agent, the Lenders Party thereto, and AutoWeb, Inc., as Borrower, and Car.com, Inc., Autobytel, Inc., and AW GUA USA, Inc., as guarantors, dated April 30, 2019, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on May 1, 2019 (SEC File No. 001-34761).

~~10.3~~31.1■	~~Indemnification Agreement~~Chief Executive Officer Section 302 Certification of Periodic Report dated ~~as of October 22, 2018 between Company and Sara Partin~~May 9, 2019.

~~10.~~31.24■	~~Severance Benefits Agreement~~Chief Financial Officer Section 302 Certification of Periodic Report dated ~~October 22, 2018 between Company and Sara Partin~~May 9, 2019.

~~31.1~~32.1**	~~Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer~~

~~31.2~~*	~~Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer~~

~~32.1~~*	~~Section 1350 Certification by Principal~~Chief Executive Officer and ~~Principal~~Chief Financial Officer Section 906 Certification of Periodic Report dated May 9, 2019.

101.INS††	XBRL Instance Document

101.SCH††	XBRL Taxonomy Extension Schema Document

101.CAL††	XBRL Taxonomy Calculation Linkbase Document

101.DEF††	XBRL Taxonomy Extension Definition Document

101.LAB††	XBRL Taxonomy Label Linkbase Document

101.PRE††	XBRL Taxonomy Presentation Linkbase Document


Date: May 9, 2019	By:	/s/ Joseph P. Hannan
		Joseph P. Hannan
		Executive Vice President, Chief Financial Officer (Principal Financial Officer)


Date: ~~November 8, 2018~~May 9, 2019	By:	/s/ Wesley Ozima
		Wesley Ozima
		Senior Vice President and ~~Interim Chief Financial Officer~~ Controller
		(Principal ~~Financial and~~ Accounting ~~Officer)~~Officer)