UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended ~~September~~June 30, ~~2021~~2022

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

For the transition period from to

Commission file number 1-34761

AutoWeb, Inc.

(Exact name of registrant as specified in its charter)

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

400 North Ashley Drive, Suite 300

Tampa, Florida 33602

(Address of principal executive offices) (Zip Code)

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

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


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

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

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

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
	Emerging growth company ☐

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

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

As of ~~November 2, 2021,~~August 9, 2022, there were ~~13,465,871~~14,051,149 shares of the Registrant’s Common Stock, $0.001 par value, outstanding.

	September 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	9,868		$	10,803		$	2,716		$	7,315
Restricted cash		4,312			4,304			100			4,314
Accounts receivable, net of allowances for bad debts and customer credits of $374 and $406 at September 30, 2021 and December 31, 2020, respectively		12,796			13,955
Accounts receivable, net of allowances for bad debts and customer credits of $47 and $101 at June 30, 2022, and December 31, 2021, respectively								10,039			11,433
Vehicle inventory		189			0			0			1,076
Prepaid expenses and other current assets		1,287			847			1,207			998
Total current assets		28,452			29,909			14,062			25,136
Property and equipment, net		3,769			2,953			3,753			3,853
Right-of-use assets		2,232			2,892			1,642			1,993
Intangible assets, net		3,927			4,733			3,047			3,634
Other assets		518			642			409			516
Total assets	$	38,898		$	41,129		$	22,913		$	35,132
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		7,955			7,233		$	8,019		$	7,705
Borrowings under revolving credit facility		10,005			10,185			4,743			10,001
Current portion of the PPP Loan		0			1,384
Accrued employee-related benefits		2,691			2,123			1,883			1,782
Other accrued expenses and other current liabilities		845			538			1,401			610
Current portion of lease liabilities		882			1,015			727			781
Current portion of financing debt		67			65
Financing debt								32			64
Total current liabilities		22,445			22,543			16,805			20,943
Lease liabilities, net of current portion		1,598			2,191			1,116			1,432
Financing debt, net of current portion		12			60
Total liabilities		24,055			24,794			17,921			22,375
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value, 11,445,187 shares authorized Series A Preferred stock, 2,000,000 shares authorized, none- issued and outstanding at September 30, 2021 and December 31, 2020		0			0
Common stock, $0.001 par value; 55,000,000 shares authorized, and 13,465,871 and 13,169,204 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		13			13
Preferred stock, $0.001 par value, 11,445,187 shares authorized
Series A Preferred Stock, 2,000,000 shares authorized, none- issued and outstanding at June 30, 2022, and December 31, 2021, respectively.								0			0
Common stock, $0.001 par value; 55,000,000 shares authorized, 14,051,149 and 13,489,482 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively.								14			13
Additional paid-in capital		367,645			366,087			369,158			368,168
Accumulated deficit		(352,815	)		(349,765	)		(364,180	)		(355,424	)
Total stockholders’ equity		14,843			16,335			4,992			12,757
Total liabilities and stockholders’ equity	$	38,898		$	41,129		$	22,913		$	35,132

See accompanying notes to unaudited condensed consolidated financial statements.

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

Revenues:
Lead generation	$	9,503		$	15,225		$	20,079		$	29,411
Digital advertising		4,012			3,511			8,149			7,205
Used vehicle sales		3,680			0			8,031			0
Total revenues		17,195			18,736			36,259			36,616
Cost of revenues – lead generation and digital advertising		10,017			12,179			20,971			24,250
Cost of revenues – used vehicles		3,497			0			7,703			0
Gross profit		3,681			6,557			7,585			12,366
Operating expenses:
Sales and marketing		2,303			2,103			4,953			4,303
Technology support		1,702			1,271			3,235			2,638
General and administrative		3,793			3,089			7,355			6,221
Depreciation and amortization		84			196			148			400
Total operating expenses		7,882			6,659			15,691			13,562

Operating loss		(4,201	)		(102	)		(8,106	)		(1,196	)
Interest and other (expense) income:
Interest expense, net		(234	)		(248	)		(500	)		(498	)
Other (expense) income		(14	)		46			(24	)		1,700
(Loss) income before income tax provision		(4,449	)		(304	)		(8,630	)		6
Income tax provision		0			0			126			0
Net (loss) income	$	(4,449	)	$	(304	)	$	(8,756	)	$	6

Basic (loss) income per common share	$	(0.33	)	$	(0.02	)	$	(0.66	)	$	0.00

Diluted (loss) income per common share	$	(0.33	)	$	(0.02	)	$	(0.66	)	$	0.00

See accompanying notes to unaudited condensed consolidated financial statements.

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Revenues:

Lead generation
$ 12,030 $ 14,759 $ 41,444 $ 47,496
Digital advertising
3,525 3,054 10,727 11,822
Used vehicle sales
1,604 0 1,604 0
Total revenues
17,159 17,813 53,775 59,318
Cost of revenues:

Cost of revenues – lead generation and digital advertising
11,280 11,390 35,530 41,498
Cost of revenues – used vehicles sales
1,446 0 1,446 0
Total cost of revenues
12,726 11,390 36,976 41,498
Gross profit
4,433 6,423 16,799 17,820
Operating expenses:

Sales and marketing
2,465 1,904 6,768 6,062
Technology support
1,395 1,451 4,034 5,094
General and administrative
3,260 3,110 9,479 9,954
Depreciation and amortization
179 225 579 1,506
Total operating expenses
7,299 6,690 20,860 22,616

Operating loss
(2,866 ) (267 ) (4,061 ) (4,796 )
Interest and other (expense) income:

Interest (expense) income, net
(253 ) (233 ) (752 ) (1,270 )
Other income
63 52 1,763 183
Loss before income tax provision
(3,056 ) (448 ) (3,050 ) (5,883 )
Income tax provision
0 0 0 0
Net loss
$ (3,056 ) $ (448 ) $ (3,050 ) $ (5,883 )

Basic loss per common share
$ (0.23 ) $ (0.03 ) $ (0.23 ) $ (0.45 )

Diluted loss per common share
$ (0.23 ) $ (0.03 ) $ (0.23 ) $ (0.45 )

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

Three Months Ended September, 2020

Common Stock

Preferred Stock

Additional

Number of Shares

Amount

Number of Shares

Amount
Paid-In Capital Accumulated Deficit
Total

Balance at June 30, 2020
13,146,831 $ 13 0 $ 0 $ 365,056 $ (348,380 ) $ 16,689
Share-based compensation
— 0 — 0 497 0 497
Issuance of common stock upon exercise of stock options
22,213 0 0 0 74 0 74
Net loss
— 0 — 0 0 (448 ) (448 )
Balance at September 30, 2020
13,169,044 $ 13 0 $ 0 $ 365,627 $ (348,828 ) $ 16,812

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

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY CONTINUED

Nine Months Ended September 30, 2020

Common Stock

Preferred Stock

Additional

Number of Shares

Amount

Number of Shares

Amount
Paid-In Capital Accumulated Deficit
Total

Balance at December 31, 2019
13,146,831 $ 13 0 $ 0 $ 364,028 $ (342,945 ) $ 21,096
Share-based compensation
— 0 — 0 1,525 0 1,525
Issuance of common stock upon exercise of stock options
22,213 0 0 0 74 0 74
Net loss
— 0 — 0 0 (5,883 ) (5,883 )
Balance at September 30, 2020
13,169,044 $ 13 0 $ 0 $ 365,627 $ (348,828 ) $ 16,812

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

Six Months Ended June 30, 2022
	Common Stock					Preferred Stock				Additional Paid-in-		Accumulated
	Number of Shares			Amount		Number of Shares		Amount			Capital		Deficit		Total

Balance at December 31, 2021		13,489,482		$	13		0	$	0	$	368,168	$	(355,424	)	$	12,757
Share-based compensation		—			0		—		0		990		0			990
Issuance of restricted stock		575,000			1		0		0		0		0			1
Cancellation of restricted stock		(13,333	)		—		0		—		—		—			—
Net loss		—			0		—		0		0		(8,756	)		(8,756	)
Balance at June 30, 2022		14,051,149		$	14		0		0	$	369,158	$	(364,180	)	$	4,992

	Nine Months Ended September 30,						Six Months Ended June 30,
	2021			2020			2022			2021
Cash flows from operating activities:
Net loss	$	(3,050	)	$	(5,883	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net (loss) income							$	(8,756	)	$	6
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,920			2,975			1,150			1,266
Provision for bad debts		(242	)		321
Provision for customer credits		321			75
(Recoveries)/provision, net								(13	)		9
Forgiveness of PPP loan		(1,384	)		0			0			(1,384	)
Share-based compensation		1,382			1,525			990			924
Right-of-use assets		660			1,107
Amortization of right-of-use assets								421			453
Gain on disposal of assets								(1	)		0
Deferred tax liability								110			0
Changes in assets and liabilities:
Accounts receivable		1,080			9,072			1,407			(914	)
Prepaid expenses and other current assets		(440	)		120			(209	)		(553	)
Vehicle inventory		(189	)		0			1,076			0
Other assets		124			(36	)		107			134
Accounts payable		446			(6,642	)		193			950
Accrued expenses and other current liabilities		800			(320	)		857			309
Lease liabilities		(726	)		(1,001	)		(440	)		(492	)
Net cash provided by operating activities		702			1,313
Net cash (used in) provided by operating activities								(3,108	)		708
Cash flows from investing activities:
Purchases of property and equipment		(1,254	)		(396	)		(340	)		(770	)
Purchase of intangible asset		(325	)		0			(75	)		0
Net cash used in investing activities		(1,579	)		(396	)		(415	)		(770	)
Cash flows from financing activities:
Borrowings under PNC credit facility		0			28,564
Principal payments on PNC credit facility		0			(32,308	)
Borrowings under CNC credit facility		54,561			53,612			36,111			35,471
Principal payments on CNC credit facility		(54,741	)		(43,588	)		(41,369	)		(35,501	)
Borrowings under the PPP Loan		0			1,384
Payments under financing agreement								(32	)		(33	)
Proceeds from exercise of stock options		176			74			0			176
Payments under financing agreement		(46	)		(29	)
Net cash (used in) provided by financing activities		(50	)		7,709			(5,290	)		113
Net increase (decrease) in cash and cash equivalents and restricted cash		(927	)		8,626
Net (decrease) increase in cash and cash equivalents								(8,813	)		51
Cash and cash equivalents and restricted cash, beginning of period		15,107			5,946			11,629			15,107
Cash and cash equivalents and restricted cash, end of period	$	14,180		$	14,572		$	2,816		$	15,158

Reconciliation of cash and cash equivalents and restricted cash
Cash and cash equivalents at beginning of period	$	10,803		$	892		$	7,315		$	10,803
Restricted cash at beginning of period		4,304			5,054			4,314			4,304
Cash and cash equivalents and restricted cash at beginning of period	$	15,107		$	5,946		$	11,629		$	15,107

Cash and cash equivalents at end of period	$	9,868		$	11,270		$	2,716		$	10,849
Restricted cash at end of period		4,312			3,302			100			4,309
Cash and cash equivalents and restricted cash at end of period	$	14,180		$	14,572		$	2,816		$	15,158

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	0		$	1		$	12		$	0
Cash refunds for income taxes		1			814		$	0		$	1
Cash paid for interest	$	656		$	640		$	427		$	435
Supplemental disclosure of non-cash financing activities
Supplemental disclosure of non-cash financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	0		$	1,535		$	70		$	0
Purchase of fixed assets or capitalized software on account	$	276		$	142
Financing for the purchase of fixed assets	$	0		$	140
Intangible asset holdback	$	75		$	0
Purchases on account related to capitalized software							$	122		$	276

See accompanying notes to unaudited condensed consolidated financial statements.

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

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

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

On ~~July 31, 2021,~~ The Company has also generated revenue through its used vehicle acquisition business by offering automotive consumers an option to sell their used vehicle outside of a dealership location through the ~~Company and~~Company’s wholly owned subsidiary, Tradein Expert, Inc., ~~a Delaware corporation and wholly owned subsidiary of the Company (“~~~~Tradein Expert~~~~”), entered into and consummated an Asset Purchase Agreement (“~~~~Purchase Agreement~~~~”), by and among the Company, Tradein Expert, Car Acquisition, LLC, a Texas limited liability company~~ dba CarZeus, (“~~Seller~~~~”), Carzuz.com LLC, a Texas limited liability company, McCombs Family Partners, Ltd., a Texas limited partnership~~ and Phil Kandera, an individual, pursuant to which Tradein Expert acquired specified assets of Seller’s San Antonio, Texas-based used vehicle acquisition platform that operates under the name CarZeus (“~~CarZeus Purchase Transaction~~~~”).. Through the Tradein Expert entity (dba CarZeus), the Company purchases~~then reselling these used vehicles ~~directly from consumers and resells them~~indirectly to Dealers through wholesale ~~channels, with the CarZeus operations within AutoWeb beginning on~~ ~~August 1, 2021.~~

The aggregate consideration for the CarZeus Purchase Transaction was $0.4 million in cash. The Purchase Agreement contains representations, warranties, covenants, and conditions that the Company believes are customary for a transaction of this size and type, as well as indemnification provisions subjectauctions or through direct to ~~specified conditions, including a~~ ~~six~~~~-month holdback of approximately $0.1 million (“~~~~Holdback Amount~~~~”) of the purchase price as a source of security for any indemnification obligations.~~Dealer sales. On ~~August 2, 2021,~~May 16, 2022, the Company ~~paid approximately $0.3 million of the purchase consideration,~~suspended its CarZeus operations and ~~subject~~furloughed its employees within that segment in order to ~~any indemnification obligations arising, the Holdback Amount is payable to the Seller on~~ ~~January 31, 2022.~~conserve cash.

The accompanying unaudited condensed consolidated financial statements are presented on the same basis as the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (“~~2020~~2021 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on March 24, 2022 pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”). ~~AutoWeb~~The Company has made its disclosures in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 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 Company management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included. The unaudited condensed consolidated ~~statement of operations and cash flows for the period ended~~ ~~September 30, 2021,~~ ~~are~~ ~~not~~ ~~necessarily indicative of the results of operations or cash flows expected for the year or any other period. The unaudited condensed consolidated~~ financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the ~~2020~~2021 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 condensed consolidated financial statement sections are in thousands, except share and per share data, unless otherwise specified.

During the six-month period ended June 30, 2022, the Company incurred a net loss of $8.8 million and had net cash flows used in operating activities of $3.1 million. On June 30, 2022, the Company had $2.7 million in cash and cash equivalents and an accumulated deficit of $364.2 million. Based on current operating and cash forecasts, the Company anticipates that it will exhaust its remaining cash resources during September 2022, and the Company’s management believes that there is substantial doubt about the Company’s ability to continue as a going concern for a period of ~~September 30, 2021,~~ one year after the date the financial statements contained in this Quarterly Report on Form 10-Q are issued, subject to the consummation of the Transactions (as defined and discussed below).

As previously reported in its Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2020,~~ 2022 (“~~restricted~~Q1 Form 10-Q”), which was filed with the SEC on May 16, 2022, a Special Committee of the Company’s Board of Directors (“Board”) consisting of independent, disinterested directors (“Special Committee”) was created to explore strategic alternatives for the Company and consider a full range of operational, financial, and other strategic alternatives, including a potential change of control transaction and the Company remaining independent (“Strategic Alternatives”). The Special Committee retained Houlihan Lokey Capital, Inc. as its financial advisor to assist with this process. Strategic Alternatives that were explored or evaluated as part of this process included:

In addition, the Company management implemented near-term operating plans to address the Company’s near-term cash ~~primarily consisted~~and liquidity needs (“Near-Term Operating Plans”), which plans included:

The Special Committee and the Company’s management team, working with the Company’s financial, legal and other advisers, proceeded with a review of ~~pledged~~Strategic Alternatives, including reaching out to potential bidders and investors. Based on a careful review and consideration of Strategic Alternatives, as previously reported in the Company’s Current Report on Form 8-K filed with the SEC on July 25, 2022 (“ July 25^th Form 8-K”), on July 24, 2022, the Board, upon the unanimous recommendation of the Special Committee, approved, and the Company entered into a definitive Agreement and Plan of Merger (“MergerAgreement”), by and among Unity AC 1, LLC, a Delaware limited liability company (“Parent”), Unity AC 2, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Purchaser”), and the Company. Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, on August 3, 2022, Purchaser commenced a tender offer (the “Offer”) to acquire all of the Company’s outstanding shares of common stock, par value $0.001 per share (“CompanyCommon Stock”), at a price of $0.39 per share in cash without interest (“Offer Price”). Parent and Purchaser are wholly-owned direct and indirect, respectively, subsidiaries of One Planet Group, LLC, a Delaware limited liability company (“One Planet Group”). Pursuant to the Merger Agreement, as soon as practicable after acquiring sufficient shares of Company Common Stock pursuant to the ~~CIT Northbridge Credit~~Offer, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Purchaser will merge with and into Company, and Company will become a wholly-owned subsidiary of Parent (the “Merger”), in accordance with Section 251(h) of the Delaware General Corporation Law (the “DGCL”), without a meeting or vote of the Company’s stockholders. The Offer, the Merger and the other transactions contemplated by the Merger Agreement are collectively referred to as the “Transactions.”

In connection with the execution of the Merger Agreement, certain of the Company’s stockholders, including certain officers, directors and stockholders affiliated with such directors, and certain other stockholders, and comprising approximately 40% of the outstanding shares of Company Common Stock, entered into Tender and Support Agreements with Parent and Purchaser, whereby such stockholders have agreed to tender and not to withdraw the shares of Company Common Stock held by them in the Offer and to vote such shares in a manner favorable to the Offer and the Merger. The Tender and Support Agreements terminate upon any termination of the Merger Agreement.

Consummation of the Transactions is subject to customary closing conditions, including that a majority of the outstanding shares of the Company Common Stock are tendered in the Offer. The Company believes that there is substantial doubt about the ability to continue as a going concern and the Company is dependent upon consummating the Transactions. The acquisition of the Company provided for in the Merger Agreement is largely outside of the Company’s control as it is subject to a tender offer which will not be concluded until after the filing of this Quarterly Report on Form 10-Q. The Company has therefore concluded that this does not mitigate the substantial doubt raised surrounding the Company’s ability to continue as a going concern. There can be no assurance that the Company will be successful in consummating the Transactions, and if unsuccessful, the Company believes that it will have no alternative other than to liquidate or to seek protection under U.S. bankruptcy laws.

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

As previously disclosed, on June 30, 2022, the Company received a written notification (“Notice”) from the Listing Qualifications department of the Nasdaq Stock Market LLC (“~~CNC Credit Agreement~~NASDAQ”) ~~discussed in Note~~advising the Company that the closing bid price of our common stock (“Common Stock”) for the previous 930 consecutive business days had been below the minimum $1.00 per share (“Minimum Bid Price Requirement”) required for continued listing on The Nasdaq Capital Market pursuant to NASDAQ Listing Rule 5550(a)(2) (“Rule”). The Notice has no immediate effect on the listing of ~~these Notes~~the Common Stock on The Nasdaq Capital Market.

Pursuant to ~~Unaudited Condensed Consolidated Financial Statements.~~NASDAQ Listing Rule 5810(c)(3)(A), the Company has been provided an initial grace period of 180 calendar days, or until December 27, 2022, to regain compliance with the Minimum Bid Price Requirement. The Notice further provides that NASDAQ will provide written confirmation stating that the Company has achieved compliance with the Rule if at any time before December 27, 2022, the bid price of the Common Stock closes at $1.00 per share or more for a minimum of 10 consecutive business days. There can be no assurance that the Company will regain compliance with the Minimum Bid Price Requirement or maintain compliance with any of the other continued listing requirements to remain listed on The Nasdaq Capital Market.

If the Merger is consummated, the Company Common Stock will be delisted from The Nasdaq Capital Market and deregistered under the Securities Exchange Act of 1934 (the “Exchange Act”)

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

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

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

Leads are generally sold with a right-of-return for services that do not meet customer requirements as specified by the relevant contract. Some leads are also ~~are subject to pricing adjustments based~~contingent upon their subsequent conversion into vehicle ~~sales. Rights-of-return~~sales which may require pricing adjustments. Rights-of-returns and lead conversions are estimable, and provisions for these estimates are recorded as a reduction in revenue by the Company in the period revenue is recognized, and thereby accounted for as variable consideration. The Company includes the allowance for customer credits in its net accounts receivable balances on the Company’s balance sheet at period end. ~~Allowances~~The Company did not have an allowance for customer credits as of June 30, 2022. The allowance for customer credits approximated ~~$304,000 and $64,000 at~~ ~~September 30, 2021~~ ~~and~~$27,000 as of December 31, ~~2020,~~ 2021.~~respectively.~~

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

The Company defers the recognition of revenue when cash payments are received or due in advance of satisfying the Company’s performance obligations, including amounts which are refundable. Such activity is not typical for the Company. The Company had ~~zero~~0 deferred revenue included in its condensed consolidated balance sheets as of ~~September~~June 30, ~~2021,~~2022, and December 31, ~~2020.~~2021. Payment terms and conditions can vary by contract type. Generally, payment terms within the Company’s customer contracts include a requirement of payment within 30 to 60 days from date of invoice. Typically, customers make payments after receipt of invoice for billed services, and less typically, in advance of rendered services.

The Company has not made any significant changes in applying ASC 606 during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

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

The following table summarizes revenue from contracts with customers, disaggregated by revenue source, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020.~~2021. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. ~~The table is in line with our reportable segments (see Note~~ 12 ~~– Segment Reporting)~~

5. Net ~~Loss~~(Loss) Income Per Share ~~and Stockholders~~’ ~~Equity~~

Basic net ~~loss~~(loss) income per share is computed using the weighted average number of common shares outstanding during the three-and-~~nine~~six-month ~~periods reflected in the following table,~~ended June 30, 2022, and 2021, excluding any unvested restricted stock. Diluted net ~~loss~~(loss) income per share is computed using the weighted average number of common shares, and if dilutive, potential common shares outstanding, as determined under the treasury stock and if-converted methods, during the ~~period.~~three-and-six-month ended June 30, 2022, and 2021. Potential common shares consist of unvested restricted stock, ~~and~~ common shares issuable upon the exercise of stock options and the exercise of warrants.

The following are the share amounts utilized to compute the basic and diluted net ~~loss~~(loss) income per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020:~~2021:

For the three and ~~nine~~six months ended ~~September~~June 30, 2022, and the three months ended June 30, 2021, ~~and~~ ~~2020,~~the Company’s basic and diluted net loss per share ~~and weighted-average number of shares~~ are the same because the Company generated a net loss for the period and potentially dilutive securities are excluded from diluted net loss per share because they have an anti-dilutive impact.

For the ~~three~~ ~~and~~ ~~nine~~six months ended ~~September~~June 30, 2021, ~~4.6 million~~weighted average dilutive securities include dilutive options and ~~4.6 million~~restricted stock awards.

For the three and six months ended June 30, 2022, the Company had 13,932 and 31,823, respectively, of potentially anti-dilutive securities related to common stock that have been excluded from the calculation of diluted net earnings per ~~share, respectively.~~share. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, ~~3.9~~the Company had 4.6 million and ~~3.9~~4.5 million of potentially anti-dilutive securities related to common stock that have been excluded from the calculation of diluted net earnings per ~~share, respectively.~~share.

Share-based compensation expense is included in ~~the following operating expense categories in the accompanying Unaudited Condensed Consolidated Statements of Operations:~~costs as follows:

~~There was~~ no ~~share-based compensation that was capitalized related to the development of internal use software.~~

~~Stock~~Service-Based Options. The Company granted the following ~~stock~~service-based options for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, and ~~2020,~~2021, respectively:

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

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

Stock option exercises. The following stock options were exercised during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, and ~~2020,~~2021, respectively:

A summary of the Company’s outstanding stock options as of ~~September~~June 30, ~~2021,~~2022, and changes during the six months then ended is presented below:

Restricted Stock Awards. The Company granted an aggregate of 575,000 and 220,000 restricted stock awards (“RSAs”) into certain executive officers of the Company during the first quarter of 2022 and 2021, ~~to certain executive officers of the Company.~~respectively. The 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. Lapsing of the forfeiture restrictions may be accelerated in the event of a change in control of the Company and will accelerate upon the death or disability of the holder of the RSAs.

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

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

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

Amortization expense is included in “Cost of revenues – lead generation and digital advertising” and “Depreciation and amortization” in the Unaudited Consolidated Condensed Statements of Operations. Total amortization expense was $0.3 million and $0.6 million for the three and six months ended June 30, 2022, respectively. Amortization expense was $0.4 million and $0.8 million for the three and six months ended June 30, 2021, respectively.

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

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

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

Accounts receivable are primarily derived from fees billed to Dealers and ~~Manufacturers as well as used vehicle sales.~~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~~ accounts receivable balances. Approximately ~~59%~~60%, or ~~$7.5~~$6.0 million, of gross accounts receivable at ~~September~~June 30, ~~2021,~~2022, and approximately ~~39%~~36% of total revenues for the ~~nine~~six months ended ~~September~~June 30,2022, are related to Carat Detroit (General Motors), Urban Science Applications (which represents Acura, Honda, Subaru, and Volvo), Autodata Solutions and Shift Digital.

During 2021, approximately 64%, or $9.7 million, of gross accounts receivable at June 30, 2021, and approximately 46% of total revenues for the six months ended June 30, 2021, are related to Urban Science Applications, Carat Detroit, ~~(General Motors) and Autodata Solutions. For~~ ~~2020,~~ ~~approximately 64%, or $9.3 million, of gross accounts receivable at~~ ~~September 30, 2020,~~ ~~and approximately 46% of total revenues for the~~ ~~nine~~ ~~months ended~~ ~~September~~ ~~30,~~~~2020,~~ ~~are related to Urban Science Applications, Carat Detroit (General Motors),~~ Ford Direct and Autodata Solutions.

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

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

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

Amortization expense is included in “Cost of revenues” and “Depreciation and amortization” in the Unaudited Condensed Consolidated Statements of Operations. Total amortization expense was $0.4 million and $1.2 million for the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2021,~~ ~~respectively. Amortization expense was $0.4 million and $2.0 million for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020,~~ ~~respectively.~~

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

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

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

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

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

Rent expense included in operating expenses and cost of revenue was $0.3 million and ~~$0.9~~$0.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022, respectively. The Company had a weighted average remaining lease term of ~~3.0~~2.5 years and a weighted average discount rate of ~~6.25% for leases prior to~~ ~~July 2021.~~ ~~For leases on or after~~ ~~August 2021~~ ~~the weighted average discount rate was 7.25%~~6.28%. Rent expense included in operating expenses and cost of revenue was ~~$0.4~~$0.3 million and ~~$1.3~~$0.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021, respectively. The Company had a weighted average remaining lease term of ~~2.9~~3.2 years and a weighted average discount rate of 6.25% ~~as of~~.

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

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

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

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

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

On May 26, 2022, the Company entered into a Fourth Amendment to Loan, Security and Guarantee Agreement (“Credit Facility Fourth Amendment”) with CNC to amend the Company’s existing Loan, Security and Guarantee Agreement with CNC initially entered into on March 26, 2020, as amended on May 18, 2020, July 30, 2021, and September 13, 2021.

The Credit Facility Fourth Amendment provides for (i) a reduction in the minimum borrowing usage requirement from forty percent (40%) to twenty percent (20%) of the aggregate revolver commitments under the existing Loan Agreement, which resulted in a reduction in the minimum borrowing usage requirement from $8.0 million to $4.0 million; (ii) a reduction in the base amount used to calculate the underusage fee from $10.0 million to $6.0 million; and (iii) application of the approximately $4.0 million in the Company’s restricted cash account used as collateral under the Credit Facility Agreement to reduce the current outstanding loan balance under the existing Loan Agreement by this amount.

The Credit Facility Fourth Amendment also amends the existing Loan Agreement to allow the financing of insurance premiums for the 2022-2023 renewal period and that any liens on the associated insurance policies or proceeds thereof that secure the financing of the insurance premiums shall be permitted liens.

As of June 30, 2022, the Company had ~~$10.0~~$4.7 million outstanding under the CNC Credit Agreement and approximately ~~$0.8~~$0.1 million of net availability. ~~To increase the borrowing base sufficient enough to meet the minimum borrowing usage requirement, the Company, on~~ ~~June 29, 2020,~~ placed $3.0 million into a restricted cash account that provided for greater availability under the CNC Credit Agreement. The Company placed an additional $1.0 million into the same restricted cash account in ~~December 2020.~~ ~~The Company can borrow up to 97.5% of the total restricted cash amount. The restricted cash accrues interest at a variable rate currently averaging 0.25% per annum.~~

Financing costs related to the CNC Credit Agreement, net of accumulated amortization, of approximately ~~$0.3~~$0.2 million, have been deferred over the initial term of the loan and are included in other assets as of ~~September~~June 30, ~~2021.~~2022. The interest rate per annum applicable to borrowings under the CNC Credit Agreement is the LIBO ~~Rate (as defined in the CNC Credit Agreement)~~ plus 5.5%. The LIBO Rate is equal to the greater of (i) 1.75%, and (ii) the rate determined by the Agent to be equal to the quotient obtained by dividing (1) the LIBO Base Rate (i.e., the rate per annum determined by Agent to be the offered rate that appears on the applicable Bloomberg page) for the applicable LIBOR Loan for the applicable interest period by (2) one minus the Eurodollar Reserve Percentage (i.e., the reserve percentage in effect under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement with respect to Eurocurrency funding for the applicable LIBOR Loan for the applicable interest period). If adequate and reasonable means do not exist for ascertaining or the LIBOR rate is no longer available, the Company and the Agent may amend the CNC Credit Agreement to replace LIBOR with an alternate benchmark rate. If no LIBOR successor rate is determined, the obligation of the lenders to make or maintain LIBOR loans will be suspended and the LIBO Base Rate component will no longer be utilized in determining the base rate.

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

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

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

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

OnAs of ~~September 13,~~June 30, 2022, restricted cash primarily consisted of pledged cash for credit card liabilities. As of December 31, 2021, ~~the Company entered into a Third Amendment~~restricted cash primarily consisted of pledged cash pursuant to ~~Loan, Security and Guarantee Agreement (“~~~~Credit Facility Third Amendment~~~~”) with CNC to amend~~ the CNC Credit Agreement to provide for, among other changes, a change in the available borrowing base calculation for the acquisition of used motor vehicle inventory by the Tradein Expert from up to (A) the lesser of (i) $3,000,000.00 and (ii) 85% of the value of eligible accounts receivable arising from the sale of used motor vehicles by Tradein Expert to (B) the lesser of (i) ~~$3,000,000~~ ~~and (ii)~~ ~~eighty~~ percent (80%) of the purchase price (subject to certain limitations set forth in the Credit Facility Third Amendment) for eligible vehicles (as defined in the Credit Facility Third Amendment) in Tradein Expert’s used motor vehicle inventory. The Credit Facility Third Amendment also reduces the minimum borrowing usage requirement from ~~fifty~~ ~~percent (~~~~50%~~~~) to~~ ~~forty~~ ~~percent (40%) of the aggregate revolver amount, which is a minimum borrowing usage requirement reduction from~~ ~~$10,000,000~~ ~~to $8,000,000.~~discussed above.

On April 16, 2020, the Company received a Paycheck Protection Program loan (“PPP Loan”) in the amount of approximately $1.38 million from PNC pursuant to the PPP administered by the United States Small Business Administration (“SBA”) under the CARES Act. In connection with the receipt of the PPP Loan, on May 18, 2020, the Company and the Agent entered into the First Amendment to Loan, Security and Guarantee Agreement to accommodate the Company’s receipt of the PPP Loan.

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

On June 10, 2020, the Company entered into a thirty-six-month equipment financing agreement (“Financing Agreement”) with Dimension Funding LLC. The Financing Agreement provides for an advance payment of approximately $170,000 to be used to secure furniture and fixtures for the Company’s new office location in Irvine, California. Payments of approximately $5,300 (inclusive of imputed interest) are made monthly under the Financing Agreement. As of ~~September~~June 30, ~~2021,~~2022, the Company has paid approximately ~~$93,000.~~$0.1 million. The Financing Agreement will mature on December 31, 2022.

The Company’s future commitments under the ~~financing agreement~~Financing Agreement as of ~~September~~June 30, ~~2021,~~2022, are as follows:

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

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

On August 4, 2022, August 9, 2022 and August 10, 2022, 4 purported stockholders of the ~~date of this Quarterly Report on Form~~ 10~~-Q,~~Company filed separate lawsuits against the Company and its board of directors in the United States District Court for the Southern District of New York (the “Stockholder Actions”). Each of the Stockholder Actions alleges that the Company violated Sections 14(e), 14(d) and 20(a) of the Securities Exchange Act of 1934 by filing a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC on August 3, 2022 (the “Recommendation Statement”). The Stockholder Actions each allege that the Recommendation Statement is materially incomplete and misleading and seek to enjoin the Transactions until the purported deficiencies in the Recommendation Statement are corrected, or alternatively, monetary damages if the Transactions are consummated. The plaintiffs each also seek fees and costs incurred in bringing the Stockholder Actions.

The defendants deny, disagree with and intend to vigorously defend against the Stockholder Actions. If the Stockholder Actions are not ~~involved~~resolved on a timely basis, the Stockholder Actions could delay consummation of the Transactions, which could impact the Company’s ability to continue as a going concern, and result in ~~any litigation.~~additional costs to the Company, including costs associated with the indemnification of directors. Additional plaintiffs may file lawsuits against the Company and/or its directors and officers in connection with the Transactions.

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

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

As of ~~September~~June 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, there were 0 accrued interest and penalties related to uncertain tax positions. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense, and the accrued interest and penalties are included in deferred and other long-term liabilities in the Company’s unaudited condensed consolidated balance sheets. There were 0no material interest or penalties included in income tax expense for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020.~~2021.

The Company is subject to taxation in the U.S. and in various foreign and state jurisdictions. Due to expired statutes of limitation, the Company’s federal income tax returns for years prior to calendar year 2018 and 2017, respectively are not subject to examination by the U.S. Internal Revenue ~~Service.~~Service (except for the use of tax losses generated prior to 2018 that may be used to offset taxable income in subsequent years). Generally, for the majority of state jurisdictions where the Company does business, periods prior to calendar year ~~2016~~2017 are no longer subject to examination. The Company does not anticipate a significant change to the total amount of unrecognized tax benefits within the next twelve months.

In response to the coronavirus pandemic, the ~~Coronavirus Aid, Relief and Economic Security Act (“~~CARES Act”) was signed into law in March 2020. The CARES Act ~~lifted~~lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act (“TCJA”). Corporate taxpayers may carryback net operating losses (“NOL’s”) originating during 2018 through 2020 for up to five years, which was not previously allowed under the TCJA. The CARES Act in part also ~~eliminated the~~ ~~80%~~ ~~of taxable income limitations by allowing corporate entities~~provides for an employee retention credit, which is a refundable tax credit against certain employment taxes equal to ~~fully utilize NOL carryforwards to offset taxable income in~~ ~~2018,~~~~2019~~ or ~~2020.~~

~~Taxpayers~~ ~~may~~ ~~generally deduct interest up to the sum of~~ 50% of ~~adjusted taxable income plus business interest income (~~qualified wages an eligible employer pays to employees (“Employee Retention Credit”). In ~~30%~~March 2022, we amended certain payroll tax filings in conjunction with the Employee Retention Credit. In July 2022, we received a payment of $0.6 million related to the second ~~limit under the TCJA) for tax years beginning~~quarter ~~January 1, 2019,~~ ~~and~~ ~~2020.~~2021 ~~The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in~~ ~~2020~~ ~~for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted~~amendment submitted by the ~~TCJA. The enactment of~~Company. We are awaiting confirmation from the ~~CARES Act did~~ ~~not~~ ~~result in any material adjustments~~IRS for amended tax filings related to the ~~Company’s income tax provision for the~~ ~~nine~~first ~~months ended~~and ~~September 30, 2021,~~ third~~or to its net deferred tax assets as~~ quarters of ~~September 30,~~ 2021.

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

As a result of the CarZeus Purchase Transaction on ~~July 31,~~August 1, 2021, the Company ~~has~~ determined that ~~it now~~ operates in 2 reportable segments: Automotive digital marketing and used vehicle acquisition and resale through the Company’s Tradein Expert subsidiary. The automotive digital marketing segment consists of all aspects related to automotive digital marketing, whereas the used vehicle acquisition and resale segment consists solely of the used vehicle acquisition and wholesale reselling business. Revenues generated by the automotive digital marketing segment primarily represent lead generation and digital advertising, while revenues generated by the used vehicle acquisition and resale segment primarily represent used car vehicle ~~sales as described~~sales. . On May 16, 2022, the Company suspended its CarZeus operations and furloughed its employees within that segment in ~~Note~~ 1order to ~~these Notes to Unaudited Condensed Consolidated Financial Statements.~~conserve cash.

The segment performance ~~of the segments~~ is reviewed by the chief ~~operating decision maker~~executive officer at the operating (loss) income ~~(loss)~~ level. The following ~~tables provide~~table provides segment reporting of the Company for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022:

As disclosed in Note 2 to these Notes to Unaudited Condensed Consolidated Financial Statements and as previously reported in the July 25^th Form 8-K, on July 24, 2022, the Company entered into the Merger Agreement with Parent and Purchaser. Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, on August 3, 2022, Purchaser commenced the Offer to acquire all of the outstanding shares of Company Common Stock at the Offer Price. As soon as practicable after acquiring sufficient shares of Company Common Stock pursuant to the Offer, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Purchaser will merge with and into Company, and Company will become a wholly-owned subsidiary of Parent as a result of the Merger. In the Merger, the shares of Company Common Stock remaining outstanding following the consummation of the Offer (other than (i) shares owned immediately prior to the time as of the Effective Time by the Company or any direct or indirect wholly-owned subsidiary of the Company, (ii) shares owned as of immediately prior to the Effective Time by Parent, Purchaser or any other direct or indirect wholly-owned subsidiary of Parent, or (iii) shares held by stockholders who have preserved their appraisal rights under Delaware law), will be converted into the right to receive the Offer Price.

On August 4, 2022 and ~~2020,~~August 9, 2022, the Stockholder Actions were filed in the United States District Court for the Southern District of New York. For a detailed discussion of the Stockholder Actions, see Note 10, ~~respectively:~~Commitments and Contingencies, of these Notes to Unaudited Condensed Consolidated Financial Statements.

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

This Quarterly Report on Form 10-Q is being filed in accordance with the requirements of the Exchange Act and is neither a recommendation, an offer to purchase nor a solicitation of an offer to sell any securities of the Company. Parent and Purchaser have filed with the SEC on August 3, 2022 a Tender Offer Statement on Schedule TO containing an offer to purchase, a form of letter of transmittal and other documents relating to the Offer, and the Company has filed with the SEC on August 3, 2022 a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer. THE TENDER OFFER MATERIALS (INCLUDING AN OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER TENDER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 CONTAIN IMPORTANT INFORMATION. THE COMPANY’S STOCKHOLDERS ARE URGED TO READ THESE DOCUMENTS CAREFULLY BECAUSE THEY CONTAIN IMPORTANT INFORMATION THAT HOLDERS OF THE COMPANY’S SECURITIES SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING TENDERING THEIR SECURITIES. The offer to purchase, the related letter of transmittal and certain other tender offer documents, as well as the Solicitation/Recommendation Statement, will be made available to all holders of the Company’s stock at no expense to them. Those documents may be obtained without charge at the SEC’s website at www.sec.gov or by directing a request to Purchaser or its agent for the tender offer as set forth in the tender offer documents.

The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” ~~“believes,~~“could,” ~~“could,~~“may,” “estimates,” “expects,” ~~“intends,~~“projects,” ~~“may,~~“intends,” “plans,” ~~“projects,~~“believes,” “will” and words or phrases of similar substance used in connection with any discussion of future operations, or financial performance, plans, events, trends or circumstances can be used to identify some, but not all, forward-looking statements. In particular, statements regarding expectations and opportunities, including related to the Transactions and the Company’s ability to continue as a going concern, 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 consummate the Transactions, carry out our plans or achieve our goals and objectives or that we will be able to do so successfully on a profitable basis. These forward-looking statements are just predictions and involve significant risks and uncertainties, many of which are beyond our control, and actual results may differ materially from these statements. Factors that could cause actual outcomes or results to differ materially from those reflected in forward-looking statements include, but are not limited to, those discussed in this Item 2 (including in the section entitled “Overview” below), Part II, Item 1A of this Quarterly Report on Form 10-Q, and under the heading “Risk Factors” in our ~~2020~~annual report on Form ~~10-K.~~10-K for the year ended December 31, 2021 (“2021Form10-K”) filed with the SEC on March 24, 2022. Investors are urged not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date on which they were made. Except as may be required by law, we do not undertake any obligation, and expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements contained herein are qualified in their entirety by the foregoing cautionary statements.

The following discussion of our results of operations and financial condition should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the notes thereto in the ~~2020~~2021 Form 10-K.

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

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

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

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and our actual results, our financial condition or results of operations may be affected. For a detailed discussion of the application of our critical accounting policies, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the ~~2020~~2021 Form 10-K. There have been no changes to our critical accounting policies since we filed our ~~2020~~2021 Form 10-K.

As disclosed in Note 2 to the Notes to Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, and as previously reported in the July 25^th Form 8-K, on July 24, 2022, the Company entered into the Merger Agreement with Parent and Purchaser. Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, on August 3, 2022, Purchaser commenced the Offer to acquire all of the outstanding shares of Company Common Stock at the Offer Price. As soon as practicable after acquiring sufficient shares of Company Common Stock pursuant to the Offer, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Purchaser will merge with and into Company, and Company will become a wholly-owned subsidiary of Parent as a result of the Merger. In the Merger, the shares of Company Common Stock remaining outstanding following the consummation of the Offer (other than (i) shares owned immediately prior to the time as of the Effective Time by the Company or any direct or indirect wholly-owned subsidiary of the Company, (ii) shares owned as of immediately prior to the Effective Time by Parent, Purchaser or any other direct or indirect wholly-owned subsidiary of Parent, or (iii) shares held by stockholders who have preserved their appraisal rights under Delaware law), will be converted into the right to receive the Offer Price.

On May 16, 2022, we suspended our CarZeus operations and furloughed our employees within that segment in order to conserve cash.

Commencing in early 2020 and continuing as of the date of this Quarterly Report on Form 10-Q, the outbreak of coronavirus and emerging variants has led to quarantines, mask mandates, vaccination requirements and stay-at-home/work-from-home orders in a number of countries, states, cities and regions and the closure or limited or restricted access to public and private offices, businesses and facilities, causing disruptions to travel, economic activity, supply chains and financial markets. In particular, Manufacturers have experienced significant disruption in the supply of semiconductor chips required for new vehicles due to a worldwide shortage of these chips. As a result, the ability of Manufacturers to maintain regular production output of certain vehicles, and the corresponding reduction in available new vehicle inventories, have adversely impacted vehicle sales. Further disrupting the automotive industry and the number of vehicles available for sale or lease are disruptions in the supply of other components used in vehicle manufacturing. These disruptions have impacted the willingness or desire of our Dealer and other customers to acquire vehicle Leads or other digital marketing services from us. While coronavirus restrictions have eased in 2022, consumer confidence and spending has declined as a result of other factors, including macroeconomic conditions such rising inflation and the global impact of Russia’s invasion of the Ukraine. Vehicle sales have declined, and we continue to experience cancellations, volume reductions or suspensions of purchases of Leads and other digital marketing services by our Dealer and other customers, which has continued to materially and adversely impact our financial performance.

We are unable to predict the continuing extent, duration and impact of the foregoing factors on the automotive industry in general, or on our business, operations and financial performance specifically. In light of the impact on us from the foregoing factors, as discussed in Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, due to our cash and liquidity position, we believe that there is substantial doubt about our ability to continue as a going concern for a period of one year after the date the financial statements contained in this Quarterly Report on Form 10-Q are issued. Our ability to continue as a going concern is contingent upon the consummation of the Transactions. If the Transactions are not consummated, we believe that we will have no alternative other than to liquidate or to seek protection under the U.S. bankruptcy laws.

Total revenues in the first ~~nine~~six months of ~~2021~~2022 were ~~$53.8~~$36.3 million compared to ~~$59.3~~$36.6 million in the first ~~nine~~six months of ~~2020.~~2021. The ~~decline~~decrease in total revenues was ~~primarily related to~~largely driven by the suspension of our CarZeus operations (suspended on May 16, 2022), the continued negative impact of the ~~coronavirus pandemic on~~supply chain for new vehicle ~~parts production~~inventory and sales, declining consumer confidence, economic inflation and ~~overall demand from our customers~~the one-time lump sum payment for ~~our~~the early termination of the new vehicle leads ~~and clicks products. As a part~~program by one of our ~~strategic decisions~~manufacturing customers of $0.5 million in the second quarter of 2021. We have worked to shift its strategy and ~~as we have adapted~~to adapt to the changing market conditions within the automotive industry ~~we shifted~~by increasing the focus ~~to our~~on core Leads, clicks and email products and services and away from non-core products and services, such as third-party party product offerings. This shift further negatively impacted total revenues. Generally lower retail Leads sales levels resulting from attrition in our retail dealer network that occurred in part of 2020 was an additional factor that contributed to lower total revenues during the nine months ended September 30, 2021. Offsetting some of the revenue declines was theservices. In addition, ~~of the used vehicle sales component of our revenue mix, which was added with the CarZeus Purchase Transaction effective as of August 1, 2021.~~

~~As a result of the continued impact of the coronavirus pandemic disrupting the supply chain for new vehicle inventory and sales,~~ we have ~~continued to~~ intentionally ~~operate~~operated at lower levels of media spend in an attempt to match projected industry selling rates. ~~Dealers~~We expect that the Company and its dealers and consumers alike ~~are still contending~~will continue to contend with broader macroeconomic uncertainty, including uncertainties created by record inflation and ~~with this in mind, our objective is to provide~~ the ~~right mix~~continued impact of ~~high-quality Leads and click traffic to our customers by staying aligned with automotive supply and demand dynamics.~~

Finally, the disruption from the January 2020 malware attack on the Company’s systems also negatively impacted total revenues in 2020. In March 2021, we received an approximate $0.3 million insurance reimbursement related to the January 2020 malware attack, which is partially included in other income during the nine months ended September 30, 2021.

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

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

To maximize our growth potential as a more involved matchmaker, we believe that we must continue to optimize our platform and products to facilitate more comprehensive matches between vehicle shoppers and vehicle sellers who can meet these shoppers’ needs. These investments began with improvements to shop.car.com and continued through the third quarter of 2021, spanning similar improvements to our additional properties, as well as our strategic relationship with CreditIQ and the CarZeus Purchase Transaction. We have also made progress with layering additional retail-ready components into our platform. At the beginning of June, we announced our new strategic relationship with CreditIQ, an automotive retailing-focused software and service company that enables dealers to provide seamless digital retail experiences to consumers. This relationship allows shoppers using our search funnel to calculate car payments on a vehicle of interest, which streamlines the car buying process for both buyers and sellers. Features like these not only enhance our platform’s user experience, but also enable us to create more tailored profiles of the buyers using our sites to understand what kind of shopping experience they’re seeking.

We plan to expand both this base and the offerings of our platform even further as a result of the CarZeus Purchase Transaction, which we believe positions us to participate more meaningfully in the used vehicle acquisition and sales market by providing us the opportunity to purchase used vehicles directly from consumers and resell them primarily through wholesale auctions, forming a complementary product line extension to our existing consumer offerings. We believe this acquisition will also allow us to increase our total addressable market by expanding our presence in the used vehicle market, while giving us the opportunity to enhance the offerings and usefulness of our underutilized sites and monetize our traffic more effectively. We plan to use our traffic acquisition capabilities and operational efficiency to drive growth, improve financial performance and build scalable operating processes to enhance performance within the San Antonio, Texas market. With this foundation in place, we plan to prepare the business for broader geographic coverage in the long-term.2022.

Although we are not able to provide any specific guidance regarding our full year 2021 future business, results of operations, financial condition, earnings per share, cash flow or the trading price of our stock (individually and collectively referred to as the Company’s “~~financial performance~~”) with detail or accuracy, many industry analysts have forecast modest improvement in the new vehicle unit sales seasonally adjusted annual rate from 14.5 million units in 2020 to a range of 15.0-15.5 million units in 2021, or 3-7% growth. Industry reports indicate that during the first half of 2021, franchise dealer unit volume grew 29%, but inventory shortages have reduced growth to the lower end of the range, and new vehicle sales have dropped below 2020 levels in the 3^rd quarter of 2021. New vehicle sales levels are expected to continue to be challenged until inventory supplies normalize. We are not able at this time to provide any specific guidance related to the impact on our full year 2021 financial performance as a result of the CarZeus Purchase Transaction.

We anticipate that our remaining 2021 financial performance may be adversely impacted when compared to 2020 by (i) the continuing impact of the coronavirus pandemic on vehicle sales and on demand for our products and services; (ii) increased competitive pressure on cost of audience acquisition that may limit how much volume we will be able to profitably source and distribute to our customers; (iii) the costs and revenue impact associated with our efforts to optimize our clicks product; (iv) the decision to shift our focus to our core leads, clicks and email products and services and away from non-core product and services provided by other partners; and (v) the increased competition for and price of used vehicles that we would target for acquisition and resale.

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

In addition to the continued impact of the coronavirus pandemic on supply chains and vehicle inventories and sales, Manufacturers have also experienced significant disruption in the supply of semiconductor chips required for new vehicles due to a worldwide shortage of these chips. As a result, the ability of Manufacturers to maintain regular production output of certain vehicles, and the corresponding reduction in available new vehicle inventories, have adversely impacted vehicle sales. Further disrupting the automotive industry and the number of vehicles available for sale or lease are disruptions in the supply of other components used in vehicle manufacturing, such as seat foam and rubber, which is a key material used in tires as well as other components of new vehicles.

We are unable to predict the continuing extent, duration and impact of the supply chain disruptions on the automotive industry in general, and on our business and operations specifically. The spread of coronavirus variants and governmental responses thereto may prolong or increase the negative impacts of the pandemic. Vehicle sales have declined, and we continue to experience cancellations or suspensions of purchases of Leads and other digital marketing services by our customers, which could materially and adversely affect our financial performance. In light of the continuing impact of the pandemic and supply chain disruptions, we have continued taking steps to reduce our overall lead and click generation efforts and corresponding costs to better align our volumes with industry demand and consumer intent and ability to purchase or lease vehicles. We will continue to evaluate these and other cost reduction measures, and explore all options available to us, in order to minimize the impact of these events on us.

Three Months Ended ~~September~~June 30, ~~2021~~2022 Compared to the Three Months Ended ~~June 30, 2021~~March 31, 2022

The following table sets forth certain statement of operations data for the three-month periods ended ~~September 30, 2021, and~~ June 30, ~~2021~~2022, and March 31, 2022 (certain balances and calculations have been rounded for presentation). In accordance with Regulation S-K Item 303(c), as amended, we are providing a comparison of our ~~September~~June 30, ~~2021,~~2022, period against the preceding quarter. We believe ~~providing a sequential results-of-operations~~this comparison is ~~more~~ useful for investors and stakeholders, as it provides more clarity into our current year financial performance. For additional information related to the three months ended June 30, 2021, please refer to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, filed with the Securities and Exchange Commission on August 5, 2021.

	September 30, 2021			% of Total Revenues			June 30, 2021			% of Total Revenues			Change			% Change				June 30, 2022			% of Total Revenues			March 31, 2022			% of Total Revenues			Change			% Change
	*(Dollar amounts* in *thousands)*
*(Dollar amounts* in *thousands)*																			*(Dollar amounts* in *thousands)*
Revenues:
Lead generation	$	12,030			70	%	$	15,225			81	%	$	(3,195	)		21	%		$	9,503			55	%	$	10,576			55	%	$	(1,073	)		(10	)%
Digital advertising		3,525			21			3,511			19			14			—				4,012			23			4,137			22			(125	)		(3	)
Used vehicle sales		1,604			9			—			—			1,604			100				3,680			22			4,351			23			(671	)		(15	)
Total revenues		17,159			100			18,736			100			(1,577	)		(8	)			17,195			100			19,064			100			(1,869	)		(10	)
Cost of revenues:
Cost of revenues – lead generation and digital advertising		11,280			66			12,179			65			(899	)		(7	)			10,017			58			10,954			58			(937	)		(9	)
Cost of revenues – used vehicles		1,446			8			—			—			1,446			100
Total cost of revenues		12,726			74			12,179			65			547			4
Cost of revenues – used vehicle sales																					3,497			20			4,206			22			(709	)		(17	)
Gross profit		4,433			26			6,557			35			(2,124	)		(32	)			3,681			21			3,904			20			(223	)		(6	)
Operating expenses:
Sales and marketing		2,465			14			2,103			11			362			17				2,303			13			2,650			14			(347	)		(13	)
Technology support		1,395			8			1,271			7			124			10				1,702			10			1,533			8			169			11
General and administrative		3,260			19			3,089			17			171			6				3,793			22			3,562			19			231			6
Depreciation and amortization		179			1			196			1			(17	)		(9	)			84			—			65			—			19			29
Total operating expenses		7,299			42			6,659			36			640			10				7,882			47			7,810			41			72			1
Operating loss		(2,866	)		(16	)		(102	)		(1	)		(2,764	)		2,710				(4,201	)		(24	)		(3,906	)		(21	)		(295	)		(8	)
Interest and other income (expense), net		(190	)		(1	)		(202	)		(1	)		11			38				(248	)		(1	)		(275	)		(1	)		27			10
Loss before income tax provision		(3,056	)		(17	)		(304	)		(2	)		(2,753	)		906				(4,449	)		(25	)		(4,181	)		(22	)		(268	)		6
Income tax provision		—			—			—			—			—			—				—			—			126			—			(126	)		(100	)
Net loss	$	(3,056	)		(17	)%	$	(304	)		(2	)%	$	(2,753	)		906	%		$	(4,449	)		(25	)%	$	(4,307	)		(22	)%	$	(142	)		3	%

Lead generation. Lead generation revenues decreased ~~$3.2~~$1.1 million, or ~~21%~~10%, in ~~the third quarter of 2021 compared to~~ the second quarter of ~~2021,~~2022 compared to the first quarter of 2022 primarily from a decrease in the volume of automotive leads delivered to Manufacturers and other wholesale customers.

Digital advertising. Digital advertising revenues decreased $0.1 million, or 3%, in the second quarter of 2022 compared to the first quarter of 2022 primarily as a result of decreased display advertising traffic on our websites.

Used vehicle sales. Used vehicle sales revenue decreased $0.7 million, or 15%, in the second quarter of 2022 compared to the first quarter of 2022. The decrease in used vehicle sales revenue is directly attributable to suspending our CarZeus operations effective May 16, 2022.

Cost of revenues – lead generation and digital advertising. Cost of revenues decreased $0.9 million, or 9%, in the second quarter of 2022 compared to the first quarter of 2022 as a result of lower revenue offset by an increase in click publisher costs.

Cost of revenues – used vehicles. Used vehicle cost of revenue decreased $0.7 million, or 17%, in the second quarter of 2022 compared to the first quarter of 2022. The decrease in used vehicle cost of revenues is directly attributable to suspending our CarZeus operations effective May 16, 2022.

Gross profit. Gross Profit decreased $0.2 million, or 6%, in the second quarter of 2022 compared to the first quarter of 2022. This was a direct result of a decrease in the volume of automotive leads ~~delivered~~coupled with decreased display advertising traffic on our websites.

Sales and marketing. Sales and marketing expense in the second quarter of 2022 decreased $0.3 million, or 13%, compared to ~~manufacturers~~the first quarter of 2022 due primarily suspending our CarZeus operations coupled with a decrease in commission related compensation.

Technology support. Technology support expense in the second quarter of 2022 increased by $0.2 million, or 11%, compared to the first quarter of 2022 due primarily from increased employee related expenses.

General and ~~wholesale customers.~~administrative. General and administrative expense in the second quarter of 2022 increased $0.2 million, or 6% compared to the first quarter of 2022 due primarily to higher professional and consulting related fees.

Income taxes. We did not recognize any expense related to income tax in the second quarter of 2022 compared to $0.1 million in the first quarter of 2022. Our income tax rate for the second quarter of 2022 differed from the federal statutory rate primarily due to operating losses that receive no tax benefit as a result of valuation allowance recorded for such losses.

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

Lead generation. Lead generation revenues decreased $9.3 million, or 32%, in the first six months of 2022 compared to the first six months of 2021 primarily as a result of the continued negative impact of the supply chain for new vehicle inventory and sales, declining consumer confidence and rising inflation. Further contributing to this decrease was a one-time lump sum payment for the early termination of the new vehicle leads program by one of our manufacturing customers which approximated $0.5 million in the second quarter of 2021.

Digital advertising. ~~Advertising~~Digital advertising revenues ~~did not materially change when~~increased $0.9 million, or 13%, in the first six months of 2022 compared to the ~~second quarter~~first six months of ~~2021.~~2021 primarily as a result of an increase in click revenue associated with increased click volume. The increase in click volume is attributed to a renewed focus on higher paying advertisers during 2022.

Used vehicle sales. Used vehicle sales was $1.6 million in the third quarter of 2021, as a result of the commencement of operations for our used vehicle acquisition and reselling business subsequent to the CarZeus Purchase Transaction on July 31, 2021. The third quarter of 2021 was the initial quarter with used vehicle sales for us.

~~Cost of Revenues~~ – ~~lead generation and digital advertising.~~ Cost of revenues consists of purchase request and traffic acquisition costs and other cost of revenues. Purchase request and traffic acquisition costs consist of payments made to our third-party purchase request providers, including internet portals and online automotive information providers. Other cost of revenues consists of SEM and fees paid to third parties for data and content, including search engine optimization activity, included on our websites; connectivity costs; development costs related to our websites; technology license fees; server equipment depreciation; and technology amortization directly related to the Company Websites. Cost of revenues decreased $0.9 million, or 7%, in the third quarter of 2021 compared to the second quarter of 2021 primarily due to decreased SEM, purchase request and traffic acquisition costs and a decrease in click publisher costs.

~~Cost of revenues~~ – ~~used vehicles.~~ ~~Used vehicle cost of revenues was $1.4 million in the third quarter of 2021, as~~As a result of the CarZeus Purchase Transaction that was effective on ~~July 31, 2021.~~

~~Gross profit.~~ ~~Gross profit decreased $2.1 million, or 32%, in~~August 1, 2021, the ~~third quarter~~Company recorded used vehicle sales of 2021 compared to the second quarter of 2021. This was a direct result of a reduction in sequential lead traffic and lead volume. Further contributing to this decrease was a one-time lump sum payment for the early termination of the new vehicle leads program by one of our manufacturing customers which approximated $0.5$8.0 million in the ~~second quarter~~first six months of 2022. The Company had no used vehicle sales in the first six months of 2021.

~~Sales and Marketing.~~ Sales and marketing expense include costs for developing our brand equity, personnel costs, and other costs associated with Dealer sales, website advertising, Dealer support, and bad debt expense. Sales and marketing expense in the third quarter of 2021 increased $0.4 million, or 17%, compared to the second quarter of 2021 due primarily to an increase in headcount related to the CarZeus Purchase Transaction coupled with an increase in marketing expenses.

~~Technology Support.~~ Technology support expense includes compensation, benefits, software licenses and other direct costs incurred by us to enhance, manage, maintain, support, monitor and operate our websites and related technologies, and to operate our internal technology infrastructure. Technology support expense in the third quarter of 2021 increased by $0.1 million, or 10%, compared to the second quarter of 2021 due primarily to an increase in consulting related expenses.

~~General and 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 quarter of 2021 increased by $0.2 million, or 6%, from the second quarter of 2021 due primarily to an increase in certain discretionary compensation.

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

~~Interest and Other Income (Expense), Net.~~ ~~Interest and other income (expense) in the third quarter of 2021 did not materially change when compared to the second quarter of 2021.~~

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

~~Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020~~

The following table sets forth certain statement of operations data for the nine-month periods ended September 30, 2021, and 2020 (certain balances and calculations have been rounded for presentation):

~~Lead generation.~~ Lead generation revenues decreased $6.1 million, or 13%, in the first nine months of 2021 compared to the first nine months of 2020 primarily as a result of the impact of the coronavirus pandemic on vehicle sales. This decrease is partially offset by the one-time lump sum payment for the early termination of the new vehicle leads program by one of our manufacturing customers which approximated $0.5 million.

~~Digital advertising.~~ Advertising revenues decreased $1.1 million, or 9%, in the first nine months of 2021 compared to the first nine months of 2020 primarily a result of a decrease in click revenue associated with decreased click volume. The decrease in click volume is attributed to the impact of the coronavirus pandemic and our internal decision to reduce overall click generation efforts to better align with industry demand.

~~Used vehicle sales.~~ Used vehicle sales was $1.6 million in the third quarter of 2021, as a result of the commencement of operations for our used vehicle acquisition and reselling business subsequent to the CarZeus Purchase Transaction on July 31, 2021. The third quarter of 2021 was the initial quarter with used vehicle sales for us.

Cost of ~~Revenues~~revenues – lead generation and digital advertising. Cost of revenues decreased ~~$6.0~~$3.3 million, or 14%, in the first ~~nine~~six months of ~~2021~~2022 compared to the first ~~nine~~six months of ~~2020 primarily due to decreased~~2021 which in line with the decrease in lead generation revenues coupled with improved efficiencies in SEM, purchase ~~requests, click~~request and traffic acquisition ~~costs and other costs of revenues.~~costs.

Cost of revenues – used vehicles. ~~Used vehicle~~As a result of the CarZeus Purchase Transaction that was effective on August 1, 2021, the Company recorded cost of revenues ~~was $1.4~~for used vehicles of $7.7 million in the first ~~nine~~six months of 2022. The Company had no cost of revenue for used vehicles in the first six months of 2021.

Gross profit. Gross profit. Gross Profit decreased $4.8 million, or 39%, for the first six months of 2022 compared to the first six months of 2021 as a result of adding the ~~CarZeus Purchase Transaction on July 31, 2021.~~

~~Gross profit.~~ ~~Gross profit decreased $1.0 million, or 6%, for~~used vehicle acquisition business, which did not operate in the ~~first nine months of 2021 compared~~comparable period in the prior year. The used vehicle acquisition business generally operates with lower gross margins than the Company’s Lead generation and Digital advertising operations. Further contributing to the ~~first nine months of 2020. This was a direct result of the impact of the coronavirus pandemic on vehicle sales. Offsetting this~~ decrease ~~was a one-time lump sum payment for the early termination of the new vehicle leads program by~~in revenue related to one of our manufacturing customers ~~which approximated~~who terminated their new vehicle leads program with the Company in the prior year period. The company received an early termination fee of approximately $0.5 ~~million.~~million in the second quarter of 2021.

Sales and ~~Marketing.~~marketing. Sales and marketing expense in the first ~~nine~~six months of ~~2021~~2022 increased $0.7 million, or ~~12%~~15%, compared to the first ~~nine~~six months of ~~2020~~2021 primarily due ~~primarily~~ to an increase in headcount related to ~~the~~ CarZeus ~~Purchase Transaction~~ coupled with an increase in marketing ~~expenses.~~expenses during the current year to date period.

Technology ~~Support.~~support. Technology support expense in the first ~~nine~~six months of ~~2021 decreased~~2022 increased by ~~$1.1~~$0.6 million, or ~~21%~~23%, compared to the first ~~nine~~six months of ~~2020 due~~2021 primarily ~~to a reduction in consulting~~from higher employee related expenses.

General and ~~Administrative.~~administrative. General and administrative expense in the first ~~nine~~six months of 2022 increased $1.1 million, or 18%, compared to the first six months of 2021 ~~decreased approximately $0.5 million, or 5%,~~primarily a result of higher professional and consulting related fees from the ~~first nine months~~Company’s strategic initiative processes launched in the second quarter of ~~2020 due primarily to reductions in recruitment, travel-related expenses, rent, severance and consulting-related expenses~~2022.

Depreciation and ~~Amortization.~~amortization. Depreciation and amortization expense in the first ~~nine~~six months of ~~2021~~2022 decreased ~~$0.9~~$0.3 million, or ~~62%,~~63% compared to the first ~~nine~~six months of ~~2020. The decrease in depreciation and amortization expense was due primarily to~~2021 as assets ~~that have been~~become fully ~~depreciated or removed from service.~~depreciated.

Interest and ~~Other Income, Net.~~other income (expense), net. Interest and other income (expense) was ~~$1.0~~$0.5 million of expense for the first six months of 2022 compared to $1.2 million of income ~~for the first nine months of 2021 compared to $1.1 million of expense~~ in the first ~~nine~~six months of ~~2020.~~2021. In the first quarter of 2021, we recorded $1.4 million of income associated with the forgiveness of our ~~Paycheck Protection Program loan.~~PPP Loan. Further contributing to the ~~increase~~decrease in interest and other income (expense) was an insurance reimbursement related to the January 2020 malware attack in which we recorded $0.2 million on our Unaudited Condensed Consolidated Statement of Operations. Interest expense decreased to $0.8 million in the first nine months of 2021 from $1.3 million in the first nine months of 2020, due to the prior year write-off of our deferred financing fees associated with the revolving line of credit under the PNC Credit Facility.Operations during 2021. Interest expense includes interest on outstanding borrowings and the amortization of debt issuance costs.

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

The table below sets forth a summary of our cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, and ~~2020:~~2021:

Our principal sources of liquidity are our ~~cash and cash equivalent balances and~~ borrowings under the CNC Credit Agreement. Our cash and cash equivalents and restricted cash totaled ~~$14.2~~$2.8 million as of ~~September~~June 30, ~~2021,~~2022, compared to ~~$15.1~~$11.6 million as of December 31, ~~2020.~~2021. As of ~~September~~June 30, ~~2021,~~2022, we had a net loss of ~~approximately $3.1 million. The net loss is primarily attributable to operating expenses of $20.9 million during the nine months ended September 30, 2021, exceeding our gross profit of $16.8~~$8.8 million. We had cash ~~provided by~~used in operations of ~~$0.7~~$3.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. As of ~~September~~June 30, ~~2021,~~2022, we had an accumulated deficit of ~~$352.8~~$364.2 million and stockholders' equity of ~~$14.8~~$5.0 million. ~~For information concerning our CNC Credit Agreement,~~ ~~see~~ ~~Note 9 in the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.~~

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

Our objective is to achieve cash generation as a business; however, there is no assurance that we will be able to achieve this objective. ~~The~~Additionally, other than the CNC Credit Agreement, ~~is expected to be used to continue to partially fund operations in addition to enabling~~which expires March 26, 2023, we have no committed source of funding from either debt or equity financings. Borrowings under the ~~purchase~~CNC Credit Agreement are dependent on, among other things, the level of ~~vehicle inventory that is ultimately resold by CarZeus.~~

our eligible accounts receivable We believe that given these factors, our current cash ~~reserves~~position and anticipated cash needs for continuing operating ~~cash flows will be enough~~activities, there is substantial doubt about our ability to ~~sustain operations for the next twelve months. If we are unsuccessful in meeting our objective to grow our gross profit and sustain cash generation~~continue as a ~~business, we may need~~going concern without obtaining additional sources of financing. Our ability to ~~seek~~operate as a going concern is contingent upon the consummation of the Transactions (see Note 2 of the Notes to ~~satisfy~~the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q). Our future capital requirements and our ~~future cash needs through private or public sales~~ability to continue as a going concern is contingent on the consummation of ~~securities, additional debt financings or partnering/licensing transactions; however, there is~~the Transactions. There can be no assurance that we will be successful in ~~satisfying our future cash needs~~consummating the Transactions, and if the Transactions are not consummated, we believe that we would have no alternative other than to ~~continue operations.~~liquidate or to seek protection under the U.S. bankruptcy laws.

~~Our future capital requirements will depend on many factors, including but not limited~~For information concerning our CNC Credit Agreement, see Note 9 included in the Notes to ~~those discussed~~Unaudited Condensed Consolidated Financial Statements included in ~~this~~Part I, Item ~~2, Part II, Item 1A~~1 of this Quarterly Report on Form 10-Q and the risk factors set forth in Part I, Item 1A, “Risk Factors” of our 2020 Form 10-K. To the extent that our existing sources of liquidity are insufficient to fund our future operations, we may need to engage in equity or additional or alternative debt financings to secure additional funds. There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.10-Q.

Net Cash (Used in) Provided by Operating ~~Activities.~~ Activities. Net cash used in operating activities in the six months ended June 30, 2022, of $3.1 million resulted primarily from a net loss of $8.8 million which was offset by a $3.0 million net decrease in net working capital, depreciation and amortization of $1.2 million, stock compensation expense of $1.0 million, amortization of right-of-use assets of $0.4 million and a $0.1 million change in deferred tax liabilities.

Net cash provided by operating activities in the ~~nine~~six months ended ~~September~~June 30, 2021, of $0.7 million resulted primarily from depreciation and amortization of ~~$1.9~~$1.3 million, stock compensation expense of ~~$1.4~~$0.9 million ~~a $1.1 million net decrease in net working capital~~ and ~~other~~the amortization of right-of-use assets of $0.5 million. Offsetting these non-cash charges ~~of $0.8 million. Offsetting this~~ was ~~a net loss of $3.1 million,~~ the forgiveness of the ~~Paycheck Protection Program~~PPP loan of $1.4 million

~~Net cash provided by operating activities in the nine months ended September 30, 2020, of $1.3 million resulted primarily from depreciation and amortization of $3.0 million,~~ coupled with a ~~$2.2~~$0.6 million net ~~decrease~~increase in net working ~~capital, stock compensation expense of $1.5 million and other non-cash charges of $0.5 million. Partially offsetting this was a net loss of $5.9 million.~~capital.

Net Cash ~~used~~Used in Investing ~~Activities.~~ ActivitiesNet cash used in investing activities was approximately $1.6 million in the nine months ended September 30, 2021, which primarily related to expenditures of capitalized internal use software of $1.3 million coupled with a $0.3 million purchase of certain assets of CarZeus as detailed in the CarZeus Purchase Transaction on July 31, 2021.

. Net cash used in investing activities was approximately $0.4 million in the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2022, was primarily related to purchases of property and equipment of $0.3 million coupled with $0.1 million paid in conjunction with the acquisition of CarZeus

Net cash used in investing activities was approximately $0.8 million in the six months ended June 30, 2021, which primarily related to purchases of property and equipment and expenditures related to capitalized internal use software.

Net Cash ~~Used in~~(Used in) Provided by Financing ~~Activities.~~ Activities. Net cash used in financing activities of ~~$0.1~~$5.3 million induring the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, primarily ~~related to $0.2 million~~consisted of net borrowings on the Company’s credit ~~facility offset by $0.1 million proceeds from the exercise of stock options.~~facility.

Net cash provided by financing activities of ~~$7.7~~$0.1 million induring the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, primarily ~~related to net borrowings~~consisted of ~~$10.0~~$0.2 million ~~on our credit facility, a $1.4 million Paycheck Protection Program loan coupled with $0.1 million~~of proceeds from the exercise of common stock ~~options,~~ offset by ~~a $3.7~~$0.1 million ~~repayment~~of net borrowings on the ~~PNC~~ credit ~~facility.~~facility coupled with payments made under the financing agreement.

~~At September 30, 2021, we had no off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(D)(ii).~~

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

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

See Note 10, Commitments and Contingencies, of the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~For information about the significant risks that could affect the Company's financial condition,~~Our future operations, business, results of operations, ~~liquidity,~~financial condition, earnings per share, cash flow or the trading price of our stock, individually and ~~cash flows, see the section~~collectively referred to as our (“financial performance,”) may be affected by a number of factors, including but not limited to those described in Part I, Item 1A of the ~~2020~~2021 Form 10-K ~~entitled~~under the heading “Risk ~~Factors,” as supplemented below,~~Factors” and under the ~~section~~heading “Cautionary Note Concerning Forward-Looking Statements” in Part I, Item 2 of this ~~quarterly report entitled “Forward-Looking Statements”.~~Quarterly Report on Form 10-Q, any one or more of which could, directly or indirectly, cause our actual financial performance to vary materially from past, or from anticipated future, financial performance. Any of these factors, in whole or in part, could materially and adversely affect our financial performance. The risks described in the 2021 Form 10-K are not the only risks we face. In addition to the risks set forth in the 2021 Form 10-K as well as the risks disclosed below, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our financial performance.

~~We may be unable~~If the Transactions are not completed, we believe that we would have no alternative other than to ~~increase Lead revenues and could continue~~liquidate or to ~~suffer declining revenues due to Dealer attrition or loss of Manufacturer customers.~~seek protection under the U.S. bankruptcy laws.

~~We predominately derive~~As discussed in Part 1, Item 2 and in Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, as a result of the Company’s cash and liquidity position and other factors, the Company’s management believes that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date the financial statements contained in this Quarterly Report on Form 10-Q are issued.

The Company’s ability to continue operating is contingent upon the consummation of the Transactions. The Merger Agreement has a number of customary closing conditions, some of which are not within our ~~Lead revenues from sales~~control or the control of the other parties to ~~Dealers and Manufacturers participating in our Lead programs. Our Lead generation revenues decreased $6.1 million, or 13%,~~the Merger Agreement, including that a majority of the outstanding shares of the Company’s Common Stock are tendered in the ~~first nine months~~Offer. We cannot predict when or if these conditions will be satisfied. If any of ~~2021 compared~~these conditions are not satisfied or waived, it is possible that the Transactions will not be consummated in the expected time frame or that the Merger Agreement may be terminated. There can be no assurance that we will be successful in consummating the Transactions. If the Transactions are not completed, we believe that we would have no alternative other than to liquidate or to seek protection under the ~~first nine months of 2020. Our ability to increase revenues from sales of Leads is dependent on a mix of interrelated factors~~U.S. bankruptcy laws. There can be no assurance that ~~include attracting and retaining Dealers and Manufacturers and increasing~~we will be successful in consummating the ~~number of high-quality Leads we sell to Dealers and Manufacturers. We are also focused on higher revenue Dealers~~Transactions. The Company has therefore concluded that are more cost-effective to support. Our Lead sales strategy is intended to result in more profitable relationships with our Dealers both in terms of cost to supply Leads and to support the Dealers. Dealer churn and termination of Manufacturer Lead programs impacts our revenues, and if our sales strategythis does not mitigate the ~~loss~~substantial doubt raised surrounding the Company’s ability to continue as a going concern.

While the Transactions are pending, we are subject to business uncertainties and contractual restrictions that could materially and adversely affect our financial performance.

The Merger Agreement includes restrictions on the conduct of our business prior to the completion of the Transactions. These restrictions generally require us to use commercially reasonable efforts to conduct our businesses in ~~revenues by maintaining~~ the ~~overall number~~ordinary course and in accordance in all material respects with consistent with past practice, and subject us to a variety of ~~Leads sold by increasing sales~~specified limitations. We may find that these and other contractual arrangements may delay, prevent or limit us from responding effectively to competitive pressures, industry developments and future business opportunities that may arise during such period, even if our management and board of directors think that they may be advisable. In connection with the Transactions, it is possible that some customers, suppliers and other ~~Dealers~~persons with whom we have a business relationship may delay or ~~Manufacturers~~defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationship with us as a result of the Transactions. If any of these effects were to occur, it could materially and adversely impact our financial performance, regardless of whether the Transactions are completed. In addition, whether or not the Transactions are completed, while ~~maintaining the overall margins we receive from the Leads sold, our revenues will decrease. We cannot provide any assurances that~~they are pending we will ~~be able~~continue to ~~increase Lead generation revenues, prevent Dealer attrition or program terminations by Manufacturers or offset~~incur costs, fees, expenses and charges related to the ~~revenues lost due to Dealer attrition or program terminations by Manufacturers by other means, and our failure to do so could~~Transaction, which may materially and adversely affect our financial performance.

WeUncertainties by our officers and other employees about the Transactions could result in a loss of employees that may ~~lose customers or quality Lead suppliers to~~materially and adversely affect our ~~competitors.~~financial performance.

Our ~~ability to provide increased numbers~~employees may experience uncertainty about their roles, longevity of ~~high-quality Leads to our customers is~~employment at the Company, compensation, benefits or seniority following the consummation of the Transactions. Our business and operations are substantially dependent on ~~increasing~~ the number of Internally Generated Leads and acquiring high-quality Non-Internally Generated Leads from third parties. Originating Internally Generated Leads is dependent on our ability to increase consumer traffic to our Company Websites by providing secure and easy to use websites with relevant and quality content for consumers and increasing visibilityperformance of our ~~brands to consumers~~executive officers and ~~by our SEM activities. We compete for Dealer and Manufacturer customers and for acquisition of Non-Internally Generated Leads with companies~~other key employees. There is no guarantee that maintain automotive Lead referral businesses that are very similar to ours. Many of these competitors are larger than us and have greater financial resources than we have. If we lose customers or quality Lead supply volume to our competitors, or if our pricing or cost to acquire Leads is adversely impacted, our financial performance will be materially and adversely affected.

~~We depend on Manufacturers, through our third-party sales channel and direct-to-Manufacturer wholesale programs, for a significant amount~~any of our ~~revenues, and we may not be able to maintain~~executive officers or ~~grow these relationships.~~

~~We depend on Manufacturers, through our third-party sales channel and direct-to-Manufacturer wholesale programs for a significant amount~~other key employees will remain employed with us. The loss of the services of one or more of our ~~revenues. A decline in~~executive officers or other key employees, whether as the ~~level~~result of ~~advertising on our websites, reductions in advertising rates, terminations of their third-party Lead programs by Manufacturers~~resignation, termination, furlough or ~~any significant failure to develop additional sources of advertising would cause our advertising revenues to decline, which~~otherwise, could have a material adverse effect on our financial performance. ~~We periodically negotiate revisions~~In addition, we have diverted, and will continue to ~~existing agreements~~divert, significant management resources toward the completion of the Transactions, which could adversely affect our financial performance.

Management has substantial doubt about our ~~wholesale program revenues~~ability to continue as a going concern. As a result, we not likely be able to fund operations through September 2022.

As discussed in ~~future periods. A number~~Part 1, Item 2 and in Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, as a result of the Company’s cash and liquidity position and other factors, the Company’s management believes that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date the financial statements contained in this Quarterly Report on Form 10-Q are issued.

As of June 30, 2022, we had cash and cash equivalents of $2.7 million and restricted cash of $0.1 million. For the six months ended June 30, 2022, we had a net loss of $8.8 million and had net cash used in operations of $3.1 million. As of June 30, 2022, we had an accumulated deficit of $364.2 million and stockholders’ equity of $5.0 million. Based on current cash forecasts, the Company does not believe that it currently has sufficient cash to sustain operations through September 2022. Other than the CNC Credit Agreement, which expires March 26, 2023, the Company currently has no finalized committed source of funding from either debt or equity financings. Borrowings under the CNC Credit Agreement are dependent on, among other things, the level of the Company’s eligible accounts receivable. As of June 30, 2022, the CNC Credit Agreement has only $0.1 million of availability. As a result of our ~~third-party sales channel agreements~~cash and ~~Manufacturer agreements~~liquidity position and other factors, we believe that there is substantial doubt about our ability to continue as a going concern for a period of one year after the date the financial statements contained in this Quarterly Report on Form 10-Q are issued. If the Transactions are not completed and we are not acquired, it is possible that the Agent will consider that to be a material adverse effect under the CNC Credit Agreement, which would constitute an event of default, and the Agent could require immediate repayment in full of our outstanding debt under the CNC Credit Agreement, and would certainly do so if the Company were to liquidate or seek protection under the U.S. bankruptcy laws.

Our common stock could be delisted from The Nasdaq Capital Market if we are not able to satisfy continued listing requirements, in which case the price of our common stockand our ability to raise additional capital and issue equity-based compensation may be ~~terminated~~adversely affected, and trading in our stock may be less orderly and efficient.

On June 30, 2022, we received a written notification (“Notice”) from the Listing Qualifications department of the Nasdaq Stock Market LLC (“NASDAQ”) advising us that the closing bid price of our common stock (“Common Stock”) for the previous 30 consecutive business days had been below the minimum $1.00 per share (“Minimum Bid Price Requirement”) required for continued listing on The Nasdaq Capital Market pursuant to NASDAQ Listing Rule 5550(a)(2) (“Rule”). The Notice has no immediate effect on the listing of the Common Stock on The Nasdaq Capital Market.

Pursuant to NASDAQ Listing Rule 5810(c)(3)(A), we have been provided an initial grace period of 180 calendar days, or until December 27, 2022, to regain compliance with the Minimum Bid Price Requirement. The Notice further provides that NASDAQ will provide written confirmation stating that we have achieved compliance with the Rule if at any time ~~without cause~~before December 27, 2022, the bid price of the Common Stock closes at $1.00 per share or ~~upon~~more for a minimum of 10 consecutive business days.

In the event that we do not regain compliance with the Rule prior to the expiration of the ~~current term~~180-day compliance period, we may be eligible for additional time to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(ii) by meeting the continued listing requirement for market value of publicly held shares and all other applicable standards for initial listing on The Nasdaq Capital Market, with the exception of the ~~agreement. We may~~Minimum Bid Price Requirement. In addition, we would need to provide written notice to NASDAQ of its intention to cure the Minimum Bid Price Requirement deficiency during the second compliance period by effecting a reverse stock split, if necessary. As part of its review process, NASDAQ staff will make a determination of whether it believes that we will be able to cure this deficiency. If NASDAQ staff concludes that we will not be able to ~~maintain~~cure the deficiency, or should we determine not to make the required representation or we are not otherwise eligible for additional time to gain compliance, at that time NASDAQ staff will provide to us a Staff Delisting Determination informing us that our ~~relationships with sales channel third parties or Manufacturers on favorable terms or find alternative comparable relationships capable~~shares of ~~replacing revenues on terms satisfactory~~Common Stock will be subject to ~~us. If~~immediate suspension and delisting unless we ~~cannot do so, our revenues would decline, which could have~~elect to appeal the delisting determination to a ~~material adverse effect on our financial performance.~~NASDAQ Hearings Panel.

If we do not regain compliance within the ~~availability~~allotted compliance period(s), including any extensions that may be granted by NASDAQ, or ~~access~~if the Common Stock has a closing bid price of $0.10 or less for ten consecutive trading days during any such compliance period(s), NASDAQ staff will issue a Staff Delisting Determination informing us that our shares of Common Stock will be subject to ~~used vehicle inventory could adversely affect our business by increasing~~immediate suspension and delisting unless we elect to appeal the ~~costs of vehicles purchased and reducing the volume of units purchased for resale.~~delisting determination to a NASDAQ Hearings Panel.

~~Tradein Expert acquires used vehicles primarily from individual consumers.~~ There can be no assurance that we will regain compliance with the Minimum Bid Price Requirement or maintain compliance with any of the other continued listing requirements to remain listed on The Nasdaq Capital Market.

Pursuant to the Merger Agreement, as soon as practicable after acquiring sufficient ~~inventory~~shares of ~~used vehicles~~our Common Stock pursuant to the Offer, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Purchaser will ~~continue to be available to Tradein Expert. or~~merge with us, and we will become a wholly-owned subsidiary of the Parent. If the Transactions are consummated, our Common Stock will be ~~available at prices acceptable~~delisted from The Nasdaq Capital Market and deregistered under the Exchange Act. If the Transactions are not consummated and the Company liquidates or seeks protection under the U.S. bankruptcy laws, this would likely lead to ~~Tradein Expert. Tradein Expert might have to absorb a portion~~delisting of ~~any cost increases in inventory without being able to pass those increases to vehicle purchasers. Any reduction in~~ the ~~availability~~Common Stock on The Nasdaq Capital Market and deregistration of ~~used vehicle inventory or increases in~~ the ~~cost of vehicles could adversely affect Tradein Expert’s financial performance. Tradein Expert could have negative gross profit in situations where~~Company under the ~~cost of inventory is greater than the resale price of that inventory to vehicle purchases.~~

~~The retail used vehicle industry is fragmented and highly competitive, which could result in increased costs to acquire vehicles, lower sales prices due to competitive pressure.~~

Tradein Expert competes principally with (i) the used vehicle retail operations of franchised automobile dealerships, (ii) independent used vehicle dealers, some of which have significantly greater financial resources, and (iii) individuals who sell used vehicles in private transactions. Increased competition in the used vehicle market, including new entrants to the market, could result in increased costs for used vehicles and lower-than-expected vehicle sales and margins. Further, if Tradein Expert’s competitors seek to gain or retain market share by increasing the prices they pay for used vehicles or reducing prices for used vehicles they sell, Tradein Expert may have to respond by increasing the prices it pays for vehicles or reducing the sales prices of used vehicles it sells to its customers in order to remain competitive, which may result in a decrease in Tradein Expert’s sales and ability to achieve profitability.Exchange Act.

~~Automotive Dealer/ Broker~~Litigation, such as the Stockholder Actions, may arise in connection with the Transactions, which could be costly, prevent consummation of the Offer and ~~Vehicle Advertising Laws.~~the Merger, divert management’s attention and otherwise materially harm our business.

~~All states comprehensively regulate vehicle sales~~As of August 10, 2022, the Stockholder Actions have been filed on behalf of purported stockholders, as described in Note 10, Commitments and ~~lease transactions, including strict licensure requirements for automotive dealers (and,~~Contingencies, of the Notes to Unaudited Condensed Consolidated Financial Statements included in ~~some states, brokers) and vehicle advertising. We do not sell motor vehicles~~Part I, Item 1 of this Quarterly Report on Form 10-Q. One of the conditions to the closing of the Transactions is the absence of any temporary restraining order, preliminary or permanent injunction issued by any governmental body of competent jurisdiction that has the effect of prohibiting the consummation of the Transactions or that makes consummation of the Transactions illegal. Accordingly, if any of the plaintiffs in ~~any state, except for Tradein Expert, our used vehicle buying and selling service that~~the Stockholder Actions is ~~licensed~~successful in obtaining an injunction prohibiting the consummation of the Transactions, then such injunction may prevent the Transactions from becoming effective, or delay the Transactions becoming effective within the expected time frame, which could impact the Company’s ability to continue as a ~~motor vehicle dealer~~going concern. Regardless of the outcome of the Stockholder Actions or any future litigation related to the Merger Agreement and the Transactions, such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. The litigation costs and diversion of management’s attention and resources to address the claims and counterclaims in the ~~State of Texas. State regulatory authorities~~Stockholder Actions or ~~third parties could take the position that some of the regulations applicable to dealers or~~any other litigation related to the manner in which motor vehicles are advertised and sold generally are directly applicable to our digital marketing and consumer referrals business. We believe that most of these laws and regulations specifically address only traditional vehicle purchase and lease transactions, not internet-based digital marketing and consumer referral programs such as our programs. If we determine that the licensing or other regulatory requirements in a given state are applicable to our digital marketing and consumer referrals business or to a particular marketing services program, we may elect to obtain required licenses and comply with applicable regulatory requirements. However, if licensing or other regulatory requirements are overly burdensome, we may elect to terminate operations or particular marketing services programs in that state, elect to not operate or introduce particular marketing services programs in that state or modify the service to comply with applicable law without being subjected to licensing requirements. In some states we have modified our marketing programs or pricing models to reduce uncertainty regarding our compliance with local laws.

With regard to our vehicle acquisition and resale business, we are subject to the motor vehicle dealer licensing and other related laws and regulations in the State of Texas, as well as changes in these laws and regulationsMerger Agreement and the manner in which they are interpreted or applied. The violation of any of these laws or regulations could result in administrative, civil or criminal penalties or in a cease-and-desist order against our vehicle acquisition and resale business operations, any of which could damage our reputation and have a material adverse effect onTransactions may materially adversely affect our financial performance. If the Offer and the Merger are not consummated, for any reason, litigation could be filed in connection with the failure to consummate the Offer and the Merger. Any litigation related to the Offer and the Merger, including the Stockholder Actions, may result in negative publicity or an unfavorable impression of the Company, which could adversely affect our financial performance.

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

	INDEX
		Page
	PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Unaudited Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2021,~~2022, and December 31, ~~2020~~2021	1

	Unaudited Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021,~~2022, and ~~2020~~2021	2

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021,~~2022, and ~~2020~~2021	3

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021,~~2022, and ~~2020~~2021	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1819

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25

ITEM 4.	Controls and Procedures	25

	PART II. OTHER INFORMATION

ITEM 1A.	Risk Factors	26

~~ITEM 4.~~	~~Controls and Procedures~~	26

	~~PART II. OTHER INFORMATION~~

~~ITEM 1A.~~	~~Risk Factors~~	27

ITEM 6.	Exhibits	29

	Signatures	30

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2022			2021			2022			2021
Basic Shares:
Weighted average common shares outstanding		13,465,871			13,153,752			13,394,101			13,149,155			14,051,149			13,461,044			13,947,779			13,357,622
Weighted average unvested restricted stock		(220,000	)		(12,898	)		(172,509	)		(13,187	)		(708,334	)		(220,000	)		(628,840	)		(148,370	)
Basic Shares		13,245,871			13,140,854			13,221,592			13,135,968			13,342,815			13,241,044			13,318,939			13,209,252

Diluted Shares:
Basic shares		13,245,871			13,140,854			13,221,592			13,135,968			13,342,815			13,241,044			13,318,939			13,209,252
Weighted average dilutive securities		0			0			0			0			—			0			0			204,543
Diluted Shares		13,245,871			13,140,854			13,221,592			13,135,968			13,342,815			13,241,044			13,318,939			13,413,795

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2022		2021		2022		2021

Number of stock options granted		112,000		0		932,000		515,000
Number of service-based options granted										0		55,000		500,000		820,000
Weighted average grant date fair value	$	2.04	$	0	$	1.85	$	1.05	$	0	$	1.94	$	2.09	$	1.83
Weighted average exercise price	$	2.88	$	0	$	2.64	$	1.90	$	0	$	2.75	$	2.94	$	2.61

	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
						*(years)*		*(thousands)*
Outstanding at December 31, 2020		3,758,670		$	4.26		4.7	$	270
Granted		932,000			2.64
Exercised		(76,667	)		2.30				55
Forfeited or expired		(119,507	)		8.80
Outstanding at September 30, 2021		4,494,496			3.84		4.6		580
Vested and expected to vest at September 30, 2021		4,336,216			3.88		4.5		552
Exercisable at September 30, 2021		2,762,680			4.50		3.8		270

	Number of Options			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
						*(years)*		*(thousands)*
Outstanding at December 31, 2021		4,381,348		$	3.85		4.3	$	1,662
Granted		500,000			2.94		—		—
Exercised		0			0		—		—
Forfeited or expired		(236,520	)		6.43		—		—
Outstanding at June 30, 2022		4,644,828		$	3.62		4.1	$	—
Vested and expected to vest at June 30, 2022		4,528,321		$	3.64		4.1	$	—
Exercisable at June 30, 2022		3,273,769		$	3.95		3.5	$	—

Three Months Ended September, 2020
	Common Stock				Preferred Stock					Additional
	Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital	Accumulated Deficit			Total

Balance at June 30, 2020		13,146,831	$	13		0	$	0	$	365,056	$	(348,380	)	$	16,689
Share-based compensation		—		0		—		0		497		0			497
Issuance of common stock upon exercise of stock options		22,213		0		0		0		74		0			74
Net loss		—		0		—		0		0		(448	)		(448	)
Balance at September 30, 2020		13,169,044	$	13		0	$	0	$	365,627	$	(348,828	)	$	16,812

Three Months Ended September 30, 2021
Three Months Ended June 30, 2021																	Three Months Ended June 30, 2021
	Common Stock				Preferred Stock					Additional								Common Stock				Preferred Stock				Additional Paid-in-		Accumulated
	Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital		Accumulated Deficit		Total				Number of Shares		Amount		Number of Shares		Amount		Capital		Deficit			Total

Balance at March 31, 2021																			13,443,909	$	13		0	$	0	$	366,712	$	(349,455	)	$	17,270
Share-based compensation																			—		0		—		0		425		0			425
Issuance of common stock upon exercise of stock options																			21,962		0		0		0		50		0			50
Net loss																			—		0		—		0		0		(304	)		(304	)
Balance at June 30, 2021		13,465,871	$	13		0	$	0	$	367,187	$	(349,759	)	$	17,441				13,465,871	$	13		0	$	0	$	367,187	$	(349,759	)	$	17,441
Share-based compensation		—		0		—		0		458		0			458
Net loss		—		0		—		0		0		(3,056	)		(3,056	)
Balance at September 30, 2021		13,465,871	$	13		0	$	0	$	367,645	$	(352,815	)	$	14,843

Three Months Ended June 30, 2022
	Common Stock				Preferred Stock				Additional Paid-in-		Accumulated
	Number of Shares		Amount		Number of Shares		Amount			Capital	Deficit			Total

Balance at March 31, 2022		14,051,149	$	14		0	$	0	$	368,683	$	(359,731	)	$	8,966
Share-based compensation		—		0		—		0		475		0			475
Net loss		—		0		—		0		0		(4,449	)		(4,449	)
Balance at June 30, 2022		14,051,149	$	14		0	$	0	$	369,158	$	(364,180	)	$	4,992

Nine Months Ended September 30, 2020
	Common Stock				Preferred Stock				Additional
	Number of Shares		Amount		Number of Shares		Amount		Paid-In Capital		Accumulated Deficit			Total

Balance at December 31, 2019		13,146,831	$	13		0	$	0	$	364,028	$	(342,945	)	$	21,096
Share-based compensation		—		0		—		0		1,525		0			1,525
Issuance of common stock upon exercise of stock options		22,213		0		0		0		74		0			74
Net loss		—		0		—		0		0		(5,883	)		(5,883	)
Balance at September 30, 2020		13,169,044	$	13		0	$	0	$	365,627	$	(348,828	)	$	16,812

Nine Months Ended September 30, 2021
Six Months Ended June 30, 2021																	Six Months Ended June 30, 2021
	Common Stock				Preferred Stock					Additional								Common Stock				Preferred Stock				Additional Paid-in-		Accumulated
	Number of Shares		Amount		Number of Shares		Amount			Paid-In Capital		Accumulated Deficit		Total				Number of Shares		Amount		Number of Shares		Amount			Capital		Deficit		Total

Balance at December 31, 2020		13,169,204	$	13		0	$	0	$	366,087	$	(349,765	)	$	16,335				13,169,204	$	13		0	$	0	$	366,087	$	(349,765	)	$	16,335
Share-based compensation		—		0		—		0		1,382		0			1,382				—		0		—		0		924		0			924
Issuance of common stock upon exercise of stock options		76,667		0		0		0		176		0			176				76,667		0		0		0		176		0			176
Issuance of restricted stock		220,000		—		0		—		—		—			—				220,000		0		0		0		0		0			0
Net loss		—		0		—		0		0		(3,050	)		(3,050	)
Balance at September 30, 2021		13,465,871	$	13		0	$	0	$	367,645	$	(352,815	)	$	14,843
Net income																			—		0		—		0		0		6			6
Balance at June 30, 2021																			13,465,871	$	13		0		0	$	367,187	$	(349,759	)	$	17,441

					June 30, 2022							December 31, 2021
Definite-lived Intangible Asset	Estimated Useful Life (Years)				Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net

Trademarks/ trade names/ licenses/ domains		3	-	7	$	16,589	$	(16,414	)	$	175	$	16,589	$	(16,372	)	$	217
Developed technology		5	-	7		8,955		(8,683	)		272		8,955		(8,138	)		817
					$	25,544	$	(25,097	)	$	447	$	25,544	$	(24,510	)	$	1,034

Year	Amortization Expense

2022 (remaining 6 months)	$	315
2023		86
2024		46
	$	447

	June 30, 2022		December 31, 2021

Accrued employee-related benefits	$	1,883	$	1,782
Other accrued expenses and other current liabilities:
Other accrued expenses		1,045		201
Amounts due to customers		30		77
Other current liabilities		326		332
Total other accrued expenses and other current liabilities		1,401		610

Total accrued expenses and other current liabilities	$	3,284	$	2,392

	% of			% of
Customers	Revenue			Accounts Receivable
Carat Detroit		9	%		20	%
Urban Science Applications		11	%		18	%
Autodata Solutions		10	%		13	%
Shift Digital		6			9
Total		36	%		60	%

				September 30, 2021							December 31, 2020
Definite-lived Intangible Asset	Estimated Useful Life (years)			Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net

Trademarks/ trade names/ licenses/ domains	3	-	7	$	16,589	$	(16,350	)	$	239	$	16,589	$	(15,961	)	$	628
Developed technology	5	-	7		8,955		(7,867	)		1,088		8,955		(7,050	)		1,905
				$	25,544	$	(24,217	)	$	1,327	$	25,544	$	(23,011	)	$	2,533

	September 30, 2021			December 31, 2020			June 30, 2022			December 31, 2021

Computer software and hardware	$	5,008		$	4,940		$	5,038		$	5,008
Capitalized internal use software		8,296			7,391			8,370			8,362
Furniture and equipment		1,105			935			1,105			1,105
Leasehold improvements		883			884			883			883
Capital projects-in-progress		1,190			805
Construction in progress								1,903			1,478
		16,482			14,955			17,299			16,836
Less—Accumulated depreciation and amortization		(12,713	)		(12,002	)		(13,546	)		(12,983	)
Property and Equipment, net	$	3,769		$	2,953
Property and equipment, net							$	3,753		$	3,853

		September 30, 2021						December 31, 2020
Indefinite-lived Intangible Asset	Estimated Useful Life	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net

Domain	Indefinite	$	2,600	$	—	$	2,600	$	2,200	$	—	$	2,200

Year	Amortization Expense

2021 (remaining 3 months)	$	294
2022		902
2023		86
2024		45
	$	1,327

Three Months Ended June 30, 2022
(In thousands)	Automotive digital marketing		Used vehicle acquisition & resale		Total
Revenues	$	13,515	$	3,680	$	17,195
Cost of sales		10,017		3,497		13,514
Gross profit		3,498		183		3,681
Operating loss		3,965		236		4,201
Total assets		22,362		551		22,913

Number	Description

~~2.1‡~~2.1	~~Asset Purchase~~ Agreement and Plan of Merger dated as of July ~~31, 2021,~~24, 2022, by and among Company, ~~Tradein Expert,~~Unity AC 1, LLC, and Unity AC 2, Inc., ~~Car Acquisition, LLC, Carzuz.com LLC, McCombs Family Partners, Ltd., and Phil Kandera,~~ incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on ~~August 2, 2021~~July 25, 2022 (SEC File No. 001-34761).

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

3.2	Seventh Amended and Restated Bylaws of AutoWeb, Inc. dated as of October 9, 2017, incorporated by reference to Exhibit 3.5 to the Current Report on Form 8-K filed with the SEC on October 10, 2017 (SEC File No. 001-34761); Amendment No. 1 to Seventh Amended and Restated Bylaws of AutoWeb, Inc, effective upon expiration of the term of the Board of Directors’ Class III Directors upon commencement of the 2022 Annual Meeting of Stockholders of AutoWeb, Inc., incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on April 21, 2022 (SEC File No. 001-34761); Amendment No. 2 to Seventh Amended and Restated Bylaws of AutoWeb, Inc, effective upon expiration of the term of the Board of Directors’ Class III Directors upon commencement of the 2022 Annual Meeting of Stockholders of AutoWeb, Inc., incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on June 1, 2022 (SEC File No. 001-34761); and Amendment No. 3 to Seventh Amended and Restated Bylaws of AutoWeb, Inc, effective June 16, 2022, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on June 21, 2022 (SEC File No. 001-34761).

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

10.1	~~Second Amendment to~~Amended and ~~Consent Under Loan, Security and Guarantee~~Restated Tax Benefit Preservation Plan Exemption Agreement dated as of ~~July 30, 2021,~~May 19, 2022, by and ~~among CIT Northbridge Credit LLC, as Agent, the Lenders Party thereto, AutoWeb, Inc., as Borrower,~~between Company and ~~Car.com, Inc.~~Global Value Investment Corp., ~~Autobytel, Inc., and AW GUA USA, Inc., as Guarantors,~~ incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on ~~August 2, 2021~~May 23, 2022 (SEC File No. 001-34761).

10.2	Irrevocable Proxy dated as of May 19, 2022, by Global Value Investment Corp., incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on May 23, 2022 (SEC File No. 001-34761).

~~10.2~~10.3*	Joinder Under Loan, Security and Guarantee Agreement and Pledge Agreement Supplement dated as of August 12, 2021, by and among CIT Northbridge Credit LLC, as Agent, the Lenders Party thereto, AutoWeb, Inc., as Borrower, and Tradein Expert, Inc., Car.com, Inc., Autobytel, Inc., and AW GUA USA, Inc., as Guarantors.
~~10.3~~	~~Third Amendment to and Consent Under Loan, Security and Guarantee~~Lease Agreement dated as of ~~September 13, 2021,~~April 1, 2022, between AW GUA, LIMITADA, a Sociedad de Responsabilidad Limitada and subsidiary of AutoWeb, Inc., and Guillermo Ravina Cabrera and Dinorah Castaneda Molina de Ravina.

10.4	Form of Tender and Support Agreement dated as of July 24, 2022, by and among ~~CIT Northbridge Credit~~Unity AC 1, LLC, ~~as Agent, the Lenders Party thereto, AutoWeb, Inc., as Borrower, and Tradein Expert, Inc., Car.com, Inc., Autobytel,~~Unity AC 2, Inc., and ~~AW GUA USA, Inc., as Guarantors,~~certain stockholders of the Company, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on ~~September 15, 2021~~July 25, 2022 (SEC File No. 001-34761).

10.5	Amendment No. 2 to Employment Agreement dated as of July 24, 2022, by an among Company, AC 1, LLC, Unity AC 2, Inc., and Jared R. Rowe, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on July 25, 2022 (SEC File No. 001-34761).

31.1*	Chief Executive Officer Section 302 Certification of Periodic Report dated ~~November 4, 2021.~~August 11, 2022.

31.2*	Chief Financial Officer Section 302 Certification of Periodic Report dated ~~November 4, 2021.~~August 11, 2022.

32.1*	Chief Executive Officer and Chief Financial Officer Section 906 Certification of Periodic Report dated ~~November 4, 2021.~~August 11, 2022.


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

101.SCH	Inline XBRL Taxonomy Extension Schema ~~Document~~Document.

101.CAL	Inline XBRL Taxonomy ~~Extension~~ Calculation Linkbase ~~Document~~Document.

101.DEF	Inline XBRL Taxonomy Extension Definition ~~Linkbase Document~~Document.

101.LAB	Inline XBRL Taxonomy ~~Extension~~ Label Linkbase ~~Document~~Document.

101.PRE	Inline XBRL Taxonomy ~~Extension~~ Presentation Linkbase ~~Document~~Document.
104	Cover Page Interactive Data File (embedded within the Inline XBRL Document and ~~include~~included in Exhibit 101)


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


Date: ~~November 4, 2021~~August 11, 2022	By:	/s/ ~~Michael Sadowski~~Carlton Hamer
			~~Michael Sadowski~~Carlton Hamer
		Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)

Date: ~~November 4, 2021~~August 11, 2022	By:	/s/ ~~Cheray Duran~~Josh Barsetti
		~~Cheray Duran~~Josh Barsetti
		Vice President, ~~Corporate~~ Controller
		(Principal Accounting Officer)