AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 1999.

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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autobytel.com inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7375 33-0711569
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
ORGANIZATION)

18872 MACARTHUR BOULEVARD
IRVINE, CALIFORNIA 92612-1400
(949) 225-4500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

MARK W. LORIMER, CHIEF EXECUTIVE OFFICER AND PRESIDENT
AUTOBYTEL.COM INC.
18872 MACARTHUR BOULEVARD
IRVINE, CALIFORNIA 92612-1400
(949) 225-4500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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COPIES TO:

THOMAS R. POLLOCK, ESQ. CHRISTOPHER L. KAUFMAN, ESQ.
BRIGITTE LIPPMANN, ESQ. LAURA I. BUSHNELL, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP LATHAM & WATKINS
399 PARK AVENUE 135 COMMONWEALTH DRIVE
NEW YORK, NEW YORK 10022 MENLO PARK, CALIFORNIA 94025
(212) 318-6000 (650) 328-4600

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement of the earlier effective registration statement for the
same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE

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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
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Common Stock, par value
$0.001 per share....... 5,175,000 Shares $16.00 $82,800,000 $23,018.40
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(1) Includes 675,000 shares issuable upon exercise of the underwriters'
over-allotment option.

(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION
JANUARY 14, 1999

4,500,000 SHARES

[LOGO]

autobytel.com inc.

COMMON STOCK

We are offering 3,500,000 shares of common stock in this offering. The
selling stockholders identified in this prospectus are offering an additional
1,000,000 shares. We will not receive any of the proceeds from the sale of
shares by the selling stockholders. There is currently no public market for our
common stock. We expect that the public offering price will be between $ and
$ per share. The market price of our common stock after this offering may be
higher or lower than the actual price at which the shares of our common stock
will be sold in this offering.

We have applied to list the common stock on the Nasdaq National Market
under the symbol "ABTL."

INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.

PER SHARE TOTAL
--------- --------

Public Offering Price............................ $ $
Underwriting Discounts........................... $ $
Proceeds, before expenses, to Autobytel.com...... $ $
Proceeds, before expenses, to the selling
stockholders................................... $ $

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The selling stockholders have granted the underwriters a 30-day option to
purchase up to an additional 675,000 shares of common stock to cover any
over-allotments. If the underwriters exercise the over-allotment option in full,
these stockholders will receive $ from the proceeds.

BT ALEX. BROWN
LEHMAN BROTHERS

PAINEWEBBER INCORPORATED

, 1999
3

We have the registered service mark Auto-By-Tel and have applied for the
registered service marks Autobytel.com, Certified Pre-Owned CyberStore, Kre8.net
and Dealer Real Time. The Autobytel.com logo is a service mark and trademark for
which we have applied for federal registration. This prospectus also includes
trademarks and tradenames of companies other than autobytel.com inc.
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PROSPECTUS SUMMARY

In addition to this summary, you should read the more detailed information
appearing elsewhere in this prospectus, including the "Risk Factors" section and
the Consolidated Financial Statements and Notes thereto. Except as otherwise
noted or where the context otherwise requires, all information in this
prospectus assumes:

- no exercise of 2,825,410 options to purchase our common stock outstanding
as of December 31, 1998 under our 1996 Stock Option Plan, Amended and
Restated 1996 Stock Incentive Plan and 1998 Stock Option Plan,

- no exercise of 773,133 warrants to purchase our common stock as of
December 31, 1998,

- no exercise of the underwriters' over-allotment option, and

- the conversion of all our outstanding shares of preferred stock into
shares of common stock upon closing of the offering.

AUTOBYTEL.COM

We believe our services benefit both consumers and participating dealers in
the following ways:

- we supply consumers with information they can use to make an informed and
intelligent vehicle purchasing decision,

- we provide consumers a convenient buying experience,

- we provide consumers access to a broad range of related services such as
insurance, financing and leasing through our Web site,

- we reduce our participating dealers' costs by directing to them large
volumes of potential automotive buyers, and

- we train our dealers to appropriately deal with knowledgeable Internet
consumers.

We introduced our new vehicle purchasing services in May 1995 and our
Certified Pre-Owned CyberStore program in April 1997. Our new vehicle purchasing
service enables consumers to shop for and select a new vehicle through our Web
site by providing research on new vehicles (e.g., pricing, features,
specifications, colors, etc.). When consumers indicate they are ready to buy,
they can complete a purchase request online. A purchase request is an online
inquiry a consumer makes to receive a price quote for a specific vehicle from
one of the dealers in our network. The CyberStore allows consumers to
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search for a pre-owned vehicle according to the price, make, model, color, year
and location of the vehicle. The CyberStore locates and displays the
descriptions, locations and actual photograph of all vehicles that satisfy the
consumer's search parameters.

According to CNW Marketing/Research, an independent research organization,
U.S. consumers spent over $670 billion on new and pre-owned vehicles in 1997,
representing the sale of over 50 million vehicles. Although automotive retailing
attracts significant consumer dollars, we believe that consumers associate the
traditional vehicle buying experience with high-pressure sales tactics. In the
United States, new vehicles are traditionally sold through face-to-face,
negotiated transactions at approximately 49,000 dealerships franchised by
manufacturers. Approximately 40% of pre-owned vehicles are also sold through
these dealerships. Our company was founded with the objective of significantly
improving the purchasing process for consumers and dealers.

Since inception, we have successfully expanded our dealer network to over
2,700 dealers and have directed approximately 2.5 million purchase requests to
our dealer network. During 1998, we directed over 1.3 million purchase requests
to our dealers. According to a survey released by J.D. Power & Associates in
September 1998, our dealer network experienced the highest sales closing rate
per purchase request in the online vehicle purchasing industry. We believe that
our dealer network experiences a high closing ratio due to the quality of
purchase requests generated through our Web site, our high quality dealer
network, and our dealer training and support. The dealers in our network use our
online information platform, the Dealer Real Time (DRT) system, which provides
dealers with immediate purchase request information, the ability to track
customers and purchase requests, and other value-added features, including
automatic uploading of pre-owned vehicle inventory into our database. We believe
that the DRT system gives dealers a competitive advantage compared to delivering
purchase requests by fax.

We have developed strategic marketing, advertising, development and
distribution affiliations with other companies, including:

- Internet portals, such as Excite, Inc.,

- broadband service providers, such as MediaOne Interactive Services, Inc.,

- international automotive distributors, such as Inchcape Automotive
Limited and Bilia AB,

- Internet providers of vehicle pricing and specification information, such
as Edmund's Publications Corp., Kelley Blue Book, Pace Publications, Inc.
and IntelliChoice, Inc. and

- financing and insurance providers, such as Chase Manhattan Automotive
Finance Corporation, General Electric Capital Auto Financial Services,
Inc. and New Hampshire Insurance Corporation, a member company of the
American International Group.
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Our primary objective is to be the leading global Internet brand for
vehicle information and purchasing services. Our strategy to achieve this
objective includes the following:

- build brand equity to drive incremental traffic to our Web site,

- assure consumers a quality experience by aggregating relevant information
and providing a convenient alternative to the traditional vehicle buying
process,

- increase the number of purchase requests and, in turn, attract additional
dealers,

- expand and improve the dealer network through technology-based tools
(such as the DRT system) and continued training and support programs,

- expand and enrich our breadth of online automotive information, products
and services for consumers in the United States and abroad,

- invest in ancillary products and services, and

- expand internationally through relationships with strategic partners.

We are a Delaware corporation incorporated on May 17, 1996. We were
formerly incorporated in Delaware in January 1995 as a limited liability company
under the name Auto-By-Tel LLC. Our principal executive offices are located at
18872 MacArthur Boulevard, Irvine, California 92612-1400, and our telephone
number is (949) 225-4500. Our Web site is located at www.autobytel.com.

THE OFFERING

Common stock offered by
Autobytel.com.......................
3,500,000 shares
Common stock offered by the selling
stockholders........................
1,000,000 shares
Common stock to be outstanding after
the offering(1).....................
17,858,745 shares
Use of proceeds.......................
For working capital and general
corporate purposes
Proposed Nasdaq National Market
symbol..............................
"ABTL"

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(1) Based on shares outstanding as of December 31, 1998. Excludes (a) 2,825,410
shares of common stock issuable upon exercise of options as of December 31,
1998 at a weighted average exercise price of $10.84 per share, (b) 773,133
shares of common stock issuable upon exercise of warrants outstanding as of
December 31, 1998 at a weighted average exercise price of $13.12 per share,
and (c) 3,723,433 shares of common stock reserved for issuance under all
stock option grants.
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCEPTION
(JANUARY 31, YEARS ENDED NINE MONTHS ENDED
1995) TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------ -----------------------
1995 1996 1997 1997 1998
------------ ------- -------- ----------- ---------
(UNAUDITED) (AUDITED)

STATEMENT OF OPERATION DATA:
Revenues.................... $ 274 $ 5,025 $ 15,338 $ 10,770 $ 16,499
======= ======= ======== ======== ========
Loss from operations........ (1,030) (6,159) (17,415) (13,135) (15,982)
------- ------- -------- -------- --------
Net loss.................... $(1,030) $(6,035) $(16,810) $(12,724) $(15,512)
======= ======= ======== ======== ========
Basic net loss per share.... $ (0.12) $ (0.73) $ (2.03) $ (1.54) $ (1.85)
======= ======= ======== ======== ========
Shares used in computing
basic net loss per
share..................... 8,250 8,252 8,291 8,283 8,396
Pro forma basic net loss per
share(1).................. $ (0.12) $ (0.68) $ (1.53) $ (1.19) $ (1.22)
======= ======= ======== ======== ========
Shares used in computing pro
forma basic net loss per
share(1).................. 8,250 8,849 10,967 10,730 12,753

SEPTEMBER 30, 1998
------------------------
PRO FORMA
ACTUAL AS ADJUSTED(2)
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BALANCE SHEET DATA:
Cash and cash equivalents............................... $10,488
Working capital......................................... 956
Total assets............................................ 15,473
Accumulated deficit..................................... (39,387)
Stockholders' equity.................................... 3,384

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(1) Pro forma net loss per share has been calculated assuming the conversion of
the outstanding preferred stock into common stock, as if the shares had been
converted on the dates of their issuance.

(2) Reflects the conversion of all outstanding shares of preferred stock
concurrent with the closing of the offering and receipt by Autobytel.com of
the estimated net proceeds of $ million from the sale of 3,500,000
shares of common stock offered hereby at an assumed initial public offering
price of $ per share net of estimated underwriting discount and
estimated offering expenses.
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RISK FACTORS

You should read the following risk factors carefully before purchasing our
common stock. This prospectus contains certain forward-looking statements based
on current expectations which involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of many factors, including the risk factors set forth
below and elsewhere in this prospectus. The cautionary statements made in this
prospectus should be read as being applicable to all forward-looking statements
wherever they appear in this prospectus.

RISK DUE TO OUR LIMITED OPERATING HISTORY AND CONTINUED LOSSES

We were formed in January 1995 as Auto-By-Tel LLC, and first received
revenues from operations in March 1995. We therefore have a limited operating
history upon which you may evaluate our operations and future prospects. Because
of the recent emergence of the Internet-based vehicle information and purchasing
industry, none of our executives has significant experience in the industry.
This limited operating history and management experience means it is difficult
for us to predict future operating results. We have incurred losses every
quarter since inception and expect to continue to incur losses for the
foreseeable future. We had an accumulated deficit of $23.9 million and $39.4
million as of December 31, 1997 and September 30, 1998, respectively. Our
potential for future profitability must be considered in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
the early stages of development, particularly companies in new and rapidly
evolving markets, such as the market for Internet commerce. To achieve
profitability, we must, among other things:

- generate increased vehicle buyer traffic to our Web site,

- continue to send new and pre-owned vehicle purchase requests to dealers
that result in sufficient dealer transactions to justify our fees,

- continue to expand the number of dealers in our network and enhance the
quality of dealers,

- respond to competitive developments,

- increase our brand name visibility,

- successfully introduce new services,

- continue to attract, retain and motivate qualified personnel, and

- continue to upgrade and enhance our technologies to accommodate expanded
service offerings and increased consumer traffic.

We cannot be certain that we will be successful in achieving these goals.

DEALER TURNOVER AND DEPENDENCE ON RELATIONSHIPS WITH SUBSCRIBING DEALERS

Substantially all of our revenues are derived from fees paid by subscribing
dealerships under five-year written marketing agreements with us. These
marketing agreements are cancelable at the option of either party upon 30 days
notice. Subscribing dealers may terminate their relationship with us for any
reason, including an unwillingness to accept our subscription terms or in order
to join alternative marketing programs. Our business is

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dependent upon our ability to attract and retain qualified new and pre-owned
vehicle dealers. During 1998, 556 subscribing dealers in the United States
terminated their affiliation with us or were terminated by us. During 1998 we
also added 1,323 subscribing dealers to our dealership network. In order for us
to grow or maintain our dealer network, we may need to reduce dealer turnover.
We cannot assure that dealers will not terminate their agreements with us. In
addition, if the volume of purchase requests increases, we may need to reduce or
reconfigure the exclusive territories currently assigned to dealerships in order
to serve consumers more effectively.

If a dealer is unwilling to accept a reduction or reconfiguration of its
territory, it may terminate its relationship with us and could sue us to prevent
such reduction or reconfiguration, or collect damages from us. We have
experienced one such lawsuit -- for more details, see the section in this
prospectus entitled "Business -- Litigation." A material decrease in the number
of dealers subscribing to our network, or slower than expected growth in the
number of subscribing dealers, or litigation with dealers could have a material
adverse effect on our business, results of operations and financial condition.

In addition, we devote significant efforts to train participating
dealerships in practices that are intended to increase consumer satisfaction.
Our inability to train dealers effectively, or the failure by participating
dealers to adopt recommended practices, respond rapidly and professionally to
vehicle inquiries, or sell and lease vehicles in accordance with our marketing
strategies, could result in low consumer satisfaction, damage our brand name and
could materially and adversely affect our business, results of operations and
financial condition.

POTENTIAL FLUCTUATIONS AND SEASONALITY IN OUR QUARTERLY OPERATING RESULTS

Our quarterly operating results may fluctuate due to many factors. Our
expense levels are based in part on our expectations of future revenues which
may vary significantly. We plan our business operations based on increased
revenues and if our revenues do not increase faster than our expenses, our
business, results of operations and financial condition will be materially and
adversely affected. Other factors that may adversely affect our quarterly
operating results include:

- our ability to retain existing dealers, attract new dealers and maintain
dealer and customer satisfaction,

- the announcement or introduction of new or enhanced sites, services and
products by us or our competitors,

- general economic conditions and economic conditions specific to the
Internet, online commerce or the automobile industry,

- the usage levels of online services and consumer acceptance of the
Internet and commercial online services for the purchase of consumer
products and services such as those offered by us,

- our ability to upgrade and develop our systems and infrastructure and to
attract new personnel in a timely and effective manner,

- the level of traffic on our Web site and other sites that refer traffic
to our Web site,

- technical difficulties, system downtime or Internet brownouts,

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- the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and infrastructure,

- governmental regulation, and

- unforeseen events affecting the industry.

To date, our quarter to quarter growth in revenues have offset any effects
due to seasonality. However, we expect our business to experience seasonality as
it matures, reflecting seasonal fluctuations in the automotive industry,
Internet and commercial online service usage and advertising expenditures. We
anticipate that purchase requests will typically increase during the first and
third quarters when new vehicle models are introduced and will typically decline
during the second and fourth quarters. Internet and commercial online service
usage and the growth rate of such usage typically declines during the summer.
Seasonality in the automotive industry, Internet and commercial online service
usage, and advertising expenditures is likely to cause fluctuations in our
operating results and could have a material adverse effect on our business,
operating results and financial condition.

SIGNIFICANT COMPETITION IN OUR INDUSTRY

Our vehicle purchasing services compete against a variety of Internet and
traditional vehicle purchasing services and automotive brokers. The market for
Internet-based commercial services is new, and competition among commercial Web
sites is expected to increase significantly in the future. The Internet is
characterized by minimal barriers to entry, and new competitors can launch new
Web sites at relatively low cost. To compete successfully as an Internet-based
commercial entity, we must significantly increase awareness of our services and
brand name. If we do not achieve our competitive objectives, such failure may
have a material adverse effect on our business, results of operations and
financial condition.

We compete with other entities which maintain similar commercial Web sites
including Autoweb.com, Cendant Membership Service, Inc.'s AutoVantage, Microsoft
Corporation's Carpoint and Stoneage Corporation. Republic Industries, Inc., a
large consolidator of dealers, has announced its intention to launch a Web site
for marketing vehicles. We also compete indirectly against vehicle brokerage
firms and affinity programs offered by several companies, including Costco
Wholesale Corporation and Wal-Mart Stores, Inc. In addition, all major vehicle
manufacturers have their own Web sites and many have recently launched or
announced plans to launch online buying services, such as General Motors
Corporation's BuyPower. We also compete with vehicle insurers, lenders and
lessors as well as other dealers that are not part of our network. Such
companies may already maintain or may introduce Web sites which compete with
ours.

We believe that the principal competitive factors in the online market are:

- brand recognition,

- speed and quality of fulfillment,

- variety of value-added services,

- ease of use,

- customer satisfaction,

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- quality of service, and

- technical expertise.

We cannot assure that we can compete successfully against current or future
competitors, many of which have substantially more capital, existing brand
recognition, resources and access to additional financing. In addition,
competitive pressures may result in increased marketing costs, decreased Web
site traffic or loss of market share or otherwise may materially and adversely
affect our business, results of operations and financial condition.

DEPENDENCE ON STRATEGIC RELATIONSHIPS

We depend on a number of strategic relationships to direct a substantial
amount of traffic to our Web site. These include online automotive information
providers, such as Edmund's and Kelley Blue Book, and Internet portals, such as
Excite. A number of our agreements with online service providers may be
terminated without cause. In addition, our agreement with Excite relating to our
sponsorship of Netscape Communications Corporation's Netcenter Auto Channel is
conditioned on Excite's Netcenter agreement with Netscape remaining in effect.
The Netcenter agreement between Excite and Netscape can be terminated in the
event of certain changes in control which may be triggered if America Online's
proposed acquisition of Netscape occurs. We cannot be certain that such online
service providers will not terminate their agreements with us. In addition, we
periodically negotiate revisions to existing agreements and these revisions
could increase our costs in future periods.

We receive a significant number of purchase requests through a limited
number of such Web sites. In 1997 and 1998, approximately 49% and 34%,
respectively, of our purchase requests came through Edmund's. Our agreement with
Edmund's extends to July 31, 2000 and provides that we are the only online
vehicle marketing service to which Edmund's will refer prospective buyers of new
vehicles, although Edmund's may refer prospective buyers directly to automotive
manufacturers' Web sites, which in many cases include dealer locator services.

We may not be able to maintain our relationship with Edmund's or other
online service providers or find alternative, comparable marketing partners
capable of originating significant numbers of purchase requests on terms
satisfactory to us. The termination of any of these relationships or any
significant reduction in traffic to Web sites on which our services are
advertised or offered, or the failure to develop additional referral sources
would have a material adverse effect on our business, results of operations and
financial condition.

As a part of our strategy, we develop new services by entering into
alliances with other companies engaged in complementary businesses, such as
vehicle financing and leasing, and insurance. Some of our relationships prohibit
or limit us from referring consumers to other potential sources of financing,
such as our agreements with Chase. We are therefore dependent on those companies
with which we have developed strategic relationships. We cannot assure that the
relationship with Chase, or any other strategic relationships will continue or
that we will be able to develop new strategic relationships.

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UNCERTAIN ACCEPTANCE OF OUR BRAND

We believe that the importance of brand recognition will increase as more
companies engage in commerce over the Internet. Development and awareness of the
Autobytel.com brand will depend largely on our ability to obtain a leadership
position in Internet commerce. If dealers do not perceive us as an effective
channel for increasing vehicle sales, or consumers do not perceive us as
offering reliable information concerning new and pre-owned vehicles, as well as
referrals to high quality dealers, in a user-friendly manner that reduces the
time spent for vehicle purchases, we will be unsuccessful in promoting and
maintaining our brand. Our brand may not be able to gain widespread acceptance
among consumers or dealers. Our failure to develop our brand sufficiently would
have a material adverse effect on our business, results of operations and
financial condition.

INABILITY TO HIRE AND RETAIN HIGHLY QUALIFIED PERSONNEL

Our future success depends on our ability to identify, hire, train and
retain highly qualified sales and marketing, managerial and technical personnel.
In addition, as we introduce new services we will need to hire a significant
number of personnel. Competition for such personnel is intense, and we may not
be able to attract, assimilate or retain such personnel in the future. The
inability to attract and retain the necessary managerial, technical and sales
and marketing personnel could have a material adverse effect on our business,
results of operations and financial condition.

Our business and operations are substantially dependent on the performance
of our executive officers and key employees, some of whom are employed on an
at-will basis and all of whom have worked together for only a short period of
time. We maintain "key person" life insurance in the amount of $3.0 million on
the life of Mark W. Lorimer, our Chief Executive Officer and President. The loss
of the services of Mr. Lorimer or Ann Marie Delligatta, Executive Vice President
and Chief Operating Officer, or one or more of our other executive officers or
key employees could have a material adverse effect on our business, results of
operations and financial condition.

INABILITY TO MANAGE GROWTH AND ENTRY INTO NEW BUSINESS AREAS

We are expanding our operations in order to establish ourselves as a leader
in the evolving market for Internet-based vehicle purchasing services. As of
December 31, 1998, we had 177 employees, compared to 159 employees as of
December 31, 1997, and 73 employees as of December 31, 1996. We believe
establishing industry leadership requires us to:

- test, introduce and develop new services and products, including
enhancing our Web site,

- expand the breadth of products and services offered,

- expand our market presence through relationships with third parties, and

- acquire new or complementary businesses, products or technologies.

We may not be able to expand our operations in a cost-effective or timely
manner or increase overall market acceptance. Our inability to generate
satisfactory revenues from such expanded services or products to offset their
cost could have a material adverse effect on our business, financial condition
and results of operations.

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REGULATORY UNCERTAINTIES AND GOVERNMENT REGULATION

Our operations may be subject, both directly and indirectly, to various
laws and regulations. Government authorities may also take the position that
federal and/or state franchise laws, automobile brokerage laws, insurance
licensing laws, motor vehicle dealership laws or related consumer protection or
product liability laws apply to aspects of our business. As we introduce new
services and expand our operations to other countries, we will need to comply
with additional licensing and regulatory requirements. Due to the increasing
popularity and use of the Internet, it is possible that a number of new laws and
regulations may be adopted with respect to this rapidly developing environment
for conducting business.

We believe that neither our relationship with our dealers nor our dealer
subscription agreements constitute "franchises" under federal or state franchise
laws and that we are not subject to the coverage of state motor vehicle dealer
licensing laws. A Federal district court in Michigan has ruled that our dealer
subscription agreement is not a "franchise" under Michigan law. However, if our
relationship or written agreement with our dealers were found to be a
"franchise" under federal or other state franchise laws, then we could be
subjected to other regulations, such as franchise disclosure and registration
requirements and limitations on our ability to effect changes in our
relationships with our dealers. We also believe that our dealer marketing
service does not qualify as an automobile brokerage activity and therefore state
broker licensing requirements do not apply to us. In response to Texas
Department of Transportation concerns, we modified our marketing program in that
state to include a pricing model under which all subscribing dealerships in
Texas are charged uniform fees based on the population density of their
particular geographic area and to make our program open to all dealerships who
wish to apply. In the event that any state's regulatory requirements impose
additional requirements on us or include us within an industry-specific
regulatory scheme, we may be required to modify our marketing programs in such
states in a manner which may undermine the program's attractiveness to consumers
or dealers, or, in the alternative, if we determine that the licensing and
related requirements are overly burdensome, we may elect to terminate operations
in such state. In each case, our business, results of operations and financial
condition could be materially and adversely affected.

We are currently in the process of applying for financial broker licenses
in Indiana and have been approved for such license in Rhode Island. We believe
these are the only states which require us to have licenses in order to market
our vehicle financing operations. It may be an expensive and time-consuming
process which could divert the efforts of management from day-to-day operations
if we are required to be licensed elsewhere. In the event other states require
us to be licensed and we are unable to do so, or are otherwise unable to comply
with regulations required by changes in current operations or the introduction
of new services, our business, results of operations and financial condition
could be materially and adversely affected.

We market insurance online, offered by New Hampshire Insurance Corporation,
a member company of the American Insurance Group (AIG), and receive referral
fees from AIG in connection with this activity. We do not believe that this
activity requires us to be licensed under state insurance laws. The use of the
Internet in the marketing of insurance products, however, is a relatively new
practice. It is not clear whether or to what extent state insurance licensing
laws apply to activities similar to ours. If we were required to comply with
such licensing laws, compliance could be costly or not possible. This could have
a material adverse effect on our business, results of operations or financial
condition.

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There are currently few laws or regulations which apply directly to the
Internet. Due to the increasing popularity of the Internet, however, it is
likely that a number of laws and regulations may be adopted at the local, state,
national or international levels with respect to commerce over the Internet,
potentially covering issues such as the pricing of services and products,
advertising, user privacy, intellectual property, information security, or anti-
competitive practices. In addition, tax authorities in a number of states are
currently reviewing the appropriate tax treatment of companies engaged in
Internet commerce. New state tax regulations may subject us to additional state
sales, use and income taxes. Because our business is dependent on the Internet,
the adoption of any such laws or regulations may decrease the growth of Internet
usage or the acceptance of Internet commerce which could, in turn, decrease the
demand for our services and increase our costs or otherwise have a material
adverse effect on our business, results of operations and financial condition.

To date, we have not spent significant resources on lobbying or related
government affairs issues but we may need to do so in the future.

DEPENDENCE ON CHANGING TECHNOLOGY

The Internet and electronic commerce markets are characterized by rapid
technological change, changes in user and customer requirements, frequent new
service and product introductions embodying new technologies and the emergence
of new industry standards and practices that could render our existing Web site
and technology obsolete. Our performance will depend, in part, on our ability to
continue to enhance our existing services, develop new technology that addresses
the increasingly sophisticated and varied needs of our prospective customers,
license leading technologies and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The
development of our Web site, DRT system and other proprietary technology entails
significant technical and business risks. We may not be successful in using new
technologies effectively or adapting our Web site, DRT system, or other
proprietary technology to customer requirements or to emerging industry
standards. If we are unable to adapt to changing technologies, our business,
results of operations and financial condition could be materially and adversely
affected.

SYSTEMS INTERRUPTIONS

We host our Web site and DRT system at our corporate headquarters in
Irvine, California. Although we maintain redundant local offsite backup servers,
all of our primary servers are located at our corporate headquarters and are
vulnerable to interruption by damage from fire, earthquake, flood, power loss,
telecommunications failure, break-ins and other events beyond our control. We
have, from time to time, experienced periodic systems interruptions and
anticipate that such interruptions will occur in the future. We maintain
business interruption insurance which pays up to $6 million for the actual loss
of business income sustained due to the suspension of operations as a result of
direct physical loss of or damage to property at our offices. However, in the
event of a prolonged interruption, this business interruption insurance may not
be sufficient to fully compensate us for the resulting losses. In the event that
we experience significant system disruptions, our business, results of
operations and financial condition would be materially and adversely affected.

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DEPENDENCE ON GROWTH AND ACCEPTANCE OF INTERNET COMMERCE

The market for Internet-based purchasing services has only recently begun
to develop and is rapidly evolving. While many Internet commerce companies have
grown in terms of revenue, few are profitable. We can not assure that we will be
profitable. As is typical for a new and rapidly evolving industry, demand and
market acceptance for recently introduced services and products over the
Internet are subject to a high level of uncertainty and there are few proven
services and products. Moreover, since the market for our services is new and
evolving, it is difficult to predict the future growth rate, if any, and size of
this market.

The success of our services will depend upon the adoption of the Internet
by consumers and dealers as a mainstream medium for commerce. While we believe
that our services offer significant advantages to consumers and dealers, there
can be no assurance that widespread acceptance of Internet commerce in general,
or of our services in particular, will occur. Our success assumes that consumers
and dealers who have historically relied upon traditional means of commerce to
purchase or lease vehicles, and to procure vehicle financing and insurance, will
accept new methods of conducting business and exchanging information. In
addition, dealers must be persuaded to adopt new selling models and be trained
to use and invest in developing technologies. Moreover, critical issues
concerning the commercial use of the Internet (including ease of access,
security, reliability, cost, and quality of service) remain unresolved and may
impact the growth of Internet use. If the market for Internet-based vehicle
marketing services fails to develop, develops slower than expected or becomes
saturated with competitors, or if our services do not achieve market acceptance,
our business, results of operations and financial condition will be materially
and adversely affected.

Our purchasing service may result in changing the way vehicles are sold
which may be viewed as threatening by new and pre-owned vehicle dealers who do
not subscribe to the Autobytel.com program. Such businesses are often
represented by influential lobbying organizations, and such organizations or
other persons may propose legislation which could impact the evolving marketing
and distribution model which our service promotes. Should current laws be
changed or new laws passed, our business, results of operations and financial
condition could be materially and adversely affected. As we introduce new
services, we may need to comply with additional licensing regulations and
regulatory requirements.

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION

We intend to expand our new vehicle purchasing service to foreign markets
through licensing our technology, business processes and tradenames and by
establishing relationships with vehicle dealers and strategic partners located
in certain foreign markets. As of December 31, 1998, approximately 161 Canadian
dealerships belonged to our network. We have entered into a licensing
relationship with Auto by Tel UK Limited, an affiliate of Inchcape Motors, the
United Kingdom's largest independent automobile distributor. We have also
entered an agreement with Auto-By-Tel Nordic, an affiliate of Bilia, AB, to
launch Autobytel.com-licensed Web sites in Sweden, Norway, Denmark and Finland.

In addition, we have entered into an arrangement with affiliates of METRO
Holding AG, a Swiss-based finance and holding company, relating to the
establishment of Web sites using Autobytel.com's vehicle marketing systems
throughout the rest of Europe. We intend to enter into similar relationships in
other countries with strong automobile markets. However, we have had limited
experience in providing our Internet-based

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marketing service abroad and we cannot be certain that we will be successful in
introducing or marketing our services abroad. In addition, there are certain
risks inherent in doing business in international markets, such as changes in
political conditions, regulatory requirements, potentially weaker intellectual
property protections, tariffs and other trade barriers, fluctuations in currency
exchange rates, potentially adverse tax consequences, difficulties in managing
or overseeing foreign operations, seasonal reductions in business activities
during summer months in Europe and other areas, and educating consumers and
dealers who may be unfamiliar with the benefits of online marketing and
commerce. One or more of such factors may have a material adverse effect on our
current or future international operations and, consequently, on our business,
results of operations and financial condition.

By expanding our operations to various other countries, we may become
subject to laws or treaties that regulate the marketing, distribution and sale
of motor vehicles. We will need to spend our resources to determine whether the
laws of the countries in which we seek to operate require us to modify, or
prohibit the use of, our Autobytel.com system. In addition, the laws of other
countries may impose licensing, bonding or similar requirements on us as a
condition to doing business therein.

RISKS ASSOCIATED WITH SECURITY BREACHES INVOLVING CONFIDENTIAL INFORMATION
TRANSMITTED VIA THE INTERNET

We rely on technology licensed from third parties that is designed to
facilitate the secure transmission of confidential information. Nevertheless,
our computer infrastructure is potentially vulnerable to physical or electronic
computer break-ins, viruses and similar disruptive problems. A party who is able
to circumvent our security measures could misappropriate proprietary
information, jeopardize the confidential nature of information transmitted over
the Internet or cause interruptions in our operations. Concerns over the
security of Internet transactions and the privacy of users could also inhibit
the growth of the Internet in general, particularly as a means of conducting
commercial transactions. To the extent that our activities or those of third
party contractors involve the storage and transmission of proprietary
information (such as personal financial information), security breaches could
expose us to a risk of financial loss, litigation and other liabilities. Our
insurance does not currently protect against such losses. Any such security
breach would have a material adverse effect on our business, results of
operations and financial condition.

INTERNET CAPACITY CONSTRAINTS

Our success will depend, in large part, upon a robust communications
industry and infrastructure for providing Internet access and carrying Internet
traffic. The Internet may not prove to be a viable commercial medium because of
inadequate development of the necessary infrastructure (e.g., reliable network
backbone), timely development of complementary products (e.g., high speed
modems), delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity or increased government
regulation. If the Internet continues to experience significant growth in the
number of users and the level of use, then the Internet infrastructure may not
be able to continue to support the demands placed on it by such potential
growth.

An unexpectedly large increase in the volume or pace of traffic on our Web
site or the number of orders placed by customers may require us to expand and
further upgrade our

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technology, transaction-processing systems and network infrastructure. We may
not be able to accurately project the rate or timing of increases, if any, in
the use of our Web site or expand and upgrade our systems and infrastructure to
accommodate such increases. In addition, we cannot assure that our dealers will
efficiently process purchase requests.

NO SPECIFIC PLAN FOR SIGNIFICANT PORTION OF PROCEEDS

We currently have no specific plans for a significant portion of the net
proceeds of the offering. As a consequence, our management will have the
discretion to allocate this portion of the net proceeds of this offering to uses
that the stockholders may not deem desirable. We may not be able to invest these
proceeds to yield a significant return. Substantially all of the proceeds of the
offering will be invested in short-term, interest-bearing, investment grade
securities for an indefinite period of time.

RISKS ASSOCIATED WITH THE YEAR 2000

Because many computer applications have been written using two digits
rather than four to define the applicable year, date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
"Year 2000 issue" could result in system failures or miscalculations causing
disruptions of operations, including disruptions of our Web site, the Dealer
Real Time (DRT) system or normal business activities.

We do not believe that we have material exposure to the Year 2000 issue
with respect to our own information systems since our existing systems correctly
define the Year 2000 with four digits. We are currently taking two actions to
mitigate the risk and exposure of the Year 2000 issue:

- We are in the process of obtaining Year 2000 compliance confirmation from
our third-party vendors (including hardware, software, network
communications, facility/utility vendors, and data suppliers) as well as
our Autobytel.com accredited dealers. We expect to receive a reply to our
Year 2000 requests from third party vendors and accredited dealers in
early 1999.

- We are implementing a test lab environment to simulate the Year 2000
rollover with hardware, software, network communications vendors and
certain key data suppliers.

In the event we decide any of our vendors are not Year 2000 compliant, our
contingency plan is to first attempt to find a replacement vendor, and if no
replacement can be found, to assist such vendor in becoming Year 2000 compliant.
If we cannot effectively assist such vendor in becoming Year 2000 compliant, we
plan to set up a front-end gate to screen all non-compliant data or to receive
the data and modify it so that the data is Year 2000 compliant. We may spend up
to $116,000 towards addressing the Year 2000 issue in fiscal year 1999.

We cannot predict the extent to which the Year 2000 issue will affect our
vendors, consumers or dealers, or the extent to which we would be vulnerable if
such parties fail to resolve any Year 2000 issues on a timely basis. The failure
of such parties subject to the Year 2000 issue to convert their systems on a
timely basis or effect a conversion that is compatible with our systems could
have a material adverse effect on us. In addition, to the extent our customers
are unable to access our Web site or dealers are unable to access the

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DRT system, such failures would have a material adverse effect on our business,
results of operations, or financial condition.

PROTECTION OF INTELLECTUAL PROPERTY

Our ability to compete depends upon our proprietary systems and technology.
While we rely on trademark, trade secret and copyright law, confidentiality
agreements and technical measures to protect our proprietary rights, we believe
that the technical and creative skills of our personnel, continued development
of our proprietary systems and technology, brand name recognition and reliable
Web site maintenance are more essential in establishing and maintaining a
leadership position and strengthening our brand. Despite our efforts to protect
our proprietary rights, unauthorized parties may attempt to copy aspects of our
services or to obtain and use information that we regard as proprietary.
Policing unauthorized use of our proprietary rights is difficult. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which our products and services are made available
online. In addition, litigation may be necessary in the future to enforce or
protect our intellectual property rights or to defend against claims or
infringement or invalidity. As part of our confidentiality procedures, we
generally enter into agreements with our employees and consultants and limit
access to our trade secrets and technology. We cannot assure that the steps
taken by us will prevent misappropriation of technology or that the agreements
entered into for that purpose will be enforceable. Misappropriation of our
intellectual property or potential litigation could have a material adverse
effect on our business, results of operations and financial condition.

NO PUBLIC MARKET FOR THE COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for our common
stock. We cannot assure that an active trading market will develop or be
sustained or that the market price of the common stock will not decline. Even if
an active trading market does develop, the market price of the common stock is
likely to be highly volatile and could be subject to wide fluctuations in
response to factors such as:

- actual or anticipated variations in our quarterly operating results,

- announcements of new product or service offerings,

- technological innovations,

- competitive developments,

- changes in financial estimates by securities analysts,

- conditions and trends in the Internet and electronic commerce industries,

- adoption of new accounting standards affecting the automotive industry,
and

- general market conditions and other factors.

Further, the stock markets, and in particular the Nasdaq National Market,
have experienced extreme price and volume fluctuations that have particularly
affected the market prices of equity securities of many technology companies and
have often been unrelated or disproportionate to the operating performance of
such companies. The trading prices of many technology companies' stocks are at
or near historical highs. We cannot assure that such high trading prices will be
sustained. These broad market factors may

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adversely affect the market price of our common stock. In addition, general
economic, political and market conditions such as recessions, interest rates or
international currency fluctuations, may adversely affect the market price of
the common stock. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. Such litigation, if instituted, could
result in substantial costs and a diversion of management's attention and
resources, which would have a material adverse effect on our business, results
of operations and financial condition.

SUBSTANTIAL CONTROL BY OUR FOUNDERS, OFFICERS AND DIRECTORS AND THEIR AFFILIATES

Following this offering, our executive officers and directors will
beneficially own or control approximately 3,145,972 shares or 17% of the
outstanding shares of our common stock. If the underwriters' over-allotment
option is exercised in full, our executive officers and directors will
beneficially own or control approximately 35% of the outstanding shares of our
common stock. In addition, after this offering, our founders, Peter Ellis and
John Bedrosian will beneficially own or control approximately 20% and 17%,
respectively, of the outstanding shares of our common stock. If the
underwriters' over-allotment option is exercised in full, our founders will
beneficially own or control approximately 18% and 15%, respectively, of the
outstanding shares of our common stock. Our officers, directors, founders and
their affiliates will have the ability to control the election of our Board of
Directors and the outcome of corporate actions requiring stockholder approval,
including mergers and other changes of corporate control, going private
transactions and other extraordinary transactions. This control could have an
adverse effect on the market price of our common stock.

EFFECT ON MARKET PRICE OF FUTURE SHARES BEING AVAILABLE

Sale of substantial numbers of shares of common stock in the public market
could adversely affect the market price of the common stock and make it more
difficult for us to raise funds through equity offerings in the future. A
substantial number of outstanding shares of common stock and shares of common
stock issuable upon exercise of outstanding stock options will become available
for resale in the public market at prescribed times. Of the 17,858,745 shares to
be outstanding after the offering, the 4,500,000 shares offered hereby will be
eligible for immediate sale in the public market without restriction.
other outstanding shares of common stock are subject to 180-day lock-up
agreements with the underwriters, and shares held by the selling
stockholders are subject to 270-day lock-up agreements with the underwriters.
Upon the expiration of these lock-up agreements, such shares of common stock
will become eligible for sale in the public market, subject to the provisions of
Rules 144(k), 144 and 701 under the Securities Act of 1933, as amended, and any
contractual restrictions on their transfer. BT Alex. Brown Incorporated may, in
its sole discretion and at any time without notice, release all or any portion
of the shares subject to lock-up agreements. Upon completion of the offering,
the holders of approximately 14,737,757 shares of common stock will be entitled
to certain registration rights with respect to such shares until such time as
the holders of such common stock may sell such shares under Rule 144 of the
Securities Act. In addition, we intend to register the shares of common stock
reserved for issuance under our 1996 Stock Option Plan, 1996 Stock Incentive
Plan, 1996 Employee Stock Purchase Plan and 1998 Stock Option Plan after the
offering.

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UNCERTAINTY OF ADDITIONAL FINANCING FOR FUTURE CAPITAL NEEDS

We currently anticipate that the net proceeds of this offering, together
with our cash, cash equivalents and short-term investments, will be sufficient
to meet our anticipated needs for working capital and other cash requirements
for at least twelve months following the effective date of this prospectus. We
may need to raise additional funds sooner, however, in order to fund more rapid
expansion, to develop new or enhance existing services or products, to respond
to competitive pressures or to acquire complementary products, businesses or
technologies. There can be no assurance that additional financing will be
available on terms favorable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our ability to fund our
expansion, take advantage of potential acquisition opportunities, develop or
enhance services or products or respond to competitive pressures would be
significantly limited. Such limitation could have a material adverse effect on
our business, results of operations, financial condition and prospects.

EFFECT OF ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS

Certain provisions of our Amended and Restated Certificate of Incorporation
and Bylaws could make it difficult for a third party to acquire, and could
discourage a third party from attempting to acquire control of us. Certain of
these provisions allow us to issue preferred stock with rights senior to those
of the common stock without any further vote or action by the stockholders.
Certain of these provisions, effective upon the closing of this offering,
provide that the Board of Directors will be divided into three classes, which
may have the effect of delaying or preventing changes in control or change in
our management because less than a majority of the Board of Directors are up for
election at each annual meeting. In addition, these provisions impose various
procedural and other requirements which could make it more difficult for
stockholders to effect certain corporate actions. Such charter provisions could
limit the price that certain investors might be willing to pay in the future for
shares of our common stock and may have the effect of delaying or preventing a
change in control. The issuance of preferred stock also could decrease the
amount of earnings and assets available for distribution to the holders of
common stock or could adversely affect the rights and powers, including voting
rights, of the holders of the common stock.

We are also subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law. In general, the statute prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. For purposes of Section
203, a "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.

RISK RELATING TO STOCK OPTIONS

Our Amended and Restated 1996 Stock Incentive Plan has a grant limit of
833,333 shares of Common Stock. From October 1996 to December 1998 we purported
to grant 1,047,679 incentive stock options above the 833,333 share limit to
employees. We have determined that these grants were not made under the
Incentive Plan and do not qualify as incentive stock options. We are notifying
all affected optionholders that they hold

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nonqualified stock options. We have adopted, subject to shareholder approval,
the 1999 Stock Option Plan pursuant to which we may re-grant to affected
optionholders incentive stock options. We will seek liability waivers from
affected optionholders in exchange for re-grants. We are unable to determine if
any of the affected optionholders will accept our proposal to rectify their
situation and waive any liability we may have to them and we cannot assure that
our liability to affected optionholders would not be material. Our inability to
obtain waivers of liability from affected optionholders could have a material
adverse effect on our business, results of operations, and financial condition.

USE OF PROCEEDS

We estimate that the proceeds from the sale by us of the 3.5 million shares
of common stock offered hereby at an assumed initial public offering price of
$ per share (the mid-point of the anticipated range of between
$ and $ per share), after deducting estimated underwriting discounts
and estimated offering expenses, will be approximately $ million. The
selling stockholders will receive $ million from the sale of one million
shares of common stock, after deducting estimated underwriting discounts, and
approximately $ million if the underwriters' over-allotment option is
exercised in full. We will not receive any proceeds from the sale of common
stock by the selling stockholders. We intend to use substantially all of the net
proceeds from the offering for general corporate purposes, including online and
traditional advertising programs designed to strengthen the Autobytel.com brand
name, information technology investments to support and further develop our Web
site and DRT system and new products and services. We may use a portion of the
proceeds from the offering for possible acquisitions of or investments in
businesses, the introduction of products or technologies that expand, complement
or are otherwise related to our current or planned services. We have no current
plans, agreements or commitments with respect to any such transaction, and we
are not currently engaged in any negotiations with respect to any such
transaction. Pending such uses, we will invest the proceeds in short-term,
investment grade, interest-bearing securities.

DIVIDEND POLICY

We have never declared or paid cash dividends on our common stock. We
intend to retain all of our future earnings, if any, for use in our business,
and therefore we do not expect to pay any cash dividends on our common stock in
the foreseeable future.

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CAPITALIZATION

The following table sets forth (i) actual capitalization of Autobytel.com
derived from its audited financial statements as of September 30, 1998, and (ii)
as adjusted capitalization of Autobytel.com to reflect (a) the conversion of all
outstanding shares of Preferred Stock into 3,941,286 shares of common stock and
(b) the sale by Autobytel.com of 3.5 million shares of common stock pursuant to
the offering at an assumed public offering price of $ (the mid-point of
the anticipated range of between $ and $ per share) and the receipt by
Autobytel.com of the estimated net proceeds therefrom, after deducting estimated
underwriting discounts and estimated offering expenses. The capitalization
information set forth in the table below is qualified by the more detailed
Consolidated Financial Statements and Notes thereto included elsewhere in this
prospectus and should be read in conjunction with such Consolidated Financial
Statements and Notes.

SEPTEMBER 30, 1998
--------------------------
AS
ACTUAL ADJUSTED
-------------- --------
(IN THOUSANDS)

Cash and cash equivalents.............................. $ 10,488 $
======== =======
Stockholders' equity:
Convertible preferred stock, $0.001 par value;
11,445,187 shares authorized, 4,570,147 shares issued
and outstanding, actual; 11,445,187 shares
authorized, no shares issued and outstanding, as
adjusted............................................. 5 --
Common stock, $0.001 par value; 50,000,000 shares
authorized, 8,490,192 shares issued and outstanding,
actual; 50,000,000 shares authorized, 15,931,478
shares issued and outstanding, as adjusted(1)........ 8
Additional paid-in capital............................. 42,783
Cumulative translation adjustment...................... (25)
Accumulated deficit.................................... (39,387)
-------- -------
Total stockholders' equity............................. 3,384
======== =======
Total capitalization................................... $ 3,384
======== =======

- ---------------
(1) Reflects the conversion of all outstanding shares of preferred stock
concurrent with the closing of the offering and receipt by Autobytel.com of
the estimated net proceeds of $ million from the sale of 3,500,000
shares of common stock offered hereby at an assumed initial public offering
price of $ per share net of estimated underwriting discount and
estimated offering expenses.

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DILUTION

The pro forma net tangible book value of the Company as of September 30,
1998 was $3.4 million or 0.27 per share of common stock. Pro forma net tangible
book value per share is equal to the Company's total tangible assets less its
total liabilities, divided by the number of shares of common stock outstanding
on a pro forma basis after giving effect to the conversion of the Preferred
Stock into 3,941,286 shares of common stock concurrent with the closing of the
offering. After giving effect to the sale of shares of common stock offered
hereby at an assumed initial public offering price of $ (the mid-point in
the anticipated range of between $ and $ per share) and the receipt
by Autobytel.com of the estimated net proceeds therefrom, after deducting
estimated underwriting discounts and offering expenses, the pro forma net
tangible book value of Autobytel.com at September 30, 1998 would have been
$ million, or $ per share. This represents an immediate increase in
pro forma net tangible book value of $ per share to existing stockholders
and an immediate dilution of $ per share to new investors. The following
table illustrates this per share dilution:

Assumed initial public offering price per share.... $
Pro forma net tangible book value per share before
the offering..................................... $ 0.27
Increase per share attributable to purchases of
common stock offered hereby......................
-------- --------
Pro forma net tangible book value per share after
the offering.....................................
Dilution per share to purchasers of common stock
offered hereby................................... $
========

The following table summarizes, on a pro forma basis (as described above)
as of September 30, 1998, the number of shares of common stock purchased from
Autobytel.com, the total consideration paid to Autobytel.com and the average
price per share paid by existing stockholders and by the investors purchasing
shares of common stock in this offering (before deducting estimated underwriting
discounts and estimated offering expenses):

SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- -------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------- ---------- ------- ----------

Existing stockholders..... 12,431,478 78.0 $ $
New investors............. 3,500,000 22.0
----------- ------- ---------- ------- ----------
Total................... 15,931,478 100.0 $ $
=========== ======= ========== ======= ==========

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SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus. The statement of operations
data for the period from inception (January 31, 1995) to December 31, 1995, the
years ended December 31, 1996 and 1997 and the nine months ended September 30,
1998 and the balance sheet data as of December 31, 1996, 1997 and as of
September 30, 1998 are derived from the Consolidated Financial Statements of the
Company which have been audited by Arthur Andersen LLP, independent auditors,
and are included elsewhere in this prospectus. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

INCEPTION
(JANUARY 31, YEARS ENDED NINE MONTHS ENDED
1995) TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------- -----------------------
1995 1996 1997 1997 1998
------------- ------- -------- ----------- --------
(UNAUDITED)

STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 274 $ 5,025 $ 15,338 $ 10,770 $ 16,499
------- ------- -------- -------- --------
Operating expenses:
Sales and marketing................... 930 7,790 21,454 15,794 22,249
Product and technology development.... 99 1,753 5,448 3,993 6,216
General and administrative............ 275 1,641 5,851(2) 4,118(2) 4,016
------- ------- -------- -------- --------
Total operating expenses........... 1,304 11,184 32,753 23,905 32,481
------- ------- -------- -------- --------
Loss from operations.................. (1,030) (6,159) (17,415) (13,135) (15,982)
Other income, net..................... -- 124 620 426 501
Loss before provision for income
taxes.............................. (1,030) (6,035) (16,795) (12,709) (15,481)
Provision for income taxes............ -- -- 15 15 31
------- ------- -------- -------- --------
Net loss.............................. $(1,030) $(6,035) $(16,810) $(12,724) $(15,512)
======= ======= ======== ======== ========
Basic net loss per share................ $ (0.12) $ (0.73) $ (2.03) $ (1.54) $ (1.85)
======= ======= ======== ======== ========
Shares used in computing basic net loss
per share............................. 8,250 8,252 8,291 8,283 8,396
Pro forma basic net loss per share
(1)................................... $ (0.12) $ (0.68) $ (1.53) $ (1.19) $ (1.22)
======= ======= ======== ======== ========
Shares used in computing pro forma basic
net loss per share(1)................. 8,250 8,849 10,967 10,730 12,753

DECEMBER 31, AS OF
------------------- SEPTEMBER 30,
1996 1997 1998 AS ADJUSTED(3)
------- -------- -------------- --------------

BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 9,062 $ 15,813 $ 10,488
Working capital............................... 5,977 10,938 956
Total assets.................................. 12,298 20,513 15,473
Accumulated deficit........................... (7,065) (23,875) (39,387)
Stockholders' equity.......................... 7,996 13,259 3,384

- -------------------------
(1) Pro forma basic net loss per share has been calculated assuming the
conversion of the outstanding preferred stock into common stock, as if the
shares had been converted on the dates of their issuance.

(2) The amounts include a non-recurring $1.1 million charge associated with a
proposed initial public offering that was withdrawn in March 1997.

(3) As adjusted for the offering.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with our Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
This discussion contains forward-looking statements based on current
expectations that involve risks and uncertainties. Actual results and the timing
of certain events may differ significantly from those projected in such
forward-looking statements due to a number of factors, including those set forth
in the section entitled "Risk Factors" and elsewhere in this Prospectus.

OVERVIEW

We are a leading, branded Internet site for new and pre-owned vehicle
information and purchasing services connecting consumers to our exclusive
network of 2,718 participating dealers, as of December 31, 1998, in the United
States and Canada. Through our Web site, www.autobytel.com, consumers can
research pricing, specifications and other information regarding new and
pre-owned vehicles. When consumers indicate they are ready to buy, they can be
connected to Autobytel.com's network. In addition, we are continuing to develop
ancillary programs for consumers such as financing, insurance and warranty
services. We introduced our new vehicle marketing service in 1995, and in 1997
commenced our CyberStore program.

We were formerly incorporated in January 1995 under the name Auto-By-Tel
LLC, and first recognized revenues from operations in March 1995. Accordingly,
we have only a limited operating history to evaluate our future prospects. As a
result of our limited operating history, period-to-period comparisons of our
financial results are not necessarily meaningful and you should not rely on them
as an indication of our future performance. We have incurred losses every
quarter since inception and expect to continue to incur losses for the
foreseeable future. We had an accumulated deficit as of December 31, 1997 and
September 30, 1998 of $23.9 million and $39.4 million, respectively. Our
prospects must be considered in light of the risks, uncertainties, expenses and
difficulties frequently encountered by companies in the early stages of
development, particularly companies in new and rapidly evolving markets, such as
the market for Internet commerce. To achieve profitability, we must, among other
things, generate increased consumer traffic to our Web site and continue to send
vehicle purchase requests to our dealers that result in adequate dealer sales
(or leases) to justify fees, and continue to expand the number of dealers in our
network and enhance the quality of our participating dealers so that our brand
recognition with consumers continues to grow. There can be no assurance that we
will successfully generate sufficient revenues from these services to achieve
profitability. Although we have experienced revenue growth in recent periods,
historical growth rates may not be sustainable and are not indicative of future
operating results, and there can be no assurance that we will achieve or
maintain profitability.

Our revenues have increased from $274,000 in 1995 to $15.3 million in 1997,
and for the nine months ended September 30, 1998, revenues were $16.5 million.
We derive substantially all of our revenues from fees paid by subscribing
dealers, and we expect to be primarily dependent on our dealer network for
revenues in the foreseeable future. Dealers using our services pay an initial
subscription fee, as well as ongoing monthly fees based on the aggregation and
transmittal to them of purchase requests. We also derive some revenue on a per
transaction basis from facilitating transactions between consumers and other
third

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parties, primarily lenders and insurance companies. We reserve the right to
raise our fees to dealers after 30 days notice.

Initial subscription fees from dealers are recognized ratably over the
first twelve months of each dealer's contract in order to match the costs of
integrating and training dealers with revenues earned. The monthly fee is
recognized in the period the service is provided. Amortized revenues from
initial subscription fees were $3.5 million, $3.6 million, $4.9 million and $2.2
million for the nine months ended September 30, 1998 and 1997, and for the years
ended December 31, 1997 and 1996, respectively. We anticipate that our initial
subscription fee amortization revenue will decline as a percentage of total
revenue over time as monthly fee revenues continue to grow. From October 1996 to
February 1998, our revenues also included revenues from sales of personal
computers to our dealers, a practice we discontinued in the first quarter of
1998. Our financial statements include revenues derived from computer equipment
sales of $147,000 in 1996, $1.5 million in 1997, and $194,000 in the first nine
months of 1998. Excluding these revenues, our revenues would have been $4.9
million, $13.8 million and $16.3 million in 1996, 1997 and the first nine months
of 1998, respectively.

Although we do not derive any direct revenue from the volume of purchase
requests, we believe our ability to increase the number of subscribing dealers
and the amount of fees paid by dealers is related to the volume of purchase
requests coming to our Web site. Vehicle purchase requests routed through our
online system increased from approximately 345,000 in 1996 to approximately
761,000 in 1997, an increase of 121%, and to 1.3 million in 1998, an increase of
71% over the previous year. Since inception we have directed approximately 2.5
million purchase requests to dealers.

We believe that our revenue growth has been and will continue to be
primarily dependent on our ability to increase the number of dealers and the
average fees paid by each dealer and our ability to continue to drive a
significant number of purchase requests to our dealer network. Since inception,
our dealer network has expanded in each quarter and as of December 31, 1998
there were 2,718 dealers. Of these dealers, 2,386 dealers pay for our service
(Core Dealers) and 332 dealers are affiliated with Core Dealers (Non-core
Dealers) in North America. Non-core Dealers are generally associated with lower
volume vehicle manufacturers (such as Jaguar or Suzuki) or are located in
remote, low volume territories and receive purchase request referrals without
paying fees to us. We enter into agreements with non-core dealers to ensure the
broadest geographic coverage possible for every make of vehicle. Although the
net number of our dealers in North America increased by 45% during 1998, 556 of
our dealers were terminated or canceled in the United States during the same
period. We believe that the principal reasons for the dealer terminations were
due to our enforcement of our dealer network agreements and the cancellation of
our fax delivery of purchase requests in conjunction with the implementation of
the DRT system. Our inability or failure to reduce dealer turnover could have a
material adverse effect on our business, results of operations and financial
condition.

Because our primary revenue source is from program fees, our business model
is significantly different from many existing Internet commerce sites. The
automobiles requested through our site are sold by individual dealers; therefore
we derive no direct revenue from the sale of a vehicle and have no significant
cost of goods sold, no procurement, carrying or shipping costs and no inventory
risk. The only cost of goods sold incurred by us since our inception was the
cost of computer equipment sold to dealers, a practice we discontinued in the
first quarter of 1998.

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Sales and marketing costs consist primarily of promotion and advertising to
build brand awareness and encourage potential customers to go to our Web site.
Our sales and marketing expenses were $22.2 million, $21.5 million and $7.8
million for the nine months ended September 30, 1998, and in 1997 and 1996,
respectively. We use Internet advertising, as well as traditional media, such as
television, radio and print. The majority of our Internet advertising is
comprised of sponsorship and partnership agreements with Internet portals and
advertising and marketing affiliations with online automotive information
providers. Also included in the sales and marketing expenses are the costs
associated with signing up new dealers and their ongoing training and support.
Sales and marketing costs are recorded as an expense in the period the service
is provided. Sales and marketing expenses have historically fluctuated
quarter-to-quarter due to varied levels of marketing and advertising.

RESULTS OF OPERATIONS

The following table sets forth our results of operations as a percentage of
revenues:

JANUARY 31, 1995 YEARS ENDED NINE MONTHS ENDED
(DATE OF INCEPTION) DECEMBER 31, SEPTEMBER 30,
TO DECEMBER 31, ------------ -----------------------
1995 1996 1997 1997 1998
------------------- ---- ---- ----------- ---------
(UNAUDITED) (AUDITED)

STATEMENT OF OPERATIONS DATA:
Revenues..................... 100% 100% 100% 100% 100%
---- ---- ---- ---- ---
Operating expenses:
Sales and marketing........ 339 155 140 147 135
Product and technology
development............. 36 35 36 37 38
General and
administrative.......... 100 33 38 38 24
---- ---- ---- ---- ---
Total operating
expenses.............. 476 223 214 222 197
---- ---- ---- ---- ---
Loss from operations....... (376) (123) (114) (122) (97)
---- ---- ---- ---- ---
Other income, net............ -- 2 4 4 3
---- ---- ---- ---- ---
Loss before provision for
income taxes............ (376) (120) (110) (118) (94)
---- ---- ---- ---- ---
Provision for income taxes... -- -- -- -- --
---- ---- ---- ---- ---
Net loss................... (376)% (120)% (110)% (118)% (94)%
==== ==== ==== ==== ===

NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997

Revenues. Our revenues increased by $5.7 million, or 53%, to $16.5 million
for the nine months ended September 30, 1998, compared to $10.8 million for the
nine months ended September 30, 1997. The growth in revenue was primarily
attributable to an increase in the net Core Dealer count and an increase in the
average fee charged to subscribing dealers. The number of Core Dealers increased
by 617, or 39%, to 2,208 as of September 30, 1998, compared to 1,591 as of
September 30, 1997. Our financial statements include revenues derived from
computer sales, a practice we discontinued in the first quarter of 1998, of
$194,000 for the nine months ended September 30, 1998 and $1.4 million for the
nine months ended September 30, 1997. Excluding our revenue from the sale of
computer equipment, our revenues would have increased by $6.9 million, or

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73%, to $16.3 million for the nine months ended September 30, 1998 as compared
to $9.4 million for the nine months ended September 30, 1997. During the nine
months ended September 30, 1998, we launched new ancillary services such as Web
site advertising and warranties.

Sales and Marketing. Sales and marketing expenses primarily include
advertising and marketing expenses paid to our purchase request providers and
for developing our brand equity, as well as personnel and other costs associated
with sales, training and support of our dealer network. Sales and marketing
expense increased by $6.4 million, or 41%, to $22.2 million for the nine months
ended September 30, 1998, compared to $15.8 million for the nine months ended
September 30, 1997. The increase was primarily due to higher numbers of purchase
requests provided by strategic referral relationships and higher expenses
developing our brand equity. We expect to continue to increase our marketing and
advertising budget in the foreseeable future.

Product and Technology Development. Product and technology development
expense primarily includes personnel costs relating to enhancing the features,
content and functionality of our Web site and DRT system, as well as expenses
associated with our telecommunications and computer infrastructure. Product and
technology development expense increased by $2.2 million, or 55%, to $6.2
million for the nine months ended September 30, 1998, compared to $4.0 million
for the nine months ended September 30, 1997. The increase was primarily due to
the hiring and training of additional product and technology development support
staff.

General and Administrative. General and administrative expense primarily
consists of executive, financial and legal personnel expenses and related costs.
General and administrative expense decreased by $102,000, or 2%, to $4.0 million
for the nine months ended September 30, 1998, compared to $4.1 million for the
nine months ended September 30, 1997. The decrease was primarily due to a
non-recurring $1.1 million charge associated with a proposed initial public
offering withdrawn in March 1997. Excluding this non-recurring charge, general
and administrative expense increased by $1.0 million, or 33%, to $4.0 million
for the nine months ended September 30, 1998, compared to $3.0 million for the
nine months ended September 30, 1997. This increase is primarily due to
additional executive and financial personnel, along with increased legal, rent
and depreciation expenses.

Other Income. Other income consists of interest income. Such income
increased by $75,000, or 18%, to $501,000 for the nine months ended September
30, 1998, compared to $426,000 for the nine months ended September 30, 1997.
Cash balances in 1998 were higher due to the sales of the Series C Preferred
Stock in 1998.

Income Taxes. No provision for federal income taxes has been recorded as we
incurred net operating losses through December 31, 1997. As of September 30,
1998, we had approximately $35.7 million of federal and state net operating loss
carry forwards that we believe are available to offset future taxable income;
such carry forwards expire in various years through 2013. Under the Tax Reform
Act of 1986, the amounts of and benefits from our net operating losses carry
forwards will likely be limited upon the completion of the initial public
offering due to a cumulative ownership change of more than 50% over a three year
period. Based on preliminary estimates, we believe the effect of such
limitation, if imposed, will not have a material adverse effect on our business,
results of operations and financial condition.

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1997 COMPARED TO 1996

Revenues. Our revenues increased by $10.3 million, or 206%, to $15.3
million in 1997, compared to $5.0 million in 1996. The significant growth in
revenue in 1997 was primarily attributable to an increase in the net Core Dealer
count and an increase in the average fee charged to subscribing dealers. The
number of Core Dealers increased by 437, or 36%, to 1,643 as of December 31,
1997, compared to 1,206 as of December 31, 1996. We started selling computer
equipment to our dealers during the last quarter of 1996 and these revenues were
$147,000 in 1996 and $1.5 million in 1997. Excluding our revenue from the sale
of computer equipment, our revenues increased by $9.0 million, or 184%, to $13.8
million in 1997, compared to $4.9 million in 1996. Also, we launched several new
ancillary services in 1997, including leasing, financing, credit union services
and the Mobalist Rewards Program, which cumulatively represented less than 3% of
total revenues during 1997.

Sales and Marketing. Sales and marketing expense increased by $13.7
million, or 176%, to $21.5 million in 1997, compared to $7.8 million in 1996.
This increase is attributable primarily to the increase in advertising and
marketing costs associated with driving the growth of purchase requests. To a
lesser degree this increase was also due to growth in personnel and other
expenses associated with sales training and maintenance of our dealer channel.

Product and Technology Development. Product and technology development
expense increased by $3.7 million, or 206%, to $5.4 million in 1997, compared to
$1.8 million in 1996. The increase in product and technology development expense
was primarily associated with adding additional product and technical staff.

General and Administrative. General and administrative expense increased by
$4.2 million, or 263%, to $5.9 million in 1997, compared to $1.6 million in
1996. The increase was primarily due to additional executive, financial and
legal personnel and related costs, as well as a non-recurring $1.1 million
charge associated with a withdrawn initial public offering in 1997. Excluding
this non-recurring charge, general and administrative expense increased by $3.1
million, or 194%, to $4.8 million in 1997, compared to $1.6 million in 1996.

Other Income. Other income, which primarily consists of interest income,
increased by $496,000, or 400%, to $620,000 in 1997, compared to $124,000 in
1996. Cash balances were higher due to the sales of Series B and Series C
Preferred Stock in 1997.

1996 COMPARED TO 1995

REVENUES

Revenues. Revenues increased by $4.8 million to $5.0 million in 1996,
compared to $274,000 for the period from inception (January 31, 1995) to
December 31, 1995. We first recognized revenues in March 1995 when we commenced
offering our vehicle marketing service. The total number of Core Dealers as of
December 31, 1996 and 1995 was 1,206 and 253, respectively. The increase in
revenues was primarily attributable to an increase in the number of Core Dealers
and increases in fees charged to them.

EXPENSES

Sales and Marketing. Sales and marketing expense increased by $6.9 million
to $7.8 million in 1996, compared to $930,000 for the period from inception to
December 31, 1995. This increase was primarily due to increased expenditures on
Internet advertising,

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the establishment of relationships with information providers, online services
and Internet portals. In addition, we increased spending on advertising in
traditional media such as television and print.

Product and Technology Development. Product and technology development
expense increased by $1.7 million to $1.8 million in 1996, compared to $99,000
for the period from inception to December 31, 1995. The increase was primarily
associated with adding technical staff and our efforts in 1996 to improve Web
site content and functionality.

General and Administrative. General and administrative expense increased
by $1.4 million to $1.6 million in 1996, compared to $275,000 for the period
from inception to December 31, 1995. The increase was primarily due to
recruiting executive management, hiring additional financial and legal
personnel, moving to new facilities and incurring legal fees.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth quarterly statement of operations data for
the eight quarters ended September 30, 1998. This quarterly information has been
derived from our unaudited financial statements and, in our opinion, includes
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the information for the periods covered. The quarterly
data should be read in conjunction with our Consolidated Financial Statements
and the notes thereto. The operating results for any quarter are not necessarily
indicative of the operating results for any future period.

INCOME STATEMENT FOR THE THREE MONTHS ENDING
(unaudited in thousands)

DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1996 1997 1997 1997 1997 1998 1998 1998
-------- -------- -------- --------- -------- -------- -------- ---------

REVENUES.......................... $ 2,203 $ 3,063 $ 3,414 $ 4,293 $ 4,568 $ 4,632 $ 5,405 $ 6,462
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing............. 3,519 6,675 4,683 4,436 5,660 8,459 5,470 8,320
Product and technology
development................... 1,114 1,103 1,394 1,496 1,455 1,895 1,969 2,352
General and administrative...... 804 1,823 1,216 1,079 1,733 1,346 1,190 1,480
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses...... 5,437 9,601 7,293 7,011 8,848 11,700 8,629 12,152
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations............ (3,234) (6,538) (3,879) (2,718) (4,280) (7,068) (3,224) (5,690)
Other income, net................. 108 165 114 147 194 185 163 153
------- ------- ------- ------- ------- ------- ------- -------
Loss before provision for income
taxes......................... (3,126) (6,373) (3,765) (2,571) (4,086) (6,883) (3,061) (5,537)
------- ------- ------- ------- ------- ------- ------- -------
Provision for income taxes........ -- 11 4 -- -- 15 10 6
------- ------- ------- ------- ------- ------- ------- -------
Net loss:....................... $(3,126) $(6,384) $(3,769) $(2,571) $(4,086) $(6,898) $(3,071) $(5,543)
======= ======= ======= ======= ======= ======= ======= =======

PERCENTAGE OF REVENUE FOR THE THREE MONTHS ENDING
(unaudited)

DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1996 1997 1997 1997 1997 1998 1998 1998
-------- -------- -------- --------- -------- -------- -------- ---------

Revenues........................... 100% 100% 100% 100% 100% 100% 100% 100%
---- ---- ---- --- --- ---- --- ---
Operating expenses:
Sales and marketing.............. 160 218 137 103 124 183 101 129
Product and technology
development.................... 51 36 41 35 32 41 36 36
General and administrative....... 36 60 36 25 38 29 22 23
---- ---- ---- --- --- ---- --- ---
Total operating expenses....... 247 313 214 163 194 253 160 188
---- ---- ---- --- --- ---- --- ---
Loss from operations............. (147) (213) (114) (63) (94) (153) (60) (88)
Other income, net.................. 5 5 3 3 4 4 3 2
---- ---- ---- --- --- ---- --- ---
Loss before provision for income
taxes.......................... (142) (208) (110) (60) (89) (149) (57) (86)
---- ---- ---- --- --- ---- --- ---
Provision for income taxes......... -- -- -- -- -- -- -- --
---- ---- ---- --- --- ---- --- ---
Net loss......................... (142)% (208)% (110)% (60)% (89)% (149)% (57)% 86%
==== ==== ==== === === ==== === ===

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Revenues. Growth in our dealer network and increases in fees and the sale
of ancillary products and services have resulted in a compounded quarterly
growth in revenue of 17% over the last eight quarters of operations. Revenue
growth is primarily associated with program fees and, to a lesser extent, new
product offerings. Between the quarters ended December 31, 1996 and March 31,
1998, we recognized revenues associated with computer systems sold to dealers.
After the introduction of the current DRT system in February 1998, we
discontinued the sale of computer equipment. In the third and fourth quarters of
1997, we recognized non-recurring revenue of $250,000 received from First USA
Bank in connection with our customer rewards program and we recognized revenue
received from charging CyberStore initial subscription fees, a practice we
discontinued in the fourth quarter of 1997. Our financial statements include
non-recurring revenue for the DRT system hardware sales, CyberStore initial fees
and fees paid by First USA in connection with the Mobalist program (our Internet
customer rewards program) in the amount of $147,000 in revenue in 1996, $2.2
million in 1997, and $194,000 in the first nine months of 1998.

Sales and Marketing. We have increased spending on sales and marketing
every year since our inception. The increase in sales and marketing spending
accelerated after we completed our Series A preferred stock offering of $15.0
million in August 1996. We launched an aggressive advertising campaign, and in
the quarters ended March 31, 1997 and 1998, we aired a television advertisement
during the Super Bowl at a cost of approximately $1.3 million and $1.5 million,
respectively. Additionally, in the quarter ended December 31, 1997, we entered
into several Internet branding and purchase request generation contracts,
including contracts with Excite. From October 1996 through February 1998, we
incurred expenses of approximately $1.6 million associated with the sale of
computer equipment to support the old DRT system. Such expenses were included in
sales and marketing. These computer sales were discontinued in February 1998
when we started selling the current DRT system. We have generally increased the
number of sales and marketing personnel each quarter.

Product and Technology Development. Product and technology development has
generally risen on a gross dollar basis since our inception. The primary cause
for the increase in product and technology development expenses is the addition
of personnel to develop the technology infrastructure and new programs for our
dealers and Internet consumers.

General and Administrative. The quarter ended March 31, 1997 includes
approximately $1.1 million in previously capitalized legal, accounting and other
direct costs associated with a proposed initial public offering that was
withdrawn in March 1997. In the quarter ended December 31, 1997, general and
administrative expenses included legal, severance and bonuses incurred during
the period.

POTENTIAL FLUCTUATIONS AND SEASONALITY IN QUARTERLY OPERATING RESULTS

Our quarterly operating results may fluctuate due to many factors and
therefore we cannot assure future financial results. In addition, our expense
levels are based in part on our expectations of future revenues which may vary
significantly. If our revenues do not increase as projected against our increase
in expenses our business, results of operations and financial condition will be
materially and adversely affected. Other factors that may adversely affect our
quarterly operating results include, but are not limited to (i) our ability to
retain existing dealers, attract new dealers and maintain dealer and customer
satisfaction, (ii) the announcement or introduction of new or enhanced sites,
services and products by us or our competitors, (iii) general economic
conditions and economic conditions specific to the Internet, online commerce or
the automobile industry, (iv) the

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level of use of online services and consumer acceptance of the Internet and
commercial online services for the purchase of consumer products and services
such as those offered by us, (v) our ability to upgrade and develop our systems
and infrastructure and to attract new personnel in a timely and effective
manner, (vi) the level of traffic on our online sites and other sites that refer
traffic to our Web site, (vii) technical difficulties, system downtime or
Internet brownouts, (viii) the amount and timing of operating costs and capital
expenditures relating to expansion of our business, operations and
infrastructure, (ix) governmental regulation, and (x) unforeseen events
affecting the industry.

To date, quarter to quarter growth in our revenues have offset any effects
due to seasonality. However, we expect our business to experience seasonality as
it matures, reflecting seasonal fluctuations in the automotive industry,
Internet and commercial online service usage and advertising expenditures. We
anticipate that purchase requests will typically increase during the first and
third quarters when new vehicle models are introduced and will typically decline
during the second and fourth quarters. Internet and commercial online service
usage and the growth rate of such usage may be expected typically to decline
during the summer. In addition, our advertising costs in traditional media, such
as broadcast and cable television, generally decline in the first and third
quarters of each year. Depending on the extent to which the Internet and
commercial online services are accepted as an advertising medium, seasonality in
the level of advertising expenditures could become more pronounced for
Internet-based advertising. Seasonality in the automotive industry, Internet and
commercial online service usage, and advertising expenditures is likely to cause
fluctuations in our operating results and could have a material adverse effect
on our business, operating results and financial condition.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations primarily from the
issuance of shares of preferred stock, which through September 30, 1998 totaled
$42.5 million, comprising of $15.0 million raised in August 1996, $9.0 million
raised in January 1997, $13.0 million raised in October 1997, $0.5 million
issued in exchange for advertising in May 1998 and $5.0 million raised in May
1998. As of September 30, 1998, we had approximately $10.5 million in cash and
cash equivalents. During the quarter ended December 31, 1998, we raised $25.2
million through the issuance of Series C Preferred Stock, including $0.5 million
issued in exchange for advertising. We had approximately $27.8 million in cash
and cash equivalents at December 31, 1998.

Net cash used in operating activities increased to $10.5 million for the
nine months ended September 30, 1998 from $9.9 million for the nine months ended
September 30, 1997 and increased to $13.5 million in 1997 from $3.6 million in
1996. In 1995 net cash used in operating activities was $681,000. The increases
in the net cash used in operating activities resulted primarily from increased
sales and marketing, product development and general and administrative
expenditures related to expanding our infrastructure. Also, working capital was
used to finance accounts receivable, prepaid expenditures and other assets,
offset partially by increased deferred revenue.

Net cash used in investing activities decreased to $780,000 for the nine
months ended September 30, 1998 from $1.6 million for the nine months ended
September 30, 1997 and increased to $1.8 million in 1997 from $1.5 million in
1996. In 1995 net cash used in investing activities was $127,000. The net cash
used in investing activities resulted primarily from purchases of property and
equipment consisting of computer hardware, telecommunications equipment,
furniture and leasehold improvements.

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Net cash provided by financing activities decreased to $5.9 million for the
nine months ended September 30, 1998 from $9.1 million for the nine months ended
September 30, 1997 and increased to $22.0 million in 1997 from $14.1 million in
1996. In 1995 net cash provided by financing activities was $856,000. The net
cash provided by financing resulted primarily from the issuance of preferred
stock.

We believe our current cash and cash equivalents, excluding proceeds from
this offering, will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. However, our
cash requirements depend on several factors, including the level of expenditures
on marketing and advertising, the rate of market acceptance, the ability to
expand our customer base and increase the volume of purchase requests, the cost
of contractual arrangements with online information providers, search engines
and other referral sources, and other factors. The timing and amount of such
working capital requirements cannot accurately be predicted. If capital
requirements vary materially from those currently planned, we may require
additional financing sooner than anticipated. We have no commitments for any
additional financing, and there can be no assurance that any such commitments
can be obtained on favorable terms, if at all. Any additional equity financing
may be dilutive to our stockholders, and debt financing, if available, may
involve restrictive covenants with respect to dividends, raising capital and
other financial and operational matters which could restrict our operations or
finances. If we are unable to obtain additional financing as needed, we may be
required to reduce the scope of our operations or our anticipated expansion,
which could have a material adverse effect on our business, results of
operations and financial condition.

YEAR 2000 ISSUES

- We are in the process of obtaining Year 2000 compliance confirmation from
our third-party vendors (including, but not limited to, hardware,
software, network communications, facility/utility vendors, and data
suppliers) as well as our Autobytel.com accredited dealers. We expect to
receive a reply to our Year 2000 requests from third party vendors and
accredited dealers in early 1999.

- We are implementing a test lab environment to simulate the Year 2000
rollover with hardware, software, network communications vendors and
certain key data suppliers.

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data is Year 2000 compliant. We may spend up to $116,000 towards addressing the
Year 2000 issue in fiscal year 1999.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This statement, adopted by us in the first quarter of
1998, requires companies to report a new measurement of income. Comprehensive
income (loss) is to include foreign currency translation gains and losses and
other unrealized gains and losses that have historically been excluded from net
income (loss) and reflected instead in equity. Currently, no material
differences exist between our net income or loss and comprehensive net income or
loss.

In March 1998, the American Institute of Certified Public Accounts (AICPA)
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained For Internal Use," which is effective for fiscal
years beginning after December 15, 1998. SOP No. 98-1 provides guidance on
accounting for the costs of computer software developed or obtained for internal
use and defines specific criteria that determine when such costs are required to
be expensed, and when such costs may be capitalized. Management believes the
adoption of SOP 98-1 will not have a material effect on our consolidated
financial statements.

In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-up
Activities," which will be adopted by us in the beginning of our fiscal year
beginning January 1, 1999. SOP No. 98-5 provides guidance on the financial
reporting of start-up costs and organization costs and requires such costs to be
expensed as incurred. We believe the adoption of SOP 98-5 will not have a
material effect on our financial statements.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which will be adopted by us in our fiscal
year beginning January 1, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments by requiring every derivative
instrument to be recorded in the balance sheet as a liability or an asset at
fair market value. Any changes to a derivatives fair market value must be
recognized currently in earnings unless specific hedge accounting criteria are
met. We do not have any derivative instruments or undertake any hedging
activities and do not anticipate doing so, therefore the adoption of SFAS No.
133 will not have a material effect on our financial statements.

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BUSINESS

OVERVIEW

We are a leading, branded Internet site for new and pre-owned vehicle
information and purchasing services. Through our Web site, www.autobytel.com,
consumers can research pricing, specifications and other information regarding
new and pre-owned vehicles. When consumers indicate they are ready to buy, they
can be connected to Autobytel.com's network of over 2,700 participating dealers
in North America, with each dealer representing a particular vehicle make. We
expect our dealers to promptly provide a haggle-free, competitive offer. In
addition, consumers can apply for and receive insurance, financing, leasing and
warranty proposals as well as other services and information through our Web
site. We believe that our services provide benefits for consumers by supplying
them with information to make an informed and intelligent vehicle purchasing
decision and by directing consumers to dealers, whom we expect to provide a
competitive price. In addition, our services are intended to reduce our dealers'
costs by directing to them large volumes of highly qualified purchase requests,
thereby enabling them to lower their marketing, advertising and personnel costs
while enhancing sales productivity. We provide our services free of charge to
consumers and derive substantially all of our revenues from fees paid by
participating dealers.

We introduced our new vehicle purchasing services in May 1995 and our
Certified Pre-Owned CyberStore in April 1997. Our new vehicle purchasing service
enables consumers to shop for and select a new vehicle through our Web site by
providing research on new vehicles (e.g., pricing, features, specifications,
colors, etc.). When consumers indicate they are ready to buy, they can complete
a purchase request online. The CyberStore allows consumers to search for a
pre-owned vehicle according to the price, make, model, color, year and location
of the vehicle. The CyberStore locates and displays the description, location
and actual photograph of all vehicles that satisfy the consumer's search
parameters. The dealers in our network use our online information platform, the
DRT system, which provides dealers with immediate purchase request information
for new and pre-owned vehicles, the ability to track customers and purchase
requests, and other value-added features, including automatic uploading of
pre-owned vehicle inventory into our database. In addition, the Company offers a
number of automotive finance and insurance services in conjunction with
strategic partners, including automobile financing through Chase, GE Capital and
Provident Bank and automotive insurance through New Hampshire Insurance Company,
a member company of the American Insurance Group.

BACKGROUND

Growth of the Internet and Online Commerce

The Web and online services have emerged as significant global
communications and commercial media enabling millions of people worldwide to
share information, communicate and conduct business electronically.
International Data Corporation (IDC) estimates that the number of Web users
worldwide will grow from approximately 69 million in 1997 to approximately 320
million by 2002. This growth is driven by a number of factors including the
large and growing base of installed personal computers in the home and
workplace, the decreasing cost of personal computers, easier, faster and cheaper
access to the Internet, the distribution of broadband applications, the
proliferation of Internet content and the increasing familiarity and acceptance
of the Internet by businesses and consumers.

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The growth in the use of the Internet has also led to a rapid growth of
online commerce. Web commerce sites are enabling businesses to target and manage
a broad customer base and establish and maintain ongoing direct customer
relationships. As a growing number of businesses and information providers have
begun marketing on the Web, it has rapidly become a medium in which consumers
can access a vast amount of information regarding the pricing, quality and
specification of products. Additionally, online transactions can be faster, less
expensive and more convenient than transactions conducted in person or even over
the telephone. According to IDC, the total value of goods and services purchased
worldwide over the Web will increase from approximately $12.4 billion in 1997 to
approximately $425 billion in 2002.

The Automotive Vehicle Market

Automotive dealers operate in localized markets and face significant state
regulations and increasing business pressures. These fragmented markets, with
over 49,000 dealers in aggregate, are characterized by (i) a perceived
overabundance of dealerships, (ii) competitive sales within regional markets,
(iii) increasing advertising and marketing costs that continue to reduce dealer
profits, (iv) high-pressure sales tactics with consumers, and (v) large
investments by dealers in real estate, construction, personnel and other
overhead expenses.

In addition, consumers have traditionally entered into the highly
negotiated sales process with relatively little information regarding
manufacturer's costs, leasing costs, financing costs, relative specifications
and other important information. Buying a vehicle is considered to be one of the
most significant purchases a U.S. consumer makes. According to CNW
Marketing/Research, over $670 billion was spent on new and pre-owned vehicles in
the United States in 1997, representing the sale of over 50 million vehicles.
Although automotive retailing attracts significant consumer dollars, we believe
that consumers associate the traditional vehicle buying experience with
high-pressure sales tactics.

THE AUTOBYTEL.COM SOLUTION

We believe that our online products and services improve the vehicle
purchasing process for both consumers and dealers. We offer consumers an
information-rich Web site, numerous tools to configure this information, and a
quality fulfillment experience. As part of the fulfillment experience, we expect
our dealers to provide competitive price quotes for new and pre-owned vehicles.
We believe our services enable dealers to reduce personnel and marketing costs,
increase consumer satisfaction, increase customer volume, and expand dealer
territories.

Benefits to Consumers. Our Web site provides consumers free of charge
up-to-date specifications and pricing information on vehicles. In addition, our
consumers gain easy access to valuable automotive information, such as dealer
invoice pricing and the AutoBuyTools(TM) services which consist of a lease
calculator, a loan calculator to determine monthly payments and a lease or buy
decision tool. Our database of articles allows consumers to perform online
library research by accessing documents such as weekly automotive reports,
consumer reviews and manufacturer brochures. Various automotive information
service providers, such as Edmund's, Kelley Blue Book, Pace Publication's
Carprice.com and IntelliChoice, are also aggregated on the Company's Web site to
assist consumers with specific vehicle and related automotive decisions such as
insurance and financing. Armed with such information, the consumer should be
more confident and capable of making an informed and intelligent vehicle buying
decision.

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We expect our dealers to provide competitive price quotes for new and
pre-owned vehicles. By providing dealers with a large number of consumers
through quality purchase requests, we believe that we can help our dealers to
lower their operating costs due to higher sales volume. We believe that lowering
their operating costs allows dealers to offer more competitive prices.

We believe we offer consumers a significantly different vehicle purchasing
experience from that of traditional methods. Consumers using the Autobytel.com
system are able to shop for a vehicle, and make financing and insurance
decisions from the convenience of their own home or office. We expect dealers to
provide consumers a haggle-free price quote and a high level of customer
service. We form our dealer relationships after careful analysis of automotive
sales and demographic data in each region. We seek to include in our dealer
network the largest and highest quality dealers within defined territories. Our
strategy to be the leading Internet-based vehicle information and purchasing
service depends on our ability to provide consumers with a quality experience.

Benefits to Dealers. Autobytel.com benefits dealers by reducing the
dealers' incremental personnel and marketing costs, increasing consumer
satisfaction and increasing consumer volume. Through our investment in national
advertising and brand recognition of Autobytel.com, we attract consumers to our
Web site and direct them to dealers in their local area. We believe this
provides dealers access to a larger number of prequalified consumers without
increasing their advertising costs. Dealers' personnel costs should be reduced
because we provide dealers access to potential purchasers who have completed
their research and should be ready to buy or lease a vehicle. As a result,
reaching these consumers and selling or leasing them vehicles costs the dealer
little or no additional overhead expense other than the fees paid to us and the
personnel costs of a dedicated Autobytel.com manager. Through our DRT system, we
provide dealers with on-site technology to better track sales, inventory,
customer solicitations, responses and other communications.

By providing consumers a quality fulfillment experience, we seek to provide
Autobytel.com dealers a large number of consumers, allowing them to compete more
effectively. Our solution includes an expanding network of over 2,700
participating dealers in the United States and Canada representing every major
domestic and imported make of vehicles and light trucks. Because a single
dealership location may hold multiple manufacturer franchises, the dealership
may represent more than one dealer in the Autobytel.com network.

To increase each dealer's incentive to participate in the Autobytel.com
system, we allocate each dealer an exclusive geographic territory based upon
specific vehicle make. A territory allocated by us to a dealer is generally
larger than a territory assigned to a dealer by a manufacturer. By granting
dealers exclusivity within a geographic area, we intend to assure dealers of a
large enough volume of quality purchase requests to lower their operating costs.

Our Web Site. Because Web sites can be continually updated and provide a
large quantity of quality information, we believe the Internet offers the most
efficient medium for consumers to learn about and shop for vehicles. The
Internet's global reach to consumers allows us to leverage our investment in
branding and marketing across a very large national and international audience
to create qualified purchase requests for vehicles. For these reasons, we also
believe that the Internet represents the most efficient method of directing
purchase requests to local markets and dealers.

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We provide the following services on our Web site:

[Chart depicting programs and services accessible to Internet consumers through
Autobytel.com]

STRATEGY

Our primary objective is to be the leading global Internet brand for
vehicle information and purchasing services. We intend to achieve this objective
through the following principal strategies:

Continue to Build Brand Equity. We believe that due to our focus on both
online and offline marketing, we have created one of the leading brand names in
our sector. We intend to continue aggressively to market and advertise to
enhance our brand recognition with consumers. We believe that continuing to
strengthen brand awareness of the Autobytel.com name among consumers is critical
to attract vehicle buyers, increase purchase requests and, in turn, increase the
size of our dealer base. We intend to continue advertising on the Internet and
through traditional media, such as television, radio and printed publications.

Ensure the Highest Quality Consumer Experience. We believe that consumer
satisfaction and loyalty is heavily influenced by the consumer's experience with
our site and with our dealers. In order to enhance our appeal to consumers, we
intend to continue developing our Web site by enhancing vehicle information, as
well as building new features such as personalization, auto maintenance
reminders and consumer reviews. As part of our continuing effort to enhance our
Web site technology and features, we have entered into strategic co-development
relationships, with Intel and Cow Inc. to improve our interactive dealer
training. In addition, we plan to continue compiling high quality content from
third party sources on our site, including information from Edmund's,
IntelliChoice, Carprices.com and Kelley Blue Book. We believe that consumer
satisfaction with the

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vehicle purchasing experience is also essential to our success and the
differentiation of our services from those of our competitors. We intend to
continue to invest in our dealer training and support services to ensure a
consistent, high-quality alternative to the traditional vehicle buying process.

Increase Purchase Requests. We believe that increasing the volume and
quality of purchase requests directed from our Web site to our dealer network is
crucial to the long-term growth and success of our business. By augmenting the
volume of quality purchase requests, we expect to attract additional dealers to
our network, increase fees paid by dealers, and solidify our relationships with
participating dealers. Our strategy for increasing traffic to our site and the
number of purchase requests includes forming and maintaining online sponsorships
and partnerships with Internet portals, such as Excite, and with Internet
automotive information providers, such as Edmund's. As part of our strategy to
improve the quality of purchase requests, we continue to expand the breadth and
depth of information and services available through our Web site to insure that
well informed, ready-to-buy consumers are directed to participating dealers.

Expand and Improve Dealer Network. We believe that strengthening the size
and quality of our dealer network is important to the success and growth of our
business. We believe our network of over 2,700 dealers is one of the largest in
the Internet-based vehicle purchasing industry. Our strategy is to increase the
size of our dealer network by attracting new dealers and strengthening
relationships with existing dealers by (i) increasing the volume and quality of
purchase requests, (ii) advertising in trade publications aimed at dealers and
participating in industry trade shows, (iii) maintaining our extensive training
and support program to participating dealers, and (iv) providing our DRT system
to all participating dealers.

Invest in Ancillary Online Services. We believe that expanding our services
to both consumers and dealers will be critical to establishing ourselves as the
premier provider of online automotive services in the future. Our strategy is to
continue to invest in ancillary services, particularly in the CyberStore and
warranty, finance and insurance services. We also intend to use the DRT system
to launch value added services for our dealer network, including allowing
dealers to offer accessories and aftermarket products directly through the
Autobytel.com Web site. We have recently begun to sell advertising on our Web
site and expect to expand this business during 1999. We are also seeking
opportunities to market the information contained in our databases.

Expand Internationally. We intend to continue our international expansion
through licensing agreements and partnering with local strategic partners. We
have established these arrangements with strategic partners such as Inchcape
Motors, Bilia AB and affiliates of Metro Holdings to launch international
automotive information and purchasing services throughout the United Kingdom,
Scandinavia and the rest of Europe, respectively. We are exploring additional
opportunities in Asia and Latin America.

PRODUCTS, PROGRAMS AND SERVICES

New Vehicle Purchasing Service. Our new vehicle marketing service enables
consumers to shop for and select a new vehicle through our Web site by providing
research on new vehicles (e.g., pricing, features, specifications, colors,
etc.). When consumers indicate they are ready to buy, a consumer can complete a
purchase request online, which specifies the type of vehicle and accessories the
consumer desires, along with the consumer's contact information. The purchase
request is then routed by us to the nearest participating dealer that sells the
type of vehicle requested, and we promptly return an e-

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mail message to the consumer with the dealership's name and phone number and the
name of the Autobytel.com manager at the dealership. Dealers agree in their
contracts to contact the consumer within 24 hours of receiving the purchase
request with a firm, haggle-free price quote for the requested vehicle. When
consumers complete a purchase, they usually take delivery of their vehicle at
the dealership showroom. Generally, within ten days of the submission of a
consumer's purchase request, we contact the consumer again by e-mail to conduct
a quality assurance survey that allows us to evaluate the sales process at
participating dealers and improve the quality of dealer service.

The Autobytel.com network has grown to 2,718 dealers as of December 31,
1998. These dealers represent every major domestic and imported make of vehicle
and light truck sold in the United States and Canada. Core dealerships are
charged initial subscription fees and on-going fees, principally on a monthly
basis, to participate in our dealer network.

Certified Pre-Owned CyberStore. We launched our CyberStore program in April
1997. The CyberStore allows consumers to search for a pre-owned vehicle
according to specific search parameters such as the price, make, model, color,
year and location of the vehicle. CyberStore locates and displays the
description, location and actual photograph of all vehicles that satisfy the
search parameters. The consumer can then complete a formal purchase request for
a specific vehicle and is contacted by the dealer to conclude the sale. To be
listed in the CyberStore, a pre-owned vehicle must first pass a 135-point
inspection and be covered by a 72-hour money-back guarantee and three-month,
3,000-mile warranty which is honored nationally by all CyberStore dealers. We
charge each new vehicle dealer that participates in the CyberStore program a
separate additional monthly fee. The CyberStore program uses the DRT system to
provide participating dealers online purchase requests shortly after submission
by consumers as well as the ability to track their inventory on a real-time
basis.

Ancillary Customer Services. We offer a number of ancillary services that
we market to consumers through our Web site and the linked Web sites of
participating partners. We make purchase and lease financing available to
consumers through various Autobytel.com financing programs offered by third
parties that allow consumers to research and apply for vehicle financing online
in a secure manner. Consumers can apply for a loan or lease online at the time
they submit their purchase request for either a new or pre-owned vehicle.
Consumers are able to arrive at the dealership with their loan pre-approved,
their credit verification documents in hand, and the loan paperwork waiting for
them. We believe that the convenience of pre-approved purchase or lease
financing, combined with a firm, competitive price, enables dealers more easily
to consummate purchase requests. Lenders to whom Autobytel.com refers customers
pay us an origination fee for most loans and the dealership is compensated by
the lender for each loan made to an Autobytel.com consumer through either an
origination fee or a limited rate participation fee. We currently market
financing through Chase and GE Capital.

We market vehicle accident, extended warranty and mechanical breakdown
insurance to consumers through New Hampshire Insurance Company, a member company
of the American Insurance Group (AIG). Our Web site currently features a direct
hyperlink to the specific Web site for AIG member companies through which
consumers submit requests for insurance quotes and obtain approval. Our
agreement with AIG provides that AIG pay us fees based on a percentage of the
net premiums earned and collected by AIG on all policies issued to Autobytel.com
referred consumers.

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We offer critical information concerning all aspects of owning and leasing
new and pre-owned vehicles that we believe makes our Web site a valuable
resource to consumers. AutoBuyTools(TM), a service on our Web site, consists of
a lease calculator, a loan calculator to determine monthly payments and a lease
or buy decision tool.

The Dealer Real Time System. In 1997, we launched a new, proprietary
technology and software system called the DRT system. We believe the DRT system
gives dealers a competitive advantage compared to delivering purchase requests
by fax. A fax-based system has the following inherent inefficiencies: it is
susceptible to system delays, has a less effective purchase request and
inventory tracking system and it is difficult to control the distribution of
purchase requests. Such inefficiencies include the delay of delivering faxes to
salesmen and the uncertainty of response time to consumers related to this
delivery. The DRT system is designed to enable dealers to communicate in real
time with potential customers, better track their inventory and customer
contacts and perform related tasks. In March 1998, as part of our new Dealer
Agreement, we began requiring our dealers to use the DRT system, and have
converted substantially all of our dealers to the DRT system.

Loyalty Rewards Program (ABT Mobalist). To attract new customers prior to
their next vehicle purchase and encourage repeat business from our existing
customers, we began to offer consumers in April 1998 an affinity program called
Mobalist Rewards. To date, our affinity marketing partners include Virtual
Vineyards, Inc. and Uniglobe Travel Online, Inc. This program allows members to
earn credits toward the purchase price of a new or pre-owned vehicle through our
service. Members earn credits by purchasing products and services from
Autobytel.com's retail partners and also by using a credit card co-branded with
the Autobytel.com trademark to make purchases. We earn a commission each time
these services or the affinity program services are used.

INTERNATIONAL ACTIVITIES

We intend to expand our new vehicle marketing service to foreign markets
through licensing agreements and by establishing relationships with vehicle
dealers and strategic partners located in foreign markets. As of December 31,
1998, approximately 161 Canadian dealerships belonged to our network. We have
entered into an agreement with Inchcape Motors, the United Kingdom's largest
independent automobile distributor, to license our technology, business
processes and trade names in the United Kingdom, as well as provide maintenance
and development for such technology. We have also entered into similar
arrangements with Auto-By-Tel Nordic, an affiliate of Bilia AB, to license our
technology, business processes, and trade names in Sweden, Norway, Denmark and
Finland. In addition, we have entered into an arrangement with Aureus Private
Equity AG and Invision AG, affiliates of Metro Holdings, a Swiss-based
investment holding company, relating to the establishment of Web sites using
Autobytel.com's vehicle marketing systems throughout the rest of Europe. We
intend to enter into similar relationships with strategic partners in other
countries that have attractive automobile markets.

MARKETING AND SALES

Our ability to enhance our brand name recognition, domestically and
internationally, and position ourselves as a leading Internet-based vehicle
information and purchasing services provider is critical to our efforts to
increase the number of vehicle purchase and ancillary service requests, as well
as the number and quality of subscribing dealerships. We have invested
significant resources to date in marketing and communications activities.

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Over the past several years, we have been the subject of numerous newspaper,
magazine, radio and television stories. Articles about our new vehicle program
have appeared in Business Week, Fortune, Forbes, Time, and the Wall Street
Journal, among other publications. Television stories featuring us have been
aired nationally on NBC Today, NBC Nightly News and CNN. We believe that ongoing
media coverage is an important element in creating consumer awareness of the
Autobytel.com brand name and has contributed to dealership awareness of, and
participation in, our programs.

We have established marketing and advertising programs with many of the
leading automotive information providers on the Internet, including Edmund's,
IntelliChoice and Kelley Blue Book which help direct traffic to our Web site and
increase purchase requests. Our agreements with automotive information providers
typically have terms ranging from one to five years. The agreement with Kelley
Blue Book, however, is cancelable by Kelley Blue Book on 60 days notice. Under
the agreements, we typically pay the automotive information provider a monthly
fee based on the number of users who submit purchase requests after having
visited the provider's Web site. Edmund's is our single largest referral
service. In 1997 and 1998, approximately 49% and 34%, respectively, of our total
purchase requests originated from Edmund's. This percentage decreased to 29% for
the last quarter of 1998. Our agreement with Edmund's, pursuant to which we
receive referrals from Edmund's Web site, is scheduled to expire July 31, 2000,
unless terminated earlier by either party on 90 days notice. Edmund's has agreed
to recommend or refer visitors to its Web site only to us and no other
competitive online marketing program with respect to new vehicles, although
Edmund's may refer prospective buyers directly to automotive manufacturers' Web
sites and dealer locator services. We expect Edmund's Web site to account for a
significant number of purchase requests for the foreseeable future.

We endeavor to position ourselves as the leading vehicle and related
services purchasing program by affiliating ourselves with online services and
Internet portals. For example, we have agreements with AT&T Corp. and
CLASSIFIEDS2000 and exclusive relationships with Excite and, through Excite, the
automotive channel of Netscape's NetCenter. We believe that our presence on
these Internet sites helps to increase purchase request volume and will remain a
key element of our future business. We are also working with MediaOne to develop
and deliver our broadband service offering. Broadband allows the Internet to
deliver content and services at faster speeds through high capacity coaxial
cable networks. We believe that the broadband opportunity is becoming an
increasingly important focus within the Internet industry, and we intend to
enhance our presence using this technology.

We supplement our Internet presence with television and traditional print
advertising. Our initial marketing focus was on computer user and hobbyist
publications and major automotive magazines. In late 1996, we began to broaden
our marketing efforts with a campaign to accelerate consumer awareness of the
Autobytel.com brand name and drive traffic to our Web site through cable
television advertisements featured on CNN and CNET, Inc. and network television
advertisements featured on NBC and MSNBC. As part of our branding efforts, we
aired a 30-second commercial during the broadcast of the Super Bowl in both 1997
and 1998. We expect to continue to use television advertising during 1999 to
strengthen our brand awareness.

In addition to our consumer-oriented marketing activities, we also market
our programs directly to dealerships, participate in trade shows, advertise in
trade publications and major automotive magazines and encourage subscribing
dealerships to recommend our program to other dealerships.

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DEALER RELATIONSHIPS AND SERVICES

Dealer Network. Our dealerships are located in most major metropolitan
areas in the United States and Canada and we believe they are generally leaders
in their respective markets. As of December 31, 1998, our participating
dealership base totaled 2,718 dealers, consisting of 2,386 core dealers and 332
non-core dealers. Core dealerships are franchises with typically high volume
vehicle sales (such as Ford or Toyota). These dealerships pay initiation and
monthly fees to subscribe to our online marketing program. Non-core dealers are
typically franchises of lower-volume vehicle manufacturers (such as Jaguar or
Suzuki) or are located in remote, low volume territories, and receive purchase
request referrals from us without paying monthly subscription fees to the
Company. We enter into agreements with non-core dealers to ensure the broadest
geographic coverage possible for the make of vehicle represented by the non-core
dealer.

Customer Support. We actively monitor subscribing dealers through ongoing
customer surveys, and research conducted by our internal dealer support group.
Generally, within ten days after a consumer submits a purchase request through
our Web site, we re-contact the consumer by e-mail requesting completion of a
quality assurance survey on our Web site that allows us to evaluate the sales
process at participating dealers. Dealerships that fail to abide by the
Autobytel.com program guidelines or who receive repeated consumer complaints are
generally reviewed and, if appropriate, terminated. In return for requiring a
high level of consumer service, we assign participating dealerships exclusive
territories. We try to assign dealers attractive territories in order to
increase participation in our program.

Our dealer agreements typically have a five-year term but are cancelable by
either party on 30 days notice. Each dealer agreement obligates the dealers to
adhere to our policy of providing prompt responses to customers, no haggle
pricing practices and full disclosure regarding vehicle availability, add-ons
and related matters. We require each dealer to have an Autobytel.com manager
whose principal responsibility is supervising the Autobytel.com system, similar
to the way in which most dealers have a new vehicle sales manager, pre-owned
vehicle sales manager and service and parts department managers who are
responsible for those dealership functions. We reserve the right to reduce or
modify each dealer's assigned territory after the first six months, although
there can be no assurance that a dealer whose territory is reduced or modified
will not contest such a change or terminate its subscription. In addition,
dealers whose territories are reduced or modified by us may sue us in an effort
to prevent the change or recover damages. We have experienced one such suit. See
"-- Litigation."

Training. We believe that traditional dealers and their employees require
specialized training to learn the skills necessary to serve the Internet user
and take full advantage of our proprietary DRT system. Therefore, we have
developed an extensive training program for our dealers. We believe that this
training is critical to enhancing the Autobytel.com brand and reputation. We
require participating dealerships to have their representatives trained on the
Autobytel.com system. Training is conducted at our headquarters in Irvine,
California, at regional training centers and at dealerships' premises. Training
is currently provided to the dealers at no additional cost. In training our
dealers, we de-emphasize traditional vehicle selling techniques and emphasize
the Autobytel.com approach. To increase consumer satisfaction and reduce costs,
we seek to discourage dealerships from using commissioned and multiple
salespersons to interface with our customers.

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COMPETITION

We believe that the principal competitive factors affecting the market for
Internet-based vehicle marketing services include:

- successful marketing and establishment of national brand name
recognition,

- ease of use, speed and quality of service execution,

- the size and effectiveness of the participating dealership base,

- the volume and quality of traffic to and purchase requests from a Web
site,

- the ability to introduce new services in a timely and cost-effective
manner.

- technical expertise,

- customer satisfaction, and

- competitive dealer pricing.

Our vehicle purchasing services compete against a variety of Internet and
traditional vehicle buying services and automotive brokers. In the
Internet-based market, we compete with other entities which maintain similar
commercial Web sites including Autoweb.com, Cendant's AutoVantage, General
Motors' BuyPower, Microsoft's CarPoint and Stoneage Corporation. Republic
Industries has also announced its intention to create a Web site for marketing
vehicles. We also compete indirectly against vehicle brokerage firms and
affinity programs offered by several companies, including Costco Wholesale
Corporation and Wal-Mart Stores, Inc.

We compete with vehicle insurers, lenders and lessors as well as individual
dealerships. Such companies may already maintain or may introduce Web sites
which compete with ours. We cannot assure that we can compete successfully
against current or future competitors, many of which have substantially more
capital, resources and access to additional financing than we do, nor can there
be any assurance that competitive pressures faced by us will not result in
increased marketing costs, decreased Web site traffic or loss of market share or
otherwise will not materially and adversely affect our business, results of
operations and financial condition. We compete primarily on brand name
recognition acquired through early entry into the Internet-based automotive
purchase referral market and through customer and dealer satisfaction.

OPERATIONS AND TECHNOLOGY

We believe that our future success is significantly dependent upon our
ability to continue to deliver a high-performance and reliable Web site, enhance
consumer/dealer communications, maintain the highest levels of information
privacy and ensure transactional security. We host our Web site at our corporate
headquarters in Irvine, California. We currently contract the services of two
Tier I Internet Service Providers utilizing four T-1 lines (approximately 6 Mbps
capacity) with our primary provider and two T-1 lines (3 Mbps) with the
secondary provider. Our primary servers are housed in one climate-controlled,
raised floor computer room with back-up power systems. We use industry-standard
servers and routers in our network. We have also installed industry-standard
firewall products to secure our entire network nationwide. System enhancements
are primarily intended to accommodate increased traffic across our Web site,
improve the speed in which purchase requests are processed and introduce new and
enhanced products and services. System enhancements entail the implementation of
sophisticated new technology and system processes and there can be no assurance
that such enhancements will prevent or not cause unanticipated system
disruptions. Although we maintain local offsite system backups, all of our
primary servers are located at our corporate headquarters
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and are vulnerable to interruption and damage from fire, earthquake, flood,
power loss, telecommunications failure and other events beyond our control. We
have implemented an out-of-state disaster recovery plan to safeguard dealer and
consumer information. We maintain business interruption insurance which pays up
to $6 million for the actual loss of business income sustained due to the
suspension of operations as a result of direct physical loss of or damage to
property at our offices.

FACILITIES

Our operations are principally located in a single office building in
Irvine, California. We occupy three full floors, each consisting of
approximately 12,000 square feet, which are leased through August 2001. We have
options to renew the leases on each floor for an additional 5-year term, and
also hold an option to lease additional floor space in the building. We also
lease office space in Houston, Texas, consisting of less than 5,000 square feet
through Kre8.net, Inc., an Internet software company for dealer Web site design
and systems backup.

GOVERNMENT REGULATION

We believe that our dealer marketing service does not constitute
franchising or qualify as a brokerage activity which would subject us to federal
and state franchise, motor vehicle dealer or broker licensing laws. A federal
court in Michigan has ruled that our dealer subscription services agreement is
not a "franchise" under Michigan law. If our relationship or written agreement
with our dealers were found to be a "franchise" under federal or other state
franchise laws, we could be subjected to, among other items, franchise
disclosure and registration requirements and limitations on our ability to
effectuate changes to our relationships with our dealers. Pursuant to an
agreement with the Texas Department of Transportation, we cannot grant exclusive
territories to its Texas dealers. In addition, we are required to modify our
marketing program in Texas to include a pricing model under which all
subscribing dealerships in Texas are charged uniform fees based on the
population density of their geographic area and to make its program open to all
dealerships who wish to apply. The Department also requires us to configure our
Texas dealers' territories in such a way that each dealer's territory has at
least 250,000 residents. If individual state regulatory requirements change or
additional requirements are imposed on us, we may be required to modify our
marketing programs in such states in a manner which may undermine the program's
attractiveness to consumers or dealers. If we determine that the licensing and
related requirements are overly burdensome, we may elect to terminate operations
in such state. In addition, in the event that a state deems that we are acting
as a broker, we may be required to comply with burdensome licensing requirements
of such state or terminate operations in such state. In each case, our business,
results of operations and financial condition could be materially and adversely
affected.

Our marketing service may result in changes in the way vehicles are sold or
may be viewed as threatening by new and pre-owned vehicle dealers who do not
subscribe to the Autobytel.com program. Such businesses are often represented by
influential lobbying organizations, and such organizations or other persons may
propose legislation which could impact the evolving marketing and distribution
model which our service promotes. Should current laws be changed or new laws
passed, our business, results of operations and financial condition could be
materially and adversely affected. As we introduce new services, we may need to
comply with additional licensing regulations and regulatory requirements.

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We expect to expand our operations to various other countries that may have
laws or be subject to treaties that regulate the marketing, distribution and
sale of motor vehicles. As we consider specific foreign operations, we will be
required to expend the resources necessary to determine whether the laws of the
countries in which we seek to operate require us to modify our program or
otherwise change the Autobytel.com system or prohibit the use of the system in
such country entirely. In addition, the laws of other countries may impose
licensing, bonding or similar requirements on us as a condition to doing
business therein.

To date, we have not expended significant resources on lobbying or related
government affairs issues but may be required to do so in the future.

EMPLOYEES

As of December 31, 1998, we had a total of 177 employees. We also utilize
independent contractors for software and hardware development and certain
administrative activities. None of our employees are represented by a labor
union. We have not experienced any work stoppages and consider our employee
relations to be good.

LITIGATION

Jerome-Duncan Ford (JDF), a Michigan dealership, first subscribed to our
new vehicle marketing program in June 1996. In January 1997, we sought to
replace the existing agreement with our new standard subscription services
agreement and realign JDF's territory. JDF objected to the realignment and
ceased payment of its monthly subscription fee to us. Unable to resolve the
matter, we terminated JDF's subscription Dealer Agreement. JDF then sued us in
Michigan State Court and sought an injunction to prevent us from cancelling
JDF's subscription services agreement. JDF based its action on Michigan
franchise law which prohibits a franchiser from terminating a franchisee without
good cause. We removed the case to federal court. In late June 1997, the federal
district court ruled in favor of us and denied the injunction. The court held
that JDF showed insufficient evidence of a likelihood of success on the merits
involving claims of breach of Michigan franchise law. The Court found that no
franchise existed. We thereafter moved for summary judgment on the franchise
issues.

In late 1997, the court granted our motion for summary judgment and held
that our subscription services agreement and method of operation did not
constitute a franchise under Michigan state law. The plaintiffs have appealed
the ruling.

Halrec, Inc. (Halrec), a California based Toyota dealership, first
subscribed to our new vehicle marketing program in October 1996 and subsequently
to our financing program. On November 13, 1998, Halrec sued Auto-By-Tel
Marketing Corporation in Superior Court, County of Santa Clara, California for,
among other things, restraint of trade, intentional misrepresentation and unfair
competition claiming that we wrongfully awarded certain geographic territories
that were contractually the property of Halrec to other car dealers. We believe
Halrec's claims are without merit and are in negotiations to resolve this
lawsuit. In January 1999, we extended a settlement offer that would grant Halrec
a new territory.

From time to time, we are involved in other litigation matters relating to
claims arising out of the ordinary course of business. We believe that there are
no other claims or actions pending or threatened against us, the ultimate
disposition of which would have a material adverse effect on our business,
results of operations and financial condition.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company.

OFFICERS AND DIRECTORS AGE POSITION
---------------------- --- --------

Michael J. Fuchs(1)(2)(3)................. 52 Chairman of the Board and Director
Mark W. Lorimer........................... 39 Chief Executive Officer, President and
Director
Robert S. Grimes.......................... 54 Executive Vice President and Director
Hoshi Printer............................. 56 Senior Vice President and Chief
Financial Officer
Ann M. Delligatta......................... 51 Executive Vice President and Chief
Operating Officer
Jeffrey H. Coats(1)(2)(3)................. 41 Director
Mark N. Kaplan(1)......................... 68 Director
Kenneth J. Orton(2)....................... 47 Director

- -------------------------
(1) Member of the Audit Committee.

(2) Member of the Compensation Committee.

(3) Designated Director of the holders of Series A Preferred Stock.

Michael J. Fuchs was elected as a director of the Company in September 1996
and became Chairman in June 1998. Mr. Fuchs was Chairman and Chief Executive
Officer of Home Box Office, a Division of TimeWarner Entertainment Company,
L.P., a leading pay-television company, from October 1984 until November 1995,
and Chairman and Chief Executive Officer of Warner Music Group, a Division of
Time Warner Inc., from May 1995 to November 1995. Mr. Fuchs holds a B.A. from
Union College and a J.D. from the New York University School of Law. Mr. Fuchs
is a member of the Board of Directors of IMAX Corp., Wink Communications, Inc.
and Consolidated Cigar Holdings Inc.

Mark W. Lorimer joined the Company in December 1996 as Vice President,
General Counsel and Secretary, and was promoted to Executive Vice President and
Chief Operating Officer in May 1997. In May 1998, Mr. Lorimer was promoted to
President. He was elected a director and appointed Chief Executive Officer of
the Company in June 1998. From January 1996 to November 1996, Mr. Lorimer was a
partner and, from March 1989 to January 1996, was an associate with the law firm
of Dewey Ballantine LLP. Mr. Lorimer is a member of the Board of Directors of
IMC Mortgage Company. Mr. Lorimer holds a B.S. in Speech from Northwestern
University and a J.D. from the Fordham University School of Law.

Robert S. Grimes has been a director of the Company since inception and has
served as Executive Vice President since July 1996. Since September 1987, Mr.
Grimes has been President of R.S. Grimes & Co., Inc., a private investment
company. From April 1981 to March 1987, Mr. Grimes was a partner with the
investment firm of Cowen & Company. Mr. Grimes holds a B.S. from the Wharton
School of Commerce and Finance at the University of Pennsylvania and an L.L.B.
from the University of Pennsylvania Law School. Mr. Grimes has served on the
Board of Directors of Philips International Realty Philips Corp., a New York
Stock Exchange listed company, since April 1998.

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Hoshi Printer joined the Company in January 1999 as Senior Vice President
and Chief Financial Officer. From June 1996 to December 1998, Mr. Printer served
as Vice President, Finance and Administration, Chief Financial Officer and
Secretary of Peerless Systems Corporation, a software technology company. From
July 1995 to May 1996, Mr. Printer was Chief Financial Officer of Neuron Data
Inc., a software technology company. From July 1994 to June 1995 Mr. Printer
served as Chief Financial Officer of Soane Technologies Inc., a polymer
technology company. From January 1990 to June 1994, Mr. Printer was Chief
Financial Officer of Catalytica Inc., an environmental technology company. Mr.
Printer also worked at Xerox Corporation for over 17 years as Vice President of
Finance and in 1976 served as a consultant to the White House for the
President's Reorganization project on cash management. Mr. Printer holds a B.E.
in mechanical engineering and a B.E. in electrical engineering from Poona
University in India, an M.S. in industrial engineering from Oklahoma State
University and an M.B.A. from Stanford University.

Ann M. Delligatta joined the Company in June 1997 as Senior Vice President
and Chief Technology Officer and was promoted to Executive Vice President and
Chief Operating Officer in July 1998. From September 1996 to June 1997, Ms.
Delligatta was President and Chief Executive Officer of the Pharos Group, an
information technology consulting organization. From January 1987 to September
1996, Ms. Delligatta held a number of managerial positions at TRW Inc.'s TRW
Information Systems and Services Group, most recently as Vice President and
General Manager/Information Technology Services. Ms. Delligatta attended Mount
St. Mary's College and was named by McGraw-Hill Companies as one of the "Top 100
Women in Computing in 1996" in recognition of her success in the alignment of
business and technology strategies.

Jeffrey H. Coats was elected a director of the Company in August 1996. Mr.
Coats has served as Managing Director of GE Equity Capital Group, Inc., a
wholly-owned subsidiary of General Electric Capital Corporation, a significant
stockholder in the Company, since April 1996. He has also held various
positions, most recently as Managing Director, of GE Capital Corporate Finance
Group, Inc., a wholly-owned subsidiary of General Electric Capital Corporation,
from June 1987 to April 1993. From March 1994 to April 1996, Mr. Coats served as
President of Maverick Capital Equity Partners, LLC, and from April 1993 to
January 1994, Mr. Coats was a partner with Veritas Capital, Inc., both of which
are investment firms. Mr. Coats holds a B.B.A. in Finance from the University of
Georgia and a Masters in International Management in Finance from the American
Graduate School of International Management. Mr. Coats is a director and
Chairman of the Board of The Hastings Group, Inc., a privately-held clothing
retailer, which on October 23, 1995, filed a voluntary petition under Chapter 11
of the Bankruptcy Code and confirmed a plan of liquidation in late 1997. Mr.
Coats is a member of the board of directors of Wink Communications, Inc. and of
Krause's Furniture, Inc., a publicly-held company.

Mark N. Kaplan was elected as a director of the Company in June 1998. Mr.
Kaplan has been a member of the law firm Skadden, Arps, Slate, Meagher & Flom
LLP since 1980. Mr. Kaplan serves on the Board of Directors of the following
companies whose shares are publicly traded: American Biltrite, Inc., Congoleum
Corporation, Inc., DRS Technologies, Inc., Grey Advertising, Inc., MovieFone,
Inc., REFAC Technology Development Corporation, and Volt Information Services,
Inc. Mr. Kaplan holds an A.B. and J.D. from Columbia College.

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Kenneth J. Orton was elected a director of the Company in June 1998. Mr.
Orton is the President and Chief Executive Officer and a director of Preview
Travel, Inc., which he joined in April 1994 as President and Chief Operating
Officer. From September 1989 to March 1994, Mr. Orton was Vice President and
General Manager of the San Francisco division of Epsilon, a database marketing
firm and a wholly owned subsidiary of American Express Company. Prior to his
employment with Epsilon, Mr. Orton was Vice President of M/A/R/C Inc., a market
research and database marketing company, and Vice President of Sales and
Marketing for Future Computing. Mr. Orton also serves as a director of ONSALE,
Inc., a publicly-held company. Mr. Orton received a B.A. from California State
University, Fullerton.

BOARD COMPOSITION

The Board of Directors has currently authorized eight members of whom two
are to be elected by the holders of Series A Preferred Stock pursuant to the
Company's Certificate of Incorporation. Messrs. Coats and Fuchs are the
designees of the Series A Preferred Stock to the Board of Directors. The rights
of the Series A Preferred stockholders will expire upon the consummation of this
offering. Members of the Board of Directors are elected each year at the
Company's annual meeting of stockholders, and serve until the following annual
meeting of stockholders or until their respective successors have been elected
and qualified.

In accordance with the terms of the Company's Restated Certificate of
Incorporation, effective upon the closing of this offering, the terms of office
of the Board of Directors will be divided into three classes: the Class I term
will expire at the annual meeting of stockholders to be held in 1999; the Class
II term will expire at the annual meeting of stockholders to be held in 2000;
and the Class III term will expire at the annual meeting of stockholders to be
held in 2001. The Class I directors will be Mr. Lorimer, the Class II directors
will be Messrs. Kaplan and Orton and the Class III directors will be Messrs.
Grimes, Fuchs and Coats. At each annual meeting of stockholders after the
initial classification, the successors to directors whose term will then expire
will be elected to serve from the time of election and qualification until the
third annual meeting following election. In addition, the Company's Restated
Certificate of Incorporation provides that the authorized number of directors
shall be designated by the Bylaws of the Company. Any additional directorships
resulting from an increase in the number of directors will be distributed among
the three classes so that, as nearly as possible, each class will consist of
one-third of the directors. This classification of the Board of Directors may
have the effect of delaying or preventing changes in control or management of
the Company. Directors of the Company may be removed, with or without cause, by
the affirmative vote of the holders of a majority of the shares entitled to vote
at an election of directors. There are no family relationships among any of the
directors and executive officers of the Company.

BOARD COMMITTEES

The Audit Committee consists of Messrs. Coats, Fuchs and Kaplan. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent public accountants, reviews the results and scope of
the audit and other services provided by the Company's independent public
accountants and reviews and evaluates the Company's control functions.

The Compensation Committee consists of Messrs. Coats, Fuchs and Orton. The
Compensation Committee administers the issuance of stock under the Company's

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Amended and Restated 1996 Stock Incentive Plan, 1996 Stock Option Plan, 1996
Employee Stock Purchase Plan and 1998 Stock Option Plan, makes recommendations
regarding the Company's various incentive compensation and benefit plans and
determines salaries for the executive officers and incentive compensation for
employees and consultants of the Company.

DIRECTOR COMPENSATION

The Company's non-employee directors do not currently receive any cash
compensation for service on the Company's Board of Directors or any committee
thereof, but directors may be reimbursed for certain expenses incurred in
connection with attendance at Board and committee meetings. The Company's
Amended and Restated 1996 Stock Incentive Plan provides for automatic grants of
stock options to non-employee directors. See "Stock Plans -- Amended and
Restated 1996 Stock Incentive Plan."

The Company has entered into indemnification agreements with each member of
the Board of Directors and its officers providing for the indemnification of
such person to the fullest extent authorized, permitted or allowed by law.

EXECUTIVE COMPENSATION

The following table sets forth information regarding the compensation
(rounded to the nearest thousand) paid during each of the Company's last three
completed fiscal years to the Chief Executive Officer of the Company and each of
the other five most highly compensated executive officers of the Company as of
December 31, 1998 (collectively, the Named Officers).

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
FISCAL COMPENSATION OTHER SECURITIES
NAME AND PRINCIPAL YEAR ENDED ------------------- ANNUAL UNDERLYING
POSITION DECEMBER 31, SALARY BONUS COMPENSATION OPTIONS(#)
------------------ ------------ -------- -------- ------------ ------------

Peter R. Ellis(1).......... 1998 $219,000 $ -- $522,000(2) --
Former Chief Executive 1997 275,000 100,000 15,000(3) --
Officer and President 1996 123,000 321,000 11,000(4) --
Mark W. Lorimer............ 1998 316,000 150,000 9,000(3) 750,000(5)
Chief Executive Officer
and 1997 200,000 100,000 70,000(6) 100,000
President 1996 8,000 -- -- 333,333
Robert S. Grimes........... 1998 220,000 75,000 -- 125,000
Executive Vice President 1997 180,000 -- -- 116,667
1996 90,000 -- -- 166,667
Ann M. Delligatta.......... 1998 177,000 100,000 -- 316,667(7)
Executive Vice President 1997 88,000 -- -- 83,334
and Chief Operating
Officer
Michael J. Lowell.......... 1998 190,000 -- -- 16,667
Senior Vice President, 1997 139,000 50,000 -- 50,000
Development 1996 15,000 -- -- 111,111
Anne Benvenuto............. 1998 150,000 -- -- 16,667
Senior Vice President, 1997 13,000 5,000 15,000(6) 33,333
Marketing

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(1) Resigned as Chief Executive Officer in June 1998.

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(2) Represents $500,000 severance pay, $14,000 car allowance and $8,000 legal
expenses. See "Certain Transactions."

(3) Car allowance and lease payments.

(4) Represents certain health benefits, insurance payments and $5,000 car
allowance and lease payments.

(5) 500,000 shares of such securities underlying options are contingent on the
performance of the Company's market trading price after the closing of the
offering.

(6) Relocation expense reimbursement.

(7) 200,000 shares of such securities underlying options are contingent on the
performance of the Company's market trading price after the closing of the
offering.

OPTION GRANTS DURING 1998

The following table sets forth the Named Officers and certain information
concerning stock options granted to them during 1998. The Company has never
issued stock appreciation rights ("SARs").

INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
---------------------------------------------------------- OF ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(5)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED(#)(1) 1998(2) ($/SHARE)(3) DATE(4) 5%($) 10%($)
---- ------------- -------------- ------------ ---------- ----------- ------------

Mark W. Lorimer...... 200,000 12.5% $13.20 12/17/08 $1,660,282 $ 4,207,480
500,000 31.3% 13.20 12/17/08 4,150,705 10,518,700
50,000 3.1% 13.20 06/21/08 415,070 1,051,870
Robert S. Grimes..... 125,000 7.8% 13.20 12/17/08 1,037,676 2,629,675
Ann M. Delligatta.... 100,000 6.3% 13.20 12/17/08 830,141 2,103,740
200,000 12.5% 13.20 12/17/08 1,660,282 4,207,480
16,667 1.0% 13.20 06/21/08 138,360 350,630
Anne Benvenuto....... 16,667 1.0% 13.20 06/21/08 138,360 350,630
Michael J. Lowell.... 16,667 1.0% 13.20 06/21/08 138,360 350,630
Peter R. Ellis....... -- -- -- -- -- --

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(1) Represents options granted under the Company's Amended and Restated 1996
Stock Incentive Plan and the 1998 Stock Option Plan.

(2) Based on an aggregate 1,597,007 shares of Company common stock subject to
options granted to employees during fiscal 1998.

(3) Options were granted at an exercise price equal to the fair market value of
the common stock at the date of grant. In determining the fair market value
of the common stock, the Board of Directors considered various factors,
including the Company's financial condition and business prospects,
operating results, the absence of a market for the common stock and the
risks normally associated with investments in companies engaged in similar
businesses.

(4) The term of each option granted is generally ten years from the date of
grant. Options may terminate before their expiration dates, if the
optionee's status as an employee or a consultant is terminated or upon the
optionee's death or disability.

(5) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
common stock prices.

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AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES

The following table sets forth for each of the Named Officers certain
information concerning options exercised during fiscal 1998 and the number of
shares subject to both exercisable and unexercisable stock options as of
December 31, 1998. Also reported are values for "in-the-money" options that
represent the positive spread between the respective exercise prices of
outstanding options and the fair market value of the common stock as of December
31, 1998. The Company has never issued SARs.

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
NUMBER OF OPTIONS AT THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------

Mark W. Lorimer........ -- -- 209,999 973,334 1,609,491 1,290,506
Michael J. Lowell...... -- -- 104,861 72,917 725,006 241,660
Robert S. Grimes....... -- -- 245,834 162,500 2,060,004 --
Ann M. Delligatta...... -- -- 29,165 370,836 -- --
Anne Benvenuto......... -- -- 8,333 41,667 -- --
Peter R. Ellis......... -- -- -- -- -- --

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(1) Calculated by determining the difference between the fair market value of
the securities underlying the options as of December 31, 1998 ($13.20 per
share as determined by the Board of Directors) and the exercise price of the
officer's options. In determining the fair market value of the common stock,
the Board of Directors considered various factors, including the Company's
financial condition and business prospects, its operating results, the
absence of a market for the common stock and the risks normally associated
with investments in companies engaged in similar businesses.

STOCK PLANS

1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the Option
Plan) was approved by the Board of Directors on May 18, 1996 and the
stockholders on May 31, 1996. The Option Plan was terminated by a resolution of
the Board of Directors on October 23, 1996, at which time over 800,000 options
had been issued.

The Option Plan provided for the granting to employees and directors of
stock options intended to qualify as incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the Code), and
for the grant to employees, consultants and directors of nonstatutory stock
options. The Company reserved 1,194,444 shares of common stock for issuance
under the Option Plan. Under the Option Plan, the exercise price of any
incentive stock options granted under the Option Plan were not less than the
fair market value of the common stock on the date of grant, and the exercise
price of any non-statutory stock option granted under the Option Plan were not
less than 85% of the fair market value of the common stock at the date of the
grant. The term of all options granted under the 1996 Option Plan did not exceed
10 years. Options granted under the Option Plan are administered by the Board of
Directors or a committee of the Board (the "Administrator"). Any options granted
under the Option Plan are exercisable at such times as determined by the
Administrator, but in no case at a rate of less than 20% per year over five
years from the grant date. A majority of the outstanding options vest and became
exercisable as to one third of the grant on October 31, 1996, and as to an
additional one third of the grant at each successive October 31. Options granted
under the Option Plan generally must be exercised within 30 days following
termination of the optionee's status as an employee, directors or consultant of
the Company, or within 12 months following such optionee's termination by death
or disability. Any optionee
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holding options granted under the Option Plan cannot sell or transfer any shares
of common stock during the 180 day period following the effective date of the
registration statement relating to an initial public offering of securities
filed pursuant to the Securities Act.

Amended and Restated 1996 Stock Incentive Plan. The Incentive Plan was
approved by the Board of Directors on October 23, 1996, amended and restated by
the Board of Directors on November 24, 1996 and approved by the stockholders on
January 16, 1997. The Company's Amended and Restated 1996 Stock Incentive Plan
(the Incentive Plan) provides for the granting to employees and directors of
stock options intended to qualify as incentive stock options within the meaning
of Section 422 of the Code, and for the granting to employees, directors and
consultants of nonstatutory stock options and stock purchase rights.

As approved by the stockholders, the Company reserved 833,333 shares of
common stock for issuance under the Incentive Plan. Options with respect to all
of the common stock reserved for issuance have been issued and are either
incentive stock options or nonstatutory stock options.

Options granted under the Incentive Plan are not generally transferable by
the optionee, and each option is exercisable during the lifetime of the optionee
only by such optionee. Options granted under the Incentive Plan must generally
be exercised within three months of the end of the optionee's status as an
employee or consultant of the Company, or within twelve months after such
optionee's termination by death or disability, but in no event later than the
expiration of the option's ten year term.

The exercise price of nonstatutory stock options granted under the
Incentive Plan was determined by the Board of Directors, and in all cases, was
the fair market value of the common stock on the date of grant. The term of all
options granted under the Incentive Plan did not exceed ten years.

The Incentive Plan provides that in the event of a merger of the Company
with or into another corporation, a sale of substantially all of the Company's
assets or a like transaction involving the Company, each option will be assumed
or an equivalent option substituted by the successor corporation. If the
outstanding options are not assumed or substituted as described in the preceding
sentence, the Committee shall provide for each optionee to have the right to
exercise the option as to all of the optioned stock, including shares as to
which it would not otherwise be exercisable. If the Administrator makes an
option exercisable in full in the event of a merger or sale of assets, the
Administrator will notify the optionee that the option will be fully exercisable
for a period of 15 days from the date of such notice, and the option will
terminate upon the expiration of such period.

Non-employee directors are entitled to participate in the Company's
Incentive Plan. The Incentive Plan provides for an automatic grant of an option
to purchase 13,333 shares of common stock (the First Option) to each
non-employee director on the date on which the Incentive Plan becomes effective
or, if later, on the date on which the person first becomes a non-employee
director. After the First Option is granted to the non-employee director, he or
she will automatically be granted an option to purchase 3,333 shares (a
Subsequent Option) on November 1 of each subsequent year provided he or she is
then a non-employee director and, provided further, that on such date he or she
has served on the Board for at least six months. First Options and each
Subsequent Option will have a term of ten years. The shares subject to the First
Option and each subsequent option vest in their entirety and becomes exercisable
on the first anniversary of the grant date, provided

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that the optionee continues to serve as a director on such dates. The exercise
price of shares subject to the First Option and each Subsequent Option shall be
100% of the fair market value per share of the common stock on the date of the
grant of the option.

From October 1996 to December 1998, the Company purported to grant
incentive stock options covering 1,047,679 shares of the Company's common stock
to employees, which grants exceeded the Incentive Plan limit of 833,333 shares.
Of these 1,047,679 shares, 837,401 shares are still outstanding. Because these
grants exceed the plan's limit, they do not qualify as incentive stock options.
The Company is notifying all affected optionholders that the options they hold
are not incentive stock options, but nonqualified stock options. We have
adopted, subject to shareholder approval, the 1999 Stock Option Plan pursuant to
which we may re-grant to affected optionholders incentive stock options. We will
seek liability waivers from affected optionholders in exchange for re-grants. At
this time the Company is unable to determine what liability, if any, the Company
will have to the optionholders in the event that the Company does not obtain
waivers from all affected optionholders.

1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock
Purchase Plan (the Purchase Plan) was adopted by the Board of Directors on
November 18, 1996 and approved by the stockholders on January 16, 1997. The
maximum number of shares of common stock available for sale is 444,444.
Currently the plan has not been implemented. The Purchase Plan, which is
intended to qualify under Section 423 of the Code, permits eligible employees of
the Company to purchase shares of common stock through payroll deductions of up
to ten percent of their compensation for all purchase periods ending within any
calendar year.

Individuals who are eligible employees on the start day of any offering
period may enter the Purchase Plan on that start date. Individuals who become
eligible employees after the start date of the offering period may join the
Purchase Plan on any subsequent quarterly entry date within that period.
Employees are eligible to participate if they are customarily employed by the
Company or any designated subsidiary for at least 20 hours per week and for more
than five months in any calendar year.

The price of common stock purchased under the Purchase Plan will be 85% of
the lower of the fair market value of the common stock on the first or last day
of each six month purchase period. Employees may end their participation in the
Purchase Plan at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with the Company. Rights granted under the Purchase Plan are not
transferable by a participant other than by will, the laws of descent and
distribution, or as otherwise provided under the plan.

The Purchase Plan will be administered by the Board of Directors or by a
committee appointed by the Board. The Board may amend or modify the Purchase
Plan at any time. The Purchase Plan will terminate 10 years from the date of its
adoption.

1998 Stock Option Plan. The Company's 1998 Stock Option Plan (the 1998
Option Plan) was adopted by the Board of Directors in December 1998. The Plan
provides that an aggregate of 1,500,000 shares of the Company's common stock is
available to be granted subject to options to key employees of the Company (and
its parent or subsidiary corporations, if any). If any stock option expires or
terminates for any reason without having been exercised in full, new stock
options may be granted covering the shares of the Company's common stock
originally set aside for the unexercised portion of such expired or terminated
stock option. Under the 1998 Option Plan, eligible key employees of the

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Company may receive incentive stock options within the meaning of Section 422 of
the Code or nonstatutory stock options. No eligible employee shall receive stock
options with respect to more than 833,333 shares of the Company's common stock
during any one calendar year. Incentive stock options granted under the 1998
Option Plan must have an exercise price that is no less than the fair market
value of the Company's common stock as of the time the option is granted and
generally may not be exercised more than ten years after the date of grant. With
respect to any optionee who beneficially owns more than 10% of the total
combined voting power of all classes of outstanding shares of capital stock of
the Company, any incentive stock option must have an exercise price that is no
less than 110% of the fair market value of the Company's common stock as of the
time the option is granted and may not be exercised more than five years after
the date of grant. To the extent that the aggregate fair market value of stock
exercisable by an optionee for the first time in any one calendar year under the
1998 Option Plan and all other stock plans of the Company exceeds $100,000,
options for such shares shall not be considered incentive stock options but
instead shall be considered nonstatutory stock options. Nonstatutory stock
options granted under the 1998 Option Plan must have an exercise price that is
no less than 50% of the fair market value of the Company's common stock as of
the time the option is granted and may not be exercised more than 10 years after
the date they are granted. Options granted under the 1998 Option Plan are
nontransferable, other than by will or the laws of descent and distribution.

The 1998 Option Plan provides that, unless otherwise provided in the stock
option agreement, upon any merger, consolidation, or sale or transfer of all or
any part of the Company's business or assets, all rights of the optionee with
respect to the unexercised portion of any option shall become immediately vested
and may be exercised immediately, except to the extent that any agreement or
undertaking of any party to any such merger, consolidation, or sale or transfer
of assets, makes specific provisions for the assumption of the obligations of
the Company with respect to the 1998 Option Plan. In addition, unless otherwise
provided in the stock option agreement for any given option, upon any
liquidation or dissolution of the Company, all rights of the optionee with
respect to the unexercised portion of any option will terminate and all options
will be canceled at the time of any such liquidation or dissolution, except to
the extent that any plan pursuant to which such liquidation or dissolution is
effected, makes specific provisions with respect to the 1998 Option Plan. The
holder of any option granted under the 1998 Option Plan has the right
immediately prior to the effective date of such merger, consolidation, sale or
transfer of assets, liquidation or dissolution to exercise such option without
regard to any vesting provision of such option. In no event may any incentive
stock options be exercised later than the date preceding the tenth anniversary
date of the grant thereof.

The 1998 Option Plan will be administered by the Board of Directors or by a
committee of the Board of Directors acting as the administrator. The
administrator shall select the eligible key employees who are to be granted
options, determine the number of shares to be subject to options to be granted
to each optionee and designate such options as incentive stock options or
nonstatutory stock options. The Board of Directors may at any time amend or
modify the 1998 Option Plan, except that the Board of Directors may not, without
approval of the stockholders of the Company, (i) increase the number of shares
issued under the 1998 Option Plan, (ii) modify the requirements as to
eligibility for participation in the 1998 Option Plan or (iii) change the option
price provisions of the 1998 Option Plan so as to have a material adverse effect
on the Company other than to conform with any applicable provisions of the Code
or regulations or rulings thereunder.

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Unless terminated earlier, the 1998 Option Plan terminates ten years from the
date it is adopted by the Board of Directors.

1999 Stock Option Plan. The Company's 1999 Stock Option Plan was adopted by
the Board of Directors on January 14, 1999. The plan provides that an aggregate
of 1,800,000 shares of the Company's common stock are available to be granted
subject to options to key employees of the Company; provided that after March
31, 1999, not more than 1,000,000 options may be granted under the plan. The
1999 Stock Option Plan is identical in all other material respects to the 1998
Stock Option Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No interlocking relationship exists between the Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past. The Compensation Committee of the Board of Directors currently consists of
Mr. Orton, Mr. Coats and Mr. Fuchs.

EMPLOYMENT AGREEMENTS

On January 1, 1998, the Company entered into a two year severance agreement
with Mr. Michael J. Lowell, the Company's Senior Vice President. Under this
agreement, Mr. Lowell is entitled to a base salary of $190,000 per year and to
all ordinary and customary perquisites afforded to executive employees of the
Company and, if Mr. Lowell's employment is terminated without cause, he is
entitled to a lump sum severance payment equal to two years' salary. In the
event of death or disability, Mr. Lowell's successors, heirs, designees or
assigns are entitled to the amount that would have been due to Mr. Lowell for
the remainder of the term of the agreement.

On July 1, 1998, the Company entered into a three year employment agreement
with Mr. Mark W. Lorimer, the Company's President and Chief Executive Officer.
Under this agreement, Mr. Lorimer is entitled to a base salary of $325,000, a
bonus and all ordinary and customary perquisites afforded to executive employees
of the Company and, if Mr. Lorimer's employment is terminated without cause or
if Mr. Lorimer terminates his employment with good reason, Mr. Lorimer is
entitled to a lump sum payment equal to the aggregate annual base salary, which
annual base salary shall be the highest annual base salary in effect during the
term of his employment, that would have been received by Mr. Lorimer if he had
remained employed by the Company for the greater of (i) the remaining balance of
the three year term or (ii) two years. In the event of a change of control of
the Company prior to January 1, 2000, and while Mr. Lorimer remains employed by
the Company, the term of the agrement shall automatically extend for a period of
three years from the date of the change of control. In addition to the above, in
the event Lorimer's employment is terminated during the six month period prior
to (or the first thirty-six months following a change of control by Mr. Lorimer
for good reason or by the Company other than for cause, disability or death, Mr.
Lorimer is entitled to (i) a lump sum payment equal to twice the highest bonus
paid to Mr. Lorimer in the last three fiscal years plus the amount of the cost
of all benefits for the greater of the remaining balance of the term of two
years. In the event of a change of control while Mr. Lorimer is employed by the
Company or if Lorimer's employment is terminated by the Company without cause or
by Mr. Lorimer for good reason during the six month period prior to a change of
control, certain unvested performance-based options shall become vested and

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exercisable to the extent certain performance targets are met. In the event of
the death or disability of Mr. Lorimer during the term of this employment
agreement, the Company shall provide Mr. Lorimer or his successors, heirs,
designees or assigns, with continued payment of Mr. Lorimer's then current base
salary and all benefits for a period of two years.

On December 17, 1998, the Company entered into a three year employment
agreement with Ms. Ann Marie Delligatta, the Company's Executive Vice President
and Chief Operating Officer. Under this agreement, Ms. Delligatta is entitled to
a base salary of $225,000, a bonus as and all ordinary and customary perquisites
afforded to executive employees of the Company and, if Ms. Delligatta's
employment is terminated without cause or if Ms. Delligatta terminates her
employment for good reason, Ms. Delligatta is entitled to a lump sum payment
equal to the base salary that would have been received by Ms. Delligatta if she
had remained employed by the Company for the remaining balance of the three year
term. Ms. Delligatta's employment with the Company shall terminate automatically
in the event of death or upon 30 days' written notice of termination by the
Company in the event of a disability.

On August 20, 1998, the Company entered into a two year Advisory Agreement
with Mr. Peter R. Ellis, the former Chairman and Chief Executive Officer of the
Company. Under this agreement, Mr. Ellis serves as Special Advisor to the Chief
Executive Officer, and is entitled to participate in all employee welfare
benefit plans for the term of the agreement and car allowance in the amount of
$1,000 dollars per month until April 30, 1999. In consideration for entering the
Advisory Agreement, Mr. Ellis was paid a one time $500,000 lump sum payment and
the Company has agreed to pay Mr. Ellis $5,000 per month beginning on the
thirteenth month anniversary of the date of this agreement. Upon the death or
disability of Mr. Ellis, the Company shall pay to Ellis or his successors,
heirs, designees or assigns, the amount that would have been due and owing to
Ellis for the remainder of the Term.

INDEMNIFICATION AND LIMITATION OF DIRECTOR AND OFFICER LIABILITY

The Company's Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law. Delaware
law provides that a corporation's certificate of incorporation may contain a
provision eliminating or limiting the personal liability of a director for
monetary damages for breach of their fiduciary duties as directors, except for
liability (i) for any breach of their duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.

The Company's Amended and Restated Bylaws provide that the Company shall
indemnify its directors and officers and may indemnify its employees and agents
to the fullest extent permitted by law. The Company believes that
indemnification under its Amended and Restated Bylaws covers at least negligence
and gross negligence on the part of indemnified parties.

The Company has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Amended and Restated Bylaws. These agreements, among other things, indemnify the
Company's directors and officers for certain expenses (including attorneys'
fees), judgments, fines and settlement

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amounts incurred by any such person in any action or proceeding, including any
action by or in the right of the Company, arising out of such person's services
as a director or officer of the Company, any subsidiary of the Company or any
other company or enterprise to which the person provides services at the request
of the Company. The Company believes that these provisions and agreements are
necessary to attract and retain qualified directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.

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CERTAIN TRANSACTIONS

Series A Preferred Stock

On August 23, 1996, in a private placement transaction, the Company issued
1,500,000 shares of Series A Preferred Stock at $10.00 per share convertible
into common stock at the conversion price per share of $9.00. The number of
shares of common stock into which each share of Series A Preferred Stock will
convert is 1.11 shares. The holders of such Series A Preferred Stock are
entitled to certain registration rights with respect to the shares of common
stock issued or issuable upon conversion thereof. See "Description of Capital
Stock--Registration Rights." All shares of Series A Preferred Stock will
automatically convert into shares of common stock upon the closing of the
offering. Investors in this financing consisted of General Electric Capital
Corporation (800,000 shares of Series A Preferred Stock), National Union Fire
Insurance Company of Pittsburgh, PA, an affiliate of AIG (400,000 shares of
Series A Preferred Stock), ContiTrade Services L.L.C. (200,000 shares of Series
A Preferred Stock) and Michael Fuchs (100,000 shares of Series A Preferred
Stock).

From July 9, 1996 through August 13, 1996, Michael Fuchs made loans to the
Company in the aggregate principal amount of $500,000. These loans, along with
accrued interest, converted into Series A Preferred Stock on August 23, 1996 at
$10.00 per share. In September 1996, Mr. Fuchs was appointed to the Company's
Board of Directors.

The holders of Series A Preferred Stock have the right to elect two members
of the Board of Directors. Because General Electric Capital Corporation holds
more than a majority of the shares of Series A Preferred Stock it has the right
to designate on behalf of all holders of Series A Preferred Stock such
directors. To date, General Capital Electric Corporation has designated Michael
Fuchs and Jeffrey Coats to the Board of Directors.

Series B Preferred Stock

On January 30, 1997, in a private placement transaction the Company issued
967,915 shares of Series B Preferred Stock at $9.35 per share convertible into
common stock at the conversion price per share of $10.37. The number of shares
of common stock into which each share of Series B Preferred Stock will convert
is 0.90 Shares. The holders of such Series B Preferred Stock are entitled to
certain registration rights with respect to the shares of common stock issued or
issuable upon conversion thereof. See "Description of Capital
Stock--Registration Rights." All shares of Series B Preferred Stock will
automatically convert into shares of common stock upon the closing of the
offering. Investors in this financing consisted of General Electric Capital
Corporation (534,760 shares of Series B Preferred Stock), National Union Fire
Insurance Company of Pittsburgh, PA, an affiliate of AIG (267,380 shares of
Series B Preferred Stock), ContiTrade Services L.L.C. (133,690 shares of Series
B Preferred Stock) and Michael Fuchs (32,085 shares of Series B Preferred
Stock).

Series C Preferred Stock

On October 21, 1997, April 30, 1998, May 7, 1998, October 30, 1998,
November 10, 1998, December 16, 1998, December 21, 1998 and December 24, 1998,
in private placement transactions, the Company issued a total of 4,968,738
shares of Series C Preferred Stock at $8.80 per share convertible into common
stock at the conversion price per share of $13.20. The number of shares of
common stock into which each share of Series C Preferred Stock will convert is
0.667 shares. The holders of such Series C

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Preferred Stock are entitled to certain registration rights with respect to the
shares of common stock issued or issuable upon conversion thereof. See
"Description of Capital Stock--Registration Rights". All shares of Series C
Preferred Stock will automatically convert into shares of common stock upon the
closing of the offering. Investors in these financings consisted of General
Electric Capital Corporation (681,819 shares of Series C Preferred Stock),
National Union Fire Insurance Company of Pittsburgh, PA, an affiliate of AIG
(227,273 shares of Series C Preferred Stock), Tozer Kimsley and Millbourn
Automotive, Ltd., a unit of Inchcape Motors (568,182 shares of Series C
Preferred Stock), Bilia (568,182 shares of Series C Preferred Stock), National
Broadcasting Company, Inc., an affiliate of General Electric Capital Corporation
(121,009 shares of Series C Preferred Stock), Invision (568,182 shares of Series
C Preferred Stock), Aureus, an affiliate of Invision (1,097,727 shares of Series
C Preferred Stock) and MediaOne, (1,136,364 shares of Series C Preferred Stock).
NBC acquired its shares by providing national spot advertising to the Company.

Other Transactions

From time to time, the Company has advanced funds to Peter R. Ellis, the
former Chairman of the Board and Chief Executive Officer of the Company. As of
December 31, 1998, Mr. Ellis was indebted to the Company in the amount of
$250,000 plus accrued interest at the rate of 8% per year compounded quarterly.
The principal amount of the loan is due and payable on or before March 1, 2003.
The Company has received a pledge of 100,657 of Mr. Ellis' shares of common
stock to secure this loan.

The Company and John M. Markovich, the Company's former Senior Vice
President and Chief Financial Officer, are parties to a Severance and General
Release Agreement dated January 30, 1998 (the Severance Agreement). Pursuant to
the terms of the Severance Agreement, in connection with his resignation from
the Company, the Company paid to Mr. Markovich a severance payment of $75,000,
extended Mr. Markovich's health coverage through July 30, 1998, paid certain
outplacement expenses of $10,000 and granted Mr. Markovich a warrant to purchase
33,333 shares of common stock at $11.25 per share. The warrant granted to Mr.
Markovich expires on January 30, 2003 unless exercised prior thereto.

The Company and Mr. Ellis, the Company's former Chief Executive Officer and
Chairman of the Board are parties to an advisory agreement dated as of August
20, 1998 (the Ellis Advisory Agreement). The Ellis Advisory Agreement has a term
of two years and provides that Mr. Ellis is to receive $500,000 on the date
thereof and commencing on the thirteenth month anniversary of this agreement,
$5,000 per month. Mr. Ellis is entitled to participate in all employee health
plans and receives a car allowance of $1,000 per month until April 30, 1999. Mr.
Ellis' advisory agreement may be terminated by the Company for cause (as defined
in such agreement) or upon 30 days prior written notice without cause. In the
event Mr. Ellis' advisory agreement is terminated without cause by the Company
or due to his death or disability, Mr. Ellis will still be entitled to receive
his base salary and health benefits through the remainder of the term of the of
the agreement. Mr. Ellis has the right to terminate his advisory agreement on 90
days prior written notice to the Company.

In addition, on January 11, 1999, in consideration of the Company
permitting the sale of $1.4 million of common stock of the Company to certain
"accredited investors" as such term is defined under Rule 501 of the Securities
Act, Mr. Ellis transferred to the Company the voting power of 593,175 shares
(the Proxy Shares) of common stock of the

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Company owned by Mr. Ellis for a period that is the earlier of five years from
the date thereof or until such time as Mr. Ellis sells the Proxy Shares to a
person not affiliated with Mr. Ellis.

Pursuant to a Marketing and Application Processing Agreement dated February
1, 1997, among GE Capital, Auto-By-Tel Acceptance Corporation (ABTAC) and the
Company, ABTAC and the Company agreed to refer customers seeking vehicle
financing with favorable credit ratings to GE Capital. In return, GE Capital
agreed to pay ABTAC a marketing fee of $100.00 for each financing consummated by
GE Capital under this agreement. GE Capital is an affiliate of General Electric
Capital Corporation which beneficially owns 1,825,828 shares of common stock. As
of December 31, 1998, ABTAC had referred customers to GE Capital to whom GE
Capital extended financing in an aggregate amount of approximately $307,000 and
received approximately $1,200 in marketing fees since the inception of this
relationship.

Pursuant to a Marketing Agreement dated July 22, 1996, among Auto-By-Tel
Acceptance Corporation (ABTAC), AIG and the Company, the Company, through ABTAC,
authorizes and provides AIG access to its Internet server, for the publication,
display, and exhibition of AIG's direct response automobile insurance sales
materials to the Company's users. In return, ABTAC is paid compensation based on
a flat fee on the basis of the premium collected.

On November 10, 1998, the Company issued to Invision AG, a subsidiary of
Metro Holdings, a warrant to purchase an aggregate of 150,000 shares of common
stock of the Company at an exercise price of $13.20 per share. This warrant is
exercisable as of the date thereof and expires on November 10, 2001.

On December 16, 1998 and December 23, 1998, the Company issued to Aureus
Private Equity AG, a subsidiary of Metro Holdings, warrants to purchase 169,800
and 120,000 shares, respectively, of common stock of the Company at an exercise
price of $13.20 per share. Each of these warrants are exercisable as of the date
thereof and expires on December 16, 2001 and December 23, 2001, respectively.

On December 21, 1998, the Company issued to MediaOne Interactive Services,
Inc. a warrant to purchase an aggregate of 300,000 shares of common stock of the
Company at an exercise price of $13.20 per share. This warrant is exercisable as
of the date thereof and expires on December 21, 2001.

All future transactions between the Company and interested directors and
stockholders, if any, will be approved by the disinterested directors or
stockholders, as appropriate in accordance with Delaware law and the Company's
Certificate of Incorporation and Bylaws.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the common stock as of December 31, 1998, as adjusted to
reflect the conversion of the Preferred Stock into common stock concurrently
with the offering and sale of common stock offered hereby for (i) each person or
entity who is known by the Company to beneficially own five percent or more of
the outstanding common stock, (ii) each of the Company's directors, (iii) each
of the Named Officers, (iv) each stockholder who is selling shares of common
stock in this offering, and (v) all directors and executive officers of the
Company as a group. As of December 31, 1998, there were 14,358,745 shares of
common stock outstanding.

SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) NUMBER OF AFTER OFFERING(1)
--------------------- SHARES BEING -------------------
NUMBER PERCENT OFFERED(2) NUMBER PERCENT
---------- -------- ------------ --------- -------

Peter R. Ellis(3)............... 4,020,667 28.0% 500,000 3,520,667 19.7%
c/o Autobytel.com
18872 MacArthur Boulevard
Irvine, California
92612-1400
John C. Bedrosian(4)............ 3,569,445 24.9% 500,000 3,069,445 17.2%
c/o Autobytel.com
18872 MacArthur Boulevard
Irvine, California
92612-1400
General Electric Capital
Corporation(5)................ 1,831,903 12.8% 1,831,903 10.3%
260 Long Ridge Road
Stamford, Connecticut 06927
Metro Holdings(6)............... 1,550,406 10.5% 1,550,406 8.5%
Neuhofstrasse 4
CH-6341 Baar
Switzerland
MediaOne Interactive
Services(7)................... 1,057,576 7.2% 1,057,576 5.8%
9000 E. Nichols Avenue
Englewood, Colorado 80112
Robert S. Grimes(8)............. 803,472 5.5% 803,472 4.4%
c/o R.S. Grimes & Co., Inc.
152 West 57th Street
New York, NY 10019
National Union Fire Insurance
Company of Pittsburgh, PA..... 837,157 5.8% 837,157 4.7%
200 Liberty Street
New York, New York 10281
Mark W. Lorimer(9).............. 214,165 1.5% 214,165 1.2%
Michael J. Fuchs(10)............ 146,130 1.0% 146,130 *
Michael J. Lowell(11)........... 106,944 * 106,944 *
Ann M. Delligatta(12)........... 32,637 * 32,637 *
Anne Benvenuto(13).............. 9,721 * 9,721 *
Mark N. Kaplan.................. 1,000 * 1,000 *
Kenneth J. Orton................ -- * -- *
All directors and executive
officers as a group (10
persons)(14).................. 7,166,639 47.8% 6,666,639 36.1%

- ---------------
* Less than 1%

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(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of December 31, 1998
are deemed outstanding. Such shares, however, are not deemed outstanding
for the purposes of computing the percentage ownership of each other
person. Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, each stockholder named in the table has
sole voting and investment power with respect to the shares set forth
opposite such stockholder's name.

(2) Assumes no exercise of the underwriters' over-allotment option.

(3) Includes 46,110 shares held by certain trusts established for family
members of Mr. Ellis as to which Mr. Ellis' spouse maintains sole voting
power. Includes 118,635 shares Mr. Ellis sold on January 11, 1999 and
593,175 shares as to which Mr. Ellis granted voting power to the Company
pursuant to a Voting Proxy dated January 11, 1999. See "Certain
Transactions." If the underwriters' over-allotment option were exercised in
full, the number of shares beneficially owned by Peter Ellis after the
offering would be 3,183,167 and the percentage would be 17.8%.

(4) All shares are held in the John C. Bedrosian and Judith D. Bedrosian
Revocable Trust in which Mr. Bedrosian maintains shared voting powers. If
the underwriters' over-allotment option were exercised in full, the number
of shares beneficially owned by Mr. Bedrosian after the offering would be
2,731,945 and the percentage would be 15.3%.

(5) Includes 888,889 shares held by General Electric Capital Corporation (GE)
following the conversion of the Series A Preferred Stock, 482,393 shares
held by GE following the conversion of the Series B Preferred Stock, and
454,546 shares held by GE following the conversion of the Series C
Preferred Stock. Mr. Coats is a managing director of GE Equity Capital
Group, Inc., an affiliate of General Electric Capital Corporation, and is a
director of the Company. Also includes 6,075 shares issuable upon exercise
of options exercisable within 60 days of December 31, 1998 which were
granted to Mr. Coats, and subsequently assigned to General Electric Capital
Corporation. Mr. Coats disclaims beneficial ownership of such 6,075 shares.

(6) Includes 378,788 shares held by Invision AG, a subsidiary of Metro
Holdings, following the conversion of the Series C Preferred Stock and
731,818 shares held by Aureus, a subsidiary of Metro Holdings, following
the conversion of the Series C Preferred Stock. Also includes 150,000
shares held by Invision AG, issuable upon exercise of warrants and 289,800
shares held by Aureus Private Equity AG, issuable upon exercise of
warrants.

(7) Includes 757,576 shares held by MediaOne following the conversion of the
Series C Preferred Stock and 300,000 shares issuable upon exercise of
warrants.

(8) Includes an aggregate of 5,554 shares held in irrevocable trusts as to
which Mr. Grimes' spouse maintains sole voting power. Includes 247,917
shares issuable upon exercise of options exercisable within 60 days of
December 31, 1998.

(9) Represents 214,165 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998.

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(10) Includes 6,076 shares issuable upon exercise of options exercisable within
60 days of December 31, 1998 and 111,111 shares held by Mr. Fuchs following
the conversion of the Series A Preferred Stock and 28,943 shares following
the conversion of the Series B Preferred Stock.

(11) Represents 106,944 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998.

(12) Represents 32,637 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998.

(13) Represents 9,721 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998.

(14) Includes 623,535 shares issuable upon exercise of options exercisable
within 60 days of December 31, 1998. Peter Ellis resigned as Chief
Executive Officer of the Company in June 1998. If Mr. Ellis' shares are not
included in the number of shares beneficially owned by all directors and
executive officers as a group, the number of shares owned by the directors
and executive officers prior to the offering is 3,145,972 shares or 21.0%
of the shares of common stock outstanding, and after the offering would be
3,145,972 shares or 17.0% of the shares of common stock outstanding.

DESCRIPTION OF CAPITAL STOCK

Upon the closing of the Offering, the outstanding shares of common stock
will consist of approximately 17,858,745 shares, $0.001 par value. As of
December 31, 1998, there were 8,506,455 shares of common stock outstanding held
of record by 38 stockholders.

COMMON STOCK

The Company is authorized to issue a total of 50,000,000 shares of common
stock. Holders of common stock are entitled to one vote per share in all matters
to be voted on by the stockholders. Subject to the preferences of the Preferred
Stock, holders of common stock are entitled to receive ratably such dividends,
if any, as may be declared from time to time by the Board of Directors out of
funds legally available for payment. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, the holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior distribution rights of shares of Preferred Stock
then outstanding, if any. The common stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable, and the shares of common stock to be
issued upon completion of the offering will be fully paid and non-assessable.

PREFERRED STOCK

Pursuant to the Company's Amended and Restated Certificate of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issue up to 11,445,187 shares of Preferred Stock in one
or more series and to fix the designations, powers, preferences, privileges, and
relative participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of the common stock. The Board of
Directors, without stockholder approval, can issue Preferred Stock with voting,
conversion or other rights that could adversely affect the voting power and
other rights of the holders of
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common stock. Preferred Stock could thus be issued quickly with terms calculated
to delay or prevent a change in control of the Company or make removal of
management more difficult. Additionally, the issuance of Preferred Stock may
have the effect of decreasing the market price of the common stock, and may
adversely affect the voting and other rights of the holders of common stock.
Upon the closing of the Offering, no shares of Preferred Stock will be
outstanding and the Company has no plans to issue any of the Preferred Stock.

REGISTRATION RIGHTS

Pursuant to the Amended and Restated Investors' Rights Agreement, dated May
7, 1998, among the Company and the holders (the "Holders") of approximately
14,737,757 shares of common stock and securities convertible into common stock
(collectively, and as converted, the "Registrable Securities"), the Holders are
entitled to certain rights with respect to the registration of such shares under
the Act. If the Company proposes to register any of its securities under the
Act, either for its own account or for the account of other Holders exercising
registration rights, the Holders are entitled to notice of such registration and
are entitled to include shares of Registrable Securities therein. Additionally,
the Holders are also entitled to certain demand registration rights pursuant to
which they may require the Company to file a registration statement under the
Act at the Company's expense with respect to their shares of Registrable
Securities, and the Company is required to use its best efforts to effect such
registration. All of these registration rights are subject to certain conditions
and limitations, among them the right of the underwriters of an offering to
limit the number of shares included in such registration and the right of the
Company not to effect a requested registration within one year of an initial
public offering of the Company's securities, such as the Offering made hereby,
or if such requested registration would have an anticipated aggregate offering
to the public of less than $30 million. The Holders have waived all such rights
in connection with the Offering.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

Anti-Takeover Law

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a publicly-held
Delaware corporation from engaging in a business combination with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner or unless the interested
stockholder acquired at least 85% of the corporation's voting stock (excluding
shares held by certain designated stockholders) in the transaction in which it
became an interested stockholder. For purposes of Section 203, a "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within the previous three years did own, 15% or more of the
corporation's voting stock.

Limitation of Director and Officer Liability

The Company's Amended and Restated Certificate of Incorporation and Bylaws
contain certain provisions relating to the limitation of liability and
indemnification of directors and officers. The Company's Amended and Restated
Certificate of Incorporation provides that directors of the Company may not be
held personally liable to the Company

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or its stockholders for a breach of fiduciary duty, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, (iii) under Section 174 of the
Delaware General Corporation Law, relating to prohibited dividends,
distributions and repurchases or redemptions of stock, (iv) for any transaction
from which the director derives an improper benefit. In addition, the Company's
Amended and Restated Certificate of Incorporation and Bylaws provide that the
Company shall indemnify directors and officers to the fullest extent authorized
by Delaware law.

No Stockholder Action by Written Consent

The Company's Amended and Restated Certificate of Incorporation provides
that the stockholders can take action only at a duly called annual or special
meeting of stockholders. Accordingly, stockholders of the Company will not be
able to take action by written consent in lieu of a meeting. This provision may
have the effect of deterring hostile takeovers or delaying changes in control or
management of the Company.

Staggered Board of Directors

The Company's Amended and Restated Certificate of Incorporation provides
that upon the closing of this offering, the terms of office of the Board of
Directors will be divided into three classes, such that the terms of Class I,
Class II and Class III directors shall expire at the annual meeting of
stockholders to be held in 1999, 2000 and 2001, respectively. The number of
directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of one-third of the directors of the
directors. This provision may have the effect of delaying or preventing changes
in control or change in our management because less than a majority of the Board
of Directors are up for election at each annual meeting.

TRANSFER AGENT AND REGISTRAR

U.S. Stock Transfer Corporation, Glendale, California, has been appointed
as the transfer agent and registrar for the common stock. Its telephone number
for such purposes is (818) 502-1404.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no market for the common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect market prices prevailing from time to time. Upon completion of
the Offering, the Company will have outstanding an aggregate of 17,858,745
shares of common stock, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options or warrants. Of these shares, the
4,500,000 shares sold in the Offering will be freely tradeable without
restriction or further registration under the Act, except that any shares
purchased by "affiliates" of the Company, as that term is defined in Rule 144 of
the Act ("Affiliates"), may generally only be sold in compliance with the
limitations of Rule 144 described below.

SALES OF RESTRICTED SHARES

The remaining 13,358,745 shares of common stock held by existing
stockholders are "restricted securities" under Rule 144 ("Restricted Shares").
The number of shares of

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common stock available for sale in the public market is limited by restrictions
under the Act and lock-up agreements under which the holders of such shares have
agreed not to sell or otherwise dispose of any of their shares for a period of
180 days after the date of this prospectus (the "lock-up period") without the
prior written consent of BT Alex. Brown Incorporated, and the selling
shareholders have agreed to the same lock-up except that they have agreed to a
270-day lock-up. On the date of this prospectus, no shares other than the shares
offered hereby will be eligible for sale. In addition, following the expiration
of the lock-up period, none of the Restricted Shares will become available for
sale in the public market until the expiration of their respective holding
periods (approximately of such shares will have been held for more than
one year at the end of such 180-day period).

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner, except if the prior owner was an
Affiliate) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of: (i) one percent of the number of
shares of common stock then outstanding (which will equal approximately 178,587
shares immediately after the Offering); or (ii) the average weekly trading
volume of the common stock on the Nasdaq National Market during the four
calendar weeks preceding the filing of a notice on Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about the Company. Under Rule 144(k), a person who is not deemed to have been an
Affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except if the prior owner was
an Affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule 144;
therefore, unless otherwise restricted, "144(k) shares" could be sold
immediately upon the completion of this offering.

Upon completion of the Offering, the holders of 14,737,757 shares of common
stock, or their transferees, will be entitled to certain rights with respect to
the registration of such shares under the Act until such time as the holders of
such common stock may sell such shares under the Rule 144 of the Securities Act.
See "Description of Capital Stock -- Registration Rights." Registration of such
shares under the Act would result in such shares becoming freely tradeable
without restriction under the Act (except for shares purchased by Affiliates)
immediately upon the effectiveness of such registration.

OPTIONS AND RESTRICTED STOCK

The Company intends to file a registration statement under the Act covering
shares of common stock reserved for issuance under the 1999 Stock Option Plan,
1998 Stock Option Plan, the Amended and Restated 1996 Stock Incentive Plan, the
1996 Stock Option Plan and the 1996 Employee Stock Purchase Plan. Such
registration statement is expected to be filed and become effective as soon as
practicable after the effective date of the offering. Accordingly, shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to Affiliates, be available for sale in the open market,
unless such shares are subject to vesting restrictions with the Company or the
lock-up agreements described above. A total of 3,723,433 shares have been
reserved for issuance under such plans. As of December 31, 1998, no options have
been granted under the 1999 Stock Option Plan, 1,125,000 options have been
granted under the 1998 Stock Option Plan,

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options to purchase 833,333 shares of common stock have been granted under the
Amended and Restated 1996 Stock Incentive Plan, options to purchase 889,163
shares of common stock have been granted under the 1996 Stock Option Plan and no
options have been granted under the 1996 Employee Stock Purchase Plan. See
"Management -- Stock Plans."

In addition, under Rule 701 of the Act as currently in effect, any
employee, consultant or advisor of the Company who is not an Affiliate who
purchased shares from the Company in connection with a compensatory stock or
option plan or other written agreement is eligible to resell such shares 90 days
after the effective date of the Offering, subject to all provisions of Rule 144
except its minimum holding period.

LOCK-UP AGREEMENTS

All officers, directors, and certain other stockholders of the Company have
agreed not to sell, offer, contract or grant any option to sell, make any short
sale, pledge, transfer, establish an open "put equivalent position" within the
meaning of the Rule 16a-1(h) under the Securities Exchange Act of 1934, as
amended, or otherwise dispose of any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock for a period of
180 days after the date of this prospectus, without the prior written consent of
BT Alex. Brown Incorporated, and the selling stockholders have agreed to the
same lock-up period except for a period of 270 days after the date of this
prospectus. In addition, under the terms of the 1996 Option Plan and the Amended
and Restated 1996 Incentive Plan, holders of options to purchase common stock
are obligated not to sell or transfer any shares of the Company during such
180-day period if so requested by the Company or the underwriters. See
"Underwriting."

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CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS

GENERAL

The following is a general discussion of the principal United States
federal income and estate tax consequences of the ownership and disposition of
common stock by a Non-U.S. Holder, as defined below. As used herein, the term
"Non-U.S. Holder" means a holder that for United States federal income tax
purposes is an individual or entity other than (i) a citizen or individual
resident of the United States, (ii) a corporation or partnership created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership treated as foreign under U.S.
Treasury regulations), (iii) an estate, the income of which is subject to U.S.
federal income taxation regardless of its source, or (iv) a trust if both (A) a
U.S. court is able to exercise primary supervision over the administration of
the trust and (B) one or more U.S. persons have the authority to control all
substantial decisions of the trust.

This discussion does not address all aspects of United States federal
income and estate taxes that may be relevant to Non-U.S. Holders in light of
their personal circumstances (including the fact that in the case of a Non-U.S.
Holder that is a partnership, the U.S. tax consequences of holding and disposing
of shares of common stock may be affected by certain determinations made at the
partner level), or to certain types of Non-U.S. Holders which may be subject to
special treatment under United States federal income tax laws (for example,
insurance companies, tax-exempt organizations, financial institutions, dealers
in securities and holders of securities held as part of a "straddle", "hedge",
or "conversion transaction") and does not address U.S. state or local or foreign
tax consequences. Furthermore, this discussion is based on provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
regulations promulgated thereunder and administrative and judicial
interpretations thereof, all as of the date hereof and all of which are subject
to change, possibly with retroactive effect. The following summary is included
herein for general information. ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO
CONSULT THEIR TAX ADVISERS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND
NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING
OF SHARES OF COMMON STOCK.

An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a nonresident alien) by virtue of being present in
the United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year and one-sixth of
the days present in the second preceding year). Resident aliens are subject to
U.S. federal tax as if they were U.S. citizens.

LIMITATION ON NET OPERATING LOSS CARRYFORWARDS

The Company has net operating loss ("NOL") carryforwards as of September
30, 1998 which may, depending upon the circumstances, be available to reduce
U.S. federal income taxes payable by the Company in the future. However, if the
Company undergoes an "ownership change" within the meaning of Section 382 of the
Code, the Company's utilization of its NOL carryforwards could be subject to
limitation. In general, an ownership change under Section 382 of the Code will
occur if, over a three-year period (or

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over a shorter period if there has been a prior ownership change within the
immediately preceding three-year period), certain stockholders who own directly
or indirectly 5% or more of the capital stock of the corporation (including the
so-called "public group") increase their percentage ownership by more than 50
percentage points in the aggregate. In general, if such an ownership change
occurs, Section 382 of the Code limits the amount of NOLs carried over from
pre-ownership change years that can be used in any post-ownership change year to
an amount equal to the product obtained by multiplying (1) the value of the
Company's capital stock (with certain adjustments) at the time of the ownership
change and (2) an interest rate determined by the Internal Revenue Service for
the month of the ownership change (the "Section 382 Limitation").

The Company believes that it will undergo an ownership change for purposes
of Section 382 of the Code. As a result, the use of the Company's pre-ownership
change NOL carryforwards will be limited annually by the Section 382 Limitation
pursuant to the rules described above.

DIVIDENDS

The Company does not anticipate paying cash dividends on its capital stock
in the foreseeable future. See "Dividend Policy." In the event, however, that
dividends are paid on shares of common stock, dividends paid to a Non-U.S.
Holder of common stock generally will be subject to withholding of United States
federal income tax at a 30% rate, or such lower rate as may be provided by an
income tax treaty between the United States and a foreign country if the
Non-U.S. Holder is treated as a resident of such foreign country within the
meaning of the applicable treaty. Non-U.S. Holders should consult their tax
advisors regarding their entitlement to benefit under a relevant income tax
treaty.

Under currently applicable U.S. Treasury regulations, dividends paid to an
address in a foreign country are presumed (absent actual knowledge to the
contrary) to be paid to a resident of such country for purposes of the
withholding discussed above and for purposes of determining the applicability of
a tax treaty rate. However, under recently finalized U.S. Treasury regulations
(the "Final Regulations"), in the case of dividends paid after December 31,
1999, a Non-U.S. Holder generally would be subject to U.S. backup withholding
tax at a 31% rate under the backup withholding rules described below, rather
than at a 30% rate or a reduced rate under an income tax treaty, unless certain
certification procedures (or, in the case of payments made outside the U.S. with
respect to an offshore account, certain documentary evidence procedures) are
satisfied, directly or through an intermediary. Further, under the Final
Regulations, a Non-U.S. Holder of common stock who wishes to claim the benefit
of an applicable treaty rate and to avoid backup withholding as discussed below,
for dividends paid after December 31, 1999 generally will be required to satisfy
applicable certification and other requirements. In addition, under the Final
Regulations, in the case of common stock held by a foreign partnership, (i) the
certification requirement will generally be applied to the partners of the
partnership and (ii) the partnership will be required to provide certain
information, including a United States taxpayer identification number. The Final
Regulations also provide look-through rules for tiered partnerships.

The Final Regulations also provide special rules for dividend payments made
to foreign intermediaries, U.S. or foreign wholly owned entities that are
disregarded for U.S. federal income tax purposes and entities that are treated
as fiscally transparent in the United States, the applicable income tax treaty
jurisdiction, or both. In addition, recently enacted legislation, effective
August 4, 1997, denies income tax treaty benefits to foreigners

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receiving income derived through a partnership (or otherwise fiscally
transparent entity) in certain circumstances. Prospective investors should
consult with their own tax advisers concerning the effect, if any, of these
Final Regulations and the recent legislation on an investment in the common
stock.

A Non-U.S. Holder of common stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for a refund with the
IRS.

Dividends that are effectively connected with: (i) a Non-U.S. Holder's
conduct of a trade or business in the United States (or, if an income tax treaty
applies, attributable to a permanent establishment), or, in the case of the
individual, a "fixed base" in the United States ("U.S. trade or business
income"), are generally subject to U.S. federal income tax on a net income basis
at regular graduated rates, but are not generally subject to the 30% withholding
tax if the Non-U.S. Holder files the appropriate U.S. Internal Revenue Service
("IRS") form with the payor (currently Form 4224). However, under the Final
Regulations the Non-U.S. Holder will be required to provide a U.S. taxpayer
identification number. Any U.S. trade or business income received by a Non-U.S.
Holder that is a corporation may also, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to U.S. federal income or
withholding tax in respect of gain recognized on a disposition of common stock
unless: (i) the gain is effectively connected with the conduct of a trade or
business (or, if an income tax treaty applies, is attributable to a "permanent
establishment," as defined therein) of the Non-U.S. Holder within the U.S. or of
a partnership, trust or estate in which the Non-U.S. Holder is a partner or
beneficiary within the U.S., (ii) the Non-U.S. Holder is an individual who holds
the common stock as a capital asset within the meaning of Section 1221 of the
Code (generally, property held for investment), is present in the United States
for 183 or more days in the taxable year of the disposition and meets certain
other requirements, (iii) the Non-U.S. Holder is subject to tax pursuant to the
provisions of the U.S. tax law applicable to certain United States expatriates,
or (iv) the Company is or has been a "U.S. real property holding corporation"
for federal income tax purposes at any time during the shorter of the five-year
period preceding such disposition or the period that the Non-U.S. Holder holds
the common stock. Generally, a corporation is a "U.S. real property holding
corporation" if the fair market value of its "U.S. real property interests"
equals or exceeds 50% of the sum of the fair market value of its worldwide real
property interests plus its other assets used or held for use in a trade or
business. The Company believes that it has not been, is not currently, and does
not anticipate becoming, a "U.S. real property holding corporation" for U.S.
federal income tax purposes. The tax with respect to stock in a "U.S. real
property holding corporation" does not apply to a Non-U.S. Holder whose
holdings, direct and indirect, at all times during the applicable period,
constitute 5% or less of the common stock, provided that the common stock was
regularly traded on an established securities market for U.S. federal income tax
purposes. If the Company were, or were to become, a U.S. real property holding
corporation, the Company believes that the common stock would be treated as
"regularly traded on an established securities market." If the common stock were
not so treated, on a sale or disposition of the common stock, the transferee of
such stock would be required to withhold 10% of the proceeds of such
dispositions unless the Company was to provide

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certification that it is not (and has not been during a specific period) a
United States real property holding company or another exemption applied.

If a Non-U.S. Holder who is an individual is subject to tax under clauses
(i) or (iii) above, such individual generally will be taxed on the net gain
derived from a sale of common stock under regular graduated United States
federal income tax rates. If an individual Non-U.S. Holder is subject to tax
under clause (ii) above, such individual generally will be subject to a flat 30%
tax on the gain derived from a sale, which may be offset by certain United
States capital losses (notwithstanding the fact that such individual is not
considered a resident alien of the United States). Thus, individual Non-U.S.
Holders who have spent (or expect to spend) more than a de minimis period of
time in the United States in the taxable year in which they contemplate a sale
of common stock are urged to consult their tax advisers prior to the sale
concerning the U.S. tax consequences of such sale.

If a Non-U.S. Holder that is a foreign corporation is subject to tax under
clause (i) above it generally will be taxed on its net gain under regular
graduated United States federal income tax rates and, in addition, will be
subject to the branch profit tax equal to 30% of its "effectively connected
earnings and profits," within the meaning of the Code for the taxable year, as
adjusted for certain items, unless it qualifies for a lower rate under an
applicable tax treaty.

FEDERAL ESTATE TAX

Common stock owned or treated as owned by an individual who is neither a
United States citizen nor a United States resident (as defined for United States
federal estate tax purposes) at the time of death will be included in the
individual's gross estate for United States federal estate tax purposes unless
an applicable estate tax or other treaty provides otherwise and, therefore, may
be subject to United States federal estate tax.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

Under United States Treasury regulations, the Company must report annually
to the IRS and to each Non-U.S. Holder the amount of dividends paid to such
holder and the tax withheld with respect to such dividends. These information
reporting requirements apply regardless of whether withholding is required.
Copies of the information returns reporting such dividends and withholding may
also be made available to the tax authorities in the country in which the
Non-U.S. Holder is a resident under the provisions of an applicable income tax
treaty or agreement.

Currently, United States backup withholding (which generally is a
withholding tax imposed at the rate of 31% on certain payments to persons that
fail to furnish certain information under the United States information
reporting requirements) generally will not apply (i) to dividends paid to
Non-U.S. Holders that are subject to the 30% withholding discussed above (or
that are not so subject because a tax treaty applies that reduces such 30%
withholding) or (ii) before January 1, 2000, to dividends paid to a Non-U.S.
Holder at an address outside of the United States unless the payor has actual
knowledge that the payee is a U.S. Holder. Backup withholding and information
reporting generally will apply to dividends paid to addresses inside the United
States on shares of common stock to beneficial owners that are not "exempt
recipients" and that fail to provide, in the manner required, certain
identifying information.

The Final Regulations alter the foregoing rules in certain respects for
dividends paid after December 31, 1999. Among other things, such regulations
provide certain
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presumptions under which a Non-U.S. Holder is subject to backup withholding at
the rate of 31% and information reporting unless the Company receives
certification from the holder of Non-U.S. status. Depending on the
circumstances, this certification will need to be provided (i) directly by the
Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder that is treated as a
partnership or other fiscally transparent entity, by the partners, shareholders
or other beneficiaries of such entity, or (iii) by certain qualified financial
institutions or other qualified entities on behalf of the Non-U.S. Holder.

The payment of the proceeds of the disposition of common stock by a holder
to or through the U.S. office of a broker or through a non-U.S. branch of a U.S.
broker generally will be subject to information reporting and backup withholding
at a rate of 31% unless the holder either certifies its status as a Non-U.S.
Holder under penalties of perjury or otherwise establishes an exemption. The
payment of the proceeds of the disposition by a Non-U.S. Holder of common stock
to or through a non-U.S. office of a non-U.S. broker will not be subject to
backup withholding or information reporting unless the non-U.S. broker has
certain U.S. relationships. In the case of the payment of proceeds from the
disposition of common stock effected by a foreign office of a broker that is a
U.S. person or a "U.S. related person", existing regulations require information
reporting on the payment unless (i) the broker receives a statement from the
owner, signed under penalty of perjury, certifying its non-U.S. status or the
broker has documentary evidence in its files as to the Non-U.S. Holder's foreign
status, and the broker has no actual knowledge to the contrary, and certain
other conditions are met or (ii) the beneficial owner otherwise establishes an
exemption. For this purpose, a "U.S. related person" is (i) a "controlled
foreign corporation" for U.S. federal income tax purposes or (ii) a foreign
person 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment (or for
such part of the period that the broker has been in existence) is derived from
activities that are effectively connected with the conduct of a U.S. trade or
business. Further, after December 31, 1999, under the Final Regulations referred
to above, information reporting and backup withholding may apply to payments of
the gross proceeds from the sale or redemption of the common stock effected
through foreign offices of brokers having any of a broader class of connections
with the U.S. unless certain IRS certification requirements are complied with.
Prospective investors should consult with their own tax advisers regarding the
Final Regulations and in particular with respect to whether the use of a
particular broker would subject the investor to these rules.

Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded (or credited against the holder's U.S. federal
income tax liability, if any) provided that the required information is
furnished to the IRS.

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UNDERWRITING

Subject to the terms of the Underwriting agreement (the "Underwriting
Agreement"), the underwriters named below (the Underwriters), through their
representatives BT Alex. Brown Incorporated, Lehman Brothers Inc. and
PaineWebber Incorporated (the Representatives), have severally agreed to
purchase from the Company the following respective number of shares of common
stock at the public offering price less the underwriting discount set forth on
the cover page of this Prospectus.

NUMBER OF
UNDERWRITERS SHARES
------------ ---------

BT Alex. Brown Incorporated.................................
Lehman Brothers Inc.........................................
PaineWebber Incorporated....................................
--------
Total.............................................
========

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of common stock offered hereby if
any of such shares are purchased.

Autobytel.com and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of common
stock to the public at the public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the offering price and other selling
terms may be changed by the Representatives.

Selling Stockholders have granted the Underwriters an option, exercisable
not later than 30 days after the date of this Prospectus, to purchase up to
675,000 additional shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of common stock to be purchased by
it in the above table bears to 4,500,000, and the stockholders will be
obligated, pursuant to the option to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 4,500,000 shares are being offered.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

Each of the officers and directors and certain stockholders of the Company,
holding in the aggregate shares of common stock, have agreed not to
offer, sell, contract to sell or otherwise dispose of (or enter into any
transaction which is designed to, or could be expected to, result in the
disposition of any portion of) any common stock for a period of 180 days after
the date of the Company's public offering, without the prior written consent of
BT Alex. Brown Incorporated, and the selling stockholders have agreed to a
lock-up for a period of 270 days after the date of the Company's public
offering. Such consent may be given at any time without public notice and may be
given for certain stock holders and not others. The Company has entered into a
similar agreement, except

73
75

that it may issue, and grant options or warrants to purchase, shares of common
stock or any securities convertible into, exercisable for or exchangeable for
shares of common stock, pursuant to the exercise of outstanding options and
warrants and the Company's issuance of options and stock granted under the
existing stock and stock purchase plans.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.

In order to facilitate the offering of the common stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the common stock. Specifically, the Underwriters may over-allot
shares of the common stock in connection with this offering, thereby creating a
short position in the common stock for their own account. Additionally, to cover
such over-allotments or to stabilize the market price of the common stock, the
Underwriters may bid for, and purchase, shares of the common stock in the open
market. Finally, the representatives, on behalf of the Underwriters, also may
reclaim selling concessions allowed to an Underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that Underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for the Company by Paul, Hastings, Janofsky & Walker LLP, New York, New
York. Certain legal matters in connection with the common stock offered hereby
will be passed upon for the Underwriters by Latham & Watkins, Menlo Park,
California.

EXPERTS

The consolidated financial statements as of and for the period from
inception (January 31, 1995) to December 31, 1995 and as of and for the years
ended December 31, 1996 and 1997 and as of and for the nine months ended
September 30, 1998 appearing in this prospectus and the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report with respect thereto and are included herein in reliance
upon the authority of said firm as experts in giving said report.

ADDITIONAL INFORMATION

A Registration Statement on Form S-1, including amendments thereto,
relating to the common stock offered hereby has been filed by the Company with
the Securities and Exchange Commission (the Commission), Washington, D.C. This
prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
prospectus as to the contents of any contract or other document referred to are
not necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. For further information with respect to the Company and the common
stock offered hereby, reference is made to such Registration Statement, exhibits
and schedules.

74
76

A copy of the Registration Statement may be inspected by anyone without charge
at the Commission's principal office, 450 Fifth Street, N.W., Washington, D.C.
20549, the New York Regional Office located at 7 World Trade Center, 13th Floor,
New York, NY 10048, and the Chicago Regional Office located at Northwestern
Atrium Center, 500 West Madison Street, Chicago, IL 60661, and copies of all or
any part thereof, including any exhibit thereto, may be obtained from the
Commission upon the payment of certain fees prescribed by the Commission. The
public may obtain information on the operation of the Public Reference room by
calling the SEC at 1-800-SEC-0330. The Commission maintains a World Wide Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the site is http://www.sec.gov.

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77

AUTOBYTEL.COM INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7

F-1
78

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of autobytel.com inc.:

We have audited the accompanying consolidated balance sheets of
autobytel.com inc. (a Delaware corporation) and subsidiaries as of December 31,
1996 and 1997 and September 30, 1998, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the period from
inception (January 31, 1995) to December 31, 1995, the years ended December 31,
1996 and 1997 and the nine months ended September 30, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
autobytel.com inc. and subsidiaries as of December 31, 1996 and 1997 and
September 30, 1998, and the results of their operations and their cash flows for
the period from inception (January 31, 1995) to December 31, 1995, the years
ended December 31, 1996 and 1997 and the nine months ended September 30, 1998 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Los Angeles, California
January 6, 1999

F-2
79

AUTOBYTEL.COM INC.

CONSOLIDATED BALANCE SHEETS

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

ASSETS

DECEMBER 31,
------------------ SEPTEMBER 30,
1996 1997 1998
------- ------- -------------

Current assets:
Cash and cash equivalents, includes restricted amounts of
$985, $248 and $248, respectively....................... $ 9,062 $15,813 $10,488
Accounts receivable, net of allowance for doubtful
accounts of $162, $337 and $416, respectively........... 298 1,493 1,826
Prepaid expenses and other current assets................. 902 795 612
------- ------- -------
Total current assets................................ 10,262 18,101 12,926
Property and equipment, net................................. 1,425 2,317 2,197
Other assets................................................ 611 95 350
------- ------- -------
Total assets........................................ $12,298 $20,513 $15,473
======= ======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Loan payable to stockholder............................... $ -- $ -- $ 776
Accounts payable.......................................... 651 2,223 5,343
Accrued expenses.......................................... 722 1,047 1,012
Deferred revenue.......................................... 2,326 3,700 4,413
Customer deposits......................................... 554 127 367
Other current liabilities................................. 32 66 59
------- ------- -------
Total current liabilities........................... 4,285 7,163 11,970
Deferred rent............................................... 17 91 119
------- ------- -------
Total liabilities................................... 4,302 7,254 12,089
------- ------- -------
Commitments and contingencies

Stockholders' equity:
Convertible preferred stock, Series A, $0.001 par value;
aggregate liquidation preference of $15,000 at September
30, 1998; 1,500,000 shares authorized; 1,500,000 shares
issued and outstanding at December 31, 1996 and 1997 and
September 30, 1998...................................... 2 2 2
Convertible preferred stock, Series B, $0.001 par value;
aggregate liquidation preference of $9,050 at September
30, 1998; 967,915 shares authorized; none issued and
outstanding at December 31, 1996; 967,915 shares issued
and outstanding at December 31, 1997 and September 30,
1998.................................................... -- 1 1
Convertible preferred stock, Series C, $0.001 par value;
aggregate liquidation preference of $18,500 at September
30, 1998; 3,977,272 shares authorized; none issued and
outstanding at December 31, 1996; 1,477,274 shares
issued and outstanding at December 31, 1997; 2,102,232
shares issued and outstanding at September 30, 1998..... -- 1 2
Common stock, $0.001 par value; 50,000,000 shares
authorized; 8,284,815 shares issued and outstanding at
December 31, 1996; 8,324,443 shares issued and
outstanding December 31, 1997; 8,490,192 shares issued
and outstanding at September 30, 1998................... 8 8 8
Additional paid-in capital................................ 15,077 37,123 42,783
Deferred compensation..................................... (26) (1) --
Cumulative translation adjustment......................... -- -- (25)
Accumulated deficit....................................... (7,065) (23,875) (39,387)
------- ------- -------
Total stockholders' equity.......................... 7,996 13,259 3,384
------- ------- -------
Total liabilities and stockholders' equity.......... $12,298 $20,513 $15,473
======= ======= =======

The accompanying notes are an integral part of these consolidated statements.
F-3
80

AUTOBYTEL.COM INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

INCEPTION YEARS ENDED NINE MONTHS ENDED
(JANUARY 31, 1995) DECEMBER 31, SEPTEMBER 30,
TO ------------------------ -------------------------
DECEMBER 31, 1995 1996 1997 1997 1998
------------------ ---------- ----------- ----------- -----------
(UNAUDITED)

Revenues................... $ 274 $ 5,025 $ 15,338 $ 10,770 $ 16,499
---------- ---------- ----------- ----------- -----------
Operating expenses:
Sales and marketing...... 930 7,790 21,454 15,794 22,249
Product and technology
development............ 99 1,753 5,448 3,993 6,216
General and
administrative......... 275 1,641 5,851 4,118 4,016
---------- ---------- ----------- ----------- -----------
Total operating
expenses............. 1,304 11,184 32,753 23,905 32,481
---------- ---------- ----------- ----------- -----------
Loss from operations..... (1,030) (6,159) (17,415) (13,135) (15,982)
Other income, net.......... -- 124 620 426 501
---------- ---------- ----------- ----------- -----------
Loss before provision for
income taxes........... (1,030) (6,035) (16,795) (12,709) (15,481)
Provision for income
taxes.................... -- -- 15 15 31
---------- ---------- ----------- ----------- -----------
Net loss................. $ (1,030) $ (6,035) $ (16,810) $ (12,724) $ (15,512)
========== ========== =========== =========== ===========
Basic net loss per share... $ (0.12) $ (0.73) $ (2.03) $ (1.54) $ (1.85)
========== ========== =========== =========== ===========
Shares used in computing
basic net loss per
share.................... 8,250,000 8,252,325 8,291,142 8,282,521 8,395,797
========== ========== =========== =========== ===========
Pro forma basic net loss
per share................ $ (0.12) $ (0.68) $ (1.53) $ (1.19) $ (1.22)
========== ========== =========== =========== ===========
Shares used in computing
pro forma basic net loss
per share................ 8,250,000 8,848,864 10,966,633 10,729,569 12,752,920
========== ========== =========== =========== ===========

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

F-4
81

AUTOBYTEL.COM INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

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

CONVERTIBLE MEMBERS'
PREFERRED STOCK COMMON STOCK INTEREST/
------------------ ------------------ ADDITIONAL DEFERRED CUMULATIVE ACCUM-
NUMBER NUMBER PAID-IN COMPEN- TRANSLATION ULATED
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL SATION ADJUSTMENT DEFICIT TOTAL
--------- ------ --------- ------ ---------- -------- ----------- -------- --------

Balance, Inception (January
31, 1995)................. -- $ -- -- $ -- $ -- $ -- $ -- $ -- $ --
Sale of members' interest
in Auto-By-Tel, LLC..... -- -- -- -- 40 -- -- -- 40
Net loss.................. -- -- -- -- -- -- -- (1,030) (1,030)
--------- ---- --------- ---- ------- ---- ---- -------- --------
Balance, December 31,
1995...................... -- -- -- -- 40 -- -- (1,030) (990)
Sale of members' interest
in ABT Acceptance
Company, LLC............ -- -- -- -- 50 -- -- -- 50
Issuance of common stock
in exchange for members'
interest................ -- -- 8,250,000 8 (8) -- -- -- --
Issuance of common stock
options with an exercise
price of $0.90 per
share................... -- -- -- -- 87 (87) -- -- --
Issuance of Series A
convertible preferred
stock at $10.00 per
share................... 1,450,000 2 -- -- 14,363 -- -- -- 14,365
Issuance of Series A
convertible preferred
stock at $10.00 per
share on conversion of
debt.................... 50,000 -- -- -- 500 -- -- -- 500
Issuance of common stock
in exchange for
services................ -- -- 6,667 -- 20 -- -- -- 20
Issuance of common stock
upon exercise of stock
options................. -- -- 28,148 -- 25 -- -- -- 25
Amortization of deferred
compensation............ -- -- -- -- -- 61 -- -- 61
Net loss.................. -- -- -- -- -- -- -- (6,035) (6,035)
--------- ---- --------- ---- ------- ---- ---- -------- --------
Balance, December 31,
1996...................... 1,500,000 2 8,284,815 8 15,077 (26) -- (7,065) 7,996
Issuance of Series B
convertible preferred
stock at $9.35 per
share................... 967,915 1 -- -- 9,028 -- -- -- 9,029
Issuance of Series C
convertible preferred
stock at $8.80 per
share................... 1,477,274 1 -- -- 12,987 -- -- -- 12,988
Issuance of common stock
upon exercise of stock
options................. -- -- 39,628 -- 31 -- -- -- 31
Amortization of deferred
compensation............ -- -- -- -- -- 25 -- -- 25
Net loss.................. -- -- -- -- -- -- -- (16,810) (16,810)
--------- ---- --------- ---- ------- ---- ---- -------- --------
Balance, December 31,
1997...................... 3,945,189 4 8,324,443 8 37,123 (1) -- (23,875) 13,259
Issuance of Series C
convertible preferred
stock at $8.80 per
share................... 568,182 1 -- -- 5,008 -- -- -- 5,009
Issuance of Series C
convertible preferred
stock at $8.80 per share
in exchange for
advertising............. 56,776 -- -- -- 500 -- -- -- 500
Issuance of common stock
upon exercise of stock
options................. -- -- 165,749 -- 152 -- -- -- 152
Amortization of deferred
compensation............ -- -- -- -- -- 1 -- -- 1
Foreign currency
translation
adjustment.............. -- -- -- -- -- -- (25) -- (25)
Net loss.................. -- -- -- -- -- -- -- (15,512) (15,512)
--------- ---- --------- ---- ------- ---- ---- -------- --------
Balance, September 30,
1998...................... 4,570,147 $ 5 8,490,192 $ 8 $42,783 $ -- $(25) $(39,387) $ 3,384
========= ==== ========= ==== ======= ==== ==== ======== ========

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

F-5
82

AUTOBYTEL.COM INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

INCEPTION
(JANUARY 31, 1995) YEARS ENDED NINE MONTHS ENDED
TO DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------ ----------------------
1995 1996 1997 1997 1998
------------------ ------- -------- ----------- --------
(UNAUDITED)

Cash flows from operating activities:
Net loss............................................ $(1,030) $(6,035) $(16,810) $(12,724) $(15,512)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................... 25 178 860 619 900
Provision for bad debt.......................... 20 145 175 348 188
Amortization of deferred compensation........... -- 61 25 24 1
Issuance of common stock in exchange for
services...................................... -- 20 -- -- --
Issuance of Series C convertible preferred stock
in exchange for advertising................... -- -- -- -- 500
Changes in assets and liabilities:
Accounts receivable........................... (34) (429) (1,370) (1,589) (521)
Prepaid expenses and other current assets..... (114) (788) 107 311 183
Other assets.................................. (7) (604) 516 502 (255)
Accounts payable.............................. 87 564 1,572 1,307 3,120
Accrued expenses.............................. -- 722 325 (45) (35)
Deferred revenue.............................. 356 1,970 1,374 930 713
Customer deposits............................. -- 554 (427) 172 240
Other current liabilities..................... 16 16 34 138 (7)
Deferred rent................................. -- 17 74 63 28
------- ------- -------- -------- --------
Net cash used in operating activities....... (681) (3,609) (13,545) (9,944) (10,457)
------- ------- -------- -------- --------
Cash flows from investing activities:
Acquisition of Internet Development Corporation..... -- -- (100) -- --
Purchases of property and equipment................. (127) (1,501) (1,652) (1,550) (780)
------- ------- -------- -------- --------
Net cash used in investing activities....... (127) (1,501) (1,752) (1,550) (780)
------- ------- -------- -------- --------
Cash flows from financing activities:
Proceeds from sale of common stock.................. -- 25 31 27 152
Proceeds from sale of members' interest in
Auto-By-Tel, LLC.................................. 40 -- -- -- --
Proceeds from sale of members' interest in
ABT Acceptance Company, LLC....................... -- 50 -- -- --
Net proceeds from issuance of Series A convertible
preferred stock................................... -- 14,365 -- -- --
Net proceeds from issuance of Series B convertible
preferred stock................................... -- -- 9,029 9,029 --
Net proceeds from issuance of Series C convertible
preferred stock................................... -- -- 12,988 -- 5,009
Proceeds from issuance of notes payable............. 816 765 -- -- 776
Repayments of notes payable......................... -- (1,081) -- -- --
------- ------- -------- -------- --------
Net cash provided by financing activities... 856 14,124 22,048 9,056 5,937
------- ------- -------- -------- --------
Effect of exchange rates on cash...................... -- -- -- -- (25)
------- ------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents......................................... 48 9,014 6,751 (2,438) (5,325)
Cash and cash equivalents, at beginning of period..... -- 48 9,062 9,062 15,813
------- ------- -------- -------- --------
Cash and cash equivalents, at end of period........... $ 48 $ 9,062 $ 15,813 $ 6,624 $ 10,488
======= ======= ======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes........ $ 2 $ 4 $ 15 $ 15 $ 31
======= ======= ======== ======== ========
Cash paid during the period for interest............ $ -- $ 24 $ -- $ -- $ 1
======= ======= ======== ======== ========

Supplemental disclosure of non-cash financing activities:

* In May 1996, 8,250,000 shares of common stock were issued to founding
stockholders in exchange for members' interests.

* In August 1996, 50,000 shares of Series A convertible preferred stock were
issued in exchange for $500 previously advanced to the Company under three
notes payable.

* In September 1996, 6,667 shares of common stock with a fair market value of
$20 were issued for services.

* In April 1998, 56,776 shares of Series C convertible preferred stock with a
fair market value of $8.80 per share convertible into common stock at the
conversion price of $13.20 per share were issued for advertising.

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

F-6
83

AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share data.
Information for the nine months ended
September 30, 1997 is unaudited.)

1. ORGANIZATION AND OPERATIONS OF THE COMPANY

autobytel.com inc. (the Company) is a branded Internet site for new and
pre-owned vehicle information and purchasing services. Through its Web site
(www.autobytel.com), consumers can research pricing, specifications and other
information related to new and pre-owned vehicles and, when consumers indicate
they are ready to buy, can be connected to the Company's network of
participating dealers. The Company also provides other related services such as
financing, leasing, vehicle warranties and insurance. The Company's services are
free to consumers and, to date, the Company has derived substantially all of its
revenues from fees paid by subscribing dealers located in the United States and
Canada.

Auto-By-Tel, LLC (ABT), the Company's predecessor, was organized in January
1995 and commenced operations as a California limited liability company in March
1995. ABT Acceptance Company, LLC (ABTAC), an affiliated company under common
control, was formed in February 1996. ABT and ABTAC (the LLCs) were reorganized
in May 1996 as a Delaware corporation pursuant to the terms of a Contribution
Agreement and Plan of Organization (the Plan of Organization) entered into by
all of the members of the LLCs (See Note 6). As the LLCs were under common
control, the reorganization was accounted for in a manner similar to a
pooling-of-interests, whereby the assets and liabilities of ABT and ABTAC were
transferred to the Company at their historical cost.

Since inception, the Company has invested the majority of its efforts in
marketing the Company's brand name and developing infrastructure to support
anticipated future operating growth. As a result, the Company has experienced
significant operating losses and had an accumulated deficit of $39,387 at
September 30, 1998. To date, such losses have been financed primarily through
private placements of preferred stock (See Notes 6 and 10).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company, its predecessors (See Note 1) and its wholly-owned subsidiaries:
Autobytel Services Corporation, Autobytel Acceptance Corporation, Autobytel
Insurance Services, Inc., Autobytel.ca Inc., Kre8.net, Inc., Auto-By-Tel
International LLC, Auto by Tel UK Limited and AutoVisions Communications, Inc.
All intercompany transactions and balances have been eliminated.

Unaudited Information

The accompanying financial information for the nine months ended September
30, 1997 is unaudited and has been prepared on substantially the same basis as
the audited consolidated financial statements. In the opinion of management, the
unaudited information contains all adjustments (consisting of normal recurring
adjustments) necessary to

F-7
84
AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

present fairly the financial position and the results of operations as of such
date and for such period in accordance with generally accepted accounting
principles.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For the purposes of the consolidated balance sheets and the consolidated
statements of cash flows, the Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of accounts receivable. To date,
accounts receivable have primarily been derived from marketing fees billed to
subscribing dealers located in the United States and Canada. The Company
generally requires no collateral to support customer receivables. The Company
maintains reserves for potential credit losses. Historically, such losses have
been minor and within management's expectations. As of December 31, 1996 and
1997 and September 30, 1998, no subscribing dealer accounted for greater than
10% of accounts receivable.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the respective
assets, generally three years. Amortization of leasehold improvements is
provided using the straight-line method over the lesser of the remaining lease
term or the estimated useful lives of the improvements.

Stock-Based Compensation

In 1996, the Company adopted Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." The Company has elected to continue accounting for
stock-based compensation issued to employees using Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly,
pro forma disclosures required under SFAS No. 123 have been presented (See Note
7).

Revenue Recognition

Substantially all revenues to date consist of fees paid by subscribing
dealers. These fees are comprised of an initial fee, a monthly fee and, through
fiscal 1997, an annual fee. In January 1998, the Company started to eliminate
annual fees and increase monthly fees to subscribing dealers. The initial fee
and annual fee are recognized ratably over the

F-8
85
AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

service period of 12 months. The monthly fee is recognized in the period
services are provided. Deferred revenue is comprised of unamortized fees.

Risks due to Concentration of Significant Customers and Export Sales

For all periods presented in the accompanying consolidated statements of
operations, no subscribing dealer accounted for greater than 10% of revenues.

The Company conducts its business within one industry segment within the
United States, Canada and the United Kingdom. Revenues from customers outside of
the United States were less than 10% of total revenues for all periods presented
in the accompanying consolidated statements of operations.

Sales and Marketing

Sales and marketing expense primarily includes advertising and marketing
expenses paid to purchase request providers and developing the Company's brand
equity, as well as personnel and other costs associated with sales, training and
support of the Company's dealer network. Sales and marketing expense also
includes cost of sales associated with the sale of computers. Sales and
marketing costs are recorded as expenses in the period services are provided.
For the period from inception (January 31, 1995) to December 31, 1995, the years
ended December 31, 1996 and 1997 and the nine months ended September 30, 1997
and 1998, Internet marketing and advertising costs were $216, $1,838, $5,828,
$3,613 and $8,060 and television advertising expenses were $0, $396, $4,048,
$3,521 and $4,204, respectively.

Product and Technology Development

Product and technology development expense primarily includes personnel
costs relating to enhancing the features, content and functionality of the
Company's Web site and its online dealer information platform, as well as
expenses associated with the Company's telecommunications and computer
infrastructure. Product and technology development expenditures are expensed as
incurred.

General and Administrative

General and administrative expense primarily consists of executive,
financial and legal personnel expenses and related costs. General and
administrative expense for the year ended December 31, 1997 includes a
non-recurring $1.1 million charge associated with a proposed and withdrawn
initial public offering in March 1997.

Foreign Currency Translation

The functional currency of the Company's subsidiaries is the local
currency. Accordingly, all assets and liabilities are translated into U.S.
dollars at the current exchange rate as of the applicable balance sheet date.
Revenues and expenses are translated at the average exchange rate prevailing
during the period. Gains and losses resulting from the translation of the
financial statements are reported as a separate component of stockholders'
equity.

F-9
86
AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Computation of Basic Net Loss Per Share and Pro Forma Basic Net Loss Per
Share

Historical net loss per share has been calculated under SFAS No. 128,
"Earnings per Share." SFAS No. 128 requires companies to compute earnings per
share under two different methods (basic and diluted). Basic net loss per share
is calculated by dividing net loss by the weighted average shares of common
stock outstanding during the period. No diluted loss per share information has
been presented in the accompanying consolidated statements of operations since
potential common shares from the conversion of preferred stock, stock options
and warrants are antidilutive. The Company evaluated the requirements of the
Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 98, and
concluded that there are no nominal issuances of common stock or potential
common stock which would be required to be shown as outstanding for all periods
as outlined in SAB No. 98.

Pro forma basic net loss per share has been calculated assuming the
conversion of the outstanding preferred stock into common stock, as if the
shares had been converted on the dates of their issuance.

New Accounting Pronouncements

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and presentation of
comprehensive income. SFAS No. 130, which was adopted by the Company in the
first quarter of 1998, requires companies to report a new measurement of income.
Comprehensive income (loss) is to include foreign currency translation gains and
losses and other unrealized gains and losses that have historically been
excluded from net income (loss) and reflected instead in equity. The only
comprehensive income included in the accompanying stockholders' equity is
foreign currency translation gain of $25 for the nine months ended September 30,
1998. As this amount is not material, comprehensive income (loss) is not
presented in the accompanying consolidated financial statements.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997, with earlier adoption permitted.
Management does not believe that adoption of these standards will have a
material effect on the Company's consolidated financial statements.

In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which is effective
for fiscal years beginning after December 15, 1998. SOP 98-1 provides guidance
on accounting for the costs of computer software developed or obtained for
internal use and defines specific criteria that determine when such costs are
required to be expensed, and when such costs may be capitalized. The Company
expenses software development costs as incurred. Management believes that the
adoption of SOP 98-1 will not have a material effect on the Company's
consolidated financial statements.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities," which is effective for fiscal years beginning after
December 15, 1998. SOP 98-5 provides guidance on the financial reporting of
start-up cost and organization

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

costs and require such costs to be expensed as incurred. Management believes
that the adoption of SOP 98-5 will not have a material effect on the Company's
consolidated financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments. The statement requires that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value, and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. The Company does not have any derivative instruments as of
September 30, 1998. Management believes that the adoption of SFAS No. 133 will
not have a material effect on the Company's consolidated financial statements.

3. BUSINESS ACQUISITION

In May 1997, one of the Company's subsidiaries, Kre8.net, Inc., entered
into an asset purchase agreement with Internet Development Corporation (IDC) to
purchase certain assets and to assume certain liabilities of the business. The
combined entity develops Web sites for automobile and other industries. The
purchase price for the net assets was $100 in cash.

The acquisition was accounted for by the purchase method. Accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed
based on their estimated fair market values whose fair value equaled book value
at the closing date. The excess of purchase price over the estimated fair value
of net assets acquired was $93, and is being amortized using the straight-line
method over a period of three years. The results of operations of the acquired
business are included in the accompanying consolidated statements of operations
and in the Company's accumulated deficit beginning in May 1997. IDC's revenues
and results of operations since the date of acquisition are immaterial.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

DECEMBER 31,
---------------- SEPTEMBER 30,
1996 1997 1998
------ ------- --------------

Computer software and hardware........... $1,125 $ 2,104 $ 2,617
Furniture and equipment.................. 412 892 1,131
Leasehold improvements................... 77 427 455
------ ------- -------
1,614 3,423 4,203
Less--Accumulated depreciation and
amortization........................... (189) (1,106) (2,006)
------ ------- -------
$1,425 $ 2,317 $ 2,197
====== ======= =======

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases its facilities and certain office equipment under
operating leases which expire on various dates through 2001. At September 30,
1998, future minimum lease payments are as follows:

YEARS ENDING DECEMBER 31,
-------------------------

1998 (Three months).................................... $ 148
1999................................................... 619
2000................................................... 649
2001................................................... 501
2002................................................... --
Thereafter............................................. --
------
$1,917
======

Rent expense was $22, $92, $247, and $336 for the period from inception
(January 31, 1995) to December 31, 1995, the years ended December 31, 1996 and
1997 and the nine months ended September 30, 1998, respectively.

Marketing Agreements

In September 1997, the Company entered into a three year Internet marketing
agreement with Excite, Inc. (Excite). The agreement permits the Company to
maintain certain exclusive promotional rights and linkage with Excite, and
provides for certain advertising. As of September 30, 1998, the agreement
requires minimum future payments of $4.3 million. The Company expenses these
amounts as services are provided.

In June 1998, the Company entered into a two year Internet marketing
agreement, through Excite, with the automotive channel of Netscape Communication
Corporation's NetCenter (NetCenter). The agreement permits the Company to
maintain certain exclusive promotional rights and linkage with NetCenter. As of
September 30, 1998, the agreement requires minimum future payments of $1.9
million. The Company expenses these amounts as services are provided.

The Company also has multi-year agreements with other automotive
information providers that make available to consumers vehicle research data
over the Internet. Such agreements are generally for a term of one to three
years and require that the Company pay fees to these companies based on the
volume of referrals received by the Company from these services. As of September
30, 1998, the minimum future commitments under these agreements aggregate to
$1.2 million. The Company expenses these amounts as services are provided.

Litigation

In the normal course of business, the Company is involved in various legal
proceedings. Based upon the information presently available, including
discussion with outside legal counsel, management believes that the ultimate
resolution of any such

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AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

proceedings will not have a material adverse effect on the Company's financial
position, liquidity or results of operations.

6. STOCKHOLDERS' EQUITY

Series A Convertible Preferred Stock

In August 1996, the Board of Directors of the Company authorized 1,500,000
shares of Series A convertible preferred stock (Series A Preferred), and the
Company completed the sale of 1,500,000 shares of Series A Preferred at $10.00
per share through a private placement offering. Of the total shares sold, 50,000
shares were issued to an individual in exchange for $500 previously advanced to
the Company under three notes payable. In addition, $1,081 of the proceeds were
used to repay notes due to the Company's former Chairman and co-founder.

The Series A Preferred will be automatically converted into 1,666,667
shares of common stock at the conversion ratio of approximately 1:1.11 upon the
earliest of (i) the closing of an underwritten public offering of the Company's
common stock with a minimum per share price of $13.50 per share, and minimum
aggregate offering price of $30 million; (ii) the consent of two-thirds of the
holders of preferred stock; or (iii) when fewer than 300,000 shares of Series A
Preferred remain outstanding. The Series A Preferred is also convertible into
1,666,667 shares of common stock at the option of the holder. The Company has
reserved 1,666,667 shares of common stock to permit the conversion of the Series
A Preferred.

Holders of Series A Preferred are entitled to one vote for each share of
common stock into which such shares of Series A Preferred may be converted
except with respect to election of directors, whereby the holders, voting
separately as a class, are entitled to elect two directors. Each share of Series
A Preferred entitles the holder to receive non-cumulative dividends, if and when
declared by the Board of Directors, prior to any dividend paid on Series B
Preferred or the common stock. Dividends, if any, on Series A Preferred shall be
declared at an annual rate of $0.80 per share. As of September 30, 1998, no
dividends have been declared.

In the event of liquidation, the Series A Preferred has preference over
Series B Preferred and the common stock in the amount of $10.00 per share, plus
declared but unpaid dividends.

Series B Convertible Preferred Stock

In January 1997, the Board of Directors of the Company authorized 967,915
shares of Series B convertible preferred stock (Series B Preferred), and the
Company completed the sale of 967,915 shares of Series B Preferred at $9.35 per
share through a private placement offering.

The Series B Preferred will be automatically converted into 873,131 shares
of common stock at the conversion ratio of approximately 1:0.90 upon the
earliest of (i) the closing of an underwritten public offering of the Company's
common stock with a minimum per share price of $13.50 per share, and minimum
aggregate offering price of $30 million; (ii) the consent of two-thirds of the
holders of preferred stock; or (iii) when fewer than 200,000 shares of Series B
Preferred remain outstanding. The Series B

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AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Preferred is also convertible into 873,131 shares of common stock at the option
of the holder. The Company has reserved 873,131 shares of common stock to permit
the conversion of the Series B Preferred.

Holders of Series B Preferred are entitled to one vote for each share of
common stock into which such shares of Series B Preferred may be converted. Each
share of Series B Preferred entitles the holder to receive noncumulative
dividends, if and when declared by the Board of Directors, prior to any dividend
paid on the common stock. Dividends, if any, on Series B Preferred shall be
declared at an annual rate of $0.80 per share. As of September 30, 1998, no
dividends have been declared.

In the event of liquidation, the Series B Preferred has preference over the
common stock in the amount of $9.35 per share, plus declared but unpaid
dividends.

Series C Convertible Preferred Stock

In October 1997, the Board of Directors of the Company authorized 2,840,909
shares of Series C convertible preferred stock (Series C Preferred), and the
Company completed the sale of 1,477,274 shares of Series C Preferred at $8.80
per share through a private placement offering. In February 1998, the Board of
Directors of the Company extended the offering and authorized an additional
1,136,363 shares of Series C Preferred.

In April 1998, the Company issued 56,776 shares of its Series C Preferred
in payment of television advertising with an estimated fair market value of
$500. The majority of the advertising aired and was expensed in the three months
ended March 31, 1998.

In May 1998, the Company sold 568,182 shares of the Series C Preferred at
$8.80 per share through a private placement offering.

The Series C Preferred will be automatically converted into 1,401,488
shares of common stock at the conversion ratio of approximately 1:0.67 upon the
earliest of (i) the closing of an underwritten public offering of the Company's
common stock with a minimum per share price of $13.50 per share, and minimum
aggregate offering price of $30 million; (ii) the consent of two-thirds of the
holders of preferred stock; or (iii) when fewer than 250,000 shares of Series C
Preferred remain outstanding. The Series C Preferred is also convertible into
1,401,488 shares of common stock at the option of the holder. The Company has
reserved 1,401,488 shares of common stock to permit the conversion of the Series
C Preferred.

Holders of Series C Preferred are entitled to one vote for each share of
common stock into which such shares of Series C Preferred may be converted. Each
share of Series C Preferred entitles the holder to receive non-cumulative
dividends, if and when declared by the Board of Directors, prior to any dividend
paid on Series A and Series B Preferred and the common stock. Dividends, if any,
on Series C Preferred shall be declared at an annual rate of $0.80 per share. As
of September 30, 1998, no dividends have been declared.

In the event of liquidation, the Series C Preferred has preference over
Series A and Series B Preferred and the common stock in the amount of $8.80 per
share, plus declared but unpaid dividends.

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AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of September 30, 1998, 5,000,000 shares of preferred stock were
undesignated. In December 1998, the Board of Directors approved the designation
of 3,000,000 additional shares of Series C Preferred.

Common Stock

Under the terms of the Plan of Organization, the interests of the members
of the LLCs were transferred to autobytel.com inc. in a tax-free transaction. In
consideration for their respective ownership interests, the members of ABT and
ABTAC received 8,250,000 shares of common stock of the Company.

7. STOCK OPTION PLANS

1996 Stock Option Plan

The Company's 1996 Stock Option Plan (the Option Plan) was approved by the
Board of Directors in May 1996. The Option Plan was terminated by a resolution
of the Board of Directors in October 1996, at which time 870,555 options had
been issued. The Option Plan provided for the granting to employees and
directors of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the Code), and for the granting to
employees, consultants and directors of nonstatutory stock options. The Company
reserved 1,194,444 shares of common stock for exercise of stock options under
the Option Plan. The exercise price of incentive stock options granted under the
Option Plan could not be lower than the fair market value of the common stock,
and the exercise price of nonstatutory stock options could not be less than 85%
of the fair market value of the common stock, as determined by the Board of
Directors, on the date of grant. With respect to any participants who, at the
time of grant, owned stock that possessed more than 10% of the voting power of
all classes of stock of the Company, the exercise price of any stock option
granted to such person was to be at least 110% of the fair market value on the
grant date, and the maximum term of such option was five years. The term of all
other options granted under the Option Plan did not exceed 10 years. Stock
options granted under the Option Plan vest according to vesting schedules
determined by the Board of Directors. As of September 30, 1998, options to
purchase an aggregate of 221,388 shares of common stock at an exercise price
ranging from $0.84 to $0.90 per share were outstanding under the Option Plan.

1996 Stock Incentive Plan

The Company's 1996 Stock Incentive Plan (the Incentive Plan) was approved
by the Board of Directors in October 1996, and was amended in November 1996. The
Incentive Plan provides for the granting to employees and directors of incentive
stock options within the meaning of Section 422 of the Code, and for the
granting to employees, directors and consultants of nonstatutory stock options
and stock purchase rights (SPRs). The Company has reserved a total of 833,333
shares of common stock for issuance under the Incentive Plan. Shares available
for future grant under the Incentive Plan are increased annually in an amount
equal to 833,333 shares less the number of shares available for issuance under
the Incentive Plan on the last day of the immediately preceding fiscal year. The
increase may not exceed 833,333 in any fiscal year. The exercise price of
incentive stock options granted under the Incentive Plan cannot be lower than
the fair market value of the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

common stock, as determined by the Board of Directors, on the date of grant.
With respect to any participants who, at the time of grant, own stock possessing
more than 10% of the voting power of all classes of stock of the Company, the
exercise price of incentive stock options granted to such person must be at
least 110% of the fair market value on the grant date, and the maximum term of
such options is five years. The term of all other options granted under the
Incentive Plan may be up to 10 years.

Non-employee directors are entitled to participate in the Company's
Incentive Plan. The Incentive Plan provides for an automatic grant of an option
to purchase 13,333 shares of common stock to each non-employee director on the
date on which the Incentive Plan becomes effective or, if later, on the date on
which the person first becomes a non-employee director. In each successive year
the non-employee director shall automatically be granted an option to purchase
3,333 shares on November 1 of each subsequent year provided the non-employee
director has served on the Board for at least six months. Each option shall have
a term of 10 years. Such options vest in their entirety and become exercisable
on the first anniversary of the grant date, provided that the optionee continues
to serve as a director on such dates and the exercise price per share shall be
100% of the fair market value of the Company's common stock as determined by the
Board of Directors on the date of the grant of the option.

From October 1996 to September 1998, the Company approved grants of
incentive stock options in excess of the Incentive Plan limit of 833,333 shares.
Of these grants, certain shares are still outstanding. The Company is in
negotiations with the affected option holders to rectify any adverse impact to
them. The Company has adopted the 1999 Stock Option Plan under which re-grants
of the incentive stock options, if required, can be made (See Note 10).

During the year ended December 31, 1996, the Company granted options under
the aforementioned plans to purchase an aggregate of 1,568,059 shares of common
stock at various exercise prices ranging from $0.90 to $11.25 per share. During
the year ended December 31, 1996, the Company recorded, based upon an
independent appraisal obtained by the Company's Board of Directors, $87 of
deferred compensation expense relating to certain options. This amount was
amortized over the vesting periods of the options. Amortization of deferred
compensation for the years ended December 31, 1996 and 1997 and the nine months
ended September 30, 1998 was $61, $25 and $1, respectively.

During the year ended December 31, 1997, the Company granted options to
various employees to purchase 853,504 shares of common stock at an exercise
price of $13.20 per share.

During the nine months ended September 30, 1998, the Company granted
options to various employees to purchase 445,007 shares of common stock at an
exercise price of $13.20 per share.

1996 Employee Stock Purchase Plan

The Company's 1996 Employee Stock Purchase Plan (the Purchase Plan) was
adopted by the Board of Directors in November 1996. The Purchase Plan, which is
intended to qualify under Section 423 of the Code, permits eligible employees of
the Company to purchase shares of common stock through payroll deductions of up
to ten percent of their compensation, up to a certain maximum amount for all
purchase periods ending within any calendar year. The Company has reserved a
total of 444,444 shares of

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AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

common stock for issuance under the Purchase Plan. The price of common stock
purchased under the Purchase Plan will be 85% of the lower of the fair market
value of the common stock on the first or last day of each six month purchase
period. Employees may end their participation in the Purchase Plan at any time
during an offering period, and they will be paid their payroll deductions to
date. Participation ends automatically upon termination of employment with the
Company. There have been no stock purchases under the Purchase Plan. In January
1999, the Board of Directors ratified the suspension of the Purchase Plan.

A summary of the status of the Company's stock options as of December 31,
1996 and 1997 and September 30, 1998, and changes during such periods is
presented below:

WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------

Outstanding at December 31, 1995................... -- $ --
Granted............................................ 1,568,059 3.24
Exercised.......................................... (28,148) 0.90
Canceled........................................... (19,353) 0.90
--------- ------
Outstanding at December 31, 1996................... 1,520,558 3.32
Granted............................................ 853,504 13.20
Exercised.......................................... (39,629) 0.90
Canceled........................................... (156,688) 7.88
--------- ------
Outstanding at December 31, 1997................... 2,177,745 6.92
Granted............................................ 445,007 13.20
Exercised.......................................... (165,749) 0.92
Canceled........................................... (660,259) 5.89
--------- ------
Outstanding at September 30, 1998.................. 1,796,744 $ 9.39
========= ======
Exercisable at December 31, 1996................... 362,958 $ 0.89
========= ======
Exercisable at December 31, 1997................... 858,187 $ 2.78
========= ======
Exercisable at September 30, 1998.................. 650,741 $ 5.69
========= ======
Weighted-average fair value of options granted
during 1996 whose exercise price is less than the
market price of the stock on the grant date
(169,445 options)................................ $ 2.45
======
Weighted-average fair value of options granted
during 1996 whose exercise price exceeds the
market price of the stock on the grant date
(1,398,614 options).............................. $ 1.16
======
Weighted-average fair value of options granted
during 1997 whose exercise price equals the
market price of the stock on the grant date
(853,504 options)................................ $ 2.73
======
Weighted-average fair value of options granted
during 1998 whose exercise price equals the
market price of the stock on the grant date
(445,007 options)................................ $ 2.61
======

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AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The fair value of each option granted through September 30, 1998 is
estimated using the Black-Scholes option-pricing model on the date of grant
using the following assumptions: (i) no dividend yield, (ii) volatility of
effectively zero, (iii) weighted-average risk-free interest rate of
approximately 6.70%, 6.18%, and 5.50% for the years ended December 31, 1996 and
1997 and the nine months ended September 30, 1998, respectively, and (iv)
expected life of 6 years.

The following table summarizes information about stock options outstanding
at September 30, 1998:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER OF REMAINING LIFE AVERAGE NUMBER OF AVERAGE
EXERCISE PRICE OPTIONS (IN YEARS) EXERCISE PRICE OPTIONS EXERCISE PRICE
- -------------- --------- -------------- -------------- --------- --------------

$ 0.84 166,667 7.8 $ 0.84 166,667 $ 0.84
0.90 54,721 7.8 0.90 54,442 0.90
4.50 466,666 8.1 4.50 246,110 4.50
11.25 29,998 8.2 11.25 9,996 11.25
13.20 1,078,692 9.2 13.20 173,526 13.20
--------- --- ------ ------- ------
$0.84-$13.20 1,796,744 8.7 $ 9.39 650,741 $ 5.69
========= === ====== ======= ======

Had compensation cost for the Company's stock option grants for its
stock-based compensation plans been determined consistent with SFAS No. 123, the
Company's net loss and net loss per share for the years ended December 31, 1996
and 1997 and the nine months ended September 30, 1998 would approximate the pro
forma amounts below:

YEARS ENDED NINE MONTHS
DECEMBER 31, ENDED
------------------ SEPTEMBER 30,
1996 1997 1998
------- -------- -------------

Net loss, as reported................... $(6,035) $(16,810) $(15,512)
Net loss per share, as reported......... (0.73) (2.03) (1.85)
Net loss, pro forma..................... (6,270) (17,624) (16,329)
Net loss per share, pro forma........... (0.76) (2.13) (1.94)

The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts.

8. INCOME TAXES

Through May 1996, the LLCs were taxed as partnerships under the provisions
of the Internal Revenue Code of 1986 (Internal Revenue Code). Under those
provisions, the Company was not subject to corporate income taxes on its taxable
income. Instead, the Company's taxable income or loss was included in the
individual income tax returns of its members. Effective May 31, 1996, under the
terms of the Plan of Organization, the LLCs were reorganized as a C Corporation
under the provisions of the Internal Revenue Code (See Note 1). The
reorganization required that the Company adopt SFAS No. 109,

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AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

"Accounting for Income Taxes." Under SFAS No. 109, deferred income tax assets
and liabilities are determined based on the differences between the book and tax
basis of assets and liabilities and are measured using the currently enacted tax
rates and laws. The cumulative tax effect of these temporary differences was
immaterial at the time of the reorganization.

No provision for federal income taxes has been recorded as the Company
incurred net operating losses through September 30, 1998. Provision for income
taxes included in the accompanying consolidated statements of operations
primarily consists of franchise taxes paid to the state of Delaware. As of
September 30, 1998, the Company had approximately $35.7 million and $17.7
million of federal and state net operating loss carryforwards available to
offset future taxable income; such carry forwards expire in various years
through 2018. Under the Tax Reform Act of 1986, the amounts of and benefits from
the Company's net operating loss carryforwards will likely be limited upon the
completion of the initial public offering due to a cumulative ownership change
of more than 50% over a three year period. Based on preliminary estimates,
management believes the effect of such limitation, if imposed, will not have a
material adverse effect on the Company.

Net deferred income tax assets, totaling approximately $2.0 million at
December 31, 1996, $6.3 million at December 31, 1997 and $14.4 million at
September 30, 1998, consist primarily of the tax effect of net operating loss
carry forwards, reserves and accrued expenses which are not yet deductible for
tax purposes. The Company has provided a full valuation allowance on these
deferred income tax assets because of the uncertainty regarding their
realization.

9. RELATED PARTY TRANSACTIONS

Peter R. Ellis

In March 1998, the Company extended a $250 loan to co-founding member and
stockholder, Peter R. Ellis. The loan bears interest at 8% per annum compounded
annually and principal and accrued interest are due in full in March 2003. The
loan is secured by Mr. Ellis's stock in the Company. In June 1998, Mr. Ellis
resigned from the Company as Chief Executive Officer. In August 1998, the
Company executed a two year agreement with Mr. Ellis to provide advisory
services. Under the agreement, Mr. Ellis is entitled to receive $500 in the
first year and $5 per month in the second year of the agreement term. The
amounts paid to Mr. Ellis under this agreement are included in operating
expenses in the accompanying consolidated statements of operations.

Inchcape Motors International plc

As of September 30, 1998, the Company had a loan payable of $776 (L457) to
Inchcape Motors International plc (Inchcape), a stockholder. The amount
represents cash advances to the Company to fund its United Kingdom operations.
The loan was due on demand and bore no interest. Subsequent to September 30,
1998, the loan was assumed by an affiliate of Inchcape (See Note 10).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. SUBSEQUENT EVENTS

Issuance of Series C Preferred

Subsequent to September 30, 1998, the Company raised additional capital of
$25.2 million through issuance of Series C Preferred as follows:

In October 1998, the Company issued 64,233 shares of Series C Preferred in
payment of television advertising with an estimated fair market value of $565.
The amount was expensed in the three months ended December 31, 1998.

In November 1998, in a private placement, the Company issued 568,182 shares
of Series C Preferred to Invision AG (Invision) at $8.80 per share convertible
into 378,788 shares of common stock at $13.20 per share. The Company also issued
a warrant to purchase 150,000 shares of common stock to Invision. The warrant is
exercisable at $13.20 per share and expires in November 2001. The warrant was
issued in exchange for Invision's commitment to fund organizational and start-up
activities related to a Pan-European entity in which the Company may invest with
Invision. The value of the warrant will be charged to operations during the
period such activities occur. In connection with these transactions, the Company
has agreed to appoint a person designated by Invision to serve on the Board of
Directors of the Company.

In December 1998, in private placements, the Company issued a total of
1,097,727 shares of Series C Preferred to Aureus Private Equity AG (Aureus), an
affiliate of Invision, at $8.80 per share convertible into 731,818 shares of
common stock at $13.20 per share. The Company also issued warrants to purchase a
total of 289,800 shares of common stock to Aureus. The warrants are exercisable
at $13.20 per share and expire in December 2001. The warrants were issued in
exchange for Aureus' commitment to fund organizational and start-up activities
related to a Pan-European entity in which the Company may invest with Aureus.
The value of the warrants will be charged to operations during the period such
activities occur.

In December 1998, in a private placement, the Company issued 1,136,364
shares of Series C Preferred to MediaOne Interactive Services, Inc. (MediaOne)
at $8.80 per share convertible into 757,576 shares of common stock at $13.20 per
share. The Company also issued a warrant to purchase 300,000 shares of its
common stock to MediaOne. The warrant is exercisable at $13.20 per share and
expires in December 2001. MediaOne is not obligated to perform any services in
connection with the issuance of the warrant, and the value of the warrant will
be accounted for as an equity transaction. The Company has agreed to appoint a
person designated by MediaOne to serve on the Board of Directors of the Company.

Proposed Initial Public Offering

In June 1998, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission to permit the
Company to sell shares of its common stock in connection with the proposed
initial public offering (IPO). If the offering is consummated under the terms
presently anticipated, the Series A, the Series B and the Series C Preferred
(collectively Preferred Stock) outstanding at September 30, 1998 will
automatically convert to common stock upon closing of the IPO (See Note 6).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Sale of Auto by Tel UK

In November 1998, the Company entered into an agreement with Inchcape
Automotive Limited to sell 100 percent of its United Kingdom operations for a
nominal cash amount and assumption of liabilities of $1,794, which includes the
$776 to an affiliate of Inchcape Automotive Limited outstanding at September 30,
1998 (See Note 9). The sale resulted in a gain of $1,408. In addition, the
Company entered into a License and Service Agreement under which it is entitled
to minimum annual license and maintenance payments of $850 and $250,
respectively, over a 20-year period.

1998 Stock Option Plan

In December 1998, the Company adopted the 1998 Stock Option Plan (the 1998
Option Plan). The Company has reserved 1,500,000 shares under the 1998 Option
Plan. The 1998 Option Plan provides for the granting to employees of incentive
stock options within the meaning of the Code, and for the granting to employees
of nonstatutory stock options. The exercise price of non-statutory options
granted under the 1998 Option Plan cannot be lower than 50% of the fair market
value of the common stock, as determined by the Board of Directors, on the date
of grant. The exercise price of all incentive stock options granted cannot be
lower than the fair market value on the grant date. With respect to any
participants who beneficially own more than 10% of the voting power of all
classes of stock of the Company, the exercise price of any stock option granted
to such person must be at least 110% of the fair market value on the grant date,
and the maximum term of such option is five years. The term of all other options
granted under the 1998 Option Plan may be up to 10 years. Under the 1998 Option
Plan, the vesting of certain nonstatutory stock options (Performance Options) is
subject to restrictions related to the performance of the Company's common stock
and the employment period of the optionee.

Grants of Stock Options

In December 1998, in connection with an employment agreement with Mark W.
Lorimer, President and Chief Executive Officer, the Company granted options to
purchase 200,000 shares of the Company's common stock and Performance Options to
purchase 500,000 shares of the common stock under the 1998 Option Plan.

In December 1998, in connection with an employment agreement with Ann M.
Delligatta, Executive Vice President and Chief Operating Officer, the Company
granted options to purchase 100,000 shares of the common stock and Performance
Options to purchase 200,000 shares of the common stock under the 1998 Option
Plan.

These stock options and Performance Options have a term of 10 years, and
the exercise price of such options is equal to the fair market value of the
common stock, as determined by the Board of Directors, on the date of grant.

F-21
98
AUTOBYTEL.COM INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Employment Agreement with Ann M. Delligatta

In January 1999, the Company entered into a three year employment agreement
with Ann M. Delligatta, Executive Vice President and Chief Operating Officer.
Under this agreement, in the event her employment is terminated without cause or
she terminates her employment with good reason, she is entitled to a lump sum
payment equal to the base salary that would have been received by her if she had
remained employed by the Company for the remaining balance of the three year
term.

1999 Stock Option Plan

In January 1999, the Board of Directors adopted the 1999 Stock Option Plan
(the 1999 Option Plan). The Company has reserved 1,800,000 shares under the 1999
Option Plan. The 1999 Option Plan provides for the granting of stock options to
key employees of the Company. Under the 1999 Option Plan, not more than
1,000,000 shares may be granted after March 31, 1999. The 1999 Option Plan is
identical in all other material respects to the 1998 Option Plan.

F-22
99

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

YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS
PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK
MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN
OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE
OFFER OR SOLICITATION IS UNLAWFUL.

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

TABLE OF CONTENTS

PAGE
----

Prospectus Summary...................... 3
Risk Factors............................ 7
Use of Proceeds......................... 20
Dividend Policy......................... 20
Capitalization.......................... 21
Dilution................................ 22
Selected Consolidated Financial Data.... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 24
Business................................ 34
Management.............................. 46
Certain Transactions.................... 58
Principal and Selling Stockholders...... 61
Description of Capital Stock............ 63
Shares Eligible for Future Sale......... 65
Certain United States Tax Considerations
for Non-United States Holders......... 68
Underwriting............................ 73
Legal Matters........................... 74
Experts................................. 74
Additional Information.................. 74
Index to Consolidated Financial
Statements............................ F-1

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

UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE THESE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

[LOGO]

autobytel.com inc.

COMMON STOCK
-------------------
PROSPECTUS
-------------------
BT ALEX. BROWN
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED

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

, 1999

- ------------------------------------------------------
- ------------------------------------------------------
100

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, to be paid in connection with the sale
of the common stock being registered, all of which will be paid by the
Registrant. All amounts are estimates except the SEC registration, NASD and
Nasdaq filing fees.

SEC Registration fee........................................ $23,018
NASD filing fee............................................. 8,780
Nasdaq National Market listing fee.......................... 95,000
Blue Sky fees and expenses.................................. 5,000
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Transfer agent and registrar fees........................... *
Printing and engraving expenses............................. *
Miscellaneous expenses...................................... *
-------
Total............................................. $ *
=======

- -------------------------
* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware Law General Law ("Delaware Law") and the
Company's Certificate of Incorporation provide for indemnification of the
Company's directors and officers in a variety of circumstances which may include
liabilities under the Act. Article IX of the Company's Certificate of
Incorporation provides that the Company shall indemnify to the full extent
permitted by the laws of Delaware, as from time to time in effect, the persons
described in Section 145 of Delaware Law.

The general effect of the provisions in the Company's Certificate of
Incorporation and Delaware Law is to provide that the Company shall indemnify
its directors and officers against all liabilities and expenses actually and
reasonably incurred in connection with the defense or settlement of any judicial
or administrative proceedings in which they have become involved by reason of
their status as corporate directors or officers, if they acted in good faith and
in the reasonable belief that their conduct was neither unlawful (in the case of
criminal proceedings) nor inconsistent with the best interests of the Company.
With respect to legal proceedings by or in the right of the Company in which a
director or officer is adjudged liable for improper performance of his duty to
the Company or another enterprise which such person served in a similar capacity
at the request of the Company, indemnification is limited by such provisions to
that amount which is permitted by the court.

The Company will maintain officers' and directors' liability insurance
which will insure against liabilities that officers and directors of the Company
may incur in such capacities. The Company has also entered into indemnification
agreements with its directors and officers.

Reference is made to the Proposed Form of Underwriting Agreement filed as
Exhibit 1.1 which provides for indemnification of the directors and officers of
the Company signing the Registration Statement and certain controlling persons
of the Company against

II-1
101

certain liabilities, including those arising under the Act in certain instances,
of the Underwriters.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since the Company's inception, the Company has made the following sales of
securities that were not registered under the Act:

1. On May 31, 1996, the Company issued and sold 8,250,000 shares of
common stock in exchange for membership interests in Autobytel LLC and
Autobytel Acceptance Corporation LLC, in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.

2. During the period from May 18, 1996 through December 31, 1998, the
Company granted options to purchase an aggregate of 2,847,496 shares of
common stock pursuant to the 1996 Stock Option Plan, 1996 Stock Incentive
Plan and 1998 Stock Option Plan of which 248,788 options have been
exercised and issued by the Company in reliance on Rule 701 promulgated
under the Act.

3. On August 20, 1996, the Company issued and sold 1,500,000 shares
of Series A Preferred Stock in a private placement for an aggregate
consideration of $15.0 million in cash and cancellation of indebtedness. In
connection with such financing, the Company issued (i) 200,000 shares to
ContiTrade Services L.L.C. in exchange for $2.0 million in cash, (ii)
400,000 shares to National Union Fire Insurance company of Pittsburgh, PA
in exchange for $4.0 million in cash, (iii) 800,000 shares to General
Electric Capital Corporation in exchange for $8.0 million in cash, and (iv)
100,000 shares to Michael Fuchs in exchange for $1.0 million in cash and
cancellation of indebtedness. Sales of Series A Preferred Stock were made
in reliance on the exemption from registration provided by Section 4(2) of
the Act.

4. On August 26, 1996, the Company issued and sold 6,667 shares to a
consultant of the Company in reliance on Rule 701 promulgated under the
Act.

5. On January 30, 1997, the Company issued and sold 967,915 shares of
Series B Preferred Stock in a private placement for an aggregate
consideration of $9.05 million in cash. In connection with such financing,
the Company issued (i) 133,690 shares to ContiTrade Services L.L.C. in
exchange for $1.25 million in cash, (ii) 267,380 shares to National Union
Fire Insurance Company of Pittsburgh, PA in exchange for $2.5 million in
cash, (iii) 534,760 shares to General Electric Capital Corporation in
exchange for $5.0 million in cash, (iv) 32,085 shares to Michael Fuchs in
exchange for $300 thousand in cash. Sales of Series B Preferred Stock were
made in reliance on the exemption from registration provided by Section
4(2) of the Act.

6. On October 21, 1997, the Company issued and sold 1,477,274 shares
of Series C Preferred Stock in a private placement for an aggregate
consideration of $13.0 million in cash. In connection with such financing,
the Company issued (i) 681,819 shares to General Electric Capital
Corporation in exchange for approximately $6.0 million in cash; (ii)
227,273 shares to National Union Fire Insurance Company of Pittsburgh in
exchange for approximately $2.0 million in cash; and (iii) 568,182 shares
to Tozer Kemsley and Millbourn Automotive Ltd., a unit of Inchcape Motors
International plc in exchange for approximately $5.0 million in cash.

II-2
102

Sales of Series C Preferred Stock were made in reliance on the exemption
from registration provided by Section 4(2) of the Act.

7. On January 20, 1998, the Company issued to John M. Markovich a
warrant to purchase 33,333 shares of common stock of the Company (after
adjustment for the Reverse Split) at an exercise price of $7.50 per share.
The warrant expires on January 20, 2003.

8. On April 20, 1998, the Company entered into a transaction with
National Broadcasting Company, Inc. ("NBC") whereby the Company issued and
sold 56,776 shares of Series C Preferred Stock in exchange for prime time
advertisement spots with a fair market value of not less than $499,629. The
sale of Series C Preferred Stock was made in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.

9. On May 7, 1998 the Company issued and sold 568,182 shares of
Series C Preferred Stock to Bilia AB in a private placement for a total
consideration of approximately $5.0 million in cash. The sale of Series C
Preferred Stock was made in reliance on the exemption from registration
provided by Section 4(2) of the Act.

10. On October 30, 1998, the Company entered into another transaction
with NBC whereby the Company issued and sold 64,233 shares of Series C
Stock in exchange for prime time advertisement spots with a fair market
value of not less than $565,250. The sale of Series C Preferred Stock was
made in reliance on the exemption from registration provided by Section
4(2) of the Securities Act.

11. On November 10, 1998, the Company issued and sold 568,182 shares
of Series C Stock to Invision AG for a total consideration of approximately
$5,000,000 in cash. The sale of Series C Preferred Stock was made in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.

12. On November 10, 1998, the Company issued to Invision AG a warrant
to purchase an aggregate of 150,000 shares of common stock of the Company
at an exercise price of $13.20 per share. This warrant expires on November
10, 2001.

13. On December 16, 1998, the Company issued and sold 643,182 shares
of Series C Stock to Aureus Private Equity AG for a total consideration of
approximately $5,660,000 in cash. The sale of Series C Preferred Stock was
made in reliance on the exemption from registration provided by Section
4(2) of the Securities Act.

14. On December 16, 1998, the Company issued to Aureus Private Equity
AG a warrant to purchase an aggregate of 169,800 shares of common stock of
the Company at an exercise price of $13.20 per share. This warrant expires
on December 16, 2001.

15. On December 21, 1998, the Company issued and sold 1,136,364 shares
of Series C Stock to MediaOne Interactive Services, Inc. for a total
consideration of approximately $10,000,000 in cash. The sale of Series C
Preferred Stock was made in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act.

16. On December 21, 1998, the Company issued to MediaOne Interactive
Services, Inc. a warrant to purchase an aggregate of 300,000 shares of
common stock of the Company at an exercise price of $13.20 per share. This
warrant expires on December 21, 2001.

II-3
103

17. On December 23, 1998, the Company issued an additional warrant to
Aureus Private Equity AG to purchase 120,000 shares of common stock of the
Company at an exercise price of $13.20 per share. This warrant expires on
December 23, 2001.

18. On December 24, 1998, the Company issued and sold an additional
454,545 shares of Series C Stock to Aureus Private Equity AG for a total
consideration of approximately $4,000,000 in cash. The sale of Series C
Preferred Stock was made in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a. Exhibits

NUMBER DESCRIPTION
------ -----------

1.1* Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation of
autobytel.com inc. certified by the Secretary of State of
Delaware (filed January , 1999)
3.2* Amended and Restated Bylaws of autobytel.com inc. (adopted
January , 1999)
4.1* Form of Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated May
7, 1998 and the Investors named in Exhibit A thereto
4.3* Form of Lock-Up Agreement
5.1* Opinion and Consent of Paul, Hastings, Janofsky & Walker LLP
9.1 Voting Proxy dated January 11, 1999 by Peter R. Ellis
10.1 Form of Indemnification Agreement between autobytel.com inc.
and its directors and officers
10.2 Employment Agreement dated July 1, 1998 between
autobytel.com inc. and Mark W. Lorimer
10.3* Employment Agreement dated January , 1999 between
autobytel.com and Anne Delligatta
10.4* Severance Agreement dated January 1, 1998 between
Auto-By-Tel Corporation and Michael J. Lowell
10.5* 1996 Stock Option Plan and related agreements
10.6* 1996 Stock Incentive Plan and related agreements
10.7* 1996 Employee Stock Purchase Plan
10.8* 1998 Stock Option Plan
10.9 Marketing Agreement dated July 22, 1996, as amended on July
23, 1996, by and among Auto-By-Tel Acceptance Corporation, a
subsidiary of the Registrant ("ABTAC"), the Registrant, as
guarantor of the obligations of ABTAC, and AIU Insurance
Company, American International South Insurance Company,
American Home Assurance Company, American International
Insurance Company, American International Insurance Company
of California, Inc., Illinois National Insurance Company,
Minnesota Insurance Company, National Union Fire Insurance
Company of Pittsburgh, PA and the Insurance Company of the
State of Pennsylvania
10.10* Marketing Agreement dated February 8, 1996 between
Auto-By-Tel, LLC and Edmund Publications Corp.
10.11* Amendment to Marketing Agreement dated February 8, 1996
between Edmund Publications Corp. and the Registrant

II-4
104

NUMBER DESCRIPTION
------ -----------

10.12 Form of Dealership Agreements
10.13 Financing Inquiry Referral Agreement dated October 25, 1996
among Auto-By-Tel, Inc, as guarantor, Auto-By-Tel Acceptance
Corporation and Chase Manhattan Automotive Finance
Corporation
10.14 Marketing and Application Processing Agreement dated
February 1, 1997 between General Electric Capital Auto
Financial Services, Inc., Auto-By-Tel Acceptance Corporation
("ABTAC") and Auto-By-Tel, Inc., as guarantor
10.15* Content License and Channel Sponsorship Term Sheet dated
September 12, 1997 between Excite, Inc. and Auto-By-Tel
10.16 Data License and Web Site Agreement dated April 1, 1997
between IntelliChoice, Inc. and Auto-By-Tel Marketing
Corporation and the Registrant
10.17 Kelley Blue Book/Auto-By-Tel Agreement dated November 19,
1997, as amended July 1, 1998, between Kelley Blue Book and
Auto-By-Tel
10.18 Listings Distribution, Sponsorship, Display Advertising and
Network Affiliation Agreement dated May 29, 1997 between
Classifieds2000, Inc. and Auto-By-Tel
10.19 License Agreement dated June 4, 1998 among J.D. Power and
Associates, Auto-By-Tel Marketing Corporation, and the
Registrant
10.20 Site Page Sponsorship and Commission Agreement dated June
25, 1997, between Auto-By-Tel Marketing Corporation and AT&T
Corporation
10.21 Letter agreement dated April 1, 1997, between Auto-By-Tel
Marketing Corporation and NBC Multimedia Inc.
10.22* Sponsorship Agreement, dated as of June 24, 1998, between
Excite, Inc. and Auto-By-Tel Corporation
10.23 License and Services Agreement dated August 7, 1998 between
autobytel.com inc. and Auto-By-Tel AB
10.24 License and Services Agreement dated November 23, 1998
between autobytel.com inc. and Auto by Tel UK Limited
10.25 Share Purchase Agreement dated November 23, 1998 between
autobytel.com inc. and Inchcape Automotive Limited
10.26 Financing Inquiry Referral Agreement dated December 31, 1998
between Provident Bank, Auto-By-Tel Acceptance Corporation
and autobytel.com inc., as guarantor
10.27 Procurement and Trafficking Agreement dated September 24,
1998 between DoubleClick Inc. and autobytel.com inc.
10.28 Loan Agreement dated November 18, 1998 between Ann Benvenuto
and autobytel.com inc.
10.29 Advisory Agreement dated August 20, 1998 between
autobytel.com inc. and Peter R. Ellis
10.30* 1999 Stock Option Plan
11.1 Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants
23.2* Consent of Paul, Hastings, Janofsky & Walker LLP (reference
is made to Exhibit 5.1)

II-5
105

NUMBER DESCRIPTION
------ -----------

24.1 Power of Attorney (reference is made to the signature page)
27.1 Financial Data Schedule

- -------------------------
* To be filed by Amendment.

(b) Financial Statement Schedules

ITEM 17. UNDERTAKINGS

(a) The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act (sec.
230.424(b)(1) or (4) or 230.497(h)) shall be deemed to be part of this
Registration Statement as of the time the Commission declared it effective.

(2) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement for the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-6
106

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized, in the City of Irvine,
State of California, on January 14, 1999.

autobytel.com inc.

By: /s/ MARK W. LORIMER
-----------------------------------
Name: Mark W. Lorimer
Title: Chief Executive Officer,
President and
Director

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mark W. Lorimer and Hoshi Printer, and
each of them, as such person's true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and any other
regulatory authority, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, or their or such person's substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:

NAME TITLE DATE
---- ----- ----

/s/ MICHAEL FUCHS Chairman of the Board January 14, 1999
- ------------------------------------------------ and Director
Michael Fuchs

/s/ JEFFREY H. COATS Director January 14, 1999
- ------------------------------------------------
Jeffrey H. Coats

/s/ MARK N. KAPLAN Director January 14, 1999
- ------------------------------------------------
Mark N. Kaplan

/s/ KENNETH J. ORTON Director January 14, 1999
- ------------------------------------------------
Kenneth J. Orton

II-7
107

NAME TITLE DATE
---- ----- ----

/s/ ROBERT S. GRIMES Executive Vice January 14, 1999
- ------------------------------------------------ President and Director
Robert S. Grimes

/s/ MARK W. LORIMER Chief Executive January 14, 1999
- ------------------------------------------------ Officer, President and
Mark W. Lorimer Director (Principal
Executive Officer)

/s/ HOSHI PRINTER Senior Vice President January 14, 1999
- ------------------------------------------------ and Chief Financial
Hoshi Printer Officer (Principal
Financial Officer and
Principal Accounting
Officer)

/s/ ANN M. DELLIGATTA Executive Vice January 14, 1999
- ------------------------------------------------ President and Chief
Ann M. Delligatta Operating Officer

II-8
108

EXHIBIT INDEX

SEQUENTIALLY
NUMBERED
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------------

1.1* Form of Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation of
autobytel.com inc. certified by the Secretary of State of
Delaware (filed January , 1999)
3.2* Amended and Restated Bylaws of autobytel.com inc.
(adopted January , 1999)
4.1* Form of Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated
May 7, 1998 and the Investors named in Exhibit A thereto
4.3* Form of Lock-Up Agreement
5.1* Opinion and Consent of Paul, Hastings, Janofsky & Walker
LLP
9.1 Voting Proxy dated January 11, 1999 by Peter R. Ellis
10.1 Form of Indemnification Agreement between autobytel.com
inc. and its directors and officers
10.2 Employment Agreement dated July 1, 1998 between
autobytel.com inc. and Mark W. Lorimer
10.3* Employment Agreement dated January , 1999 between
autobytel.com and Anne Delligatta
10.4* Severance Agreement dated January 1, 1998 between
Auto-By-Tel Corporation and Michael J. Lowell
10.5* 1996 Stock Option Plan and related agreements
10.6* 1996 Stock Incentive Plan and related agreements
10.7* 1996 Employee Stock Purchase Plan
10.8* 1998 Stock Option Plan
10.9 Marketing Agreement dated July 22, 1996, as amended on
July 23, 1996, by and among Auto-By-Tel Acceptance
Corporation, a subsidiary of the Registrant ("ABTAC"),
the Registrant, as guarantor of the obligations of ABTAC,
and AIU Insurance Company, American International South
Insurance Company, American Home Assurance Company,
American International Insurance Company, American
International Insurance Company of California, Inc.,
Illinois National Insurance Company, Minnesota Insurance
Company, National Union Fire Insurance Company of
Pittsburgh, PA and the Insurance Company of the State of
Pennsylvania
10.10* Marketing Agreement dated February 8, 1996 between
Auto-By-Tel, LLC and Edmund Publications Corp.
10.11* Amendment to Marketing Agreement dated February 8, 1996
between Edmund Publications Corp. and the Registrant
10.12 Form of Dealership Agreements
10.13 Financing Inquiry Referral Agreement dated October 25,
1996 among Auto-By-Tel, Inc, as guarantor, Auto-By-Tel
Acceptance Corporation and Chase Manhattan Automotive
Finance Corporation

109

SEQUENTIALLY
NUMBERED
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------------

10.14 Marketing and Application Processing Agreement dated
February 1, 1997 between General Electric Capital Auto
Financial Services, Inc., Auto-By-Tel Acceptance
Corporation ("ABTAC") and Auto-By-Tel, Inc., as guarantor
10.15* Content License and Channel Sponsorship Term Sheet dated
September 12, 1997 between Excite, Inc. and Auto-By-Tel
10.16 Data License and Web Site Agreement dated April 1, 1997
between IntelliChoice, Inc. and Auto-By-Tel Marketing
Corporation and the Registrant
10.17 Kelley Blue Book/Auto-By-Tel Agreement dated November 19,
1997, as amended July 1, 1998, between Kelley Blue Book
and Auto-By-Tel
10.18 Listings Distribution, Sponsorship, Display Advertising
and Network Affiliation Agreement dated May 29, 1997
between Classifieds2000, Inc. and Auto-By-Tel
10.19 License Agreement dated June 4, 1998 among J.D. Power and
Associates, Auto-By-Tel Marketing Corporation, and the
Registrant
10.20 Site Page Sponsorship and Commission Agreement dated June
25, 1997, between Auto-By-Tel Marketing Corporation and
AT&T Corporation
10.21 Letter agreement dated April 1, 1997, between Auto-By-Tel
Marketing Corporation and NBC Multimedia Inc.
10.22* Sponsorship Agreement, dated as of June 24, 1998, between
Excite, Inc. and Auto-By-Tel Corporation
10.23 License and Services Agreement dated August 7, 1998
between autobytel.com inc. and Auto-By-Tel AB
10.24 License and Services Agreement dated November 23, 1998
between autobytel.com inc. and Auto by Tel UK Limited
10.25 Share Purchase Agreement dated November 23, 1998 between
autobytel.com inc. and Inchcape Automotive Limited
10.26 Financing Inquiry Referral Agreement dated December 31,
1998 between Provident Bank, Auto-By-Tel Acceptance
Corporation and autobytel.com inc., as guarantor
10.27 Procurement and Trafficking Agreement dated September 24,
1998 between DoubleClick Inc. and autobytel.com inc.
10.28 Loan Agreement dated November 18, 1998 between Ann
Benvenuto and autobytel.com inc.
10.29 Advisory Agreement dated August 20, 1998 between
autobytel.com inc. and Peter R. Ellis
10.30* 1999 Stock Option Plan
11.1 Statement Regarding Computation of Per Share Earnings
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants

110

SEQUENTIALLY
NUMBERED
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ------------

23.2* Consent of Paul, Hastings, Janofsky & Walker LLP
(reference is made to Exhibit 5.1)
24.1 Power of Attorney (reference is made to the signature
page)
27.1 Financial Data Schedule

- -------------------------
* To be filed by Amendment.