AutoWeb, Inc. - Quarter Report: 2017 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017
or
[
]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to .
Commission file number 1-34761
Autobytel Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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33-0711569
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification Number)
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18872 MacArthur Boulevard, Suite 200, Irvine,
California
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92612
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(Address of principal executive offices)
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(Zip Code)
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(949) 225-4500
(Registrant’s telephone number, including area
code)
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [
]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
[X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer [ ]
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Accelerated filer [X]
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Emerging growth company [ ]
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Non-accelerated filer [ ]
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Smaller reporting company [ ]
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(Do not check if a smaller reporting
company)
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards pursuant to Section 13(a) of the Exchange Act. [
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ]
No [X]
As of May 1, 2017, there were 11,071,584 shares of the Registrant’s Common Stock,
$0.001 par value, outstanding.
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INDEX
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Page
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PART I. FINANCIAL INFORMATION
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ITEM 1.
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Financial
Statements
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Unaudited Consolidated Condensed Balance Sheets
as of March 31, 2017 and December 31, 2016
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3
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Unaudited
Consolidated Condensed Statements of Operations and Comprehensive
Income (Loss) for the Three Months Ended March 31, 2017 and
2016
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4
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Unaudited
Consolidated Condensed Statements of Cash Flows for the Three
Months Ended March 31, 2017 and 2016
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5
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Notes
to Unaudited Consolidated Condensed Financial
Statements
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6
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ITEM 2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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16
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ITEM 3.
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Quantitative and
Qualitative Disclosures About Market Risk
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20
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ITEM 4.
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Controls and
Procedures
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20
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PART II. OTHER INFORMATION
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ITEM 6.
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Exhibits
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21
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Signatures
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23
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PART I. FINANCIAL INFORMATION
Item 1. Financial
Statements
AUTOBYTEL INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands, except share and per-share
data)
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March 31,
2017
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December 31,
2016
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Assets
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Current
assets:
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Cash
and cash equivalents
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$39,643
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$38,512
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Short-term
investment
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251
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251
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Accounts
receivable, net of allowances for bad debts and customer credits of
$968 and $1,015 at March 31, 2017 and December 31, 2016,
respectively
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28,517
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33,634
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Deferred
tax asset
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—
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4,669
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Prepaid
expenses and other current assets
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885
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901
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Total
current assets
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69,296
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77,967
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Property
and equipment, net
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4,140
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4,430
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Investments
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680
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680
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Intangible
assets, net
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22,395
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23,783
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Goodwill
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42,821
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42,821
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Long-term
deferred tax asset
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25,622
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14,799
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Other
assets
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757
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801
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Total
assets
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$165,711
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$165,281
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Liabilities and Stockholders’ Equity
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Current
liabilities:
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Accounts
payable
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$7,237
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$9,764
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Accrued
employee-related benefits
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2,246
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4,530
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Other
accrued expenses and other current liabilities
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7,741
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8,315
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Current
portion of term loan payable
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4,688
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6,563
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Total
current liabilities
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21,912
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29,172
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Convertible
note payable
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1,000
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1,000
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Long-term
portion of term loan payable
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6,750
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7,500
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Borrowings
under revolving credit facility
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8,000
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8,000
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Total
liabilities
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37,662
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45,672
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Commitments
and contingencies (Note 10)
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—
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—
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Stockholders’
equity:
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Preferred
stock, $0.001 par value, 11,445,187 shares authorized
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Series
A Preferred stock, none issued and outstanding
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—
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—
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Series
B Preferred stock, 168,007 shares issued and
outstanding
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—
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—
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Common
stock, $0.001 par value; 55,000,000 shares authorized and
11,062,688 and 11,012,625 shares issued and outstanding at March
31, 2017 and December 31, 2016, respectively
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11
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11
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Additional
paid-in capital
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351,490
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350,022
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Accumulated
deficit
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(223,452)
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(230,424)
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Total
stockholders’ equity
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128,049
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119,609
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Total
liabilities and stockholders’ equity
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$165,711
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$165,281
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See accompanying notes to unaudited consolidated condensed
financial statements.
AUTOBYTEL INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands, except per-share data)
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Three Months Ended
March 31,
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2017
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2016
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Revenues:
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Lead
fees
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$29,092
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$31,996
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Advertising
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7,969
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3,766
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Other
revenues
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280
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485
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Total
revenues
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37,341
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36,247
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Cost
of revenues
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24,430
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22,612
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Gross
profit
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12,911
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13,635
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Operating
expenses:
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Sales
and marketing
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3,763
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5,677
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Technology
support
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3,253
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4,188
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General
and administrative
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3,482
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3,373
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Depreciation
and amortization
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1,229
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1,286
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Litigation
settlements
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(25)
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(5)
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Total
operating expenses
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11,702
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14,519
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Operating
income (loss)
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1,209
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(884)
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Interest
and other income (expense), net
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(100)
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(224)
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Income
(loss) before income tax provision (benefit)
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1,109
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(1,108)
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Income
tax provision (benefit)
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625
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(432)
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Net
income (loss) and comprehensive income (loss)
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$484
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$(676)
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Basic
earnings (loss) per common share
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$0.04
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$(0.06)
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Diluted
earnings (loss) per common share
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$0.04
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$(0.06)
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See accompanying notes to unaudited consolidated condensed
financial statements.
AUTOBYTEL INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS
(Amounts in thousands)
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Three Months Ended
March 31,
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2017
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2016
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Cash
flows from operating activities:
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Net
income (loss)
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$484
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$(676)
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Adjustments
to reconcile net income (loss) to net cash provided
by operating activities:
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Depreciation
and amortization
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1,841
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1,813
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Provision
for bad debts
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43
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54
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Provision
for customer credits
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94
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181
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Share-based
compensation
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1,011
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1,364
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Change
in deferred tax asset
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334
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(595)
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Changes
in assets and liabilities:
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Accounts
receivable
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4,980
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206
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Prepaid
expenses and other current assets
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16
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426
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Other
assets
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44
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76
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Accounts
payable
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(2,527)
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1,667
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Accrued
expenses and other current liabilities
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(2,858)
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(2,969)
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Non-current
liabilities
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—
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13
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Net
cash provided by operating activities
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3,462
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1,560
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Cash
flows from investing activities:
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Purchases
of property and equipment
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(163)
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(899)
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Net
cash used in investing activities
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(163)
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(899)
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Cash
flows from financing activities:
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Payments
on term loan borrowings
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(2,625)
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(1,313)
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Proceeds
from exercise of stock options
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457
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699
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Payment
of contingent fee arrangement
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—
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(13)
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Net
cash used in financing activities
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(2,168)
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(627)
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Net
increase in cash and cash equivalents
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1,131
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34
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Cash
and cash equivalents, beginning of period
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38,512
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23,993
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Cash
and cash equivalents, end of period
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$39,643
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$24,027
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Supplemental
disclosure of cash flow information:
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Cash
paid for income taxes
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$—
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$—
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Cash
paid for interest
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$356
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$230
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See accompanying notes to unaudited consolidated condensed
financial statements.
AUTOBYTEL INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
1. Organization and Operations
Autobytel Inc. (“Autobytel” or the “Company”) is an automotive marketing services
company that assists automotive retail dealers
(“Dealers”) and automotive manufacturers
(“Manufacturers”)
market and sell new and used vehicles through its programs for
online lead referrals (“Leads”), Dealer marketing products and services,
online advertising and consumer traffic referral
programs and mobile products.
The Company’s consumer-facing automotive
websites (“Company
Websites”), including its
flagship website Autobytel.com®,
provide consumers with information and tools to aid them with their
automotive purchase decisions and the ability to submit inquiries
requesting Dealers to contact the consumers regarding purchasing or
leasing vehicles (“Leads”). The Company’s mission for
consumers is to be “Your Lifetime Automotive
Advisor®” by engaging consumers throughout the entire
lifecycle of their automotive needs.
The
Company was incorporated in Delaware on May 17, 1996. Its
principal corporate offices are located in Irvine, California. The
Company’s common stock is listed on The Nasdaq Capital Market
under the symbol ABTL.
On December 19, 2016, Autobytel and Car.com, Inc.,
a wholly owned subsidiary of Autobytel (“Car.com”), entered into an Asset Purchase and Sale
Agreement, by and among Autobytel, Car.com, and Internet Brands,
Inc., a Delaware corporation (“Internet
Brands”), in which
Internet Brands acquired substantially all of the assets of the
automotive specialty finance leads group of Car.com. The
transaction was completed effective as of December 31, 2016. The
transaction consideration consisted of $3.2 million in cash and
$1.6 million to be paid over a five year period pursuant to a
Transitional License and Linking Agreement. The Company recorded a
gain on sale of approximately $2.2 million in connection with the
transaction in the fourth quarter of 2016. See Note 4.
2. Basis of Presentation
The accompanying unaudited consolidated condensed
financial statements are presented on the same basis as the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2016 (“2016 Form 10-K”)
filed with the Securities and Exchange Commission
(“SEC”). Autobytel has made its
disclosures in accordance with U.S. generally accepted accounting
principles (“GAAP”) for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation with respect to interim financial
statements, have been included. The consolidated
condensed statements of operations and comprehensive income (loss)
and cash flows for the periods ended March 31, 2017 and 2016 are
not necessarily indicative of the results of operations or cash
flows expected for the year or any other period. The
unaudited consolidated condensed financial statements should be
read in conjunction with the audited consolidated financial
statements and the notes thereto in the 2016 Form
10-K.
3. Recent Accounting Pronouncements
Issued but not yet adopted by the Company
Accounting Standards
Codification 606 “Revenue from Contracts with
Customers.” In
May 2014, Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from
Contracts with Customers (Topic 606)” was
issued. This ASU requires an entity to recognize the
amount of revenue to which it expects to be entitled for the
transfer of promised goods or services to customers. The standard
will replace most existing revenue recognition guidance in GAAP
when it becomes effective. Early application is not
permitted. The standard permits the use of either the retrospective
or cumulative effect transition method. In April 2016,
ASU No. 2016-10, “Identifying Performance Obligations and
Licensing” was issued. This ASU clarifies 1) the
identification of performance obligations and, 2) licensing
implementation guidance as it relates to Topic 606, Revenue from
Contracts with Customers. In May 2016, ASU No. 2016-12,
“Narrow-Scope Improvements and Practical Expedients”
was issued. This ASU addresses certain issues as it
relates to assessing collectability, presentation of sales taxes,
noncash consideration, and completed contracts and contract
modifications at transition as it relates to Topic 606, Revenue
from Contracts with Customers. This ASU and related
amendments are effective for public entities for annual periods
beginning after December 15, 2017, including interim periods
therein. The Company is continuing to evaluate the effect this
guidance will have on the consolidated financial statements and
related disclosures.
Accounting Standards
Codification 842
“Leases.” In February 2016, ASU No. 2016-02, “Leases
(Topic 842)” was issued. This ASU will require
lessees to recognize on the balance sheet the assets and
liabilities for the rights and obligations created by those leases
of terms more than 12 months. The ASU will require both
capital and operating leases to be recognized on the balance
sheet. Qualitative and quantitative disclosures will
also be required to help investors and other financial statement
users better understand the amount, timing and uncertainty of cash
flows arising from leases. The ASU will take effect for
public companies for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018. We expect this
standard will have a material effect on our financial statements
due to the recognition of new right-of-use assets and lease
liabilities on our balance sheet for real estate and equipment
operating leases. The Company is continuing to evaluate the effect
this guidance will have on the consolidated financial statements
and related disclosures.
Accounting Standards
Codification 805 “Business
Combinations.” In January 2017, ASU No. 2017-01,
“Clarifying the Definition of a Business” was
issued. This ASU provides a more robust framework to use
in determining when a set of assets and activities is a
business. The amendments in this ASU are effective for
annual periods beginning after December 15, 2017, and interim
periods within those periods. The Company does not
believe this ASU will have a material effect on the consolidated
financial statements.
Accounting Standards
Codification 350 “Intangibles – Goodwill and
Other.” In
January 2017, ASU No. 2017-04, “Simplifying the Test for
Goodwill Impairment” was issued. Under the
amendments in this ASU, an entity should perform its annual, or
interim, goodwill impairment test by comparing the fair value of a
reporting unit with its carrying amount. An entity
should recognize an impairment charge for the amount by which the
carrying amount exceeds the reporting unit’s fair value;
however, the loss should not exceed the total amount of goodwill
allocated to that reporting unit. The ASU also eliminated the
requirements for any reporting unit with a zero or negative
carrying amount to perform a qualitative assessment and, if it
fails that qualitative test, to perform Step 2 of the goodwill
impairment test. An entity should apply this ASU on a prospective
basis and for its annual or any interim goodwill impairment tests
in fiscal years beginning after December 15, 2019. The Company is
continuing to evaluate the effect this guidance will have on the
consolidated financial statements and related
disclosures.
Recently adopted by the Company
Accounting Standards
Codification 740 “Income
Taxes.” In November
2015, ASU No. 2015-17, “Balance Sheet Classification of
Deferred Taxes” was issued. This ASU requires that
deferred tax liabilities and assets be classified as noncurrent in
a classified statement of financial position. The
amendments in this update apply to all entities that present a
classified statement of financial position. The Company
adopted this ASU prospectively in the three months ended March 31,
2017 and reclassified $4.7 million of current deferred tax
assets to long-term deferred tax assets. Prior periods were not
retrospectively adjusted.
Accounting Standards
Codification 323 “Investments-Equity Method and Joint
Ventures.” In
March 2016, ASU No. 2016-07, “Simplifying the Transition to
the Equity Method of Accounting” was issued. This
ASU eliminates the requirement that when an investment qualifies
for use of the equity method as a result of an increase in the
level of ownership interest or degree of influence, an investor
must adjust the investment, results of operations, and retained
earnings retroactively on a step-by-step basis as if the equity
method had been in effect during all previous periods that the
investment was held. The amendments require that the
equity method investor add the cost of acquiring the additional
interest in the investee to the current basis of the
investor’s previously held interest and adopt the equity
method of accounting as of the date the investment becomes
qualified for equity method accounting. Thus, upon
qualifying for the equity method of accounting, no retroactive
adjustment of the investment is required. The Company
adopted this ASU in the three months ended March 31, 2017 and it
did not have a material effect on the consolidated financial
statements.
Accounting Standards
Codification 718 “Compensation-Stock
Compensation.” In March
2016, ASU No. 2016-09, “Improvements to Employee Share-Based
Payment Accounting” was issued. This ASU provides
for areas of simplification for several aspects of the accounting
for share-based payment transactions, including the income tax
consequences, classification of awards as either equity or
liabilities, and classification on the statement of cash
flows. The amendments in this ASU are effective for
annual periods beginning after December 15, 2016, and interim
periods within those annual periods.
The changes in the new standard eliminate the accounting for excess
tax benefits to be recognized in additional paid-in capital and tax
deficiencies recognized either in the income tax provision or in
additional paid-in capital. ASU 2016-09 requires recognition of
excess tax benefits and tax deficiencies in the income statement on
a prospective basis. For the three months ended March 31, 2017, we
recognized all excess tax benefits and tax deficiencies as income
tax expense or benefit as a discrete event. Income tax expense of
approximately $0.2 million was recognized in the
quarterly period ended March 31, 2017 as a result of the adoption
of ASU 2016-09.
The Company adopted the amendments related
to the timing of when excess tax benefits are recognized on a
modified retrospective transition method. The Company
recognized $6.5 million of deferred tax assets relating to
unrealized stock option benefits, resulting in a cumulative $6.5
million adjustment to retained earnings.
The treatment of forfeitures has not changed as we are electing to
continue our current process of estimating the number of
forfeitures. As such, this has no cumulative effect on retained
earnings. We have elected to present the cash flow statement on a
prospective transition method and no prior periods have been
adjusted.
The
Company calculates diluted earnings (loss) per share using the
treasury stock method for share-based payment awards. ASU 2016-09
eliminates excess tax benefits and deficiencies from the
calculation of assumed proceeds under the treasury stock method,
which the Company adopted on a prospective transition
method.
Accounting Standards
Codification 230 “Statement of Cash
Flows.” In
August 2016, ASU No. 2016-15, “Classification of Certain Cash
Receipts and Cash Payments” was issued. This ASU
provides guidance on eight specific cash flow issues with the
objective of reducing the existing diversity in practice for those
issues. The amendments in this ASU are effective for
annual periods beginning after December 15, 2017, and interim
periods within those annual periods. The Company early adopted this
ASU in the three months ended March 31, 2017 and it did not have a
material effect on the consolidated financial
statements.
Accounting Standards
Codification 810
“Consolidation.” In October 2016, ASU No. 2016-17, “Interests
Held through Related Parties That Are Under Common Control”
was issued. This ASU amends the consolidation guidance
on how a reporting entity that is the single decision maker of a
variable interest entity (“VIE”) should treat indirect interests in the
entity held through related parties that are under common control
with the reporting entity when determining whether it is the
primary beneficiary of that VIE. The amendments in this
ASU are effective for annual periods beginning after December 15,
2016, and interim periods within those annual
periods. The Company adopted this ASU in the three
months ended March 31, 2017 and it did not have a material effect
on the consolidated financial statements.
4. Disposal of Specialty Finance Leads
Product
On December 19, 2016, Autobytel and Car.com
entered into an Asset Purchase and Sale Agreement with Internet
Brands, pursuant to which Internet Brands acquired substantially
all of the assets of the automotive specialty finance leads group
of Car.com (“Acquired
Group”). The transaction
was completed effective as of December 31, 2016. The transaction
consideration consisted of $3.2 million in cash paid at closing and
$1.6 million to be paid over a five year period pursuant to a
Transitional License and Linking Agreement
(“License
Agreement”). The Company
recorded a gain on sale of approximately $2.2 million in connection
with the transaction in December 2016.
In
connection with the transaction, Internet Brands, Car.com and
Autobytel entered into the License Agreement pursuant to which
Car.com and Autobytel will provide to Internet Brands certain
transition services and arrangements. Pursuant to the License
Agreement, (i) Internet Brands will pay Autobytel $1.6 million in
fees over the five-year term of the License Agreement, and (ii)
Car.com will (1) grant Internet Brands a limited, non-exclusive,
non-transferable license to use the Car.com logo and name solely
for sales and marketing purposes in Internet Brand’s
automotive specialty finance leads business; and (2) provide
certain redirect linking of consumer traffic from the Acquired
Group’s current specialty finance leads application forms to
a landing page designated by Internet Brands. The Company received
$0.1 million during the three months ended March 31, 2017 related
to the License Agreement.
The
disposal of the automotive specialty finance leads product did not
qualify for presentation and disclosure as a discontinued operation
because it did not represent a strategic shift that had or will
have a major effect on the Company’s operations. The pretax
profit of the finance leads product for the three months ended
March 31, 2016 was $0.1 million.
5. Computation of
Basic and Diluted Net Earnings (Loss) Per Share
Basic
net earnings (loss) per share is computed using the weighted
average number of common shares outstanding during the period,
excluding any unvested restricted stock. Diluted net earnings
(loss) per share is computed using the weighted average number of
common shares, and if dilutive, potential common shares
outstanding, as determined under the treasury stock and
if-converted methods, during the period. Potential common shares
consist of common shares issuable upon the exercise of stock
options, common shares issuable upon the exercise of warrants,
common shares issuable upon conversion of convertible notes
and unvested restricted stock. The following are the
share amounts utilized to compute the basic and diluted
net earnings (loss) per share for the three months ended March
31, 2017 and 2016:
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
2016
|
|
Basic
Shares:
|
|
|
|
Weighted
average common shares outstanding
|
11,025,864
|
10,633,907
|
|
Weighted
average unvested restricted stock
|
(116,667)
|
(125,000)
|
|
Basic
Shares
|
10,909,197
|
10,508,907
|
|
|
|
|
|
Diluted
Shares:
|
|
|
|
Basic
shares
|
10,909,197
|
10,508,907
|
|
Weighted
average dilutive securities
|
2,399,938
|
—
|
|
Diluted
Shares
|
13,309,135
|
10,508,907
|
For
the three months ended March 31, 2017, weighted average dilutive
securities included dilutive options, restricted stock awards, and
the convertible note issued in connection with the acquisition of
AutoWeb, Inc.
For
the three months ended March 31, 2017 and 2016, 2.2 million and 2.8
million of potentially anti-dilutive shares of common stock have
been excluded from the calculation of diluted net earnings per
share, respectively.
On June 7, 2012, the Company announced that its
board of directors had authorized the Company to repurchase up to
$2.0 million of the Company's Common Stock, and on September 17,
2014 the Company announced that the board of directors
had approved the repurchase of up to an additional $1.0 million of
the Company's Common Stock. The authorization may be
increased or otherwise modified, renewed, suspended or terminated
by the Company at any time, without prior notice. The
Company may repurchase Common Stock from time to time on the open
market or in private transactions. Shares repurchased under this
program have been retired and returned to the status of authorized
and unissued shares. The Company funded repurchases and
anticipates that the Company would fund future repurchases through
the use of available cash. The repurchase authorization does
not obligate the Company to repurchase any particular number of
shares. The timing and actual number of repurchases of
additional shares, if any, under the Company’s stock
repurchase program will depend upon a variety of factors, including
price, market conditions, release of quarterly and annual earnings
and other legal, regulatory and corporate considerations at the
Company’s sole discretion. The impact of
repurchases on the Company’s Tax Benefit Preservation Plan,
as amended, and on the Company’s use of its net operating
loss carryovers and other tax attributes if the Company were to
experience an “ownership change,” as defined in Section
382 of the Internal Revenue Code, is also a factor that the Company
considers in connection with share repurchases. No
shares were repurchased in the three months ended March 31, 2017
and 2016, respectively.
Warrants. The
warrant to purchase 69,930 shares of Company common stock issued in
connection with the acquisition of AutoUSA on January 13, 2014
(“AutoUSA Acquisition
Date”) was valued at
$7.35 per share for a total value of $0.5 million
(“AutoUSA
Warrant”). The
Company used an option pricing model to determine the value of the
AutoUSA Warrant. Key assumptions used in valuing the
AutoUSA Warrant are as follows: risk-free rate of 1.6%, stock price
volatility of 65.0% and a term of 5.0 years. The AutoUSA
Warrant was valued based on long-term stock price volatilities of
the Company. The exercise price of the AutoUSA Warrant
is $14.30 per share (as may be adjusted for stock splits, stock
dividends, combinations and other similar events). The
AutoUSA Warrant became exercisable on January 13, 2017 and expires
on January 13, 2019. The right to exercise the AutoUSA
Warrant is accelerated in the event of a change in control of the
Company.
The warrant to purchase up to 148,240 shares of
Series B Preferred Stock issued in connection with the acquisition
of AutoWeb, Inc. (“AutoWeb
Warrant”) was valued at
$1.72 per share for a total value of $2.5 million. The
Company used an option pricing model to determine the value of the
AutoWeb Warrant. Key assumptions used in valuing the
AutoWeb Warrant are as follows: risk-free rate of 1.9%, stock price
volatility of 74.0% and a term of 7.0 years. The AutoWeb
Warrant was valued based on long-term stock price volatilities of
the Company’s Common Stock. The exercise price of
the AutoWeb Warrant is $184.47 per share (as adjusted for stock
splits, stock dividends, combinations and other similar
events). The AutoWeb Warrant becomes exercisable on
October 1, 2018, subject to the following vesting conditions: (i)
with respect to the first one-third (1/3) of the warrant shares, if
at any time after the issuance date of the AutoWeb Warrant and
prior to the expiration date of the AutoWeb Warrant the weighted
average closing price of the Common Stock for the preceding 30
trading days (adjusted for any stock splits, stock dividends,
reverse stock splits or combinations of the Common Stock occurring
after the issuance date) (“Weighted Average Closing
Price”) is at or above
$30.00; (ii) with respect to the second one-third (1/3) of the
warrant shares, if at any time after the issuance date of the
AutoWeb Warrant and prior to the expiration date the Weighted
Average Closing Price is at or above $37.50; and (iii) with respect
to the last one-third (1/3) of the warrant shares, if at any time
after the issuance date of the AutoWeb Warrant and prior to the
expiration date the Weighted Average Closing Price is at or above
$45.00. The AutoWeb Warrant expires on October 1,
2022.
6. Share-Based Compensation
Share-based
compensation expense is included in costs and expenses in the
accompanying Unaudited Consolidated Condensed Statements of
Operation and Comprehensive Income (Loss) as follows:
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
2016
|
|
|
|
|
|
Share-based
compensation expense:
|
|
|
|
Cost
of revenues
|
$20
|
$14
|
|
Sales and marketing [1]
|
412
|
632
|
|
Technology support [2]
|
128
|
332
|
|
General
and administrative
|
452
|
388
|
|
Share-based
compensation costs
|
1,012
|
1,366
|
|
|
|
|
|
Amount
capitalized to internal use software
|
1
|
2
|
|
Total
share-based compensation costs
|
$1,011
|
$1,364
|
(1)
Certain
awards were modified in connection with the termination of an
executive officer’s employment with the Company and their
vesting accelerated in accordance with the terms of the applicable
option agreements. The total expense related to these
modifications and acceleration of vested awards was approximately
$0.3 million in the three months ended March 31, 2016.
(2)
The
vesting of certain awards was accelerated in accordance with the
terms of the applicable option agreements in connection with the
termination of an executive officer’s employment with the
Company. The total expense related to acceleration of vested
awards was approximately $0.2 million in the three months ended
March 31, 2016.
Service-Based
Options. The Company
granted the following service-based options for the three months
ended March 31, 2017 and 2016:
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
2016
|
|
|
|
|
|
Number
of service-based options granted
|
319,250
|
428,900
|
|
Weighted
average grant date fair value
|
$6.91
|
$8.12
|
|
Weighted
average exercise price
|
$13.81
|
$17.12
|
These
options are valued using a Black-Scholes option pricing model and
generally vest one-third on the first anniversary of the grant date
and ratably over twenty-four months thereafter. The
vesting of these awards is contingent upon the employee’s
continued employment with the Company during the vesting
period.
Market Condition
Options. On January 21, 2016, the Company granted 100,000
stock options to its chief executive officer with an exercise price
of $17.09 and grant date fair value of $1.47 per option, using a
Monte Carlo simulation model (“CEO Market Condition
Options”).
The CEO Market Condition Options were previously valued at $2.94
per option but were revalued when the requisite stockholder
approval for the Company’s Amended and Restated 2014 Equity
Incentive Plan was obtained in June 2016. The CEO Market Condition
Options are subject to both stock price-based and service-based
vesting requirements that must be satisfied for the CEO Market
Condition Options to vest and become exercisable. The CEO Market
Condition Options provide that the stock price-based vesting
condition will be met (i) with respect to the first one-third (1/3)
of the CEO Market Condition Options, if at any time after the grant
date and prior to the expiration date of the CEO Market Condition
Options the Weighted Average Closing Price is at or above $30.00;
(ii) with respect to the second one-third (1/3) of the CEO Market
Condition Options, if at any time after the grant date and prior to
the expiration date the Weighted Average Closing Price is at or
above $37.50; and (iii) with respect to the last one-third (1/3) of
the CEO Market Condition Options, if at any time after the grant
date and prior to the expiration date the Weighted Average Closing
Price is at or above $45.00. With respect to any of the CEO Market
Condition Options for which the stock price-based requirements are
met, these options are also subject to the following service-based
vesting schedule: (i) thirty-three and one-third percent (33 1/3%)
of these options vested on January 21, 2017 and (ii) one
thirty-sixth (1/36th) of these options will vest on each successive
monthly anniversary thereafter for the following twenty-four months
ending on January 21, 2019. None of the stock-price based vesting
requirements have been met as of March 31, 2017. The CEO Market
Condition Options expire on January 21, 2023.
Stock option
exercises. The
following stock options were exercised during the three months
ended March 31, 2017 and 2016,
respectively:
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
2016
|
|
|
|
|
|
Number
of stock options exercised
|
58,959
|
53,839
|
|
Weighted
average exercise price
|
$7.75
|
$12.97
|
The
grant date fair value of stock options granted during these periods
was estimated using the Black-Scholes option pricing model using
the following weighted average assumptions:
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
2016
|
|
|
|
|
|
Dividend
yield
|
—
|
—
|
|
Volatility
|
61%
|
58%
|
|
Risk-free
interest rate
|
1.8%
|
1.3%
|
|
Expected
life (years)
|
4.4
|
4.4
|
Upon
adoption of ASU 2016-09, the Company has elected to estimate the
number of forfeitures.
Restricted Stock
Awards. The Company
granted an aggregate of 125,000 restricted stock awards
(“RSAs”) on April 23, 2015 in connection with the
promotion of one of its executive officers. Of the
125,000 RSAs, 25,000 were service-based and the forfeiture
restrictions lapse with respect to one-third of the restricted
stock on each of the first, second and third anniversaries of the
date of the award. Forfeiture restrictions lapsed on
8,333 shares of restricted stock on April 23, 2016. This executive
officer was also awarded 100,000 shares of the Company’s
common stock in the form of performance-based restricted
stock. The shares are subject to forfeiture upon the
earlier of (such earliest date being referred to as the
“Termination
Date”) (i) a termination
of the executive officer’s employment with the Company; (ii)
March 31, 2018; and (iii) other events of forfeiture set forth in
the award agreement, subject to the following: (i) the forfeiture
restrictions with respect to 50,000 of the restricted shares will
lapse if any time prior to the Termination Date the weighted
average closing price of the Company’s common stock for the
preceding 30 trading days is at or above $30.00 per share, and (ii)
the forfeiture restrictions with respect to any of the restricted
shares that remain subject to forfeiture restrictions will lapse if
any time prior to the Termination Date the weighted average closing
price of the Company’s common stock for the preceding 30
trading days is at or above $45.00 per share. None of
the forfeiture restrictions had lapsed during the three months
ended March 31, 2017.
7. Investments
The Company’s investments at March 31, 2017
and December 31, 2016 consisted primarily of investments in
privately-held SaleMove, Inc., a Delaware corporation
(“SaleMove”), and GoMoto, Inc., a Delaware corporation (“GoMoto”).
In
September 2013, the Company entered into a Convertible Note
Purchase Agreement with SaleMove in which Autobytel invested
$150,000 in SaleMove in the form of an interest bearing,
convertible promissory note. In November 2014, the Company
invested an additional $400,000 in SaleMove in the form of an
interest bearing, convertible promissory note. Upon
closing of a preferred stock financing by SaleMove in July 2015,
these two notes were converted in accordance with their terms into
an aggregate of 190,997 Series A Preferred Stock, which shares are
classified as a long-term investment on the consolidated balance
sheet as of March 31, 2017.
In
October 2013, the Company entered into a Reseller Agreement with
SaleMove to become a reseller of SaleMove’s technology for
enhancing communications with
consumers. SaleMove’s technology allows Dealers
and Manufacturers to enhance the online shopping experience by
interacting with consumers in real-time, including live video,
audio and text-based chat or by phone. The Company and SaleMove
will equally share in revenues from automotive-related sales of the
SaleMove products and services. In connection with this reseller
arrangement, the Company advanced to SaleMove $1.0
million to fund SaleMove’s 50% share of various product
development, marketing and sales costs and expenses, with the
advanced funds to be recovered by the Company from SaleMove’s
share of sales revenue. SaleMove advances are repaid to
the Company from SaleMove’s share of net revenues and
expenses from the Reseller Agreement. As of March 31,
2017, the net advances due from SaleMove totaled $509,000 and are
recorded as an other long-term asset on the Unaudited Consolidated
Condensed Balance Sheets.
In December 2014, the Company entered into a
Series Seed Preferred Stock Purchase Agreement with GoMoto in which
the Company paid $100,000 for 317,460 shares of Series Seed
Preferred Stock, $0.001 par value per share. The
$100,000 investment in GoMoto was recorded at cost because the
Company does not have significant influence over
GoMoto. In October 2015 and May 2016, the Company
invested an additional $375,000 and $375,000, respectively, in
GoMoto in the form of convertible promissory notes
(“GoMoto Notes”). The GoMoto Notes accrue
interest at an annual rate of 4.0% and are due and payable in full
on or after October 28, 2017 upon demand or at GoMoto’s
option ten days’ written notice unless converted prior to the
maturity date. The GoMoto Notes will be converted into
preferred stock of GoMoto in the event of a preferred stock
financing by GoMoto of at least $1.0 million prior to the maturity
date of the convertible note. As of March 31, 2017, the Company
maintains a reserve of $0.8 million related to the GoMoto Notes and
related interest receivable because the Company believes the
amounts may not be recoverable.
8. Selected Balance Sheet Accounts
Property and
Equipment. Property
and equipment consists of the following:
|
|
March 31,
2017
|
December 31,
2016
|
|
|
(in thousands)
|
|
|
Computer
software and hardware
|
$12,189
|
$12,027
|
|
Capitalized
internal use software
|
5,360
|
5,359
|
|
Furniture
and equipment
|
1,332
|
1,332
|
|
Leasehold
improvements
|
1,139
|
1,139
|
|
|
20,020
|
19,857
|
|
Less—Accumulated
depreciation and amortization
|
(15,880)
|
(15,427)
|
|
Property
and Equipment, net
|
$4,140
|
$4,430
|
The
Company periodically reviews long-lived assets to determine if
there are any impairment indicators. The Company
assesses the impairment of these assets, or the need to accelerate
amortization, whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. The Company’s
judgments regarding the existence of impairment indicators are
based on legal factors, market conditions and operational
performance of the Company’s long-lived assets. If
such indicators exist, the Company evaluates the assets for
impairment based on the estimated future undiscounted cash flows
expected to result from the use of the assets and their eventual
disposition. Should the carrying amount of an asset exceed its
estimated future undiscounted cash flows, an impairment loss is
recorded for the excess of the asset’s carrying amount over
its fair value. Fair value is generally determined based on a
valuation process that provides an estimate of the fair value of
these assets using an undiscounted cash flow model, which includes
assumptions and estimates.
Concentration of Credit Risk
and Risks Due to Significant Customers. Financial instruments that
potentially subject the Company to concentrations of credit risk
consist primarily of cash and cash equivalents and accounts
receivable. Cash and cash equivalents are primarily maintained with
two high credit quality financial institutions in the United
States. Deposits held by banks exceed the amount of insurance
provided for such deposits. These deposits may be redeemed upon
demand.
Accounts
receivable are primarily derived from fees billed to Dealers and
Manufacturers. The Company generally requires no
collateral to support its accounts receivables and maintains an
allowance for bad debts for potential credit losses.
The
Company has a concentration of credit risk with its automotive
industry related accounts receivable balances, particularly with
Urban Science Applications (which represents Acura, Audi, Honda,
Nissan, Infiniti, Subaru, Toyota, Volkswagen and Volvo), Ford
Direct and General Motors. During the first three months of 2017,
approximately 29% of the Company’s total revenues was derived
from these three customers, and approximately 40%, or $11.7 million
of gross accounts receivables, related to these three customers at
March 31, 2017.
During
the first three months of 2016, approximately 26% of the
Company’s total revenues was derived from General Motors,
Urban Science Applications and Jumpstart Automotive, and
approximately 41%, or $11.7 million of gross accounts receivables,
related to these three customers at March 31, 2016.
Intangible
Assets. The Company
amortizes specifically identified definite-lived intangible assets
using the straight-line method over the estimated useful lives of
the assets. The Company’s intangible assets will
be amortized over the following estimated useful lives (in
thousands):
|
|
|
|
March 31, 2017
|
December 31, 2016
|
|||||
|
Definite-lived
Intangible Asset
|
|
Estimated Useful Life
|
|
Gross
|
Accumulated Amortization
|
Net
|
Gross
|
Accumulated Amortization
|
Net
|
|
Trademarks/trade
names/licenses/domains
|
|
3
– 6 years
|
|
$5,519
|
$(3,152)
|
$2,367
|
$9,294
|
$(6,756)
|
$2,538
|
|
Software
and publications
|
|
3
years
|
|
1,300
|
(1,300)
|
—
|
1,300
|
(1,300)
|
—
|
|
Customer
relationships
|
|
2 -
10 years
|
|
19,563
|
(8,229)
|
11,334
|
19,563
|
(7,454)
|
12,109
|
|
Employment/non-compete
agreements
|
|
1-5
years
|
|
1,510
|
(1,375)
|
135
|
1,510
|
(1,273)
|
237
|
|
Developed
technology
|
|
5-7
years
|
|
8,955
|
(2,596)
|
6,359
|
8,955
|
(2,256)
|
6,699
|
|
|
|
|
$36,847
|
$(16,652)
|
$20,195
|
$40,622
|
$(19,039)
|
$21,583
|
|
|
|
|
|
March 31, 2017
|
December 31, 2016
|
|||||
|
Indefinite-lived
Intangible Asset
|
|
Estimated Useful Life
|
|
Gross
|
Accumulated Amortization
|
Net
|
Gross
|
Accumulated Amortization
|
Net
|
|
Tradename
|
|
Indefinite
|
|
$2,200
|
$—
|
$2,200
|
$2,200
|
$—
|
$2,200
|
Amortization
expense is included in “Depreciation and amortization”
in the Unaudited Consolidated Condensed Statements of
Operations. Amortization expense was $1.4 million for
both the three months ended March 31, 2017 and 2016,
respectively.
Amortization
expense for the remainder of the year and for future years is as
follows:
|
Year
|
Amortization Expense
|
|
|
(in thousands)
|
|
2017
|
$3,978
|
|
2018
|
5,028
|
|
2019
|
3,655
|
|
2020
|
2,224
|
|
2021
|
2,116
|
|
2022
|
1,518
|
|
Thereafter
|
1,676
|
|
|
$20,195
|
Goodwill. Goodwill
represents the excess of the purchase price over the fair value of
net assets acquired. Goodwill is not amortized and is
assessed annually for impairment or earlier, when events or
circumstances indicate that the carrying value of such assets may
not be recoverable. The Company did not record
impairment related to goodwill as of March 31, 2017 and December
31, 2016.
Accrued Expenses and Other
Current Liabilities. Accrued expenses and other current
liabilities consisted of the following:
|
|
March 31,
2017
|
December 31,
2016
|
|
|
(in thousands)
|
|
|
Accrued
employee-related benefits
|
$2,246
|
$4,530
|
|
Other
accrued expenses and other current liabilities:
|
|
|
|
Other
accrued expenses and current liabilities
|
7,197
|
7,849
|
|
Amounts
due to customers
|
544
|
466
|
|
Total
other accrued expenses and other current liabilities
|
7,741
|
8,315
|
|
|
|
|
|
Total
accrued expenses and other current liabilities
|
$9,987
|
$12,845
|
Convertible Notes
Payable. In
connection with the acquisition of AutoUSA, the Company issued a
convertible subordinated promissory note for $1.0 million
(“AutoUSA Note”)
to AutoNationDirect.com, Inc. The fair value of the AutoUSA
Note as of the AutoUSA Acquisition Date was $1.3 million.
This valuation was estimated using a binomial option pricing
method. Key assumptions used by the Company’s
outside valuation consultants in valuing the AutoUSA Note
include a market yield of 1.6% and stock price volatility of
65.0%. As the AutoUSA Note was issued with a substantial
premium, the Company recorded the premium as additional paid-in
capital. Interest is payable at an annual interest rate of 6%
in quarterly installments. The entire outstanding balance of
the AutoUSA Note is to be paid in full on January 31, 2019.
At any time after January 31, 2017, the holder of the AutoUSA Note
may convert all or any part, but at least 30,600 shares, of the
then outstanding and unpaid principal of the AutoUSA Note into
fully paid shares of the Company's common stock at a conversion
price of $16.34 per share (as adjusted for stock splits, stock
dividends, combinations and other similar events). The right
to convert the AutoUSA Note into common stock of the Company is
accelerated in the event of a change in control of the
Company. In the event of default, the entire unpaid balance
of the AutoUSA Note will become immediately due and payable and
will bear interest at the lower of 8% per year and the highest
legal rate permissible under applicable law.
9. Credit Facility
On June 1, 2016, the Company entered into a Fourth
Amendment to Loan Agreement (“Credit Facility
Amendment”) with MUFG
Union Bank, N.A., formerly Union Bank, N.A.
(“Union Bank”), amending the Company’s existing
Loan Agreement with Union Bank initially entered into on February
26, 2013, as amended on September 10, 2013, January 13, 2014 and
May 20, 2015 (the existing Loan Agreement, as amended to date, is
referred to collectively as the “Credit Facility
Agreement”). The Credit Facility Agreement
provided for a $9.0 million term loan (“Term Loan 1”). The Credit Facility Amendment
provides for (i) a $15.0 million term loan
(“Term
Loan 2”); (ii) the
amendment of certain financial covenants in the Credit Facility
Agreement; and (iii) amendments to the Company’s existing
$8.0 million working capital revolving line of credit
(“Revolving
Loan”).
Term Loan 1 is amortized over a period of four
years, with fixed quarterly principal payments of $562,500.
Borrowings under Term Loan 1 bear interest at either (i) the
bank’s Reference Rate (prime rate) minus 0.50% or (ii) the
London Interbank Offering Rate (“LIBOR”) plus 2.50%, at the option of the Company.
Interest under Term Loan 1 adjusts (i) at the end of each LIBOR
rate period (1, 2, 3, 6 or 12 months terms) selected by the
Company, if the LIBOR rate is selected; or (ii) with changes in
Union Bank’s Reference Rate, if the Reference Rate is
selected. Borrowings under Term Loan 1 are secured by a
first priority security interest on all of the Company’s
personal property (including, but not limited to, accounts
receivable) and proceeds thereof. Term Loan 1 matures on December
31, 2017. Borrowing under Term Loan 1 was limited to use
for the acquisition of AutoUSA, and the Company drew down the
entire $9.0 million of Term Loan 1, together with $1.0 million
under the Revolving Loan, in financing this
acquisition. The outstanding balance of Term Loan 1 as
of March 31, 2017 was $1.7 million and is classified as a current
liability on the Unaudited Consolidated Condensed Balance
Sheets.
Term
Loan 2 is amortized over a period of five years, with fixed
quarterly principal payments of $750,000. Borrowings under Term
Loan 2 bear interest at either (i) LIBOR plus 3.00% or (ii) the
bank’s Reference Rate (prime rate), at the option of the
Company. Borrowings under the Revolving Loan bear interest at
either (i) the LIBOR plus 2.50% or (ii) the bank’s Reference
Rate (prime rate) minus 0.50%, at the option of the Company.
Interest under both Term Loan 2 and the Revolving Loan adjust (i)
at the end of each LIBOR rate period (1, 2, 3, 6 or 12 months
terms) selected by the Company, if the LIBOR rate is selected; or
(ii) with changes in Union Bank’s Reference Rate, if the
Reference Rate is selected. The Company paid an upfront fee of
0.10% of the Term Loan 2 principal amount upon drawing upon Term
Loan 2 and also pays a commitment fee of 0.10% per year on the
unused portion of the Revolving Loan, payable quarterly in arrears.
Borrowings under Term Loan 2 and the Revolving Loan are secured by
a first priority security interest on all of the Company’s
personal property (including, but not limited to, accounts
receivable) and proceeds thereof. Term Loan 2 matures June 30,
2020, and the maturity date of the Revolving Loan was extended
from March 31, 2017 to April 30, 2018. Borrowings under the
Revolving Loan may be used as a source to finance working capital,
capital expenditures, acquisitions and stock buybacks and for other
general corporate purposes. Borrowing under Term Loan 2 was limited
to use for the acquisition of Dealix/Autotegrity, and the Company
drew down the entire $15.0 million of Term Loan 2, together with
$2.75 million under the Revolving Loan and $6.76 million from
available cash on hand, in financing this
acquisition. The outstanding balances of Term Loan 2 and
the Revolving Loan as of March 31, 2017 were $9.8 million and $8.0
million, respectively.
The
Credit Facility Agreement contains certain customary affirmative
and negative covenants and restrictive and financial covenants,
including that the Company maintain specified levels of minimum
consolidated liquidity and quarterly and annual earnings before
interest, taxes and depreciation and amortization, which the
Company was in compliance with as of March 31, 2017.
10. Commitments and Contingencies
Employment Agreements
The
Company has employment agreements and retention agreements with
certain key employees. A number of these agreements require
severance payments, continuation of certain insurance benefits and
acceleration of vesting of stock options in the event of a
termination of employment by the Company without cause or by the
employee for good reason.
Litigation
From
time to time, the Company may be involved in litigation matters
arising from the normal course of its business activities. The
actions filed against the Company and other litigation, even if not
meritorious, could result in substantial costs and diversion of
resources and management attention, and an adverse outcome in
litigation could materially adversely affect its business, results
of operations, financial condition and cash flows.
11. Income Taxes
We have adopted the provisions of ASU 2016-09 as
of January 1, 2017 which requires recognition through opening
retained earnings of any pre-adoption date net operating loss
(“NOL”) carryforwards from nonqualified stock
options and other employee share-based payments (e.g., restricted
shares and share appreciation rights), as well as recognition of
all income tax effects from share-based payments arising on or
after January 1, 2017 in income tax expense. As a result, we
recognized through opening retained earnings $18.4 million of
pre-adoption date NOL carryforwards with remaining carryforward
periods of at least seven years (the corresponding deferred tax
asset is $6.5 million). No valuation allowance is needed as the
newly recognized NOL is considered more likely than not realizable
given that we have sufficient positive sources of taxable income
including continued profitability and utilization of NOLs, taxable
reversing temporary differences and reliable forecast of income. In
addition, we realized shortfall tax deficiencies in the interim
period of adoption of $0.2 million, which we recognized as a
discrete period income tax expense as required by the ASU. This
detriment resulted in increasing our effective tax rate for the
interim period by 18.39%.
On
an interim basis, the Company estimates what its anticipated annual
effective tax rate will be and records a quarterly income tax
provision in accordance with the estimated annual rate, plus the
tax effect of certain discrete items that arise during the
quarter. As the fiscal year progresses, the Company
refines its estimates based on actual events and financial results
during the year. This process can result in significant
changes to the Company’s estimated effective tax
rate. When this occurs, the income tax provision
(benefit) is adjusted during the quarter in which the estimates are
refined so that the year-to-date provision reflects the estimated
annual effective tax rate. These changes, along with
adjustments to the Company's deferred taxes and related valuation
allowance, may create fluctuations in the overall effective tax
rate from quarter to quarter.
The
Company’s effective tax rate for the three months ended March
31, 2017 differed from the U.S. federal statutory rate primarily
due to state income taxes and tax deficiencies from stock-based
compensation.
The
total amount of unrecognized tax benefits, excluding associated
interest and penalties, was $0.5 million as of March 31, 2017, all
of which, if subsequently recognized, would have affected the
Company’s tax rate.
As
of March 31, 2017 and December 31, 2016, the total balance of
accrued interest and penalties related to uncertain tax positions
was zero. The Company recognizes interest and penalties
related to uncertain tax positions as a component of income tax
expense, and the accrued interest and penalties are included in
deferred and other long-term liabilities in the Company’s
condensed consolidated balance sheets. There were no
material interest or penalties included in income tax expense
(benefit) for the three months ended March 31, 2017 and March, 31,
2016.
The
Company is subject to taxation in the U.S. and in various foreign
and state jurisdictions. Due to expired statutes of
limitation, the Company’s federal income tax returns for
years prior to calendar year 2013 are not subject to examination by
the U.S. Internal Revenue Service. Generally, for the
majority of state jurisdictions where the Company does business,
periods prior to calendar year 2012 are no longer subject to
examination. The Company does not anticipate a
significant change to the total amount of unrecognized tax benefits
within the next twelve months. Audit outcomes and the
timing of settlements are subject to significant
uncertainty.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of
Operations
Cautionary Note Concerning Forward-Looking
Statements
The Securities and Exchange Commission
(“SEC”) encourages companies to disclose
forward-looking information so that investors can better understand
a company’s future prospects and make informed investment
decisions. This Quarterly Report on Form 10-Q contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as
“anticipates,” “estimates,”
“expects,” “projects,”
“intends,” “plans,” “believes,”
“will” and words of similar substance used in
connection with any discussion of future operations or financial
performance identify forward-looking statements. In particular,
statements regarding expectations and opportunities, industry
trends, new product expectations and capabilities, and our outlook
regarding our performance and growth are forward-looking
statements. This Quarterly Report on Form 10-Q also contains
statements regarding plans, goals and objectives. There is no
assurance that we will be able to carry out our plans or achieve
our goals and objectives or that we will be able to do so
successfully on a profitable basis. These forward-looking
statements are just predictions and involve risks and
uncertainties, many of which are beyond our control, and actual
results may differ materially from these statements. Factors that
could cause actual results to differ materially from those
reflected in forward-looking statements include, but are not
limited to, those discussed in this Item 2 and under the heading
“Risk Factors” in our annual report on Form 10-K for
the year ended December 31, 2016 (“2016 Form 10-K”).
Investors are urged not to place undue reliance on forward-looking
statements. Forward-looking statements speak only as of the date on
which they were made. Except as may be required by law, we do not
undertake any obligation, and expressly disclaim any obligation, to
update or alter any forward-looking statements, whether as a result
of new information, future events or otherwise. All forward-looking
statements contained herein are qualified in their entirety by the
foregoing cautionary statements.
You
should read the following discussion of our results of operations
and financial condition in conjunction with our unaudited
consolidated condensed financial statements and related notes
included in Part I, Item 1 of this Quarterly Report on Form 10-Q
and our audited consolidated financial statements and the notes
thereto in the 2016 Form 10-K.
Our corporate website is located at
www.autobytel.com.
Information on our website is not incorporated by reference in this
Quarterly Report on Form 10-Q. At or through the Investor Relations
section of our website we make available free of charge our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and all amendments to these reports as soon as
practicable after the reports are electronically filed with or
furnished to the SEC.
Unless
the context otherwise requires, the terms “we”,
“us”, “our”, “Autobytel” and
“Company” refer to Autobytel Inc. and its consolidated
subsidiaries.
Basis of Presentation and Critical Accounting Policies
See Note 2, Basis of
Presentation, to the
accompanying unaudited consolidated condensed financial
statements.
We prepare our financial statements in conformity
with accounting principles generally accepted in the United States
of America (“GAAP”), which require us to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Accordingly,
actual results could differ materially from our estimates. To the
extent that there are material differences between these estimates
and our actual results, our financial condition or results of
operations may be affected. For a detailed discussion of the
application of our critical accounting policies, see Note 2 of the
“Notes to Consolidated Financial Statements” in Part
II, Item 8 “Financial Statements and Supplementary
Data” in the 2016 Form 10-K. Except for the accounting
pronouncements adopted by the Company that are described in Note 3
included in Part I, Item 1 of this Quarterly Report on Form 10-Q,
there have been no changes to our critical accounting policies
since we filed our 2016 Form 10-K.
Recent Disposal
On
December 19, 2016, Autobytel and Car.com entered into an Asset
Purchase and Sale Agreement with Internet Brands pursuant to which
Internet Brands acquired substantially all of the assets of the
automotive specialty finance leads group of Car.com. The
transaction was completed effective as of December 31, 2016. The
transaction consideration consisted of $3.2 million in cash and
$1.6 million to be paid over a five year period pursuant to a
Transitional License and Linking Agreement. The Company recorded a
gain on sale of approximately $2.2 million in connection with the
transaction in the fourth quarter of 2016.
For additional information concerning this
disposal, see Note 4, Disposal of Specialty Finance
Leads Product, Notes to
Unaudited Consolidated Condensed Financial Statements included in
Part I, Item 1 of this Quarterly Report on Form
10-Q.
Overview
We are an automotive marketing services company
that assists automotive retail dealers (“Dealers”) and automotive manufacturers
(“Manufacturers”)
market and sell new and used vehicles to consumers through our
programs for online lead referrals (“Leads”), Dealer marketing products and services,
online advertising and consumer traffic referral programs and
mobile products.
Our consumer-facing automotive websites
(“Company
Websites”), including our
flagship website Autobytel.com®, provide consumers with
information and tools to aid them with their automotive purchase
decisions and the ability to submit inquiries requesting Dealers to
contact the consumers regarding purchasing or leasing vehicles
(“Vehicle
Leads”). The
Company’s mission for consumers is to be “Your Lifetime
Automotive Advisor"® by engaging consumers throughout the
entire lifecycle of their automotive needs.
We measure Lead quality by the conversion of Leads
to actual vehicle sales, which we refer to as the “buy
rate.” Buy rate is the percentage of the consumers submitting
Leads that we delivered to our customers represented by the number
of these consumers who purchased vehicles within ninety days of the
date of the Lead submission. We rely on detailed feedback
from Manufacturers and wholesale customers to confirm the
performance of our Leads. Our Manufacturer and
wholesale customers each match the Leads we deliver to our
customers against vehicle sales to provide us with information
about vehicle purchases by the consumers who submitted Leads that
we delivered to these customers. Autobytel also obtains vehicle registration
data from a third party provider. This information, together with
our internal analysis allows us to estimate the buy rates for the
consumers who submitted the Internally Generated Leads and
Non-Internally Generated Leads that we delivered to our customers,
and based on these estimates, to estimate an industry average buy
rate. Based on the most current information and our internal
analysis, we have estimated that, on average, consumers who submit
Internally-Generated Leads that we deliver to our customers have an
estimated buy rate of approximately 18%. Buy rates that
individual Dealers may achieve can be impacted by factors such as
the strength of processes and procedures within the dealership to
manage communications and follow up with
consumers.
In
addition, we report a number of key metrics to our customers,
allowing them to gain a better understanding of the revenue
opportunities that they may realize by acquiring Leads from
us. We can now optimize the mix of Leads we deliver to
our customers based on multiple sources of quality measurements.
Also, by reporting the buying behavior of potential consumers, the
findings also can help shape improvements to online Lead
management, online advertising and dealership sales process
training. By providing actionable data, we are now
placing useful information in the hands of our
customers.
For
the three months ended March 31, 2017 our business, results of
operations and financial condition were affected, and may continue
to be affected in the future, by general economic and market
factors, conditions in the automotive industry, the market for
Leads and the market for advertising services, including, but not
limited to, the following:
●
The
effect of unemployment on the number of vehicle
purchasers;
●
Pricing
and purchase incentives for vehicles;
●
The
expectation that consumers will be purchasing fewer vehicles
overall during their lifetime as a result of better quality
vehicles and longer warranties;
●
The
impact of fuel prices on demand for the number and types of
vehicles;
●
Increases
or decreases in the number of retail Dealers or in the number of
Manufacturers and other wholesale customers in our customer
base;
●
The
effect of changes in search engine algorithms and methodologies on
our Lead generation and website advertising activities and
margins;
●
Volatility
in spending by Manufacturers and others in their marketing
budgets and allocations;
●
The
competitive impact of consolidation in the online automotive
referral industry; and
●
The
effect of changes in transportation policy, including the potential
increase of transportation options.
In
addition, our future business, results of operations and financial
condition will be affected by our acquisition of AutoWeb, discussed
above in the Notes to Unaudited Consolidated Condensed Financial
Statements included in Part I, Item 1 of this Quarterly Report on
Form 10-Q.
Results of Operations
Three Months
Ended March 31, 2017 Compared to the Three Months Ended March 31,
2016
The
following table sets forth certain statement of operations data for
the three-month periods ended March 31, 2017 and 2016 (certain
amounts may not calculate due to rounding):
|
|
2017
|
% of total revenues
|
2016
|
% of total revenues
|
$ Change
|
% Change
|
|
|
(Dollar amounts in thousands)
|
|
||||
|
Revenues:
|
|
|
|
|
|
|
|
Lead
fees
|
$29,092
|
78%
|
$31,996
|
88%
|
$(2,904)
|
(9)%
|
|
Advertising
|
7,969
|
21
|
3,766
|
11
|
4,203
|
112
|
|
Other
revenues
|
280
|
1
|
485
|
1
|
(205)
|
(42)
|
|
Total
revenues
|
37,341
|
100
|
36,247
|
100
|
1,094
|
3
|
|
Cost
of revenues
|
24,430
|
66
|
22,612
|
62
|
1,818
|
8
|
|
Gross
profit
|
12,911
|
34
|
13,635
|
38
|
(724)
|
(5)
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Sales
and marketing
|
3,763
|
10
|
5,677
|
16
|
(1,914)
|
(34)
|
|
Technology
support
|
3,253
|
9
|
4,188
|
12
|
(935)
|
(22)
|
|
General
and administrative
|
3,482
|
9
|
3,373
|
9
|
109
|
3
|
|
Depreciation
and amortization
|
1,229
|
3
|
1,286
|
3
|
(57)
|
(4)
|
|
Litigation
settlements
|
(25)
|
—
|
(5)
|
—
|
(20)
|
400
|
|
Total
operating expenses
|
11,702
|
31
|
14,519
|
40
|
(2,817)
|
(19)
|
|
Operating
income (loss)
|
1,209
|
3
|
(884)
|
(2)
|
2,093
|
237
|
|
Interest
and other income (expense), net
|
(100)
|
—
|
(224)
|
(1)
|
124
|
(55)
|
|
Income
(loss) before income tax provision (benefit)
|
1,109
|
3
|
(1,108)
|
(3)
|
2,217
|
200
|
|
Income
tax provision (benefit)
|
625
|
2
|
(432)
|
(1)
|
1,057
|
245
|
|
Net
income (loss)
|
$484
|
1%
|
$(676)
|
(2%)
|
$1,160
|
172%
|
Leads. Lead
fees revenues decreased $2.9 million, or 9%, in the first quarter
of 2017 compared to the first quarter of 2016 primarily as a result
of the disposal of our specialty finance leads product and the
effects of the elimination of poor quality traffic during 2016 from
the Dealix/Autotegrity acquisition in May 2015.
Advertising.
Advertising revenues increased $4.2
million, or 112%, in the first quarter of 2017 compared to the
first quarter of 2016 as a result of an increase in click revenue
due to increased click volume and pricing.
Other
Revenues. Other
revenues consist primarily of revenues from our mobile products and
revenues from our Reseller Agreement with
SaleMove. Other revenues decreased to $0.3 million in the
first quarter of 2017 from $0.5 million in the first quarter of
2016 primarily due to the discontinuation of a Manufacturer’s
brand utilizing other Company products.
Cost of
Revenues. Cost of
revenues consists of purchase request and traffic acquisition costs
and other cost of revenues. Purchase request and traffic
acquisition costs consist of payments made to our purchase request
providers, including internet portals and online automotive
information providers. Other cost of revenues consists of search
engine marketing (“SEM”) and fees paid to third parties for data
and content, including search engine optimization
(“SEO”) activity, included on our websites,
connectivity costs, development costs related to our websites,
compensation related expense and technology license fees, server
equipment depreciation and technology amortization directly related
to the Company Websites. SEM, sometimes referred to as paid search
marketing, is the practice of bidding on keywords on search engines
to drive traffic to a website.
Cost
of revenues increased $1.8 million, or 8%, in the first quarter of
2017 compared to the first quarter of 2016 primarily due to
increased traffic acquisition costs associated with both lead and
click volume offset by a decrease in cost of revenues associated
with the specialty finance divestiture effective December 31,
2016.
Sales and Marketing.
Sales and marketing expense
includes costs for developing our brand equity, personnel costs and
other costs associated with Dealer sales, website advertising,
Dealer support and bad debt expense. Sales and marketing expense in
the first quarter of 2017 decreased $1.9 million, or 34%, compared
to the first quarter of 2016 due primarily to non-recurring
severance related expenses in the first quarter of
2016.
Technology Support.
Technology support expense includes
compensation, benefits, software licenses and other direct costs
incurred by the Company to enhance, manage, maintain, support,
monitor and operate the Company’s websites and related
technologies, and to operate the Company’s internal
technology infrastructure. Technology support expense in the first
quarter of 2017 decreased by $0.9 million, or 22%, compared to the
first quarter of 2016 due primarily to non-recurring severance
related expenses in the first quarter of 2016.
General and
Administrative. General and
administrative expense consists of executive, financial and legal
personnel expenses and costs related to being a public company.
General and administrative expense in the first quarter of 2017 was
relatively flat from the first quarter of 2016.
Depreciation and
Amortization. Depreciation and amortization expense in the first
quarter of 2017 decreased $57,000 to $1.2 million compared to $1.3
million in the first quarter of 2016 primarily due to normal
amortization.
Litigation
Settlements. Payments received primarily from 2010 settlements
of patent infringement claims against third parties relating to the
third parties’ methods of Lead delivery were $25,000 for the
first quarter of 2017 compared to $5,000 in the first quarter of
2016.
Interest and Other Income
(Expense), Net. Interest and other expense was $0.1 million for
the first quarter of 2017 compared to $0.2 million in the first
quarter of 2016. Interest expense decreased to $203,000
in the first quarter of 2017 from $230,000 in the first
quarter of 2016 primarily due to a decreased balance on our term
loans.
Income Taxes.
Income tax expense was $0.6 million in
the first quarter of 2017 compared to income tax benefit of $0.4
million in the first quarter of 2016. Income tax expense
for the first quarter of 2017 differed from the federal statutory
rate primarily due to state income taxes and discrete
items.
Liquidity and Capital Resources
The
table below sets forth a summary of our cash flows for the three
months ended March 31, 2017 and 2016:
|
|
|
Three Months Ended
March 31,
|
|
|||||
|
|
|
2017
|
|
|
2016
|
|
||
|
|
|
(in thousands)
|
|
|||||
|
Net
cash provided by operating activities
|
|
$
|
3,462
|
|
|
$
|
1,560
|
|
|
Net
cash used in investing activities
|
|
|
(163
|
)
|
|
|
(899
|
)
|
|
Net
cash used in financing activities
|
|
|
(2,168
|
)
|
|
|
(627
|
)
|
Our
principal sources of liquidity are our cash and cash equivalents
balances. Our cash and cash equivalents totaled $39.6
million as of March 31, 2017 compared to $38.5 million as of
December 31, 2016.
For
information concerning the Company’s previously announced
share repurchase authorization, see Note 5, Notes to Unaudited
Consolidated Condensed Financial Statements included in Part I,
Item 1 of this Quarterly Report on Form 10-Q.
Credit Facility and Term
Loan. For information
concerning our term and revolving bank loans, see Note 9, Notes to
Unaudited Consolidated Condensed Financial Statements included in
Part I, Item 1 of this Quarterly Report on Form
10-Q.
Net Cash Provided by Operating
Activities. Net cash
provided by operating activities in the three months ended March
31, 2017 of $3.5 million resulted primarily from net income of $0.5
million, as adjusted for non-cash charges. We also had
net decreases in working capital, driven by a decrease in accounts
payable of $2.5 million and cash used to reduce accrued liabilities
of $2.9 million primarily related to the payment of annual
incentive compensation amounts accrued in 2016 and paid in the
first three months of 2017 offset by a decrease in our accounts
receivable balance related to the timing of payments
received.
Net
cash provided by operating activities in the three months ended
March 31, 2016 of $1.6 million resulted primarily from adjustments
for non-cash charges to earnings offset by a net loss of $0.7
million. This was offset by net decreases in working
capital, driven by cash used to reduce accrued liabilities of $3.0
million primarily related to the payment of annual incentive
compensation amounts accrued in 2015 and paid in the first three
months of 2016.
Net Cash Used in Investing
Activities. Net cash
used in investing activities was $0.2 million in the three months
ended March 31, 2017 which primarily related to purchases of
property and equipment and expenditures related to capitalized
internal use software.
Net
cash used in investing activities was $0.9 million in the three
months ended March 31, 2016 which primarily related to purchases of
property and equipment and expenditures related to capitalized
internal use software.
Net Cash Used In Financing
Activities. Net cash
used in financing activities of $2.2 million primarily related to
payments of $2.6 million made against the term loan borrowings in
the first three months of 2017. In addition, stock options for
58,959 shares of the Company’s common stock were exercised in
the first three months of 2017 resulting in $0.5 million cash
inflow.
Net
cash used in financing activities primarily related to payments of
$1.3 million made against the term loan borrowings in the first
three months of 2016. In addition, stock options for 53,839 shares
of the Company’s common stock were exercised in the first
three months of 2016 resulting in $0.7 million cash
inflow.
Off-Balance Sheet Arrangements
At
March 31, 2017, we had no off-balance sheet arrangements as defined
in Regulation S-K, Item 303(a)(4)(D)(ii).
Item 3. Quantitative and Qualitative
Disclosures about Market Risk
In
the ordinary course of business, we are exposed to various market
risk factors, including fluctuations in interest rates and changes
in general economic conditions. For the three months
ended March 31, 2017 there were no material changes in the
information required to be provided under Item 305 of Regulation
S-K from the information disclosed in Item 7A of the 2016 Form
10-K.
Item
4. Controls
and Procedures
As of the end of the period covered by this
Quarterly Report on Form 10-Q, we carried out an evaluation under
the supervision and with the participation of our management,
including our Chief Executive Officer and our Chief Financial
Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-15 under
the Securities Exchange Act of 1934, as amended
(“Exchange Act”). Based on the evaluation, our Chief
Executive Officer and our Chief Financial Officer believe that, as
of the end of the period covered by this Quarterly Report on
Form 10-Q, our disclosure controls and procedures were
effective at ensuring that the information required to be disclosed
by us in the reports that we file or submit under the Exchange Act
are (i) recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms and
(ii) accumulated and communicated to our management, including
our principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required financial
disclosure.
As
of the end of the period covered by this Quarterly Report on Form
10-Q, there were no changes in our internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act)
that have materially affected, or were reasonably likely to
materially affect, our internal control over financial
reporting.
Our
management, including our Chief Executive Officer and our Chief
Financial Officer, does not expect that our disclosure controls and
internal control over financial reporting will prevent all errors
and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of a simple error or
mistake. Additionally, controls may be circumvented by the
individual acts of some persons, by collusion of two or more people
or by management override of the control.
The
design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated
goals under all potential future conditions; over time, a control
may become inadequate because of changes in conditions, or the
degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud
may occur and not be detected.
PART II. OTHER INFORMATION
Item 6. Exhibits
|
2.1‡
|
Asset
Purchase and Sale Agreement dated as of December 19, 2016 by and
among Autobytel, Car.com, Inc., a Delaware corporation, and
Internet Brands, Inc., a Delaware corporation, incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed
with the SEC on December 21, 2016 (SEC File No.
001-34761)
|
|
|
|
|
3.1
|
Fifth Amended and Restated Certificate of Incorporation of
Autobytel Inc. (formerly Autobytel.com Inc.) certified by the
Secretary of State of Delaware (filed December 14, 1998), as
amended by Certificate of Amendment dated March 1, 1999, Second
Certificate of Amendment of the Fifth Amended and Restated
Certificate of Incorporation of Autobytel Inc. dated July 22, 1999,
Third Certificate of Amendment of the Fifth Amended and Restated
Certificate of Incorporation of Autobytel Inc. dated August 14,
2001, and Amended Certificate of Designation of Series A Junior
Participating Preferred Stock dated April 24, 2009, which are
incorporated herein by reference to Exhibit 3.1 to the Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2009
filed with the SEC on April 24, 2009 (SEC File No. 000-22239);
Fourth Certificate of Amendment to Fifth Amended and Restated
Certificate of Incorporation of Autobytel Inc. dated July 10, 2012,
which is incorporated herein by reference to Exhibit 3.1 to the
Current Report on Form 8-K filed with the SEC on July 12, 2012 (SEC
File No. 001-34761); and Fifth Certificate of Amendment to Fifth
Amended and Restated Certificate of Incorporation of Autobytel Inc.
dated July 3, 2013, which is incorporated herein by reference to
Exhibit 3.3 to the Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2013 filed with the SEC on August 1, 2013
(SEC File No. 001-34761); and Certificate of Designations of
Series B Junior Participating Convertible Preferred Stock of
Autobytel Inc. dated October 1, 2015, which is incorporated herein
by reference to Exhibit 3.1 to the October 2015 Form
8-K
|
|
|
|
|
3.2
|
Sixth Amended and Restated Bylaws of Autobytel Inc. dated April 13,
2017, which is incorporated by reference to Exhibit 3.1 to the
Current Report on Form 8-K filed with the SEC on April 14, 2017
(SEC File No. 001-34761)
|
|
4.1
|
Form of Common Stock Certificate of Autobytel Inc., which is
incorporated herein by reference to Exhibit 4.1 to the Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
2001 filed with the SEC on November 14, 2001 (SEC File No.
000-22239)
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|
|
|
|
4.2
|
Tax Benefit Preservation Plan dated as of May 26, 2010 between
Autobytel Inc. and Computershare Trust Company, N.A., as rights
agent, together with the following exhibits thereto: Exhibit A
– Form of Right Certificate; and Exhibit B – Summary of
Rights to Purchase Shares of Preferred Stock of Autobytel Inc.,
which is incorporated herein by reference to Exhibit 4.1 to the
Current Report on Form 8-K filed with the SEC on June 2, 2010 (SEC
File No. 000-22239), as amended by Amendment No. 1 to Tax Benefit
Preservation Plan dated as of April 14, 2014, between Autobytel
Inc. and Computershare Trust Company, N.A., as rights agent, which
is incorporated herein by reference to Exhibit 4.1 to the Current
Report on Form 8-K filed with the SEC on April 16, 2014 (SEC File
No. 001-34761), and as amended by Amendment No. 2 to Tax Benefit
Preservation Plan dated as of April 13, 2017, between Autobytel
Inc. and Computershare Trust Company, N.A., as rights agent, which
is incorporated herein by reference to Exhibit 4.1 to the Current
Report on Form 8-K filed with the SEC on April 14, 2017 (SEC File
No. 001-34761)
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|
|
|
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4.3
|
Certificate of Adjustment Under Section 11(m) of the Tax Benefit
Preservation Plan dated July 12, 2012, which is incorporated by
reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2012 filed with the SEC on
November 8, 2012 (SEC File No. 001-34761)
|
|
|
|
|
10.1‡
|
Transitional
License and Linking Agreement, made as of January 1, 2017, by and
among Internet Brands, Inc., a Delaware corporation, Car.com, Inc.,
a Delaware corporation, and Autobytel, which is incorporated herein
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on
January 6, 2017 (SEC File No. 001-34761)
|
|
|
|
|
10.2
|
Amended and Restated Stockholder Agreement dated as of October 1,
2015 by and among Autobytel, Auto Holdings Ltd., a British Virgin
Islands business company, Manatee Ventures Inc., a British Virgin
Islands business company, Galeb3 Inc., a Florida
corporation, Matías de Tezanos, and José Vargas, and the
other parties set forth on the signature pages thereto, which is
incorporated herein by reference to Exhibit 10.2 to the October
2015 Form 8-K, as amended by Second Amended and Restated
Stockholder Agreement dated as of October 19, 2016, which is
incorporated herein by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the SEC on October 21, 2016 (SEC File
No. 001-34761), as amended by Third Amended and Restated
Stockholder Agreement dated as of November 30, 2016, which is
incorporated herein by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the SEC on December 2, 2016 (SEC File
No. 001-34761), and as amended by Fourth Amended and Restated
Stockholder Agreement dated as of March 1, 2017, which is
incorporated herein by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the SEC on March 2, 2017 (SEC File
No. 001-34761)
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|
|
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10.3*
|
Amendment No. 17 dated April 14, 2017 to the Lease Agreement dated
April 3, 1997 between GFE MacArthur Investments, LLC, as
successor-in-interest to TFP Partners, and Autobytel
|
|
|
|
| 10.4 | Memorandum dated January 31, 2017, amending Letter Agreement dated October 10, 2006 between Autobytel and Glenn E. Fuller, which is incorporated herein by reference to Exhibit 10.13 to the Annual Report on Form 10-K for the Year Ended of December 31, 2016 filed with the SEC on March 9, 2017 (SEC File No. 001-34761) (“2016 Form 10-K”) | |
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|
|
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|
10.5
|
Stock
Memorandums dated January 22, 2016 and
January 31, 2017, amending Letter Agreement dated August 6, 2004
between Autobytel and Wesley Ozima, which is incorporated herein by
reference to Exhibit 10.16 to the 2016 Form
10-K
|
|
|
|
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10.6
|
Employment Offer Letter dated February 14, 2014 between Autobytel
and Taren Peng, as amended by Memorandum dated January 31, 2017,
which is incorporated herein by reference to Exhibit 10.49 to the
2016 Form 10-K
|
|
|
|
|
|
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10.7
|
Amended and Restated Letter Agreement dated April 24, 2013 between
Autobytel and John Skocilic Jr., as amended by Memorandum dated
January 22, 2016 and Memorandum dated January 31, 2017, which is
incorporated herein by reference to Exhibit 10.16 to the 2016 Form
10-K
|
|
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31.1*
|
Rule
13a-14(a)/15d-14(a) Certification by Principal Executive
Officer
|
|
|
|
|
31.2*
|
Rule
13a-14(a)/15d-14(a) Certification by Principal Financial
Officer
|
|
|
|
|
32.1*
|
Section
1350 Certification by Principal Executive Officer and Principal
Financial Officer
|
|
|
|
|
101.INS††
|
XBRL
Instance Document
|
|
|
|
|
101.SCH††
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
|
101.CAL††
|
XBRL
Taxonomy Calculation Linkbase Document
|
|
|
|
|
101.DEF††
|
XBRL
Taxonomy Extension Definition Document
|
|
|
|
|
101.LAB††
|
XBRL
Taxonomy Label Linkbase Document
|
|
|
|
|
101.PRE††
|
XBRL
Taxonomy Presentation Linkbase Document
|
*
Filed or furnished herewith.
‡
Certain
schedules in this Exhibit have been omitted in accordance with Item
601(b)(2) of Regulation S-K. Autobytel will furnish
supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request; provided, however,
that Autobytel may request confidential treatment pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended, for any
schedule or exhibit so furnished.
††
Furnished
with this report. In accordance with Rule 406T of
Regulation S-T, the information in these exhibits shall not be
deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject
to liability under that section, and shall not be incorporated by
reference into any registration statement or other document filed
under the Securities Act of 1933, as amended, except as expressly
set forth by specific reference in such filing.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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|
AUTOBYTEL INC.
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||
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Date: May 4, 2017
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By:
|
/s/
Kimberly S. Boren
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|
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|
Kimberly S. Boren
|
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
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|
|
(Duly Authorized Officer and Principal Financial
Officer)
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Date: May 4, 2017
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By:
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/s/
Wesley Ozima
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Wesley Ozima
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Senior Vice President and Controller
|
|
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(Principal Accounting Officer)
|
|
EXHIBIT INDEX
|
2.1‡
|
Asset
Purchase and Sale Agreement dated as of December 19, 2016 by and
among Autobytel, Car.com, Inc., a Delaware corporation, and
Internet Brands, Inc., a Delaware corporation, incorporated by
reference to Exhibit 2.1 to the Current Report on Form 8-K filed
with the SEC on December 21, 2016 (SEC File No.
001-34761)
|
|
|
|
|
3.1
|
Fifth Amended and Restated Certificate of Incorporation of
Autobytel Inc. (formerly Autobytel.com Inc.) certified by the
Secretary of State of Delaware (filed December 14, 1998), as
amended by Certificate of Amendment dated March 1, 1999, Second
Certificate of Amendment of the Fifth Amended and Restated
Certificate of Incorporation of Autobytel Inc. dated July 22, 1999,
Third Certificate of Amendment of the Fifth Amended and Restated
Certificate of Incorporation of Autobytel Inc. dated August 14,
2001, and Amended Certificate of Designation of Series A Junior
Participating Preferred Stock dated April 24, 2009, which are
incorporated herein by reference to Exhibit 3.1 to the Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2009
filed with the SEC on April 24, 2009 (SEC File No. 000-22239);
Fourth Certificate of Amendment to Fifth Amended and Restated
Certificate of Incorporation of Autobytel Inc. dated July 10, 2012,
which is incorporated herein by reference to Exhibit 3.1 to the
Current Report on Form 8-K filed with the SEC on July 12, 2012 (SEC
File No. 001-34761); and Fifth Certificate of Amendment to Fifth
Amended and Restated Certificate of Incorporation of Autobytel Inc.
dated July 3, 2013, which is incorporated herein by reference to
Exhibit 3.3 to the Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2013 filed with the SEC on August 1, 2013
(SEC File No. 001-34761); and Certificate of Designations of
Series B Junior Participating Convertible Preferred Stock of
Autobytel Inc. dated October 1, 2015, which is incorporated herein
by reference to Exhibit 3.1 to the Current Report on Form 8-K filed
with the SEC on October 6, 2015 (SEC File No. 001-34761)
(“October 2015 Form
8-K”)
|
|
|
|
|
3.2
|
Sixth Amended and Restated Bylaws of Autobytel Inc. dated April 13,
2017, which is incorporated by reference to Exhibit 3.1 to the
Current Report on Form 8-K filed with the SEC on April 14, 2017
(SEC File No. 001-34761) (“April 2017 Form
8-K”)
|
|
4.1
|
Form of Common Stock Certificate of Autobytel Inc., which is
incorporated herein by reference to Exhibit 4.1 to the Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
2001 filed with the SEC on November 14, 2001 (SEC File No.
000-22239)
|
|
|
|
|
4.2
|
Tax Benefit Preservation Plan dated as of May 26, 2010 between
Autobytel Inc. and Computershare Trust Company, N.A., as rights
agent, together with the following exhibits thereto: Exhibit A
– Form of Right Certificate; and Exhibit B – Summary of
Rights to Purchase Shares of Preferred Stock of Autobytel Inc.,
which is incorporated herein by reference to Exhibit 4.1 to the
Current Report on Form 8-K filed with the SEC on June 2, 2010 (SEC
File No. 000-22239), as amended by Amendment No. 1 to Tax Benefit
Preservation Plan dated as of April 14, 2014, between Autobytel
Inc. and Computershare Trust Company, N.A., as rights agent, which
is incorporated herein by reference to Exhibit 4.1 to the Current
Report on Form 8-K filed with the SEC on April 16, 2014 (SEC File
No. 001-34761), and as amended by Amendment No. 2 to Tax Benefit
Preservation Plan dated as of April 13, 2017, between Autobytel
Inc. and Computershare Trust Company, N.A., as rights agent, which
is incorporated herein by reference to Exhibit 4.1 to the April
2017 Form 8-K
|
|
|
|
|
4.3
|
Certificate of Adjustment Under Section 11(m) of the Tax Benefit
Preservation Plan dated July 12, 2012, which is incorporated by
reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2012 filed with the SEC on
November 8, 2012 (SEC File No. 001-34761)
|
|
|
|
|
10.1‡
|
Transitional
License and Linking Agreement, made as of January 1, 2017, by and
among Internet Brands, Inc., a Delaware corporation, Car.com, Inc.,
a Delaware corporation, and Autobytel, which is incorporated herein
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on
January 6, 2017 (SEC File No. 001-34761)
|
|
|
|
|
10.2
|
Amended and Restated Stockholder Agreement dated as of October 1,
2015 by and among Autobytel, Auto Holdings Ltd., a British Virgin
Islands business company, Manatee Ventures Inc., a British Virgin
Islands business company, Galeb3 Inc., a Florida
corporation, Matías de Tezanos, and José Vargas, and the
other parties set forth on the signature pages thereto, which is
incorporated herein by reference to Exhibit 10.2 to the October
2015 Form 8-K, as amended by Second Amended and Restated
Stockholder Agreement dated as of October 19, 2016, which is
incorporated herein by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the SEC on October 21, 2016 (SEC File
No. 001-34761), as amended by Third Amended and Restated
Stockholder Agreement dated as of November 30, 2016, which is
incorporated herein by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the SEC on December 2, 2016 (SEC File
No. 001-34761), and as amended by Fourth Amended and Restated
Stockholder Agreement dated as of March 1, 2017, which is
incorporated herein by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the SEC on March 2, 2017 (SEC File
No. 001-34761)
|
|
|
|
|
10.3*
|
Amendment No. 17 dated April 14, 2017 to the Lease Agreement dated
April 3, 1997 between GFE MacArthur Investments, LLC, as
successor-in-interest to TFP Partners, and Autobytel
|
|
|
|
|
10.4
|
Letter Agreement dated October 10, 2006 between
Autobytel and Glenn E. Fuller, as amended by Memorandum dated April
18, 2008, Memorandum dated as of December 8, 2008, and Memorandum
dated as of March 1, 2009, which are incorporated herein by
reference to Exhibit 10.77 to the Annual Report on Form 10-K for
the Year Ended December 31, 2008 filed with the SEC on March 13,
2009 (SEC File No. 000-22239) (“2008 Form
10-K”); and Memorandum
dated January 31, 2017, amending Letter Agreement dated October 10,
2006 between Autobytel and Glenn E. Fuller, which is incorporated herein by reference to
Exhibit 10.13 to the Annual Report on Form 10-K for the Year Ended
of December 31, 2016 filed with the SEC on March 9, 2017 (SEC File
No. 001-34761) (“2016 Form
10-K”)
|
|
|
|
|
|
|
10.5
|
Stock
Letter Agreement dated August 6, 2004 between Autobytel and Wesley
Ozima, as amended by Memorandum dated March 1, 2009, which are
incorporated herein by reference to Exhibit 10.81 to the 2008 Form
10-K; and Memorandums dated January
22, 2016 and January 31, 2017, amending Letter Agreement dated
August 6, 2004 between Autobytel and Wesley Ozima, which is
incorporated herein by reference to Exhibit 10.16 to the 2016 Form
10-K
|
|
|
|
|
|
|
10.6
|
Employment Offer Letter dated February 14, 2014 between Autobytel
and Taren Peng, as amended by Memorandum dated January 31, 2017,
which is incorporated herein by reference to Exhibit 10.49 to the
2016 Form 10-K
|
|
|
|
|
|
|
10.7
|
Amended and Restated Letter Agreement dated April 24, 2013 between
Autobytel and John Skocilic Jr., as amended by Memorandum dated
January 22, 2016 and Memorandum dated January 31, 2017, which is
incorporated herein by reference to Exhibit 10.51 to the 2016 Form
10-K
|
|
|
31.1*
|
Rule
13a-14(a)/15d-14(a) Certification by Principal Executive
Officer
|
|
|
|
|
31.2*
|
Rule
13a-14(a)/15d-14(a) Certification by Principal Financial
Officer
|
|
|
|
|
32.1*
|
Section
1350 Certification by Principal Executive Officer and Principal
Financial Officer
|
|
|
|
|
101.INS††
|
XBRL
Instance Document
|
|
|
|
|
101.SCH††
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
|
101.CAL††
|
XBRL
Taxonomy Calculation Linkbase Document
|
|
|
|
|
101.DEF††
|
XBRL
Taxonomy Extension Definition Document
|
|
|
|
|
101.LAB††
|
XBRL
Taxonomy Label Linkbase Document
|
|
|
|
|
101.PRE††
|
XBRL
Taxonomy Presentation Linkbase Document
|
*
Filed herewith.
‡
Certain
schedules in this Exhibit have been omitted in accordance with Item
601(b)(2) of Regulation S-K. Autobytel will furnish
supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request; provided, however,
that Autobytel may request confidential treatment pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended, for any
schedule or exhibit so furnished.
††
Furnished
with this report. In accordance with Rule 406T of
Regulation S-T, the information in these exhibits shall not be
deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject
to liability under that section, and shall not be incorporated by
reference into any registration statement or other document filed
under the Securities Act of 1933, as amended, except as expressly
set forth by specific reference in such filing.
-25-