auto20220630

auto20220630_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2022

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

For the transition period from to

Commission file number 1-34761

AutoWeb, Inc.

(Exact name of registrant as specified in its charter)

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

400 North Ashley Drive, Suite 300

Tampa, Florida 33602

(Address of principal executive offices) (Zip Code)

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

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

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

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

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

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

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

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

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

As of August 9, 2022, there were 14,051,149 shares of the Registrant’s Common Stock, $0.001 par value, outstanding.

	INDEX
		Page
	PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements

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

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

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

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

	Notes to Unaudited Condensed Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25

ITEM 4.	Controls and Procedures	25

	PART II. OTHER INFORMATION

ITEM 1A.	Risk Factors	26

ITEM 6.	Exhibits	29

	Signatures	30

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited amounts in thousands, except share data)

	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	2,716		$	7,315
Restricted cash		100			4,314
Accounts receivable, net of allowances for bad debts and customer credits of $47 and $101 at June 30, 2022, and December 31, 2021, respectively		10,039			11,433
Vehicle inventory		—			1,076
Prepaid expenses and other current assets		1,207			998
Total current assets		14,062			25,136
Property and equipment, net		3,753			3,853
Right-of-use assets		1,642			1,993
Intangible assets, net		3,047			3,634
Other assets		409			516
Total assets	$	22,913		$	35,132
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,019		$	7,705
Borrowings under revolving credit facility		4,743			10,001
Accrued employee-related benefits		1,883			1,782
Other accrued expenses and other current liabilities		1,401			610
Current portion of lease liabilities		727			781
Financing debt		32			64
Total current liabilities		16,805			20,943
Lease liabilities, net of current portion		1,116			1,432
Total liabilities		17,921			22,375
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.001 par value, 11,445,187 shares authorized
Series A Preferred Stock, 2,000,000 shares authorized, none- issued and outstanding at June 30, 2022, and December 31, 2021, respectively.		—			—
Common stock, $0.001 par value; 55,000,000 shares authorized, 14,051,149 and 13,489,482 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively.		14			13
Additional paid-in capital		369,158			368,168
Accumulated deficit		(364,180	)		(355,424	)
Total stockholders’ equity		4,992			12,757
Total liabilities and stockholders’ equity	$	22,913		$	35,132

See accompanying notes to unaudited condensed consolidated financial statements.

-1-

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited amounts in thousands, except per-share data)

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

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

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

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

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

See accompanying notes to unaudited condensed consolidated financial statements.

-2-

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

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

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

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

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

-3-

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY CONTINUED

(Amounts in thousands, except share data)

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

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

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

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

-4-

AUTOWEB, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net (loss) income	$	(8,756	)	$	6
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,150			1,266
(Recoveries)/provision, net		(13	)		9
Forgiveness of PPP loan		—			(1,384	)
Share-based compensation		990			924
Amortization of right-of-use assets		421			453
Gain on disposal of assets		(1	)
Deferred tax liability		110			—
Changes in assets and liabilities:
Accounts receivable		1,407			(914	)
Prepaid expenses and other current assets		(209	)		(553	)
Vehicle inventory		1,076			—
Other assets		107			134
Accounts payable		193			950
Accrued expenses and other current liabilities		857			309
Lease liabilities		(440	)		(492	)
Net cash (used in) provided by operating activities		(3,108	)		708
Cash flows from investing activities:
Purchases of property and equipment		(340	)		(770	)
Purchase of intangible asset		(75	)		—
Net cash used in investing activities		(415	)		(770	)
Cash flows from financing activities:
Borrowings under CNC credit facility		36,111			35,471
Principal payments on CNC credit facility		(41,369	)		(35,501	)
Payments under financing agreement		(32	)		(33	)
Proceeds from exercise of stock options		—			176
Net cash (used in) provided by financing activities		(5,290	)		113
Net (decrease) increase in cash and cash equivalents		(8,813	)		51
Cash and cash equivalents and restricted cash, beginning of period		11,629			15,107
Cash and cash equivalents and restricted cash, end of period	$	2,816		$	15,158

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

Cash and cash equivalents at end of period	$	2,716		$	10,849
Restricted cash at end of period		100			4,309
Cash and cash equivalents and restricted cash at end of period	$	2,816		$	15,158

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	12		$	—
Cash refunds for income taxes	$	—		$	1
Cash paid for interest	$	427		$	435
Supplemental disclosure of non-cash financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	70		$	—
Purchases on account related to capitalized software	$	122		$	276

See accompanying notes to unaudited condensed consolidated financial statements.

-5-

AUTOWEB, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Operations

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

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

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

The Company has also generated revenue through its used vehicle acquisition business by offering automotive consumers an option to sell their used vehicle outside of a dealership location through the Company’s wholly owned subsidiary, Tradein Expert, Inc., dba CarZeus, and then reselling these used vehicles indirectly to Dealers through wholesale auctions or through direct to Dealer sales. On May 16, 2022, the Company suspended its CarZeus operations and furloughed its employees within that segment in order to conserve cash.

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are presented on the same basis as the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”) on March 24, 2022 pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”). The Company has made its disclosures in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of Company management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the 2021 Form 10-K.

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

Going Concern

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

- 6-

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

●

Continuing to seek debt or equity financing on terms and conditions acceptable to the Company;

●

Evaluating potential sale/divestiture transactions, including a sale of the Company or its assets;

●

Seeking partnering/licensing transactions; and

●

Restructuring the Company’s debt and operations, including the possibility that the Company may seek protection under the U.S. Bankruptcy Code.

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

●

Conducting a review of and reductions to the Company’s cost and expense structure, including reductions in employee expense (which could include furloughs and terminations);

●

Working with current and potential vendors to decrease costs and expenses;

●

Suspending investments in growth strategies and the Company's transformation from a digital media company to a transaction-enabled matchmaker;

●

Suspending capital expenditures; and

●

Suspending, or reducing the scope of, some or all of the Company’s operations, which included the suspension of the Company’s used vehicle acquisition business and furloughing the employees within that segment in May 2022.

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

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

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

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

- 7-

Nasdaq Notice of Delisting

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

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

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

3. Recent Accounting Pronouncements

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

4. Revenue Recognition

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

- 8-

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

●

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

●

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

●

Used Vehicle Sales – Used vehicles acquired by the Company are predominately resold at wholesale auctions or direct to Dealers. Revenue from the sale of these vehicles is recognized upon transfer of ownership of the vehicle to the wholesale customer.

Variable Consideration

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

Contract Assets and Contract Liabilities

Unbilled Revenue

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

Deferred Revenue

The Company defers the recognition of revenue when cash payments are received or due in advance of satisfying the Company’s performance obligations, including amounts which are refundable. Such activity is not typical for the Company. The Company had no deferred revenue included in its condensed consolidated balance sheets as of June 30, 2022, and December 31, 2021. Payment terms and conditions can vary by contract type. Generally, payment terms within the Company’s customer contracts include a requirement of payment within 30 to 60 days from date of invoice. Typically, customers make payments after receipt of invoice for billed services, and less typically, in advance of rendered services.

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

Disaggregation of Revenue

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

- 9-

The following table summarizes revenue from contracts with customers, disaggregated by revenue source, for the three and six months ended June 30, 2022, and 2021. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

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

Lead generation	$	9,503	$	15,225	$	20,079	$	29,411
Digital advertising
Clicks		3,659		2,839		7,315		5,770
Display and other advertising		353		672		834		1,435
Total digital advertising		4,012		3,511		8,149		7,205
Used vehicle sales		3,680		—		8,031		—
Total revenues	$	17,195	$	18,736	$	36,259	$	36,616

5. Net (Loss) Income Per Share

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

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Basic Shares:
Weighted average common shares outstanding		14,051,149			13,461,044			13,947,779			13,357,622
Weighted average unvested restricted stock		(708,334	)		(220,000	)		(628,840	)		(148,370	)
Basic Shares		13,342,815			13,241,044			13,318,939			13,209,252

Diluted Shares:
Basic shares		13,342,815			13,241,044			13,318,939			13,209,252
Weighted average dilutive securities		—			—			—			204,543
Diluted Shares		13,342,815			13,241,044			13,318,939			13,413,795

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

For the six months ended June 30, 2021, weighted average dilutive securities include dilutive options and restricted stock awards.

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

- 10-

SEC Form 10-Q filed by AutoWeb Inc.