Blueprint
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, 2018
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
AutoWeb,
Inc.
(Exact name of registrant as specified in its charter)
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.
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. [
]
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 7, 2018, there were 12,886,225 shares of the
Registrant’s Common Stock, $0.001 par value,
outstanding.
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INDEX
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AUTOWEB, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands, except share and per-share
data)
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Assets
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Current
assets:
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Cash
and cash equivalents
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$15,159
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$24,993
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Short-term
investment
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255
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254
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Accounts
receivable, net of allowances for bad debts and customer credits of
$857 and $892 at March 31, 2018 and December 31, 2017,
respectively
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25,024
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25,911
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Prepaid
expenses and other current assets
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1,667
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1,805
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Total
current assets
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42,105
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52,963
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Property
and equipment, net
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4,070
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4,311
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Investments
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100
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100
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Intangible
assets, net
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27,426
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29,113
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Goodwill
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—
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5,133
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Long-term
deferred tax asset
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—
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692
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Other
assets
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1,269
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601
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Total
assets
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$74,970
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$92,913
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Liabilities and Stockholders’ Equity
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Current
liabilities:
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Accounts
payable
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$5,984
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$7,083
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Accrued
employee-related benefits
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1,925
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2,411
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Other
accrued expenses and other current liabilities
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7,473
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7,252
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Current
convertible note payable
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1,000
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—
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Total
current liabilities
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16,382
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16,746
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Convertible
note payable
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—
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1,000
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Borrowings
under revolving credit facility
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—
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8,000
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Total
liabilities
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16,382
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25,746
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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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Common
stock, $0.001 par value; 55,000,000 shares authorized and
12,896,225 and 13,059,341 shares issued and outstanding at March
31, 2018 and December 31, 2017, respectively
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13
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13
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Additional
paid-in capital
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357,754
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356,054
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Accumulated
deficit
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(299,179)
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(288,900)
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Total
stockholders’ equity
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58,588
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67,167
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Total
liabilities and stockholders’ equity
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$74,970
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$92,913
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See accompanying notes to unaudited consolidated condensed
financial statements.
AUTOWEB, 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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Revenues:
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Lead
fees
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$24,080
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$29,092
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Advertising
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8,087
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7,969
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Other
revenues
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182
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280
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Total
revenues
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32,349
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37,341
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Cost
of revenues
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24,659
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24,430
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Gross
profit
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7,690
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12,911
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Operating
expenses:
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Sales
and marketing
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3,712
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3,763
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Technology
support
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3,385
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3,253
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General
and administrative
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4,575
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3,457
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Depreciation
and amortization
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1,160
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1,229
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Goodwill
impairment
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5,133
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—
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Total
operating expenses
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17,965
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11,702
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Operating
income (loss)
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(10,275)
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1,209
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Interest
and other income (expense), net
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—
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(100)
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Income
(loss) before income tax provision
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(10,275)
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1,109
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Income
tax provision
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4
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625
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Net
income (loss) and comprehensive income (loss)
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$(10,279)
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$484
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Basic
earnings (loss) per common share
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$(0.81)
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$0.04
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Diluted
earnings (loss) per common share
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$(0.81)
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$0.04
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See accompanying notes to unaudited consolidated condensed
financial statements.
AUTOWEB, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
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Three Months Ended
March 31,
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Cash
flows from operating activities:
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Net
income (loss)
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$(10,279)
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$484
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Adjustments
to reconcile net income (loss) to net cash (used in) provided
by operating activities:
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Depreciation
and amortization
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2,179
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1,841
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Provision
for bad debts
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69
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43
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Provision
for customer credits
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65
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94
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Share-based
compensation
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1,626
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1,011
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Change
in deferred tax asset
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692
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334
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Goodwill
impairment
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5,133
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—
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Changes
in assets and liabilities:
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Accounts
receivable
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753
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4,980
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Prepaid
expenses and other current assets
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137
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16
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Other
assets
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(668)
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44
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Accounts
payable
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(1,099)
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(2,527)
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Accrued
expenses and other current liabilities
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(265)
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(2,858)
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Net
cash (used in) provided by operating activities
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(1,657)
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3,462
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Cash
flows from investing activities:
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Purchases
of property and equipment
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(250)
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(163)
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Net
cash used in investing activities
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(250)
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(163)
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Cash
flows from financing activities:
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Payments
on term loan borrowings
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—
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(2,625)
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Proceeds
from exercise of stock options
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73
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457
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Payments
on revolving credit facility
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(8,000)
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—
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Net
cash used in financing activities
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(7,927)
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(2,168)
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Net
(decrease) increase in cash and cash equivalents
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(9,834)
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1,131
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Cash
and cash equivalents, beginning of period
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24,993
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38,512
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Cash
and cash equivalents, end of period
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$15,159
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$39,643
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Supplemental
disclosure of cash flow information:
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Cash
paid for income taxes
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$—
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$—
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Cash
paid for interest
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$73
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$356
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See accompanying notes to unaudited consolidated condensed
financial statements.
AUTOWEB, INC.
NOTES TO UNAUDITED CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
1. Organization and Operations
AutoWeb, Inc. (“AutoWeb” or the “Company”) is a digital marketing company for
the automotive industry that assists automotive retail dealers
(“Dealers”) and
automotive manufacturers (“Manufacturers”) market and sell
new and used vehicles to consumers by utilizing the Company’s
digital sales enhancing products and services.
The Company’s consumer-facing automotive
websites (“Company
Websites”) provide
consumers with information and tools to aid them with their
automotive purchase decisions and gives in-market consumers the
ability to connect with Dealers regarding purchasing or leasing
vehicles. These consumers are connected to Dealers via the
Company’s various programs for online lead referrals
(“Leads”). The Company’s AutoWeb®
consumer traffic referral product engages with car buyers from
AutoWeb’s network of automotive websites and uses our
proprietary technology to present them with highly relevant offers
based on their make and model of interest and their geographic
location. The Company then directs these in-market consumers to key
areas of a Dealer’s or Manufacturer’s website to
maximize conversion for sales, service or other products or
services.
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 AUTO.
On
October 9, 2017, the Company changed its name from Autobytel Inc.
to AutoWeb, Inc., assuming the name of AutoWeb, Inc., which was the
name of the company that the Company acquired in October 2015. In
connection with this name change, the Company changed its stock
ticker symbol from “ABTL” to “AUTO” on The
Nasdaq Capital Market.
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, 2017 (“2017 Form 10-K”)
filed with the Securities and Exchange Commission
(“SEC”). AutoWeb has made its
disclosures in accordance with U.S. generally accepted accounting
principles (“GAAP”) for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation with respect to interim financial statements, have
been included. Certain amounts have been reclassified from
the prior year presentation to conform to the current year
presentation. The consolidated condensed statements of
operations and comprehensive income (loss) and cash flows for the
periods ended March 31, 2018 and 2017 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 2017 Form 10-K.
3. Recent Accounting Pronouncements
Issued but not yet adopted by the Company
Accounting Standards
Codification 220 “Comprehensive Income.” In
February 2018, Accounting Standards
Update (“ASU”) 2018-02, “Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive
Income” was issued. The new guidance allows a
reclassification from accumulated other comprehensive income to
retained earnings for stranded tax effects resulting from the Tax
Cuts and Jobs Act (“TCJA “) and will improve the
usefulness of information reported to financial statement users.
The ASU will take effect for all
entities for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. The Company does not
believe this ASU will have a material effect 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. In January 2018, ASU No.
2018-01, “Land Easement Practical Expedient for Transition to
Topic 842” was issued. This ASU permits an entity to elect an
optional transition practical expedient to not evaluate under Topic
842 land easements that exist or expired before the entity’s
adoption of Topic 842 and that were not previously accounted for as
leases under Topic 840. The ASU will take effect for public
companies for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. The Company expects this
standard will have a material effect on its consolidated financial
statements due to the recognition of new right-of-use assets and
lease liabilities on its balance sheet for real estate and
equipment operating leases. The Company continues to evaluate the
effect this guidance will have on the consolidated financial
statements and related disclosures.
Recently adopted by the Company
Accounting Standards
Codification 606 “Revenue from Contracts with
Customers.” In
May 2014, ASU No. 2014-09, “Revenue from Contracts with
Customers (Topic 606)” was issued. This ASU
requires the use of a five-step methodology to depict the transfer
of promised goods and services to customers in an amount that
reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. In addition, the
ASU requires enhanced disclosure regarding revenue
recognition.
The
standard permits the use of either the retrospective or cumulative
effect transition method (modified retrospective method). The
Company adopted the ASU on a modified retrospective transition
method on January 1, 2018 and will apply ASC 606 to the most
current period presented in the financial statements issued
subsequent to the adoption date. The Company did not record a
cumulative adjustment to retained earnings as of January 1, 2018
since the Company was recognizing revenue consistent with the
provisions of ASC 606 and any adjustment would have been deemed
immaterial. In preparation for adoption of the standard, the
Company implemented internal controls to enable the preparation of
financial information and has reached conclusions on key accounting
assessments related to the standard, including that accounting for
variable consideration is immaterial.
The
Company adopted the standard through the application of the
portfolio approach and selected a sample of customer contracts to
assess under the guidance of the new standard that are
characteristically representative of each revenue stream. The
Company completed its review of the sample contracts, and there was
no significant change to the pattern or timing of revenue
recognition as a result of adopting the new standard.
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 adopted this ASU on
January 1, 2018 and it did not have a material effect on the
consolidated financial statements.
Accounting Standards
Codification 718 “Compensation – Stock
Compensation.” In May 2017, ASU No. 2017-09, “Scope of
Modification Accounting” was issued. The
amendments in this update provide guidance about which changes to
the terms or conditions of a share-based payment award require an
entity to apply modification accounting in Topic 718. An entity
should apply this ASU on a prospective basis for an award modified
on or after the adoption date for annual periods, and interim
periods within those annual periods, beginning after December 15,
2017. The Company adopted this ASU on January 1, 2018 and it did
not have a material effect on the consolidated financial
statements.
4. Revenue Recognition
Revenue
is recognized upon transfer of control of promised goods or
services to our customers, or when performance obligations under
contract have been satisfied, in an amount that reflects the
consideration we expect to be entitled to in exchange for those
goods or services. Further, under ASC 606, contract assets or
contract liabilities that arise from a past performance but require
a further performance obligation to be satisfied as a condition of
settlement must be identified and recorded on the balance sheet
until respectively settled.
The
Company performs the following steps in order to properly determine
revenue recognition and identify relevant contract assets and
contract liabilities:
●
identify the
contract with a customer;
●
identify the
performance obligations in the contract;
●
determine the
transaction price;
●
allocate the
transaction price to the performance obligations in the contract;
and
●
recognize
revenue when, or as, we satisfy a performance
obligation.
Accounting Policy - Revenue Recognition
The
Company earns revenue by providing leads, advertising and mobile
products and services used by Dealers and Manufacturers in their
efforts to market and sell new and used vehicles to consumers. The
Company enters into contracts that can include various combinations
of products and services, which are generally capable of being
distinct and accounted for as separate performance obligations. We
record revenue on distinct performance obligations at a single
point in time, when control is transferred to the customer, which
is consistent with past practice.
The
Company has three main revenue sources – Lead fees,
advertising and other revenue. Accordingly, we recognize revenue
for each source as described below:
●
Lead fees -
paid by Dealers and Manufacturers
participating in the Company’s Lead programs and are
comprised of Lead transaction and/or monthly subscription fees.
Lead fees are recognized in the period when service is
provided.
●
Advertising -
fees paid by Dealers and Manufacturers
for 1) display advertising on our website and 2) fees from our
clicks program. Revenue is recognized in the period advertisements
are displayed on our websites or the period in which clicks have
been delivered, as applicable. The Company recognizes gross
revenue from the delivery of action-based ads in the period in
which a user takes the action for which the marketer contracted
with us. For advertising revenue arrangements where we are not the
principal, we recognize revenue on a net basis.
●
Other Revenues
- consists primarily of revenues from our mobile
products and revenues from our Reseller Agreement entered into with
SaleMove, Inc. Revenue is recognized in the period in which
products or services are sold.
Variable Consideration
The
Company’s products, namely Leads, are generally sold with a
right-of-return for services that do not meet customer requirements
as specified by the contract. Rights-of-return are estimable, and
provisions for estimated returns are recorded as a reduction in
revenue by the Company in the period revenue is recognized, and
thereby accounted for as variable consideration. We include the
allowance for customer credits in our net accounts receivable
balances on the Company’s balance sheet at period end, which
is consistent with past practice. Allowance for customer credits
totaled $186,000 and $213,000 as of March 31, 2018 and December 31,
2017, respectively.
See
further discussion below on Significant Judgments exercised by the
Company in regards to variable consideration.
Contract Assets and Contract Liabilities
Unbilled Revenue
Timing
of revenue recognition may differ from the timing of invoicing to
customers. We record 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 but
not-yet invoiced, for which we have satisfied contract performance
obligation and have a right to receive payment. These receivable
balances are driven by the timing of administrative transaction
processing, rather than indicative of partially complete
performance obligations, or unbilled revenue, which represents
revenue that is partially earned, control of promised services has
not yet transferred to the customer and for which we have not
earned complete right to payment.
Deferred Revenue
We
defer the recognition of revenue when cash payments are received or
due in advance of satisfying our performance obligations, including
amounts which are refundable. Such activity is not a common
practice of operation.
Payment
terms and conditions vary by contract type, although terms
generally include a requirement of payment within 30 to 60 days
from date of invoice.
Practical Expedients and Exemptions
We
exclude from the transaction price all sales taxes related to
revenue producing transactions collected from the customer for a
governmental authority.
We
apply the new revenue standard requirements to a portfolio of
contracts (or performance obligations) with similar characteristics
for transactions where it is expected that the effects on the
financial statements of applying the revenue recognition guidance
to the portfolio would not differ materially from applying this
guidance to the individual contracts (or performance obligations)
within that portfolio.
We
generally expense incremental costs of obtaining a contract when
incurred because the amortization period would be less than one
year. These costs primarily relate to sales commissions and are
recorded in selling, marketing and distribution
expense.
Significant Judgments
The Company
provides Dealers and Manufacturers with various opportunities to
market their vehicles to potential vehicle buyers, namely via
consumer lead and traffic referrals and online advertising products
and services. Properly accounting for revenue generated by these
digital marketing activities, as well as any related assets and
liabilities that may arise in conjunction with these activities,
requires management to exercise significant
judgment:
●
Arrangements
with Multiple Performance Obligations
The Company enters into contracts
with customers that often include multiple products and services to
a customer. Determining whether products and/or services are
distinct performance obligations that should be accounted for
singularly or separately may require significant
judgment.
●
Variable Consideration and Customer
Credits
The Company’s products are
generally sold with a right-of-return. The Company sometimes may
also provide other customer credits or sales incentives which are
accounted for as variable consideration when determining the
allocation of the transaction price to performance obligations
under a contract. The allowance for customer credits is an
estimate of adjustments for services that do not meet the customer
requirements. Additions to the estimated allowance for customer
credits are recorded as a reduction of revenues and are based on
the Company’s historical experience of: (i) the amount of
credits issued; (ii) the length of time after services are rendered
that the credits are issued; (iii) other factors known at the time;
and (iv) future expectations. Reductions in the estimated allowance
for customer credits are recorded as an increase in revenues. As
specific customer credits are identified, they are written off
against the previously established estimated allowance for customer
credits with no impact on revenues. Returns and credits are measured
at contract inception, with respective obligations reviewed each
reporting period or as further information becomes available,
whichever is earlier, and only to the extent that it is probable
that a significant reversal of any incremental revenue will not
occur. Customer credits are included in
the net accounts receivable balance of the Company’s balance
sheets as of March 31, 2018 and December 31,
2017.
The
Company has not made any significant changes to judgments in
applying ASC 606 during the three months ended March 31,
2018.
Disaggregation of Revenue
We
disaggregate revenue from
contracts with customers by revenue source and have determined that
disaggregating revenue into these categories sufficiently depicts
the differences in the nature, amount, timing and uncertainty of
our revenue streams. The Company has
three main sources of revenue: lead fees, advertising and other
revenues.
The
following table summarizes revenue from contracts with customers,
disaggregated by revenue source, for the three months ended
March 31, 2018 and 2017. Revenue is recognized net of
allowances for returns and any taxes collected from customers,
which are subsequently remitted to governmental
authorities.
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Three Months Ended
March 31,
|
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(in thousands)
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Lead
fees
|
$24,080
|
$29,092
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Advertising
|
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Clicks
|
6,691
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6,514
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Display and other
advertising
|
1,396
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1,455
|
Other
revenues
|
182
|
280
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Total
revenue
|
$32,349
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$37,341
|
5. Net Earnings
(Loss) Per Share and Stockholders’ Equity
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 unvested restricted stock and common shares issuable
upon the exercise of stock options, the exercise of warrants and
conversion of convertible notes. The following are
the share amounts utilized to compute the basic and diluted
net earnings per share for the three months ended March 31,
2018 and 2017:
|
Three Months Ended
March 31,
|
|
|
|
Basic
Shares:
|
|
|
Weighted
average common shares outstanding
|
13,010,948
|
11,025,864
|
Weighted
average unvested restricted stock
|
(393,890)
|
(116,667)
|
Basic
Shares
|
12,617,058
|
10,909,197
|
|
|
|
Diluted
Shares:
|
|
|
Basic
shares
|
12,617,058
|
10,909,197
|
Weighted
average dilutive securities
|
—
|
2,399,938
|
Diluted
Shares
|
12,617,058
|
13,309,135
|
For the three months ended March 31, 2018, the
Company’s basic and diluted net loss per share are the same
since the Company generated a net loss for the period and
potentially dilutive securities are excluded from diluted net loss
per share because they have an anti-dilutive impact. For the three
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. (“AWI”).
For
the three months ended March 31, 2018 and 2017, 3.0 million and 2.2
million of potentially anti-dilutive securities related to common
stock have been excluded from the calculation of diluted net
earnings per share, respectively.
On September 6, 2017, the Company announced that
its board of directors authorized the Company to repurchase up to
$3.0 million of the Company’s common stock. Under the
repurchase program, the Company may repurchase common stock from
time to time on the open market or in private transactions. This
authorization does not require the Company to purchase a specific
number of shares, and the board of directors may suspend, modify or
terminate the program at any time. The Company will fund future
repurchases, if any, through the use of available cash. No
shares were repurchased during the three months ended March 31,
2018 and 2017. As of March 31, 2018, $2.3 million remains available
for the Company to repurchase common stock.
On June 22, 2017, the Company obtained stockholder
approval for the issuance of shares of the Company’s
common stock upon (i) the conversion of the Company’s then
outstanding Series B Junior Participating Convertible Preferred
Stock, par value $0.001 per share (“Series B Preferred
Stock”); and (ii) the
conversion of shares of Series B Preferred Stock that would be
issued upon exercise of the AWI Warrant (described below). Upon
obtaining stockholder approval for the conversion, each outstanding
share of Series B Preferred Stock was automatically converted into
10 shares of the Company’s common stock, which resulted in
the outstanding shares of Series B Preferred Stock being converted
into 1,680,070 shares of the Company’s common stock, and the
AWI Warrant converted into warrants to acquire up to 1,482,400
shares of the Company’s common stock.
Warrants. The
warrant to purchase 69,930 shares of the Company’s common
stock issued in connection with the acquisition of AutoUSA was
valued at $7.35 per share for a total value of $0.5 million
(“AutoUSA
Warrant”). The
Company used an option pricing model to determine the value of the
AutoUSA Warrant. Key assumptions used in valuing the
AutoUSA Warrant are as follows: risk-free 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 warrant to purchase up to 148,240 shares of
Series B Preferred Stock issued in connection with the acquisition
of AWI (“AWI Warrant”) was valued at $1.72 per share for a total
value of $2.5 million. The Company used an option
pricing model to determine the value of the AWI
Warrant. Key assumptions used in valuing the AWI Warrant
are as follows: risk-free rate of 1.9%, stock price volatility of
74.0% and a term of 7.0 years. The AWI Warrant was
valued based on long-term stock price volatilities of the
Company’s common stock. On June 22, 2017, the
Company received stockholder approval which resulted in the
automatic conversion of the AWI Warrant into warrants to acquire up
to 1,482,400 shares of the Company’s common stock at an
exercise price of $18.45 per share of common stock. The AWI Warrant
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 AWI Warrant and prior to the expiration date of the AWI Warrant
the weighted average closing price of the Company’s common
stock for the preceding 30 trading days (adjusted for any stock
splits, stock dividends, reverse stock splits or combinations of
the Company’s common stock occurring after the issuance date)
(“Weighted Average Closing
Price”) is at or above
$30.00; (ii) with respect to the second one-third (1/3) of the
warrant shares, if at any time after the issuance date of the AWI
Warrant and prior to the expiration date the Weighted Average
Closing Price is at or above $37.50; and (iii) with respect to the
last one-third (1/3) of the warrant shares, if at any time after
the issuance date of the AWI Warrant and prior to the expiration
date the Weighted Average Closing Price is at or above
$45.00. The AWI Warrant expires on October 1,
2022.
6.
Share-Based Compensation
Share-based
compensation expense is included in costs and expenses in the
accompanying Unaudited Consolidated Condensed Statements of
Operations and Comprehensive Income (Loss) as follows:
|
Three Months Ended
March 31,
|
|
|
|
|
(in thousands)
|
Share-based
compensation expense:
|
|
|
Cost
of revenues
|
$15
|
$20
|
Sales
and marketing
|
225
|
412
|
Technology
support
|
153
|
128
|
General
and administrative (1)
|
1,234
|
452
|
Share-based
compensation costs
|
1,627
|
1,012
|
|
|
|
Amount
capitalized to internal use software
|
1
|
1
|
Total
share-based compensation costs
|
$1,626
|
$1,011
|
(1)
Certain
awards were modified in connection with the termination of the
Company’s former Chief Executive Officer’s employment
by the Company and their vesting accelerated in accordance with the
terms of the applicable award agreements. The total expense related
to the acceleration of vested awards was approximately $0.8 million
in the three months ended March 31, 2018.
Service-Based
Options. The Company
granted the following service-based options for the three months
ended March 31, 2018 and 2017:
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
Number
of service-based options granted
|
1,500
|
319,250
|
Weighted
average grant date fair value
|
$4.30
|
$6.91
|
Weighted
average exercise price
|
$8.19
|
$13.81
|
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 and
vesting may be accelerated in the event of a change in control of
the Company.
Market Condition
Options. On January
21, 2016, the Company granted 100,000 stock options to its former
chief executive officer (“Former CEO”) with an exercise price of $17.09 and
grant date fair value of $1.47 per option, using a Monte Carlo
simulation model (“Former CEO Market Condition
Options”).
The Former CEO Market Condition Options were previously valued at
$2.94 per option but were revalued when the requisite stockholder
approval for the Company’s Amended and Restated 2014 Equity
Incentive Plan was obtained in June 2016. The Former CEO Market
Condition Options are subject to both stock price-based and
service-based vesting requirements that must be satisfied for the
Former CEO Market Condition Options to vest and become exercisable.
The Former 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 Former CEO Market Condition Options,
if at any time after the grant date and prior to the expiration
date of the Former 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 Former 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
Former 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 Former 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. The Former CEO Market Condition Options
expire on January 21, 2023. Subsequent to March 31, 2018, the
Former CEO Market Condition Options fully vested pursuant to the
stock option award agreement for these options. See Note
12.
Stock option
exercises. The
following stock options were exercised during the three months
ended March 31, 2018 and 2017,
respectively:
|
Three Months Ended
March 31,
|
|
|
|
|
|
|
Number
of stock options exercised
|
15,217
|
58,959
|
Weighted
average exercise price
|
$4.80
|
$7.75
|
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,
|
|
|
|
|
|
|
Dividend
yield
|
—
|
—
|
Volatility
|
64%
|
61%
|
Risk-free
interest rate
|
2.4%
|
1.8%
|
Expected
life (years)
|
4.5
|
4.4
|
Upon
adoption of ASU 2016-09, “Improvements to Employee
Share-Based Payment Accounting,” the Company 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 these
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 and on 8,334
shares of restricted stock on April 23, 2017. During the three
months ended March 31, 2018, 8,333 of the foregoing service-based
RSAs were forfeited upon the resignation of this executive officer.
This executive officer was also awarded 100,000 shares of the
Company’s common stock in the form of performance-based RSAs.
During the three months ended March 31, 2018, 100,000 of these
performance-based RSAs were forfeited upon the resignation of this
executive officer.
The
Company granted an aggregate of 345,000 RSAs on September 27, 2017
to executive officers of the Company. These RSAs are
service-based and the forfeiture restrictions lapse with respect to
one-third of the restricted stock on each of the first, second and
third anniversaries of the date of the award. Lapsing of
the forfeiture restrictions may be accelerated in the event of a
change in control of the Company and will accelerate upon the death
or disability of the holder. During the three months ended March
31, 2018, 70,000 shares of these RSAs were forfeited upon the
resignation of an executive officer.
7. Investments
The Company’s investments at March 31, 2018
and December 31, 2017 consisted primarily of investments in
SaleMove and GoMoto, Inc., a Delaware corporation (“GoMoto”).
In
September 2013, the Company entered into a Convertible Note
Purchase Agreement with SaleMove in which AutoWeb invested $150,000
in SaleMove in the form of an interest bearing, convertible
promissory note. In November 2014, the Company invested an
additional $400,000 in SaleMove in the form of an interest bearing,
convertible promissory note. Upon closing of a preferred
stock financing by SaleMove in July 2015, these two notes were
converted in accordance with their terms into an aggregate of
190,997 Series A Preferred Stock, which shares were previously
classified as a long-term investment on the consolidated balance
sheet. The Company recorded an impairment charge of $0.6 million in
SaleMove in the three months ended December 31, 2017.
In
October 2013, the Company entered into a Reseller Agreement with
SaleMove to become a reseller of SaleMove’s technology for
enhancing communications with
consumers. SaleMove’s technology allows Dealers
and Manufacturers to enhance the online shopping experience by
interacting with consumers in real-time, including live video,
audio and text-based chat or by phone. The Company and SaleMove
share equally in revenues from automotive-related sales of the
SaleMove products and services. In connection with this reseller
arrangement, the Company advanced 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,
2018, the net advances due from SaleMove totaled $401,000 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
upon demand by the Company or at GoMoto’s option ten
days’ written notice unless converted prior to the repayment
of the GoMoto Notes. The GoMoto Notes will be converted
into preferred stock of GoMoto in the event of a preferred stock
financing by GoMoto of at least $1.0 million prior to repayment of
the GoMoto Notes. As of March 31, 2018, 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:
|
|
|
|
|
Computer
software and hardware
|
$11,168
|
$11,065
|
Capitalized
internal use software
|
5,896
|
5,774
|
Furniture
and equipment
|
1,702
|
1,703
|
Leasehold
improvements
|
1,565
|
1,539
|
|
20,331
|
20,081
|
Less—Accumulated
depreciation and amortization
|
(16,261)
|
(15,770)
|
Property
and Equipment, net
|
$4,070
|
$4,311
|
The
Company periodically reviews the value of 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), Media.net
Advertising and General Motors. During the first three months of
2018, approximately 38% of the Company’s total revenues was
derived from these three customers, and approximately 45%, or $11.6
million of gross accounts receivables related to these three
customers at March 31, 2018. During the first three months of 2017,
approximately 29% of the Company’s total revenues was derived
from Urban Science Applications, Ford Direct and General Motors,
and approximately 40%, or $11.7 million of gross accounts
receivables, related to these three customers at March 31,
2017.
Intangible
Assets. The Company
amortizes specifically identified definite-lived intangible assets
using the straight-line method over the estimated useful lives of
the assets.
On October 5, 2017, the Company and DealerX
Partners, LLC, a Florida limited liability company
(“DealerX”), entered into a Master License and
Services Agreement (“DealerX License
Agreement”). Pursuant to
the terms of the DealerX License Agreement, AutoWeb was granted a
perpetual license to access and use DealerX’s proprietary
platform and technology for targeted, online
marketing.
The transaction consideration consisted of: (i)
$8.0 million in cash paid to DealerX upon execution of the DealerX
License Agreement and (ii) the right to 710,856 shares of the
Company’s common stock, par value $0.001 per share,
representing approximately five percent of the Company’s
outstanding Common Stock as of the date the parties entered into
the DealerX License Agreement (“Market Capitalization
Shares”) if on or before
October 5, 2022: (i) AutoWeb’s market capitalization averages
at least $225.0 million over a consecutive 90 day period or (ii)
there is a change in control of AutoWeb that reflects a market
capitalization of at least $225.0 million. If the Market
Capitalization Shares are issued to DealerX, DealerX’s
Platform Support Obligations will continue in perpetuity.
Alternatively, upon the occurrence of certain events prior to the
issuance of the Market Capitalization Shares, AutoWeb may elect to
make an additional lump-sum payment of $12.5 million (“Alternative Cash Payment”) in order to extend DealerX’s
Platform Support Obligations in perpetuity. If the Alternative Cash
payment is made, DealerX’s contingent right to receive the
Market Capitalization Shares will be terminated. The fair value of
the Market Capitalization Shares was calculated at $2.5 million.
The DealerX perpetual license and related Market Capitalization
Shares is being amortized over seven years.
The
Company’s intangible assets will be amortized over the
following estimated useful lives:
|
|
|
|
Definite-lived
Intangible Asset
|
|
|
|
|
|
|
|
|
|
|
Trademarks/trade
names/licenses/domains
|
3
– 7 years
|
$16,589
|
$(4,602)
|
$11,987
|
$16,589
|
$(4,037)
|
$12,552
|
Software
and publications
|
3
years
|
1,300
|
(1,300)
|
—
|
1,300
|
(1,300)
|
—
|
Customer
relationships
|
2 -
10 years
|
19,563
|
(11,331)
|
8,232
|
19,563
|
(10,555)
|
9,008
|
Employment/non-compete
agreements
|
1-5
years
|
1,510
|
(1,499)
|
11
|
1,510
|
(1,493)
|
17
|
Developed
technology
|
5-7
years
|
8,955
|
(3,959)
|
4,996
|
8,955
|
(3,619)
|
5,336
|
|
$47,917
|
$(22,691)
|
$25,226
|
$47,917
|
$(21,004)
|
$26,913
|
|
|
|
|
Indefinite-lived
Intangible Asset
|
|
|
|
|
|
|
|
Domain
|
Indefinite
|
$2,200
|
$—
|
$2,200
|
$2,200
|
$—
|
$2,200
|
Amortization
expense is included in cost of revenues and depreciation and
amortization in the Unaudited Consolidated Condensed Statements of
Operations. Amortization expense was $1.7 million and
$1.4 million for the three months ended March 31, 2018 and 2017,
respectively.
Amortization
expense for the remainder of the year and for future years is as
follows:
Year
|
|
|
|
2018
|
$4,918
|
2019
|
5,236
|
2020
|
3,805
|
2021
|
3,697
|
2022
|
3,100
|
Thereafter
|
4,470
|
|
$25,226
|
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 impaired goodwill by $5.1 million
during the quarter ended March 31,
2018.
|
|
Goodwill
as of December 31, 2017
|
$5,133
|
Impairment
charge
|
(5,133)
|
Goodwill
as of March 31, 2018
|
$—
|
Accrued Expenses and Other
Current Liabilities. Accrued expenses and other current
liabilities consisted of the following:
|
|
|
|
|
Accrued
employee-related benefits
|
$1,925
|
$2,411
|
Other
accrued expenses and other current liabilities:
|
|
|
Other
accrued expenses
|
6,563
|
6,307
|
Amounts
due to customers
|
452
|
438
|
Other
current liabilities
|
458
|
507
|
Total
other accrued expenses and other current liabilities
|
7,473
|
7,252
|
|
|
|
Total
accrued expenses and other current liabilities
|
$9,398
|
$9,663
|
Convertible Notes
Payable. In
connection with the acquisition of AutoUSA, the Company issued a
convertible subordinated promissory note for $1.0 million
(“AutoUSA Note”)
to AutoNationDirect.com, Inc. The fair value of the AutoUSA
Note as of the AutoUSA Acquisition Date was $1.3 million.
This valuation was estimated using a binomial option pricing
method. Key assumptions used by the Company’s
outside valuation consultants in valuing the AutoUSA Note
included a market yield of 1.6% and stock price volatility of
65.0%. As the AutoUSA Note was issued with a substantial
premium, the Company recorded the premium as additional paid-in
capital. Interest is payable at an annual interest rate of 6%
in quarterly installments. The entire outstanding balance of
the AutoUSA Note is to be paid in full on January 31, 2019.
The holder of the AutoUSA Note may at any time convert all or any
part, but at least 30,600 shares, of the then outstanding and
unpaid principal of the AutoUSA Note into fully paid shares of the
Company's common stock at a conversion price of $16.34 per share
(as adjusted for stock splits, stock dividends, combinations and
other similar events). In the event of default, the
entire unpaid balance of the AutoUSA Note will become immediately
due and payable and will bear interest at the lower of 8% per year
and the highest legal rate permissible under applicable
law.
9. Credit Facility
The Company and MUFG Union Bank, N.A. entered into
a Loan Agreement dated February 26, 2013, as amended on September
10, 2013, January 13, 2014, May 20, 2015, June 1, 2016, June 28,
2017 and December 27, 2017 (the original Loan Agreement, as
amended, is referred to collectively as the
“Credit Facility
Agreement”). The Credit Facility Agreement
provided for (i) a $9.0 million term loan; (ii) a $15.0 million
term loan; and (iii) an $8.0 million working capital revolving line
of credit (“Revolving
Loan”). The term
loans were fully paid as of December 31, 2017. The Revolving Loan
was fully paid as of March 31, 2018.
10. Commitments and Contingencies
Employment Agreements
The
Company has employment agreements and severance benefits/retention
agreements with certain key employees. A number of these agreements
require severance payments and continuation of certain insurance
benefits in the event of a termination of the employee’s
employment by the Company without cause or by the employee for good
reason (as defined is these agreements). Stock option agreements
and restricted stock award agreements with some key employees
provide for acceleration of vesting of stock options and lapsing of
forfeiture restrictions on restricted stock in the event of a
change in control of the Company, upon termination of employment by
the Company without cause or by the employee for good reason, or
upon the employee’s death or disability.
Litigation
From
time to time, the Company may be involved in litigation matters
arising from the normal course of its business activities. Such
litigation, even if not meritorious, could result in substantial
costs and diversion of resources and management attention, and an
adverse outcome in litigation could materially adversely affect its
business, results of operations, financial condition and cash
flows.
11. Income Taxes
On
December 22, 2017, the U.S. government enacted comprehensive tax
legislation known as the TCJA. The TCJA establishes new tax laws
that took effect in 2018, including, but not limited to (1)
reduction of the U.S. federal corporate tax rate from a maximum of
35% to 21%; (2) elimination of the corporate alternative minimum
tax; (3) a new limitation on deductible interest expense; (4) the
Transition Tax; (5) limitations on the deductibility of certain
executive compensation; (6) changes to the bonus depreciation rules
for fixed asset additions: and (7) limitations on net operating
loss carryovers generated after December 31, 2017, to 80% of
taxable income.
ASC 740, Income Taxes, requires the effects of
changes in tax laws to be recognized in the period in which the
legislation is enacted. However, due to the complexity and
significance of the TCJA's provisions, the SEC staff issued Staff
Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting
for the tax effects of the TCJA. SAB 118 provides a measurement
period that should not extend beyond one year from the TCJA
enactment date for companies to complete the accounting under ASC
740. In accordance with SAB 118, a company must reflect the income
tax effects of those aspects of the TCJA for which the accounting
under ASC 740 is complete. To the extent that a company’s
accounting for certain income tax effects of the TCJA is incomplete
but it is able to determine a reasonable estimate, it must record a
provisional estimate in the financial statements. If a company
cannot determine a provisional estimate to be included in the
financial statements, it should continue to apply ASC 740 on the
basis of the provisions of the tax laws that were in effect
immediately before the enactment of the TCJA.
At
March 31, 2018 and December 31, 2017, the Company has not completed
its accounting for the tax effects of enactment of the TCJA;
however, the Company has made a reasonable estimate of the effects
of the TCJA’s change in the federal rate and revalued its
deferred tax assets based on the rates at which they are expected
to reverse in the future, which is generally the new 21% federal
corporate tax rate plus applicable state tax rate. The Company
recorded a decrease in deferred tax assets and deferred tax
liabilities of $11.7 million and $0.0 million, respectively, with a
corresponding net adjustment to deferred income tax expense of
$11.7 million for the year ended December 31, 2017. In addition,
the Company recognized a deemed repatriation of $0.6 million of
deferred foreign income from its Guatemala subsidiary, which did
not result in any incremental tax cost after application of foreign
tax credits. The Company’s provisional estimates will be
adjusted during the measurement period defined under SAB 118, based
upon ongoing analysis of data and tax positions along with the new
guidance from regulators and interpretations of the
law.
On
an interim basis, the Company estimates 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 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.
During
2017, management assessed the available positive and negative
evidence to estimate if sufficient future taxable income will be
generated to utilize the existing deferred tax assets. A
significant piece of objective negative evidence evaluated was the
cumulative losses incurred over the three-year period ended
December 31, 2017. The Company was projecting pre-tax income for
2017 until the three months ended December 31, 2017, in which the
Company incurred a significant pre-tax loss due to goodwill
impairment. The Company experienced increased costs in servicing
its customers and started to see a decrease in market share as a
result of more competition. The Company also projects that 2018
pre-tax profits may not offset the cumulative three-year pre-tax
loss as of December 31, 2017. Based on this evaluation, the Company
recorded an additional valuation allowance of $16.7 million against
its deferred tax assets during the year ended December 31, 2017. At
March 31, 2018 and December 31, 2017, the Company has recorded a
valuation allowance of $21.3 million against its deferred tax
assets.
The
Company’s effective tax rate for the three months ended March
31, 2018 differed from the U.S. federal statutory rate primarily
due to operating losses that receive no tax benefit as a result of
valuation allowance recorded for such losses.
The
total amount of unrecognized tax benefits, excluding associated
interest and penalties, was $0.5 million as of March 31, 2018, all
of which, if subsequently recognized, would have affected the
Company’s tax rate.
As
of March 31, 2018 and December 31, 2017, 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 for
the three months ended March 31, 2018 and March 31,
2017.
The Company
operates under a tax holiday in Guatemala, which began November 16,
2017 and is effective through November 16, 2027. The tax
holiday is conditional upon our meeting certain employment and
investment requirements. The impact of the tax holiday was not
material for the year ended December 31, 2017 and decreased foreign
taxes by $33,000 for the three months ended March 31, 2018. The
benefit of the tax holiday on net income per share (diluted) was
not material for 2017 or for the three months ended March 31,
2018.
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 2014 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 2013 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.
12. Subsequent
Event
On April 12, 2018, the Company’s board of
directors (“Board”) terminated Jeffrey H. Coats’
employment as President and CEO without cause. In connection with
the termination of Mr. Coats’ employment and in accordance
with his Second Amended and Restated Employment Agreement dated
April 3, 2014, Mr. Coats is entitled to severance benefits,
including (i) continued payment of his annual base salary of
$550,000 in monthly installments for a period of 12 months after
his employment termination date; (ii) reimbursement or payment of
the premiums for continuation of his medical, dental and vision
insurance benefits under COBRA for a period of 12 months after the
employment termination date; and (iii) his annual incentive
compensation payout based on actual performance for the entire
performance period, prorated for the amount of time Mr. Coats was
employed by the Company prior to the date of termination during
such performance period. Any stock options or restricted stock
awards granted to Mr. Coats that remained unvested as of April 12,
2018 immediately vested in accordance with the terms of the
applicable award agreements. The Company accrued $1.4 million in
severance charges during the quarter ended March 31, 2018 related
to Mr. Coats’ termination.
Also
on April 12, 2018, the Board appointed Jared R. Rowe to the
position of President and CEO. In accordance with his employment
agreement, the Board also appointed Mr. Rowe to the Board as a
Class I director effective on that date, with his term to expire at
the Company’s annual meeting of stockholders in
2020.
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,” “could,” “may,”
“estimates,” “expects,”
“projects,” “intends,” “plans,”
“believes,” “will” and words of similar
substance used in connection with any discussion of future
operations or financial performance identify forward-looking
statements. In particular, statements regarding expectations and
opportunities, industry trends, new product expectations and
capabilities, and our outlook regarding our performance and growth
are forward-looking statements. This Quarterly Report on Form 10-Q
also contains statements regarding plans, goals and objectives.
There is no assurance that we will be able to carry out our plans
or achieve our goals and objectives or that we will be able to do
so successfully on a profitable basis. These forward-looking
statements are just predictions and involve risks and
uncertainties, many of which are beyond our control, and actual
results may differ materially from these statements. Factors that
could cause actual outcomes or results to differ materially from
those reflected in forward-looking statements include, but are not
limited to, those discussed in this Item 2 and under the heading
“Risk Factors” in our annual report on Form 10-K for
the year ended December 31, 2017 (“2017 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 2017 Form 10-K.
Our corporate website is located at
www.autoweb.com.
Information on our website is not incorporated by reference in this
Quarterly Report on Form 10-Q. At or through the Investor Relations
section of our website we make available free of charge our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and all amendments to these reports as soon as
practicable after the reports are electronically filed with or
furnished to the SEC.
Unless
the context otherwise requires, the terms “we”,
“us”, “our”, “AutoWeb” and
“Company” refer to AutoWeb, Inc. and its consolidated
subsidiaries.
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 2017 Form 10-K. There have been no changes to
our critical accounting policies since we filed our 2017 Form
10-K.
Overview
We are a digital marketing services company that
assists automotive retail dealers (“Dealers”) and automotive manufacturers
(“Manufacturers”)
market and sell new and used vehicles to consumers through our
programs for online lead referrals, Dealer marketing products and
services, online advertising and consumer traffic referral programs
and mobile products.
Our consumer-facing automotive websites
(“Company
Websites”) provide
consumers with information and tools to aid them with their
automotive purchase decisions and the ability to submit inquiries
requesting Dealers to contact the consumers regarding purchasing or
leasing vehicles (“Leads”). Leads are
internally-generated from our Company Websites
(“Internally-Generated
Leads”) or acquired from
third parties (“Non-Internally-Generated
Leads”) that generate
Leads from their websites. Our AutoWeb®
consumer traffic referral product
provides consumers who are shopping for vehicles online with
targeted offers based on make, model and geographic location. As
these consumers conduct online research on a Company Website or on
the site of one of our network of automotive publishers, they are
presented with relevant offers on a timely basis and, upon the
consumer clicking on the displayed advertisement, are sent to the
appropriate website location of one of our Dealer, Manufacturer or
advertising customers.
Our business, results of operations and financial
condition are impacted by the volume and quality of our Leads. We
measure Lead quality by the conversion of Leads to actual vehicle
sales, which we refer to as the “buy rate.” Buy rate is
the percentage of the consumers submitting Leads that we delivered
to our customers represented by the number of these consumers who
purchased vehicles within ninety days of the date of the Lead
submission. We rely on detailed feedback from Manufacturers
and wholesale customers to confirm the performance of our Leads.
Our Manufacturer and other wholesale customers each
match the Leads we deliver to our customers against vehicle sales
to provide us with information about vehicle purchases by the
consumers who submitted Leads that we delivered to these customers.
AutoWeb also obtains vehicle
registration data from a third party provider. This information,
together with our internal analysis allows us to estimate the buy
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.
Total revenues in
the first three months of 2018 were $32.3 million compared to $37.3
million in the first three months of 2017. The decline in revenue
was primarily due to less efficient traffic acquisition
and lower retail dealer count and lead
volumes. The lower revenue was partially offset by continued growth
in advertising click revenues. We believe that a large part of the
inefficiency in traffic acquisition was the result of increased
traffic acquisition costs that we believe are being driven by
increased search engine marketing (“SEM”) spend from several of our
competitors as well as the consumers shift to mobile. We will
continue to work with our traffic partners to optimize our SEM
methodologies and rebuild our high-quality traffic streams.
In addition, in order to mitigate the impact to profitability, we
realigned our headcount in February 2018 and expect it to reduce
operating expenses. We cannot provide an exact timeframe for
resolution of these issues, and these trends have continued into
the second quarter of 2018 and may continue beyond the
second quarter.
For
the three months ended March 31, 2018 our business, results of
operations and financial condition were affected, and may continue
to be affected in the future, by general economic, employment and
market factors, conditions in the automotive industry, the markets
for Leads and online advertising services, including, but not
limited to, the following:
●
Pricing,
interest rates and purchase incentives for vehicles;
●
The
expectation that consumers will be purchasing fewer vehicles
overall during their lifetime as a result of better quality
vehicles and longer warranties;
●
The
impact of fuel prices on demand for the number and types of
vehicles;
●
Increases
or decreases in the number of retail Dealers or in the number of
Manufacturers and other wholesale customers in our customer
base;
●
The
effect of changes in search engine algorithms and methodologies on
our Lead generation and website advertising activities and
margins;
●
Volatility
in spending by Manufacturers and others in their marketing budgets
and allocations;
●
The
competitive impact of consolidation in the online automotive
referral industry;
●
The
effect of changes in transportation policy, including the potential
increase of public transportation options; and
●
The
effect of fewer vehicles being purchased as a result of new
business models and changes in consumer attitudes regarding the
need for vehicle ownership.
Results of Operations
Three
Months Ended March 31, 2018 Compared to the Three Months Ended
March 31, 2017
The
following table sets forth certain statement of operations data for
the three-month periods ended March 31, 2018 and 2017 (certain
amounts may not calculate due to rounding):
|
|
|
|
|
|
|
|
(Dollar amounts in thousands)
|
|
Revenues:
|
|
|
|
|
|
|
Lead
fees
|
$24,080
|
74%
|
$29,092
|
78%
|
$(5,012)
|
(17%)
|
Advertising
|
8,087
|
25
|
7,969
|
21
|
118
|
1
|
Other
revenues
|
182
|
1
|
280
|
1
|
(98)
|
(35)
|
Total
revenues
|
32,349
|
100
|
37,341
|
100
|
(4,992)
|
(13)
|
Cost
of revenues
|
24,659
|
76
|
24,430
|
66
|
229
|
1
|
Gross
profit
|
7,690
|
24
|
12,911
|
34
|
(5,221)
|
(40)
|
Operating
expenses:
|
|
|
|
|
|
|
Sales
and marketing
|
3,712
|
12
|
3,763
|
10
|
(51)
|
(1)
|
Technology
support
|
3,385
|
10
|
3,253
|
9
|
132
|
4
|
General
and administrative
|
4,575
|
14
|
3,457
|
9
|
1,118
|
32
|
Depreciation
and amortization
|
1,160
|
4
|
1,229
|
3
|
(69)
|
(6)
|
Goodwill
impairment
|
5,133
|
16
|
—
|
—
|
5,133
|
100
|
Total
operating expenses
|
17,965
|
56
|
11,702
|
31
|
6,263
|
54
|
Operating
income (loss)
|
(10,275)
|
(32)
|
1,209
|
3
|
(11,484)
|
(950)
|
Interest
and other income (expense), net
|
—
|
—
|
(100)
|
—
|
100
|
(100)
|
Income
(loss) before income tax provision
|
(10,275)
|
(32)
|
1,109
|
3
|
(11,384)
|
(1,027)
|
Income
tax provision
|
4
|
—
|
625
|
2
|
(621)
|
(99)
|
Net
income (loss)
|
$(10,279)
|
(32%)
|
$484
|
1%
|
$(10,763)
|
(2,224%)
|
Leads. Lead
fees revenues decreased $5.0 million, or 17%, in the first quarter
of 2018 compared to the first quarter of 2017 primarily as a result
of a decrease in revenue from Manufacturers coupled with decreased
retail lead fee revenues.
Advertising.
Advertising revenues increased $0.1
million, or 1%, in the first quarter of 2018 compared to the first
quarter of 2017 as a result of an increase in click revenue
associated with 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 $0.2 million in the
first quarter of 2018 from $0.3 million in the first quarter of
2017 primarily due to lower customer utilization of the mobile
product and SaleMove product.
Cost of
Revenues. Cost of
revenues consists of purchase request and traffic acquisition costs
and other cost of revenues. Purchase request and traffic
acquisition costs consist of payments made to our purchase request
providers, including internet portals and online automotive
information providers. Other cost of revenues consists of SEM and
fees paid to third parties for data and content, including search
engine optimization activity, included on our websites,
connectivity costs, development costs related to our websites,
compensation related expense and technology license fees, server
equipment depreciation and technology amortization directly related
to the Company Websites. SEM, sometimes referred to as paid search
marketing, is the practice of bidding on keywords on search engines
to drive traffic to a website.
Cost
of revenues increased $0.2 million, or 1%, in the first quarter of
2018 compared to the first quarter of 2017 primarily due to
increased traffic acquisition costs.
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 2018 decreased $51,000,
or 1%, compared to the first quarter of 2017 due primarily to lower
headcount related costs.
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 2018 increased by $0.1 million, or 4%, compared to the
first quarter of 2017 due primarily to increased headcount related
costs partially offset by lower facilities
costs.
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 2018
increased by $1.1 million, or 32%, from the first quarter of 2017
due primarily to accrued severance expenses of $1.4 million related
to the termination of the Company’s chief operating
officer.
Depreciation and
Amortization. Depreciation and amortization expense in the first
quarter of 2018 decreased $69,000 to $1.2 million compared to $1.2
million in the first quarter of 2017 primarily due to normal
amortization.
Goodwill impairment.
The Company evaluated enterprise
goodwill for impairment as of March 31, 2018 due to the
Company’s decreased stock price since its annual goodwill
impairment analysis on October 1, 2017. As of March 31, 2018, the
carrying value of AutoWeb was higher than its fair value based on
market capitalization at that date. As a result, a non-cash
impairment charge of $5.1 million was recording during the three
months ended March 31, 2018.
Interest and Other Income
(Expense), Net. Interest and other income (expense), net was $0
for the first quarter of 2018 compared to $0.1 million in the first
quarter of 2017. Interest expense decreased to $88,000
in the first quarter of 2018 from $0.2 million in the first
quarter of 2017 primarily due to paying off our term loans and
revolving loan. We also recorded $0.1 million in other income
during the first quarter of 2018 related to a Transitional License
and Linking Agreement with Internet Brands,
Inc.
Income Taxes.
Income tax expense was $4,000 in the
first quarter of 2018 compared to income tax expense of $0.6
million in the first quarter of 2017. Income tax expense
for the first quarter of 2018 differed from the federal statutory
rate primarily due to operating losses that receive no tax benefit
as a result of valuation allowance recorded for such
losses.
Liquidity and Capital Resources
The
table below sets forth a summary of our cash flows for the three
months ended March 31, 2018 and 2017:
|
Three Months Ended
March 31,
|
|
|
|
|
|
Net
cash (used in) provided by operating activities
|
$(1,657)
|
$3,462
|
Net
cash used in investing activities
|
(250)
|
(163)
|
Net
cash used in financing activities
|
(7,927)
|
(2,168)
|
Our
principal sources of liquidity are our cash and cash equivalents
balances. Our cash and cash equivalents totaled $15.2
million as of March 31, 2018 compared to $25.0 million as of
December 31, 2017.
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 (Used in)
Operating Activities. Net cash used in operating activities
in the three months ended March 31, 2018 of $1.7 million resulted
primarily from net loss of $10.3 million, as adjusted for non-cash
charges. We also had net decreases in working capital,
driven by a decrease in our accounts receivable balance related to
the timing of payments received offset by a decrease in accounts
payable of $1.1 million and cash used to reduce accrued liabilities
of $0.3 million primarily related to the payment of annual
incentive compensation amounts accrued in 2017 and paid in the
first three months of 2018.
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 Used in Investing
Activities. Net cash
used in investing activities was $0.3 million in the three months
ended March 31, 2018 which primarily related to purchases of
property and equipment and expenditures related to capitalized
internal use software.
Net
cash used in investing activities was $0.2 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 Financing
Activities. Net cash
used in financing activities of $7.9 million in the three months
ended March 31, 2018 primarily related to payments of $8.0 million
to pay down the revolving credit facility. In addition, stock
options for 15,217 shares of the Company’s common stock were
exercised in the first three months of 2018 resulting in $0.1
million cash inflow.
Net
cash used in financing activities of $2.2 million in the three
months ended March 31, 2017 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.
Off-Balance Sheet Arrangements
At
March 31, 2018, 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, 2018 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 2017 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 Interim 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”). Disclosure controls and procedures
ensure 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. Based on this evaluation, our Chief Executive Officer
and our Interim Chief Financial Officer believe that, due to the
material weakness in internal control over financial reporting
previously reported in our 2017 Form 10-K, our disclosure controls
and procedures were not effective as of March 31,
2018.
As
previously reported in our 2017 Form 10-K, in connection with their
attestation report on our internal control over financial reporting
as of December 31, 2017, Moss Adams LLP identified what they
believed was a material weakness in our evaluation and measurement
of goodwill for impairment and valuation of deferred tax
assets.
A
material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluations of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may
deteriorate.
With
respect to the material weakness identified by Moss Adams LLP, we
are continuing to take steps to remediate this material weakness in
our internal control over financial reporting, including
identifying and documenting controls for increased management
review of goodwill and valuation of deferred tax assets. We have
also dedicated additional external resources to assist in improving
internal controls so that they are designed to operate at a
sufficient level of precision.
Effective January
1, 2018, we adopted the new revenue guidance under ASC
Topic 606, Revenue from Contracts with Customers. The adoption
of this guidance requires the implementation of new accounting
policies and processes, which changed the Company’s internal
controls over financial reporting for revenue recognition and
related disclosures.
As
of the end of the period covered by this Quarterly Report on Form
10-Q, other than the items mentioned in the above paragraph, 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 Interim
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.
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Asset
Purchase and Sale Agreement dated as of December 19, 2016 by and
among AutoWeb, Inc. (formerly Autobytel Inc.), Car.com, Inc., a
Delaware corporation, and Internet Brands, Inc., a Delaware
corporation, incorporated by reference to Exhibit 2.1 to the
Current Report on Form 8-K filed with the SEC on December 21, 2016
(SEC File No. 001-34761)
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Sixth
Restated Certificate of Incorporation of AutoWeb, Inc. (filed with
the Secretary of the State of Delaware on October 9, 2017),
incorporated by reference to Exhibit 3.4 to the Current Report on
Form 8-K filed with the SEC on October 10, 2017 (SEC File No.
001-34761) (“October 2017 Form
8-K”)
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Seventh Amended and Restated Bylaws of AutoWeb dated October 9,
2017, incorporated by reference to Exhibit 3.5 to the October 2017
Form 8-K
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4.1
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Tax Benefit Preservation Plan dated as of May 26, 2010 between
Company and Computershare Trust Company, N.A., as rights agent,
together with the following exhibits thereto: Exhibit A –
Form of Right Certificate; and Exhibit B – Summary of Rights
to Purchase Shares of Preferred Stock of Company, incorporated by
reference to
Exhibit 4.1 to the Current Report
on Form 8-K filed with the SEC on June 2, 2010 (SEC File No.
000-22239), Amendment No. 1 to Tax Benefit Preservation Plan dated
as of April 14, 2014, between Company and Computershare Trust
Company, N.A., as rights agent, incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K filed with the
SEC on April 16, 2014 (SEC File No. 001-34761), Amendment No. 2 to
Tax Benefit Preservation Plan dated as of April 13, 2017, between
Company and Computershare Trust Company, N.A., as rights agent,
incorporated by reference to
Exhibit 4.1 to the Current Report
on Form 8-K filed with the SEC on April 14, 2017 (SEC File No.
001-34761)
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Certificate of Adjustment Under Section 11(m) of the Tax Benefit
Preservation Plan, incorporated by reference to Exhibit 4.3 to the
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2012 filed with the SEC on November 8, 2012 (SEC File
No. 001-34761)
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Employment Agreement dated as of April 12, 2018 between Company and
Jared R. Rowe, incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed with the SEC on April 18, 2018
(SEC File No. 001-34761) (“April 2018 Form
8-K”)
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Inducement Stock Option Award Agreement dated as of April 12, 2018
between Company and Jared R. Rowe, incorporated by reference to
Exhibit 10.2 to the April 2018 Form 8-K
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Consulting Services Agreement dated as of April 12, 2018 between
Company and Jeffrey H. Coats, incorporated by reference to Exhibit
10.3 to the April 2018 Form 8-K
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Second Amended and Restated Severance Benefits Agreement dated as
of April 12, 2018 between Company and Glenn E. Fuller
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Rule 13a-14(a)/15d-14(a) Certification by Principal Executive
Officer
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Rule 13a-14(a)/15d-14(a) Certification by Principal Financial
Officer
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Section 1350 Certification by Principal Executive Officer and
Principal Financial Officer
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101.INS††
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XBRL Instance Document
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101.SCH††
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XBRL Taxonomy Extension Schema Document
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101.CAL††
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XBRL Taxonomy Calculation Linkbase Document
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101.DEF††
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XBRL Taxonomy Extension Definition Document
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101.LAB††
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XBRL Taxonomy Label Linkbase Document
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101.PRE††
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XBRL Taxonomy Presentation Linkbase Document
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■
Management
Contract or Compensatory Plan or Arrangement.
‡
Certain
schedules in this Exhibit have been omitted in accordance with Item
601(b)(2) of Regulation S-K. AutoWeb, Inc. will furnish
supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request; provided, however,
that AutoWeb, Inc. 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.
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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AutoWeb,
Inc.
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Date: May 10, 2018
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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, and Interim Chief Financial
Officer
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(Principal Accounting Officer)
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Exhibit 10.4
Exhibit
10.4
AUTOWEB,
INC.
SECOND
AMENDED AND RESTATED SEVERANCE BENEFITS AGREEMENT
This
Second Amended and Restated Severance Benefits Agreement
(“Agreement”) is
entered into effective as of April 12, 2018 (“Effective Date”) between AutoWeb,
Inc., a Delaware corporation (“AutoWeb” or “Company”), and Glenn E.
Fuller (“Employee”). Background
AutoWeb
has determined that it is in its best interests to provide Employee
with certain severance benefits to encourage Employee’s
continued employment with, and dedication to the business of, the
Company, and as a result thereof, AutoWeb and Employee have
previously entered into an Amended and Restated Severance Agreement
dated as of September 29, 2008, as amended by Amendment No. 1 to
Amended and Restated Severance Agreement dated as of December 14,
2012 (collectively, the “Prior Severance Agreement”). In
light of the changed circumstances at the Company since the last
amendment of Employee’s severance benefits agreement, the
Company has determined that it is in the Company’s best
interests to amend and restate the Prior Severance Agreement to
provide for additional incentive to encourage Employee’s
continued employment with AutoWeb and dedication to the
Company’s business.
In
consideration of the foregoing and other good and valuable
consideration, receipt of which is hereby acknowledged, the Parties
hereby agree as follows.
1. Definitions.
For purposes of this Agreement, the terms below that begin with
initial capital letters within this Agreement shall have the
specially defined meanings set forth below (unless the context
clearly indicates a different meaning).
(a)
“409A Suspension Period”
shall have the meaning set forth in Section 3.
(b)
“Arbitration Agreement”
means that certain Mutual Agreement to Arbitrate dated as of
October 16, 2006 by and between AutoWeb and Employee.
(c)
“Cause” shall mean the
termination of the Employee’s employment by the Company as a
result of any one or more of the following:
(i)
any
conviction of, or
pleading of nolo contendere by, the Employee for any
felony;
(ii)
any
willful
misconduct of the Employee which has a materially injurious effect
on the business or reputation of the Company;
(iii)
the
gross
dishonesty of the Employee in any way that adversely affects the
Company; or
(iv)
a
material failure to
consistently discharge Employee’s employment duties to the
Company which failure continues for thirty (30) days following
written notice from the Company detailing the area or areas of such
failure, other than such failure resulting from Employee’s
Disability.
For
purposes of this definition of Cause, no act or failure to act, on
the part of the Employee, shall be considered “willful”
if it is done, or omitted to be done, by the Employee in good faith
or with reasonable belief that Employee’s action or omission
was in the best interest of the Company. Employee shall have the
opportunity to cure any such acts or omissions (other than clauses
(i) and (iii) above) within thirty (30) days of the
Employee’s receipt of a written notice from the Company
notifying Employee that, in the opinion of the Company,
“Cause” exists to terminate Employee’s
employment.
(d)
“Change of Control” shall
mean any of the following events:
(i) When
any “person” as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof
(including a “group” as defined in Section 13(d) of the
Exchange Act, but excluding the Company, any Subsidiary or any
employee benefit plan sponsored or maintained by the Company or any
Subsidiary (including any trustee of such plan acting as trustee)),
directly or indirectly, becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act, as amended from
time to time), of securities of the Company representing 50% or
more of the combined voting power of the Company’s then
outstanding securities.
(ii) When
the individuals who, as of the Effective Date, constitute the Board
(“Incumbent
Board”), cease for any
reason to constitute at least a majority of the Board; provided
however, that any individual becoming a director subsequent to such
date, whose election, or nomination for election by the
Company’s stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall, for purposes of this section, be counted as a member of the
Incumbent Board in determining whether the Incumbent Board
constitutes a majority of the Board.
(iii) Consummation
of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another corporation (a
“Business
Combination”), in each
case, unless, following such Business
Combination:
(1) all
or substantially all of the individuals and entities who were the
beneficial owners of the then outstanding shares of common stock of
the Company and the beneficial owners of the combined voting power
of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors immediately prior to
such Business Combination beneficially own, directly or indirectly,
more than fifty percent (50%) of the then outstanding shares of
common stock and the combined voting power of the then outstanding
securities entitled to vote generally in the election of directors,
respectively, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either
directly or indirectly or through one or more subsidiaries);
and
(2) no
person (excluding any employee benefit plan or related trust of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, fifty
percent (50%) or more of the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of such corporation except to the
extent that such ownership existed prior to the Business
Combination.
(iv) Approval
by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
(e)
“COBRA” shall mean the
Consolidated Omnibus Budget Reconciliation Act, as amended, and the
rules and regulations promulgated thereunder.
(f)
“Code” shall mean the
Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
(g)
“Company” means AutoWeb,
and upon any assignment to and assumption of this Agreement by any
Successor Company, shall mean such Successor Company.
(h)
“Disability” shall mean
the inability of the Employee to perform Employee’s duties to
the Company on account of physical or mental illness or incapacity
for a period of one-hundred twenty (120) consecutive calendar days,
or for a period of one hundred eighty (180) calendar days, whether
or not consecutive, during any three hundred sixty-five (365) day
period.
(i)
“Employee’s
Position” means Employee’s position as the
Executive Vice President, Chief Legal and Administrative Officer
and Secretary of the Company.
(j)
“Employee’s Primary Work
Location” means AutoWeb’s headquarters located
at 18872 MacArthur Boulevard, Irvine, California,
92612-1400.
(k)
“Good Reason” means any
act, decision or omission by the Company that: (A) materially
modifies, reduces, changes, or restricts Employee’s base
salary as in existence as of the Effective Date or as of the date
prior to any such change, whichever is more beneficial for Employee
at the time of the act, decision, or omission by the Company; (B)
materially modifies, reduces, changes, or restricts the
Employee’s Health and Welfare Benefits as a whole as in
existence as of the Effective Date hereof or as of the date prior
to any such change, whichever are more beneficial for Employee at
the time of the act, decision, or omission by the Company; (C)
materially modifies, reduces, changes, or restricts the
Employee’s authority, duties, or responsibilities
commensurate with the Employee’s Position but excluding the
effects of any reductions in force other than the Employee’s
own termination; (D) relocates the Employee’s primary
place of employment without Employee’s consent from
Employee’s Primary Work Location to any other location in
excess of a fifty (50) mile radius from the Employee’s
Primary Work Location other than on a temporary basis or requires
any such relocation as a condition to continued employment by
Company; (E) constitutes a failure or refusal by any Company
Successor to assume this Agreement; or (F) involves or results in
any material failure by the Company to comply with any provision of
this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of written notice
thereof given by the Employee. Notwithstanding the foregoing, no
event shall constitute “Good Reason” unless (i) the
Employee first provides written notice to the Company within ninety
(90) days of the event(s) alleged to constitute Good Reason, with
such notice specifying the grounds that are alleged to constitute
Good Reason, and (ii) the Company fails to cure such a material
breach to the reasonable satisfaction of the Employee within thirty
(30) days after Company’s receipt of such written
notice.
(l)
“Health and Welfare
Benefits” means all Company medical, dental, vision,
life and disability plans in which Employee
participates.
(m)
“Separation from Service”
or “Separates from
Service” shall mean Employee’s termination of
employment, as determined in accordance with Treas. Reg. §
1.409A-1(h). Employee shall be considered to have experienced a
termination of employment when the facts and circumstances indicate
that Employee and the Company reasonably anticipate that either (i)
no further services will be performed for the Company after a
certain date, or (ii) that the level of bona fide services Employee
will perform for the Company after such date (whether as an
employee or as an independent contractor) will permanently decrease
to no more than twenty percent (20%) of the average level of bona
fide services performed by Employee (whether as an employee or
independent contractor) over the immediately preceding thirty-six
(36) month period (or the full period of services to the Company if
Employee has been providing services to the Company for less than
thirty six (36) months). If Employee is on military leave, sick
leave, or other bona fide leave of absence, the employment
relationship between Employee and the Company shall be treated as
continuing intact, provided that the period of such leave does not
exceed six months, or if longer, so long as Employee retains a
right to reemployment with the Company under an applicable statute
or by contract. If the period of a military leave, sick leave, or
other bona fide leave of absence exceeds six months and Employee
does not retain a right to reemployment under an applicable statute
or by contract, the employment relationship shall be considered to
be terminated for purposes of this Agreement as of the first day
immediately following the end of such six-month period. In applying
the provisions of this section, a leave of absence shall be
considered a bona fide leave of absence only if there is a
reasonable expectation that Employee will return to perform
services for the Company. For purposes of determining whether
Employee has incurred a Separation from Service, the Company shall
include the Company and any entity that would be considered a
single employer with the Company under Code Section 414(b) or
414(c).
(n)
“Severance Period” shall
equal eighteen (18) months.
(o)
“Successor Company” means
any successor to AutoWeb or its assets by reason of any Change of
Control.
(p)
“Termination Without
Cause” means termination of Employee’s
employment with the Company (i) by the Company (a) for any reason
other than (1) death, (2) Disability or (3) those reasons expressly
set forth in the definition of “Cause,” (b) for no
reason at all, or (c) in connection with or as a result of a Change
of Control; provided, however, that a termination of
Employee’s employment with the Company in connection with a
Change of Control shall not constitute a Termination Without Cause
if Employee is offered employment with the Successor Company under
terms and conditions, including position, salary and other
compensation, and benefits, that would not provide Employee the
right to terminate Employee’s employment for Good
Reason.
2. Severance Benefits
and Conditions.
(a)
In the event of (i) Termination Without Cause by the Company, or
(ii) the termination of Employee’s employment with the
Company by Employee for Good Reason within 30 days following the
earlier of (1) the Company’s failure to cure within the
30-day period set forth in the definition of Good Reason, and (2)
the Company’s notice to Employee that it will not cure the
event giving rise to such termination for Good Reason, then (A)
Employee shall receive upon such termination a lump sum amount
equal to the number of months constituting the Severance Period at
the time of termination times the Employee’s monthly base
salary (determined as the Employee’s highest monthly base
salary paid to Employee while employed by the Company; base salary
does not include any bonus, commissions or other incentive payments
or compensation); (B) subject to Section 2(b) below, Employee shall
be entitled to a continuation of all Health and Welfare Benefits
for Employee and, if applicable, Employee’s eligible
dependents during the Severance Period at the time they would have
been provided or paid had the Employee remained an employee of
Company during the Severance Period and at the levels provided
prior to the event giving rise to a termination; (C) the amount of
Employee’s annual incentive compensation plan payout for the
annual incentive compensation plan year in which Employee’s
date of termination occurred, based on actual performance for the
entire performance period and prorated for the amount of time
Employee was employed by the Company prior to the date of
termination during such plan year and (D) the Company shall make
available to Employee career transition services at a level and
with a provider selected by the Company in accordance with Section
2(g) below.
(b)
(i)
With respect to Health and Welfare Benefits that are eligible for
continuation coverage under COBRA, in the event the Company is
unable to continue Employee’s and Employee’s eligible
dependents’ (assuming such dependents were covered by AutoWeb
at the time of termination) participation under the Company’s
then existing insurance policies for such Health and Welfare
Benefits, Employee may elect to obtain coverage for such Health and
Welfare Benefits either by (1) electing COBRA continuation benefits
for Employee and Employee’s eligible dependents; (2)
obtaining individual coverage for Employee and Employee’s
eligible dependents (if Employee and Employee’s eligible
dependents qualify for individual coverage); or (3) electing
coverage as eligible dependents under another person’s group
coverage (if Employee and Employee’s eligible dependents
qualify for such dependent coverage), or any combination of the
foregoing alternatives. Employee may also initially elect COBRA
continuation benefits and later change to individual coverage or
dependent coverage for Employee or any eligible dependent of
Employee, but Employee understands that if continuation of Health
and Welfare Benefits under COBRA is not initially selected by
Employee or is later terminated by Employee, Employee will not be
able to return to continuation coverage under COBRA. The Company
shall pay directly or reimburse to Employee the monthly premiums
for the benefits or coverage selected by Employee, with such
payment or reimbursement not to exceed the monthly premiums the
Company would have paid assuming Employee elected continuation of
benefits under COBRA. The Company’s obligation to pay or
reimburse for the Health and Welfare Benefits covered by this
Section 2(b)(i) shall terminate upon the earlier of (i) the end of
the Severance Period; and (ii) Employee’s employment by an
employer that provides Employee and Employee’s eligible
dependents with group coverage substantially similar to the Health
and Welfare Benefits provided to Employee and Employee’s
eligible dependents at the time of the termination of
Employee’s employment with the Company, provided that
Employee and Employee’s eligible dependents are eligible for
participation in such group coverage.
(ii)
With respect to Health and Welfare Benefits that are not eligible
for continuation coverage under COBRA, in the event the Company is
unable to continue Employee’s participation under the
Company’s then existing insurance policies for such Health
and Welfare Benefits, Employee may elect to obtain coverage for
such Health and Welfare Benefits either by (1) obtaining individual
coverage for Employee (if Employee qualifies for individual
coverage); or (2) electing coverage as an eligible dependent under
another person’s group coverage (if Employee qualifies for
such dependent coverage), or any combination of the foregoing
alternatives. The Company shall pay directly or reimburse to
Employee the monthly premiums for the benefits or coverage selected
by Employee, with such payment or reimbursement not to exceed the
monthly premiums the Company paid for such Health and Welfare
Benefits at the time of termination of Employee’s employment
with the Company. The Company’s obligation to pay or
reimburse for the Health and Welfare Benefits covered by this
Section 2(b)(ii) shall terminate upon the earlier of (i) the end of
the Severance Period; and (ii) Employee’s employment by an
employer that provides Employee with group coverage substantially
similar to the Health and Welfare Benefits provided to Employee at
the time of the termination of Employee’s employment with the
Company, provided that Employee is eligible for participation in
such group coverage. Employee acknowledges and agrees that the
Company shall not be obligated to provide any Health and Welfare
Benefits covered by this Section 2(b)(ii) for Employee if Employee
does not qualify for coverage under the Company’s existing
insurance policies for such Health and Welfare Benefits, for
individual coverage, or for dependent coverage.
(c)
The payments
and benefits set forth in Sections 2(a) and 2(b) are conditioned
upon and shall be provided to Employee only if (i) Employee has
executed and delivered to the Company a Separation and Release
Agreement in favor of the Company and Releasees, which agreement
shall be substantially in the form attached hereto as Exhibit A
(“Release”) no
later than the expiration of the applicable period of time allowed
for Employee to consider the Release as set forth in Section 17 of
the Release (“Release
Consideration Period”); (ii) Employee has not revoked
the Release prior to the expiration of the applicable revocation
period set forth in Section 17 of the Release (“Release Revocation Period”); and
(iii) the Release has become effective and non-revocable no later
than the cumulative period of time represented by the sum of the
maximum Release Consideration Period and the maximum Release
Revocation Period. No payments or benefits set forth in Sections
2(a) or 2(b) shall be due or payable to, or provided to, Employee
if the Release has not become effective and non-revocable in
accordance with the requirements of this Section 2(c).
(d)
Upon
satisfaction of the conditions set forth in Section 2(c), but
subject to the last sentence of this Section 2(d), all payments
under Section 2(a)(A) shall be made to Employee within five (5)
business days after the Release becomes effective and non-revocable
in accordance with its terms. In any case, the payment under
Section 2(a)(A) shall be made no later than two and one-half months
after the end of the calendar year in which Employee’s
Separation from Service occurs, provided that the Release shall
have become effective and non-revocable in compliance with Section
2(c) prior to expiration of such two and one-half month period. If
the period of time covered by the entire allowed Release
Consideration Period, the entire Revocation Period and the entire
five business day period described above in this Section 2(d)
(considering such periods consecutively) begins in one calendar
year and ends in the following calendar year, all payments under
Section 2(a)(A) shall be made to Employee on the first business day
of such following calendar year which is five (5) or more business
days after the date on which the Release became effective and
non-revocable in accordance with its terms.
(e)
In addition
to the payments and benefits under Sections 2(a) and 2(b), to the
extent required by applicable law or the Company’s incentive
or other compensation plans applicable to Employee, if any, upon
any termination of Employee’s employment Employee shall
receive (i) any amounts earned and due and owing to Employee as of
the termination date with respect to any base salary, incentive
compensation or commissions; and (ii) any other payments required
by applicable law (including payments with respect to accrued and
unused vacation time). Payments required under this Section 2(e)
are not conditioned upon Employee’s signing the Release and
shall be made within the time period(s) required by applicable
law.
(f)
All payments
and benefits under this Section 2 are subject to legally required
federal, state and local payroll deductions and
withholdings.
(g)
To receive
career transition services, Employee must contact the service
provider no later than 30 days after the Release becomes
effective.
(h)
Other than
the payments and benefits provided for in this Section 2, Employee
shall not be entitled to any additional payments or benefits from
the Company resulting from a termination of Employee’s
employment with the Company; provided, however, that the terms and
conditions of any stock, stock options or other equity-based
compensation awards, including any terms and conditions providing
for the acceleration of the vesting of any stock, stock options or
other equity-based compensation awards resulting from a termination
of Employee’s employment with the Company, shall continue to
be governed by the terms and conditions of the applicable plans and
awards agreements pursuant to which such stock, stock options or
other equity-based compensation awards were granted, shall not be
affected by this Agreement.
3. Taxes. All
payments made pursuant to this Agreement will be subject to
withholding of applicable taxes. Notwithstanding the foregoing, and
except as otherwise specifically provided elsewhere in this
Agreement, Employee is solely responsible and liable for the
satisfaction of any federal, state, province or local taxes that
may arise with respect to this Agreement (including any taxes and
interest arising under Section 409A of the Code). Neither the
Company nor any of its employees, directors, or service providers
shall have any obligation whatsoever to pay such taxes or interest,
to prevent Employee from incurring them, or to mitigate or protect
Employee from any such tax or interest liabilities. Notwithstanding
anything in this Agreement to the contrary, if any amounts that
become due under this Agreement on account of Employee’s
termination of employment constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code,
payment of such amounts shall not commence until Employee incurs a
Separation from Service. If, at the time of Employee’s
Separation from Service under this Agreement, Employee is a
“specified employee” (within the meaning of Section
409A of the Code), any amounts that constitute “nonqualified
deferred compensation” within the meaning of Section 409A of
the Code that become payable to Employee on account of
Employee’s Separation from Service (including any amounts
payable pursuant to the preceding sentence) will not be paid until
after the end of the sixth calendar month beginning after
Employee’s Separation from Service (“409A Suspension Period”). Within
14 calendar days after the end of the 409A Suspension Period,
Employee shall be paid a lump sum payment, without interest, in
cash equal to any payments delayed because of the preceding
sentence. Thereafter, Employee shall receive any remaining benefits
as if there had not been an earlier delay. With respect to the
reimbursement of expenses to which Employee is entitled under this
Agreement, if any, or the provision of in-kind benefits to Employee
as specified under this Agreement, if any, such reimbursement of
expenses or provision of in-kind benefits shall be subject to the
following conditions: (i) the expenses eligible for
reimbursement or the amount of in-kind benefits provided in one
taxable year shall not affect the expenses eligible for
reimbursement or the amount of in-kind benefits provided in any
other taxable year, except for any medical reimbursement
arrangement providing for the reimbursement of expenses referred to
in Section 105(b) of the Code, solely to the extent that the
arrangement provides for a limit on the amount of expenses that may
be reimbursed under such arrangement over some or all of the period
in which the reimbursement arrangement remains in effect;
(ii) the reimbursement of an eligible expense shall be made no
later than the end of the calendar year after the calendar year in
which such expense was incurred; (iii) the right to
reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit; and (iv) the right to
reimbursement or provision of in-kind benefits shall not apply to
any expenses incurred or benefits to be provided beyond the last
day of the second taxable year following the year in which
Employee's Separation from Service occurred.
4. Arbitration.
Any controversy or claim arising out of, or related to, this
Agreement, or the breach thereof, shall be governed by the terms of
the Arbitration Agreement, which is incorporated herein by
reference.
5. Entire
Agreement. All oral or written agreements or representations
express or implied, with respect to the subject matter of this
Agreement are set forth in this Agreement. This Agreement contains
the entire integrated understanding between the parties hereto and
supersedes any prior employment, severance, or change-in-control
protective agreement or other agreement, plan or arrangement
between the Company or any predecessor and Employee. No provision
of this Agreement shall be interpreted to mean that Employee is
subject to receiving fewer benefits than those available to
Employee without reference to this Agreement. The Parties
acknowledge and agree that the Prior Severance Agreement is hereby
terminated and shall have no further force or effect.
6. Notices.
Except as otherwise provided in this Agreement, any notice,
approval, consent, waiver or other communication required or
permitted to be given or to be served upon any person in connection
with this Agreement shall be in writing. Such notice shall be
personally served, sent by fax or cable, or sent prepaid by either
registered or certified mail with return receipt requested or
Federal Express and shall be deemed given (i) if personally served
or by Federal Express, when delivered to the person to whom such
notice is addressed, (ii) if given by fax or cable, when sent, or
(iii) if given by mail, two (2) business days following deposit in
the United States mail. Any notice given by fax or cable shall be
confirmed in writing, by overnight mail or Federal Express within
forty-eight (48) hours after being sent. Such notices shall be
addressed to the party to whom such notice is to be given at the
party’s address set forth below or as such party shall
otherwise direct.
If to
the Company:
AutoWeb,
Inc.
18872
MacArthur Boulevard, Suite 200
Irvine,
California, 92612-1400
Facsimile: (949)
862-1323
Attn:
Chief Legal Officer
If to
the Employee:
To
Employee’s latest home address on file with the
Company
7. No Waiver.
No waiver, by conduct or otherwise, by any party of any term,
provision, or condition of this Agreement, shall be deemed or
construed as a further or continuing waiver of any such term,
provision, or condition nor as a waiver of a similar or dissimilar
condition or provision at the same time or at any prior or
subsequent time.
8. Amendment to this
Agreement. No modification, waiver, amendment, discharge or
change of this Agreement, shall be valid unless the same is in
writing and signed by the party against whom enforcement of such
modification, waiver amendment, discharge, or change is or may be
sought.
9. Non-Disclosure.
Except as set forth below, and unless required by applicable law,
rule, regulation or order or to enforce this Agreement, Employee
shall not disclose the existence of this Agreement or the
underlying terms to any third party, including without limitation,
any former, present or future employee of the Company, other than
to Employee’s immediate family who have a need to know such
matters or to Employee’s tax or legal advisors who have a
need to know such matters. If Employee does disclose this Agreement
or any of its terms to any of Employee’s immediate family or
tax or legal advisors, then Employee will inform them that they
also must keep the existence of this Agreement and its terms
confidential. The Company may disclose the existence or terms of
the Agreement and its terms and may file this Agreement as an
exhibit to its public filings if it is required to do so under
applicable law, rule, regulation or order. In the event the Company
shall publicly disclose the existence or terms of this Agreement,
or file this Agreement with any public filings, the provisions of
this Section 9 shall terminate and shall no longer restrict
Employee from disclosing the existence or terms of this
Agreement.
10. Enforceability;
Severability. If any provision of this Agreement shall be
invalid or unenforceable, in whole or in part, such provision shall
be deemed to be modified or restricted to the extent and in the
manner necessary to render the same valid and enforceable, or shall
be deemed excised from this Agreement, as the case may require, and
this Agreement shall be construed and enforced to the maximum
extent permitted by law as if such provision had been originally
incorporated herein as so modified or restricted, or as if such
provision had not been originally incorporated herein, as the case
may be.
11. Governing
Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California without giving
effect to such State’s choice of law rules. This Agreement is
deemed to be entered into entirely in the State of California. This
Agreement shall not be strictly construed for or against either
party.
12. No Third Party
Beneficiaries. Except as otherwise set forth in this
Agreement, nothing contained in this Agreement is intended or shall
be construed to create rights running to the benefit of any third
party.
13. Successors of the
Company. The rights and obligations of the Company under
this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and assigns of the Company, including any
Successor Company. This Agreement shall be assignable by the
Company in the event of a merger or similar transaction in which
the Company is not the surviving entity, or a sale of all or
substantially all of the Company’s assets.
14. Rights
Cumulative. The rights under this Agreement, or by law or
equity, shall be cumulative and may be exercised at any time and
from time to time. No failure by any party to exercise, and no
delay in exercising, any rights shall be construed or deemed to be
a waiver thereof, nor shall any single or partial exercise by any
party preclude any other or future exercise thereof or the exercise
of any other right.
15. No Right or
Obligation of Employment. Employee acknowledges and agrees
that nothing in this Agreement shall confer upon Employee any right
with respect to continuation of employment by the Company, nor
shall it interfere in any way with Employee’s right or the
Company’s right to terminate Employee’s employment at
any time, with or without Cause.
16. Interpretation.
Every provision of this Agreement is the result of full
negotiations between the parties, both of whom have either been
represented by counsel throughout or otherwise been given an
opportunity to seek the aid of counsel. Each party hereto further
agrees and acknowledges that it is sophisticated in legal affairs
and has reviewed this Agreement in detail. Accordingly, no
provision of this Agreement shall be construed in favor of or
against any of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof.
Captions and headings of sections contained in this Agreement are
for convenience only and shall not control the meaning, effect, or
construction of this Agreement. Time periods used in this Agreement
shall mean calendar periods unless otherwise expressly
indicated.
17. Legal and Tax
Advice. Employee acknowledges that: (i) the Company has
encouraged Employee to consult with an attorney and/or tax advisor
of Employee’s choosing (and at Employee’s own cost and
expense) in connection with this Agreement, and (ii) Employee is
not relying upon the Company for, and the Company has not provided,
legal or tax advice to Employee in connection with this Agreement.
It is the responsibility of Employee to seek independent tax and
legal advice with regard to the tax treatment of this Agreement and
the payments and benefits that may be made or provided under this
Agreement and any other related matters. Employee acknowledges that
Employee has had a reasonable opportunity to seek and consider
advice from Employee’s counsel and tax advisors.
18. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which shall
constitute one instrument. The parties agree that facsimile copies
of signatures shall be deemed originals for all purposes hereof and
that a party may produce such copies, without the need to produce
original signatures, to prove the existence of this Agreement in
any proceeding brought hereunder.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the Company and
Employee have executed and entered into this Agreement effective as
of the date first shown above.
AUTOWEB,
INC.
By:
/s/ Jared R.
Rowe
Jared
R. Rowe
President and Chief
Executive Officer
EMPLOYEE
/s/
Glenn E. Fuller
Glenn E.
Fuller
EXHIBIT A
SEPARATION AND RELEASE AGREEMENT
It is
hereby agreed by and between you, Glenn E. Fuller (for yourself,
your spouse, family, agents and attorneys) (jointly,
“You” or
“Employee”), and
AutoWeb, Inc., its predecessors, successors, affiliates, directors,
employees, shareholders, fiduciaries, insurers, employees and
agents (jointly, the “Company”), as
follows:
1. Separation
of Employment. You acknowledge that your employment with the
Company ended effective [_______], 201[__] (“Employment Termination Date”), and
that You will perform no further duties, functions or services for
the Company subsequent to the Employment Termination Date. You have
resigned or hereby resign from all officer and director positions
You held with the Company or any of its subsidiaries effective as
of the Employment Termination Date. This Separation and Release
Agreement (“Release”) is entered into in
connection with that certain Second Amended and Restated Severance
Benefits Agreement dated effective as of April 12, 2018 by and
between the Company and Employee (“Severance Benefits
Agreement”).
2. Release
Consideration. In exchange for your promises and obligations
in this Release and the Severance Benefits Agreement, including the
release of claims set forth below, if You sign and do not revoke
this Release and this Release becomes effective, the Company will
pay You the amounts, and will provide the benefits, due to You
under the Severance Benefits Agreement, minus legally required
federal, state and local payroll deductions and withholdings.
Payment of any monetary amount provided for in this Section 2 will
be made within the time periods required by the Severance Benefits
Agreement (except for payments or benefits that will be paid or
provided over time as provided therein) and, if no time is
specified, within 5 business days after this Release becomes
effective.
3. Acknowledgement
of Receipt of Amounts Due. You acknowledge and agree that
You have received all, and that the Company does not owe You any
additional, payments, benefits or other compensation as a result of
your employment with the Company or your separation from employment
with the Company, including, but not limited to, wages,
commissions, bonuses, vacation pay, severance pay, expenses, fees,
or other compensation or payments of any kind or nature, other than
those amounts or benefits, if any, payable or to be provided to You
after the date hereof pursuant to the Severance Benefits Agreement
after this Release becomes effective.
Return of Company
Property. You represent and warrant that You have returned
to the Company any and all documents, software, equipment
(including, but not limited to, computers and computer-related
items), and all other materials or other things in your possession,
custody, or control which are the property of the Company,
including, but not limited to, Company identification, keys,
computers, cell phones, and the like, wherever such items may have
been located; as well as all copies (in whatever form thereof) of
all materials relating to your employment, or obtained or created
in the course of your employment with the Company. You hereby
represent that, other than those materials You have returned to the
Company pursuant to this Section 4, You have not copied or caused
to be copied, and have not transferred or printed-out or caused to
be transferred or printed-out, any software, computer disks,
e-mails or other documents other than those documents generally
available to the public, or retained any other materials
originating with or belonging to the Company. You further represent
that You have not retained in your possession, custody or control,
any software, documents or other materials in machine or other
readable form, which are the property of the Company, originated
with the Company, or were obtained or created in the course of or
relate to your employment with the Company; provided, however, that
nothing in this Release or elsewhere shall prevent You from
retaining and utilizing copies of documents relating to Your
employment or personal benefits, entitlements and obligations
(including employment agreements, confidentiality agreements, stock
options award agreements and severance agreements); documents
relating to Your personal tax obligations; the data and entries
from Your contacts and calendar; Your personal emails; documents
constituting your work product resulting from your services as
attorney for the Company; and such other records and documents as
may reasonably be approved by the Company.
4. Confidentiality
and Non-Solicitation/Interference.
(a) You
shall keep confidential, and shall not hereafter use or disclose to
any person, firm, corporation, governmental agency, or other
entity, in whole or in part, at any time in the future, any trade
secret, proprietary information, or confidential information of the
Company, including, but not limited to, information relating to
trade secrets, processes, methods, pricing strategies, customer
lists, marketing plans, product introductions, advertising or
promotional programs, sales, financial results, financial records
and reports, regulatory matters and compliance, and other
confidential matters, except as required by law and as necessary
for compliance purposes. These obligations are in addition to the
obligations set forth in any confidentiality or non-disclosure
agreement between You and the Company, including, without
limitation, that certain Employee Confidentiality Agreement dated
as of October 16, 2006, which shall remain binding on You after the
Employment Termination Date.
(b)
Unless required by applicable law, rule, regulation or order or to
enforce this Agreement, Employee shall not disclose the existence
of the Severance Benefits Agreement or this Release or the
underlying terms to any third party, including without limitation,
any former, present or future employee of the Company, other than
to Employee’s immediate family who have a need to know such
matters or to Employee’s tax or legal advisors who have a
need to know such matters. If Employee does disclose this Release,
the Severance Benefits Agreement or any of their respective terms
to any of Employee’s immediate family or tax or legal
advisors, then Employee will inform them that they also must keep
the existence of this Release, the Severance Benefits Agreement and
their respective terms confidential. The Company may disclose the
existence or terms of this Release, the Severance Benefits
Agreement and their respective terms and may file this Release and
the Severance Benefits Agreement as exhibits to its public filings
if it is required to do so under applicable law, rule, regulation
or order. In the event the Company shall publicly disclose the
existence or terms of this Agreement, or file this Agreement with
any public filings, the provisions of this Section 5(b) shall
terminate and shall no longer restrict Employee from disclosing the
existence or terms of Severance Benefits Agreement or this
Release.
(c)
For a period of one (1) year immediately following
this Release becoming effective, You agree that You will not
interfere with Company’s business by soliciting an employee
to leave Company’s employ, or by inducing a consultant or
vendor to sever its relationship with Company. You may not, at any
time, use the Company’s trade secrets to solicit business
from any source, including the Company’s customers or
clients. This Section 5(c) is not intended to, and shall not,
prevent You from lawful competition with the Company. You represent
and warrant that You have not engaged in any of the foregoing
activities prior to the effective date of this
Release.
5. Nondisparagement.
You agree that neither You nor anyone acting on your behalf or at
your direction will disparage, denigrate, defame, criticize, impugn
or otherwise damage or assail the reputation or integrity of the
Company publicly or privately to any third party, including without
limitation (i) to any current or former employee, officer,
director, contractor, supplier, customer, or client of the Company;
(ii) any prospective or actual purchaser of the equity interests of
the Company or its business or assets; or (iii) to any person or
entity in the automotive industry, automotive marketing,
advertising or other services, or the automotive
press.
6. Unconditional
General Release of Claims.
(a) In
consideration for the payment and benefits provided for in Section
2, and notwithstanding the provisions of Section 1542 of the Civil
Code of California, You unconditionally release and forever
discharge the Company, and the Company’s current, former, and
future controlling shareholders, subsidiaries, affiliates, related
companies, predecessor companies, divisions, directors, trustees,
officers, employees, agents, attorneys, successors, and assigns
(and the current, former, and future controlling shareholders,
directors, trustees, officers, employees, agents, and attorneys of
any such subsidiaries, affiliates, related companies, predecessor
companies, and divisions) (all of the foregoing released persons or
entities being referred to herein as “Releasees”), from any and all
claims, complaints, demands, actions, suits, causes of action,
obligations, damages and liabilities of whatever kind or nature,
whether known or unknown, based on any act, omission, event,
occurrence, or nonoccurrence from the beginning of time to the date
of execution of this Release, including, but not limited to, claims
that arise out of or in any way relate to your employment or your
separation from employment with the Company.
(b)
You acknowledge and agree that the foregoing unconditional and
general release includes, but is not limited to, (i) any claims for
salary, bonuses, commissions, equity, compensation (except as
specified in this Agreement), wages, penalties, premiums, severance
pay, vacation pay or any benefits under the Employee Retirement
Income Security Act of 1974, as amended; (ii) any claims of
harassment, retaliation or discrimination; (iii) any claims
based on any federal, state or governmental constitution, statute,
regulation or ordinance, including, without limitation, Title VII
of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the
Age Discrimination in Employment Act, the Americans With
Disabilities Act, Section 1981 of the Civil Rights Act of 1866, the
California Fair Employment and Housing Act, the California Family
Rights Act, the Family and Medical Leave Act, the California
Constitution, the California Labor Code, the California Industrial
Welfare Commission Wage Orders, the California Government Code, the
Worker Adjustment and Retraining Notification Act; (iv)
whistleblower claims, claims of breach of implied or express
contract, breach of promise, misrepresentation, negligence, fraud,
estoppel, defamation, infliction of emotional distress, violation
of public policy, wrongful or constructive discharge, or any other
employment-related tort, and any claims for costs, fees, or other
expenses, including attorneys’ fees; and (v) any other aspect
of your employment or the termination of your
employment.
(c)
For the purpose of implementing a full and complete release, You
expressly acknowledge and agree that this Release resolves all
claims You may have against the Company and the Releasees as of the
date of this Release, including but limited to claims that You did
not know or suspect to exist in your favor at the time of the
execution of this Release. You expressly waive any and all rights
which You may have under the provisions of Section 1542 of the
California Civil Code or any similar state or federal statute.
Section 1542 provides as follows:
“A general
release does not extend to claims which the creditor does not know
or suspect to exist in his or her favor at the time of executing
the release, which if known by him or her must have materially
affected his or her settlement with the debtor.”
(d)
This Release will not waive the Employee’s rights to
indemnification under the Company’s certificate of
incorporation or by-laws or, if applicable, any written agreement
between the Company and the Employee, or under applicable
law.
(e)
You hereby certify that
You have not experienced a job-related illness or injury for which
You have not already filed a claim.
(f)
This general release does not waive or release rights or claims
arising after You sign this Release.
7. Covenant
Not to Sue. A
“covenant not to sue” is a promise not to sue in court.
This covenant differs from a general release of claims in that,
besides waiving and releasing the claims covered by this Release,
You represent and warrant that You have not filed, and agree that
You will not file, or cause to be filed or maintained, any judicial
complaint, lawsuit or demand for arbitration involving any claims
You have released in this Release, and You agree to withdraw any
judicial complaints, lawsuits or demands for arbitration You have
filed, or were filed on your behalf, prior to the effective date of
this Release. Still, You may sue to enforce this Release. You agree
if You breach this covenant, then You must pay the legal expenses
incurred by incurred by any Releasee in defending against your
suit, including reasonable attorneys’ fees, or, at the
Company’s option, return everything paid to You under this
Agreement. In that event, the Company shall be excused from making
any further payments or continuing any other benefits otherwise
owed to You under paragraph 2 of this Agreement. Furthermore, You
give up all rights to individual damages in connection with any
administrative or court proceeding with respect to your employment
with or termination of employment from, the Company. You also agree
that if You are awarded money damages, You will assign your right
and interest to such money damages (i) in connection with an
administrative charge, to the relevant administrative agency; and
(ii) in connection with a lawsuit or demand for arbitration, to the
Company.
8. Cooperation
With Company. You agree to assist and cooperate (including,
but not limited to, providing information to the Company and/or
testifying truthfully in a proceeding) in the investigation and
handling of any internal investigation, governmental matter, or
actual or threatened court action, arbitration, administrative
proceeding, or other claim involving any matter that arose during
the period of your employment. You shall be reimbursed for
reasonable expenses actually incurred in the course of rendering
such assistance and cooperation. Your agreement to assist and
cooperate shall not affect in any way the content of information or
testimony provided by You.
9. No
Reemployment. You
acknowledge and agree that the Company has no obligation to employ
You or offer You employment in the future and You shall have no
recourse against the Company if it refuses to employ You or offer
You employment. If You do seek re-employment, then this Release
shall constitute sufficient cause for the Company to refuse to
re-employ You. Notwithstanding the foregoing, the Company has the
right to offer to re-employ You in the future if, in its sole
discretion, it chooses to do so.
10. No
Admission of Liability. This Release does not constitute an
admission that the Company or any other Releasee has violated any
law, rule, regulation, contractual right or any other duty or
obligation.
11. Severability.
Should any provision of this Release be declared or be determined
by any court or arbitrator to be illegal or invalid, the validity
of the remaining parts, terms, or provisions shall not be affected,
and said illegal or invalid part, term, or provision shall be
deemed not to be part of this Release.
12. Governing
Law. This Release is made and entered into in the State of
California and shall in all respects be interpreted, enforced, and
governed under the law of that state, without reference to conflict
of law provisions thereof.
13. Interpretation.
The language of all parts in this Release shall be construed as a
whole, according to fair meaning, and not strictly for or against
any party. The captions and headings contained in this Agreement
are for convenience only and shall not control the meaning, effect,
or construction of this Agreement.
14. Knowing
and Voluntary Agreement. You have carefully reviewed this
Release and understand the terms and conditions it contains. By
entering into this Release, You are giving up potentially valuable
legal rights. You specifically acknowledge that You are waiving and
releasing any rights You may have under the ADEA. You acknowledge
that the consideration given for this waiver and release is in
addition to anything of value to which You were already entitled.
You acknowledge that You are signing this Release knowingly and
voluntarily and intend to be bound legally by its
terms.
15. Entire
Agreement. You hereby acknowledge that no promise or
inducement has been offered to You, except as expressly stated in
this Release and in the Severance Benefits Agreement, and You are
relying upon none. This Release and the Severance Benefits
Agreement represent the entire agreement between You and the
Company with respect to the subject matter hereof, and supersede
any other written or oral understandings between the parties
pertaining to the subject matter hereof and may only be amended or
modified with the prior written consent of You and the
Company.
16. Arbitration.
Any controversy or claim arising out or, or related to, this
Release Agreement, or the breach thereof, shall be governed by the
terms of the Arbitration Agreement (as defined in the Severance
Benefits Agreement).
17. Protected
Rights.
(a)
An
individual may not be held criminally or civilly liable under any
federal or state trade secret law for the disclosure of a trade
secret that: (a) is made (i) in confidence to a federal, state, or
local government official, either directly or indirectly, or to an
attorney; and (ii) solely for the purpose of reporting or
investigating a suspected violation of law; or (b) is made in a
complaint or other document that is filed under seal in a lawsuit
or other proceeding. Further, an individual who files a lawsuit for
retaliation by an employer for reporting a suspected violation of
law may disclose the employer’s trade secrets to the attorney
and use the trade secret information in the court proceeding if the
individual: (a) files any document containing the trade secret
under seal; and (b) does not disclose the trade secret, except
pursuant to court order.
(b)
Employee
understands that nothing contained in your Confidentiality
Agreement limits Employee’s ability to file a charge or
complaint with the Equal Employment Opportunity Commission, the
National Labor Relations Board, the Occupational Safety and Health
Administration, the Securities and Exchange Commission or any other
federal, state or local governmental agency or commission
(“Government Agencies”). Employee further understands
that this Agreement does not limit Employee’s ability to
communicate with any Government Agencies or otherwise participate
in any investigation or proceeding that may be conducted by any
Government Agency, including providing documents or other
information, without notice to Company. This Agreement does not
limit Employee’s right to receive an award for information
provided to any Government Agencies.
18. Period
for Review and Consideration/Revocation Rights.
[Alternative 1 for
Section 18 if Employee is age 40 or over at time of separation from
employment, separation from employment is NOT in connection with a
group separation, and ADEA Claims are being
released]
You
understand that You have twenty-one (21) days after this Release
has been delivered to You by the Company to decide whether to sign
this Release, although You may sign this Release at any time within
the twenty-one (21) day period. If You do sign it, You also
understand that You will have an additional seven (7) days after
the date You deliver this signed Release to the Company and to
change your mind and revoke this Release, in which case a written
notice of revocation must be delivered to the Company’s Chief
Legal Officer, AutoWeb, Inc., 18872 MacArthur Blvd. Suite 200,
Irvine, California 92612-1400, on or before the seventh (7th) day
after your delivery of this signed Release to the Company (or on
the next business day if the seventh calendar day is not a business
day). You understand that this Release will not become effective or
enforceable until after that seven (7) day period has passed. If
You revoke this Release, this Release shall not be effective or
enforceable as to any rights You may have under this Release. In
the event that You revoke this Release, You will not be entitled to
the payments and benefits specified in Paragraph 2.
[Alternative
2 for Section 18 if Employee is age 40 or over at time of
separation from employment, separation from employment IS in
connection with a group termination, and ADEA Claims are being
released]
(a)
You understand that You have forty-five (45) days after this
Release has been delivered to You by the Company to decide whether
to sign this Release, although You may sign this Release at any
time within the forty-five (45) day period. If You do sign it, You
also understand that You will have an additional seven
(7) days after You sign
to change your mind and revoke the Agreement, in which case a
written notice of revocation must be delivered to the
Company’s Chief Legal Officer, AutoWeb, Inc., 18872 MacArthur
Blvd. Suite 200, Irvine, California 92612-1400, on or before the
seventh (7th) day after your delivery of this signed Release to the
Company (or on the next business day if the seventh calendar day is
not a business day). You understand that this Release will not
become effective or enforceable until after that seven (7) day
period has passed. If You revoke this Release, this Release shall
not be effective or enforceable as to any rights You may have under
this Release. In the event that You revoke this Release, You will
not be entitled to the payments and benefits specified in Paragraph
2.
(b)
You acknowledge that You have received the group information of
employees included in the Company’s ____________ group
termination program, the eligibility factors for participation in
the program, and the time limits for participation in the program.
You also acknowledge that You have received lists of the ages and
job titles of employees eligible or selected for the program and
employees not eligible or selected for the group termination
program. This information is set forth on Appendix A attached
hereto and incorporated herein by reference.
19. Advice
of Attorney and Tax Advisor. Employee acknowledges that: (i)
the Company has advised Employee to consult with an attorney and/or
tax advisor of Employee’s choosing (and at Employee’s
own cost and expense) before executing this Release, and (ii)
Employee is not relying upon the Company for, and the Company has
not provided, legal or tax advice to Employee in connection with
this Release. It is the responsibility of Employee to seek
independent tax and legal advice with regard to the tax treatment
of this Release and the payments and benefits that may be made or
provided under this Release and any other related matters. Employee
acknowledges that Employee has had a reasonable opportunity to seek
and consider advice from Employee’s attorney and tax
advisors.
PLEASE
READ CAREFULLY. THIS RELEASE INCLUDES A GENERAL RELEASE OF ALL
CLAIMS, KNOWN AND UNKNOWN. YOU MAY NOT MAKE ANY CHANGES TO THE
TERMS OF THIS RELEASE THAT ARE NOT AGREED UPON BY THE COMPANY IN
WRITING. ANY CHANGES SHALL CONSTITUTE A REJECTION OF THIS RELEASE
BY EMPLOYEE.
Dated:_____________,
20__
|
_____________________________________
|
|
Glenn E.
Fuller
|
|
|
Dated:_____________, 20__
|
AutoWeb
Inc.
|
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By:
__________________________________
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(Officer
Name)
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(Title)
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Exhibit 31.1
Exhibit 31.1
CERTIFICATION
I, Jared R. Rowe, certify that:
1.
I
have reviewed this quarterly report on Form 10-Q of AutoWeb,
Inc.;
2.
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
d)
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
5.
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
b)
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: May 10, 2018
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/s/ Jared R. Rowe
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Jared R. Rowe
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President and Chief Executive Officer
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Exhibit 31.2
Exhibit 31.2
CERTIFICATION
I, Wesley Ozima, certify that:
1.
I
have reviewed this quarterly report on Form 10-Q of AutoWeb,
Inc.;
2.
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
d)
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
5.
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
b)
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: May 10, 2018
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/s/ Wesley Ozima
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Wesley Ozima
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Senior Vice President and Controller, and Interim
Chief Financial Officer
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Exhibit 32.1
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of
AutoWeb, Inc. (the “Company”) on Form 10-Q for the period ended March
31, 2018 (the “Report”), we, Jared R. Rowe, President and Chief
Executive Officer of the Company, and Wesley Ozima, Senior Vice
President and Controller and Interim Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
1.
The
Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2.
The
information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.
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/s/ Jared R. Rowe
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Jared R. Rowe
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President and Chief Executive Officer
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May 10, 2018
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/s/ Wesley Ozima
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Wesley Ozima
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Senior Vice President and Controller, and
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Interim Chief Financial Officer
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May 10, 2018
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A
signed original of this written statement required by
Section 906, or other document authenticating, acknowledging,
or otherwise adopting the signatures that appear in typed form
within the electronic version of this written statement required by
Section 906, has been provided to AutoWeb, Inc. and will be
retained by AutoWeb, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.