You should read the following discussion of our results of operations and
financial condition in conjunction with the "Risk Factors" included in Part I,
Item 1A and our Consolidated Financial Statements and related Notes thereto
included in Part II, Item 8 of this Annual Report on Form 10-K. See also the
discussion of "Forward-Looking Statements" immediately preceding Part I of this
Annual Report on Form 10-K.



Overview



As reflected under the section "Results of Operations" in this Item 7, the
decline in total revenues for 2021 compared to 2020 was primarily related to the
impact of the coronavirus pandemic on the vehicle parts supply chain, vehicle
sales, the overall demand from our customers for our leads and clicks products
and the loss of one of our major manufacturing customers.  We have worked to
shift our strategy and to adapt to the changing market conditions within the
automotive industry, by increasing our focus to our core Leads, clicks and email
products and services and away from non-core products and services, such as
third-party product offerings. This shift also negatively impacted total
revenues for 2021. Generally lower retail Leads sales levels resulting from
attrition in our retail dealer network that occurred in the second half of 2020
further contributed to lower total revenues during the year ended December 31,
2021. The addition of used vehicle sales revenue as a result of the CarZeus
Purchase Transaction effective as of August 1, 2021 partially offset the revenue
declines in our core business.



As a result of the continued impact of the coronavirus pandemic on the supply
chain for new vehicle inventory and sales, we have continued to intentionally
operate at lower levels of media spend to match projected industry selling
rates. We expect that in 2022, dealers and consumers alike will continue to
contend with broader macroeconomic uncertainty, including uncertainties created
by high inflation rates and Russia's recent invasion of Ukraine. Our objective
is to provide the appropriate mix of high-quality Leads and click traffic to our
customers by staying aligned with automotive supply and demand dynamics.



Finally, the disruption from the January 2020 malware attack on the Company's
systems also negatively impacted total revenues in 2020. In March 2021, we
received an approximate $0.3 million insurance reimbursement related to the
January 2020 malware attack, which is partially included in other income during
the year ended December 31, 2021.



As we continue to work with our traffic suppliers to optimize our search engine
marketing ("SEM") methodologies and further grow our high-quality traffic
streams, we are also investing in and testing new traffic acquisition strategies
and enhanced mobile consumer experiences. Further, we continue to invest in our
pay-per-click approach to improve the consumer experience of that product. With
a more efficient traffic acquisition model emerging, our plan for 2022 and
beyond is to grow audience, improve conversion, improve Leads and clicks
delivery rates, expand distribution, and increase retail Dealer Leads and clicks
budget capacity. We believe that this focus, along with plans to develop or
integrate new, innovative products and re-platforming existing experiences will
create a more efficient process for how active vehicle shoppers with a vehicle
in mind can be matched with sellers that can meet the shoppers' needs, which
will create opportunities for improved quality of delivery and strengthen our
position for revenue growth.



                                      -27-

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

Table of Contents





Our lead and click generation products have historically operated with limited
visibility regarding future performance due to short sales cycles and a high
rate of customer churn as customers are able to join and leave our platform with
limited notice.  Our advertising business is also subject to seasonal trends,
with the first quarter of the calendar year typically showing sequential decline
versus the fourth quarter. These factors have historically contributed to
volatility in our revenues, cost of revenues, gross profit, and gross profit
margin. These trends were apparent through 2021 and we anticipate they will
continue into 2022 and beyond.



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



We plan to expand both this base and the offerings of our platform even further
as a result of the CarZeus Purchase Transaction, which we believe positions us
to participate more meaningfully in the used vehicle acquisition and sales
market by providing us the opportunity to purchase used vehicles directly from
consumers and resell them primarily through wholesale auctions, forming an
additional method of monetization along the vehicle purchase transaction in
addition to our existing consumer offerings. We believe this acquisition will
also allow us to increase our total addressable market by expanding our presence
in the used vehicle market, while giving us the opportunity to enhance the
offerings and usefulness of our digital marketing and lead acquisition
expertise. We plan to use our traffic acquisition capabilities and operational
efficiency to drive growth, improve financial performance and build scalable
operating processes to enhance performance within the San Antonio, Austin and
Houston, Texas markets. With this foundation in place, we plan to prepare the
business for broader geographic expansion over time.



Although we are not able to provide any specific guidance regarding our full
year 2022 future business, results of operations, financial condition, earnings
per share, cash flow or the trading price of our stock (individually and
collectively referred to as the Company's "financial performance") with detail
or accuracy, many industry analysts have forecast modest improvement in the new
vehicle unit sales seasonally adjusted annual rate from 14.9 million units in
2021 to a range of 15.2-16.0 million units in 2022, or 1-7% growth. New vehicle
sales levels are expected to continue to be challenged until new vehicle
inventories normalize.



In early 2020 and continuing as of the date of this Annual Report on Form 10-K,
the outbreak of coronavirus and emerging variants has led to quarantines, mask
mandates, vaccination requirements and stay-at-home/work-from-home orders in a
number of countries, states, cities and regions and the closure or limited or
restricted access to public and private offices, businesses and facilities,
causing widespread disruptions to travel, economic activity, supply chains and
financial markets. The continuing effects of the coronavirus pandemic has led
our Manufacturer and Dealer customers to experience disruptions in the supply of
vehicle and parts inventories, and in the overall health, safety and
availability of their labor force. Manufacturers have also shut down assembly
plants, adversely impacting inventories of new vehicles. Volatility in the
financial markets, concerns about exposure to the virus, governmental
quarantines, mask mandates, vaccination requirements,
stay-at-home/work-from-home orders, business closures and employment furloughs
and layoffs have also impacted consumer confidence and spending. Lower consumer
confidence may continue even after quarantines, mask mandates, vaccination
requirements, stay-at-home/work-from-home orders and business closures have
ended. These disruptions have impacted the willingness or desire of our
customers to acquire vehicle Leads or other digital marketing services from us.
We are also experiencing direct disruptions in our operations due to the overall
health and safety of, and concerns for, our labor force and as a result of
governmental "social distancing" programs, quarantines, mask mandates,
vaccination requirements and stay-at-home/work-from-home orders, leading us to
reduce/restrict access to our offices and allowing employees to work remotely
from their homes.



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



                                      -28-

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

Table of Contents





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



Segment Information



As a result of the CarZeus Purchase Transaction on July 31, 2021, the Company
has determined that it now operates in two reportable segments: Automotive
digital marketing and used vehicle acquisition and resale through the Company's
Tradein Expert subsidiary. The automotive digital marketing segment consists of
all aspects related to automotive digital marketing, whereas the used vehicle
acquisition and resale segment consists solely of the used vehicle acquisition
and wholesale reselling business.



Operating Metrics



We evaluate several key operating metrics, or key performance indicators, that
we believe are instrumental to understanding the direction of our business,
including Lead traffic, volume, retail dealer count and Lead capacity; click
traffic and click volume, vehicles purchased and sold, sales price per vehicle,
cost per vehicle and gross profit per vehicle.



Lead Traffic and Volume. Lead traffic is the number of consumers who visited our
entire portfolio of owned Lead websites during the applicable review period.
Lead traffic represents the total opportunity of potential Internally and
Non-Internally generated Lead revenue, as it represents the prospective consumer
engaging with our experiences. Lead volume means the total new and used vehicle
Leads invoiced to retail and wholesale customers for the applicable review
period. Lead volume directly translates to Lead revenue, as we bill our clients
for the Lead volume we deliver to them. Although we are not able at this time to
disclose any guidance as to 2022 Lead traffic or Lead volume with any detail or
accuracy, we do anticipate some typical level of volatility in our Lead traffic
and Lead volume, and we anticipate that our Lead sourcing mix between Internally
Generated Leads and Non-Internally Generated Leads will vary as we balance
quality and quantity of our core Lead product. We are also balancing the gross
margin economic characteristics of Internally Generated Leads and Non-Internally
Generated Leads.



Retail Dealer Count and Capacity. Retail dealer count means the number of
franchised dealers contracted for delivery of retail new vehicle Leads plus the
number of vehicle dealers (franchised or independent) contracted for delivery of
retail used vehicle Leads. Retail dealer count growth enables more opportunity
to create a match between Lead volume and retail dealer inventory, and
ultimately translates into retail Dealer Lead capacity. Retail Dealer Lead
capacity is the sum of the number of new and used vehicle Leads contracted for
by new or used retail vehicle Dealers that the Dealers wish to receive each
month (i.e., "targets") during the applicable review period. Retail capacity
represents the total available opportunity to monetize Lead volume within the
Retail Dealer channel. We believe that we need to refine our distribution
channel effectiveness and improve our relationships with the top 150 dealer
groups in the United States. We expect some volatility in both dealer count and
lead capacity during 2022 as we continue to evolve our engagement model for both
retail dealers and the top 150 dealer groups.



Click Traffic and Volume. Click traffic is the total number of visits to
Company-owned click referral websites during the applicable review period. Click
traffic encompasses the total opportunity of potential Internally and
Non-Internally generated click revenue, as it represents the prospective
consumer engaging with our experiences. Click volume is the number of times
consumers clicked on advertisements on the Company's click referral websites
during the applicable review period. Click volume directly translates to click
revenue, as we bill our clients for the click volume we deliver to them. We
anticipate click volume and ultimately click monetization will be impacted by
overall customer mix between non-endemic (i.e., non-automotive) advertisers and
endemic (i.e., automotive) advertisers. We intend to continue to focus on
shifting this mix towards endemic (i.e., automotive) advertisers in order to
create the right match for our click volume and overall monetization
opportunities. While we are taking steps in this direction, this is an area of
focus in order to get performance back to an optimized level.



                                      -29-

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

Table of Contents





Lead Quality. 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 Leads delivered to our customers that
resulted in a vehicle purchase within ninety days of the date of the Lead
submission. High-quality Leads delivered to the right customer will have a
higher buy rate than lower quality or unmatched Leads. We rely on detailed
feedback from Dealers and from Manufacturers and other wholesale customers to
confirm the performance of our Leads. Our Manufacturer and other wholesale
customers each compare the Leads we deliver to them against vehicle sales and
provide us with information about those vehicle purchases related to the
consumer leads submitted through our experiences. We also obtain vehicle
registration data from a third-party provider to conduct our own internal review
of buy rate and Lead quality.



Used Vehicle Acquisition & Resale Metrics. Vehicles purchased is the number of
vehicles acquired during a period that are available for resale. Vehicles sold
is the number of vehicles resold at auctions or direct to Dealers. The sales
price per vehicle is the amount the auction participant or dealer has paid to
acquire each vehicle. The cost per vehicle is the amount we paid to acquire each
vehicle plus any reconditioning or auction fees. Gross profit per vehicle is the
difference between the sales price per vehicle and the cost per vehicle.



Results of Operations

Fiscal Year 2021 Compared to Fiscal year 2020

The following table sets forth our results of operations as a percentage of total revenues for the years ended December 31, 2021, and 2020 (certain percentages below may not sum due to rounding):





                                                                 Years Ended December 31,
                                                                 2021                 2020
Revenues:
Lead generation                                                      72.8 %               79.8 %
Digital advertising                                                  19.8                 20.2
Used vehicle sales                                                    7.4                  0.0
Total revenues                                                      100.0                100.0
Cost of revenues - lead generation and digital advertising           64.7                 69.1
Cost of revenues - used vehicle sales                                 6.9                    -
Gross profit                                                         28.4                 30.9
Operating expenses:
Sales and marketing                                                  12.8                 10.7
Technology support                                                    7.9                  8.6
General and administrative                                           15.8                 16.6
Depreciation and amortization                                         0.9                  2.2
Total operating expenses                                             37.4                 38.1
Operating loss                                                       (9.0 )               (7.2 )
Interest and other income, net                                        1.1                 (1.7 )
Loss before income tax provision                                     (7.9 )               (8.9 )
Income tax provision (benefit)                                          -                    -
Net loss                                                             (7.9 )%              (8.9 )%




Revenues by groups of similar services and gross profits are as follows (dollars
in thousands):



                                                         Years Ended December 31,
                                             2021          2020         $ Change       % Change
Revenues:
Lead generation                            $  52,117     $  61,129     $   (9,012 )          (15 )%
Digital advertising                           14,142        15,441         (1,299 )           (8 )
Used vehicle sales                             5,326             -          5,326            N/A
Total revenues                                71,585        76,570         (4,985 )           (7 )
Cost of revenues - lead generation and
digital advertising                           46,300        52,890         (6,590 )          (12 )
Cost of revenues - used vehicle
wholesale                                      4,954             -          4,954            N/A
Gross profit                               $  20,331     $  23,680     $   (3,349 )          (14 )%




                                      -30-

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

Table of Contents





Lead Generation. Lead generation revenues decreased $9.0 million or 15% in 2021
compared to 2020. The decrease in Lead generation revenues was primarily the
result of a decrease in the volume of automotive leads delivered to
Manufacturers and other wholesale customers. Further contributing to this
decrease is the early termination of the new vehicle leads program by one of our
Manufacturer customers during the second half of 2021, which was partially
offset by a $0.5 million payment made for the early termination of this
Manufacturer.



Digital advertising. Digital advertising revenue decreased $1.3 million or 8% in
2021 compared to 2020. The decrease was primarily the result of a decrease in
click revenue from an overall decrease in click volume year over year. The
continued impact of the coronavirus pandemic and our internal decision to reduce
overall click generation efforts to better align with industry demand led to the
decrease in click volume.



Used vehicle sales. As a result of the CarZeus Purchase Transaction that was
effective on August 1, 2021, the Company recorded used vehicle sales of $5.3
million in 2021. The Company had no used vehicle sales in 2020.



Cost of Revenues - lead generation and digital advertising. Cost of revenues
consists of purchase request and traffic acquisition costs and other costs of
revenues. Purchase request and traffic acquisition costs consist of payments
made to our third-party purchase request providers, including internet portals
and online automotive information providers. Other cost of revenues consists of
SEM and fees paid to third parties for data and content, including search engine
optimization activity, included on our websites; connectivity costs; development
costs related to our websites; technology license fees; server equipment
depreciation; and technology amortization directly related to our Websites.



The $6.6 million or 12% decrease in cost of revenues in 2021 compared to 2020
was primarily from a reduction in revenue, decreased SEM, purchase request and
traffic acquisition costs.

Cost of revenues - used vehicles. As a result of the CarZeus Purchase Transaction that was effective on August 1, 2021, used vehicle cost of revenues was $5.0 million in 2021. The Company did not have any used vehicle cost of revenues in 2020.





Gross Profit. Gross profit decreased $3.3 million, or 14%, compared to 2020 due
to reductions in Lead traffic and Lead volume. Further contributing to this
decrease was the early termination of the new vehicle Leads program by one of
our Manufacturer customers during the second half of 2021, which was partially
offset by a $0.5 million payment made for the early termination of this
Manufacturer.

Operating expenses, interest and other income and income tax provision were as follows (dollars in thousands):





                                                       Years Ended December 31,
                                             2021          2020         $ Change       % Change
Operating expenses:
Sales and marketing                        $   9,170     $   8,201     $      969             12 %
Technology support                             5,649         6,574           (925 )          (14 )
General and administrative                    11,324        12,718         (1,394 )          (11 )
Depreciation and amortization                    653         1,711         (1,058 )          (62 )
Total operating expenses                   $  26,796     $  29,204     $   (2,408 )           (8 )%

Interest and other (expense) income, net   $     807     $  (1,286 )   $    2,093            N/A

Income tax provision                       $       -     $      10     $      (10 )         (100 )%




Sales and Marketing. Sales and marketing expense includes costs for developing
our brand, personnel costs, and other costs associated with retail Dealer and
Manufacturer sales, website advertising and Dealer support. Sales and marketing
expense for the year ended December 31, 2021, increased $1.0 million, or 12%,
compared to the 2020 period, primarily from an increase in headcount related to
the CarZeus Purchase Transaction coupled with an increase in marketing expenses.



                                      -31-

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

Table of Contents





Technology Support. Technology support includes compensation, benefits, software
licenses and other direct costs incurred by us to enhance, manage, maintain,
support, monitor and operate our websites and related technologies, and to
operate our internal technology infrastructure. Technology support expense for
the year ended December 31, 2021, decreased $0.9 million, or 14%, compared to
the year ended December 31, 2020. The change was due primarily to a reduction in
consulting and headcount related expenses.



General and Administrative. General and administrative expense consists of
certain executive, financial, human resources, legal and facilities personnel
expenses, public company and bad debt expense. General and administrative
expense for the year ended December 31, 2021, decreased $1.4 million, or 11%,
compared to 2020 primarily from reductions in recruitment, travel-related
expenses, bad debt expense, rent and severance.



Depreciation and Amortization. Depreciation and amortization expense for the
year ended December 31, 2021, decreased $1.1 million, or 62%, when compared to
the 2020 period. This decrease was primarily from assets that have been fully
depreciated as compared to the same period in the prior year.



Interest and Other (Expense) Income, net. Interest and other (expense) income
increased approximately $2.1 million when compared to the 2020 period. In the
first quarter of 2021, we recorded $1.4 million of income associated with the
forgiveness of our Paycheck Protection Program loan. Further contributing to the
increase in interest and other income (expense) was an insurance reimbursement
related to the January 2020 malware attack of which $0.2 million was recorded on
our fiscal year 2021 Condensed Consolidated Statement of Operations. Interest
expense decreased to $1.0 million for the year ended December 31, 2021, compared
to $1.6 million for the year ended December 31, 2020, primarily from the
write-off of our deferred financing fees associated with the revolving line of
credit under the PNC Credit Facility. Interest expense also includes interest on
outstanding borrowings and the amortization of debt issuance costs.



Income tax provision. Income tax expense was de minimis for the years ended
December 31, 2021, and 2020. Operating losses during the year ended December 31,
2021 did not result in tax as valuation allowances were recorded against the
deferred tax assets. Income tax expense was driven by changes in certain state
taxes.

Liquidity and Capital Resources

The table below sets forth a summary of our cash flow for the years ended December 31, 2021 and 2020 (dollars in thousands):





                                                         Years Ended December 31,
                                                          2021               2020

Net cash (used in) provided by operating activities $ (1,416 ) $

1,901


Net cash (used in) investing activities                      (2,044 )            (596 )
Net cash (used in) provided by financing activities             (18 )           7,856




Our principal sources of liquidity are our cash and cash equivalent balances and
borrowings under the CNC Credit Agreement. See Note 6 of the "Notes to
Consolidated Financial Statements" included in our Consolidated Financial
Statements under Part IV, Item 15 of this Annual Report on Form 10-K. Our cash
and cash equivalents and restricted cash totaled $11.6 million as of December
31, 2021, compared to $15.1 million as of December 31, 2020. As of December 31,
2021, we had an accumulated deficit of $355.4 million and stockholders' equity
of $12.8 million.



Net Cash (Used in) Provided by Operating Activities. Net cash used in operating
activities totaled $0.9 million for the year ended December 31, 2021, compared
to net cash provided by operating activities of $1.9 million in the prior year.
Net cash used in operating activities for the year ended December 31, 2021 was
primarily related our net loss of $5.7 million, the forgiveness of the Paycheck
Protection Program loan of $1.4 million and the provision for bad debt of $0.2
million. These decreases were offset by depreciation and amortization of $2.5
million, stock compensation expense of $1.9 million, right-of-use asset
amortization of $0.9 million and other non-cash charges of $0.6 million.



Net Cash (Used in) Investing Activities. Net cash used in investing activities
of $2.0 million for the year ended December 31, 2021, primarily related to
purchase of property and equipment and expenditures related to capitalized
internal use software of $1.7 million coupled with $0.3 million paid in the
acquisition of certain assets of Car Acquisition, LLC in the CarZeus Purchase
Transaction effective August 1, 2021.



Net Cash (Used in) Provided by Financing Activities. Net cash provided by
financing activities was generally unchanged for the year ended December 31,
2021. Net cash provided by financing activities of $0.02 million primarily
consisted of net borrowings on the Company's credit facilities offset by $0.2
million of proceeds from the exercise of stock options.



                                      -32-

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

Table of Contents





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



Our objective is to achieve cash generation as a business; however, there is no
assurance that we will be able to achieve this objective. The CNC Credit
Agreement expires in March 2023. If we are unable to obtain adequate financing
or financing on terms satisfactory to us, or when we require it, the ability to
continue operating could be significantly limited, and our financial performance
could be materially and adversely affected.



In response to the coronavirus pandemic, the CARES Act was signed into law in
March 2020. The CARES Act in part provides for an employee retention credit,
which is a refundable tax credit against certain employment taxes equal to 50%
of qualified wages an eligible employer pays to employees. In March 2022, we
amended certain payroll tax filings in conjunction with the employee retention
credit and are awaiting confirmation of the credit from the Internal Revenue
Service.



We believe current cash reserves and operating cash flows are adequate to
sustain operations for the next twelve months. If we are unsuccessful in
improving our operating performance and in meeting our objectives to achieve
cash generation, we may need to seek to satisfy our future cash needs through
private or public sales of securities, debt financings or partnering/licensing
transactions; however, in this event, there is no assurance that we will be able
to obtain alternative sources of cash on acceptable terms to satisfy our future
cash needs.



Contractual Obligations

The following table provides aggregated information about our outstanding contractual obligations as of December 31, 2021 (in thousands):





                                                                                                         More than 5
                                    Total       Less than 1 year       1-3 years        3-5 years           years
Credit Facility Obligations (a)   $  10,001     $               -     $    10,001     $           -     $           -
Operating Lease Obligations (b)       2,403                   881           1,522                 -                 -
Debt Obligations (c)                     64                    64               -                 -                 -
Total                             $  12,468     $             945     $    11,523     $           -     $           -




(a) Credit Facility obligations as defined by ASC 470, "Debt," and disclosed in
Note 6 of the Consolidated Financial Statements included in Part II, Item 8 of
this Annual Report on Form 10-K.



(b) Operating lease obligations as defined by ASC 842, "Leases," and disclosed
in Note 7 of the Consolidated Financial Statements included in Part II, Item 8
of this Annual Report on Form 10-K.



(c) Debt obligations as defined by ASC 470, "Debt," and disclosed in Note 6 of
the Consolidated Financial Statements included in Part II, Item 8 of this Annual
Report on Form 10-K.



Critical Accounting Estimates



Our significant accounting policies are discussed in Note 2 - Summary of
Significant Accounting Policies of the Notes to the Consolidated Financial
Statements included in Part II, Item 8- Financial Statements and Supplementary
Data to this Annual Report on Form 10-K. We consider the accounting policies
described below to be critical in preparing our consolidated financial
statements. These policies require us to make estimates and judgments that
affect the reported amounts of certain assets, liabilities, revenues, expenses
and related disclosures of contingencies. Our assumptions, estimates and
judgments are based on historical experience, current trends and other factors
to be relevant at the time we prepare the consolidated financial statements.
Although our estimates and assumptions are reasonable, we cannot determine
future events. Consequently, actual results could differ materially from our
assumptions and estimates.



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



                                      -33-

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

Table of Contents

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, the Company satisfies a performance obligation.






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.
The Company records revenue on distinct performance obligations at a single
point in time, when control is transferred to the customer. In addition, the
Company Used vehicles acquired by Tradein Expert are predominately resold at
auctions or direct to Dealers, and revenue from the sale of these vehicles is
recognized upon transfer of ownership of the vehicle to the Company's wholesale
customer.



Allowances for Bad Debts and Customer Credits. The allowance for bad debts is an
estimate of bad debt expense that could result from the inability or refusal of
customers to pay for services. Additions to the estimated allowance for bad
debts are recorded to general and administrative expenses and are based on
factors such as historical write-off percentages, the current business
environment and known concerns within the current aging of accounts receivable.
Reductions in the estimated allowance for bad debts due to subsequent cash
recoveries are recorded as a decrease in general and administrative expenses. As
specific bad debts are identified, they are written off against the previously
established estimated allowance for bad debts with no impact on operating
expenses.



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. From time to time, the Company may issue discounts or
credits on current invoices. These discounts or credits are direct reductions to
revenue without a change in the allowance for customer credits.



If there is a decline in the general economic environment that negatively
affects the financial condition of the Company's customers or an increase in the
number of customers that are dissatisfied with their services, additional
estimated allowances for bad debts and customer credits may be required, and the
impact on the Company's business, results of operations, financial condition,
earnings per share, cash flow or the trading price of our stock could be
material.



Capitalized Internal Use Software and Website Development Costs. The Company
capitalizes costs to develop internal use software in accordance with ASC
350-40, "Internal-Use Software", and ASC 350-50, "Website Development Costs",
which require the capitalization of external and internal computer software
costs and website development costs, respectively, incurred during the
application development stage. The application development stage is
characterized by software design and configuration activities, coding, testing
and installation. Training and maintenance costs are expensed as incurred while
upgrades and enhancements are capitalized if it is probable that such
expenditures will result in additional functionality. Capitalized internal use
software development costs are amortized using the straight-line method over an
estimated useful life of three to five years. Capitalized website development
costs, once placed in service, are amortized using the straight-line method over
the estimated useful life of the related websites.

Recent Accounting Pronouncements





See Note 2 of the "Notes to Consolidated Financial Statements" in Part II, Item
8, Financial Statements and Supplementary Data of this Annual Report on Form
10-K for recent accounting pronouncements.



                                      -34-

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

Table of Contents

© Edgar Online, source Glimpses