form8ka_111210.htm

0001023364-10-000062.txt : 20101112 0001023364-10-000062.hdr.sgml : 20101111 20101112135150 ACCESSION NUMBER: 0001023364-10-000062 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20100916 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20101112 DATE AS OF CHANGE: 20101112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOBYTEL INC CENTRAL INDEX KEY: 0001023364 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 330711569 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-34761 FILM NUMBER: 101185284 BUSINESS ADDRESS: STREET 1: 18872 MACARTHUR BLVD STREET 2: SUITE 200 CITY: IRVINE STATE: CA ZIP: 92612-1400 BUSINESS PHONE: 9492254500 MAIL ADDRESS: STREET 1: 18872 MACARTHUR BLVD STREET 2: SUITE 200 CITY: IRVINE STATE: CA ZIP: 92612-1400 FORMER COMPANY: FORMER CONFORMED NAME: AUTOBYTEL INC DATE OF NAME CHANGE: 20010905 FORMER COMPANY: FORMER CONFORMED NAME: AUTOBYTEL COM INC DATE OF NAME CHANGE: 19981230 FORMER COMPANY: FORMER CONFORMED NAME: AUTO BY TEL CORP DATE OF NAME CHANGE: 19960920 8-K/A 1 form8ka_111210.htm FORM 8-KA CYBER VENTURES AUTOTROPOLIS form8ka_111210.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM 8-K/A

__________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) September 16, 2010

___________________

Autobytel Inc.

(Exact name of registrant as specified in its charter)

_________________________

Delaware		0-22239		33-0711569
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

18872 MacArthur Boulevard, Suite 200, Irvine, California		92612-1400
(Address of principal executive offices)		(Zip Code)

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

(Former name or former address, if changed since last report.)

______________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.01 Completion of Acquisition or Disposition of Assets.

Purchase Agreement

On September 17, 2010, Autobytel Inc., a Delaware corporation (“Autobytel”), filed a Current Report on Form 8-K (“Original Form 8-K”) to report that on September 16, 2010 Autobytel completed its acquisition of substantially all of the assets of privately-held Autotropolis, Inc., a Florida corporation, and Cyber Ventures, Inc., a Florida corporation (collectively, the “Sellers”). In the Original Form 8-K, we indicated that the financial statements and pro forma financial information required under Item 9.01 of Form 8-K would be filed by amendment to the Original Form 8-K no later than 71 calendar days after the date the Original Form 8-K was filed. This Amendment No. 1 to the Original Form 8-K contains the required financial statements and pro forma financial information.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The following audited combined financial statements of Cyber Ventures, Inc. and Autotropolis, Inc. are attached hereto as Exhibit 99.1 and incorporated herein by reference:

Audited Combined Financial Statements of Cyber Ventures, Inc. and Autotropolis, Inc. as of and for the years ended December 31, 2009 and December 31, 2008.

The following unaudited condensed combined financial statements of Cyber Ventures, Inc. and Autotropolis, Inc. are attached hereto as Exhibit 99.2 and incorporated herein by reference:

Unaudited Condensed Combined Financial Statements of Cyber Ventures, Inc. and Autotropolis, Inc. for the six months ended June 30, 2010.

(b) Pro Forma Financial Information.

The following unaudited pro forma condensed combined financial statements of Autobytel Inc. are attached hereto as Exhibit 99.3 and incorporated herein by reference:

Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2010 and Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2009 and the six months ended June 30, 2010 of Autobytel Inc.

(d) Exhibits


Exhibit		Description

23.1		Consent of Independent Auditors, Ernst & Young LLP

99.1		Audited Combined Financial Statements of Cyber Ventures, Inc. and Autotropolis, Inc. as of and for the years ended December 31, 2009 and December 31, 2008

99.2		Unaudited Condensed Combined Financial Statements of Cyber Ventures, Inc. and Autotropolis, Inc. for the six months ended June 30, 2010

99.3		Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2010 and Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2009 and the six months ended June 30, 2010 of Autobytel Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		Autobytel, Inc.
Date: November 12, 2010

	By:	/s/ Glenn E. Fuller
		Glenn E. Fuller
		Executive Vice President, Chief Legal and
		Administrative Officer and Secretary

EX-23.1 2 ex23_1.htm CONSENT OF ERNST AND YOUNG ex23_1.htm

Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-135076, 333-116930, 333-90045, 333-77943, 333-39396, 333-33038, 333-67692, 333-168834) of Autobytel Inc. of our report dated November 12, 2010, with respect to the combined financial statements of Cyber Ventures, Inc. and Autotropolis, Inc. as of and for the years ended December 31, 2009 and 2008 included in this Current Report on Form 8-K/A of Autobytel Inc.

/s/ Ernst & Young LLP

Orange County, California

November 12, 2010

EX-99.1 3 ex99_1.htm 2008 AND 2009 AUDITED FINANCIAL STATEMENTS ex99_1.htm

Exhibit 99.1

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

COMBINED FINANCIAL STATEMENTS

CONTENTS

	Page

Report of Independent Auditors	3

Combined Balance Sheets	4

Combined Statements of Income	5

Combined Statement of Stockholders' Equity	6

Combined Statements of Cash Flows	7

Notes to the Combined Financial Statements	8

REPORT OF INDEPENDENT AUDITORS

The Board of Directors

Cyber Ventures, Inc. and Autotropolis, Inc.

We have audited the accompanying combined balance sheets of Cyber Ventures, Inc. and Autotropolis, Inc. (the Company) as of December 31, 2009 and 2008, and the related combined statements of income, stockholders’ equity, and cash flows for the years then ended. These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estima tes made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Cyber Ventures, Inc. and Autotropolis, Inc. as of December 31, 2009 and 2008, and the combined results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

November 12, 2010

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

COMBINED BALANCE SHEETS

	December 31,		December 31,
	2009		2008
Assets
Current assets:
Cash and cash equivalents	$	427,560	$	108,743
Accounts receivable		759,389		1,169,615
Prepaid expenses and other current assets		—		7,186
Total current assets		1,186,949		1,285,544
Property and equipment, net		88,474		127,850
Other long-term assets		6,000		6,000
Total assets	$	1,281,423	$	1,419,394
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	335,315	$	454,098
Accrued expenses		41,689		11,080
Deferred rent, current		18,076		19,498
Short term debt		100,000		25,000
Total current liabilities		495,080		509,676

Long-term liabilities:
Deferred rent, noncurrent		24,225		51,067
Loans payable to stockholders		16,841		16,841
Total long-term liabilities		41,066		67,908

Total liabilities		536,146		577,584

Commitments and contingencies (Note 4)		—		—

Stockholders’ equity:
Common stock, $1.00 par value; 2,000 shares authorized; 1,200 shares issued and outstanding at December 31, 2009 and 2008		1,200		1,200
Retained earnings		744,077		840,610
Total stockholders’ equity		745,277		841,810
Total liabilities and stockholders’ equity	$	1,281,423	$	1,419,394

The accompanying notes are an integral part of these combined financial statements.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

COMBINED STATEMENTS OF INCOME

	Year Ended December 31,
	2009			2008

Revenues	$	10,271,647		$	8,497,997
Cost of revenues		7,621,262			5,225,341
		2,650,385			3,272,656

Operating expenses:
Sales and marketing		1,156,984			1,254,971
General and administrative		195,513			314,294
		1,352,497			1,569,265

Income from operations		1,297,888			1,703,391

Other expense		(4,582	)		(1,900	)

Net income	$	1,293,306		$	1,701,491

The accompanying notes are an integral part of these combined financial statements.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

								Total
	Common Stock				Accumulated			Stockholders’
	Shares		Amount		Deficit			Equity

Balance at December 31, 2007		1,200	$	1,200	$	749,119		$	750,319
Net income						1,701,491			1,701,491
Distributions						(1,610,000	)		(1,610,000	)
Balance at December 31, 2008		1,200		1,200		840,610			841,810
Net income						1,293,306			1,293,306
Distributions						(1,389,839	)		(1,389,839	)
Balance at December 31, 2009		1,200	$	1,200	$	744,077		$	745,277

The accompanying notes are an integral part of these combined financial statements.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

COMBINED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
	2009			2008
Operating Activities:
Net income	$	1,293,306		$	1,701,491
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		50,514			26,551
Changes in assets and liabilities:
Accounts receivable		410,227			(353,952	)
Prepaid expenses and other assets		7,186			(7,186	)
Other long-term assets		—			(6,000	)
Accounts payable and accrued expenses		(88,175	)		(165,949	)
Deferred rent		(28,264	)		70,565
Net cash provided by operating activities		1,644,794			1,265,520
Investing Activities:
Purchases of property and equipment		(11,138	)		(121,309	)
Net cash used in investing activities		(11,138	)		(121,309	)
Financing Activities:
Proceeds from borrowings on line of credit		75,000			—
Payment on line of credit		—			(20,000	)
Distributions		(1,389,839	)		(1,610,000	)
Net cash used in financing activities		(1,314,839	)		(1,630,000	)
Net increase (decrease) in cash		318,817			(485,789	)
Cash and cash equivalents, at the beginning of year		108,743			594,532
Cash and cash equivalents, end of year	$	427,560		$	108,743

Supplemental disclosure of cash flow information
Cash provided for interest	$	4,582		$	4,281

The accompanying notes are an integral part of these combined financial statements.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 1 – Business Description and Significant Accounting Policies

Organization and Operations

Autotropolis, Inc. and Cyber Ventures, Inc. are privately-held Florida corporations (collectively, the “Company”). The stockholders of each of these corporations have elected the S corporation status under the provisions of the federal and state tax code. Prior to the acquisition (see Note 7), the two corporations operated under common ownership in Tampa, Florida and shared operating staff and other administrative and operational resources. Cyber Ventures, Inc., through proprietary content, generates and sell in-market consumer automotive purchase requests. Autotropolis, Inc., through its Autotropolis.com website, provides new car purchase requests and related digital products directly to automotive dealers.

Cyber Ventures, Inc. was incorporated in Florida in 2003 and Autotropolis, Inc. was incorporated in Florida in 2006. The principal corporate offices are located in Tampa, Florida.

Basis of Presentation

The combined financial statements include the accounts of Cyber Ventures, Inc. and Autotropolis, Inc.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company 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.

On an ongoing basis, management evaluates its estimates, including those related to (i) the collectability of customer accounts; (ii) useful lives of tangible assets; and (iii) the recognition and disclosure of contingent liabilities. These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Such estimates often require the selection of appropriate valuation methodologies and models, and significant judgment and assumptions. Actual results may differ from those estimated under different assumptions or circumstances.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. Cash and cash equivalents represent amounts held by the Company for use by the Company, and are recorded at cost which approximates fair value.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, are primarily cash and cash equivalents and accounts receivable. The Company maintains its cash balances in the form of bank demand deposits and money market accounts with financial institutions that management believes are creditworthy. The Company may be exposed to credit risk. The Company has not established an allowance for uncollectible accounts as historically their receivables have been 100% collectible.

The Company records reductions to revenue for estimated adjustments for services that do not meet the customer requirements in the same period that the related revenue is recorded.

Concentration of Customers

The following customers account for more than 10% of accounts receivable (billed and unbilled) and 10% of revenue at December 31, 2009 and 2008 and for the years then ended:

	December 31,
	2009			2008
Revenue:
Customer A		39	%		40	%
Customer B		31	%		19	%
Customer C		17	%		11	%

Accounts receivable:
Customer A		37	%		23	%
Customer D		14	%		2	%

Accounts Receivable

Credit is extended to customers based on an evaluation of the customer’s financial condition, and when credit is extended, collateral is generally not required. Interest is not normally charged on receivables.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Contingencies and Litigation

From time to time the Company may be subject to proceedings, lawsuits and other claims. The Company assesses the likelihood of any adverse judgments or outcomes of these matters as well as potential ranges of probable losses. The Company records a loss contingency when an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. The amount of allowances required, if any, for these contingencies is determined after analysis of each individual case. The amount of allowances may change in the future if there are new material developments in each matter. At December 31, 2009 and December 31, 2008, the Company did not record any allowances for contingencies. Gain contingencies are not recorded until all elements necessary to realize the revenue are present. Any legal fees incurred in connection with a c ontingency are expensed as incurred.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets, generally three years. Amortization of leasehold improvements is provided using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements. Repair and maintenance costs are charged to operating expenses as incurred. Gains or losses resulting from the retirement or sale of property and equipment are recorded as operating income or expenses, respectively.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets, primarily consisting of property and equipment, for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows attributable to such assets including any cash flows upon their eventual disposition, to their carrying value. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value. As of December 31, 2009 and 2008, there have no such impairments.

Fair Value of Financial Instruments

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt.

The fair value of cash and cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates, durations or the variable rates of interest provided for in the credit facility.

Operating Leases

The Company leases office space, under an operating lease agreement which expires on February 4, 2011, with an option to renew on expiration of the original lease terms. The lease term begins on the date of initial possession of the leased property for purposes of recognizing rent expense on a straight-line basis over the term of the lease. Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the initial lease term.

Revenue Recognition

Lead fees consist of vehicle buying purchase request fees for new and used vehicles, and finance request fees (“Leads”). Fees paid by customers participating in the Company’s Lead programs are comprised of monthly transaction and/or subscription fees.

The Company recognizes revenues when evidence of an arrangement exists, pricing is fixed and determinable, collection is reasonably assured, and delivery or performance of service has occurred. Lead fees are generally recognized as revenue in the period the service is provided.

The Company records reductions to revenue for estimated adjustments for services that do not meet the customer requirements in the same period that the related revenue is recorded.

Cost of Sales

Cost of sales consists primarily of online advertising, website content expenses and maintenance costs. These costs are expensed in the period incurred.

Business Segment

The Company conducts its business within the United States and within one business segment which is defined as providing automotive and marketing services.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Advertising Costs and Concentration of Vendors

Advertising costs, which are included in costs of sales primarily includes online advertising fees paid to the top tier Web search advertising companies (Google, Yahoo, and MSN). Online advertising was $7,136,427 and $4,967,648 for the year ended December 31, 2009 and 2008, respectively.

Income Taxes

The Company’s stockholders elected S corporation status under the provisions of the federal and California tax code. Under federal laws, taxes based on income of S corporations are payable individually by the corporation’s stockholders. Accordingly, no provision for federal income taxes has been provided in the accompanying consolidated financial statements. The California franchise tax is included in selling, marketing, general and administrative expense.

Comprehensive Loss

The Company has not had any transactions or other economic events that qualify as a component of comprehensive loss.

Subsequent Events

The Company evaluated subsequent events through the date and time its financial statements were issued. Notes 1 through 6 of the Notes to Combined Financial Statements incorporate disclosures of significant subsequent events that have occurred after December 31, 2009 through the date of issuance of November 12, 2010.

Recently Adopted Accounting Pronouncements

In June 2009, the Financial Accounting Standard Board (“FASB”) issued the Generally Accepted Accounting Principles Topic of the FASB Accounting Standards Codification (“Codification”). The Generally Accepted Accounting Principles Topic of the Codification is the single source of U.S. GAAP in the preparation of financial statements, except for rules and interpretive releases of the SEC under authority of federal securities laws, which are sources of authoritative guidance for SEC registrants. The Codification was not meant to create new accounting and reporting guidance, but rather to simplify user access to all authoritative accounting guidance by reorganizing U.S. GAAP pronouncements into accounting topics within a consistent organizational structure. The Codification supersedes all existing non-SEC acc ounting and reporting standards and is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

The FASB no longer issues new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead, it issues Accounting Standards Updates (“ASU’s”). The FASB will not consider ASU’s as authoritative in their own right; rather these updates will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the Codification. In the description that follows, reference to the Codification Topics and Subtopics are provided, as appropriate.

ASC 820 “Fair Value Measurements and Disclosures.” In September 2006, the FASB established a framework for measuring fair value and expanded the disclosures of fair value measurements. This new guidance is effective for financial statements issued for periods beginning after November 15, 2007. In February 2008, the FASB deferred the effective date of the new guidance for non-financial assets and liabilities that are not recorded at fair value on a recurring basis until periods beginning after November 15, 2008. The Company adopted the non-deferred portion of this guidance on January 1, 2008 and adopted the previously deferred portion of this guidance on January 1, 2009 and it did not have an impact on the Company’s combined financia l statements.

ASC 805 “Business Combinations.” In December 2007, the FASB established principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non- controlling interest in the acquiree. The new requirements also provide guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. The new guidance is effective for business combinations occurring after December 31, 2008. The adoption of this new guidance did not have any effect on the Company’s combined financial s tatements.

In May 2009, the FASB issued ASC 855, Subsequent Events (ASC 855), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. ASC 855 applies prospectively to both interim and annual financial periods ending after June 15, 2009. The Company’s adoption of ASC 855 in the year ended December 31, 2009 did not have an impact on the Company’s financial statements.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

NOTE 2 – Property and Equipment

Property and equipment consists of the following:

	December 31,
	2009	2008

Furniture and fixtures	$55,838	$88,599
Computer equipment and software	67,931	24,033
Leasehold improvements	70,213	70,213
Less accumulated depreciation	(105,508)	(54,995)
	$88,474	$127,850

Depreciation expense for the years ended December 31, 2009 and 2008 was $50,514 and $26,551, respectively.

NOTE 3 – Short-Term Debt

The Company has a line of credit with Bank of America, expiring on July 31, 2010, that provides for borrowings up to $100,000. Borrowings bear interest at Prime plus 0.50% (3.75% at December 31, 2009 and 2008). At December 31, 2009 and 2008, the Company had outstanding borrowings of $100,000 and $25,000, respectively. For the years ending December 31, 2009 and 2008, interest expense was $4,582 and $4,281, respectively. Subsequently, on September 17, 2010, this line of credit was paid in full and retired.

NOTE 4 – Commitments and Contingencies

Operating Leases

The Company leases its office facilities under a noncancelable operating lease. The terms of the Company’s corporate office facility lease provide for rental increases on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period. Accordingly, rent expense recognized in excess of paid rent is reflected as deferred rent.

Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2009 are as follows:

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

Year Ending December 31,		Totals

2010		$50,582
2011		21,323
		$71,905

Rent expense for the years ended December 31, 2009 and 2008 was $46,417 and $90,326, respectively. Included in the 2009 and 2008 rent expense was $19,840 and $43,647, respectively, in rent expense paid to an entity owned by the Company’s two stockholders.

Litigation

From time to time, the Company may be involved in other routine litigation arising in the ordinary course of business. While the results of such litigation cannot be predicted with certainty, the Company does not believe the outcome of such matters will have a material adverse effect on its financial position, results of operations or cash flows.

NOTE 5- Shareholder Distributions

From time to time, the Company makes periodic distributions to its two stockholders on a discretionary basis. Cash distributions to stockholders for the year ended December 31, 2009 and 2008 were $1,389,839 and $1,610,000, respectively.

NOTE 6 – Related Party Transactions

During 2003 the Company’s two shareholders, William Ferriolo and Ian Bentley each loaned the Company $8,421 for a total of $16,841, which is included on the Combined Balance Sheets as Loans payable to stockholders. There is no interest payable on these loans and repayment terms have not been established by the Company. As of December 31, 2009, the loan balance was $16,841.

Included in the 2009 and 2008 rent expense was $19,840 and $43,647, respectively, of rent paid to an entity owned by the Company’s two stockholders.

NOTE 7 – Acquisition

On September 16, 2010 (“Closing Date”), Autobytel Inc., a Delaware corporation, (“Autobytel”) acquired substantially all of the assets of the Company. This agreement became effective September 17, 2010.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2009 AND 2008

The acquisition was effected through an Asset Purchase Agreement dated the Closing Date among Autobytel, Autobytel Acquisition Subsidiary, Inc., the Company and the stockholders of the Company. The aggregate purchase price was $15,000,000, which includes post-closing cash payments of up to $1,000,000, contingent on the achievement of target operating goals of the Company over a 12 quarter period commencing with the quarter ending December 31, 2010, and ending with the quarter ending September 30, 2013. At closing, Autobytel paid a portion of the purchase price with a combination of $9,000,000 in cash on hand, $5,000,000 in convertible subordinated debt, and a warrant to purchase 2,000,000 shares of Autobytel’s common stock. The stockholders of the Company became employees of Autobytel upon closing.

Prior to the acquisition, Autobytel was a customer of Cyber Ventures, Inc. and Cyber Ventures, Inc. recorded revenue of $1,705,978 and $934,314 for the years ended December 31, 2009 and 2008, respectively, related to sales to Autobytel. As of December 31, 2009 and 2008, the outstanding accounts receivable balance from Autobytel was $15,327 and $65,257, respectively.

EX-99.2 4 ex99_2.htm JUNE 30, 2010 FINANCIAL STATEMENTS ex99_2.htm

Exhibit 99.2

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

CONTENTS

	Page

Unaduited Condensed Combined Balance Sheets as of June 30, 2010 and December 31, 2009	3

Unaduited Condensed Statements of Operations for the six months ended June 30, 2010 and 2009	4

Unaduited Condensed Combined Statements of Cash Flows for the six months ended June 30, 2010 and 2009	5

Notes to the Unaudited Condensed Combined Financial Statements	6

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

UNAUDITED CONDENSED COMBINED BALANCE SHEETS

	June 30,		December 31,
	2010		2009
Assets
Current assets:
Cash and cash equivalents	$	423,650	$	427,560
Accounts receivable		1,009,763		759,389
Prepaid expenses and other current assets		—		—
Total current assets		1,433,413		1,186,949
Property and equipment, net		65,094		88,474
Other long-term assets		6,000		6,000
Total assets	$	1,504,507	$	1,281,423
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	535,216	$	335,315
Accrued expenses		16,319		41,689
Deferred rent, current		27,755		18,076
Short term debt		100,000		100,000
Total current liabilities		679,290		495,080

Long-term liabilities:
Deferred rent, noncurrent		—		24,225
Loans payable to stockholders		16,841		16,841
Total long-term liabilities		16,841		41,066

Total liabilities		696,131		536,146

Commitments and contingencies (Note 4)		—		—

Stockholders’ equity:
Common stock, $1.00 par value; 2,000 shares authorized; 1,200 shares issued and outstanding at June 30, 2010 and December 31, 2009		1,200		1,200
Retained earnings		807,176		744,077
Total stockholders’ equity		808,376		745,277
Total liabilities and stockholders’ equity	$	1,504,507	$	1,281,423

The accompanying notes are an integral part of these condensed combined financial statements.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

UNAUDITED CONDENSED COMBINED STATEMENTS OF INCOME

	Six Months Ended June 30,
	2010			2009

Revenues	$	5,194,598		$	5,919,515
Cost of revenues		3,970,497			4,417,369
		1,224,101			1,502,146

Operating expenses:
Sales and marketing		539,884			580,866
General and administrative		109,221			89,796
		649,105			670,662

Income from operations		574,996			831,484

Other expense		(1,896	)		(2,437	)

Net income	$	573,100		$	829,047

The accompanying notes are an integral part of these condensed combined financial statements.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS


	Six Months Ended June 30,
	2010			2009
Operating Activities:
Net income	$	573,100		$	829,047
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,380			24,925
Changes in assets and liabilities:
Accounts receivable		(250,375	)		(85,674	)
Prepaid expenses and other assets		—			(3,882	)
Accounts payable and accrued expenses		174,531			33,989
Deferred rent		(14,546	)		(13,835	)
Net cash provided by operating activities		506,090			784,570
Investing Activities:
Purchases of property and equipment		—			(8,971	)
Net cash used in investing activities		—			(8,971	)
Financing Activities:
Proceeds from borrowings on line of credit		—			75,000
Distributions		(510,000	)		(669,841	)
Net cash used in financing activities		(510,000	)		(594,841	)
Net increase (decrease) in cash		(3,910	)		180,758
Cash and cash equivalents, at the beginning of period		427,560			108,743
Cash and cash equivalents, end of period	$	423,650		$	289,501

Supplemental disclosure of cash flow information
Cash provided for interest	$	1,896		$	2,437

The accompanying notes are an integral part of these condensed combined financial statements.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

NOTE 1 – Basis of Presentation

The Cyber Ventures, Inc. was incorporated in Florida in 2003 and Autotropolis, Inc. was incorporated in Florida in 2006. The principal corporate offices are located in Tampa, Florida.

Basis of Presentation

The combined condensed financial statements include the accounts of Cyber Ventures, Inc. and Autotropolis, Inc.

The Company has made its disclosures in accordance with accounting principles generally accepted in the United States as they apply to interim reporting, but condensed or omitted certain information and disclosures normally included in notes to combined financial statements. The unaudited condensed combined financial statements should be read in conjunction with the combined financial statements and the notes thereto for the year ended December 31, 2009.

In the opinion of the Company’s management, the accompanying unaudited condensed combined financial statements contain all adjustments (consisting of normal recurring adjustments) to fairly present the Company’s condensed combined financial position as of June 30, 2010 and 2009, and the condensed combined statements of income and cash flows for the six months ended June 30, 2010 and 2009, as applicable. The statement of income and cash flows for the periods ended June 30, 2010 and 2009 are not necessarily indicative of the results of operations or cash flows expected for the year or any other period.

Use of Estimates

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Cash and Cash Equivalents

Concentrations of Credit Risk

Concentration of Customers

The following customers account for more than 10% of revenue for the six months ended June 30, 2010 and 2009 and 10% of accounts receivable (billed and unbilled) at June 30, 2010 and December 31, 2009:

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

	Six Months Ended June 30,
	2010			2009
Revenue:
Customer A		46	%		36	%
Customer B		31	%		32	%
Customer C		14	%		17	%


	As of			As of
	June 30, 2010			December 31, 2009
Accounts receivable:
Customer A		45	%		37	%
Customer D		10	%		2	%

Accounts Receivable

Contingencies and Litigation

From time to time the Company may be subject to proceedings, lawsuits and other claims. The Company assesses the likelihood of any adverse judgments or outcomes of these matters as well as potential ranges of probable losses. The Company records a loss contingency when an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. The amount of allowances required, if any, for these contingencies is determined after analysis of each individual case. The amount of allowances may change in the future if there are new material developments in each matter. At June 30, 2010 and December 31, 2009, the Company did not record any allowances for contingencies. Gain contingencies are not recorded until all elements necessary to realize the revenue are present. Any legal fees incurred in connection with a conti ngency are expensed as incurred.

Property and Equipment

Impairment of Long-Lived Assets

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

comparing the forecasted undiscounted cash flows attributable to such assets including any cash flows upon their eventual disposition, to their carrying value. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value. As of June 30, 2010 and December 31, 2009, there have no such impairments.

Fair Value of Financial Instruments

In 2009, the Company adopted Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures, which defines fair value, established guidelines for measuring fair value and expands disclosures regarding fair value measurements. The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt.

Operating Leases

Revenue Recognition

The Company records reductions to revenue for estimated adjustments for services that do not meet the customer requirements in the same period that the related revenue is recorded.

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

Cost of Sales

Cost of sales consists primarily of online advertising, website content expenses and maintenance costs. These costs are expensed in the period incurred.

Business Segment

The Company conducts its business within the United States and within one business segment which is defined as providing automotive and marketing services.

Advertising Costs and Concentration of Vendors

Advertising costs, which are included in the cost of sales primarily includes online advertising fees paid to the three top tier Web search advertising companies (Google, Yahoo, and MSN). Online advertising was $3,776,029 and $4,131,094 for the six month period ended June 30, 2010 and 2009, respectively.

Income Taxes

Comprehensive Loss

The Company has not had any transactions or other economic events that qualify as a component of comprehensive loss.

Subsequent Events

The Company evaluated subsequent events through the date and time its financial statements were issued. Notes 1 through 6 of the Notes to Combined Financial Statements incorporate disclosures of significant subsequent events that have occurred after June 30, 2010 through the date of issuance of November 12, 2010.

Recently Adopted Accounting Pronouncements

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

In May 2009, the FASB issued ASC 855, Subsequent Events (ASC 855), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

date but before the financial statements are issued or are available to be issued. ASC 855 applies prospectively to both interim and annual financial periods ending after June 15, 2009. The Company’s adoption of ASC 855 in the year ended December 31, 2009 did not have an impact on the Company’s financial statements.

NOTE 2 – Property and Equipment

Property and equipment consists of the following:

	June 30,			December 31,
	2010			2009

Furniture and fixtures	$	55,838		$	55,838
Computer equipment and software		67,931			67,931
Leasehold improvements		70,213			70,213
Less accumulated depreciation		(128,888	)		(105,508	)
	$	65,094		$	88,474

Depreciation expense for the six months ended June 30, 2010 and 2009 was $23,380 and $24,925, respectively.

NOTE 3 – Short-Term Debt

The Company has a line of credit with Bank of America, expiring on July 31, 2010, that provides for borrowings up to $100,000. Borrowings bear interest at Prime plus 0.50% (3.75% at June 30, 2010 and 2009). At June 30, 2010 and at December 31, 2009, the Company had outstanding borrowings of $100,000. For the six months ending June 30, 2010 and 2009, interest expense was $1,896 and $2,437, respectively. Subsequently, on September 17, 2010, this line of credit was paid in full and retired.

NOTE 4 – Commitments and Contingencies

Operating Leases

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

Litigation

NOTE 5 - Shareholder Distributions

From time to time, the Company makes periodic distributions to its two stockholders on a discretionary basis. Cash distributions to stockholders for the six months ended June 30, 2010 and 2009 were $510,000 and $669,841, respectively.

NOTE 6 – Related Party Transactions

During 2003 the Company’s two stockholders, William Ferriolo and Ian Bentley each loaned the Company $8,421 for a total of $16,841, which is included on the Condensed Combined Balance Sheets as Loans payable to stockholders. There is no interest payable on these loans and repayment terms have not been established by the Company. As of June 30, 2010, and December 31, 2009, the loan balance was $16,841.

NOTE 7 – Acquisition

CYBER VENTURES, INC. AND AUTOTROPOLIS, INC.

NOTES TO THE CONDENSED COMBINED FINANCIAL STATEMENTS

JUNE 30, 2010

Prior to the acquisition, Autobytel was a customer of Cyber Ventures, Inc. and Cyber Ventures, Inc. recorded revenue of $719,954 and $1,001,211 for the six months ended June 30, 2010 and 2009, respectively, related to sales to Autobytel. As of June 30, 2010 and December 31, 2009, the outstanding accounts receivable balance from Autobytel was $105,645 and $15,327, respectively.

EX-99.3 5 ex99_3.htm PRO FORMA FINANCIAL STATEMENTS ex99_3.htm

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Exhibit 99.3

On September 16, 2010 Autobytel Inc. (the “Company”) completed its acquisition of Cyber Ventures, Inc. and Autotropolis, Inc. (“Cyber and Autotropolis”) and the acquisition was effective on September 17, 2010. The unaudited pro forma condensed combined financial statements (“pro forma financial statements”) included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for the purposes of inclusion in our amended Form 8-K prepared in connection with the acquisition of Cyber and Autotropolis filed on September 17, 2010.

The pro forma financial statements are prepared in conformity with the Securities Exchange Commission (“SEC”), Regulation S-X: Article 3, Rule 3.05, Financial Statements of Businesses Acquired or to be Acquired (“Rule 3.05”) and Article 11, Pro forma Financial Information (“Article 11”). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures provided herein are adequate to make the information presented not misleading.

The following unaudited pro forma condensed combined financial statements are derived from the historical unaudited interim financial statements as of and for the six months ended June 30, 2010 and audited financial statements for the year ended December 31, 2009, of the Company and Cyber and Autotropolis, respectively. These pro forma financial statements are presented to include the effects of the acquisition of Cyber and Autotropolis. Cyber and Autotropolis are privately-held Florida corporations, which operated under common ownership in Tampa, Florida and shared operating staff and other administrative and operational resources and therefore the financial statements have been combined.

The unaudited pro forma results are presented for illustrative purposes only and do not reflect the realization of potential cost savings, and any related integration costs. Certain cost savings may result from the acquisition; however, there can be no assurance that these cost savings will be achieved. Cost savings, if achieved, could result from, among other things, the reduction of overhead expenses, including employee levels and the elimination of duplicate facilities and capital expenditures.

The unaudited pro forma condensed combined financial statements do not include any adjustments regarding liabilities incurred or cost savings achieved resulting from the integration of the two companies, as management is in the process of assessing what, if any, future actions are necessary. However, additional liabilities ultimately may be recorded for costs associated with removing redundant operations that could affect amounts in these unaudited pro forma combined financial statements, and their effects may be material and would be reflected in the statement of operations.

Significant assumptions, estimates and adjustments herein have been made solely for purposes of developing these unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements and related notes of the Company and " Management’s Discussion and Analysis of Financial Condition and Results of Operations ” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 and the Company’s Form 10-Q for the six months ended June 30, 2010, as well as the audited historical financial statements and related notes of Cyber and Autotropolis, as of December 31, 2009 and unaudited historical condensed combined financial statements for the six months ended June 30, 2010 of Cyber and Autotropolis, which are attached as Exhibit 99.1 and Exhibit 99.2, respectively, in this Form 8-KA. The unaudited pro forma combined financial statements are not intended to represent or be indicative of the consolidated results of operations or financial condition of the Company that would have been reported had the acquisition been completed as of the dates presented, and should not be construed as representative of the future consolidated results of operations or financial condition of a combined entity.

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Autobytel Inc.

Pro forma Condensed Combined Statement of Position

As of June 30, 2010

(Amounts in thousands)

	Historical Autobytel			Historical Cyber and Autotropolis		Adjustments			Ref *		Pro forma Combined
Assets
Current assets:
Cash and cash equivalents	$	23,877		$	424	$	(9,000	)		b	$	14,877
							(424	)		c
Accounts receivable, net		7,438			1,010		(106	)		a		8,342
Prepaid expenses and other current assets		987			—		—					987
Total current assets		32,302			1,434		(9,530	)				24,206
Property and equipment, net		863			65							928
Intangible assets, net		—			—		4,500			b		4,500
Goodwill		—			—		11,776			d		11,776
Investment and other assets		149			6		—					155
Total assets	$	33,314		$	1,505	$	6,746				$	41,565
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,922		$	535	$	(106	)		a	$	3,351
Accrued expenses and other current liabilities		3,196			45		526			b		3,858
							91			b
Deferred revenues		540			—		—					540
Short-term debt		—			100		(100	)				—
Total current liabilities		6,658			680		411					7,749

Long-term liabilities:
Loans payable to stockholders		—			17		(17	)		h		—
Convertible debt		—			—		5,000			b		5,000
Other long-term liabilities		45			—		—					45
Total long-term liabilities		45			17		4,983					5,045

Total liabilities		6,703			697		5,394					12,794

Stockholders’ equity:
Common stock		45			1		(1	)		h		45
Additional paid-in capital		302,505			—		1,260			b		304,665
							900			b
Accumulated other comprehensive income		—			—		—
Retained (deficit) earnings		(275,939	)		807		(807	)		h		(275,939	)
Total stockholders’ equity		26,611			808		1352					28,771
Total liabilities and stockholders’ equity	$	33,314		$	1,505	$	6,746				$	41,565

* See Note 3, Pro forma Adjustments

See accompanying notes to the unaudited pro forma condensed combined financial statements

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Autobytel Inc.

Pro forma Condensed Combined Statement of Operations

For the Six Months Ended June 30, 2010

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

	Historical Autobytel			Historical Cyber and Autotropolis			Adjustments			Ref *		Pro forma Combined

Revenues	$	23,943		$	5,195		$	(720	)		f	$	28,418
Cost of revenues		14,953			3,970			(720	)		f		18,203
Gross margin		8,990			1,225			—					10,215

Operating expenses:
Sales and marketing		5,671			540			—					6,211
Technology support		2,980			—			—					2,980
General and administrative		5,791			109			—					5,900
Patent litigation settlement		(2,806	)		—			—					(2,806	)
Amortization of acquired intangible assets		—			—			661			e		661
Total operating expenses		11,636			649			661					12,946

Income (loss) from operations		(2,646	)		576			(661	)				(2,731	)

Other income (expense):
Interest expense		—			—			(150	)		g		(150	)
Interest income		490			—			—					490
Other expense		—			(2	)		—					(2	)
		490			(2	)		(150	)				338
Income (loss) before income tax expense		(2,156	)		574			(811	)				(2,393	)
Income tax expense		48			—			156			i		204
Income (loss) from continuing operations		(2,204	)		574			(967	)				(2,597	)

Net income (loss)	$	(2,204	)	$	574		$	(967	)			$	(2,597	)

Net income (loss) per share – basic and diluted	$	(0.05	)									$	(0.06	)
Weighted average shares outstanding
basic and diluted		44,881,733											44,881,733

* See Note 3, Pro forma Adjustments

See accompanying notes to the unaudited pro forma condensed combined financial statements

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Autobytel Inc.

Proforma Condensed Combined Statement of Operations

For the Year Ended December 31, 2009

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

	Historical Autobytel			Historical Cyber and Autotropolis			Adjustments			Ref *		Pro forma Combined

Revenues	$	52,918		$	10,272		$	(1,706	)		f	$	61,484
Cost of revenues		33,986			7,621			(1,706	)		f		39,901
Gross margin		18,932			2,651			—					21,583

Operating expenses:
Sales and marketing		10,179			1,157			—					11,336
Technology support		5,244			—			—					5,244
General and administrative		11,591			196			—					11,787
Patent litigation settlement		(2,892	)		—			—					(2,892	)
Amortization of acquired intangible assets		—			—			1,323			e		1,323
Total operating expenses		24,122			1,353			1,323					26,798

Income (loss) from operations		(5,190	)		1,298			(1,323	)				(5,215	)

Other income (expense):
Interest expense		—			—			(300	)		g		(300	)
Interest income		1,028			—			—					1,028
Other expense		—			(5	)		—					(5	)
		1,028			(5	)		(300	)				723
Income (loss) before income tax expense		(4,162	)		1,293			(1,623	)				(4,492	)
Income tax expense (benefit)		(606	)		—			312			i		(294	)
Income (loss) from continuing operations		(3,556	)		1,293			(1,935	)				(4,198	)
Discontinued operations, net		1,179			—			—					1,179
Net income (loss)	$	(2,377	)	$	1,293		$	(1,935	)			$	(3,019	)

Net loss per share – basic and diluted	$	(0.05	)									$	(0.07	)
Weighted average shares outstanding
basic and diluted		44,562,842											44,562,842

* See Note 3, Pro forma Adjustments

See accompanying notes to the unaudited pro forma condensed combined financial statements

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Note 1. Basis of Pro forma Presentation

Basis of Pro forma Presentation

The unaudited pro forma financial statements are not intended to represent or be indicative of the Company’s consolidated results of operations or financial position that would have been reported had the Cyber and Autotropolis acquisition been completed as of the dates presented, and should not be taken as a representation of our future consolidated results of operations or financial position. The unaudited pro forma financial statements do not reflect any operating efficiencies and associated cost savings that we may achieve with respect to the combined companies.

The historical financial statements of the Company and Cyber and Autotropolis should be read in conjunction with these unaudited condensed combined pro forma statements. The Company’s historical financial statements are filed with the SEC on their audited 2009 annual report on Form 10-K and their unaudited 2010 second quarter report on Form 10-Q and are incorporated herein by reference. Cyber and Autotropolis’ historical audited annual and unaudited interim financial statements are included with this filing as exhibits 99.1 and 99.2, respectively, for the referenced periods.

Use of Estimates

Significant assumptions, estimates and adjustments herein have been made solely for purposes of developing these unaudited pro forma condensed combined financial statements for illustrative purposes. These adjustments are described in Note 3, Pro forma Adjustments. Actual results could differ from these estimates.

Cyber and Autotropolis Business Combination

Upon Cyber and Autotropolis’ acquisition effective date, on September 17, 2010 in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations” (“ASC 805”), the business combination was accounted for under the “acquisition method.” As such, the total estimated purchase price, described in Note 2, Acquisition of Cyber and Autotropolis, is allocated to the net tangible and intangible assets acquired in connection with the acquisition, based on their estimated fair values as of the effective date of the acquisition. The preliminary allocation of the purchase price was based upon management’s preliminary valuation of the fair value of tangible a nd intangible assets acquired and liabilities assumed and such estimates and assumptions are subject to change (generally one year from the acquisition date).

Pursuant to Rule 3.05, we have provided the pro forma results herein of our significant acquisition of Cyber and Autotropolis on September 17, 2010, presented in accordance with Article 11, by the following:

·	The unaudited pro forma condensed combined statement of position, as of June 30, 2010, has been presented as if the acquisition of Cyber and Autotropolis occurred on June 30, 2010.

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2009, and the six months ended June 30, 2010, respectively, has been presented as if the acquisition of Cyber and Autotropolis occurred on January 1, 2009.

The pro forma statements include applicable purchase adjustments to accomplish these pro forma results, provided in Note 3, Pro forma Adjustments.

Note 2. Acquisition of Cyber Ventures and Autotropolis

Fair Value of Consideration

On September 16, 2010 (effective September 17, 2010), the Company completed its previously announced acquisition of Cyber Ventures, Inc. and Autotropolis, Inc. The acquisition was made pursuant to an Agreement and Plan of Merger dated September 16, 2010 (the “Merger Agreement”) by and among the Company and Cyber Ventures, Inc. and Autotropolis, Inc.

The acquisition was effected through an Asset Purchase Agreement dated the Closing Date among Autobytel and Autobytel Acquisition Subsidiary, Inc. and the stockholders of Cyber and Autotropolis. The estimated aggregate purchase price was $16,777,000, which includes post-closing cash payments of up to $1,000,000, contingent on the achievement of target operating goals of the Company over a 12 quarter period commencing with the quarter ending December 31, 2010, and ending with the quarter ending September 30, 2013. At closing, the Company paid a portion of the purchase price with a combination of $9,000,000 in cash on hand, $5,000,000 in convertible subordinated debt, and a warrant to purchase 2,000,000 shares of the Company’s Common Stock. The stockholders of Cyber and Autotropolis became employees o f the Company upon closing.

The promissory note bears interest at a rate of 6% per annum and matures on September 30, 2015. The promissory note has been valued at $5,900,000, $900,000 in excess of its face value. This valuation was estimated using a binomial option pricing method. Key assumptions used in valuing the promissory note include a market yield of 15.0% and stock price volatility of 77.5%. As the convertible note was issued with a substantial premium, the Company recorded the premium as additional paid-in capital. At any time after September 30, 2013, the note can be converted into fully paid and nonassessable shares of the Company’s Common Stock. Any exercise of this right to Voluntary Conversion must involve a conversion under this agreement of a minimum of 200,000 shares of Common Stock at a conversion price of $0.93 per share.

The warrant has been valued at $0.63 per share for a total value of $1,260,000. The Company used an option pricing model to determine the value of the warrant. Key assumptions used in valuing the warrant are as follows: risk-free rate of 2.3%, stock price volatility of 77.5% and a term of 8.04 years. The warrant becomes exercisable on the third anniversary of the issuance date and expires on the eighth anniversary of the issuance date. The warrants was valued based on long-term volatilities of the common stock of Autobytel Inc. and comparable public companies’ as of September 17, 2010.

Based upon current projections, the post-closing payout has been estimated at $526,000 although up to $1,000,000 can be earned if projections change and set goals are met. If the actual earnout payments are higher or lower than the estimated $526,000, the difference will be recorded as a gain or loss on the statement of operations. The Company estimated the fair value of the earnout using a Monte Carlo Simulation. The key assumptions in applying the Monte Carlo Simulation consisted of minimum, maximum, and modal values for the expected quarterly incremental lead volume, close rate index, and gross margin growth rate as well as a triangular distribution assumption.

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The Merger Agreement also provided for a working capital adjustment based on the actual working capital of Cyber Ventures, Inc. and Autotropolis, Inc on the closing date. The working capital adjustment resulted in a n additional payment of $91,000 to the selling shareholders.

	As of September 17, 2010
	(in thousands)
Preliminary fair value of consideration at acquisition date:
Cash	$	9,000
Subordinated convertible promissory note		5,000
Premium on convertible note		900
Earnout		526
Warrants		1,260
Working capital adjustment		91
Total consideration	$	16,777

Purchase Price Allocation

Under the acquisition method of accounting, the total estimated purchase price is allocated to Cyber and Autotropolis’ net tangible and intangible assets based on their estimated fair values as of September 17, 2010, the acquisition completion date. Based on the Company’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, and other factors as described in the introduction to these unaudited pro forma condensed combined financial statements, the preliminary estimated purchase price is allocated as follows:

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

	As of September 17, 2010
	(in thousands)
Cyber and Autotropolis purchase price allocation at acquisition date:
Accounts receivable	$	1,296
Prepaid expenses and other current assets		12
Property and equipment		56
Other assets		6
Accounts payable		(662	)
Short-term debt		(100	)
Total net assets		608
Definite-lived intangible assets acquired		4,500
Goodwill		11,669
Total estimated purchase price	$	16,777

Prior to the end of the measurement period for finalizing the purchase price allocation, if information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.

Goodwill and Other Intangibles Acquired

Of the total estimated purchase price, approximately $11,669,000 is goodwill. Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net tangible and intangible assets acquired. In accordance with ASC 350, Intangibles, Goodwill and Other, goodwill will not be amortized but instead will be tested for impairment at least annually or more frequently if indicators of impairment exist.

Goodwill, other intangibles and long-lived assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable.

If an impairment indicator is present, the Company will evaluate recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows that are expected to generate from these assets. If the assets are impaired, the Company will recognize an impairment charge equal to the amount by which

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

the carrying amount exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying values or fair values, less estimated costs of disposal.

Goodwill impairment will be tested on an annual basis. If goodwill impairment is present, the Company will compare the implied fair value of goodwill to the carrying amount. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss will be recognized in an amount equal to that excess. The loss recognized will not exceed the carrying amount of goodwill.

The preliminary fair value of the acquired intangible assets was determined using the below valuation approaches. In estimating the preliminary fair value of the acquired intangible assets, the Company utilized the valuation methodology determined to be most appropriate for the individual intangible asset being valued as described below. The acquired intangible assets include the following:

	Valuation Method	Estimated Fair Value		Remaining Useful Lives (1)
		(in thousands)		(years)

Employment/Non-compete Agreements	Discounted Cash Flow (2)	$	500		5
Publications	Cost Approach (3)		500		3
Customer Relationships	Excess of Earnings (4)		1,870		3
Trademarks and tradenames	Relief from Royalty (5)		830		5
Software	Cost Approach (3)		800		3
Total purchase intangible assets		$	4,500

(1)

Determination of the estimated useful lives of the individual categories of purchased intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives are recognized over the shorter of the respective lives of the agreement or the period of time the assets are expected to contribute to future cash flows.

(2)	The employment/non-compete agreements fair value was derived by calculating the difference between the present value of the Company’s forecasted cash flows with the agreements in place and without the agreements in place.

(3)	The cost approach estimates the cost required to repurchase or reproduce the intangible assets. The method takes into account technological and economic obsolescence of the publications and software licenses.

(4)

The excess of earnings method estimates a purchased intangible asset’s value based on the present value of the prospective net cash flows (or excess earnings) attributable to it. The value attributed to these intangibles was based on projected net cash inflows from existing contracts or relationships.

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(5)	The relief from royalty method is an earnings approach which assesses the royalty savings an entity realizes since it owns the asset and doesn’t have to pay a third party a license fee for its use.

Some of the more significant estimates and assumptions inherent in the estimate of the fair value of the identifiable purchased intangible assets include all assumptions associated with forecasting cash flows and profitability. The primary assumptions used for the determination of the preliminary fair value of the purchased intangible assets were generally based upon the present value of anticipated cash flows discounted at a rate of 18%.

Note 3. Pro Forma Adjustments

Pro forma adjustments are made to reflect the estimated purchase price, to adjust amounts related to Cyber and Autotropolis’ net tangible and intangible assets to a preliminary estimate of the fair values of those assets, to reflect the amortization expense related to the estimated amortizable intangible and to reflect the interest and issuance amortization of financing.

Autobytel has not identified any material pre-acquisition contingencies where the related asset, liability or impairment is probable and the amount of the asset, liability or impairment can be reasonably estimated.

The following describes the pro forma adjustments related to the acquisition made in the accompanying unaudited pro forma condensed consolidated balance sheet as of June 30, 2010 and the unaudited pro forma condensed consolidated statements of operation for the twelve months ended December 31, 2009 and six month ended June 30, 2010:

a)	To eliminate the outstanding accounts receivable balance at June 30, 2010 between the Company and Cyber Ventures, Inc.

b)	To record purchase of Cyber and Autotropolis. See Note 2 above for detail.

c)	To eliminate the cash of the acquired company. According to the September 16, 2010 Asset Purchase Agreement, the purchase does not include the combined cash balances of Cyber Ventures, Inc. and Autotropolis, Inc.

d)	To record acquired goodwill from the Cyber and Autotropolis acquisition and the pro forma elimination of Cyber and Autotropolis net assets acquired as of June 30, 2010, the pro forma acquisition date:

Pro forma goodwill (in thousands):	Pro forma, as of June 30, 2010

Purchase price	$	16,777
Pro forma Cyber and Autotropolis net assets acquired		(5,001	)
Pro forma adjustment to goodwill	$	11,776

AUTOBYTEL INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

e)	To record amortization of acquired intangibles.

			Pro forma		Pro forma
			Year Ended		Year Ended		Amortization
Pro forma Definite-Lived Intangible Amortization Expense (in thousands):	As of June 30, 2010		December 31, 2009		June 30, 2010		Rate

Trademarks	$	830	$	166	$	83		5
Software and articles		1,300		433		217		3
Customer relationships		1,870		624		311		3
Non-compete agreements		500		100		50		5
	$	4,500	$	1,323	$	661

f)	To eliminate the sales between the Company and Cyber Ventures, Inc. for the year ended December 31, 2009 and for the six months ended June 30, 2010.

To record interest expense from convertible note. The table below assumes constant interest rates and principal amounts with those as of the date of issuance. The unaudited pro forma condensed combined statements of operations and the table below do not assume reductions in interest expense resulting from actual and anticipated principal repayments of our borrowings or changes in interest rates if we refinance our borrowings.

Effective

Pro forma

As of

Interest

Year Ended

Pro forma interest expense (in thousands):

June 30, 2010

Rate

December 31, 2009

June 30, 2010

Convertible debt

5,000

300

150

h)	To eliminate Cyber and Autotropolis’ stockholders’ equity.

To record the tax effects resulting from the tax-deductible goodwill recorded and the related impact on the determination of the Company’s deferred tax valuation allowance. In determining the net deferred tax asset subject to valuation allowance, the Company excluded the deferred tax liability related to goodwill that is not expected to reverse in the foreseeable future.

Pro forma tax expense (in thousands):	Goodwill Amortization (tax purposes only)		Effective Tax Rate			Pro forma Tax Expense

Six months ended June 30, 2010	$	390		40	%	$	156
Year ended December 31, 2009	$	779		40	%	$	312

Note 4: Pro Forma Net Income per Common Share

The calculation of basic earnings (loss) per share is based on the weighted-average number of common shares outstanding during the applicable period. The calculation for diluted earnings (loss) per share recognizes the effect of all potential dilutive common shares that were outstanding during the respective periods, unless their impact would be anti-dilutive.

Diluted earnings per share recognizes the dilution that would occur if securities or other contracts to issue common stock were exercised or converted into shares. These potential shares arise from common stock options, convertible debt, and warrants.

The Company utilized the treasury stock method to calculate the dilutive effect of our stock options, convertible debt, and warrants (using the average market price). Shares potentially issuable for certain stock options, the Company’s convertible debt and the Company’s warrants were not included in the computation of diluted earnings per share for the periods presented because inclusion would be anti-dilutive. In addition, shares potentially issuable for the Company’s warrant transactions were not included as they are by design anti-dilutive. For periods in which there was a net loss to common stockholders, no potentially dilutive securities are included in the calculation of diluted loss per share, as inclusion of these securities would have reduced the net loss per share.

The pro forma basic and diluted earnings per share amounts presented in our unaudited pro forma condensed combined statements of operations are based upon the weighted average number of our common shares outstanding.

Pro forma EPS (in thousands, except per share data):	Pro forma Year Ended December 31, 2009			Pro forma Six Months Ended June 30, 2010

Revenues	$	61,484		$	28,418
Net loss	$	(3,019	)	$	(2,597	)

Weighted average common shares outstanding		44,562,842			44,881,733

Basic and diluted loss per common share	$	(0.07	)	$	(0.06	)