<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                             ----------------------
                                   FORM 10-Q

                                   (Mark One)



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


                 For the quarterly period ended March 31, 2001


                                       OR


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



        For the transition period from _______________ to ______________


                       Commission file number: 000-25577


                               AUTOWEB.COM, INC.
             (Exact name of Registrant as specified in its charter)



            Delaware                                   77-0412737
  (State or other jurisdiction                      (I.R.S. Employer
of incorporation or organization)                 Identification Number)



                                3270 Jay Street
                         Santa Clara, California 95054
          (Address of principal executive offices, including zip code)



                                 (408) 970-9100
              (Registrant's telephone number, including area code)



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



As of April 30, 2001, there were 29,526,453 shares of the Registrant's common
stock outstanding.

<PAGE>   2


                               AUTOWEB.COM, INC.


                                     INDEX


<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                                                                                                     <C>
                          PART I. FINANCIAL INFORMATION

ITEM 1: Condensed Financial Statements:

        Condensed Balance Sheets as of March 31, 2001 and December 31, 2000 ........................       3

        Condensed Statements of Operations for the three months ended March 31, 2001 and 2000 ......       4

        Condensed Statements of Cash Flows for the three months ended March 31, 2001 and 2000  .....       5

        Notes to Condensed Financial Statements ....................................................       6

ITEM 2: Management's Discussion and Analysis of Financial Condition and Results of Operations ......       9

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk .................................      21

                           PART II. OTHER INFORMATION

ITEM 1: Legal Proceedings ..........................................................................      21

ITEM 2: Changes in Securities and Use of Proceeds ..................................................      21

ITEM 3: Defaults upon Senior Securities ............................................................      21

ITEM 4: Submission of Matters to a Vote of Security Holders ........................................      22

ITEM 5: Other Information ..........................................................................      22

ITEM 6: Exhibits and Reports on Form 8-K ...........................................................      22

Signatures .........................................................................................      23
</TABLE>

<PAGE>   3

                         PART I: FINANCIAL INFORMATION

                     ITEM 1: CONDENSED FINANCIAL STATEMENTS

                               AUTOWEB.COM, INC.

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               March 31,      December 31,
                                                                               ---------      ------------
                                                                                 2001             2000
                                                                               ---------      ------------
                                                                                     (in thousands)
                                                                                       (unaudited)

                                     ASSETS
<S>                                                                            <C>             <C>
Current assets:
  Cash and cash equivalents .............................................      $  13,191          27,137
  Accounts receivable, net ..............................................          8,545           8,518
  Prepaid expenses and other current assets .............................          5,716          10,149
                                                                               ---------       ---------
      Total current assets ..............................................         27,452          45,804

Property and equipment, net .............................................          1,887           2,285
Purchased technology and other intangible assets, net ...................         10,104          11,878
Deposits and other assets ...............................................            177             177
                                                                               ---------       ---------
      Total assets ......................................................      $  39,620       $  60,144
                                                                               =========       =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Account payable and other accrued expenses ............................      $   2,425       $   3,705
  Accrued payroll and related expenses ..................................            897             991
  Deferred revenue ......................................................            540             773
  Notes and capital lease obligations payable ...........................            205             314
                                                                               ---------       ---------
      Total current liabilities .........................................          4,067           5,783
                                                                               ---------       ---------

Stockholders' equity:
  Common stock ..........................................................             26              26
  Additional paid-in capital ............................................        131,762         131,761
  Notes receivable from stockholders ....................................           (786)           (786)
  Unearned stock-based compensation .....................................         (2,177)         (2,489)
  Accumulated deficit ...................................................        (93,272)        (74,151)
                                                                               ---------       ---------
      Total stockholders' equity ........................................         35,553          54,361
                                                                               ---------       ---------
      Total liabilities and stockholders' equity ........................      $  39,620       $  60,144
                                                                               =========       =========
</TABLE>



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

<PAGE>   4

                               AUTOWEB.COM, INC.

                       CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                      March 31,
                                                               -----------------------
                                                                 2001           2000
                                                               --------       --------
                                                      (in thousands except per share amounts)

                                                                     (Unaudited)
<S>                                                            <C>            <C>
Net revenues .......................................           $ 10,094       $ 15,794
Cost of net revenues ...............................              1,919          1,661
                                                               --------       --------
    Gross profit ...................................              8,175         14,133

Operating expenses:
    Sales and marketing ............................              8,393         14,725
    Sales and marketing--settlement charge .........             12,635              0
    Product development ............................              1,601          1,882
    General and administrative .....................              2,367          3,327
    Merger related costs ...........................                850              0
    Amortization of intangible assets ..............              1,775          1,745
                                                               --------       --------

         Total operating expenses ..................             27,621         21,679
                                                               --------       --------

Loss from operations ...............................            (19,446)        (7,546)

Interest and other income, net .....................                325            318
                                                               --------       --------
Net loss ...........................................           $(19,121)      $ (7,228)
                                                               ========       ========
Net loss per share:
    Basic and diluted ..............................            $(0.65)        $(0.28)
                                                               ========       ========
    Weighted average shares--basic and diluted .....             29,535         25,503
                                                               ========       ========
</TABLE>

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


<PAGE>   5

                                AUTOWEB.COM, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            Three months Ended
                                                                                                 March 31,
                                                                                          -----------------------
                                                                                            2001           2000
                                                                                          --------       --------
                                                                                               (in thousands)
                                                                                                (unaudited)
<S>                                                                                       <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss .......................................................................      $(19,121)      $ (7,228)
    Adjustments to reconcile net loss to net cash provided by (used in)
    operating activities:
         Depreciation and amortization .............................................           495            471
         Amortization of purchased technology and other intangible assets ..........         1,775          1,745
         Provision for doubtful accounts ...........................................          (235)           421
         Stock-based compensation expense for employee options granted, net ........           312            419
         Change in assets and liabilities:
               Accounts receivable .................................................           208         (2,977)
               Prepaid expenses and other current assets ...........................         4,433         (1,399)
               Deposits and other assets ...........................................            --            354
               Accounts payable and other accrued expenses .........................        (1,280)         1,621
               Accrued payroll and related expenses ................................           (94)          (977)
               Deferred revenue ....................................................          (233)           116
                                                                                          --------       --------
                     Net cash used in operating activities .........................       (13,740)        (7,434)
                                                                                          --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of short-term investments ............................................            --             --
    Maturity of short-term investments .............................................            --         20,897
    Acquisition of property and equipment ..........................................           (98)          (475)
                                                                                          --------       --------
                     Net cash provided by (used in) investing activities ...........           (98)        20,422
                                                                                          --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal payments under notes payable and capital lease obligations ...........          (109)           (80)
    Proceeds from borrowing under debt facilities ..................................            --             --
    Proceeds from issuance of common stock, net of issuance costs ..................             1            406
                                                                                          --------       --------
                     Net cash provided by (used in) financing activities ...........          (108)           326
                                                                                          --------       --------
Net increase in cash and cash equivalents ..........................................       (13,946)        13,314
Cash and cash equivalents, at the beginning of period ..............................        27,137          9,387
                                                                                          --------       --------
Cash and cash equivalents, at end of period ........................................      $ 13,191       $ 22,701
                                                                                          ========       ========
Supplemental disclosure of noncash investing and financing activities:
    Unearned stock-based compensation (cancellations) related to employee stock
      option grants, net ...........................................................      $     --       $   (875)
    Revenue and advertising expense from barter transactions .......................      $     --       $     69
</TABLE>


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


<PAGE>   6

                               AUTOWEB.COM, INC.
                    NOTES TO CONDENSED FINANCIAL STATEMENTS


                                   AUTOWEB.COM

                          NOTES TO FINANCIAL STATEMENTS

Note 1--The Company

     Autoweb.com, Inc. (the "Company") was incorporated in California on October
3, 1995 as Downtown Web, Inc. and reincorporated in Delaware on March 16, 1999.
The Company provides a consumer automotive Internet service, whereby its Web
site enables consumers to select new or pre-owned vehicles from member dealers,
and also offers services that enable consumers to purchase automotive-related
products and services such as insurance and financing. The Company also
provides, through its division Automotive Information Center ("AIC"), automotive
and on-line research tools for automotive manufacturers, major web portals and
other industries. The Company markets and sells it's services primarily in North
America and operates in one business segment.

     The Company has sustained net losses and negative cash flows from
operations since its inception. The Company's ability to meet its obligations in
the ordinary course of business is dependent on its ability to achieve
profitable operations and/or raise additional financing through public or
private equity financings or other sources of financing to fund operations.
However, there is no assurance that the Company will achieve profitable
operations or that it will be able to raise adequate financing from other
sources. Management believes that its current funds will be sufficient to enable
the Company to meet its planned expenditures through at least March 31, 2002.
If anticipated operating results are not achieved, management has the intent and
it believes that it has the ability to delay or reduce expenditures so as not to
require additional financial resources, if such resources were not available on
terms acceptable to the Company.

Note 2--Summary of Significant Accounting Policies


Basis of Preparation

     The accompanying condensed financial statements as of March 31, 2001, and
for the three months ended March 31, 2001 and 2000, are unaudited. These
unaudited interim condensed financial statements have been prepared on the same
basis as the annual financial statements and, in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows as of March 31, 2001 and for the three months ended
March 31, 2001 and 2000. These unaudited interim condensed financial statements
and notes thereto should be read in conjunction with the Company's financial
statements included in the Company's 2000 10-K/A filed with the Securities and
Exchange Commission on April 30, 2001. The results for the three months ended
March 31, 2001 are not necessarily indicative of the expected results for the
year ending December 31, 2001 or any other future period.


Concentration of Credit Risk

     Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable. Cash and cash equivalents are deposited with six high credit quality
financial institutions in the United States. The Company maintains allowances
for potential credit losses, and such losses have been within management's
expectation. The Company's accounts receivable are derived from revenues earned
primarily from customers located in the United States and the Company performs
ongoing credit evaluations of its customers' financial condition.


Fair Value of Financial Instruments

     Carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable and
other accrued liabilities, approximate fair value due to their relatively short
maturities.


Cash and Cash Equivalents

     The Company considers all highly liquid investments purchased with original
maturities or remaining maturities at the time of purchase of ninety days or
less to be cash equivalents. Cash equivalents consist primarily of deposits in
money market funds.

<PAGE>   7

                               AUTOWEB.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



Stock-Based Compensation


In 1997, the Company adopted the disclosure provisions of Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-based Compensation." The Company has elected to
continue accounting for stock-based compensation issued to employees using
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." Under APB No. 25, compensation expense is based on the
difference, if any, on the date of the grant between the fair value of the
Company's stock and the exercise price. Stock issued to non-employees has been
accounted for in accordance with SFAS No. 123 and valued using the Black-Scholes
option pricing model.


Net Loss Per Share


The Company computes net loss per share in accordance with SFAS No. 128,
"Earning per Share" and SEC Staff Accounting Bulletin ("SAB") 98. Under the
provisions of SFAS No. 128, basic net loss per share is computed by dividing the
net loss available to common stockholders for the period by the weighted average
number of common shares outstanding during the period. Diluted net loss per
share is computed by dividing the net loss for the period by the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares, composed of common shares issuable upon the
exercise of stock options are included in the diluted net loss per share
computation to the extent such shares are dilutive.


<TABLE>
<CAPTION>
                                                                      Three Months Ended,
                                                                          March 31,,
                                                                    -----------------------
                                                                      2001           2000
                                                                    --------       --------
                                                           (In thousands, except per share amounts)
<S>                                                                 <C>            <C>
Numerator:
  Net loss .......................................                  $(19,121)      $ (7,228)
                                                                    ========       ========

Denominator:

  Weighted average shares--basic and diluted .....                    29,535         25,503
                                                                    ========       ========
  Net loss per share--basic and diluted ..........                    $(0.65)        $(0.28)
                                                                    ========       ========
</TABLE>


Recent Accounting Pronouncements


In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended, is effective for all fiscal quarters of all years beginning after June
15, 2000. SFAS No. 133 requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair market value. Under SFAS No.
133, gains or losses resulting from changes in the values of derivatives are to
be reported in the statement of operations or as a deferred item, depending on
the use of the derivatives and whether they qualify for hedge accounting. The
Company is required to adopt SFAS No. 133 in the first quarter of 2001. To date,
the Company has not engaged in any hedging activity and therefore the adoption
of this new standard has not had a significant impact on the Company.


<PAGE>   8

                               AUTOWEB.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 3--Common Stock

Unearned Stock-Based Compensation

     In connection with certain employee stock option grants during the three
months ended March 31, 2001 and 2000, the Company recognized unearned
compensation and related amortization expense as displayed in the table below.
Amortization expense is being recognized over the vesting periods of the related
options.

<TABLE>
<CAPTION>
                                                            Three months Ended
                                                                 March 31,
                                                            ------------------
                                                              2001       2000
                                                             ------      -----
<S>                                                          <C>         <C>
Unearned stock-based compensation (cancellations) .....       $  0       $(368)

Amortization expense, net of cancellations ............       $312       $ 420
</TABLE>

Note 4--Related Party Transactions

     At March 31, 2001, the Company had full recourse promissory notes
receivable in the amount of approximately $960,000, approximately $922,000 of
which is from Dean DeBiase, our Chairman and approximately $38,000 of which is
from Samuel Hedgpeth, our former President and Chief Executive Officer. Of this
amount, approximately $174,000 is included in "prepaid expenses and other
current assets" and approximately $786,000 is included in stockholders' equity
as "notes receivable from stockholders." Notes receivable totaling approximately
$922,000 are interest free and collateralized by 595,660 shares of common stock
and the remaining note receivable for approximately $38,000 bears interest at a
rate of 5.59% per annum and is collateralized by 177,012 shares of common stock.


Note 5--Commitments

     Through March 31, 2000, the Company had agreements with two global Internet
media companies to maintain certain exclusive promotional rights and linkage
with the media companies and to receive certain advertising. In addition, the
Company shares in certain advertising revenues earned by the media companies.
One of the agreements had been entered into on March 26, 2000 and on April 18,
2000 the related party had finalized its purchase of newly-issued unregistered
shares of common stock from the Company for approximately $21.9 million,
resulting in the ownership of approximately 10% of the Company's outstanding
common stock. The related party has registration rights with respect to those
shares. The March 2000 agreement committed the Company to the following payments
for services to be provided by the shareholder: 2001 - $10.0 million; 2002 -
$10.0 million; 2003 - $2.5 million. In addition, the Company participated in
certain advertising revenue earned by the related party shareholder. On March
21, 2001 the agreement was terminated and the Company made a final payment of
$13.3 million to the shareholder in settlement of its then outstanding
commitments; no specific services were received for that payment. The Company
will continue to receive certain content and customer referrals from the related
party shareholder and will participate in certain advertising revenue earned by
the related party shareholder.

     Also, on April 2, 2001, the Company entered into an amendment of the
agreement with the remaining global Internet media company which provides for a
reduction in the advertising received in consideration for reduced payments. The
future remaining payments under the amended agreement were reduced from $6.7
million, $8.8 million and $6.7 million as compared to the payments under the
amended arrangement of $3.8 million, $5.1 million and $3.8 million, for the
remainder of 2001, 2002 and 2003, respectively.

     The Company also has multi-year agreements with other Internet advertisers
and automotive information providers that make available to consumers vehicle
research data over the Internet. Such agreements require that the Company pay
fees to these companies based on the volume of referrals received by the Company
from these services. The Company expenses these amounts as the services are
provided.

Note 6--Subsequent Events

     On April 11, 2001, Autoweb entered into a definitive acquisition agreement
with Autobytel. Under the terms of the agreement, Autoweb stockholders will
receive 0.3553 shares of Autobytel common stock in exchange for each share
of Autoweb common stock. Outstanding stock options to purchase shares of
Autoweb common stock will be assumed after adjustment at the same exchange
ratio.

<PAGE>   9

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     This Form 10-Q, including the discussion of our business, should be read in
conjunction with the Condensed Financial Statements and Notes, thereto, of
Autoweb.com, Inc. The following discussion contains forward-looking statements.
Forward-looking statements involve risks and uncertainties that could cause
actual results to differ from anticipated results. In particular, factors that
could cause different results include, but are not limited to: our ability to
attract consumers through existing portal relationships; the combined viability
of current and new car buying process on our site; consumer acceptance of online
car buying; our ability to continue to reduce expenses without comparable or
greater revenue reductions; the effect of the restructuring of certain marketing
agreements; the failure to realize anticipated synergies related to the proposed
merger with Autobytel.com, failure to obtain required stockholder or regulatory
approvals or the merger not closing for any other reason, failure of the
combined company to retain and hire key employees, and difficulties in
successfully integrating the parties' businesses and technologies.

     Other uncertainties include the fact that the Company received a Nasdaq
Staff Determination letter on March 1, 2001, indicating that Autoweb has failed
to comply with the minimum bid price requirement for continued listing, and is
subject to delisting from the Nasdaq National Market; changes in competitive
behavior or market forces; uncertainties regarding response from the vehicle
manufacturers; changes in the legal or regulatory environment, changes or lack
of changes in consumer preferences over time, technological challenges and an
inability to forecast future traffic and transactions. Other statements that
could cause actual results to differ from those projected in these
forward-looking statements include without limitation, those discussed below in
the "Factors That May Affect Future Results." Readers are urged to carefully
review and consider the various disclosures made by us in this report, and those
detailed from time to time in our reports and filings with the Securities and
Exchange Commission that attempt to advise interested parties of the risks and
factors that are likely to affect our business.

OVERVIEW

     Autoweb.com is a leading consumer automotive Internet service. Our Web site
centralizes an extensive collection of automotive-related commerce, content and
community offerings to assist consumers in researching, evaluating and buying
vehicles and automotive-related products and services such as insurance and
financing. In addition, we provide automotive content, Web hosting and
development services and sales automation services to vehicle manufacturers,
dealers and online partners. Through our acquisition of Automotive Information
Center ("AIC"), in 1999, we now provide consumers and automotive professionals
with Autosite.com, a 20,000-page online vehicle buyer's guide and a rich suite
of related services information and original automotive editorial content.

     We began selling our services to automobile dealers and launched the
Autoweb.com Web site for consumer use in October 1995. Currently, our network of
member dealers (where each franchise and pre-owned location for a particular
vehicle manufacturer is defined as a member dealer) is approximately 4,400. We
currently derive approximately 60% of our revenues from fees charged to our
member dealers in exchange for qualified purchase inquiries. The revenue related
to each fee is recognized in the month the qualified purchase inquiry is
provided to the member dealer. We also provide online advertising space on the
Autoweb.com site. Revenues from advertising contracts, which typically have
terms of less than three months, are recognized as the contracts are fulfilled.
In addition, we offer automotive-related services on the Autoweb.com site
through agreements with third-party category partners. We derive revenues from
third parties for the right to provide its consumer services, such as automobile
financing and insurance, on our Web site. Revenues from these agreements are
generally recognized ratably over the terms of the agreements.

     We incurred a net loss of $19.1 million for the three months ended March
31, 2001. Our limited operating history makes it difficult to forecast future
operating results. We cannot be certain that net revenues will increase at a
rate sufficient to achieve and maintain profitability. Even if we were to
achieve profitability in any period, we might fail to sustain or increase that
profitability on a quarterly or annual basis.

     On April 11, 2001, Autoweb entered into a definitive acquisition agreement
with Autobytel.com, Inc. The merger is expected to close late in the second
calendar quarter or early in the third calendar quarter of 2001 upon
satisfaction of customary and other closing conditions and receipt of
governmental and stockholder approvals. Under the terms of the agreement,
Autoweb stockholders will receive 0.3553 shares of Autobytel common stock in
exchange for each share of Autoweb common stock. Outstanding stock options to
purchase shares of Autoweb common stock will be assumed after adjustment at the
same exchange ratio.

Results of Operations

     The following table sets forth, for the periods presented, certain data
derived from our unaudited condensed statements of operations as a percentage of
net revenues. The operating results for the three months ended March 31, 2001
are not necessarily indicative of the results that may be expected for any
future period.

<PAGE>   10

<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                                         March 31,
                                                                    ------------------
                                                                    2001          2000
                                                                    ----          ----
<S>                                                                 <C>           <C>
Net revenues ..............................................         100%          100%
Cost of net revenues ......................................          19            11
                                                                   ----           ---
Gross profit ...............................................         81            89
                                                                   ----           ---
Operating expenses:
           Sales and marketing ............................          83            93
           Sales and marketing - Settlement charge ........         125             0
           Product development ............................          16            12
           General and administrative .....................          23            21
           Merger related costs ...........................           9             0
           Amortization of intangible assets ..............          18            11
                                                                   ----           ---
                              Total operating expense .....         274           137
                                                                   ----           ---
Loss from operations ......................................        (193)          (48)
Interest and other income, net ............................           4             2
                                                                   ----           ---
Net loss ..................................................        (189)%         (46)%
                                                                   ====           ===
</TABLE>

Net Revenues

Our net revenues decreased to $10.1 million in the first quarter of 2001, from
$15.8 million in the first quarter of 2000, an overall decrease of 36%.
Approximately 109% of the decrease in net revenues was due to lower net dealer
fees. This was partially offset by higher manufacturer sales. The decrease in
net dealer fee revenue is primarily the result of decreases in the number of
purchase inquiries that we provided to our member dealers, and
automotive-related vendors or category partners.

Cost of Net Revenues

Cost of net revenues increased to $1.9 million in the first quarter of 2001 from
$1.7 million in the first quarter of 2000. The increase was due to higher
revenue sharing costs partially offset by lower web site operation costs
including personnel and site content. The increase in revenue sharing costs is
the result of the increase in pay-for-performance marketing arrangements.

Sales and Marketing

Our sales and marketing expenses decreased to $8.4 million in the first quarter
of 2001 from $14.7 million in the first quarter of 2000. Approximately 63% of
the decrease in sales and marketing expenses was due to lower offline
advertising. Approximately 11% of the decrease was due to lower tradeshow costs.
A majority of the remaining decrease was the result of lower salary and salary
related costs.

Sales and Marketing -- Settlement Charge

Our sales and marketing -- settlement charge in the first quarter was $12.6
million. The settlement charge is the result of a payment made to a related
party stockholder to terminate and settle all outstanding commitments under an
advertising agreement.

Product Development

Our product development expenses decreased to $1.6 million in the first quarter
of 2001 from $1.9 million in the first quarter of 2000. The decrease is
primarily due to lower salary and salary related costs.

<PAGE>   11

General and Administrative

Our general and administrative expenses decreased to $2.4 million in the first
quarter of 2001 from $3.3 million in the first quarter of 2000. Approximately
75% of the decrease is due to lower salary costs, while approximately 38% of the
decrease in general and administrative expenses was due to decreases in costs
attributable to the recruiting of administrative personnel.

Merger Related Costs

Our Merger related costs in the first quarter of 2001 were $850,000. The merger
related costs represent investment banking and legal fees for services related
to the definitive acquisition agreement entered into with Autobytel.

Amortization of Intangible Assets

Our amortization of intangible assets expense was $1.8 million in the first
quarter of 2001 and $1.7 million in the first quarter of 2000. All of the
amortization expense was due to the acquisition of certain intangibles. In July
1999, the Company entered into an agreement with SalesEnhancer.com, LLC
(SalesEnhancer) to acquire certain technology and other assets and certain
liabilities for $3.7 million in cash. In October 1999, the Company entered into
an agreement with The Gale Group, Inc., a subsidiary of the Thompson Company,
Inc., to acquire certain assets and liabilities of AIC for $19.3 million in cash
and common stock.

Stock-Based Compensation

Our stock-based compensation expense decreased to $312,000 in the first quarter
of 2001 from $419,000 in the first quarter of 2000. The decrease reflects
cancellations of previously recorded unearned stock based compensation charges
due to employee terminations. Stock based compensation expense has been
allocated to the relevant functional expense categories within operating
expenses.

Interest and Other Income, Net

Our interest and other income, net, increased to $325,000 in the first quarter
of 2001 from $318,000 in the first quarter of 2000.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended, is effective for all fiscal quarters of all years beginning after June
15, 2000. SFAS No. 133 requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair market value. Under SFAS No.
133, gains or losses resulting from changes in the values of derivatives are to
be reported in the statement of operations or as a deferred item, depending on
the use of the derivatives and whether they qualify for hedge accounting. The
Company is required to adopt SFAS No. 133 in the first quarter of 2001. To date,
the Company has not engaged in any hedging activity and therefore the adoption
of this new standard has not had a significant impact on the Company.


<PAGE>   12
Liquidity and Capital Resources

     Net cash used in operating activities was $13.7 million in the three months
ended March 31, 2001 compared to net cash used in operations of $7.4 million in
the three  months ended March 31, 2000. Net cash used in operating activities in
the three months ended March 31, 2001 was primarily due to the net loss of $19.1
million for the period which includes the settlement charge of $12.6 million and
decreases in accounts payable of $1.3 million partially offset by decreases in
prepaid expenses of $4.4 million and depreciation and amortization expense of
$1.8 million and stock based compensation expense of $312,000. Net cash used in
operating activities in the three months ended March 31, 2000 of $7.4 million
was primarily due to the net loss of $7.2 million.

     Net cash used in investing activities was $98,000 in the first three months
of 2001 and was primarily the result of the acquisition of property and
equipment. Net cash provided by investing activities was $20.4 million in the
first three months of 2000 and was primarily the result of the maturity of short
term investments.

     Net cash used in financing activities was $108,000 for the first three
months of 2001 and was the result of principal payments under notes payable and
capital lease obligations. Net cash provided by financing activities was
$326,000 for the first three months of 2000 and resulted primarily from the
issuance of common stock.

     At March 31, 2001, the total of our cash and cash equivalents was $13.2
million. We believe that our current cash position together with anticipated
future revenues will be sufficient to meet our cash requirements for at least
the next 12 months. Depending on our rate of growth and cash requirements, we
may require additional equity or debt financing to meet future working capital
or capital expenditure needs. There can be no assurance that such additional
financing will be available or, if available, that such financing can be
obtained on terms satisfactory to us.

FACTORS THAT MAY AFFECT FUTURE RESULTS

     We have a limited operating history under our current business model

    As part of our business strategy, we acquired AIC in 1999. As a result of
the acquisition, approximately 40% of our employees are now based outside of our
Santa Clara headquarters. If we are unable to effectively manage a large and
geographically dispersed group of employees, our business will be adversely
affected. In addition, we have a limited operating history and unproven business
model as a combined company. A number of risks and challenges accompany our
model, including:

     - the difficulty of continuing to assimilate the operations and personnel
       of the combined entities;

     - the impairment or integration of relationships with employees or
       customers as a result of any integration of the combined companies;

     - the ability of the combined company to continue to generate revenue
       streams from fees for consumer inquiries, advertising, automotive content
       and technology;

     - the difficulty in maintaining a consumer, dealer, OEM, and affiliate or
       category partner customer base; and

     - the ability to continue to develop our technology infrastructure in order
       to handle greater Internet traffic efficiently.

     We may not be successful in addressing these risks or any other problems
encountered in connection with our current business model.

     If we are unable to maintain our Nasdaq National Market Listing, the
liquidity of our common stock would be seriously limited.

     On March 1, 2001, the Company received a Nasdaq Staff Determination
indicating that the Company has failed to comply with the minimum bid price
requirement for continued listing, and is subject to delisting from the Nasdaq
National Market. The Company has filed a request for a hearing before the Nasdaq
Qualifications Panel ("Panel") to review the staff determination. The hearing
was held on April 12, 2001.

     There can be no assurance that the Panel will decide to allow the Company
to remain listed or that the Company's actions will prevent the delisting of its
common stock. The Company will not be notified until the Panel makes a formal
decision. Until then, the Company's shares will continue to trade on the Nasdaq
National Market. In the event the Company's shares are delisted from the Nasdaq
National Market, we will attempt to have our common stock traded on the NASD
over-the counter Bulletin Board.

<PAGE>   13
     If our common stock is delisted, it would seriously limit the liquidity of
our common stock and limit our potential to raise future capital through the
sale of our common stock, which could have a material adverse effect on our
business.

Our operating results are likely to fluctuate significantly

     Our results of operations have varied widely in the past, and we expect
that they will continue to vary significantly from quarter to quarter due to a
number of factors described below and elsewhere in this Form 10-Q.

     Our revenue growth rates, if any, may not be sustainable. Any shortfall in
our revenues would immediately increase our operating losses and would adversely
affect the market price of our common stock. We continue to be substantially
dependent on member dealer fees. Therefore, our quarterly revenues and operating
results are likely to be particularly affected by the level of member dealer
fees in each quarter. If revenues fall below our expectations, we will not be
able to reduce our spending rapidly in response to such a shortfall. This will
adversely affect our operating results.

     We believe that we may experience seasonality in our business. The seasonal
patterns of Internet usage and vehicle purchasing do not completely overlap.
Internet usage typically declines during the summer and certain holiday periods,
while vehicle purchasing in the United States is strongest in the late spring
and summer months. We cannot predict which seasonal pattern, if any, will
dominate.

     Due to the foregoing factors and factors described elsewhere in this Form
10-Q, we believe that quarter-to-quarter comparisons of our results of
operations are not a good indication of our future performance. It is likely
that our results of operations in some future quarter may be below the
expectations of public market analysts and investors. In this event, the price
of our common stock is likely to decline.

We have a history of net losses and expect net losses for the foreseeable future

     We have incurred net losses in each fiscal year since our inception,
including a net loss of $38.4 million in 2000. We had an accumulated deficit of
$93.3 million as of March 31, 2001. The size of future net losses will depend,
in part, on the rate of growth in our revenues from member dealer fees, category
partners fees, advertising sales and other e-commerce activities. It is critical
to our success that we continue to expend financial and management resources to
develop Autoweb.com brand awareness and loyalty through marketing and promotion,
expansion of our member dealer network, development of our online content and
expansion of our other services. As a result, a significant portion of our
operating expenses for the next several years will continue in sales and
marketing. With these expenses, we will need to generate significant additional
revenues to achieve profitability. As a result, we may never achieve or sustain
profitability, and, if we do achieve profitability in any period, we may not be
able to sustain or increase profitability on a quarterly or annual basis.

Our business is dependent on the economic strength of the automotive industry

     The economic strength of the automotive industry significantly impacts the
revenues we derive from our member dealers, vehicle manufacturers and category
partners, advertising revenues and consumer traffic to our Web site. The
automotive industry is cyclical, with vehicle sales fluctuating due to changes
in national and global economic forces. Vehicle sales in the United States have
been declining in the latter part of 2000. We cannot assure you that vehicle
sales will increase or stay at their current levels. A further decrease in the
current level of vehicle sales could have a material adverse effect on our
business, results of operations and financial condition.

We currently rely heavily on member dealers

     We derive the majority of our revenues from member dealer fees (payments
from member dealers for each purchase inquiry that we provide to them), and we
expect to continue to do so for the foreseeable future. Member dealer fees
represented approximately 60%, 66%, and 78% of our net revenues in 2000, 1999,
and 1998 respectively. Consequently, our business is highly dependent on
consumers' use of Autoweb.com to purchase vehicles so that member dealers will
achieve a satisfactory return on their investment in the Autoweb.com program.
<PAGE>   14
     The success of our business strategy depends on our member dealers'
adherence to the Autoweb.com purchase process, including responding to consumer
purchase inquiries within 24 hours, providing a competitive, firm quote to
consumers during the initial communication, explaining the Autoweb.com purchase
process to the consumer and answering any consumer questions. We devote
significant efforts and resources to certifying and supporting participating
member dealers in these practices that are intended to increase consumer
satisfaction. Our inability to certify and support member dealers effectively,
or member dealers' failure to adopt such practices, respond rapidly and
professionally to vehicle purchase inquiries, or sell vehicles in accordance
with our marketing strategies, could result in low consumer satisfaction and
materially adversely affect our business, results of operations and financial
condition.

     To maintain and increase our network of member dealers, we must reduce the
rate of turnover of our member dealers. Commencing in February 1998, we
introduced a new "pay for performance" pricing model and began actively to
convert our existing member dealers to this model. Prior to that time, all of
our member dealers were on a subscription model under which they paid a fixed
amount per month regardless of the number of purchase inquiries that we provided
to them. During 1998, we lost approximately 60% of the member dealers that we
had at the beginning of the year and converted approximately 30% to the new
pricing model. During 1998, we lost approximately 22% of the performance-based
member dealers that we converted or with which we first entered into a contract
in 1998. During 1999, we lost approximately 31% of the performance-based member
dealers that we had at the beginning of the year or first entered into a
contract during the year. During 2000, we lost approximately 49% of the
performance-based member dealers that we had at the beginning of the year. In
February 2001, we introduced a flat fee program pricing model and began to offer
the flat fee option to new and existing dealers. It is too early to determine
whether the flat fee program will reduce the rate of turnover of our member
dealers or attract and maintain new or existing member dealers at a greater rate
than our pay-for- performance pricing model.

     Attrition remains high and there is increased competition from the
automobile manufacturers and dealers entering this market on their own. We
cannot assure you that we will be able to reduce the level of this attrition,
and our failure to do so could materially and adversely affect our business,
results of operation and financial condition.

We must leverage our current technology assets and develop our information
services business.

     Information and technology has a high value to our customers and potential
customers that may generate significant additional revenue. In order to
capitalize on this revenue stream, we must build on our existing data and
technology business and develop our information services. This undertaking must
be executed rapidly and is likely to be expensive and complex and require
additional technical expertise. Also, as we acquire users who rely upon us for a
wide variety of services, it becomes more technologically complex and costly to
retrieve, store and integrate data that will enable us to track each user's
preferences. Any loss of traffic, increased costs, inefficiencies or failures to
adapt our existing and new technologies and the associated adjustment to our
business plan would have a material effect on our business.

We need to build strong brand loyalty

     We believe that maintaining and expanding the Autoweb brand is critical to
attracting consumers, member dealers, vehicle manufacturers, category partners
and advertisers. Furthermore, we believe that the importance of brand loyalty
will increase as low barriers to entry encourage the proliferation of Web sites.
We have spent considerable monies and resources on the establishment and
maintenance of the Autoweb brand and will continue to do so in the form of
online advertising campaigns, print media, and other forms of traditional
advertising. We may not be able to successfully maintain or enhance consumer
awareness of our brand and, even if we are successful in our branding efforts,
such efforts may be costly. If we are unable to maintain or enhance customer
awareness of the Autoweb brand in a cost-effective manner, our business,
operating results and financial condition would be materially and adversely
affected.

     If the merger is completed between Autoweb and Autobytel, the Autoweb brand
may be confused with the Autobytel brand and have a negative impact on the
perceptions of consumers, business partners, analysts and the media.

We depend on third-party relationships

     We have entered into agreements with various category partners, some of
which require us to feature them exclusively in certain sections of our Web
site. Existing and future exclusive arrangements may prevent us from entering
into other content agreements, advertising or sponsorship arrangements or other
commercial relationships. Many companies that we may pursue for a commercial
relationship may also offer competing services. As a result, these competitors
may be reluctant to enter into commercial relationships with us. Our business
could be adversely affected if we do not maintain our existing commercial
relationships on terms as favorable as currently in effect, if we do not
establish additional commercial relationships on commercially reasonable terms
or if our commercial relationships do not result in the expected increased use
of our Web site.
<PAGE>   15
     Additionally, our sale of automotive content, Web hosting and development
services and sales automation services to vehicle manufacturers and online
partners is dependent upon a few primary relationships, including competitive
online automotive car buying services and various vehicle manufacturers.

     We also depend on establishing and maintaining a number of commercial
relationships with high-traffic Web sites to increase traffic on Autoweb.com. We
currently have agreements with major Internet portals, such as America Online
and its related properties and Lycos. There is intense competition for
placements on these sites, and in the future we may not be able to enter into
distribution relationships on commercially reasonable terms or at all. Even if
we enter into distribution relationships with these Web sites, they themselves
may not attract significant numbers of consumers. Therefore, our Web site may
receive less than the number of additional consumers we expect from these
relationships. Moreover, we may have to pay significant fees to establish or
renew these relationships.

     We also depend on establishing and maintaining a number of commercial
relationships with other companies. Our current relationships include:

     - New Car Test Drive and ASE, under which we purchase content for use by
       our consumers;

     - America Online's Digital City, iWon.com, AutoNation, CarsDirect,
       Carprices, Lycos, and Homestore.com, under which we share the revenue
       generated from automotive and related purchase inquiries submitted by
       consumers and directed to our Web site through links between our Web site
       and the other company's Web site; and

     - members of the Autoweb.com Affiliates Program, each of which receives a
       commission from us for traffic or vehicle purchase inquiries delivered to
       us through a link to the affiliate's Web site.

     We cannot assure you that we will be able to establish new agreements or
maintain existing agreements or that the above agreements can be renewed on
commercially acceptable terms

     We also may not be able to maintain relationships with third parties that
supply us with software or products that are crucial to our success, and the
vendors of these software or products may not be able to sustain any third-party
claims or rights against their use. Furthermore, we cannot assure you that the
software, services or products of those companies that provide access or links
to our services or products will achieve market acceptance or commercial
success. In addition, we cannot assure you that our existing relationships will
result in sustained business arrangements, successful service or product
offerings or the generation of significant revenues for us. Failure of one or
more of our relationships to achieve or maintain market acceptance or commercial
success or the termination of one or more relationship could have a material
adverse effect on our business, results of operations and financial condition.

We need to continue to develop Autoweb.com content and service offerings

     To remain competitive, we must continue to enhance and improve the ease of
use, responsiveness, functionality and features of the Autoweb.com site and
develop new services in addition to continuing to improve the consumer
purchasing experience. These efforts may require the development or licensing of
increasingly complex technologies. We may not be successful in developing or
introducing new features, functions and services, and these features, functions
and services may not achieve market acceptance or enhance our brand loyalty. If
we fail to develop and introduce new features, functions or services
effectively, it could have a material adverse effect on our business, results of
operations and financial condition.

We are dependent on certain key personnel

     Our future success is substantially dependent on our senior management and
key technical personnel. If one or more of our key employees decided to leave
us, join a competitor or otherwise compete directly or indirectly with us, this
could have a material adverse effect on our business, results of operations and
financial condition. During the first quarter of 2001, we did not have any
senior management changes. However, Autoweb has a history of a high rate of
senior management turnover. Any senior management turnover could have a material
adverse impact on our business, results of operations and financial condition.

<PAGE>   16
     In addition, our future success depends on our continuing ability to retain
and attract highly qualified technical and managerial personnel. As of March 31,
2001, we had 152 full-time employees. Wages for managerial and technical
employees are increasing and are expected to continue to increase in the
foreseeable future due to the competitive nature of the current employment
market, particularly in Northern California, the location of our headquarters.
We may be unable to retain key technical and managerial personnel or to attract
and retain additional highly qualified technical and managerial personnel in the
future. We have experienced difficulty from time to time attracting the
personnel necessary to support the growth of our business, and we may experience
similar difficulty in the future. Inability to attract and retain the technical
and managerial personnel necessary to support the growth of our business could
have a material adverse effect upon our business, results of operations and
financial condition.

We face risks associated with possible regulation under state or federal
franchise and brokering laws

     In May 1998, the Texas Department of Transportation notified us that, in
their opinion, our performance-based pricing model is illegal, because it makes
us a broker as defined under Texas law. They have taken the position that the
fee paid to us by member dealers for each qualified purchase inquiry is
equivalent to a broker's fee and that we are arranging for two persons to meet
and enter into a transaction that involves the sale of a motor vehicle. In
September 1999 the Texas Department of Transportation sent a letter to the same
effect to our Texas member dealers, and as a result one of our largest member
dealer groups severed its business relationship with us. Shortly after the
Department's letter was sent to our Texas member dealers, we modified our
pricing model. To date the Department has taken no other action against us or
our member dealers based on our pricing model. A proposal to modify the
regulations governing how the Texas brokering law is enforced passed in February
2000. We have received written notice from the Texas Department of
Transportation that our newly revised pricing model conforms to the new
regulations.

     Other states, substantially all of which have laws that broadly define
brokerage activities, could determine that we are acting as a broker. If this
occurs, we may be required to comply with burdensome licensing requirements or
terminate our operations in those states. In either case, our business, results
of operations and financial condition could be materially and adversely
affected. We believe that our service does not qualify as a vehicle brokerage
activity and therefore that state broker licensing requirements do not apply to
us.

     In addition, government authorities may take the position that motor
vehicle dealer franchise laws or related consumer protection or product
liability laws apply to aspects of our business, including advertising vehicles
on the Internet. We do not believe our present business is subject to these
laws, however, we have not sought a legal opinion regarding whether our service
complies with the laws and regulations regarding motor vehicle dealer franchises
in each state.

We generally face risks associated with possible regulation under insurance,
financing or other laws

     State regulatory requirements may also include us within an
industry-specific regulatory scheme, such as those for the vehicle insurance or
vehicle financing industries. In the event that individual states' regulatory
requirements change or additional requirements are imposed on us, we may be
required to modify aspects of our business in those states in a manner that
might undermine the attractiveness of the Autoweb.com purchase process to
consumers, member dealers, vehicle manufacturers, category partners or
advertisers or require us to terminate operations in that state, either of which
could have a material adverse effect on our business, results of operations and
financial condition.

     Government authorities may take the position that state or federal
insurance licensing laws apply to aspects of our business. As we introduce new
services and expand our operations to other countries, we will need to comply
with additional licensing and regulatory requirements.

     Autoweb currently provides a link on its Web site so consumers can receive
real time quotes for insurance coverage and can submit quote applications
online. Autoweb receives fees from its participant in connection with this
advertising activity.

     Autoweb does not believe that the above activity requires Autoweb to be
licensed under state insurance laws. The use of the Internet in the marketing of
insurance products, however, is a relatively new practice. It is not clear
whether or to what extent state insurance licensing laws apply to activities
similar to Autoweb's.

We are subject to U.S. government regulation of the Internet, the impact of
which is difficult to predict

     There are currently laws and regulations directly applicable to the
Internet. Some of these laws are currently in flux. The applications of existing
laws and regulations to Autoweb.com relating to issues such as user privacy,
defamation, pricing, taxation, promotions, content regulation, intellectual
property ownership and infringement can be unclear. In addition, we expect to be
subject to new laws and regulations directly applicable to our activities. Any
existing or new legislation applicable to us could expose us to substantial
liability, including significant expenses necessary to comply with such laws and
regulations.

<PAGE>   17
    Several recently passed federal laws could have an impact on our affiliate
and other programs. The Digital Millennium Copyright Act is intended to limit
the liability of online services for listing or linking to third-party Web sites
that may include materials that infringe the copyrights or other rights of
others.

    We adhere to industry privacy policies and practices concerning the use and
disclosure of user data. There are a large number of legislative proposals
before the United States Congress and various state legislative bodies regarding
privacy issues related to our business. It is not possible to predict whether or
when such legislation may be adopted, and whether certain proposals, if adopted,
could materially and adversely affect our business.

We depend on increased use of the Internet

    Our future success and revenue growth depends substantially upon continued
growth in the use of the Internet. Consumers and businesses will likely widely
accept and adopt the Internet for conducting business and exchanging information
only if the Internet provides these consumers and businesses with greater
efficiencies and improvements in commerce and communication. In addition, e-
commerce generally, and the purchase of automotive and automotive related
products and services on the Internet in particular, must become widespread. The
Internet may prove not to be a viable commercial marketplace generally, or, in
particular, for vehicles and related products and services. If use of the
Internet does not continue to increase, our business, results of operations and
financial condition would be materially and adversely affected.

We depend on continued improvements in our systems and the Internet
infrastructure

    Our ability to retain and attract consumers, member dealers, vehicle
manufacturers, category partners and advertisers, and to achieve market
acceptance of our services and our brand, depends significantly upon the
performance of our systems and network infrastructure. Any system or network
failure that causes interruption or slower response time of our services could
result in less traffic to our Web site and, if sustained or repeated, could
reduce the attractiveness of our services to consumers, member dealers, category
partners and advertisers. An increase in the volume of our Web site traffic
could strain the capacity of our technical infrastructure, which could lead to
slower response times or system failures. This would cause the number of
purchase inquiries, advertising impressions, other revenue producing e-commerce
offerings and our information and community offerings to decline, any of which
could hinder our revenue growth and our brand loyalty. In addition, if traffic
increases, we cannot assure you that our technical infrastructure, such as a
reliable network backbone with the necessary speed and data capacity and the
development of complementary products such as high-speed modems, will be able to
increase accordingly, and we face risks related to our ability to scale up to
expected consumer levels while maintaining performance. Further, security and
authentication concerns regarding the transmission of confidential information
over the Internet, such as credit card numbers, may continue. Any failure of our
server and networking systems ability to handle current or higher volumes of
traffic would have a material adverse effect on our business, results of
operations and financial condition.

    The recent growth in Internet traffic has caused frequent periods of
decreased performance, requiring Internet service providers and users of the
Internet to upgrade their infrastructures. If Internet usage continues to
increase rapidly, the Internet infrastructure may not be able to support the
demands placed on it by this growth and its performance and reliability may
decline. If outages or delays on the Internet occur frequently, overall Internet
usage or usage of our Web site could increase more slowly or decline. Our
ability to increase the speed with which we provide services to consumers and to
increase the scope of such services is limited by and dependent upon the speed
and reliability of the Internet. Consequently, the emergence and growth of the
market for our services is dependent on future improvements to the entire
Internet.

    In addition, our operations depend upon our ability to maintain and protect
our computer systems, some of which are located at our corporate headquarters in
Santa Clara, California. We do have a backup disaster recovery program and fully
redundant systems for our service at an off-site location hosted by Exodus
Communications, Inc. While this offsite location does provide a significant
amount of security and scalability there is no guarantee that the system is not
vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures and similar events. Although we maintain insurance
against fires, floods, earthquakes and general business interruptions, the
amount of coverage may not be adequate in any particular case. The occurrence of
such an event could have a material adverse effect on our business, results of
operations and financial condition.


<PAGE>   18

The Internet industry is characterized by rapid technological change

    Rapid technological developments, evolving industry standards and consumer
demands, and frequent new product introductions and enhancements characterize
the market for Internet products and services. These market characteristics are
exacerbated by the emerging nature of the market and the fact that many
companies are expected to introduce new Internet products and services in the
near future. Our future success will significantly depend on our ability to
continually improve the vehicle purchasing experience, the addition of new and
useful services and content to our Web site, and the performance, features and
reliability of our Web site. In addition, the widespread adoption of developing
multimedia-enabling technologies could require fundamental and costly changes in
our technology and affect the nature, viability and measurability of Internet-
based advertising, which could adversely affect our business, results of
operations and financial condition.

We could face liability for information retrieved from or transmitted over
the Internet and liability for products sold over the Internet

    We could be exposed to liability with respect to third-party information
that may be accessible through our Web site, links or car review services. Such
claims might assert, among other things, that, by directly or indirectly
providing links to Web sites operated by third parties, we should be liable for
copyright or trademark infringement or other wrongful actions by such third
parties through such Web sites. It is also possible that, if any third-party
content information provided on our Web site contains errors, consumers could
make claims against us for losses incurred in reliance on such information.

    We also enter into agreements with other companies under which any revenue
that results from the purchase of services through direct links to or from our
Web site is shared. Such arrangements may expose us to additional legal risks
and uncertainties, including local, state, federal and foreign government
regulation and potential liabilities to consumers of these services, even if we
do not provide the services ourselves. We cannot assure you that any
indemnification provided to us in our agreements with these parties, if
available, will be adequate.

    Even to the extent such claims do not result in liability to us, we could
incur significant costs in investigating and defending against such claims. The
imposition upon us for potential liability of information carried on or
disseminated through our system could require us to implement measures to reduce
our exposure to such liability, which might require the expenditure of
substantial resources or limit the attractiveness of our services to consumers,
member dealers, category partners and others.

    Our general liability insurance and our communications liability insurance
may not cover all potential claims to which we are exposed and may not be
adequate to indemnify us for all liability that may be imposed. Any imposition
of liability that is not covered by insurance or is in excess of insurance
coverage could have a material adverse effect on our business, results of
operations and financial condition.

Our intellectual property protection may be inadequate

    Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and we can give no assurance regarding the future
viability or value of any of our proprietary rights. Despite the precautions we
have taken, it may be possible for a third party to copy or otherwise obtain and
use our proprietary information without authorization or to develop similar
technology independently.

    We have registered in the United States the "Autoweb" and "Autoweb.com"
trademarks associated with the services we provide and have registered the mark
"Autoweb" in a foreign jurisdiction. We are aware, however, that another party
has registered the "Autoweb" mark internationally. We cannot guarantee,
therefore, that we will be able to continue to use the name "Autoweb" or
"Autoweb.com" worldwide in the future. If we were required to change our name
and adopt a new trademark, we would incur significant expenses related to
marketing a replacement trademark, and such a change would likely have a
material adverse effect on our business, results of operations and financial
condition. We have also registered in the United States "Autokey" trademark
associated with a customized search function.

We face risks associated with litigation

    Litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets or trademarks or to determine the
validity and scope of the proprietary rights of others. Such litigation might
result in substantial costs and diversion of resources and management attention.
Furthermore, our business activities may infringe upon the proprietary rights of
others and other parties may assert infringement claims against us, including
patent claims or claims that arise from directly or


<PAGE>   19

indirectly providing hyperlink text links to Web sites operated by third
parties. Moreover, from time to time, we may be subject to claims of alleged
infringement by us or our member dealers of the trademarks, service marks,
patents and other intellectual property rights of third parties. Such claims and
any resultant litigation, should it occur, might subject us to significant
liability for damages, might result in invalidation of our proprietary rights
and, even if not meritorious, could result in substantial costs and diversion of
resources and management attention and have a material adverse effect on our
business, results of operations and financial condition.

     In April and May 2001, four purported class action lawsuits were filed in
the United States District Court for the Southern District of New York against
Autoweb, some of Autoweb's current and former directors and officers, and the
underwriters involved in Autoweb's initial public offering. The complaints
allege violations of the Securities Act of 1933 and the Securities Exchange Act
of 1934, involving alleged undisclosed compensation to the underwriter and seek
unspecified damages. Autoweb believes that it has meritorious defenses to the
complaints and intends to vigorously defend the actions; however, this and other
litigation, even if not meritorious, could result in substantial costs,
diversion of resources and management attention, and materially affect Autoweb's
business or operating results.

We depend on third party technology

    We currently license from third parties certain technologies and information
incorporated into our Web site. As we continue to introduce new services that
incorporate new technologies and information, we may be required to license
additional technology and information from others. We cannot assure you that
these third-party technology and information licenses will continue to be
available to us on commercially reasonable terms, if at all. Additionally, we
cannot assure you that the third parties from which we currently license our
technology and information will be able to defend their proprietary rights
successfully against claims of infringement. Any failure to obtain any of these
technology and information licenses could result in delays or reductions in the
introduction of new features, functions or services. It could also adversely
affect the performance of our existing services until equivalent technology or
information can be identified, obtained and integrated.

We may be affected by general economic conditions

    Purchases of new vehicles are typically discretionary for consumers and may
be particularly affected by negative trends in the general economy. The success
of our operations depends to a significant extent upon a number of factors
relating to discretionary consumer spending, including economic conditions (and
perceptions by consumers) affecting disposable consumer income (such as
employment, wages and salaries, business conditions, interest rates,
availability of credit and taxation) for the economy as a whole and in regional
and local markets where we operate. In addition, because the purchase of a
vehicle is a significant investment and is relatively discretionary, any
reduction in disposable income in general may affect us more significantly than
companies in other industries. In addition, our business strategy relies on
advertising by and agreements with other Internet companies. Any significant
deterioration in general economic conditions that adversely affects these
companies could also have a material adverse effect on our business, results of
operations and financial condition.

We have security risks

    On occasion, some experienced programmers ("hackers") have attempted to
penetrate our network security. We expect that these attempts, some of which
have succeeded, will continue to occur from time to time. Because a hacker who
penetrates our network security could misappropriate proprietary information or
cause interruptions in our services, we might be required to expend significant
capital and resources to protect against, or to alleviate, problems caused by
hackers. Additionally, we may not have a timely remedy against a hacker who is
able to penetrate our network security. In addition to purposeful security
breaches, the inadvertent transmission of computer viruses could expose us to
litigation or to a material risk of loss. Such security breaches and inadvertent
transmissions could have a material adverse effect on our business, results of
operations and financial condition.

    In offering certain online payment services, we may increasingly rely on
technology licensed from third parties to provide the security and
authentication necessary to effect secure transmission of confidential
information, such as consumer credit card numbers. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments may result in a compromise or breach of the algorithms that we use
to protect our consumers' transaction data or our software vendors' products.
Any well-publicized compromise of security could deter use of the Internet in
general or use of the Internet to conduct transactions that involve transmitting
confidential information or downloading sensitive materials.

Power shortages in California may adversely affect us

    We conduct most of our operations in the state of California and rely on a
continuous power supply to conduct operations. California's current energy
crisis could substantially disrupt our operations and increase our expenses.
California has recently implemented, and may in the future continue to
implement, rolling blackouts throughout the state. Although state lawmakers are
working to minimize the impact, if blackouts interrupt our power supply, we may
be temporarily unable to continue operations at our facilities. Any such
interruption in our ability to continue operations at our facilities could delay
the development of our


<PAGE>   20

products and disrupt communications with our customers, suppliers or
manufacturing operations. Future interruptions could damage our reputation and
could result in lost revenue, either of which could substantially harm our
business and results of operations. In addition, Autoweb currently hosts its Web
sites with a third party service provider. Although this service provider
maintains backup generation capabilities, it recently suffered a power
disruption that caused its backup system to fail. This recent power disruption
did not affect Autoweb's Web site, however, there is no guarantee that future
disruptions in power at Autoweb's service provider facility will not affect
Autoweb and interrupt the availability of its web site. Interruptions in the
accessibility of Autoweb's Web site by consumers and others will have a negative
effect on our business and operating results. Furthermore, shortages in
wholesale electricity supplies have caused power prices to increase. If
wholesale prices continue to increase, our operating expenses will likely
increase which will have a negative effect on our operating results.

We have risks associated with international operations and expansions

    A part of our long-term strategy is to establish Autoweb.com and AIC in
international markets. However, the Internet, or our commerce, content and
community services model, may not become widely accepted in any market. In
addition, we expect that the success of any additional foreign operations we
initiate will be substantially dependent upon our member dealers, category
partners and content services. We may experience difficulty in managing
international operations as a result of failure to identify an effective foreign
partner, competition, technical problems, local laws and regulations, distance
and language and cultural differences. Our international partners may not be
able to successfully market and operate our community model in foreign markets.
There are also certain risks inherent in doing business internationally,
including:

    -  cultural and business practices differences;

    -  fluctuations in currency exchange rates;

    -  political issues;

    -  legal and economic instability;

    -  seasonal reductions in business activity in certain other parts of the
       world; and

    -  potentially adverse tax consequences.

    One or more of such factors could have a material adverse effect on our
future international operations and, consequently, on our business, results of
operations and financial condition.

<PAGE>   21

Our Certificate of Incorporation and Bylaws and Delaware law contain provisions
that could discourage a takeover.


Certain provisions of Delaware law and our Certificate of Incorporation and
Bylaws could have the effect of delaying or preventing a change in control.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


We considered the provisions of Financial Reporting Release No. 48, "Disclosure
of Accounting Policies for Derivative Financial Instruments and Derivative
Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments." We had no
holdings of derivative financial or commodity instruments at March 31, 2001.
However, we are exposed to financial market risks, including changes in foreign
currency exchange rates and interest rates. The majority of our revenue,
expenses and capital expenditures are transacted in U. S. dollars.


At March 31, 2001, we had no assets classified as short-term investments.
The objectives of our investment policy are the safety and preservation of
invested funds, and liquidity of investments that is sufficient to meet cash
flow requirements. Our policy is to place our cash, cash equivalents, and
investments available for sale with high credit quality financial institutions,
commercial companies, and government agencies in order to limit the amount of
credit exposure. Our investment policy also provides that our investment
portfolio must not have an average portfolio maturity of beyond one year and
that we must maintain liquidity positions. Our investment policy prohibits
investments in industries and speculative activities and requires investments be
denominated in U.S. dollars.


                           PART II: OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

        In April and May 2001, four purported class action lawsuits were filed
in the United States District Court for the Southern District of New York
against Autoweb, some of Autoweb's current and former directors and officers,
and the underwriters involved in Autoweb's initial public offering. The
complaints allege violations of the Securities Act of 1933 and the Securities
Exchange Act of 1934, involving alleged undisclosed compensation to the
underwriter and seek unspecified damages. Autoweb believes that it has
meritorious defenses to the complaints and intends to vigorously defend the
actions; however, this and other litigation, even if not meritorious, could
result in substantial costs, diversion of resources and management attention,
and materially affect Autoweb's business or operating results.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS


        Not applicable.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES


        Not applicable.

<PAGE>   22

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Security Holding during the Quarter
ending March 31, 2001.

ITEM 5. OTHER INFORMATION

As of March 31, 2001, our officers, directors and key employees are as
follows:

<TABLE>
<CAPTION>
       NAME OF DIRECTOR         AGE             PRINCIPAL OCCUPATION
       ----------------         ---             --------------------
<S>                             <C>             <C>
Dean A. DeBiase ............... 42      Chairman of the Board

Jeffery A. Schwartz ........... 35      President, Chief Executive Officer and a Director

Michael P. Schmidt ............ 38      Chief Financial Officer

Nadyne G. Edison, Ph.D. ....... 43      Chief Marketing Officer and Vice President, Customer
                                        Relationship Management

William J. Barrett ............ 44      Divisional President, Automotive Information Center
                                        (AIC)

Jerome S. Karr ................ 53      Vice President, Engineering and Chief Technology
                                        Officer

Regan Senkarik ................ 42      Vice President, Product Management

Steve Cottrell ................ 40      Vice President, Sales

Fred L. Ruffin ................ 50      Vice President, Human Resources

Meri E. Glade ................. 40      Vice President, Legal Affairs, General Counsel and
                                        Secretary

Jay C. Hoag(1)................. 42      Director

Lawrence E. Lepard(1) ......... 46      Director

Mark R. Ross(1) ............... 55      Director
</TABLE>

(1) Member of the Audit Committee and the Compensation Committee

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

There were no reports on Form 8-K filed during the quarter ended March 31, 2001.

<PAGE>   23

                                   SIGNATURES



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



Date: May 11, 2001                         By: /s/ JEFFREY SCHWARTZ
                                               ---------------------------------
                                                       Jeffrey Schwartz
                                              President, Chief Executive Officer



Date: May 11, 2001                         By: /s/ MICHAEL SCHMIDT
                                               ---------------------------------
                                                       Michael Schmidt
                                                   Chief Financial Officer


Date: May 11, 2001                        By: /s/ SANDRA CRAIG
                                              ----------------------------------
                                                         Sandra Craig
                                                   Vice President, Finance