UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
  Form
10-Q
 
 x     QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 For the
quarterly period ended March 31, 2010
 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 0-22239
 
  Autobytel
Inc.
 (Exact
name of registrant as specified in its charter)
 
 
 
 
 Delaware
              33-0711569(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer identification number)18872
      MacArthur Boulevard, Suite 200, Irvine, California
              92612(Address
      of principal executive offices)
              (Zip
      Code)
  (949)
225-4500
 (Registrant’s
telephone number, including area code)
 
  Indicate
by check mark whether the registrant: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  x    No   ̈
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).  Yes 
 ̈   No   ̈
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule12b-2 of the Exchange Act.
 
 Large
      accelerated filer   ̈
              Accelerated
      filer   ̈
              Non-accelerated
      filer   ̈
              Smaller
      reporting company  x(Do
      not check if a smaller reporting company)
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.)    Yes   ̈    No  x
 
 As of
April 15, 2010, there were 45,163,705 shares of the Registrant’s Common
Stock outstanding.
  
 
 
 INDEXPagePART
      I. FINANCIAL INFORMATIONITEM 1.
              Unaudited
      Consolidated Condensed Financial Statements:Unaudited
      Consolidated Condensed Balance Sheets as of March 31, 2010 and December
      31, 2009
              3Unaudited
      Consolidated Condensed Statements of Operations and Comprehensive Income
      (Loss) for the Three Months Ended March 31, 2010 and the Three Months
      Ended March 31, 2009
              4Unaudited
      Consolidated Condensed Statements of Cash Flows for the Three Months Ended
      March 31, 2010 and the Three Months Ended March 31, 2009
              5Notes
      to Unaudited Consolidated Condensed Financial Statements
              6ITEM 2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              13ITEM 3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              17ITEM 4T.
              Controls
      and Procedures
              17PART
      II. OTHER INFORMATIONITEM 1.
              Legal
      Proceedings
              18ITEM 1A.
              Risk
      Factors
              18ITEM 5.
              Exhibits
              18Signatures
              
              19
  
  PART
I. FINANCIAL INFORMATION
  Item 1.  Unaudited Consolidated
      Condensed Financial
Statements
  
  AUTOBYTEL
INC.
 UNAUDITED
CONSOLIDATED CONDENSED BALANCE SHEETS
 (Amounts
in thousands, except share and per-share data)
 
   March
      31,
              
              
              December
      31,2010
              
              
              2009AssetsCurrent
      assets:Cash
      and cash equivalents
              
              $
              26,061
              
              
              $
              25,097Accounts
      receivable, (net of allowances for bad debts and customer credits of $942
      and $1,107 at March 31, 2010 and December 31, 2009,
      respectively)
              
              
              7,544
              
              
              
              8,573Prepaid
      expenses and other current assets
              
              
              561
              
              
              
              594Total
      current assets
              
              
              34,166
              
              
              
              34,264Property
      and equipment, net
              
              
              1,105
              
              
              
              1,003Other
      assets
              
              
              131
              
              
              
              123Total
      assets
              
              $
              35,402
              
              
              $
              35,390Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Accounts
      payable
              
              $
              2,749
              
              
              $
              2,539Accrued
      expenses and other current liabilities
              
              
              2,989
              
              
              
              4,028Deferred
      revenues
              
              
              430
              
              
              
              603Total
      current liabilities
              
              
              6,168
              
              
              
              7,170Non-current
      liabilities
              
              
              54
              
              
              
              79Total
      liabilities
              
              
              6,222
              
              
              
              7,249Commitments
      and contingencies (Note 7)Stockholders’
      equity:Preferred
      stock, $0.001 par value; 11,445,187 shares authorized; none
      outstanding
              
              
              —
              
              
              
              —Common
      stock, $0.001 par value; 200,000,000 shares authorized and 45,168,706
      shares issued and outstanding as of March 31, 2010 and December 31,
      2009
              
              
              45
              
              
              
              45Additional
      paid-in capital
              
              
              302,073
              
              
              
              301,831Accumulated
      deficit
              
              
              (272,938
              )
              
              
              (273,735
              )Total
      stockholders’ equity
              
              
              29,180
              
              
              
              28,141Total
      liabilities and stockholders’ equity
              
              $
              35,402
              
              
              $
              35,390
  See
accompanying notes.
  3
   AUTOBYTEL
INC.
 UNAUDITED
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 AND
COMPREHENSIVE INCOME (LOSS)
 (Amounts
in thousands, except per-share data)
  
 
 Three
      Months Ended March 31,2010
              
              
              2009Net
      revenues:Lead
      fees
              
              $
              10,733
              
              
              $
              12,152Advertising
              
              
              1,054
              
              
              
              1,687Other
      revenues
              
              
              26
              
              
              
              31Total
      net revenues
              
              
              11,813
              
              
              
              13,870Cost
      of revenues (excludes depreciation of $182 and $321 for the three months
      ended March 31, 2010 and 2009, respectively)
              
              
              7,065
              
              
              
              8,887Gross
      profit
              
              
              4,748
              
              
              
              4,983Operating
      expenses:Sales
      and marketing
              
              
              2,767
              
              
              
              3,003Technology
      support
              
              
              1,391
              
              
              
              1,461General
      and administrative
              
              
              2,720
              
              
              
              3,690Patent
      litigation settlement
              
              
              (2,763
              )
              
              
              (2,667
              )Total
      operating expenses
              
              
              4,115
              
              
              
              5,487Operating
      income (loss)
              
              
              633
              
              
              
              (504
              )Interest
      and other income
              
              
              177
              
              
              
              147Income
      (loss) before provision for income taxes
              
              
              810
              
              
              
              (357
              )Income
      tax provision
              
              
              13
              
              
              
              —Net
      income (loss)
              
              $
              797
              
              
              $
              (357
              )Comprehensive
      income (loss):Net
      income (loss)
              
              $
              797
              
              
              $
              (357
              )Unrealized
      gain from investment
              
              
              —
              
              
              
              5Comprehensive
      income (loss)
              
              $
              797
              
              
              $
              (352
              )Basic
      earnings (loss) per common share
              
              $
              0.02
              
              
              $
              (0.01
              )Diluted
      earnings (loss) per common share
              
              $
              0.02
              
              
              $
              (0.01
              )
  
  
  See
accompanying notes.
  4
   AUTOBYTEL
INC.
 UNAUDITED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Amounts
in thousands)
  
  
 Three
      Months Ended March 31,2010
              
              
              2009Cash
      flows from operating activities:Net
      income (loss)
              
              $
              797
              
              
              $
              (357
              )Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
              
              
              322
              
              
              
              495Provision
      for bad debts
              
              
              75
              
              
              
              384Provision
      for customer credits
              
              
              174
              
              
              
              247Share-based
      compensation
              
              
              242
              
              
              
              268Changes
      in assets and liabilities:Accounts
      receivable
              
              
              780
              
              
              
              800Prepaid
      expenses and other current assets
              
              
              33
              
              
              
              172Other
      non-current assets
              
              
              (15
              )
              
              
              11Accounts
      payable
              
              
              210
              
              
              
              174Accrued
      expenses and other liabilities
              
              
              (1,039
              )
              
              
              (3,412
              )Deferred
      revenues
              
              
              (173
              )
              
              
              (350
              )Non-current
      liabilities
              
              
              (25
              )
              
              
              (15
              )Net
      cash provided by (used in) operating activities
              
              
              1,381
              
              
              
              (1,583
              )Cash
      flows from investing activities:Purchases
      of property and equipment
              
              
              (417
              )
              
              
              (38
              )Net
      cash used in investing activities
              
              
              (417
              )
              
              
              (38
              )Cash
      flows from financing activities:Proceeds
      from exercise of stock options and awards issued under the employee stock
      purchase plan
              
              
              —
              
              
              
              —Net
      cash provided by financing activities
              
              
              —
              
              
              
              —Net
      increase (decrease) in cash and cash equivalents
              
              
              964
              
              
              
              (1,621
              )Cash
      and cash equivalents, beginning of period
              
              
              25,097
              
              
              
              27,393Cash
      and cash equivalents, end of period
              
              $
              26,061
              
              
              $
              25,772
  See
accompanying notes.
  5
   AUTOBYTEL
INC.
 NOTES
TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
  
 1.
Organization and Operations of Autobytel
  Autobytel
Inc. (“Autobytel” or the “Company”) is an automotive marketing services company
that helps automotive retail dealers (“Dealers”) and automotive manufacturers
(“Manufacturers”) market and sell new and used vehicles through its internet
lead referral and online advertising programs.  Internet lead
referrals (“Leads”) are consumer internet requests for pricing and availability
of new or used vehicles or for vehicle financing.  Leads originate
from the Company’s websites or are purchased from third parties (“Network
Websites”), and are sold primarily to Dealers and
Manufacturers.   The Company’s consumer-facing automotive
websites, including Autobytel.com®,
Autoweb.com®,
AutoSite.com®,
Car.comsm,
CarSmart.com®,
CarTV.com®, and
MyRide.com®
provide consumers with information and tools to aid them with their automotive
purchase decisions and the opportunity to submit Lead
requests.  Manufacturers direct consumers to their messages and their
respective websites by purchasing advertising on the Company’s
websites.
  The
Company was incorporated in Delaware on May 17, 1996. Its principal
corporate offices are located in Irvine, California. The Company’s common stock
is listed on The NASDAQ Global Market under the symbol ABTL.
  The
Company has historically experienced negative cash flow and at March 31, 2010
had an accumulated deficit of $273 million.  The Company continues to
face many risks and uncertainties related to the general economic conditions and
the automotive industry in particular, however, the Company believes current
cash and cash equivalents are sufficient to meet anticipated cash needs for
working capital and capital expenditures for at least the next 12
months.
  
  2.
Basis of Presentation, Unaudited Interim Financial Statements
  The
unaudited consolidated condensed financial statements of Autobytel presented
herein are presented on the same basis as the Company’s 2009 Annual Report on
Form 10-K.  Autobytel has made its disclosures in accordance with
accounting principles generally accepted in the United States of America as they
apply to interim reporting, but condensed or omitted certain information and
disclosures normally included in notes to consolidated financial statements in
accordance with the Securities and Exchange Commission’s rules and regulations.
The unaudited consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto in
Autobytel’s Annual Report on Form 10-K filed with the SEC for the year ended
December 31, 2009.
  In the
opinion of Autobytel’s management, the accompanying unaudited interim
consolidated condensed financial statements contain all adjustments (consisting
of normal recurring adjustments) necessary to fairly present Autobytel’s
consolidated condensed financial position as of March 31, 2010 and the
consolidated condensed statements of operations and cash flows for the three
months ended March 31, 2010 and 2009, as applicable. The statements of
operations and comprehensive income (loss) and cash flows for the periods ended
March 31, 2010 and 2009 are not necessarily indicative of the results of
operations or cash flows expected for the year or any other period.
  Certain
reclassifications have been made to prior periods’ consolidated condensed
financial statements to conform to the current year
presentation.  These reclassifications include presenting bad debt
expense in Sales and Marketing and presenting rental expense in General and
Administrative expense.
  6
  
  AUTOBYTEL
INC.
 NOTES
TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS –
(continued)
  
  3.
Computation of Basic and Diluted Net Loss Per Share
  Basic net
earnings (loss) per share is computed using the weighted average number of
common shares outstanding during the period, excluding any unvested restricted
stock. Diluted net earnings (loss) per share is computed using the weighted
average number of common shares, and if dilutive, potential common shares
outstanding, as determined under the treasury stock method, during the period.
Potential common shares consist of unvested restricted stock and the common
shares issuable upon the exercise of stock options.  The following are
the share amounts utilized to compute the basic and diluted net loss per share
for the three months ended March 31, 2010 and 2009:
  Three
      Months Ended March 31,2010
              
              
              2009Basic
      shares:Weighted
      average common shares outstanding
              
              
              45,168,706
              
              
              
              45,219,679Weighted
      average unvested restricted stock
              
              
              (365,881
              )
              
              
              (720,000
              )Basic
      shares
              
              
              44,802,825
              
              
              
              44,499,679Diluted
      Shares:Basic
      Shares
              
              
              44,802,825
              
              
              
              44,499,679Weighted
      average dilutive securities
              
              
              1,189,607
              
              
              
              —Dilutive
      Shares
              
              
              45,992,432
              
              
              
              44,499,679
  For the
three months ended March 31, 2010, 4.4 million anti-dilutive potential shares of
common stock have been excluded from the calculation of dilutes earnings per
share.  For the three months ended March 31, 2009, 7.0 million
anti-dilutive potential shares of common stock have been excluded from the
calculation of dilutes earnings per share.
  
  4.
Share-Based Compensation
  Share-based
compensation expense is included in costs and expenses in the accompanying
Consolidated Condensed Statements of Operations and Comprehensive Income (Loss)
as follows:
 
 Three
      Months Ended March 31,2010
              
              
              2009(in
      thousands)Cost
      of revenues
              
              $
              9
              
              
              $
              6Sales
      and marketing
              
              
              59
              
              
              
              84Technology
      support
              
              
              32
              
              
              
              22General
      and administrative(a)
              
              
              142
              
              
              
              156Total
      share-based compensation costs
              
              $
              242
              
              
              $
              268
 
 (a)  Approximately
$46,000 of accelerated stock compensation expense is included in the three
months ended March 31, 2009 amount. This award accelerated vesting in accordance
with the original award agreement.
 
  Service-Based
Options.  During the three months ended March 31, 2010, the
Company granted 222,500 service-based stock options with weighted average grant
date fair values of $0.66.  During the three months ended March 31,
2009, the Company granted 200,000 service-based stock options, with weighted
average grant date fair values of $0.25.  These options vest one-third
on the first anniversary of the grant date and ratably over twenty-four months
thereafter.  The vesting of these awards is contingent upon the
employee rendering service to the Company during the vesting
period.
  7
   AUTOBYTEL
INC.
 NOTES
TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS –
(continued)
  
  Market Condition
Options.During the three months ended March 31, 2009 the
Company granted 1,068,250 stock options to substantially all employees with a
fair market value per option granted of $0.19, using Black-Scholes option
pricing model.  One-third of these options cliff vest on the first
anniversary following the grant date and the remaining two-thirds vest ratably
over twenty-four months thereafter.  In addition, the remaining
two-thirds of the awards must meet additional conditions in order to be
exercisable.  One-third of the remaining options must also satisfy the
condition that the closing price of Autobytel’s common stock over any 30
consecutive trading days is at least two times the option exercise price to be
exercisable (“Market Condition A”).  The final one-third of the
remaining options must also satisfy the condition that the closing price of
Autobytel’s common stock over any 30 consecutive trading days is at least three
times the option exercise price to be exercisable (“Market Condition B”).
Certain of these options will accelerate vesting upon a change in
control.  During 2009 Market Condition A was achieved.
  There
were no stock options exercised during the three month periods ended March 31,
2010 or 2009.  The grant date fair value of stock options granted
during these periods was estimated using the Black-Scholes option-pricing model
using the following weighted average assumptions:
 
 
 Three Months Ended
      March 31,2010
              
              
              2009Dividend
      yield
              
              
              —
              
              
              
              —Volatility
              
              
              82
              %
              
              
              72
              %Risk-free
      interest rate
              
              
              2.0
              %
              
              
              1.6
              %Expected
      life (years)
              
              
              4.1
              
              
              
              4.1
  
  5.
Selected Balance Sheet Accounts
  Property and
Equipment.  Property and equipment consisted of the
following:
 
 March
      31,
              
              
              December
      31,2010
              
              
              2009(in
      thousands)Computer
      software and hardware
              
              $
              9,459
              
              
              $
              9,183Furniture
      and equipment
              
              
              1,432
              
              
              
              1,432Leasehold
      improvements
              
              
              949
              
              
              
              949Capitalized
      internal use software
              
              
              912
              
              
              
              912Fixed
      assets not placed in service
              
              
              141
              
              
              
              —12,893
              
              
              
              12,476Less
      – Accumulated depreciation and amortization
              
              
              (11,788
              )
              
              
              (11,473
              )$
              1,105
              
              
              $
              1,003
  At March
31, 2010 and December 31, 2009, capitalized internal use software, net of
amortization, and development in process were $0.1 million and $0.1 million,
respectively.
  The
Company periodically reviews long-lived assets to determine if there are any
impairment indicators.  The Company assesses the impairment of these
assets, or the need to accelerate amortization, whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. The
Company’s judgments regarding the existence of impairment indicators are based
on legal factors, market conditions and operational performance of our
long-lived assets. If such indicators exist, the Company evaluates the assets
for impairment based on the estimated future undiscounted cash flows expected to
result from the use of the assets and their eventual disposition. Should the
carrying amount of an asset exceed its estimated future undiscounted cash flows,
an impairment loss is recorded for the excess of the asset’s carrying amount
over its fair value. Fair value is generally determined based on a valuation
process that provides an estimate of a fair value of these assets using a
discounted cash flow model, which includes assumptions and
estimates.
 8
  
  AUTOBYTEL
INC.
 NOTES
TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS –
(continued)
  
  Concentration of Credit Risk and
Risks Due to Significant Customers.  Financial instruments that
potentially subject the Company to concentrations of credit risk consist
primarily of cash and cash equivalents and accounts receivable. Cash and cash
equivalents are primarily maintained with three financial institutions in the
United States. Deposits held by banks and exceed the amount of insurance
provided for such deposits. Generally these deposits may be redeemed upon
demand. Accounts receivable are primarily derived from fees billed to automotive
dealers and automotive manufacturers.  The Company generally requires
no collateral to support its accounts receivables and maintains an allowance for
bad debts for potential credit losses.
  The
Company has a concentration of credit risk with its automotive industry related
accounts receivable balances, and in particular with the three largest U.S.
automobile manufacturers (General Motors, Chrysler LLC, and Ford) (“Detroit
Three”). During the first three months of 2010 approximately 12% of the
Company’s total revenues were derived from the Detroit Three, and approximately
17% or $1.4 million of gross accounts receivable relate to the Detroit Three at
March 31, 2010.
   Accrued Expenses and Other Current
Liabilities.  Accrued expenses and other current liabilities
consisted of the following:
 
 March
      31,
              
              
              December
      31,2010
              
              
              2009(in
      thousands)Compensation
      and related costs
              
              $
              1,537
              
              
              $
              2,672Professional
      fees
              
              
              20
              
              
              
              71Other
      accrued expenses
              
              
              723
              
              
              
              596Amounts
      due to customers
              
              
              524
              
              
              
              468Other
      current liabilities
              
              
              185
              
              
              
              221Total
      accrued expenses and other current liabilities
              
              $
              2,989
              
              
              $
              4,028
 
  6.
Patent Litigation Settlements
 
 Dealix
Patent Litigation Settlement  In 2004, the Company brought a
lawsuit for patent infringement against Dealix Corporation (“Dealix”). In
December 2006, the Company entered into a settlement agreement with Dealix (the
“Settlement Agreement”). The Settlement Agreement provides that Dealix will pay
the Company a total of $20.0 million in settlement payments for a mutual release
of claims and a license from the Company to Dealix and its parent company, the
Cobalt Group, of certain of the Company’s patent and patent applications. On
March 13, 2007, the Company received the initial $12.0 million settlement
payment with the remainder to be paid out in installments of $2.7 million on the
next three anniversary dates of the initial payment.  The Company did
not have reasonable assurance that it would receive the remaining payment on its
due date and therefore had not recorded any amounts receivable related to the
Settlement Agreement as of December 31, 2009.  As of March 31, 2010
the Company had received the final annual installment payment of $2.7
million.  The Company recorded the payment as patent litigation
settlement in the period payment was received, as a reduction to operating
expenses.
 
 
  9
   AUTOBYTEL
INC.
 NOTES
TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS –
(continued)
 
  
 Texas
and California Patent Litigation Settlements. The Company entered into a
settlement agreement with Insweb Corporation (“Insweb”), Leadpoint, Inc.
(“Leadpoint”), and Internet Brands, Inc. (“Internet Brands”) settling and
dismissing with prejudice various patent-related and other claims by and against
the Company. Under the settlement terms, Autobytel granted to Insweb, Leadpoint
and Internet Brands, and Insweb, Leadpoint and Internet Brands each granted to
Autobytel, a non-exclusive perpetual license to their respective patents as well
as long-term covenants not to sue any of the parties for infringement of current
or future patents; and mutual releases of claims. In connection with the
settlement, (i) Autobytel and Autodata Solutions, Inc. (“Autodata”), a
wholly owned subsidiary of Internet Brands, entered into a Master License and
Services Agreement pursuant to which the Company will have the right to publish
certain editorial content, images, shopping tools and vehicle data provided by
Autodata for a term of five years; and (ii) shares of Internet Brands’
common stock previously issued to one of the Company’s subsidiaries but held by
Internet Brands was released to the Company. In addition, InsWeb and Autobytel
entered into a Content License Agreement pursuant to which Autobytel will
receive specific auto insurance editorial content, data and interactive tools
from InsWeb. The content and tools will contain links to one of InsWeb’s
insurance websites, and Autobytel and InsWeb will share the revenue associated
with consumer activity generated by the links. LeadPoint agreed to pay Autobytel
$200,000, $100,000 of which was paid in connection with the signing of the
settlement, to be followed by $50,000 installments payable on or before
March 31, 2010 and September 30, 2010, respectively. In connection
with the settlement, all claims brought by Insweb, Internet Brands and Leadpoint
against Dominion Enterprises (“Dominion”), the purchaser of the Company’s AVV
business, and Retention Performance Marketing, Inc. (“RPM”), and OneCommand,
Inc. (“OneCommand”), the purchaser of the Company’s RPM business, were also
dismissed with prejudice, with Internet Brands, Leadpoint, and Insweb each
providing Dominion, OneCommand, and RPM covenants not to sue for infringement of
the Insweb patent at issue in the litigation, and Dominion, OneCommand, and RPM
each granting to Insweb, Internet Brands, and Leadpoint, and Insweb, Internet
Brands and Leadpoint each granting to Dominion, OneCommand, and RPM, mutual
releases of claims.
  Edmunds
Declaratory Relief Action Settlement. On March 13, 2008, Edmunds
Holding Company and Edmunds.com (collectively “Edmunds”) filed a lawsuit against
the Company in the United States District Court for the District of Delaware
relating to the Company’s U.S. Patent Number 6,282,517 for lead technology
(“‘517 Patent”). In the lawsuit, Edmunds sought a declaration that its business
activities, some of which include generating automotive leads, did not infringe
the ‘517 Patent and that such patent was invalid. On February 20, 2009,
this declaratory relief action was dismissed by the court. In March 2009, the
Company entered into a settlement resolving the issues presented in Edmunds’
declaratory judgment action.  Under this settlement, Autobytel granted
to Edmunds a limited license to the ‘517 Patent and other existing Autobytel
leads-related patents in exchange for the right to publish on Autobytel’s family
of websites a select assortment of Edmunds.com’s multi-media automotive content,
including photos, editorial reviews, and articles. The settlement agreement also
provided for mutual releases of claims.  This settlement did not have
a material impact on the Company’s financial statements.
  
  7. Commitments and
Contingencies
  Employment
Agreements
  The
Company has employment agreements and retention agreements with certain key
employees. A number of these agreements require severance payments, continuation
of certain insurance benefits and acceleration of vesting of stock options and
restricted stock units in the event of a termination of employment without cause
or for good reason. In addition, these employees were also granted stock options
and awarded restricted stock, the agreements for which provide for acceleration
of vesting upon a change of control.
  10
   AUTOBYTEL
INC.
 NOTES
TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS –
(continued)
   
 Litigation
  In August
2001, a purported class action lawsuit was filed in the United States District
Court for the Southern District of New York against Autobytel and certain of the
Company’s current and former directors and officers (the “Autobytel Individual
Defendants”) and underwriters involved in the Company’s initial public offering.
A Consolidated Amended Complaint, which is now the operative complaint, was
filed on April 19, 2002. This action purports to allege violations of the
Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of
1934 (“Exchange Act”). Plaintiffs allege that the underwriter defendants agreed
to allocate stock in the Company’s initial public offering to certain investors
in exchange for excessive and undisclosed commissions and agreements by those
investors to make additional purchases of stock in the aftermarket at
predetermined prices. Plaintiffs allege that the prospectus for the Company’s
initial public offering was false and misleading in violation of the securities
laws because it did not disclose these arrangements. The action seeks damages in
an unspecified amount. The action is being coordinated with approximately 300
other nearly identical actions filed against other companies.  The
parties in the approximately 300 coordinated cases, including the parties in the
Autobytel case, reached a settlement.  The insurers for the issuer
defendants in the coordinated cases will make the settlement payment on behalf
of the issuers, including Autobytel.  On October 6, 2009, the Court
granted final approval of the settlement.  A group of three objectors
filed a petition to the Second Circuit seeking permission to appeal the District
Court’s final approval order on the basis that the settlement class is broader
than the class previously rejected by the Second Circuit in its
December  2006 order reversing the District Court’s order certifying
classes in six of the coordinated cases.  The six cases, which do not
include Autobytel’s case, are intended to serve as test
cases.  Plaintiffs filed an opposition to the
petition.  Objectors, including the objectors that filed the petition
seeking permission to appeal, filed six notices of appeal of the Court’s order
finally approving the settlement.  The time to file additional appeals
has run. Due to the inherent uncertainties of litigation, the Company cannot
accurately predict the ultimate outcome of this matter. If the settlement does
not survive appeal, and Autobytel is found liable, it is possible that damages
could be greater than Autobytel’s insurance coverage and the impact on
Autobytel’s financial statements could be material.
  Between
April and September 2001, eight separate purported class actions virtually
identical to the one filed against Autobytel were filed against Autoweb.com,
Inc. (“Autoweb”), certain of Autoweb’s former directors and officers (the
“Autoweb Individual Defendants”), and underwriters involved in Autoweb’s initial
public offering. A Consolidated Amended Complaint, which is now the operative
complaint, was filed on April 19, 2002. It purports to allege violations of the
Securities Act and the Exchange Act. Plaintiffs allege that the underwriter
defendants agreed to allocate stock in Autoweb’s initial public offering to
certain investors in exchange for excessive and undisclosed commissions and
agreements by those investors to make additional purchases of stock in the
aftermarket at predetermined prices. Plaintiffs also allege that the prospectus
for Autoweb’s initial public offering was false and misleading in violation of
the securities laws because it did not disclose these arrangements. The action
seeks damages in an unspecified amount. The action is being coordinated with
approximately 300 other nearly identical actions filed against other
companies.  The parties in the approximately 300 coordinated cases,
including Autoweb’s case, reached a settlement.  The insurers for the
issuer defendants in the coordinated cases will make the settlement payment on
behalf of the issuers, including Autoweb.  On October 6, 2009, the
Court granted final approval of the settlement.  A group of three
objectors filed a petition to the Second Circuit seeking permission to appeal
the District Court’s final approval order on the basis that the settlement class
is broader than the class previously rejected by the Second Circuit in its
December 2006 order reversing the District Court’s order certifying classes in
six of the coordinated cases.  The six cases, which do not include
Autoweb’s case, are intended to serve as test cases.  Plaintiffs filed
an opposition to the petition.  Objectors, including objectors that
filed the petition seeking permission to appeal, filed six notices of appeal of
the Court’s order finally approving the settlement.  The time to file
additional appeals has run.    Due to inherent uncertainties
of litigation, the Company cannot accurately predict the ultimate outcome of
this matter. If the settlement does not survive that appeal, and Autoweb is
found liable, it is possible that damages could be greater than Autoweb’s
insurance coverage and the impact on Autobytel’s financial statements could be
material.
  From time
to time, the Company may be involved in other litigation matters arising from
the normal course of its business activities. The actions filed against the
Company and other litigation, even if not meritorious, could result in
substantial costs and diversion of resources and management attention, and an
adverse outcome in litigation could materially adversely affect its business,
results of operations, financial condition, and cash flows.
  
  11
   AUTOBYTEL
INC.
 NOTES
TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS –
(continued)
  
  8.
Related Party Transaction
  The
Compensation Committee approved a payment of $70,000 to Maverick Associates LLC,
a Delaware limited liability company, for consulting services rendered to the
Company by Jeffrey H. Coats during 2008 in connection with the Company’s
evaluation of strategic alternatives and development and implementation of cost
reduction initiatives by the Company. Mr. Coats is the sole member of Maverick
Associates.  The $70,000 was recorded as an expense in the first
quarter of 2009.
   
   
   12
  
  Item 2.  Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations
  The
Securities and Exchange Commission (“SEC”) encourages companies to disclose
forward-looking information so that investors can better understand a company’s
future prospects and make informed investment decisions. This Quarterly Report
on Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as “anticipates,”
“estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words of
similar substance used in connection with any discussion of future operations or
financial performance identify forward-looking statements. In particular,
statements regarding expectations and opportunities, industry trends, new
product expectations and capabilities, and our outlook regarding our performance
and growth are forward-looking statements. This Quarterly Report on Form 10-Q
also contains statements regarding plans, goals and objectives. There is no
assurance that we will be able to carry out our plans or achieve our goals and
objectives or that we will be able to do so successfully on a profitable basis.
These forward-looking statements are just predictions and involve risks and
uncertainties, many of which are beyond our control, and actual results may
differ materially from these statements. Factors that could cause actual results
to differ materially from those reflected in forward-looking statements include,
but are not limited to, those discussed in this Item 2 and under the heading
“Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on
Form 10-K for the year ended December 31, 2009. Investors are urged not to place
undue reliance on forward-looking statements. Forward-looking statements speak
only as of the date on which they were made. Except as may be required by law,
we do not undertake any obligation, and expressly disclaim any obligation, to
update or alter any forward-looking statements, whether as a result of new
information, future events or otherwise. All forward-looking statements
contained herein are qualified in their entirety by the foregoing cautionary
statements.
  You
should read the following discussion of our results of operations and financial
condition in conjunction with our consolidated condensed financial statements
and related notes included elsewhere in this Quarterly Report on Form 10-Q and
our consolidated financial statements and the notes thereto in Autobytel’s
Annual Report on Form 10-K for the year ended December 31,
2009.
  Our
corporate website is located at www.autobytel.com.
Information on our website is not incorporated by reference in this Quarterly
Report. At or through the Investor Relations section of our website we make
available free of charge our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and all amendments to these reports as
soon as practicable after that material is electronically filed with or
furnished to the SEC. Our Code of Conduct and Ethics for Employees, Officers and
Directors is available at the Corporate Governance link of the Investor
Relations section of our website.
   Basis
of Presentation
  The
unaudited consolidated condensed financial statements presented herein are
presented on the same basis as the Company’s 2009 Annual Report on Form
10-K.  We have made the disclosures in accordance with accounting
principles generally accepted in the United States of America as they apply to
interim reporting, but condensed or omitted certain information and disclosures
normally included in notes to consolidated financial statements in accordance
with the Securities and Exchange Commission’s rules and regulations. The
unaudited consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto in
our Annual Report on Form 10-K filed with the SEC for the year ended
December 31, 2009.
  Certain
reclassifications have been made to prior periods’ consolidated financial
statements to conform to the current year presentation.  These
reclassifications include presenting bad debt expense in Sales and Marketing and
presenting rental expense in General and Administrative expense.
   Overview
  We are an
automotive marketing services company that helps automotive retail dealers
(“Dealers”) and automotive manufacturers (“Manufacturers”) market and sell new
and used vehicles through our internet lead referral and online advertising
programs.  Internet lead referrals (“Leads”) are consumer internet
requests for pricing and availability of new or used vehicles or for vehicle
financing.  Leads originate from our websites or are purchased from
third parties (“Network Websites”), and are sold primarily to Dealers and
Manufacturers.   Our consumer-facing automotive websites,
including Autobytel.com®,
Autoweb.com®,
AutoSite.com®,
Car.comsm,
CarSmart.com®,
CarTV.com®, and
MyRide.com®
provide consumers with information and tools to aid them with their automotive
purchase decisions and the opportunity to submit Lead
requests.  Manufacturers direct consumers to their messages and their
respective websites by purchasing advertising on our websites.  Our
websites are the source of an increasing percentage of our Leads and provide a
significant portion of the page views for the advertising component of our
business.
  13
   For the
three months ended March 31, 2010 our results of operations were affected and
may continue to be affected in the future, by various factors, including, but
not limited to, the following:
  ·
              General
      economic conditions, specifically including the adverse effect of high
      unemployment on the number of vehicle purchasers and the lack of available
      consumer credit to finance vehicle purchases.  These adverse
      economic conditions have affected the automotive industry, which is
      currently enduring what is considered to be the most challenging
      environment of the past several
decades:
 ·
              North
      American vehicle sales have decreased
  significantly,
 ·
              Dealer
      consolidations, closings, and bankruptcies have increased
      significantly,
 ·
              Auto
      sales in the United States are expected to continue to remain at
      relatively low levels in 2010.
  ·
              The
      market for Leads, including:
 ·
              The
      effects of competition and Lead sourcing (i.e., Leads from our websites
      versus Leads acquired from third parties) on our supply and acquisition
      costs of quality Leads and the resulting effects on sales, pricing and
      margins for our services and products,
and
 ·
              A
      declining Dealer base and a corresponding decline in the number of Leads
      delivered to our Dealers in the
aggregate.
  ·
              The
      market for advertising services,
including:
 ·
              Variations
      in spending by Manufacturers and others for our advertising
      services,
 ·
              The
      amount of visits (traffic) to our
websites,
 ·
              The
      cost of acquiring traffic to our websites,
and
 ·
              The
      rates attainable from our
advertisers.
  
 Results
of Operations
  Three Months Ended March 31, 2010
Compared to the Three Months Ended March 31, 2009
 
 2010
              
              
              %
      of total net revenues
              
              
              2009
              
              
              %
      of total net revenues
              
              
              $
      Change
              
              
              %
      Change(Dollar
      amounts in thousands)Net
      revenues:Lead
      fees
              
              $
              10,733
              
              
              
              91
              
              
              $
              12,152
              
              
              
              88
              
              
              $
              (1,419
              )
              
              
              (12
              )Advertising
              
              
              1,054
              
              
              
              9
              
              
              
              1,687
              
              
              
              12
              
              
              
              (633
              )
              
              
              (38
              )Other
              
              
              26
              
              
              
              —
              
              
              
              31
              
              
              
              —
              
              
              
              (5
              )
              
              
              (16
              )Total
      net revenues
              
              
              11,813
              
              
              
              100
              
              
              
              13,870
              
              
              
              100
              
              
              
              (2,057
              )
              
              
              (15
              )Cost
      of revenues (excludes depreciation of $182 and $321 for the three months
      ended March 31, 2010 and 2009, respectively)
              
              
              7,065
              
              
              
              60
              
              
              
              8,887
              
              
              
              64
              
              
              
              (1,822
              )
              
              
              (21
              )Gross
      profit
              
              
              4,748
              
              
              
              40
              
              
              
              4,983
              
              
              
              36
              
              
              
              (235
              )
              
              
              (5
              )Operating
      expenses:Sales
      and marketing
              
              
              2,767
              
              
              
              23
              
              
              
              3,003
              
              
              
              22
              
              
              
              (236
              )
              
              
              (8
              )Technology
      support
              
              
              1,391
              
              
              
              12
              
              
              
              1,461
              
              
              
              11
              
              
              
              (70
              )
              
              
              (5
              )General
      and administrative
              
              
              2,720
              
              
              
              23
              
              
              
              3,690
              
              
              
              27
              
              
              
              (970
              )
              
              
              (26
              )Patent
      litigation settlement
              
              
              (2,763
              )
              
              
              (23
              )
              
              
              (2,667
              )
              
              
              (19
              )
              
              
              (96
              )
              
              
              4Total
      operating expenses
              
              
              4,115
              
              
              
              35
              
              
              
              5,487
              
              
              
              40
              
              
              
              (1,372
              )
              
              
              (25
              )Operating
      income (loss)
              
              $
              633
              
              
              
              5
              
              
              $
              (504
              )
              
              
              (4
              )
              
              $
              1,137
  
  
  14
  Lead Fees.Lead fees
decreased $1.4 million or 12% in first quarter 2010, compared to first quarter
2009, primarily due to a 6% decline in the volume of Leads
delivered.  This volume decline is the result of a 22% decline in new
and used retail Lead volume, which was due to a 13% net reduction in the number
of auto-dealer customers, partially offset by an increase in the volume of
finance Leads delivered of 15%, as the automotive consumer credit environment
showed signs of recovery in the first quarter 2010, and a 9% increase in Leads
delivered to Manufacturers.  In addition, the elimination of certain
underperforming  third party Lead suppliers and the first quarter 2010
Toyota recalls, which impacted consumer demand for the Toyota brand, negatively
impacted results.
  Advertising.Advertising
revenues decreased $0.6 million or 38% in first quarter 2010, compared to first
quarter 2009, due primarily to unsold advertising, as ad budgets for our
Manufacturer customers have remained conservative, a 9% decline in traffic,
which was due to the elimination of a large traffic partner in the fourth
quarter of 2009, and the recognition of $0.2 million of deferred advertising
revenue in the first quarter 2009 related to advertising campaigns that were
closed out with certain advertisers, which did not recur in first quarter
2010.
 
 Cost of Revenues.Cost of
revenues consists of Lead and traffic acquisition costs, and other cost of
revenues. Lead and traffic acquisition costs consist of payments made to our
Lead suppliers, including internet portals and online automotive information
providers. Other cost of revenues consists of search engine marketing and fees
paid to third parties for data and content included on our properties,
connectivity costs, technology license fees, development and maintenance costs
related to our websites, server equipment depreciation and technology
amortization and compensation related expense. Search engine marketing (“SEM”),
sometimes referred to as paid search marketing, is the practice of bidding on
keywords on search engines to drive traffic to a website.  Our SEM
also provides a source of Leads generated from our websites.
  The $1.8
million or 21% decrease in the cost of revenues in first quarter 2010, compared
to first quarter 2009, was primarily due to a decrease of $2.4 million in Lead
acquisition costs directly related to the decline in volume of Leads delivered,
and a $0.4 million decrease in other traffic acquisition costs, partially offset
by a $1.0 million increase in SEM.
  Sales and
Marketing. Sales and marketing expense includes costs for developing
our brand equity, internal personnel costs, and other costs associated with
dealer sales, website advertising, dealer support, and bad debt expense. Sales
and marketing expense in first quarter 2010 decreased by $0.2 million or 8%
compared to first quarter 2009, due principally the reduction of bad debt
expense, as the automotive market showed signs of stabilizing in first quarter
2010.
  Technology Support.Technology support expense includes personnel costs related to enhancing
the features, content and functionality of our websites and our Internet-based
communications platform, costs associated with our telecommunications and
computer infrastructure, and costs related to data and technology development.
Technology support expenses in first quarter 2010 are consistent with the first
quarter of 2009.
  General and Administrative.
General and administrative expense consists of executive, financial and legal
personnel expenses and costs related to being a public company. General and
administrative expense in first quarter 2010 decreased $1.0 million or 26%
compared to first quarter 2009 due to a decrease in severance expense of $0.5
million, a reduction of professional fees of $0.3, and a decrease in rent
expense of $0.2 million.
 
 Dealix Patent Litigation
Settlement.  In 2004, the Company brought a lawsuit for patent
infringement against Dealix Corporation (“Dealix”). In December 2006, the
Company entered into a settlement agreement with Dealix (the “Settlement
Agreement”). The Settlement Agreement provides that Dealix will pay the Company
a total of $20.0 million in settlement payments for a mutual release of claims
and a license from the Company to Dealix and its parent company, the Cobalt
Group, of certain of the Company’s patent and patent applications. On
March 13, 2007, the Company received the initial $12.0 million settlement
payment with the remainder to be paid out in installments of $2.7 million on the
next three anniversary dates of the initial payment. As of March 31, 2010 the
Company had received the final annual installment payment of $2.7
million.  The Company recorded the payment as patent litigation
settlement in the period payment was received, as a reduction to operating
expenses. The Company did not have reasonable assurance that it would receive
the remaining payment on its due date and therefore had not recorded any amounts
receivable related to the Settlement Agreement as of December 31,
2009.
   Employees
  As of
April 15, 2010, we had 129 employees. We also use independent contractors as
required. None of our employees are represented by labor unions. We have not
experienced any work stoppages and consider our employee relations to be
generally good.
  15
   Liquidity
and Capital Resources
  The table
below sets forth a summary of our cash flows for the three months ended March
31, 2010 and 2009:
  
 Three
      Months Ended March 31,2010
              
              
              2009(in
      thousands)Net
      cash provided by (used in) operating activities
              
              $
              1,381
              
              
              $
              (1,583
              )Net
      cash used in investing activities
              
              $
              (417
              )
              
              $
              (38
              )Net
      cash provided by financing activities
              
              $
              —
              
              
              $
              —
  Our
principal sources of liquidity are our cash and cash equivalents balances and
litigation settlement proceeds.  We entered into a Settlement
Agreement with Dealix, which among other things, provides for settlement
payments. As of March 31, 2010 we received the final annual installment payment
of $2.7 million from Dealix.  We continue to have no debt. Our cash
and cash equivalents totaled $26.1 million as of March 31, 2010 compared to cash
and cash equivalents of $25.1 million as of December 31, 2009.
  Net Cash Provided by (Used in)
Operating Activities.  Net cash provided by operating
activities the first quarter 2010 of $1.4 million resulted primarily from net
income, as adjusted for non-cash charges to earnings, $0.8 million of cash
received related to our accounts receivable, partially offset by cash used to
reduce accrued liabilities of $1.0 million primarily related to the payment of
annual bonus amounts accrued in 2009 and paid in first quarter
2010.  Net cash used in operating activities in the three months ended
2009 was $1.6 million and resulted primarily from net losses and an increase in
cash used to reduce accounts payable and other accrued expenses of $2.8 million
primarily related to severance costs that were accrued as of December 31, 2008
and paid in the first quarter of 2009, partially offset by cash received related
to our accounts receivable of $0.8 million.
  Net Cash Used in Investing
Activities.  Net cash used in investing activities was $0.4
million in first quarter 2010 is related to the investment in upgrading our
internal information technology (“IT”) infrastructure.
  Net Cash Provided by Financing
Activities.  Our primary source of cash from financing
activities is from the exercise of stock options.  There were no
financing activities in the first quarters of 2010 and 2009.  Our
future cash flows from employee stock options will depend on the future timing,
value and amount of stock option exercises, if any.
   Off-Balance
Sheet Arrangements
  At March
31, 2010 we had no off-balance sheet arrangements as defined in Item
303(a)(4)(ii) of Regulation S-K.
  
  16
   Item 3.
              Quantitative and Qualitative
      Disclosures about Market
Risk
  For the
three months ended March 31, 2010 there were no material changes in the
information required to be provided under Item 305 of Regulation S-K from
the information disclosed in Item 7A of the Company’s Annual Report on
Form 10-K for the year ended December 31, 2009.
  
  Item 4T.
              Controls and
      Procedures
  As of the
end of the period covered by this Quarterly Report on Form 10-Q, we carried out
an evaluation under the supervision and with the participation of our
management, including our Chief Executive Officer and our Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rule 13a-15 under the Securities Exchange
Act of 1934, as amended (“Exchange Act”). Based on the evaluation, our Chief
Executive Officer and our Chief Financial Officer believe that, as of the end of
the period covered by this Quarterly Report on Form  10-Q, our
disclosure controls and procedures were effective at ensuring that the
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is (i) recorded, processed, summarized, and reported
within the time periods specified in the SEC’s rules and forms and
(ii) accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required financial disclosure.
  As of the
end of the period covered by this Quarterly Report on Form 10-Q, there were no
changes in our internal control over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act) that have materially affected or were
reasonably likely to materially affect, our internal control over financial
reporting.
  Our
management, including our Chief Executive Officer and our Chief Financial
Officer, does not expect that our disclosure controls and internal control over
financial reporting will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls may be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control.
  The
design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions; over time, a control may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected.
  17
   PART
II. OTHER INFORMATION
  
  Item 1.  Legal
      Proceedings
  See
discussion at Part I, Item 1, Note 7, “Commitments and Contingencies –Litigation,” to the
unaudited consolidated condensed financial statements, which is incorporated by
reference herein.
  
  Item 1A.  Risk
      Factors
  Our
common stock could be delisted from the NASDAQ Global Market if we are not able
to satisfy continued listing requirements, and if this were to occur, the price
of our common stock and our ability to raise additional capital may be adversely
affected and the ability to buy and sell our stock may be less orderly and
efficient.
  Our
common stock is currently listed on the NASDAQ Global Market. Continued listing
ofa
security on the NASDAQ Global Market is conditioned upon compliance with various
continued listing standards. There can be no assurancethat
we will continue to satisfy the requirements for maintaining a NASDAQ Global
Market listing.  The standards for continued listing require, among
other things, that the closing minimum bid price for the listed securities be at
least $1.00 per share for 30 consecutive trading days. Our common stock has
traded below $1.00 per share in 2010, and there can be no assurances made that
we will satisfy the $1.00 minimum bid price required for continued listing of
our common stock on the NASDAQ Global Market.  If our common stock
trades below the minimum closing bid requirement for any 30 consecutive trading
days, NASDAQ will send us a Deficiency Notice and we will be afforded a 180 day
compliance period to regain compliance.  If we are unable regain
compliance, we will be delisted.  If our common stock were to be
delisted from the NASDAQ Global Market, the price of our common stock, the
ability of holders to sell our stock, and our ability to raise additional
capital will likely be adversely affected. If our common stock is delisted and
thereafter traded over-the-counter, trading in our stock could be less
efficient. If we sought to re-list our stock on the NASDAQ Global Market, we
would be required to comply with all of the initial listing requirements to be
re-listed on the NASDAQ Global Market, which in some instances are more
stringent than the continued listing requirements.
  Item 5.  Exhibits
  31.1*
              Chief
      Executive Officer Section 302 Certification of Periodic Report, dated
      April 23, 2010.31.2*
              Chief
      Financial Officer Section 302 Certification of Periodic Report, dated
      April 23, 2010.32.1*
              Chief
      Executive Officer and Chief Financial Officer Section 906 Certification of
      Periodic Report, dated April 23,
2010.
  *
              Filed
      herewith
  
 
  18
  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, thereunto
duly authorized.
 
 AUTOBYTEL INC.By:
              /s/
      Curtis E. DeWaltCurtis
      E. DeWaltSenior
      Vice President and Chief Financial Officer(Duly
      Authorized Officer and Principal Financial Officer)
 
 Date:
      April 23, 2010By:
              /s/
      Wesley OzimaWesley
      OzimaVice
      President and Controller(Principal
      Accounting Officer)
 
 
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