CarLotz, Inc. (Form: 10-Q, Received: 05/09/2022 16:52:58)

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TABLE OF CONTENTS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2022


☐			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 001-38818

CarLotz, Inc.

(Exact name of registrant as specified in its charter)


Delaware			83-2456129
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
3301 W. Moore Street	Richmond	Virginia	23230
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (804) 510-0744

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	LOTZ	The Nasdaq Global Market
Redeemable warrants, exercisable for Class A common stock at an exercise price of $11.50 per share	LOTZW	The Nasdaq Global Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The registrant had outstanding 114,218,814 shares of common stock as of May 6, 2022.

TABLE OF CONTENTS

CarLotz, Inc.

TABLE OF CONTENTS


		Page
Part I - Financial Information
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46
Part II - Other Information
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48




Item 6.	Exhibits	50
Signatures		52

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

CarLotz, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share data)


	March 31, 2022		December 31, 2021
Assets
Current Assets:
Cash and cash equivalents	$	75,328	$	75,029
Restricted cash	4,011		4,336
Marketable securities – at fair value	74,109		116,589
Accounts receivable, net	6,922		8,206
Inventories	46,095		40,985
Other current assets	10,741		4,705
Total Current Assets	217,206		249,850
Marketable securities – at fair value	971		1,941
Property and equipment, net	13,042		22,628
Capitalized website and internal-use software costs, net	13,385		13,716
Operating lease assets	49,608		—
Finance lease assets, net	11,811		—
Lease vehicles, net	2,223		1,596
Other assets	553		558
Total Assets	$	308,799	$	290,289
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Current portion of finance lease liabilities	$	560	$	509
Floor plan notes payable	22,052		27,815
Accounts payable	7,914		6,352

Accrued expenses	14,369		14,428
Current portion of operating lease liabilities	6,810		—
Other current liabilities	662		754
Total Current Liabilities	52,367		49,858
Finance lease liabilities, less current portion	12,080		12,206

Operating lease liabilities, less current portion	45,076		—
Earnout shares liability	3,650		7,679
Merger warrants liability	4,691		6,291
Other liabilities	651		744
Total Liabilities	118,515		76,778
Commitments and Contingencies (Note 15)	—		—


Stockholders’ Equity (Deficit):
Common stock, $0.0001 par value; 500,000,000 authorized shares, 114,111,796 and 113,996,401 shares issued and outstanding at March 31, 2022 and December 31, 2021	11		11
Additional paid-in capital	289,191		287,509
Accumulated deficit	(98,752)		(73,916)
Accumulated other comprehensive (loss) income	(166)		(93)

Total Stockholders’ Equity (Deficit)	190,284		213,511
Total Liabilities and Stockholders’ Equity (Deficit)	$	308,799	$	290,289

See notes to condensed consolidated financial statements.

CarLotz, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended March 31,
	2022		2021
Revenues:
Retail vehicle sales	$	50,588	$	50,383
Wholesale vehicle sales	8,575		4,568
Finance and insurance, net	3,705		1,554
Lease income, net	146		107
Total Revenues	63,014		56,612
Cost of sales (exclusive of depreciation)	60,936		54,604
Gross Profit	2,078		2,008
Operating Expenses:
Selling, general and administrative	27,674		18,873
Stock-based compensation expense	1,684		41,963
Depreciation and amortization expense	1,789		383
Management fee expense – related party	—		2

Total Operating Expenses	31,147		61,221
Loss from Operations	(29,069)		(59,213)
Interest expense	617		175
Other Income, net
Change in fair value of Merger warrants liability	1,600		12,358

Change in fair value of earnout shares	4,029		31,846
Other income (expense)	(779)		162
Total Other Income, net	4,850		44,366
Loss Before Income Tax Expense	(24,836)		(15,022)
Income tax expense	—		—
Net Loss	$	(24,836)	$	(15,022)
Net Loss per Share, basic and diluted	$	(0.22)	$	(0.15)
Weighted-average Shares used in Computing Net Loss per Share, basic and diluted	114,054,597		100,817,385

See notes to condensed consolidated financial statements.

CarLotz, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive (Loss)

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2022		2021
Net loss	$	(24,836)	$	(15,022)
Other Comprehensive (Loss), net of tax:
Unrealized (losses) gains on marketable securities arising during the period	(73)		(131)
Tax effect	—		—
Unrealized (losses) gains on marketable securities arising during the period, net of tax	(73)		(131)
Reclassification adjustment for realized losses	—		—
Tax effect	—		—
Reclassification adjustment for realized losses, net of tax	—		—
Other Comprehensive (Loss), net of tax	(73)		(131)
Total Comprehensive (Loss)	$	(24,909)	$	(15,153)

See notes to condensed consolidated financial statements.

CarLotz, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

Three Months Ended March 31, 2022 and 2021

(Unaudited)

(In thousands, except share data)


	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance December 31, 2021	—	$	—	113,996,401	$	11	$	287,509	$	(73,916)	$	(93)	$	213,511


Net loss	—	—		—	—		—		(24,836)		—		(24,836)
Other comprehensive income, net of tax	—	—		—	—		—		—		(73)		(73)






Cashless exercise of options	—	—		44,424	—		—		—		—		—

Stock-based compensation	—	—		—	—		1,684		—		—		1,684












Issuance of common stock to settle vested restricted stock units	—	—		70,971	—		(2)		—		—		(2)


Balance March 31, 2022	—	$	—	114,111,796	$	11	$	289,191	$	(98,752)	$	(166)	$	190,284


	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance December 31, 2020	2,034,751	$	17,560	37,881,435	$	4	$	3,221	$	(34,037)	$	15	$	(30,797)
Retroactive application of recapitalization	(2,034,751)	(17,560)		20,739,607	2		17,558		—		—		17,560
Adjusted balance, beginning of period	—	—		58,621,042	6		20,779		(34,037)		15		(13,237)
Net loss	—	—		—	—		—		(15,022)		—		(15,022)
Other comprehensive income, net of tax	—	—		—	—		—		—		(131)		(131)
Accrued dividends on redeemable convertible preferred stock	—	—		—	—		(19)		—		—		(19)
PIPE issuance	—	—		12,500,000	1		124,999		—		—		125,000
Merger financing	—	—		38,194,390	4		309,995		—		—		309,999
Consideration to existing shareholders of Former CarLotz, net of accrued dividends	—	—		—	—		(62,693)		—		—		(62,693)
Transaction costs and advisory fees	—	—		—	—		(47,579)		—		—		(47,579)
Settlement of redeemable convertible preferred stock tranche obligation	—	—		—	—		2,832		—		—		2,832
Cashless exercise of options	—	—		54,717	—		—		—		—		—
Cash consideration paid to Former Carlotz optionholders	—	—		—	—		(2,465)		—		—		(2,465)
Stock-based compensation	—	—		—	—		41,963		—		—		41,963
Earnout liability	—	—		—	—		(74,284)		—		—		(74,284)
Merger warrants liability	—	—		—	—		(39,025)		—		—		(39,025)
KAR/AFC note payable conversion	—	—		3,546,984	—		3,625		—		—		3,625
KAR/AFC warrant exercise	—	—		752,927	—		144		—		—		144
Balance March 31, 2021	—	$	—	113,670,060	$	11	$	278,272	$	(49,059)	$	(116)	$	229,108

See notes to condensed consolidated financial statements.

CarLotz, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2022		2021
Cash Flow from Operating Activities
Net loss	$	(24,836)	$	(15,022)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization – property, equipment, ROU assets and capitalized software	4,097		105
Amortization and accretion - marketable securities	440		238
Depreciation – lease vehicles	85		15

Loss on marketable securities	—		—
Provision for doubtful accounts	(30)		—
Stock-based compensation expense	1,684		41,963
Change in fair value of Merger warrants liability	(1,600)		(12,358)
Change in fair value of earnout shares	(4,029)		(31,846)

Change in Operating Assets and Liabilities:
Accounts receivable	1,314		(5,192)
Inventories	(5,110)		1,991
Other current assets	(6,036)		(5,868)
Other assets	5		(3,038)
Accounts payable	1,562		3,140
Accrued expenses	975		6,187
Accrued expenses – related party	—		(229)
Other current liabilities	(92)		559
Other liabilities	(93)		(245)
Net Cash Used in Operating Activities	(31,664)		(19,600)
Cash Flows from Investing Activities
Purchase of property and equipment	(4,091)		(586)
Capitalized website and internal-use software costs	(611)		(1,154)
Purchase of marketable securities	(21,974)		(217,689)
Proceeds from sales of marketable securities	64,917		59
Purchase of lease vehicles	(712)		—
Net Cash (Used in) Provided by Investing Activities	37,529		(219,370)
Cash Flows from Financing Activities

Payments made on finance leases	(126)		—
PIPE issuance	—		125,000
Merger financing	—		309,999
Payment made on accrued dividends	—		(4,853)
Payments to existing shareholders of Former CarLotz	—		(62,693)
Transaction costs and advisory fees	—		(47,579)
Payments made on cash considerations associated with stock options	—		(2,465)
Repayment of Paycheck Protection Program loan	—		(1,749)
Payments made on note payable	—		(3,000)
Payments on floor plan notes payable	(41,728)		(11,150)
Borrowings on floor plan notes payable	35,965		9,236

See notes to condensed consolidated financial statements.


Payments made for tax on equity award transactions	(2)		—
Net Cash (Used in) Provided by Financing Activities	(5,891)		310,746
Net Change in Cash and Cash Equivalents Including Restricted Cash	(26)		71,776
Cash and cash equivalents and restricted cash, beginning	79,365		2,813
Cash and cash equivalents and restricted cash, ending	$	79,339	$	74,589
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	615	$	402
Supplementary Schedule of Non-cash Investing and Financing Activities:

Transfer from lease vehicles to inventory	$	—	$	100

KAR/AFC exercise of stock warrants	—		(144)
KAR/AFC conversion of notes payable	—		(3,625)
Convertible redeemable preferred stock tranche obligation expiration	—		(2,832)
Capitalized website and internal use software costs accrued	—		(1,400)

See notes to condensed consolidated financial statements.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

Note 1 Description of Business

Defined Terms

Unless otherwise indicated or unless the context otherwise requires, the following terms used herein shall have the following meanings:

•references to “CarLotz,” “we,” “us,” “our” and the “Company” are to CarLotz, Inc. and its consolidated subsidiaries;

•references to “Acamar Partners” refer to the Company for periods prior to the consummation of the Merger referred to below;

•references to “Acamar Sponsor” are to Acamar Partners Sponsor I LLC; and

•references to the “Merger” are to the merger pursuant to that certain Agreement and Plan of Merger, dated as of October 21, 2020 (as amended by Amendment No. 1, dated December 16, 2020, the “Merger Agreement”), by and among CarLotz, Inc. (f/k/a Acamar Partners Acquisition Corp.) (the “Company”), Acamar Partners Sub, Inc., a wholly owned subsidiary of CarLotz, Inc. (“Merger Sub”), and CarLotz Group, Inc. (f/k/a CarLotz, Inc.) (“Former CarLotz”), pursuant to which Merger Sub merged with and into Former CarLotz, with Former CarLotz surviving as the surviving company and as a wholly owned subsidiary of the Company.

The Company is a used vehicle consignment and Retail RemarketingTM company based in Richmond, Virginia. The Company operates an innovative and one-of-a-kind consumer and commercial used vehicle consignment and sales business model, with an online marketplace and twenty-two retail hub locations throughout the United States, including in Alabama, California, Colorado, Georgia, Florida, Illinois, North Carolina, Tennessee, Texas, Virginia and Washington State.

Subsidiaries are consolidated when the parent is deemed to have control over the subsidiaries’ operations.

Subsidiary Operations

CarLotz, Inc. owns 100% of CarLotz Group, Inc. (a Delaware corporation), which owns 100% of CarLotz, Inc. (an Illinois corporation), CarLotz Nevada, LLC (a Delaware LLC), CarLotz California, LLC (a California LLC), CarLotz Logistics, LLC (a Delaware LLC), Orange Grove Fleet Solutions, LLC (a Virginia LLC), Orange Peel Protection Reinsurance Co. Ltd. (a Turks and Caicos Islands, British West Indies company) and Orange Peel LLC (a Virginia LLC), which owns 100% of Orange Peel Reinsurance, Ltd. (a Turks and Caicos Islands, British West Indies company).

Basis of Presentation

On January 21, 2021 (the “Closing Date”), the Company consummated the merger pursuant to that certain Agreement and Plan of Merger, dated as of October 21, 2020, by and among the Company, Merger Sub and Former CarLotz, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated December 16, 2020, by and among the Company, Merger Sub and Former CarLotz (See Note 3 “Merger” for further discussion).

Pursuant to the terms of the Merger Agreement, a business combination between the Company and Former CarLotz was effected through the merger of Merger Sub with and into Former CarLotz with Former CarLotz continuing as the surviving company. Notwithstanding the legal form of the Merger pursuant to the Merger Agreement, the Merger is accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Under this method of accounting, CarLotz is treated as the acquired company and Former CarLotz is treated as the acquiror for financial statement reporting and accounting purposes.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

As a result of Former CarLotz being the accounting acquirer, the financial reports filed with the U.S. Securities and Exchange Commission (“SEC”) by the Company subsequent to the Merger are prepared “as if” Former CarLotz is the predecessor and legal successor to the Company. The historical operations of Former CarLotz are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Former CarLotz prior to the Merger, (ii) the combined results of the Company and Former CarLotz following the Merger on January 21, 2021, (iii) the assets and liabilities of Former CarLotz at their historical cost and (iv) the Company’s equity structure for all periods presented. The recapitalization of the number of shares of common stock attributable to the purchase of Former CarLotz in connection with the Merger is reflected retroactively to the earliest period presented and will be utilized for calculating earnings per share in all prior periods presented. No step-up basis of intangible assets or goodwill was recorded in the Merger transaction consistent with the treatment of the transaction as a reverse recapitalization of Former CarLotz.

In connection with the Merger, Acamar Partners Acquisition Corp. changed its name to CarLotz, Inc. The Company’s common stock is now listed on The Nasdaq Global Market under the symbol “LOTZ” and warrants to purchase the common stock at an exercise price of $11.50 per share are listed on The Nasdaq Global Market under the symbol “LOTZW”. Prior to the Merger, the Company neither engaged in any operations nor generated any revenue. Until the Merger, based on the Company’s business activities, it was a “shell company” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The accompanying interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements have been condensed or omitted pursuant to such rules and regulations. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, except for those related to recent accounting pronouncements adopted in the current fiscal year.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in management’s opinion, include all adjustments, which consist of only normal recurring adjustments, necessary for the fair statement of the Company’s condensed consolidated balance sheet as of March 31, 2022 and its results of operations for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the current fiscal year or any other future periods.

Note 2 — Summary of Significant Accounting Policies

For a detailed discussion about the Company’s significant accounting policies and for further information on accounting updates adopted in the prior year, see Note 2 to the audited consolidated financial statements.

During the three months ended March 31, 2022, there were no significant revisions to the Company’s significant accounting policies, other than those indicated herein related to the adoption of Leases Topic 842.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities.

Following the closing of the Merger, Former CarLotz equity holders at the effective time of the Merger will have the contingent right to receive, in the aggregate, up to 7,500,000 shares of common stock if, from the closing of the Merger until the fifth anniversary thereof, the reported closing trading price of the common stock exceeds certain thresholds. Estimating the change in fair value of the earnout liability for the earnout shares that could be earned by Former CarLotz equity holders at the effective time of the Merger requires determining both the fair value valuation model to use and inputs to the valuation model. The fair value of the earnout shares was estimated by utilizing a Monte-Carlo simulation model, which is a commonly used valuation model for this type of transaction. Inputs that have a significant effect on the earnout shares valuation include the expected volatility, starting stock price, expected term, risk-free interest rate and the earnout hurdles. See Note 6 — Fair Value of Financial Instruments.

Warrants that were issued by Acamar Partners (Merger warrants) and continue to exist following the closing of the Merger are accounted for as freestanding financial instruments. These warrants are classified as liabilities on the Company’s condensed

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

consolidated balance sheets and are recorded at their estimated fair value. The estimated fair value of the warrants is determined by using the market value in an active trading market. See Note 6 — Fair Value of Financial Instruments.

Beginning in the first quarter of 2020, the World Health Organization declared the outbreak and spread of the COVID-19 virus a pandemic. The outbreak is disrupting supply chains and impacting production and sales across a wide range of industries. The full economic impact of this pandemic has not been determined, including the impact on the Company’s suppliers, customers and credit markets. Due to the evolving and uncertain nature of COVID-19, it is reasonably possible that it could materially impact the Company’s estimates, particularly those noted above that require consideration of forecasted financial information, in the near to medium term. The ultimate impact will depend on numerous evolving factors that the Company may not be able to accurately predict, including the duration and extent of the pandemic, the impact of federal, state, local and foreign governmental actions, consumer behavior in response to the pandemic and other economic and operational conditions the Company may face.

Restricted Cash

As of March 31, 2022 and December 31, 2021, restricted cash included approximately $4,011 and $4,336, respectively. The restricted cash is legally and contractually restricted as collateral for lines of credit, including floorplan, and for the payment of claims on the reinsurance companies.

Advertising Costs

The Company expenses advertising costs as they are incurred. Advertising costs are included in selling, general and administrative expenses on the accompanying condensed consolidated statements of operations. Advertising expenses were approximately $3,154 and $2,526 for the three months ended March 31, 2022 and 2021, respectively.

Concentration of Credit Risk

Concentrations of credit risk with respect to accounts receivables are limited due to the large diversity and number of customers comprising the Company’s retail customer base.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard will affect all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. For lessors, accounting for leases is substantially the same as in prior periods. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to apply certain aspects of the new leases standard. ASU 2016-02, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, and early adoption is permitted.

We adopted ASC 842 for the year beginning January 1, 2022 using the modified retrospective transition approach applied at the beginning of the period of adoption, which did not result in a cumulative-effect adjustment to retained earnings. Comparative periods presented in the financial statements continue to be presented in accordance with ASC 840. As permitted under the standard, we have elected the package of practical expedients for the transition to ASC 842, under which we did not reassess our prior conclusions regarding lease identification, lease classification, or initial direct costs for contracts existing as of the transition date. We have also elected to apply the following practical expedients for contracts existing as of the transition date and all new contracts after our adoption of ASC 842: 1) recognizing lease expense on a straight-line basis over the lease term for leases with a term of 12 months or less and not recognizing them on the balance sheet and 2) accounting for lease and non-lease components for all asset classes as a combined single unit of account. We have not elected the practical expedient related to all land easements nor the hindsight practical expedient.

The adoption of ASC 842 resulted in the recognition of $50.5 million of operating lease assets, which included an adjustment for deferred rent, and $52.6 million of operating lease liabilities on our opening consolidated balance sheet. We have

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

implemented new business processes, accounting policies, systems and internal controls as part of adopting the new standard. See Note 14 for additional information on leases.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years. The Company is currently evaluating the impact of this standard to its financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022, with early adoption permitted, including adoption in an interim period. The Company is currently evaluating the impact of this standard on its financial statements.

Note 3 — Merger

On the Closing Date, the Company consummated the merger pursuant to that certain Agreement and Plan of Merger, dated as of October 21, 2020, by and among the Company, Merger Sub and Former CarLotz, as amended by Amendment No. 1, dated December 16, 2020, by and among the Company, Merger Sub and Former CarLotz.

The Merger was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Acamar Partners was treated as the “acquired” company for financial reporting purposes (See Note 1 - Description of the Business). Accordingly, for accounting purposes, the Merger was treated as the equivalent of Former CarLotz issuing stock for the net assets of Acamar Partners, accompanied by a recapitalization.

Prior to the Merger, Former CarLotz and Acamar Partners filed separate standalone federal, state and local income tax returns. As a result of the Merger, structured as a reverse acquisition for tax purposes, Acamar Partners was renamed CarLotz, Inc. and became the parent of the consolidated filing group, with Former CarLotz as a subsidiary.


	Recapitalization
Cash - Acamar Partners’ trust and cash	$	309,999
Cash - PIPE	125,000
Less: consideration delivered to existing shareholders of Former CarLotz	(62,693)
Less: consideration to pay accrued dividends	(4,853)
Less: transaction costs and advisory fees paid	(47,579)
Less: payments on cash considerations associated with stock options	(2,465)
Net contributions from Merger and PIPE financing	317,409
Liabilities relieved: preferred stock obligation	2,832
Liabilities relieved: KAR/AFC note payable	3,625
Liabilities relieved: historic warrant liability	144
Less: earnout shares liability	(74,285)
Less: Merger warrants liability	(39,024)

Merger warrants

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

The following is an analysis of the warrants to purchase shares of the Company’s stock deemed acquired as part of the Merger and outstanding during the three months ended March 31, 2022. There has been no change in outstanding stock warrants since the Merger.


			March 31, 2022
Stock warrants outstanding - Public			10,185,774
Stock warrants outstanding - Private			6,074,310
Stock warrants cancelled			—
Stock warrants exercised			—
Stock warrants outstanding			16,260,084

Earnout Shares

Former CarLotz equity holders at the closing of the Merger are entitled to receive up to an additional 6,945,732 earnout shares. The earnout shares will be issued to the beneficiaries if certain targets are met in the post-acquisition period. The earnouts for the earnout shares are subject to an earnout period, which is defined as the date 60 months following the consummation of the Merger. The Merger closed on January 21, 2021, and the earnout period expires January 21, 2026. The earnout shares will be issued if any of the following conditions are achieved following January 21, 2021:

i.If at any time during the 60 months following the Closing Date (the first business day following the end of such period, the “Forfeiture Date”), the closing trading price of the common stock is greater than $12.50 over any 20 trading days within any 30 trading day period (the “First Threshold”), the Company will issue 50% of the earnout shares.

ii.If at any time prior to the Forfeiture Date, the closing trading price of the common stock is greater than $15.00 over any 20 trading days within any 30 trading day period (the “Second Threshold”), the Company will issue 50% of the earnout shares.

iii.If either the First Threshold or the Second Threshold is not met on or before the Forfeiture Date, any unissued earnout shares are forfeited. All unissued earnout shares will be issued if there is a change of control of the Company that will result in the holders of the common stock receiving a per share price equal to or in excess of $10.00 (as equitably adjusted for stock splits, stock dividends, special cash dividends, reorganizations, combinations, recapitalizations and similar transactions affecting the common stock) prior to the Forfeiture Date.

Before the contingency is met, the earnout shares will be classified as a liability under the FASB’s Accounting Standards Codification (“ASC”) Topic 815, so changes in the fair value of the earnout shares in future periods will be recognized in the condensed consolidated statement of operations. The estimated fair value of the liability is determined by using a Monte-Carlo simulation model.

Note 4 — Revenue Recognition

Disaggregation of Revenue

The significant majority of the Company’s revenue is derived from contracts with customers related to the sales of vehicles. In the following tables, revenue is disaggregated by major lines of goods and services and timing of transfer of goods and services. The Company has determined that these categories depict how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

The tables below include disaggregated revenue under ASC 606 (Revenue from Contracts with Customers):


	Three Months Ended March 31, 2022
	Vehicle Sales		Fleet Management		Total
Retail vehicle sales	$	50,588	$	—	$	50,588
Wholesale vehicle sales	8,575		—		8,575
Finance and insurance, net	$	3,705	$	—	$	3,705
Lease income, net	—		146		146
Total Revenues	$	62,868	$	146	$	63,014


	Three Months Ended March 31, 2021
	Vehicle Sales		Fleet Management		Total
Retail vehicle sales	$	50,383	$	—	$	50,383
Wholesale vehicle sales	4,568		—		4,568
Finance and insurance, net	$	1,554	$	—	$	1,554
Lease income, net	—		107		107
Total Revenues	$	56,505	$	107	$	56,612

The following table summarizes revenues and cost of sales for retail and wholesale vehicle sales for the periods ended:


	Three Months Ended March 31,
	2022		2021
Retail vehicles:
Retail vehicle sales	$	50,588	$	50,383
Retail vehicle cost of sales	52,415		48,917
Gross Profit – Retail Vehicles	$	(1,827)	$	1,466
Wholesale vehicles:
Wholesale vehicle sales	$	8,575	$	4,568
Wholesale vehicle cost of sales	8,521		5,687
Gross Profit – Wholesale Vehicles	$	54	$	(1,119)

Retail Vehicle Sales

The Company sells used vehicles to retail customers through its 22 retail hub locations. The transaction price for used vehicles is a fixed amount as set forth in the customer contract, and the revenue recognized by the Company is inclusive of the agreed upon transaction price and any service fees. Customers frequently trade-in their existing vehicle to apply toward the transaction price of a used vehicle. Trade-in vehicles represent noncash consideration, which the Company measures at estimated fair value of the vehicle received on the trade. The Company satisfies its performance obligation and recognizes revenue for used vehicle sales at a point in time when the title to the vehicle passes to the customer, at which point the customer controls the vehicle.

The Company receives payment for used vehicle sales directly from the customer at the time of sale or from third-party financial institutions within a short period of time following the sale if the customer obtains financing.

The Company’s exchange policy allows customers to initiate an exchange of a vehicle during the first three days or 500 miles after delivery, whichever comes first. An exchange reserve is immaterial based on the Company’s historical activity.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

Wholesale Vehicle Sales

Vehicles that do not meet the Company’s standards for retail vehicle sales, vehicles that did not sell through the retail channel within a reasonable period of time and vehicles that the Company determines offer greater financial benefit through the wholesale channel are sold through various wholesale methods. The Company satisfies its performance obligation and recognizes revenue for wholesale vehicle sales when the vehicle is sold at auction or directly to a wholesaler and title to the vehicle passes to the next owner.

Finance and Insurance, net

The Company provides customers with options for financing, insurance and extended warranties. Certain warranties are serviced by a company owned by a major stockholder. All other services are provided by third-party vendors, and the Company has agreements with each of these vendors giving the Company the right to offer such services.

When a customer selects a service from these third-party vendors, the Company earns a commission based on the actual price paid or financed. The Company concluded that it is an agent for these transactions because it does not control the products before they are transferred to the customer. Accordingly, the Company recognizes finance and insurance revenue at the point in time when the customer enters into the contract.

Note 5 — Marketable Securities

The following table summarizes amortized cost, gross unrealized gains and losses and fair values of the Company’s investments in fixed maturity debt securities as of March 31, 2022 and December 31, 2021:


	March 31, 2022
	Amortized Cost/ Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasuries	$	—	$	—	$	—	$	—
Corporate bonds	30,216		2		(114)		30,104
Municipal bonds	21,990		5		(40)		21,955
Commercial paper	19,997		—		—		19,997
Foreign governments	2,491		2		(21)		2,472
Total Fixed Maturity Debt Securities	$	74,694	$	9	$	(175)	$	74,528


	December 31, 2021
	Amortized Cost/ Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasuries	$	—	$	—	$	—	$	—
Corporate bonds	57,460		—		(72)		57,388
Municipal bonds	28,325		5		(10)		28,320
Commercial paper	19,989		—		—		19,989
Foreign governments	12,291		2		(18)		12,275
Total Fixed Maturity Debt Securities	$	118,065	$	7	$	(100)	$	117,972

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

The amortized cost and fair value of the Company’s fixed maturity debt securities as of March 31, 2022 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Fair Value
Due in one year or less	$	73,667	$	73,557
Due after one year through five years	731		694
Due after five years through ten years	296		277
Total	$	74,694	$	74,528

The following tables summarize the Company’s gross unrealized losses in fixed maturity securities as of March 31, 2022 and December 31, 2021:


			March 31, 2022
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds	$	29,890	$	(98)	$	209	$	(16)	$	30,099	$	(114)
Municipal bonds	19,289		(32)		133		(8)		19,422		(40)
Foreign governments	2,236		(18)		117		(3)		2,353		(21)
Total Fixed Maturity Debt Securities	$	51,415	$	(148)	$	459	$	(27)	$	51,874	$	(175)


			December 31, 2021
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate bonds	$	56,902	$	(69)	$	376	$	(3)	$	57,278	$	(72)
Municipal bonds	$	19,945	$	(7)	$	340	$	(3)	$	20,285	$	(10)
Foreign governments	$	12,152	$	(18)	$	—	$	—	$	12,152	$	(18)
Total Fixed Maturity Debt Securities	$	88,999	$	(94)	$	716	$	(6)	$	89,715	$	(100)

Unrealized losses shown in the tables above are believed to be temporary. Fair value of investments in fixed maturity debt securities change and are based primarily on market rates. As of March 31, 2022, the Company’s fixed maturity portfolio had 16 securities with gross unrealized losses totaling $27 that had been in loss positions in excess of 12 months and 99 securities with gross unrealized losses totaling $148 that had been in loss positions less than 12 months. No single issuer had a gross unrealized loss position greater than $21, or 0.7% of its amortized cost. As of December 31, 2021, the Company’s fixed maturity portfolio had 23 securities with gross unrealized losses totaling $(6) that had been in loss positions in excess of 12 months and 106 securities with gross unrealized losses totaling $(94) that had been in loss positions less than 12 months. No single issuer had a gross unrealized loss position greater than $12 (actual), or 0.4% of its amortized cost.

The following tables summarize cost and fair values of the Company’s investments in equity securities as of March 31, 2022 and December 31, 2021:


	March 31, 2022
	Cost		Fair Value
Equity securities	$	430	$	552

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

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(In thousands, except share data)


	December 31, 2021
	Cost		Fair Value
Equity securities	$	432	$	558

Proceeds from sales and maturities, gross realized gains, gross realized losses and net realized gains (losses) from sales and maturities of fixed maturity securities for the three months ended March 31, 2022 and 2021 consisted of the following:


	March 31, 2022
	Proceeds		Gross Realized Gains		Gross Realized Losses		Net Realized Gain
Fixed maturity debt securities	$	64,911	$	—	$	—	$	—
Equity securities	—		—		—		—
Total Marketable Securities	$	64,911	$	—	$	—	$	—


	March 31, 2021
	Proceeds		Gross Realized Gains		Gross Realized Losses		Net Realized Gain
Fixed maturity debt securities	$	59	$	—	$	—	$	—
Equity securities	—		—		—		—
Total Marketable Securities	$	59	$	—	$	—	$	—

Note 6 — Fair Value of Financial Instruments

Items Measured at Fair Value on a Recurring Basis

As of March 31, 2022 and December 31, 2021, the Company held certain assets and liabilities that were required to be measured at fair value on a recurring basis.

The following tables are summaries of fair value measurements and hierarchy level as of:


	March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	—	$	—	$	—	$	—
Equity securities	552		—		—		552
Fixed maturity debt securities, including cash equivalents	—		118,347		—		118,347
Total Assets	$	552	$	118,347	$	—	$	118,899
Liabilities:


Merger warrants liability	2,939		1,752		—		4,691
Earnout shares liability	—		—		3,650		3,650
Total Liabilities	$	2,939	$	1,752	$	3,650	$	8,341

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	—	$	—	$	—	$	—
Equity securities	558		—		—		558
Fixed maturity debt securities	—		135,346		—		135,346
Total Assets	$	558	$	135,346	$	—	$	135,904
Liabilities:
Merger warrants liability	$	3,941	$	2,350	$	—	$	6,291
Earnout shares liability	—		—		7,679		7,679
Total Liabilities	$	3,941	$	2,350	$	7,679	$	13,970

Money market funds consist of highly liquid investments with original maturities of three months or less and classified in restricted cash in the accompanying condensed consolidated balance sheets.

The Company recognizes transfers between the levels as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers between the levels during the three months ended March 31, 2022 and 2021.

The following tables set forth a summary of changes in the estimated fair value of the Company’s Level 3 redeemable convertible preferred stock tranche obligation, historic warrants liability and earnout shares for the three months ended March 31, 2022 and 2021:


	January 1, 2022		Issuances		Settlements		Change in fair value		March 31, 2022


Earnout shares	7,679		—		—		(4,029)		3,650
Total	$	7,679	$	—	$	—	$	(4,029)	$	3,650


	January 1, 2021		Issuances		Settlements		Change in fair value		March 31, 2021
Redeemable convertible preferred stock tranche obligation	$	2,832	$	—	$	(2,832)	$	—	$	—
Historic warrants liability	144				(144)		—		—
Earnout shares	—		74,284		—		(31,846)		42,438
Total	$	2,976	$	74,284	$	(2,976)	$	(31,846)	$	42,438

The fair value of the earnout shares was estimated by utilizing a Monte-Carlo simulation model. The inputs into the Monte-Carlo pricing model included significant unobservable inputs. The table below summarizes the significant observable inputs used when valuing the earnout shares as of:


	March 31, 2022		March 31, 2021
Expected volatility	85.00	%	80.00	%
Starting stock price	$1.37		$7.13
Expected term (in years)	3.7 years		4.70 years
Risk-free interest rate	2.44	%	0.87	%
Earnout hurdle	$12.50-$15.00		$12.50-$15.00

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

Fair Value of Financial Instruments Not Measured at Fair Value on a Recurring Basis

The carrying amounts of restricted cash, accounts receivable and accounts payable approximate fair value because their respective maturities are less than three months.

Beginning March 10, 2021, the Company entered into a $30,000 floor plan credit facility with Ally Financial. Concurrently, proceeds from the agreement were used to settle outstanding debt obligations on the Company’s preexisting floor plan facility with Automotive Finance Corporation (“AFC”). In June 2021, the Company expanded the floor plan credit facility by $10,000 to a total of $40,000. The carrying value of the Ally Financial floor plan notes payable outstanding as of March 31, 2022 approximates fair value due to its variable interest rate determined to approximate current market rates.

Note 7 — Accounts Receivable, Net

The following table summarizes accounts receivable as of:


	March 31, 2022		December 31, 2021
Contracts in transit	$	6,117	$	7,836
Trade	1		386
Finance commission	593		284
Other	481		—
Total	7,192		8,506
Allowance for doubtful accounts	(270)		(300)
Total Accounts Receivable, net	$	6,922	$	8,206

Note 8 — Inventory and Floor Plan Notes Payable

The following table summarizes inventory as of:


	March 31, 2022		December 31, 2021
Used vehicles	$	45,846	$	40,739
Parts	249		246
Total	$	46,095	$	40,985

Beginning March 10, 2021, the Company entered into a $30,000 floor plan credit facility, which was expanded to $40,000 in the second quarter of 2021, with Ally Financial to finance the acquisition of used vehicle inventory. Concurrently, proceeds from the agreement were used to settle outstanding debt obligations on the Company’s preexisting floor plan facility with AFC. Borrowings under the Ally Financial facility accrue interest at a variable rate based on the most recent prime rate plus 2.50% per annum. The prime rate as of March 31, 2022 was 3.50%.

Floor plan notes payable are generally due upon the sale of the related used vehicle inventory.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

Note 9 — Property and Equipment, Net

The following table summarizes property and equipment as of:


	March 31, 2022		December 31, 2021
Capital lease assets	—		12,566
Leasehold improvements	8,030		4,628
Furniture, fixtures and equipment	7,570		7,993
Corporate vehicles	138		158
Total property and equipment	15,738		25,345
Less: accumulated depreciation	(2,696)		(2,609)
Less: impairment	—		(108)
Property and Equipment, net	$	13,042	$	22,628

Depreciation expense for property and equipment was approximately $584 and $105 for the three months ended March 31, 2022 and 2021, respectively.

Note 10 — Other Assets

The following table summarizes other assets as of:


	March 31, 2022		December 31, 2021
Other Current Assets:
Lease receivable, net	$	29	$	29
Deferred acquisition costs	40		46
Prepaid expenses	10,133		3,664
Interest receivable	539		966

Total Other Current Assets	$	10,741	$	4,705
Other Assets:
Lease receivable, net	$	16	$	16
Deferred acquisition costs	30		35
Security deposits	507		507
Total Other Assets	$	553	$	558

Note 11 — Long-term Debt

The following table summarizes long-term debt as of:


	March 31, 2022		December 31, 2021
Capital lease obligation	$	—	$	12,715
Finance lease liabilities	$	12,640	$	—



	12,640		12,715
Current portion of long-term debt	—		(509)
Current portion of finance lease liabilities	(560)		—
Long-term Debt	$	12,080	$	12,206

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

Promissory Note

Concurrently with the closing of the Merger on January 21, 2021, the promissory note was extinguished through a cash payment of $3,000.

Convertible Notes Payable

As of December 31, 2020, the Company had a convertible note balance of $3,500. The note accrued interest at 6.00% on a 365-day basis and the outstanding interest payable as of December 31, 2020 was approximately $212. Concurrently with the closing of the Merger on January 21, 2021, the historic warrants and the note were converted to a fixed number of shares pursuant to a conversion agreement with AFC. The convertible notes were extinguished by issuing AFC 347,992 shares of Former CarLotz common stock and the warrants were exercised into 73,869 shares of Former CarLotz common stock. There are no historic warrants outstanding subsequent to the exercise.

Payroll Protection Program Loan

In April 2020, the Company received a Paycheck Protection Program (“PPP”) loan, a new loan program under the Small Business Administration’s 7(a) program providing loans to qualifying businesses, totaling approximately $1,749. As of December 31, 2020, the Company had an outstanding PPP loan balance of $1,749, which was extinguished concurrently with the closing of the Merger.

Note 12 — Accrued Expenses

The following table summarizes accrued expenses as of:


	March 31, 2022		December 31, 2021
License and title fees	$	784	$	903
Payroll and bonuses	4,564		2,047
Deferred rent	—		1,636
Technology	1,120		1,127
Inventory	3,612		2,542
Other	4,289		6,173
Total Accrued Expenses	$	14,369	$	14,428

Note 13 — Other Liabilities

The following table summarizes other liabilities as of:


	March 31, 2022		December 31, 2021
Other Liabilities, Current
Unearned insurance premiums	$	662	$	754


Other Liabilities
Unearned insurance premiums	530		622
Other long-term liabilities	121		122

Other Liabilities, Long-term	$	651	$	744

Note 14 — Leases

The Company leases its operating facilities from various third parties under non-cancelable operating and finance leases. The leases require various monthly rental payments ranging from approximately $3 to $70, with various ending dates through September 2036. The initial term for real property leases is typically 5 to 15 years. Most leases include one or more options to

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

renew, with renewal terms that can extend the lease term from 1 to 5 years or more. We include options to renew (or terminate) in our lease term, and as part of our right-of-use ("ROU") assets and lease liabilities, when it is reasonably certain that we will exercise that option. ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. The leases are triple net, whereby the Company is liable for taxes, insurance and repairs. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. Most of these leases have escalating rent payments, which are being expensed on a straight-line basis and are included in operating lease amounts on the balance sheet.

The Company also leases vehicles from a third party under noncancelable operating leases and leases these same vehicles to end customers with similar lease terms, with the exception of the interest rate. The leases require various monthly rental payments from the Company ranging from $229 to $2,356 (actual) with various ending dates through March 2027. The initial term for vehicle leases is typically 36 to 72 months. Most leases do not include an option to renew. The lease payments are generally fixed throughout the term and any variable lease payments (non-recurring maintenance, taxes, registration) are not included in the measurement of the ROU asset and lease liability.

As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. We have elected the practical expedient on not separating lease components from non-lease components. All leases with a term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The components of lease expense were as follows:


	Three Months Ended March 31, 2022
Operating lease cost (1)	$	2,435
Finance lease cost:
Depreciation of lease assets	263
Interest on lease liabilities	287
Total finance lease cost	550
Total lease cost	2,985

(1) Includes short-term leases and variable lease costs, which are immaterial.

Supplemental balance sheet information related to leases was as follows:


	Classification	As of March 31, 2022
Assets:
Operating lease assets		49,608
Finance lease assets		11,811
Total lease assets		61,419
Liabilities:
Current:
Current portion of operating lease liabilities		6,810
Current portion of finance lease liabilities		560
Long-term:
Operating leases, less current portion		45,076
Finance leases, less current portion		12,080
Total lease liabilities		64,526

(1) Finance lease assets are recorded net of accumulated depreciation of $755 as of March 31, 2022.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

Lease term and discount rate information related to leases was as follows:


Lease Term and Discount Rate	As of March 31, 2022
Weighted Average Remaining Lease Term (in years)
Operating leases	8.01 years
Finance leases	11.92 years

Weighted Average Discount Rate
Operating leases	5.87	%
Finance leases	10.01	%

Supplemental cash flow information related to leases was as follows:


			Three Months Ended March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			2,308
Operating cash flows from finance leases			287
Financing cash flows from finance leases			126

Lease assets obtained in exchange for lease obligation
Operating leases			51,916
Finance leases			—

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

Maturities of lease liabilities were as follows:


	As of March 31, 2022
	Operating Leases (1)	Finance Leases (1)
Fiscal 2022, remaining	7,118	1,281
Fiscal 2023	9,268	1,669
Fiscal 2024	8,518	1,694
Fiscal 2025	7,887	1,721
Fiscal 2026	6,875	1,766
Thereafter	26,074	14,322
Total lease payments	65,740	22,453
Less: interest	(13,854)	(9,813)
Present value of lease liabilities	51,886	12,640

(1) There are no legally binding minimum lease payments for leases signed but not yet commenced excluded from the table.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 and under the previous lease accounting standard, the following is a table of facility lease commitments due for the next five years, and thereafter, as of December 31, 2021:


	Total Per Year		Total Capital Leases
2022	$	6,788	$	1,643
2023	6,931		1,669
2024	6,657		1,695
2025	6,832		1,721
2026	5,884		1,766
Thereafter	23,715		14,322
Total	$	56,807	$	22,816
Less: amount representing interest			(10,101)
Present value of minimum lease payments			12,715
Less: current obligation			(509)
Long-term obligations under capital lease			$	12,206

The following is a schedule of the approximate future minimum lease payments due to third parties and the related expected future receipts related to these lease vehicles as of December 31, 2021:


	Payments Due to Third-Parties		Future Receipts
2022	$	1,435	$	1,721
2023	1,017		1,205
2024	605		716
2025	180		216
2026	55		69
Total	3,292		3,927

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

Note 15 — Commitments and Contingencies

The Company’s facilities are subject to federal, state and local provisions regulating the discharge of materials into the environment. Compliance with these provisions has not had, nor does the Company expect such compliance to have, any material effect upon the capital expenditures, net income, financial condition or competitive position of the Company. Management believes that its current practices and procedures for the control and disposition of such materials comply with the applicable federal and state requirements.

Legal Matters

Federal Securities Litigation

On July 8, 2021, purported CarLotz stockholder Daniel Erdman, individually and on behalf of others similarly situated, filed a putative class action complaint in the United States District Court for the Southern District of New York, alleging that CarLotz and certain of its executive officers made various false and misleading statements or omissions about the Company’s business, operations, financial performance and prospects in violation of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5, promulgated thereunder. See Daniel Erdman v. CarLotz, Inc., et al., 21-cv-5906 (S.D.N.Y.) The action is stated to be brought on behalf of purchasers of the securities of Acamar Partners Acquisition Corp. and CarLotz during the period from December 30, 2020 to May 25, 2021. The action seeks to recover unspecified compensatory damages allegedly caused by the defendants’ purported violations of the federal securities laws, plus interest and costs and expenses.

On July 20, 2021, purported CarLotz stockholder Michael Widuck, individually and on behalf of others similarly situated, filed a putative class action complaint in the United States District Court for the Southern District of New York, alleging that CarLotz and certain of its executive officers made various false and misleading statements or omissions about the Company’s business, operations, financial performance and prospects in violation of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5, promulgated thereunder. See Michael Widuck v. CarLotz, Inc., et al., 21-cv-6191 (S.D.N.Y.). The action is stated to be brought on behalf of purchasers of the securities of Acamar Partners Acquisition Corp. and CarLotz during the period from December 30, 2020 to May 25, 2021. The action seeks to recover unspecified compensatory damages allegedly caused by the defendants’ purported violations of the federal securities laws, plus interest and costs and expenses.

On August 5, 2021, purported CarLotz stockholder Michael Turk, individually and on behalf of others similarly situated, filed a putative class action complaint in the United States District Court for the Southern District of New York, alleging that CarLotz and certain of its executive officers made various false and misleading statements or omissions about the Company’s business, operations, financial performance and prospects in violation of Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5, promulgated thereunder. See Michael Turk v. CarLotz, Inc., et al., 21-cv-6627 (S.D.N.Y.) The action is stated to be brought on behalf of purchasers of the securities of Acamar Partners Acquisition Corp. and CarLotz during the period from December 30, 2020 to May 25, 2021. The action seeks to recover unspecified compensatory damages allegedly caused by the defendants’ purported violations of the federal securities laws, plus interest and costs and expenses.

The above three cases were consolidated by the Court on August 31, 2021 under In re CarLotz, Inc. Sec. Litig., 21-cv-05906 (S.D.N.Y.). On October 15, 2021, the Court appointed David Berger lead plaintiff and Kahn Swick & Foti, LLC lead counsel for the putative class. On December 14, 2021, Lead Plaintiff Berger and Additional Plaintiff Craig Bailey filed an Amended Complaint against CarLotz, various directors and officers of CarLotz, Acamar, various directors of Acamar, Acamar Partners Sponsor I LLC, and Acamar Partners Sub, Inc., purporting to assert claims on behalf of purchasers of Acamar and CarLotz securities during the period from October 22, 2020 through May 25, 2021. The Amended Complaint alleges that the defendants made various false and misleading statements or omissions about CarLotz’ business, operations, financial performance and prospects in violation of Sections 10(b), 14(a) and 20(a) of the Exchange Act; and Sections 11, 12(a)(2) and 15 of the Securities Act. The Amended Complaint sought a declaration that it is a proper class action pursuant to Fed. R. Civ. P. 23, as well as unspecified compensatory damages allegedly caused by the defendants’ purported violations of the federal securities laws, plus interest and costs and expenses, and any further relief that the Court may deem proper.

On February 17, 2022, Plaintiffs filed a Letter Motion for Leave to File Second Amended Complaint, citing the need “to resolve certain factual and legal issues bearing on the viability of certain of plaintiffs’ claims and named defendants.” On February 18, 2022, the Court granted Plaintiffs’ letter motion for leave to file a Second Amended Complaint and ordered that the Second Amended Complaint be filed by March 4, 2022.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

On March 4, 2022, Lead Plaintiff Berger and Additional Plaintiff Bailey filed a Second Amended Complaint against CarLotz, various directors and officers of CarLotz, Acamar, various directors of Acamar, and Acamar Partners Sponsor I LLC, purporting to assert claims on behalf of purchasers of Acamar and CarLotz securities during the period from October 22, 2020 through May 25, 2021. The Second Amended Complaint alleges that the defendants made various false and misleading statements or omissions about CarLotz’ business, operations, financial performance and prospects in violation of Sections 10(b) and 20(a) of the Exchange Act; and Sections 11, 12(a)(2) and 15 of the Securities Act. The Second Amended Complaint seeks a declaration that it is a proper class action pursuant to Fed. R. Civ. P. 23, as well as unspecified compensatory damages allegedly caused by the defendants’ purported violations of the federal securities laws, plus interest and costs and expenses, and any further relief that the Court may deem proper. Defendants’ deadline to move, answer, or otherwise respond to the Second Amended Complaint is May 16, 2022.

Delaware Stockholder Derivative Litigation

On September 21, 2021, purported CarLotz stockholder W. Kenmore Cardoza, trustee of the W. Kenmore & Joyce M. Cardoza Revocable Trust, filed a derivative suit purportedly on behalf of CarLotz in the United States District Court for the District of Delaware against certain officers and directors of CarLotz. See Cardoza v. Mitchell, et al., 21-cv-1332 (D. Del.). The complaint, which principally concerns the same alleged misstatements or omissions at issue in In re CarLotz, Inc. Sec. Litig., asserts derivative claims for alleged violations of Sections 10(b) and 21D of the Exchange Act, breach of fiduciary duty and waste. The action seeks to recover unspecified compensatory damages on behalf of the Company, an award of costs and expenses, and other relief.

On February 14, 2022, the parties filed a stipulation and proposed scheduling order, pursuant to which Plaintiff will file an amended complaint by April 1, 2022, Defendants will answer or otherwise respond to the amended complaint within 30 days of the filing of the amended complaint, and the parties shall meet and confer on conduct of further proceedings within 7 days of the filing of the amended complaint. On February 15, 2022, the Court so-ordered the parties’ proposed schedule. On April 1, 2022, Plaintiff filed an amended complaint asserting derivative claims for alleged violations of Sections 10(b), 14(a), and 21D of the Exchange Act, breach of fiduciary duty, waste, and unjust enrichment.

On March 31, 2022, purported CarLotz stockholder Mohammad Osman filed a derivative suit purportedly on behalf of CarLotz in the United States District Court for the District of Delaware against certain officers and directors of CarLotz. See Osman v. Bor, et al., 22-cv-0431 (D. Del.). The complaint, which principally concerns the same alleged misstatements or omissions at issue in In re CarLotz, Inc. Sec. Litig., asserts derivative claims for alleged violations of Sections 10(b), 20(a), and 21D of the Exchange Act, breach of fiduciary duty and unjust enrichment. The action seeks to recover unspecified compensatory damages on behalf of the Company, an award of costs and expenses, and other relief.

On April 13, 2022, Plaintiff in the Cardoza matter moved to consolidate Cardoza and Osman and to be appointed lead plaintiff. On April 27, 2022, Plaintiff in the Osman action cross-moved to consolidate Cardoza and Osman and to be appointed lead plaintiff. The motions remain pending.

New York Stockholder Derivative Litigation

On October 20, 2021, purported CarLotz stockholder Julian Cha filed a derivative suit purportedly on behalf of CarLotz in the United States District Court for the Southern District of New York against certain officers and directors of CarLotz. See Julian Cha v. David R. Mitchell, et al., 21-cv-8623 (S.D.N.Y.). The complaint, which principally concerns the same alleged misstatements or omissions at issue in In re CarLotz, Inc. Sec. Litig., asserts derivative claims for alleged violations of Sections 10(b), 14(a), and 21D of the Exchange Act, breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste. The action seeks to recover unspecified compensatory damages on behalf of the Company, an award of costs and expenses and other relief.

On October 27, 2021, purported CarLotz stockholder Mark Habib filed a derivative suit purportedly on behalf of CarLotz in the United States District Court for the Southern District of New York against certain officers and directors of CarLotz. See Mark Habib v. David R. Mitchell, et al., 21-cv-8786 (S.D.N.Y.). The complaint, which principally concerns the same alleged misstatements or omissions at issue in In re CarLotz, Inc. Sec. Litig., asserts derivative claims for alleged violations of Sections 10(b), 14(a), and 21D of the Exchange Act and breach of fiduciary duty. The action seeks to recover unspecified compensatory damages on behalf of the Company, an award of costs and expenses and other relief.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

On November 15, 2021, the Court issued an order¸ inter alia, consolidating Cha and Habib under In re CarLotz, Inc. Deriv. Litig., 21-cv-8623 and appointing co-lead counsel. On February 14, 2022, the parties filed a stipulation and proposed order staying the case, which requested that all proceedings in this action be stayed pending the resolution of defendants’ forthcoming motion to dismiss the Second Amended Complaint in In re CarLotz, Inc. Sec. Litig. The Court granted that proposal and stayed the case on February 15, 2022.

In addition to the matters above, the Company is involved in certain legal matters that it considers incidental to its business. In management’s opinion, none of these legal matters will have a material effect on the Company’s financial position or results of operations.

Note 16 — Redeemable Convertible Preferred Stock

Unpaid cumulative distributions were approximately $4,800 as of December 31, 2020, and the Series A Preferred Stock had a liquidation preference of $37,114 as of December 31, 2020. Upon liquidation of Former CarLotz, proceeds in excess of the Series A Preferred Stock would have been shared pro rata among all stockholders based on the number of shares. The unpaid cumulative distributions are included as Accrued expenses — related party on the accompanying condensed consolidated balance sheets. As a result of the Merger, the Company settled Former CarLotz’ redeemable convertible preferred stock and redeemable convertible preferred stock tranche obligation with carrying values of $17,560 and $2,832, respectively, as of December 31, 2020.

Note 17 — Stock-Based Compensation Plan

Stock Option Plans

The Company has three stock incentive plans, the “2011 Stock Option Plan,” the “2017 Stock Option Plan” and the “2020 Incentive Award Plan,” to promote the long-term growth and profitability of the Company. The plans do this by providing senior management and other employees with incentive to improve shareholder value and contribute to the growth and financial success of the Company by granting equity instruments to these stakeholders.

Share-based compensation expense was recorded for the three months ended March 31, 2022 and 2021 of approximately $1,684 and $41,963, respectively.

The Company estimates the fair value of stock options using the Black-Scholes pricing model. The Black-Scholes pricing model requires the use of subjective inputs such as stock price volatility. Changes in the inputs can materially affect the fair value estimates and ultimately the amount of stock-based compensation expense that is recognized.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

A summary of activity for the three months ended March 31, 2022 and 2021 for the 2011 Stock Option Plan is as follows:


	Number of Stock Options	Weighted Average Exercise Price
Balance (December 31, 2021)	1,260,328	$0.56
Granted	—	—
Exercised	(50,964)	0.32
Forfeited	—	—
Balance (March 31, 2022)	1,209,364	0.57
Vested (as of March 31, 2022)	1,209,364	$0.57


	Number of Stock Options	Weighted Average Exercise Price
Balance (December 31, 2020)	1,571,205	$0.59
Granted	—	—
Exercised	(56,059)	0.24
Forfeited	—	—
Balance (March 31, 2021)	1,515,146	0.58
Vested (as of March 31, 2021)	1,515,146	$0.58

The following summarizes certain information about stock options vested and expected to vest as of March 31, 2022 related to the 2011 Stock Option Plan:

Number of

Stock Options

Weighted Average

Remaining

Contractual Life

Weighted Average

Exercise Price

Outstanding

1,209,364

0.42 years

$0.57

Exercisable

1,209,364

0.42 years

$0.57

Aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the option exercise price and the estimated fair value of the Company’s common stock at the time such option exercises. This intrinsic value changes based on changes in the fair value of the Company’s underlying common stock. The aggregate intrinsic value for options outstanding and options exercisable as of March 31, 2022 was $0.80.

The terms of the 2017 Stock Option Plan provide for vesting upon certain market and performance conditions, including achieving certain triggering events, including specified levels of return on investment upon a sale of the Company. Because the 2017 Stock Option Plan has a market-based vesting condition, an open-form valuation model was used to value the options. All

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

stock options related to the 2017 Stock Option Plan have an exercise price of $0.92 per share. All stock options related to the 2017 Stock Option Plan expire 10 years after the grant date, which ranges from March 2028 to August 2030.

A summary of activity for the three months ended March 31, 2022 and 2021 for the 2017 Stock Option Plan is as follows:


	Number of Units	Weighted Averaged Exercise Price
Balance (December 31, 2021)	3,936,176	$	0.92
Granted	—	—
Exercised	(6,371)	$	0.92
Forfeited	(19,111)	0.92
Balance (March 31, 2022)	3,910,694	$	0.92
Vested (as of March 31, 2022)	3,631,681	$	0.92


	Number of Units	Weighted Averaged Exercise Price
Balance (December 31, 2020)	3,961,658	$	0.92
Granted	—	—
Forfeited	—	—
Balance (March 31, 2021)	3,961,658	$	0.92

The 2017 options vest upon a change of control. Although the Merger did not meet the definition of a change of control, the Company modified the awards in connection with the Merger such that all vesting conditions were waived for 3,538,672 of the options. This modification impacted eight employees and resulted in $38,800 of share-based compensation on the modification date. The remaining options were also modified but will vest over a service period of four years and impacted 16 employees. At the time of modification, these options resulted in $186 of cash consideration and $4,500 of share based compensation that will be recognized over the service period of four years. For the three months ended March 31, 2022, $249 of share-based compensation was recognized.

The following summarizes certain information about stock options vested and expected to vest as of March 31, 2022 related to the 2017 Stock Option Plan:

Number of

Stock Options

Weighted Average

Remaining

Contractual Life

Weighted Average

Exercise Price

Outstanding

3,910,694

7.30 years

$0.92

Exercisable

3,631,681

7.21 years

$0.92

The aggregate intrinsic value for options outstanding and options exercisable as of March 31, 2022 was $0.45.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

The inputs used for the 2017 Stock Option Plan were as follows:


Balance (Expected volatility)	80.00	%
Expected dividend yield	—	%
Expected term (in years)	3.6 - 4.8 years
Risk-free interest rate	0.32% - 0.45%

The options associated with the 2020 Incentive Award Plan vest over a service period of three to four years. A summary of activity for the three months ended March 31, 2022 and 2021 for the options associated with the 2020 Incentive Award Plan is as follows:


	Number of Units	Weighted Averaged Exercise Price
Balance (December 31, 2021)	1,469,297	$	11.12
Granted	1,573,361	$	1.68
Forfeited	(74,626)	$	10.47
Balance (March 31, 2022)	2,968,032	$	6.13
Exercisable	388,691	$	11.34


	Number of Units	Weighted Averaged Exercise Price
Balance (December 31, 2020)	—	$	—
Granted	1,409,401	11.35
Forfeited	—	—
Balance (March 31, 2021)	1,409,401	$	11.35

The grant date fair value of the options granted in the three months ended March 31, 2022 was $1.17. For the three months ended March 31, 2022, $908 of share based compensation was recognized. As of March 31, 2022, there was approximately $8,609 of total unrecognized compensation cost related to unvested options related to the 2020 Stock Incentive Award Plan.

The following summarizes certain information about stock options vested and expected to vest as of March 31, 2022 related to the 2020 Stock Option Plan:

Number of

Stock Options

Weighted Average

Remaining

Contractual Life

Weighted Average

Exercise Price

Outstanding

2,968,032

9.20 years

$6.13

Exercisable

388,691

7.27 years

$11.34

The aggregate intrinsic value for options outstanding and options exercisable as of March 31, 2022 was $0.00.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

The inputs used for the 2020 Incentive Award Plan options were as follows for the three months ended March 31, 2022:


Balance (Expected volatility)	80%
Expected dividend yield	—	%
Expected term (in years)	6 years
Risk-free interest rate	2.20%

The restricted shares associated with the 2020 Incentive Award Plan vest over a service period. A summary of activity for the three months ended March 31, 2022 for the restricted shares associated with the 2020 Incentive Award Plan is as follows:


	Balance (Number of Units	Weighted Average Grant Date Fair Value
Balance (December 31, 2021)	597,739	$	5.57
Granted	1,235,437	$	1.68
Forfeited	(54,208)	$	5.56
Vested (as of March 31, 2022)	(71,273)	$	5.69
Balance (March 31, 2022)	1,707,695	$	2.75

The grant date fair value of the restricted shares granted in the three months ended March 31, 2022 was $1.68. For the three months ended March 31, 2022, $527 of share based compensation cost was recognized. As of March 31, 2022, there was approximately $1,454 of unrecognized compensation cost that vests over a service period of four years, approximately $2,047 of unrecognized compensation cost that vests over a service period of three years, and $164 of unrecognized compensation cost that vests over a service period of one year related to unvested restricted shares related to the 2020 Stock Incentive Award Plan.

Earnout Restricted Stock Units

Former CarLotz option holders as of the effective time of the Merger received 640,421 earnout restricted stock units (Earnout RSUs). The Earnout RSUs vest if certain targets are met in the post-Merger period. The earnouts for the Earnout RSUs are subject to an earnout period, which is defined as the date 60 months following the consummation of the Merger. The Merger closed on January 21, 2021, and the earnout period expires January 21, 2026. Earnout RSUs will vest if any of the following conditions are achieved following January 21, 2021:

iii.If either the First Threshold or the Second Threshold is not met on or before the Forfeiture Date, any unvested Earnout RSUs are forfeited. All unvested Earnout RSUs will vest if there is a change of control of the Company that will result in the holders of the common stock receiving a per share price equal to or in excess of $10.00 (as equitably adjusted for stock splits, stock dividends, special cash dividends, reorganizations, combinations, recapitalizations and similar transactions affecting the common stock) prior to the Forfeiture Date.

The estimated fair value of the liability is determined by using a Monte-Carlo simulation model, which incorporates various assumptions, including expected stock price volatility, contractual term, dividend yield and stock price at grant date. The Company estimates the volatility of common stock on the date of grant based on the weighted-average historical stock price volatility of comparable publicly-traded companies.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

A summary of activity for the three months ended March 31, 2022 and 2021 for the RSUs is as follows:


	Number of Units	Weighted Average grant date fair value
Balance (December 31, 2021)	621,200	$	10.70
Granted	—	—
Forfeited	(141,350)	10.70
Balance (March 31, 2022)	479,850	$	10.70


	Number of Units	Weighted Average grant date fair value
Balance (December 31, 2020)	—	$	—
Granted	640,421	10.70
Forfeited	—	—
Balance (March 31, 2021)	640,421	$	10.70

During the three months ended March 31, 2022, the Company recognized no stock-based compensation cost related to the RSUs. As of March 31, 2022, there was no additional unrecognized compensation cost related to the Earnout RSUs.

The inputs used to value the Earnout RSUs were as follows at January 21, 2021:


Expected volatility	80.00		%
Starting stock price	$	11.31
Expected term (in years)	5 years
Risk-free interest rate	0.45		%
Earnout hurdle	$12.50-$15.00

Note 18 — Income Taxes

During the three months ended March 31, 2022, the Company recorded no income tax benefits for the net operating losses incurred in the period due to its uncertainty of realizing a benefit from those items. All of the Company’s operating losses since inception have been generated in the United States.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception through March 31, 2022 and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Management reevaluates the positive and negative evidence at each reporting period. As of March 31, 2022 and December 31, 2021, no facts or circumstances arose that affected the Company’s determination as to the full valuation allowance established against the net deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of March 31, 2022 and December 31, 2021.

CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except share data)

Note 19 — Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31,
	2022		2021
Numerator:
Net Loss	$	(24,836)	$	(15,022)
Denominator:
Weighted average common shares outstanding, basic and diluted	114,054,597		100,817,385
Net Loss per Share Attributable to Common Stockholders, basic and diluted	$	(0.22)	$	(0.15)

The following table summarizes the outstanding potentially dilutive securities that were excluded from the computation of diluted net loss per share attributable to common stockholders because the impact of including them would have been antidilutive for the three months ended March 31, 2022 and 2021:


	2022	2021
Public warrants	10,185,774	10,185,774
Private warrants	6,074,310	6,074,310
Earnout RSUs	479,850	640,421
Earnout shares	6,945,732	6,945,732
Convertible notes payable	—	—
Historic warrants	—	—
Stock options outstanding to purchase shares of common stock	8,088,090	6,886,205
Unvested RSUs	1,707,695	—
Total	33,481,451	30,732,442

Note 20 — Concentrations

The suppliers that accounted for 10% or more of the Company’s vehicle purchases are presented as follows:


	Total purchases from vendor to total vehicle purchases for the three months ended March 31,
Vendor	2022	2021
Vendor A	20%	62%
Vendor B	—%	—%

Vendor A is a corporate vehicle sourcing partner. Typically, we purchase the vehicles from our corporate vehicle sourcing partners at the time of sale to a retail customer.

For the periods ended March 31, 2022 and 2021, no retail or wholesale customers accounted for more than 10% of the Company’s revenue.

Note 21 — Subsequent Events

In preparing these condensed consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through May 9, 2022, the date the financial statements were available to be issued.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto contained herein and the consolidated financial statements and notes thereto for the year ended December 31, 2021 contained in our Annual Report on Form 10-K filed with the SEC on March 15, 2022. Unless the context otherwise requires, references to “we”, “us”, “our” and the “Company” are intended to mean the business and operations of CarLotz, Inc. and its consolidated subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding, among other things, the plans, strategies and prospects, both business and financial, of the Company. These statements are based on the beliefs and assumptions of our management team. Although we believe our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” “intends” or similar expressions. Such statements, including statements regarding our ability to: manage our business through and following the COVID-19 pandemic and the related semi-conductor chip and labor shortages; achieve revenue growth and profitability in the future; innovate and expand our technological capabilities; effectively optimize our reconditioning operations; grow existing vehicle sourcing accounts and key vehicle channels; add new corporate vehicle sourcing accounts and increase consumer sourcing; have sufficient and suitable inventory for resale; increase our service offerings and price optimization; effectively promote our brand and increase brand awareness; expand our product offerings and introduce additional products and services; improve future operating and financial results; acquire and protect intellectual property; attract, train and retain key personnel, including sales and customer service personnel; acquire and integrate other companies and technologies; remediate material weaknesses in internal control over financial reporting; comply with laws and regulations applicable to our business; successfully defend litigation; and successfully deploy the proceeds from the merger pursuant to that certain Agreement and Plan of Merger, dated as of October 21, 2020 (as amended by Amendment No. 1, dated December 16, 2020), by and among CarLotz, Inc. (f/k/a Acamar Partners Acquisition Corp.), Acamar Partners Sub, Inc., a wholly owned subsidiary of CarLotz, Inc., and CarLotz Group, Inc. (f/k/a CarLotz, Inc.), pursuant to which Acamar Partners Sub, Inc. merged with and into Former CarLotz, with Former CarLotz surviving as the surviving company and as a wholly owned subsidiary of CarLotz, Inc. (the “Merger”), are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results or other outcomes to differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 15, 2022, and those described from time to time in our future reports filed with the SEC. Many of these risk factors are outside of our control, and as such, they involve risks which are not currently known that could cause actual results to differ materially from those discussed or implied herein. The forward-looking statements in this document are made as of the date on which they are made and we do not undertake to update our forward-looking statements.

Website and Social Media Disclosure

We use our website (https://www.carlotz.com/) and various social media channels as a means of disclosing information about the Company and its products to its customers, investors and the public (e.g., @CarLotz411 on Twitter, CarLotz on YouTube, and CarLotz on LinkedIn). The information on our website (or any webpages referenced in this Quarterly Report on Form 10-Q) or posted on social media channels is not part of this or any other report that the Company files with, or furnishes to, the SEC. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts.

Overview

CarLotz operates a consignment-to-retail used vehicle marketplace that provides our corporate vehicle sourcing partners and retail sellers of used vehicles with the ability to easily access the retail sales channel. Our mission is to create the world’s greatest vehicle buying and selling experience. We operate a technology-enabled buying, sourcing and selling model that offers an omni-channel experience and diverse selection of vehicles. Our proprietary technology provides our corporate vehicle

sourcing partners with real-time performance metrics and data analytics along with custom business intelligence reporting that enables vehicle triage optimization between the wholesale and retail channels.

Our consignment model facilitates the sale of a vehicle by individuals and businesses alike. For our consignment partners we offer a physical location to display the vehicle, detailing, photography, marketing, a degree of separation between the seller and buyer, and the consumer confidence associated with a national dealership. Our asset-light model is designed to allow us to obtain vehicles through consignment, thereby limiting capital risk, as those vehicles consigned to us for sale (as opposed to purchased vehicles) are still owned by our corporate vehicle sourcing partners and retail sellers.

We offer our products and services to (i) corporate vehicle sourcing partners, (ii) retail sellers of used vehicles and (iii) retail customers seeking to buy used vehicles. Our corporate vehicle sourcing partners include fleet leasing companies, vehicle rental companies, banks, finance companies, third-party remarketers, wholesalers, corporations managing their own fleets and OEMs. We offer our corporate vehicle sourcing partners a pioneering, Retail Remarketing™ service that is designed to fully integrate with their existing technology platforms. For individuals who are our retail sellers, our goal is to offer a hassle-free selling experience that allows them to stay fully informed by tracking the sale process through our easy to navigate online portal. Buyers can browse our inventory online through our website or at our locations as well as select from our integrated financing and insurance products with ease.

Founded in 2011, CarLotz currently operates twenty-two retail hub locations in the U.S., initially launched in the Mid-Atlantic region and since expanded to the Southeast, Southwest, Midwest, West and Pacific Northwest regions of the United States. Our current facilities are located in Alabama, California, Colorado, Georgia, Florida, Illinois, North Carolina, Tennessee, Texas, Virginia and Washington State. Generally, our hubs act as both physical showrooms with retail sales and as consignment centers where we can source, process and recondition newly acquired vehicles. With the aim of improving our operating and financial results, we are planning to pause our real estate growth efforts in 2022, except for one hub which we may open in 2022.

Business Update

During the three months ended March 31, 2022, the continuing semi-conductor chip shortage, COVID-related supply chain issues constraining supply of new vehicles and an elevated vehicle wholesale pricing environment relative to historic levels has reduced the incremental value we may deliver to our corporate vehicle sourcing partners via Retail Remarketing™, at times making consignment less attractive to partners than quickly selling vehicles through the wholesale channel. Supply of used vehicles from our corporate vehicle sourcing partners has been severely constrained by the lack of new vehicle supply due to the semi-conductor chip shortage. Due to the continued uncertainty influencing the used vehicle market, we are unable to predict when there will be a return to a more normalized used vehicle market.

During the three months ended March 31, 2022, some of our inventory was less profitable than expected and was held for sale longer than desired. As a result, our retail gross profit was negatively impacted in the first quarter of 2022 by lower front-end profits on owned vehicles as well as processing center inefficiencies, and we expect gross profit to be under pressure until the used vehicle market normalizes and we are able to improve the productivity and efficiency at our hubs. At March 31, 2022, non-competitively sourced vehicles (i.e. vehicles sourced other than from auctions) represented approximately 69% of our vehicle inventory, as compared to 75% at March 31, 2021. As part of our goal to increase non-competitively sourced vehicles, our strategy is to increase our consignments from our sourcing partners and consumer acquired vehicles and reduce our reliance on sourcing via wholesale auction.

During the three months ended March 31, 2022, we experienced a decrease in retail unit sales and revenue compared to same period in 2021. Hubs opened in 2021 have not been ramping to expected results and consequently have not provided the expected contribution to unit sales, revenue, and gross profit. Also, we experienced a weaker retail GPU performance for the three months ended March 31, 2022 compared to the same period in 2021, due to both sourcing constraints and reconditioning inefficiency. We did not experience the uptick in sales that typically occurs late in the first calendar quarter of each year in our industry, primarily due to market dynamics related to the continuing semi-conductor chip shortage, inventory constraints and COVID-related supply chain issues as well as a fall in consumer sentiment given rising interest rates, inflation, and the economic impact of the war in Ukraine.

For the three months ended March 31, 2022, the corporate vehicle sourcing partner which accounted for 68% and 31% of our sold vehicles in the three months ended March 31, 2021 and the year ended December 31, 2020, respectively, accounted for 24% of our sold vehicles. We cannot currently predict the ultimate volume and profitability of any sourced vehicles from this partner.

As inventory levels increased and we moved through the quarter, we decreased our purchasing of vehicles through wholesale auctions as we increased our sourcing of non-competitively sourced vehicles. At March 31, 2022, consigned vehicles represented approximately 34% of our vehicle inventory.

Revenue Generation

CarLotz generates a significant majority of its revenue from contracts with retail customers related to the sales of vehicles. We sell used vehicles to our retail customers from our hubs located throughout the U.S. Customers also may trade-in their existing vehicle to apply toward the transaction price of a used vehicle, for which we generate revenue on the sale of a used vehicle to the customer trading-in their vehicle and on the traded-in vehicle when it is sold to a new owner. CarLotz also generates revenue from providing retail vehicle buyers with third-party options for financing, insurance, extended warranties, and other vehicle protection products, which CarLotz either marks up or earns commissions based on our customers’ purchases. Since we do not control these products before they are transferred to the consumer, we recognize net commission revenue at the time of sale.

We also sell vehicles to wholesalers or other dealers, primarily at auctions. Generally, the vehicles sold through the wholesale channel are vehicles acquired via trade-in, acquired via consignment that do not meet our quality standards for sale to retail customers, vehicles that remain unsold at the end of the consignment period, retail vehicles that did not sell through the retail channel within a reasonable period of time, or vehicles that the Company determines offer greater financial benefit through the wholesale channel.

Our revenue for the three months ended March 31, 2022 and 2021 was $63.0 million and $56.6 million, respectively.

Inventory Sourcing

We source vehicles from both corporate and consumer sellers, auctions and other wholesale channels. We source vehicles non-competitively (i.e. vehicles sourced other than from auctions) through our consignment to retail sales model, through purchases directly from consumers and through arrangements with corporate vehicle sourcing partners. We also source vehicles competitively through purchase at auction, as necessary, to provide inventory at our newer hub locations, to round out our inventory and during periods of tight supply.

We expect to maintain long-term sourcing relationships with a number of national accounts and to pursue sales from new accounts. We support our corporate vehicle sourcing partners by offering a technology platform designed to allow our supply partners to track the sale process of their vehicles in real-time, along with a custom system for managing customer leads and leads from third party providers. Our proprietary application includes a suite of tailored features designed to create value for sellers with tools for documenting and transmitting vehicle information.

We generally charge our retail sellers and some corporate vehicle sourcing partners a flat fee for our consignment services. In addition to our flat fee model, we also enter into alternative fee arrangements, such as profit sharing programs or programs with fees based on a return above a wholesale index. The profit sharing programs generally include arrangements where we share a percentage of vehicle sale profits and, in some cases, fees with our corporate sourcing partners. The programs with fees based on a return above a wholesale index generally include a payment above the wholesale price. Under these alternative fee arrangements, our gross profit for a particular unit could be higher or lower than the gross profit per unit we would realize under our flat fee pricing model depending on, among other things, the unit’s sale price, shipping and reconditioning costs, and fees we are able to charge in connection with the sale. We do not have long-term contracts with any of our corporate vehicle sourcing partners and, under arrangements with them, they are not required to make vehicles available to us. For these and other reasons, our volume and mix of vehicles from our corporate vehicle sourcing partners has fluctuated in the past and will continue to fluctuate over time. In addition, our gross profit per unit has fluctuated in the past and is likely to fluctuate from period to period, perhaps significantly, due to, among other reasons, our mix of competitively sourced and non-competitively sourced inventory, and the sales prices and fees we are able to collect on the vehicles.

We also have dealer owned inventory, which includes inventory purchased at wholesale auctions or purchased from consumers and our corporate partners, that operates in a similar manner to traditional used car dealers and which exposes us directly to the effects of changes in vehicle prices (generally price depreciation) more directly than inventory sourced through consignment.

Our gross profit per unit has fluctuated and will continue to fluctuate from period to period, perhaps significantly, due to, among other things, our mix of competitively sourced and non-competitively sourced inventory, acquisition costs and the sales prices and fees we are able to collect on the vehicles.

Regional Hub Network

Through our e-commerce website and twenty-two regional hubs, we aim to provide a shopping experience for today’s modern vehicle buyer, allowing our nationwide retail customers to transact online, in-person or a combination of both. We aim to offer a full-spectrum of inventory, including high-value and commercial vehicles, available for delivery anywhere in the U.S. Our regional hubs allow for test drives and on-site purchase. Our current facilities are located in Alabama, California, Colorado, Georgia, Florida, Illinois, North Carolina, Tennessee, Texas, Virginia, and Washington State.

Finance and Insurance (F&I)

CarLotz also generates revenue from providing retail vehicle buyers with options for financing, insurance and extended warranties; these services are provided by third parties that pay CarLotz a commission based on our customers’ purchases. Since we do not control these products before they are transferred to the consumer, we recognize commission revenue at the time of sale.

Factors Affecting our Performance

Impact of COVID-19

Our ability to acquire and sell used vehicles can be negatively impacted by a number of factors that are outside of our control. Due to the impacts of the COVID-19 pandemic and shortages of semi-conductor chips and other automotive supplies starting in 2020, certain automobile manufacturers have slowed production of new vehicles. The reduction in supply of new vehicles has limited the supply of used vehicles available through our corporate sourcing partners and is likely to continue to do so until the market normalizes. To address the reduction from this supply source, we have sourced a higher percentage of our vehicles through wholesale auction channels than we have historically. Because we are purchasing these vehicles in a competitive environment and paying auction fees, there is greater risk to the Company that the margin between the cost of the vehicle and the selling price will be compressed, and, in turn, will result in reduced gross profit and retail GPU, which we expect to continue until the used vehicle market normalizes and we are able to improve the productivity and efficiency at our hubs. This risk could be compounded by our inability to turn inventory quickly and the pace at which used vehicles depreciate.

We cannot provide assurance of the ultimate significance and duration of COVID-19 and the variants’ disruption to our operations for several reasons, including, but not limited to, uncertainty regarding the duration of the pandemic and related disruptions, the impact of governmental orders and regulations that have been, and may in the future be, imposed, and the impact of COVID-19 and the variants on our customers and corporate vehicle sourcing partners.

Like many companies, COVID-19 has increased our focus on the health and safety of our guests, employees and their families. To maintain a safe work environment, we have implemented procedures aligned with the Centers for Disease Control and Prevention to limit the spread of the virus and provide a safe environment for our guests and teammates. Some of the measures taken include encouraging our teammates to take advantage of flexible work arrangements, acquiring additional corporate office space and mandating social distancing.

Ability to Source Vehicles from Consumers

We believe that we can benefit from the significant volume of vehicles which consumers are selling to dealers and to car buying companies. We intend to increase our efforts on sourcing vehicles from the consumer market. Our ability to successfully source vehicles from consumers is dependent on our marketing, brand, process and pricing. In addition to our consignment model, we partnered with a third-party company to be able to provide instant purchase offers to potential sellers.

Further Penetration of Existing Accounts and Key Vehicle Channels

We believe that we can benefit from volume with existing corporate vehicle sourcing partners. Many of our existing sourcing partners still sell only a small percentage of their volumes through the retail channel. As Retail Remarketing™ continues to develop as a more established alternative and as CarLotz expands to serve buyers and sellers in its markets, we believe we can grow our existing commercial seller accounts, after the supply of new vehicles returns to normal.

Seasonality

Used vehicle sales generally experience seasonality with sales typically peaking late in the first calendar quarter of each year and diminishing through the rest of the year, with the lowest relative level of vehicle sales expected to occur in the fourth calendar quarter. Used vehicle prices also exhibit seasonality, with used vehicle prices declining at a faster rate in the last two quarters of each year and a slower rate in the first two quarters of each year, all other factors being equal. Because of the market dynamics related to the continuing semi-conductor chip shortage and COVID-related supply chain issues constraining supply, we have not seen the typical seasonality related to used vehicle volume and prices.

Operational Efficiency

As we scaled our business, we incurred various costs to identify new hub locations, obtain licensing, build out our hubs and hire and train our employees. The costs we incurred scaling our business are non-recurring, and we further plan to focus on operational efficiency by reducing discretionary spending, optimizing our staffing level, and focusing on the efficiency of our processing centers.

In addition to achieving cost savings and operational efficiencies, we aim to lower our days to recondition. Going forward, our strategy is to focus on efficiency and reduce our use of the third party reconditioning services which are more costly and are not as timely as our internal reconditioning resources. All of these initiatives are designed to lower reconditioning costs per unit and thereby improve per unit economics.

Technological Capabilities

We are constantly reviewing our technology platform, and our goal is to enhance our online platform for seamless end-to-end transactions and to continually enhance both the car buying and selling experience. Our B2B portal and integration framework are designed to support the assignment, reconditioning, sale and remittance of vehicles from corporate vehicle sourcing partners. We plan to invest in our core suite of technology to enhance the buyer and seller experience, improve our B2B vehicle sourcing and enhance our business intelligence capabilities.

Key Operating Metrics

We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our progress and make strategic decisions. Our operating metrics (which may be changed or adjusted over time as our business scales up or industry dynamics change) measure the key drivers of our growth, including opening new hubs, increasing our brand awareness through unique site visitors and continuing to offer a full spectrum of used vehicles to service all types of customers.


	Three Months Ended March 31,
	2022			2021
Retail vehicles sold	2,270			2,554
Number of hubs	22			11
Average monthly unique visitors	257,022			178,783
Vehicles available for sale	2,184			1,581
Retail gross profit per unit	$	827		$	1,182
Percentage of unit sales sourced non-competitively(1)	65		%	99		%

(1) Vehicles are sourced non-competitively through our consignment to retail sales model, through purchases directly from consumers and through arrangements with corporate vehicle sourcing partners.

Retail Vehicles Sold

We define retail vehicles sold as the number of vehicles sold to customers in a given period, net of returns. We currently have a three-day, 500 mile exchange policy. The number of retail vehicles sold is the primary contributor to our revenues and gross profit, since retail vehicles enable multiple complementary revenue streams, including all finance and insurance products. We view retail vehicles sold as a key measure of our growth, as growth in this metric is an indicator of our ability to successfully scale our operations while maintaining product integrity and customer satisfaction.

Number of Hubs

We define a hub as a physical location at which we may sell and purchase, recondition and store vehicles within a market.

Average Monthly Unique Visitors

We define a monthly unique visitor as an individual who has visited our website within a calendar month, based on data provided by Google Analytics. We calculate average monthly unique visitors as the sum of monthly unique visitors in a given period, divided by the number of months in that period. We view average monthly unique visitors as a key indicator of the strength of our brand, the effectiveness of our advertising and merchandising campaigns and consumer awareness.

Vehicles Available-for-Sale

We define vehicles available-for-sale as the number of vehicles listed for sale on our website on the last day of a given reporting period. We view vehicles available-for-sale as a key measure of our growth potential. Growth in vehicles available-for-sale increases the selection of vehicles available to consumers in all of our markets simultaneously, which we believe will allow us to increase the number of vehicles we sell. Moreover, growth in inventory units available is an indicator of our ability to scale our vehicle sourcing, inspection and reconditioning operations.

Retail Gross Profit per Unit

We define retail gross profit per unit as the aggregate retail and F&I gross profit in a given period divided by retail vehicles sold during that period. Total retail gross profit per unit is driven by sales of used vehicles and the profit margin and fees on sale of those vehicles, each of which may generate additional revenue from providing retail vehicle buyers with options for financing, insurance and extended warranties. We believe gross profit per unit is a key measure of our growth and long-term profitability.

Percentage of unit sales non-competitively sourced

We define percentage of unit sales sourced non-competitively as the percentage derived by dividing the number of vehicles sold during the period that were sourced non-competitively (i.e., number of vehicles sourced other than from auctions) divided by the total number of vehicles sold during the period. The percentage of unit sales sourced non-competitively dropped in the first quarter of 2022 due to the low supply of vehicles available from our corporate vehicle sourcing accounts as a result of the chip shortage.

Components of Results of Operations

Revenues

Retail Vehicle Sales

CarLotz sells used vehicles to retail customers through its hubs in various cities throughout the continental U.S. Revenue from retail vehicle sales is recognized when the title to the vehicle passes to the customer, at which point the customer controls the vehicle. We recognize revenue based on the total purchase price stated in the contract, including any processing fees. Our exchange policy allows customers to initiate the exchange of a vehicle until the earlier of the first three days or 500 miles after delivery.

Wholesale Vehicle Sales

Vehicles that do not meet the Company’s standards for retail vehicle sales, retail vehicles that did not sell through the retail channel within a reasonable period of time and vehicles that the Company determines offer greater financial benefit through the wholesale channel are sold through various wholesale methods. Revenue from wholesale vehicle sales is recognized when the vehicle is sold, either at auction or directly to a wholesaler, and title to the vehicle passes to the buyer.

Finance and Insurance, net

We provide customers with options for financing, insurance and extended warranties. Certain warranties sold beginning January 1, 2019 are serviced by a company owned by a major stockholder. All other such services are provided by third-party vendors with whom we have agreements giving us the right to offer such services directly. When a customer selects a service

from these third-party vendors, we earn a commission based on the actual price paid or financed. We recognize finance and insurance revenue at the point in time when the customer enters into the contract.

Lease Income, net

Lease income, net represents revenue earned on the spread between the interest rate on leases we enter into with our B2B lease customers and the related leases we enter into with third party lessors, as well as revenue (net of depreciation and other costs to maintain the vehicles) earned on our owned vehicles leased to B2B lease customers.

Cost of Sales

Cost of sales includes the cost to acquire used vehicles and the related reconditioning costs to prepare the vehicles for resale. Vehicle reconditioning costs include parts, labor, inbound transportation costs and other costs such as mechanical inspection, vehicle preparation supplies and repair costs. Cost of sales also includes any necessary adjustments to reflect vehicle inventory at the lower of cost or net realizable value.

Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily include compensation and benefits, marketing, facilities cost, technology expenses, logistics and other administrative expenses. Advertising costs are expensed as incurred.

Depreciation and Amortization

Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which is: the lesser of 15 years or the underlying lease terms for leasehold improvements, one to five years for equipment, furniture and fixtures, and five years for corporate vehicles. Expenditures for maintenance, repairs and minor renewals are charged to expense as incurred. Major remodels and improvements are capitalized. Depreciation on vehicles leased to B2B customers is calculated using the straight-line over the estimated useful life and is included as a charge to Lease income, net. Amortization of capitalized website and internal-use software costs is computed using the straight-line method over 3 years. Amortization of operating lease right-of-use assets is rent expense, included in selling, general, and administrative expenses.

Non-Operating Expenses

Non-operating expenses represent the change in fair value of the Merger warrants and the earnout shares. Additional non-operating income and expense include interest income on marketable securities, floor plan interest incurred on borrowings to finance the acquisition of used vehicle inventory under the Company’s former $12 million revolving floor plan facility with Automotive Finance Corporation and floor plan interest incurred on borrowings to finance the acquisition of used vehicle inventory under the Company’s current $40 million revolving floor plan facility with Ally.

Results of Operations

The following table presents our condensed consolidated statements of operations for the periods indicated:


	Three Months Ended March 31,
	2022		2021
	($ in thousands)
Revenues:
Retail vehicle sales	$	50,588	$	50,383
Wholesale vehicle sales	8,575		4,568
Finance and insurance, net	3,705		1,554
Lease income, net	146		107
Total Revenues	63,014		56,612
Cost of sales (exclusive of depreciation)	60,936		54,604
Gross Profit	2,078		2,008
Operating Expenses:
Selling, general and administrative	27,674		18,873
Stock based compensation expense	1,684		41,963
Depreciation and amortization expense	1,789		383
Management fee expense – related party	—		2
Total Operating Expenses	31,147		61,221
Loss from Operations	(29,069)		(59,213)
Interest expense	617		175
Other Income (Expense), net
Change in fair value of Merger warrants liability	1,600		12,358

Change in fair value of earnout provision	4,029		31,846
Other (expense) income	(779)		162
Total Other Income, net	4,850		44,366
Loss Before Income Tax Expense	(24,836)		(15,022)
Income tax expense	—		—
Net Loss	$	(24,836)	$	(15,022)

Presentation of Results of Operations

We present operating results down to gross profit for our three distinct revenue channels along with our net lease income:

Retail Vehicle Sales: Retail vehicle sales represent sales of vehicles to our retail customers through our hubs in various cities.

Wholesale Vehicle Sales: Wholesale vehicle sales represent sales of vehicles through wholesale channels, primarily through wholesale auctions.

Finance and Insurance: Finance and insurance represents commissions earned on financing, insurance and extended warranty products that we offer to our retail vehicle buyers.

Lease Income, net: Lease income, net represents revenue earned on the spread between the interest rate on leases we enter into with our B2B lease customers and the related leases we enter into with third party lessors, as well as revenue (net of depreciation and other costs to maintain the vehicles) earned on our owned vehicles leased to B2B lease customers.

Three Months Ended March 31, 2022 and 2021

The following table presents certain information from our condensed consolidated statements of operations by channel:


	Three Months Ended March 31,
	2022		2021		Change
	($ in thousands, except per unit metrics)
Revenue:
Retail vehicle sales	$	50,588	$	50,383	0.4	%
Wholesale vehicle sales	8,575		4,568		87.7	%
Finance and insurance, net	3,705		1,554		138.4	%
Lease income, net	146		107		36.4	%
Total revenues	63,014		56,612		11.3	%
Cost of sales:
Retail vehicle cost of sales	52,415		48,917		7.2	%
Wholesale vehicle cost of sales	8,521		5,687		49.8	%
Total cost of sales	$	60,936	$	54,604	11.6	%
Gross profit:
Retail vehicle gross profit (loss)	$	(1,827)	$	1,466	(224.6)	%
Wholesale vehicle gross profit (loss)	54		(1,119)		104.8	%
Finance and insurance gross profit	3,705		1,554		138.4	%
Lease income, net	146		107		36.4	%
Total gross profit	$	2,078	$	2,008	3.5	%
Retail gross profit per unit(1):
Retail vehicle gross profit (loss)	(1,827)		1,466		(224.6)	%
Finance and insurance gross profit	3,705		1,554		138.4	%
Total retail vehicle and finance and insurance gross profit	1,878		3,020		(37.8)	%
Retail vehicle unit sales	2,270		2,554		(11.1)	%

Retail vehicle gross profit per unit	$	827	$	1,182	(30.0)	%

______________

(1)Gross profit per unit is calculated as gross profit for retail vehicles and finance and insurance, each of which is divided by the total number of retail vehicles sold in the period.

Retail Vehicle Sales

Retail vehicle sales revenue increased by $0.2 million, or 0.4%, to $50.6 million during the three months ended March 31, 2022, from $50.4 million in the comparable period in 2021. The increase was primarily driven by an increase in average sale price per unit of $2,631, to $21,875 that was offset by a decrease in retail vehicle unit sales to 2,270 retail vehicles in the three months ended March 31, 2022, compared to 2,554 retail vehicles in the comparable period in 2021. The average sale price has increased consistent with macroeconomic trends in the used car industry.

Wholesale Vehicle Revenue

Wholesale vehicle revenue increased by $4.0 million, or 87.7%, to $8.6 million during the three months ended March 31, 2022, from $4.6 million in the comparable period in 2021. The increase was primarily due to an increased average selling price of the wholesale vehicles sold, combined with an increase in wholesale vehicle unit sales.

Finance and Insurance (F&I)

F&I revenue increased by $2.1 million, or 138.4%, to $3.7 million during the three months ended March 31, 2022, from $1.6 million in the comparable period in 2021. This increase in F&I revenue was driven by higher penetration of contract sales per unit sold and higher profit per contract.

Lease Income, net

Lease income, net was $0.1 million during the three months ended March 31, 2022 and 2021.

Cost of Sales

Cost of sales increased by $6.3 million, or 11.6%, to $60.9 million during the three months ended March 31, 2022, from $54.6 million in the comparable period in 2021. The increase was due to an increased average acquisition price of the vehicles we sold in that period.

Retail Vehicle Gross Profit

Retail vehicle gross profit (loss) decreased by $(3.3) million, or (224.6)%, to $(1.8) million during the three months ended March 31, 2022, from $1.5 million in the comparable period in 2021. The decrease in retail gross profit for the three months ended March 31, 2022 resulted from a decrease in front-end margin per unit compared to the same period in 2021, driven by decreased front-end margins due to a combination of elevated acquisition prices of inventory primarily sourced through auction towards the end of prior year and the lowering of retail prices relative to the acquisition costs as the inventory matured. Additionally, as a result of adjusting the carrying value of inventory to the lower of cost or net realizable value, gross profit decreased by $(0.1) million, reducing retail gross profit per unit by $48, for the three months ended March 31, 2022.

Wholesale Vehicle Gross Profit

Wholesale vehicle gross profit (loss) increased by $1.2 million, to $0.1 million during the three months ended March 31, 2022, from $(1.1) million in the comparable period in 2021. The increase was primarily due to a decrease in the number of delisted consignment units compared to the same period in 2021.

F&I Gross Profit

F&I revenue consists of 100% gross margin products for which there are no costs associated with the products. Therefore, changes in F&I gross profit and the associated drivers are identical to changes in F&I revenue and the associated drivers.

Components of SG&A


	Three Months Ended March 31,
	2022		2021
	($ in thousands)
Compensation and benefits(1)	$	10,798	$	6,856
Marketing	3,154		2,526
Technology	1,535		2,925
Accounting and legal	2,065		2,819
Insurance	2,236		1,336
Occupancy	3,291		1,032
Other costs(2)	4,595		1,379
Total selling, general and administrative expenses	$	27,674	$	18,873

(1)Compensation and benefits includes all payroll and related costs, including benefits, and payroll taxes, except those related to preparing vehicles for sale, which are included in cost of sales, and those related to the development of software products for internal use, which are capitalized to software and depreciated over the estimated useful lives of the related assets.

(2)Other costs include all other selling, general and administrative expenses such as logistics and other administrative expenses.

Selling, general and administrative expenses increased by $8.8 million, to $27.7 million during the three months ended March 31, 2022, from $18.9 million in the comparable period in 2021. Costs related to the expansion of the Company since the prior year period increased $5.6 million, primarily due to insurance, occupancy and vehicle listing costs. Compensation and benefits increased $3.9 million due to increased corporate headcount and new hub openings. Marketing expense increased $0.6

million in connection with marketing higher levels of inventory online and our national expansion, and technology expense decreased $(1.4) million due to elevated costs in the prior year quarter when the Company began website enhancements.

Non-GAAP Financial Measures

To supplement the interim unaudited condensed consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles (GAAP), we also present the following non-GAAP measures: EBITDA, Adjusted EBITDA and Adjusted retail GPU. We believe the presentation of both GAAP and non-GAAP financial measures provides investors with increased transparency into financial measures used by our management team, and it also improves investors’ understanding of our underlying operating performance and their ability to analyze our ongoing operating trends. All historic non-GAAP financial measures have been reconciled with the most directly comparable GAAP financial measures.

EBITDA is defined as net loss attributable to common stockholders adjusted to exclude interest expense, income tax expense and depreciation and amortization expense.

Adjusted EBITDA is EBITDA adjusted to exclude certain expenses related to the Company’s capital structure and management fee expense prior to the Merger, stock compensation expense and other non-operating income and expenses, including interest, investment gain/loss and nonrecurring income/expense.

Adjusted retail GPU is retail gross profit per unit adjusted to exclude the change in the inventory reserve for owned inventory to record inventory at the lower of cost or net realizable value. Retail gross profit per unit is the aggregate retail and F&I gross profit in a given period divided by retail vehicles sold during that period.

Management believes the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is useful to investors in comparing the Company’s performance prior to the Merger and the Company’s performance following the Merger.

Management believes the inclusion of supplementary adjustments to retail gross profit per unit in presented Adjusted retail GPU is useful to investors in presenting the Company’s gross profit per unit on units actually sold during the period in comparing the Company’s performance to prior periods that did not have a material change in the inventory reserve.

EBITDA, Adjusted EBITDA and Adjusted retail GPU have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of the results as reported under GAAP. These measures may not be comparable to similarly titled measures reported by other companies.

The following tables reconcile EBITDA and Adjusted EBITDA to net loss attributable to common stockholders and Adjusted retail GPU to retail gross profit per unit for the periods presented:


	Three Months Ended March 31,
	2022		2021
	($ in thousands)
Net Loss	$	(24,836)	$	(15,022)
Adjusted to exclude the following:
Interest expense	617		175
Income tax expense	—		—
Depreciation and amortization expense	1,789		383
EBITDA	$	(22,430)	$	(14,464)
Other expense	779		(162)
Stock compensation expense	1,684		41,963
Management fee expense - related party	—		2
Change in fair value of warrants liability	(1,600)		(12,358)

Change in fair value of earnout provision	(4,029)		(31,846)
Adjusted EBITDA	$	(25,596)	$	(16,865)


	Three Months Ended March 31,
	2022		2021		Change		Change
Adjusted retail gross profit per unit(1):
Retail vehicle gross profit	$	(1,827)	$	1,466	$	(3,293)	(225)	%
Finance and insurance gross profit	3,705		1,554		2,151		138	%
Total retail gross profit	1,878		3,020		(1,142)		(38)	%
Change in inventory reserve(2)	109		—		109		100	%
Total adjusted retail gross profit	1,987		3,020		(1,033)		(34)	%
Retail vehicle units sold	2,270		2,554		(284)		(11)	%
Retail vehicle adjusted gross profit per unit	$	875	$	1,182	$	(307)	(26)	%

(1)Adjusted gross profit per unit is calculated as gross profit for retail vehicles and finance and insurance, excluding any cost of sales associated with recording existing inventory to net realizable value, each of which is divided by the total number of retail vehicles sold in the period.

(2)The change in inventory reserve represents the impact on the Condensed Consolidated Statements of Operations related to the adjustment for lower of cost or net realizable value of inventory in the period.

Liquidity and Capital Resources

Sources of liquidity

Our main source of liquidity is cash generated from financing activities, which primarily includes proceeds from the Merger (see Note 3 — Merger in our interim unaudited condensed consolidated financial statements). In connection with the Merger, pursuant to subscription agreements dated October 21, 2020 by and between Acamar Partners Acquisition Corp. (“Acamar Partners”) and certain strategic and accredited investors (the “PIPE Investors”), with respect to a private placement of shares of Acamar Partners Class A common stock, the Company issued and sold 12.5 million shares of Acamar Partners Class A common stock to the PIPE Investors at a price per share of $10.00 and an aggregate purchase price of $125.0 million.

Since inception, we have generally operated at a loss for most periods. As of March 31, 2022, we had cash and cash equivalents, restricted cash and short-term marketable securities of $153.4 million. We believe our available cash, restricted cash, short-term marketable securities and liquidity available under the Ally Facility are sufficient to fund our operations for at least the next 12 months. We expect to continue to operate at a loss until we bring our hubs to maturity, achieve scale and are able to leverage our operating costs. Our hubs opened in 2021 have not been ramping to expected results and consequently have not provided the expected contribution to unit sales, revenue and gross profit. We may also seek additional funds as needed through alternative sources of liquidity, including equity or debt financings or other arrangements. However, additional funds may not be available when we need them on terms that are acceptable to us, or at all.

Debt obligations

On March 10, 2021, we entered into an Inventory Financing and Security Agreement (the “Ally Facility”) with Ally Bank, a Utah chartered state bank (“Ally Bank”), and Ally Financial, Inc., a Delaware corporation (“Ally” and, together with Ally Bank, the “Lender”), pursuant to which the Lender may provide up to $30 million in financing, or such lesser sum which may be advanced to or on behalf of us from time to time, as part of our floorplan vehicle financing program. In June 2021, the Company expanded the floor plan credit facility by $10 million to a total of $40 million. As of March 31, 2022, we had $22.1 million principal outstanding under the Ally Facility, primarily from increased sourcing through vehicle purchases.

Under the Ally Facility, the Company is subject to financial covenants that require the Company to maintain at least 10% of the credit line in cash and cash equivalents, to maintain at least 10% of the credit line on deposit with Ally Bank and to maintain a minimum tangible net worth of $90 million calculated in accordance with U.S. GAAP.

Advances under the Ally Facility bear interest at a per annum rate designated from time to time by the Lender determined using a 365/360 simple interest method of calculation, unless expressly prohibited by law. The interest rate is currently the prime rate plus 2.50% per annum, or 6%. Advances under the Ally Facility, if not demanded earlier, are due and payable for each vehicle financed under the Ally Facility as and when such vehicle is sold, leased, consigned, gifted, exchanged,

transferred, or otherwise disposed of. Interest under the Ally Facility is due and payable upon demand, but, in general, in no event later than 60 days from the date of request for payment. Upon any event of default (including, without limitation, our obligation to pay upon demand any outstanding liabilities of the Ally Facility), the Lender may, at its option and without notice to us, exercise its right to demand immediate payment of all liabilities and other indebtedness and amounts owed to the Lender and its affiliates by us and our affiliates.

The Ally Facility is secured by a grant of a security interest in certain vehicle inventory and other assets of the Company.

We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests, certain derivative instruments and variable interest entities that either have, or are reasonably likely to have, a current or future material effect on our interim unaudited condensed consolidated financial statements.

Cash Flows — Three Months Ended March 31, 2022 and 2021

The following table summarizes our cash flows for the periods indicated:


	Three Months Ended March 31,
	2022		2021
	($ in thousands)
Cash Flow Data:
Net cash (used in) operating activities	$	(31,664)	$	(19,600)
Net cash provided by (used in) investing activities	37,529		(219,370)
Net cash provided by (used in) financing activities	(5,891)		310,746

Operating Activities

For the three months ended March 31, 2022, net cash used in operating activities was $(31.7) million, primarily driven by net loss of $(24.8) million adjusted for non-cash charges of $0.6 million and net changes in our operating assets and liabilities of $(7.5) million. The non-cash adjustments primarily relate to a decrease in fair value of the warrants and earnout shares of $(5.6) million, offset by depreciation and amortization of $4.1 million and stock compensation of $1.7 million. The changes in operating assets and liabilities were primarily driven by an increase in inventories $(5.1) million and an increase other current assets of $(6.0) million, partially offset by an increase in accrued expenses of $1.0 million, an increase in accounts payable of $1.6 million, and a decrease in accounts receivable of $1.3 million.

For the three months ended March 31, 2021, net cash used in operating activities was $(19.6) million, primarily driven by net loss of $(15.0) million adjusted for non-cash charges of $(1.9) million and net changes in our operating assets and liabilities of $(2.7) million. The non-cash adjustments primarily relate to a decrease in fair value of the warrants and earnout shares of $44.2 million, partially offset by an increase in stock compensation of $(42.0) million. The changes in operating assets and liabilities were primarily driven by an increase in other current assets of $5.9 million, an increase in accounts receivable of $5.2 million, and an increase in other long-term assets of $3.0 million, partially offset by an increase in accrued expenses of $(5.9) million, an increase in accounts payable of $(3.1) million, and a decrease in inventories of $(2.0) million.

Investing Activities

For the three months ended March 31, 2022, net cash provided by investing activities was $37.5 million, primarily driven by sales and maturities of marketable securities of $64.9 million and partially offset by the purchase of property and equipment of $(4.1) million and purchases of marketable securities of $(22.0) million.

For the three months ended March 31, 2021, net cash used in investing activities was $(219.5) million, primarily driven by purchases of marketable securities of $(217.7) million and the purchase of property and equipment of $(1.7) million.

Financing Activities

For the three months ended March 31, 2022, net cash used in financing activities was $(5.9) million, primarily driven by payments on floor plan notes payable of $(41.7) million, partially offset by borrowings on the floor plan facility of $36.0 million.

For the three months ended March 31, 2021, net cash provided by financing activities was $310.7 million, primarily driven by the issuance of common stock to the PIPE investors and Former CarLotz shareholders of $319.9 million, partially offset by the repayment of debt of $(12.2) million and the payment of cash consideration on options of $(2.5) million, partially offset by borrowings on the floorplan facility of $9.2 million.

Material Contractual Obligations

The Company had contractual obligations as of March 31, 2022 that are material to an assessment of the Company’s short- and long-term cash requirements. As of March 31, 2022, the Company has total outstanding debt of $22.1 million under the floorplan facility, which represents the principal amount outstanding due to the uncertainty of forecasting the timing of expected variable interest rate payments. Borrowings under the floorplan facility are payable when the underlying vehicle is sold, which is expected to be in 2022.

Off-Balance Sheet Arrangements

Critical Accounting Policies and Estimates

For information on critical accounting policies, see “Critical Accounting Policy and Estimates” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Form 10-K filed with the SEC on March 15, 2022.

There have been no changes to our critical accounting policies during the three months ended March 31, 2022.

Recently Issued and Adopted Accounting Pronouncements

See the section titled “Recently Issued Accounting Pronouncements” in Note 2 in the “Notes to Condensed Consolidated Financial Statements” in our interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Cash and cash equivalents include highly liquid investments that are due on demand or have a remaining maturity of three months or less at the date of purchase. As of March 31, 2022, cash and cash equivalents consisted of bank deposits, money market placements and debt securities that have a remaining maturity of three months or less at the date of purchase.

The cash and cash equivalents are held primarily for working capital purposes. These interest-earning instruments are subject to interest rate risk. To date, fluctuations in interest income have not been significant. Our surplus cash has been invested in money market fund accounts, interest-bearing savings accounts and U.S. government debt securities as well as corporate debt securities from time to time. We have not entered into investments for trading or speculative purposes. Due to the conservative nature of our investment portfolio, which is predicated on capital preservation of investments with short-term maturities, we do not believe an immediate one percentage point change in interest rates would have a material effect on the fair market value of our portfolio, and therefore, we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.

We also have exposure to changing interest rates in connection with the floor plan facility. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. Advances under the floor plan facility accrue interest at the most recent prime rate published in The Wall Street Journal plus 2.50% per annum and, as of March 31, 2022, the prime rate as published in The Wall Street Journal

was 3.5%. We believe a change to our interest rate of 1% applicable to our outstanding indebtedness would have an immaterial financial impact. As of March 31, 2022, we had total outstanding debt of $22.1 million under the floor plan facility.

Credit Risk

Financial instruments that potentially subject us to concentration of credit risk consist of cash and cash equivalents and accounts receivable. Substantially all of our cash and cash equivalents were deposited in accounts at one financial institution, and account balances may at times exceed federally insured limits. Management believes that we are not exposed to significant credit risk due to the financial strength of the depository institution in which the cash is held.

Concentrations of credit risk with respect to trade receivables are limited due to the large diversity and number of customers comprising our retail customer base.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of March 31, 2022 due to the existence of material weaknesses in internal control over financial reporting that were identified in connection with the audits of our consolidated financial statements as of December 31, 2021 and 2020 and for the years in the three year period ended December 31, 2021, and which are still being remediated.

Material Weaknesses in Internal Control Over Financial Reporting

Control Environment

We did not maintain an effective control environment to enable the identification and mitigation of risks of material misstatement, either individually or in the aggregate, based on the criteria established in the COSO Framework relating to the lack of sufficient accounting and financial reporting resources to address internal control over financial reporting.

Specifically, we did not attract, develop and retain accounting and financial resources commensurate with the size and complexity of our organization to support the oversight of processes and procedures in applying internal control over financial reporting to adequately prevent or detect accounting errors.

Control Activities

We did not design and implement effective control activities to enable the identification and mitigation of risks of material misstatement, either individually or in the aggregate, based on the criteria established by the COSO Framework. We have identified deficiencies in the principles associated with the control activities component of the COSO Framework relating to our: (i) inability to appropriately and timely reconcile account balances to detect accounting errors and evaluate balances for completeness and accuracy, and (ii) selecting and developing control activities and information technology that contribute to the mitigation of risks and support achievement of objectives.

The following deficiencies in control activities, among others, contributed to accounting errors or the potential for there to have been accounting errors that are material to the financial statements:

•Lack of sufficient resources within the accounting and financial reporting department to review for the completeness and accuracy of source data supporting account reconciliations.

•Inadequate segregation of duties.

•Inadequate general information technology controls in the areas of access security and program change-management over certain information technology systems that support the Company’s financial reporting processes.

Remediation Efforts to Address Material Weaknesses

Remediation of the identified material weaknesses and strengthening of our internal control environment will require a substantial effort throughout 2022 and beyond as necessary. The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

While we have taken steps to address the material weaknesses, our current information technology systems have limited automated capabilities which create manual processes that require the time of our accounting and financial reporting resources. We are creating more streamlined and efficient accounting processes to allow the accounting and financial reporting resources to effectively operate the controls that we have designed and implemented.

We are designing and implementing controls to establish and maintain appropriate segregation of duties, formalize accounting policies and controls around user access and change management and evaluating options for a new ERP system.

We will also continue to attract, develop and retain competent management to ensure oversight of our processes and procedures in applying internal control over financial reporting.

The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations.

Changes in Internal Control Over Financial Reporting

Except as disclosed above, there were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

The information with respect to this Part II, Item 1 can be found in Note 15 to our interim unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

In addition to the other information set forth in this report, readers should carefully consider the additional risk factor included below as well as the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition or future results. The risks described in our most recent Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. The impact of COVID-19 may implicate and exacerbate other risks discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, including but not limited to risks relating to general economic conditions. This situation continues to evolve and additional impacts may arise that we are not currently aware of. Due to the unprecedented nature of the COVID-19 pandemic and responses thereto, we cannot identify all of the risks we face from the pandemic and its aftermath.

Our failure to meet the continued listing requirements of The Nasdaq Global Market could result in a delisting of our common stock.

Our common stock is listed on The Nasdaq Global Market (“Nasdaq”), and we are required to satisfy the continued listing requirements of Nasdaq to maintain such listing, including, among other things, the maintenance of a minimum closing bid price of $1.00 per share. Nasdaq Listing Rule 5450(a)(1) requires listed securities maintain a minimum closing bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. In order to regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days. Although we are currently in compliance with the continued listing requirements of Nasdaq, there can be no assurance that we will be able to maintain compliance in the future.

The delisting of our common stock from Nasdaq may make it more difficult for us to raise capital on favorable terms in the future, or at all. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. Further, if our common stock were to be delisted from Nasdaq, our common stock would cease to be recognized as a covered security, and we would be subject to additional regulation in each state in which we offer our securities. Moreover, there is no assurance that any actions that we take to restore our compliance with the Nasdaq minimum bid requirement would stabilize the market price or improve the liquidity of our common stock, prevent our common stock from falling below the Nasdaq minimum bid price required for continued listing again or prevent future non-compliance with Nasdaq’s listing requirements.

There can be no assurance that we will continue to meet the minimum bid price requirement, or any other requirement in the future. If we fail to meet the minimum bid price requirement, or other applicable Nasdaq listing requirements, including maintaining minimum levels of stockholders’ equity or market values of our common stock, our common stock could be delisted. Delisting from Nasdaq would cause us to pursue eligibility for trading of our common stock on other markets or exchanges, or on an over-the-counter market. In such case, our stockholders’ ability to trade or obtain quotations of the market value of our common stock would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices of these securities. There can be no assurance that our common stock, if delisted from the Nasdaq, would be listed on a national securities exchange, a national quotation service or the over-the-counter markets. Delisting from the Nasdaq could also result in negative publicity, make it more difficult for us to raise additional capital, adversely affect the market liquidity of our common stock, decrease securities analysts’ coverage of us or diminish investor, supplier and employee confidence. In addition, our stock could become a “penny stock,” which would make trading of our common stock more difficult.

Use of social media may adversely impact our reputation or subject us to fines or other penalties.

Use of social media platforms, user review and recommendation websites and other forms of online communications provides individuals with access to a broad audience of consumers and other interested persons and increases the speed with which information and opinions can be shared. Regardless of their accuracy, negative posts or communications regarding our marketplace may be posted on social media platforms at any time and could quickly proliferate, which may harm our brand, reputation or business. The harm may be immediate, without affording us an opportunity for redress or correction. If we fail to

mitigate any misinformation or negative information, including information spread through social media channels, it could have a material adverse effect on our business, sales and results of operations.

We also use social media platforms as marketing tools or as channels to disseminate information. For example, the Company and its executive officers maintain Facebook, Instagram, YouTube, Twitter, LinkedIn, and other social media accounts, where certain information that may be relevant to customers and investors is disseminated. Our reputation or brand could be adversely impacted by, among other things, customer perceptions of our use of social media or customer perceptions of statements on social media platforms made by us, our employees or other third parties. In addition, as laws and regulations rapidly evolve to govern the use of these platforms, any failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could adversely impact our business, financial condition and results of operations or subject us to fines or other penalties.

Exhibit Index

Item 6. Exhibits and Financial Statement Schedules


Exhibit No.						Description
3.1						Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-252993), filed with the SEC on February 11, 2021)

3.2						Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K (File No. 001-38818), filed with the SEC on January 27, 2021)

10.1†						Separation and Release Agreement, dated March 14, 2022, between Michael Bor and CarLotz, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 001-38818), filed with the SEC on March 15, 2022)

10.2†						Employment Agreement, dated March 12, 2022, between Lev Peker and CarLotz, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K (File No. 001-38818), filed with the SEC on March 15, 2022)

10.3†						Employment Agreement, dated March 19, 2022, between Ozan Kaya and CarLotz, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 001-38818), filed with the SEC on March 31, 2022)

10.4†						Separation and Release Agreement, dated April 8, 2022, between John Foley and CarLotz, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 001-38818), filed with the SEC on April 11, 2022)

10.5*†						Separation and Release Agreement, dated April 1 , 2022, between Daniel Valerian and CarLotz, Inc.

10.5.1*†						Amendment to Separation and Release Agreement, dated May 5, 2022, between Daniel Valerian and CarLotz, Inc.















31.1*						Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002

31.2*						Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002

32.1*						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

32.2*						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002










































































































101.INS*						XBRL Instance Document

101.SCH*						XBRL Taxonomy Extension Schema Document

101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*						XBRL Taxonomy Extension Label Linkbase Document

101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (embedded with the Inline XBRL document and included in Exhibit 101)

_____________________

* Filed herewith

† Indicates a management contract or compensatory plan or arrangement.

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.


			CarLotz, Inc.

By:			/s/ THOMAS W. STOLTZ
			Thomas W. Stoltz
			Chief Financial Officer
			(Duly Authorized Officer and Principal Financial Officer)

Date: May 9, 2022

Execution Version

SEPARATION AND RELEASE AGREEMENT

This Separation and Release Agreement (the “Agreement”) is entered into on April 1, 2022, by and between Daniel Valerian (“Employee”) and CarLotz Inc., a Delaware corporation (the “Company”). Capitalized terms used but not defined herein shall have the meanings set forth in that certain Employment Agreement, entered into as of December 11, 2020, by and between Employee and the Company (the “Employment Agreement”).

1.Separation of Employment. Employee’s last day of employment with the Company shall be April 15, 2022 (the “Separation Date”). Effective as of the Separation Date, (i) Employee’s employment with the Company and all of its affiliates shall terminate and Employee shall cease to be an employee of all of the foregoing, (ii) pursuant to Section 3(d) of the Employment Agreement, Employee shall be deemed to have resigned from all positions as an officer of the Company and all positions as an officer of any subsidiary of the Company and (iii) the Employment Agreement shall terminate, and neither the Company nor Employee shall have any further obligations thereunder except as otherwise set forth herein. The Company and Employee further acknowledge and agree that the termination of Employee’s employment hereunder constitutes a “separation from service” within the meaning of Section 409A of the Code.

2.Accrued and Unpaid Compensation and Benefits. The Company will pay to Employee accrued and unpaid Annual Base Salary, unpaid Annual Bonus for 2021, expenses owed, accumulated unused vacation time and any other accrued amounts and benefits under the Company Arrangements (collectively, the “Accrued Benefits”), in each case in accordance with the terms of Section 4(a) (Company Obligations Upon Termination) of the Employment Agreement. The amount of the Annual Bonus for 2021 is $0. As of the Separation date, Employee has accrued seventy-three and sixty-eight hundredths (73.68) hours of vacation and eight (8) hours of paid time off.

3.Separation Benefits. In consideration of, and subject to and conditioned upon (i) Employee’s timely execution of this Agreement, (ii) Employee’s continued employment through the Separation Date, (iii) Employee’s continued compliance with the Loyalty Agreement (as defined below) and (iv) Employee’s timely execution of the general release attached hereto as Exhibit A (the “Additional Release”) on or within seven (7) days following the Separation Date, the Company will provide Employee with the separation benefits set forth in Section 4(c) (Severance Payments Upon a Termination Without Cause or Resignation with Good Reason) of the Employment Agreement subject to the terms, including payment timing, set forth therein, as modified herein, and Sections 9(k) (Withholding) and 9(m) (Section 409A) of the Employment Agreement, as set forth below. The Company and Employee acknowledge the following:

(a)The aggregate amount of Annual Base Salary to be paid in accordance with the Company’s payroll practices during the period commencing on the Separation Date and ending on the twelve (12)-month anniversary thereof in accordance with Section 4(c)(i)(A) of the Employment Agreement is $350,000.

(b)With respect to Employee’s outstanding equity awards:

(i)Notwithstanding anything to the contrary in Employee’s applicable equity award agreements, the termination of Employee’s employment hereunder shall constitute a termination of service as of the Separation Date for purposes of all such outstanding equity awards.

(ii)Employee’s 101,928 fully-vested stock options that were converted on January 21, 2021 from stock options originally granted on


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January 20, 2014 with a current exercise price of $0.24, shall remain exercisable for three (3) months from the Separation Date.

(iii)Employee’s 305,782 fully-vested stock options that were converted on January 21, 2021 from stock options originally granted on January 1, 2017, with a current exercise price of $0.64, shall remain exercisable for three (3) months from the Separation Date.

(iv)Employee’s 61,156 fully-vested stock options that were converted on January 21, 2021 from stock options originally granted on April 23, 2018, with a current exercise price of $0.92, shall remain exercisable until April 23, 2028.

(v)Employee’s 509,637 fully-vested stock options that were converted on January 21, 2021 from stock options originally granted on November 1, 2019, with a current exercise price of $0.92, shall remain exercisable until November 1, 2029.

(vi)Of Employee’s 183,469 stock options that were converted on January 21, 2021 from stock options originally granted on August 10, 2020 with a current exercise price of $0.92, (A) 45,867 are fully vested and shall remain exercisable until August 10, 2030 and (B) the remaining 137,602 shall be automatically cancelled and forfeited as of the Separation Date.

(vii)Of Employee’s 44,876 stock options that were granted on January 21, 2021 with an exercise price of $11.35, (A) 11,219 stock options are fully vested and shall remain exercisable for three (3) months following the Separation Date and (B) the remaining 33,657 stock options shall be automatically cancelled and forfeited as of the Separation Date.

(viii)Employee’s 23,127 outstanding unvested time-vesting restricted stock units granted on January 21, 2021 shall be automatically cancelled and forfeited as of the Separation Date.

(ix)Employee’s outstanding 118,091 earnout-vesting restricted stock units that were granted on January 21, 2021 shall be automatically cancelled and forfeited as of the Separation Date.

(c)In accordance with Section 4(c)(i)(D) of the Employment Agreement, during the period beginning on the Separation Date ending on the twelve (12) month anniversary thereof or, if earlier, the date on which Employee becomes eligible for comparable replacement coverage under a subsequent employer’s group health plan (in any case, the “COBRA Period”), subject to Employee’s valid election to continue healthcare coverage under Section 4980B of the Code and the regulations thereunder, the Company shall, in its sole discretion, either (A) continue to provide to Employee and Employee’s dependents, at the Company’s sole expense, or (B) reimburse Employee and Employee’s dependents for coverage under its group health plan (if any), at the same levels and costs in effect on the Separation Date (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars); provided, however, that if (1) any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the continuation coverage period to be, exempt from the application of Section 409A under Treasury Regulation Section 1.409A-1(a)(5), (2) the Company is


US-LEGAL-11047090 174293-0005

otherwise unable to continue to cover Employee or Employee’s dependents under its group health plans or (3) the Company cannot provide the benefit without violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then, in any such case, an amount equal to each remaining Company subsidy shall thereafter be paid to Employee in substantially equal monthly installments over the COBRA Period (or remaining portion thereof).

(d)The payments and benefits described in this Section 3 shall be in lieu of any termination or severance payments or benefits for which Employee may be eligible under any of the plans, policies or programs of the Company or under the Worker Adjustment Retraining Notification Act of 1988 or any similar state statute or regulation.

(e)No payment that is otherwise required to be paid to Employee pursuant to this Section 3 before the Additional Release becomes final and binding shall be paid to Employee until the first normal payroll payment date following the date the Additional Release becomes final and binding and any payment delayed as a result of this Section 3(e) shall be in a lump sum paid on such first payroll date; provided that if Employee materially breaches this Agreement or the Loyalty Agreement, then the Company’s continuing obligations under this Section 3 shall cease as of the date of the breach and Employee shall be entitled to no further payments hereunder.

4.Transition Consulting Services.

(a)Consulting Period. During the period commencing on the Separation Date and ending on the first (1st) anniversary thereof, unless earlier terminated as provided below (the “Consulting Period” and the last day of the Consulting Period, the “Consulting Period End Date”), Employee shall be available to provide services to the Company as a consultant for transition purposes (the “Transition Services”) for up to ten (10) hours per week, on an as-needed as-requested basis. Such Transition Services may include (i) providing transition and other related services to the Company to provide an effective transition of Employee’s existing responsibilities to the Company’s incoming Chief Technology Officer and (ii) providing advice relating to the Company as to matters of which Employee has knowledge from Employee’s role as former Chief Technology Officer. Such Transition Services shall be provided by telephone or in person or, at the Company’s request, at the Company’s business premises in Richmond, Virginia or such other location as the Company may reasonably designate.

(b)Consulting Fees. In exchange for the performance of the Transition Services during the Consulting Period, Employee shall be entitled to a consulting fee of $10,000 per month (the “Consulting Fee”). The portion of the Consulting Fee payable for each month will be paid in arrears, in accordance with the Company’s payroll practices.

(c)Expense. The Company will also reimburse Employee for expenses actually incurred by Employee in performing the Transition Services, so long as such expenses are reasonable and necessary as determined by the Company and approved in advance by the Company in writing.

(d)Books and Records Employee shall maintain adequate books and records relating to the fees owing hereunder and expenses to be reimbursed and shall


US-LEGAL-11047090 174293-0005

submit fee invoices and requests for reimbursement in a timely manner and form acceptable to the Company.

(e)Benefits. As an independent contractor, Employee understands and agrees that, while performing any services for the Company after the Separation Date, Employee shall not be eligible to participate in or accrue benefits under any Company benefit plan for which status as an employee of the Company is a condition of such participation or accrual. To the extent that Employee was deemed eligible to participate, as an employee, in any Company benefit plan, Employee hereby waives Employee’s participation (except as provided for in Section 1).

(f)Independent Contractor Status. Employee and the Company acknowledge and agree that, during the Consulting Period, Employee shall be an independent contractor. During the Consulting Period and thereafter, Employee shall not be an agent or employee of the Company and shall not be authorized to act on behalf of the Company or obligate the Company by contract or otherwise. Employee agrees to furnish all materials necessary to accomplish the Transition Services and assumes all of the risk for Employee’s own profit or loss with respect to the Transition Services provided hereunder. Employee acknowledges and agrees that the Company shall not direct or control Employee with respect to the manner in which the Transition Services are provided. Personal income and self-employment taxes for any fees or other compensation to which Employee is entitled during the Consulting Period shall be the sole responsibility of Employee. Employee agrees to indemnify and hold the Company and the other entities released herein harmless for any tax claims or penalties resulting from any failure by Employee to make required personal income and self-employment tax payments with respect to such compensation.

(g)Termination. The Company or Employee may terminate the Consulting Period at any time and for any reason by giving no less than one (1) month’s prior written notice to the other party; provided that the Company may terminate the Consulting Period without notice if, within thirty (30) days following the date of termination, it pays Employee the portion of the Consulting Fee otherwise payable for the one (1) month period following the Consulting Period End Date. Notwithstanding the foregoing, the Company may terminate the Consulting Period without notice for Cause (as defined in the Employment Agreement) without any payment obligations other than any accrued Consulting Fee earned but not yet paid.

5.Warranty. Employee acknowledges that all payments and benefits under Section 3 and Section 4 constitute additional compensation to which Employee would not be entitled except for Employee’s decision to sign this Agreement and to abide by the terms of this Agreement. Employee acknowledges that, upon receipt of the Accrued Benefits, Employee has received all monies and other benefits due to Employee as a result of Employee’s employment with and separation from the Company. Employee further represents that, to the best of Employee’s knowledge, Employee has not sustained a work-related injury or illness that Employee has not previously reported to the Company.

6.Release of Claims.

(a)Release by Employee. In exchange for the consideration set forth in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Employee agrees unconditionally and forever to release and discharge the Company and the


US-LEGAL-11047090 174293-0005

Company’s affiliated, related, parent and subsidiary corporations, as well as their respective past and present parents, subsidiaries, affiliates, associates, members, stockholders, employee benefit plans, attorneys, agents, representatives, partners, joint venturers, predecessors, successors, assigns, insurers, owners, employees, officers, directors and all persons acting by, through, under, or in concert with them, or any of them (hereinafter the “Releasees”) from any and all manner of claims, actions, causes of action, in law or in equity, demands, rights, or damages of any kind or nature which Employee may now have, or ever have, whether known or unknown, fixed or contingent, including any claims, causes of action or demands of any nature (hereinafter called “Claims”), that Employee now has or may hereafter have against the Releasees by reason of any and all acts, omissions, events or facts occurring or existing prior to Employee’s execution of this release. The Claims released hereunder specifically include, but are not limited to, any claims for fraud; breach of contract; breach of implied covenant of good faith and fair dealing; inducement of breach; interference with contract; wrongful or unlawful discharge or demotion; violation of public policy; sexual or any other type of assault and battery; invasion of privacy; intentional or negligent infliction of emotional distress; intentional or negligent misrepresentation; conspiracy; failure to pay wages, benefits, vacation pay, severance pay, commissions, equity, attorneys’ fees, or other compensation of any sort; failure to accommodate disability, including pregnancy; discrimination or harassment on the basis of pregnancy, race, color, sex, gender, national origin, ancestry, religion, disability, handicap, medical condition, marital status, sexual orientation or any other protected category; any claim under the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621 et seq. (“ADEA”); the Older Workers’ Protection Benefit Act of 1990; Title VII of the Civil Rights Act of 1964, as amended, by the Civil Rights Act of 1991, 42 U.S.C. § 2000 et seq.; Equal Pay Act, as amended, 29 U.S.C. § 206(d); the Civil Rights Act of 1866, 42 U.S.C. § 1981; the Family and Medical Leave Act of 1993, 29 U.S.C. § 2601 et seq.; the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101 et seq.; the False Claims Act, 31 U.S.C. § 3729 et seq.; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq.; the Worker Adjustment and Retraining Notification Act, as amended, 29 U.S.C. § 2101 et seq.; the Fair Labor Standards Act, 29 U.S.C. § 215 et seq.; § 2.2-3900, et seq. of the Code of Virginia; the Virginia Payment of Wage Law, § 40.1-29, et seq. of the Code of Virginia; the Virginia Minimum Wage Act § 40.1-28.8, et seq. of the Code of Virginia, other Virginia statutes and regulations and any federal, state or local laws of similar effect.

(b)Claims Not Released. This release shall not apply to: the Company’s obligations to provide the separation benefits under Section 3 of the Agreement; the Company’s obligation to pay the Consulting Fee under Section 4 of the Agreement; Employee’s right to indemnification under any applicable indemnification agreement with the Company; the Company’s governing documents or applicable law; the right to continued coverage under D&O insurance on the same terms as for other active executives; Employee’s right to assert claims for workers’ compensation or unemployment benefits; Employee’s right to bring to the attention of the Equal Employment Opportunity Commission (“EEOC”) claims of discrimination (provided, however, that Employee releases Employee’s right to secure any damages for alleged discriminatory treatment); any right to communicate directly with, cooperate with, or provide information to, any federal, state or local government regulator; any right to file an unfair labor practice charge under the National Labor Relations Act; Employee’s rights in Employee’s capacity as an equity holder of the Company (as modified by this


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Agreement); any other rights that may not be waived by an employee under applicable law; or rights to enforce and claims to interpret the Agreement.

(c)Unknown Claims. Employee acknowledges that Employee has been advised of and is aware that in certain jurisdictions, there are certain laws that provide that this release would not, if not for this Section 6(c), extend to claims that are unknown, or not suspected, by Employee at the time this release is executed. Employee, being aware of such laws, hereby expressly waives any rights Employee may have thereunder.

(d)Acknowledgements. Employee is hereby advised as follows: (i) Employee has read this release and understands its terms and effect, including the fact that Employee is agreeing to release and forever discharge the Company and each of the Releasees from any Claims released in this release; (ii) Employee understands that, by entering into this release, Employee does not waive any Claims that may arise after the date of Employee’s execution of this release, including without limitation any rights or claims that Employee may have to secure enforcement of the terms and conditions of this release; (iii) Employee has signed this release voluntarily and knowingly in exchange for the consideration described in this release, which Employee acknowledges is adequate and satisfactory to Employee and in addition to any other benefits to which Employee is otherwise entitled; (iv) The Company advises Employee to consult with an attorney prior to executing this release; and (v) Employee has twenty-one (21) days to review and decide whether or not to sign this release. If Employee signs this release prior to the expiration of such period, Employee acknowledges that Employee has done so voluntarily, had sufficient time to consider the release, to consult with counsel and that Employee does not desire additional time and hereby waives the remainder of the twenty-one (21) day period. In the event of any changes to this release, whether or not material, Employee waives the restarting of the twenty-one (21) day period. Employee has seven (7) days after signing this Agreement to revoke this Agreement and this Agreement will become effective upon the expiration of that revocation period. If Employee revokes this Agreement during such seven (7)-day period, this Agreement will be null and void and of no force or effect on either the Company or Employee and Employee will not be entitled to any of the payments or benefits which are expressly conditioned upon the execution and non-revocation of this Agreement.

(e)Representations. Employee represents and warrants that there has been no assignment or other transfer of any interest in any Claim which Employee may have against Releasees, or any of them, and Employee agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against Employee under this indemnity. Employee agrees that if Employee hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then Employee agrees to pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim.

(f)No Actions. Employee represents and warrants to the Company that Employee has no pending actions, Claims or charges of any kind. Employee


US-LEGAL-11047090 174293-0005

agrees that if Employee hereafter commences, joins in, or in any manner seeks relief through any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against the Releasees any of the Claims released hereunder, then Employee will pay to the Releasees against whom such Claim(s) is asserted, in addition to any other damages caused thereby, all attorneys’ fees incurred by such Releasees in defending or otherwise responding to said suit or Claim; provided, however, that Employee shall not be obligated to pay the Releasees’ attorneys’ fees to the extent such fees are attributable to: (1) claims under the ADEA or a challenge to the validity of the release of claims under the ADEA; or (2) Employee’s right to file a charge with the EEOC or any other government agency; however, to the extent permitted by law, Employee hereby waives any right to any damages or individual relief resulting from any such charge.

7.Exceptions. Notwithstanding anything in this Agreement to the contrary, nothing contained in this Agreement shall prohibit Employee (or Employee’s attorney) from (a) filing a charge with, reporting possible violations of federal law or regulation to, participating in any investigation by, or cooperating with the Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”), the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Commodity Futures Trading Commission, the Department of Justice or any other securities regulatory agency, self-regulatory authority or non-U.S., federal, state or local regulatory authority (collectively, "Government Agencies"), or making other disclosures that are protected under the whistleblower provisions of applicable law or regulation, (b) communicating directly with, cooperating with, or providing information (including trade secrets) in confidence to any Government Agencies for the purpose of reporting or investigating a suspected violation of law, or from providing such information to Employee’s attorney or in a sealed complaint or other document filed in a lawsuit or other governmental proceeding, and/or (c) receiving an award for information provided to any Government Agency. Pursuant to 18 USC Section 1833(b), Employee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, nothing in this Agreement is intended to or shall preclude Employee from providing truthful testimony in response to a valid subpoena, court order, regulatory request or other judicial, administrative or legal process or otherwise as required by law. If Employee is required to provide testimony, then unless otherwise directed or requested by a Governmental Agency or law enforcement, Employee shall notify the Company in writing as promptly as practicable after receiving any such request of the anticipated testimony and at least ten (10) days prior to providing such testimony (or, if such notice is not possible under the circumstances, with as much prior notice as is possible) to afford the Company a reasonable opportunity to challenge the subpoena, court order or similar legal process.

8.Mutual Non-Disparagement. Employee shall not at any time make, publish, or communicate to any person or entity or in any public forum any defamatory, false or disparaging remarks, comments, or statements oral or written, including on social media, concerning any of the Releasees. The Board shall instruct its directors and executive officers not to, at any time, make, publish or communicate to any person or entity or in any public forum any defamatory, false or disparaging remarks, comments or statements oral or written, including on social media, that refer to Employee by name or by his former title as Chief Technology Officer. Notwithstanding the foregoing, Employee, on the one hand, and the directors and the executive officers on the other hand, may (a) provide truthful testimony in response to a valid subpoena, court order, regulatory, request or other judicial, administrative or legal process or otherwise as required by law, (b) rebut factually inaccurate statements made about the other party by making a truthful statement, but only to the extent reasonably necessary to correct or refute such inaccurate


US-LEGAL-11047090 174293-0005

statements or (c) confer in confidence with their respective counsel, accountants or other professional advisors.

9.Governing Law. This Agreement shall be interpreted, construed, governed and enforced according to the laws of the Commonwealth of Virginia without regard to the application of choice of law rules.

10.Survival of Employment Agreement and Loyalty Agreement Provisions. All provisions of the Employment Agreement that survive a termination of employment (as modified herein) and the Loyalty Agreement dated as of December 11, 2020 between the Company and Employee (the “Loyalty Agreement”) (including the second sentence of Section 2(h) of the Employment regarding continued coverage under the Company’s directors’ and officers’ liability insurance policy) shall continue to apply pursuant to their terms; provided that (i) the Non-Compete Period (as defined in the Loyalty Agreement) and the time period during which the non-solicitation covenant in Section 6 of the Loyalty Agreement applies shall be extended to the first (1st) anniversary of the Consulting Period End Date (subject in each case to Section 9 of the Loyalty Agreement), provided that, if the Company terminates the Consulting Period for Cause prior to the first (1st) anniversary of the Separation Date, such periods shall be extended to the second (2nd) anniversary of the Separation Date and (ii) notwithstanding Section 4(b)(ii) of the Employment Agreement, Employee may retain books and records of the Company until the Consulting Period End Date (subject to Section 2(a) of the Loyalty Agreement).

11.Entire Agreement/Integration. This Agreement, together with the surviving provisions of the Employment Agreement, the Loyalty Agreement (as modified in Section 10), the Additional Release, Employee’s right to continued coverage under the Company’s directors’ and officers’ insurance policy, and the equity award agreements granting the equity awards that remain outstanding following the Separation Date pursuant to Section 3(d), constitutes the entire agreement between Employee and the Company concerning the subject matter hereof. No covenants, agreements, representations, or warranties of any kind, other than those set forth herein, have been made to any party hereto with respect to this Agreement. All prior discussions and negotiations have been and are merged and integrated into, and are superseded by, this Agreement. No amendments to this Agreement will be valid unless written and signed by Employee and an authorized representative of the Company.

12.Consultation with Counsel. Employee acknowledges (a) that Employee has thoroughly read and considered all aspects of this Agreement, that Employee understands all its provisions and that Employee is voluntarily entering into this Agreement, and (b) that Employee has been represented by, or had the opportunity to be represented by independent counsel of Employee’s own choice in connection with the negotiation and execution of this Agreement and has been advised to do so by the Company, and (c) that Employee has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on Employee’s own judgment. Without limiting the generality of the foregoing, Employee acknowledges that Employee has had the opportunity to consult with Employee’s own independent tax advisors with respect to the tax consequences to Employee of this Agreement and the payments hereunder, and that Employee is relying solely on the advice of Employee’s independent advisors for such purposes. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

* * * * *


US-LEGAL-11047090 174293-0005

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first written above.

CARLOTZ INC.

By: /s/ Luis Solorzano

Name: Luis Solorzano

Title: Director

EMPLOYEE

By: /s/ Daniel Valerian

Name: Daniel Valerian


US-LEGAL-11047090 174293-0005

[Signature Page to Separation Agreement]

Exhibit A

GENERAL RELEASE AGREEMENT

This General Release of Claims (this “Release”) is made by Daniel Valerian (“Employee”) in favor of CarLotz Inc., a Delaware Corporation (the “Company”), and the “Releasees” (as defined below), as of the date of Employee’s execution of this Release.

1.Release by Employee. In exchange for the benefits set forth in the Separation and Release Agreement entered into by and between the Company and Employee, dated as of April 1, 2022, (the “Agreement”) to which this Release is an exhibit, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Employee agrees unconditionally and forever to release and discharge the Company and the Company’s affiliated, related, parent and subsidiary corporations, as well as their respective past and present parents, subsidiaries, affiliates, associates, members, stockholders, employee benefit plans, attorneys, agents, representatives, partners, joint venturers, predecessors, successors, assigns, insurers, owners, employees, officers, directors and all persons acting by, through, under, or in concert with them, or any of them (hereinafter the “Releasees”) from any and all manner of claims, actions, causes of action, in law or in equity, demands, rights, or damages of any kind or nature which Employee may now have, or ever have, whether known or unknown, fixed or contingent, including any claims, causes of action or demands of any nature (hereinafter called “Claims”), that Employee now has or may hereafter have against the Releasees by reason of any and all acts, omissions, events or facts occurring or existing prior to Employee’s execution of this Release. The Claims released hereunder specifically include, but are not limited to, any claims for fraud; breach of contract; breach of implied covenant of good faith and fair dealing; inducement of breach; interference with contract; wrongful or unlawful discharge or demotion; violation of public policy; sexual or any other type of assault and battery; invasion of privacy; intentional or negligent infliction of emotional distress; intentional or negligent misrepresentation; conspiracy; failure to pay wages, benefits, vacation pay, severance pay, commissions, equity, attorneys’ fees, or other compensation of any sort; failure to accommodate disability, including pregnancy; discrimination or harassment on the basis of pregnancy, race, color, sex, gender, national origin, ancestry, religion, disability, handicap, medical condition, marital status, sexual orientation or any other protected category; any claim under the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621 et seq. (“ADEA”); the Older Workers’ Protection Benefit Act of 1990; Title VII of the Civil Rights Act of 1964, as amended, by the Civil Rights Act of 1991, 42 U.S.C. § 2000 et seq.; Equal Pay Act, as amended, 29 U.S.C. § 206(d); the Civil Rights Act of 1866, 42 U.S.C. § 1981; the Family and Medical Leave Act of 1993, 29 U.S.C. § 2601 et seq.; the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101 et seq.; the False Claims Act, 31 U.S.C. § 3729 et seq.; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq.; the Worker Adjustment and Retraining Notification Act, as amended, 29 U.S.C. § 2101 et seq.; the Fair Labor Standards Act, 29 U.S.C. § 215 et seq; the Virginia Human Rights Act, § 2.2-3900, et seq. of the Code of Virginia; the Virginia Payment of Wage Law, § 40.1-29, et seq. of the Code of Virginia; the Virginia Minimum Wage Act § 40.1-28.8, et seq. of the Code of Virginia, other Virginia statutes and regulations); and any federal, state or local laws of similar effect.

2.Claims Not Released. This Release shall not apply to: the Company’s obligations to provide the separation benefits under Section 4 of the Agreement; Employee’s right to indemnification under any applicable indemnification agreement with the Company; the Company’s governing documents or applicable law; the right to continued coverage under D&O insurance on the same terms as for other active executives; Employee’s right to assert claims for workers’ compensation or unemployment benefits; Employee’s right to bring to the attention of the Equal Employment Opportunity Commission (“EEOC”) claims of discrimination (provided, however, that Employee releases Employee’s right to secure any damages for alleged discriminatory treatment); any right to communicate directly with, cooperate with, or provide information to, any federal, state or local government regulator; any right to file an unfair labor practice charge under the National Labor Relations Act; Employee’s rights in Employee’s capacity as an equity holder of the Company (as modified by the Agreement); any other rights that may not be waived by an employee under applicable law; or rights to enforce and claims to interpret the Agreement.


US-LEGAL-11047090 174293-0005

3.Unknown Claims. Employee acknowledges that Employee has been advised of and is aware that in certain jurisdictions, there are certain laws that provide that this Release would not, if not for this Section 3, extend to claims that are unknown, or not suspected, by Employee at the time this Release is executed. Employee, being aware of such laws, hereby expressly waives any rights Employee may have thereunder.

4.Acknowledgements. Employee is hereby advised as follows:

(a)Employee has read this Release and understands its terms and effect, including the fact that Employee is agreeing to release and forever discharge the Company and each of the Releasees from any Claims released in this Release.

(b)Employee understands that, by entering into this Release, Employee does not waive any Claims that may arise after the date of Employee’s execution of this Release, including without limitation any rights or claims that Employee may have to secure enforcement of the terms and conditions of this Release.

(c)Employee has signed this Release voluntarily and knowingly in exchange for the consideration described in this Release, which Employee acknowledges is adequate and satisfactory to Employee and in addition to any other benefits to which Employee is otherwise entitled.

(d)The Company advises Employee to consult with an attorney prior to executing this Release.

(e)Employee has twenty-one (21) days to review and decide whether or not to sign this Release. If Employee signs this Release prior to the expiration of such period, Employee acknowledges that Employee has done so voluntarily, had sufficient time to consider the Release, to consult with counsel and that Employee does not desire additional time and hereby waives the remainder of the twenty-one (21) day period. In the event of any changes to this Release, whether or not material, Employee waives the restarting of the twenty-one (21) day period.

(f)Employee has seven (7) days after signing this Release to revoke this Release and this Release will become effective upon the expiration of that revocation period. If Employee revokes this Release during such seven (7)-day period, this Release will be null and void and of no force or effect on either the Company or Employee and Employee will not be entitled to any of the payments or benefits which are expressly conditioned upon the execution and non-revocation of this Release.

5.Representations. Employee represents and warrants that there has been no assignment or other transfer of any interest in any Claim which Employee may have against Releasees, or any of them, and Employee agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against Employee under this indemnity. Employee agrees that if Employee hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then Employee agrees to pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim.

6.No Actions. Employee represents and warrants to the Company that Employee has no pending actions, Claims or charges of any kind. Employee agrees that if Employee hereafter commences, joins in, or in any manner seeks relief through any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against the Releasees any of the Claims released hereunder, then Employee will pay to the Releasees against whom such Claim(s) is asserted, in addition to any other damages caused thereby, all attorneys’ fees incurred by such Releasees in defending

A-2


US-LEGAL-11047090 174293-0005

or otherwise responding to said suit or Claim; provided, however, that Employee shall not be obligated to pay the Releasees’ attorneys’ fees to the extent such fees are attributable to: (1) claims under the ADEA or a challenge to the validity of the release of claims under the ADEA; or (2) Employee’s right to file a charge with the EEOC or any other government agency; however, to the extent permitted by law, Employee hereby waives any right to any damages or individual relief resulting from any such charge.

7.Exceptions. Notwithstanding anything in this Release to the contrary, nothing contained in this Release shall prohibit Employee (or Employee’s attorney) from (i) filing a charge with, reporting possible violations of federal law or regulation to, participating in any investigation by, or cooperating with the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the EEOC, the National Labor Relations Board, the Occupational Safety and Health Administration, the Commodity Futures Trading Commission, the Department of Justice or any other securities regulatory agency, self-regulatory authority or non-U.S., federal, state or local regulatory authority (collectively, “Government Agencies”), or making other disclosures that are protected under the whistleblower provisions of applicable law or regulation, (ii) communicating directly with, cooperating with, or providing information (including trade secrets) in confidence to any Government Agencies for the purpose of reporting or investigating a suspected violation of law, or from providing such information to Employee’s attorney or in a sealed complaint or other document filed in a lawsuit or other governmental proceeding, and/or (iii) receiving an award for information provided to any Government Agency. Pursuant to 18 USC Section 1833(b), Employee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (y) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, nothing in this Release is intended to or shall preclude Employee from providing truthful testimony in response to a valid subpoena, court order, regulatory request or other judicial, administrative or legal process or otherwise as required by law. If Employee is required to provide testimony, then unless otherwise directed or requested by a Governmental Agency or law enforcement, Employee shall notify the Company in writing as promptly as practicable after receiving any such request of the anticipated testimony and at least ten (10) days prior to providing such testimony (or, if such notice is not possible under the circumstances, with as much prior notice as is possible) to afford the Company a reasonable opportunity to challenge the subpoena, court order or similar legal process.

8.Miscellaneous.

(a)No Admission. Employee understands and agrees that neither the payment of money nor the execution of this Release shall constitute or be construed as an admission of any liability whatsoever by the Releasees.

(b)Severability. If any sentence, phrase, section, subsection or portion of this Release is found to be illegal or unenforceable, such action shall not affect the validity or enforceability of the remaining sentences, phrases, sections, subsections or portions of this Release, which shall remain fully valid and enforceable.

(c)Headings. The headings in this Release are provided solely for convenience, and are not intended to be part of, nor to affect or alter the interpretation or meaning of, this Release.

(d)Construction of Agreement. Employee has been represented by, or had the opportunity to be represented by, counsel in connection with the negotiation and execution of this Release. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Release.

(e)Entire Agreement/Integration. This Release, together with the Agreement, constitutes the entire agreement between Employee and the Company concerning the subject matter hereof. No covenants, agreements, representations, or warranties of any kind, other than those set forth herein, have been made to any party hereto with respect to this Release. All prior discussions and negotiations have been and are merged and integrated into, and are superseded by, this Release. No

A-3


US-LEGAL-11047090 174293-0005

amendments to this Release will be valid unless written and signed by Employee and an authorized representative of the Company.

Sign only on or within twenty-one (21) days after April 1, 2022 (but in no event prior to April 1, 2022).

DANIEL VALERIAN

Date:____________________

Daniel Valerian

A-4


US-LEGAL-11047090 174293-0005


US-LEGAL-11047090/6 174293-0005

Execution Version

AMENDMENT TO SEPARATION AND RELEASE AGREEMENT

THIS AMENDMENT TO SEPARATION AND RELEASE AGREEMENT (this “Amendment”) is made and entered into on May 5, 2022, by and between CarLotz, Inc., a Delaware corporation (the “Company”), and Daniel Valerian (the “Employee” and, together with the Company, the “Parties”).

Whereas, the Parties entered into that certain Separation and Release Agreement, dated as of April 1, 2022 (the “Separation Agreement”); and

Whereas, Section 3(b)(vi) of the Separation Agreement provides that 137,602 of 183,469 stock options held by the Employee, converted from an original grant on August 10, 2020, with a current exercise price of $0.92 would be forfeited as of April 15, 2022 (the “Separation Date”); and

Whereas, the Company has determined that all of such 183,469 stock options were vested as of the Separation Date, so that no such options should have been forfeited,

Now, therefore, in consideration of the premises and mutual covenants and conditions herein, the Parties, intending to be legally bound, hereby agree as follows:

1. Amendment. Section 3(b)(vi) of the Separation Agreement shall be revised as follows: “Employee’s 183,469 fully-vested stock options that were converted on January 21, 2021 from stock options originally granted on August 10, 2020, with a current exercise price of $0.92, shall remain exercisable until August 10, 2030.”

2. Counterparts. This Amendment may be executed in one or more facsimile, electronic or original counterparts, each of which shall be deemed an original and both of which together shall constitute the same instrument.

3. Other terms. All terms and provisions of the Separation Agreement not specifically amended hereby shall remain in full force and effect. From and after the date hereof, all references to the term “Agreement” in this Amendment or the original Separation Agreement shall include the terms contained in this Amendment.

[Signature Page Follows]


US-LEGAL-11254327/2 174293-0005

IN WITNESS WHEREOF, the Parties have executed this Amendment on the date and year first above written.

CarLotz, Inc.

By: /s/ Thomas Stoltz

Name: Tom Stoltz

Title: CFO

Employee

By: /s/ Daniel Valerian

Name: Daniel Valerian

[Signature Page to Separation and Release Agreement Amendment]


US-LEGAL-11254327/2 174293-0005

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lev Peker, certify that:


			1.			I have reviewed this Quarterly Report on Form 10-Q of CarLotz, Inc.;
			2.			Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
			3.			Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
			4.			The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
			a)			Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
			b)			Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
			c)			Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
			d)			Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
			5.			The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
			a)			All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
			b)			Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	May 9, 2022	/s/ Lev Peker
		Lev Peker
		Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas W. Stoltz, certify that:


			1.			I have reviewed this Quarterly Report on Form 10-Q of CarLotz, Inc.;
			2.			Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
			3.			Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
			4.			The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
			a)			Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
			b)			Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
			c)			Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
			d)			Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
			5.			The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
			a)			All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
			b)			Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	May 9, 2022	/s/ Thomas W. Stoltz
		Thomas W. Stoltz
		Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of CarLotz, Inc. (the “Company”) for the quarterly period ended March 31, 2022, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Lev Peker, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:


1.			The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.			The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	May 9, 2022	/s/ Lev Peker
		Lev Peker
		Chief Executive Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of CarLotz, Inc. (the “Company”) for the quarterly period ended March 31, 2022, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Thomas W. Stoltz, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:


1.			The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.			The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	May 9, 2022	/s/ Thomas W. Stoltz
		Thomas W. Stoltz
		Chief Financial Officer