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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
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 001-38818
CarLotz, Inc.
(Exact name of registrant as specified in its charter)
Delaware83-2456129
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3301 W. Moore StreetRichmondVirginia23230
(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 classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.0001 per shareLOTZThe Nasdaq Global Market
Redeemable warrants, exercisable for Class A common stock at an exercise price of $11.50 per shareLOTZWThe 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
x
Non-accelerated filer
¨
Smaller reporting company
Emerging growth company
x
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.


CarLotz, Inc.
TABLE OF CONTENTS
Page
1
30


i


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 cash4,011 4,336 
Marketable securities – at fair value74,109 116,589 
Accounts receivable, net6,922 8,206 
Inventories46,095 40,985 
Other current assets10,741 4,705 
Total Current Assets217,206 249,850 
Marketable securities – at fair value971 1,941 
Property and equipment, net13,042 22,628 
Capitalized website and internal-use software costs, net13,385 13,716 
Operating lease assets49,608 — 
Finance lease assets, net11,811 — 
Lease vehicles, net2,223 1,596 
Other assets553 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 payable22,052 27,815 
Accounts payable7,914 6,352 
Accrued expenses14,369 14,428 
Current portion of operating lease liabilities6,810 — 
Other current liabilities662 754 
Total Current Liabilities52,367 49,858 
Finance lease liabilities, less current portion12,080 12,206 
Operating lease liabilities, less current portion45,076 — 
Earnout shares liability3,650 7,679 
Merger warrants liability4,691 6,291 
Other liabilities651 744 
Total Liabilities118,515 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 capital289,191 287,509 
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.
1


CarLotz, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
Three Months Ended March 31,
20222021
Revenues:
Retail vehicle sales$50,588 $50,383 
Wholesale vehicle sales8,575 4,568 
Finance and insurance, net3,705 1,554 
Lease income, net146 107 
Total Revenues63,014 56,612 
Cost of sales (exclusive of depreciation)60,936 54,604 
Gross Profit2,078 2,008 
Operating Expenses:
Selling, general and administrative27,674 18,873 
Stock-based compensation expense1,684 41,963 
Depreciation and amortization expense1,789 383 
Management fee expense – related party 2 
Total Operating Expenses31,147 61,221 
Loss from Operations(29,069)(59,213)
Interest expense617 175 
Other Income, net
Change in fair value of Merger warrants liability1,600 12,358 
Change in fair value of earnout shares4,029 31,846 
Other income (expense)(779)162 
Total Other Income, net4,850 44,366 
Loss Before Income Tax Expense(24,836)(15,022)
Income tax expense  
Net Loss$(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 diluted114,054,597100,817,385
See notes to condensed consolidated financial statements.
2


CarLotz, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive (Loss)
(Unaudited)
(In thousands)
Three Months Ended March 31,
20222021
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.
3


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)
SharesAmountSharesAmount
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)
SharesAmountSharesAmount
Balance December 31, 20202,034,751 $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.
4


CarLotz, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended March 31,
20222021
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 software4,097 105 
Amortization and accretion - marketable securities440 238 
Depreciation – lease vehicles85 15 
Loss on marketable securities  
Provision for doubtful accounts(30) 
Stock-based compensation expense1,684 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 receivable1,314 (5,192)
Inventories(5,110)1,991 
Other current assets(6,036)(5,868)
Other assets5 (3,038)
Accounts payable1,562 3,140 
Accrued expenses975 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 securities64,917 59 
Purchase of lease vehicles(712) 
Net Cash (Used in) Provided by Investing Activities37,529 (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 payable35,965 9,236 
See notes to condensed consolidated financial statements.
5


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, beginning79,365 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.
6


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.

7


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
8


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
9


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.

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 surviving as the surviving company.
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 - PIPE125,000 
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 financing317,409 
Liabilities relieved: preferred stock obligation2,832 
Liabilities relieved: KAR/AFC note payable3,625 
Liabilities relieved: historic warrant liability144 
Less: earnout shares liability(74,285)
Less: Merger warrants liability(39,024)

Merger warrants
10


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 - Public10,185,774 
Stock warrants outstanding - Private6,074,310 
Stock warrants cancelled— 
Stock warrants exercised— 
Stock warrants outstanding16,260,084 

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.
11


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 SalesFleet ManagementTotal
Retail vehicle sales$50,588 $— $50,588 
Wholesale vehicle sales8,575 — 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 SalesFleet ManagementTotal
Retail vehicle sales$50,383 $— $50,383 
Wholesale vehicle sales4,568 — 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,
20222021
Retail vehicles:
Retail vehicle sales$50,588 $50,383 
Retail vehicle cost of sales52,415 48,917 
Gross Profit – Retail Vehicles$(1,827)$1,466 
Wholesale vehicles:
Wholesale vehicle sales$8,575 $4,568 
Wholesale vehicle cost of sales8,521 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.
12


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 bonds30,216 2 (114)30,104 
Municipal bonds21,990 5 (40)21,955 
Commercial paper19,997   19,997 
Foreign governments2,491 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 bonds57,460  (72)57,388 
Municipal bonds28,325 5 (10)28,320 
Commercial paper19,989   19,989 
Foreign governments12,291 2 (18)12,275 
Total Fixed Maturity Debt Securities$118,065 $7 $(100)$117,972 
13


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 years731 694 
Due after five years through ten years296 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 Months12 Months or MoreTotal

Fair Value
Unrealized
Losses

Fair Value
Unrealized
Losses

Fair Value
Unrealized
Losses
Corporate bonds$29,890 $(98)$209 $(16)$30,099 $(114)
Municipal bonds19,289(32)133(8)19,422(40)
Foreign governments2,236(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 Months12 Months or MoreTotal
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 
14


CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements
(Unaudited)
(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 1Level 2Level 3Total
Assets:
Money market funds$ $ $ $ 
Equity securities552   552 
Fixed maturity debt securities, including cash equivalents 118,347  118,347 
Total Assets$552 $118,347 $ $118,899 
Liabilities:
Merger warrants liability2,939 1,752  4,691 
Earnout shares liability  3,650 3,650 
Total Liabilities$2,939 $1,752 $3,650 $8,341 
15


CarLotz, Inc. and Subsidiaries — Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except share data)
December 31, 2021
Level 1Level 2Level 3Total
Assets: