Form 10-Q - Quarterly report [Sections 13 or 15(d)]

I have read and agree to the terms and conditions set forth above:

LEV MICHAILOVICH PEKER

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2023

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

Commission File Number: 001-38296

PARTS iD, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware		81-3674868
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

1 Corporate Drive, Suite C

Cranbury, New Jersey 08512

(Address of Principal Executive Offices, Zip Code)

Registrant’s telephone number, including area code: (609) 642-4700

Securities registered under 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		ID		NYSE American

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 ☒ 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 42,932,553 shares of Class A common stock, $0.0001 par value per share, outstanding on November 27, 2023.

TABLE OF CONTENTS

		Page
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS		ii

PART I		1
ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4.	CONTROLS AND PROCEDURES	38

PART II		39
ITEM 1.	LEGAL PROCEEDINGS	39
ITEM 1A.	RISK FACTORS	41
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	41
ITEM 6.	EXHIBITS	42

SIGNATURES		44

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements in this Quarterly Report on Form 10-Q that address events, developments, or results that we expect or anticipate may occur in the future are “forward-looking statements” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “project,” “forecast,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “seeks,” “scheduled,” or “will,” and similar expressions are intended to identify forward-looking statements. These statements relate to future periods, future events or our future operating or financial plans or performance, are made on the basis of management’s current views and assumptions with respect to future events, including management’s current views regarding the impacts of the COVID-19 pandemic, supply chain constraints from current economic conditions, high inflation and the conflict in Ukraine. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward-looking statement. We operate in a changing environment where new risks emerge from time to time and it is not possible for us to predict all risks that may affect us, particularly those associated with the COVID-19 pandemic and the conflict in Ukraine, which have had wide-ranging and continually evolving effects. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, without limitation:

●

our future capital requirements;

●

our ability to raise capital and utilize sources of cash;

●

our ability to generate sufficient revenue to cover our operating expenses and to continue to operate with a working capital deficiency;

●

our ability to service our obligations (whether indebtedness or otherwise) and to obtain additional funding for our operations, including payments to our key vendors and credit card providers;

●

the ongoing conflicts between Ukraine and Russia and Israel and Hamas which may affect or continue to affect our business;

●

competition and our ability to counter competition, including changes to the algorithms of Google and other search engines and related impacts on our revenue and advertisement expenses;

●

the impact on our business of macro-economic factors including discretionary spending pressure due to inflation and low savings rates that impact consumer sentiment;

●

the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;

●

disruptions in the supply chain and associated impacts on demand, product availability, order cancellations and cost of goods sold including the economic impacts of inflation;

●

difficulties in managing our international business operations, particularly in Ukraine, including with respect to enforcing the terms of our agreements with our contractors and managing increasing costs of operations;

●

changes in our strategy, future operations, financial position, estimated revenue and losses, product pricing, projected costs, prospects and plans;

●

the outcome of actual or potential litigation, complaints, product liability claims, or regulatory proceedings, and the potential adverse publicity related thereto;

●

the implementation, market acceptance and success of our business model, expansion plans, opportunities, and initiatives, including the market acceptance of our planned products and services;

●

developments and projections relating to our competitors and industry;

●

our expectations regarding our ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

●

our ability to maintain and enforce intellectual property rights and our ability to maintain our technology position;

●

changes in applicable laws or regulations;

●

the effects of current and future U.S. and foreign trade policy and tariff actions;

●

disruptions in the marketplace for online purchases of aftermarket auto parts;

	●	costs related to operating as a public company;

	●	our ability to comply with the continued listing standards of the NYSE American;

	●	fluctuations in the trading price of our Common Stock (as defined below), and

●

the possibility that we may be adversely affected by other economic, business, and/or competitive factors.

See also the section titled “Risk Factors” (refer to Part II, Item 1A of this report), and subsequent reports and registration statements filed from time to time with the Securities and Exchange Commission (the “SEC”), for further discussion of certain risks and uncertainties that could cause actual results and events to differ materially from our forward-looking statements. Readers of this report are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This cautionary note is applicable to all forward-looking statements contained in this report.

iii

PART I

Item 1. Financial Statements

Index to Condensed Consolidated Financial Statements

		Page

Unaudited Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets		2

Condensed Consolidated Statements of Operations		3

Condensed Consolidated Statements of Changes in Shareholders’ Deficit		4

Condensed Consolidated Statements of Cash Flows		5

Notes to Condensed Consolidated Financial Statements		6

PARTS iD, INC.

Condensed Consolidated Balance Sheets

As of September 30, 2023 and December 31, 2022

	September 30, 2023 (Unaudited)			December 31, 2022
ASSETS
Current assets
Cash	$	1,491,856		$	3,796,267
Accounts receivable		736,843			1,330,521
Inventory		1,229,548			2,505,259
Prepaid expenses and other current assets		4,134,425			3,775,055
Total current assets		7,592,672			11,407,102

Property and equipment, net		10,287,508			12,915,773
Intangible assets		12,966			262,966
Right-of-use assets		556,390			1,075,157
Security deposits		247,708			247,708
Total assets	$	18,697,244		$	25,908,706
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Accounts payable	$	35,359,411		$	36,404,249
Customer deposits		815,527			3,098,119
Accrued expenses		6,952,521			5,793,044
Other current liabilities		1,414,764			2,279,138
Operating lease liabilities		310,177			688,188
Convertible notes payable, net		8,777,632			4,203,282
Derivative liabilities		1,150,000			551,000
Total current liabilities		54,780,032			53,017,020
Other non-current liabilities
Operating lease, net of current portion		246,214			386,866
Total liabilities		55,026,246			53,403,886

COMMITMENTS AND CONTINGENCIES (Note 7)

SHAREHOLDERS’ DEFICIT
Preferred stock, $0.0001 par value per share;
1,000,000 shares authorized and 0 issued and outstanding		-			-
Common stock, $0.0001 par value per share;
10,000,000 Class F shares authorized and 0 issued and outstanding		-			-
100,000,000 Class A shares authorized and 37,838,931 issued and outstanding as of September 30, 2023 and 34,825,971 issued and outstanding as of December 31, 2022		3,789			3,411
Additional paid in capital		18,434,085			11,107,946
Accumulated deficit		(54,766,876	)		(38,606,537	)
Total shareholders’ deficit		(36,329,002	)		(27,495,180	)
Total liabilities and shareholders’ deficit	$	18,697,244		$	25,908,706

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

PARTS iD, INC.

Condensed Consolidated Statements of Operations

For the three and nine months ended September 30, 2023 and 2022 (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net revenue	$	15,711,394		$	79,884,740		$	48,032,207		$	279,034,366
Cost of goods sold		11,395,872			63,962,534			36,225,160			224,034,701
Gross profit		4,315,522			15,922,206			11,807,047			54,999,665

Operating expenses:
Advertising		486,254			7,329,172			2,053,547			26,468,121
Selling, general and administrative		5,863,379			9,458,749			17,021,120			31,072,365
Depreciation		1,899,995			2,113,695			5,877,025			6,210,590
Total operating expenses		8,249,628			18,901,616			24,951,692			63,751,076

Loss from operations		(3,934,106	)		(2,979,410	)		(13,144,645	)		(8,751,411	)
Loss on extinguishment of debt		-			-			879,045			-
Loss on extinguishment of warrants		317,000			-			317,000			-
Change in fair value of derivatives		(93,000	)		-			(634,000	)		-
Interest and financing expense		1,513,483			50,000			2,452,649			50,000
Loss before income taxes		(5,671,589	)		(3,029,410	)		(16,159,339	)		(8,801,411	)
Income tax expense		-			3,241,618			1,000			2,322,515
Net loss	$	(5,671,589	)	$	(6,271,028	)	$	(16,160,339	)	$	(11,123,926	)

Loss per common share
Loss per share (basic and diluted)	$	(0.16	)	$	(0.18	)	$	(0.46	)	$	(0.33	)
Weighted average number of shares (basic and diluted)		35,868,525			34,064,266			35,357,877			34,004,944

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

PARTS iD, INC.

Condensed Consolidated Statements of Changes in Shareholders’ Deficit

For the three and nine months ended September 30, 2023 and 2022 (Unaudited)

					Additional						Total
	Class A Common Stock				Paid-In			Accumulated			Shareholders’
	Shares		Amount		Capital			Deficit			Deficit

Balance at July 1, 2022		34,062,616	$	3,406	$	8,516,706		$	(25,535,555	)	$	(17,015,443	)
Share-based compensation		51,833		5		1,350,240			-			1,350,245
Net loss		-		-		-			(6,271,028	)		(6,271,028	)
Balance at September 30, 2022		34,114,449	$	3,411	$	9,866,946		$	(31,806,583	)	$	(21,936,226	)

Balance at July 1, 2023		35,102,553	$	3,515	$	13,537,195		$	(49,095,287	)	$	(35,554,577	)
Share-based compensation		-		-		902,079			-			902,079
Common stock issued in exchange for services rendered		138,977		14		65,583			-			65,597
Conversion of debt to common stock		2,597,401		260		85,365			-			85,625
Issuance of warrants		-		-		3,843,863			-			3,843,863
Net loss		-		-		-			(5,671,589	)		(5,671,589	)
Balance at September 30, 2023		37,838,931	$	3,789	$	18,434,085		$	(54,766,876	)	$	(36,329,002	)

Balance at January 1, 2022		33,965,804	$	3,396	$	6,973,541		$	(20,682,657	)	$	(13,705,720	)
Share-based compensation		148,645		15		2,893,405			-			2,893,420
Net loss		-		-		-			(11,123,926	)		(11,123,926	)
Balance at September 30, 2022		34,114,449	$	3,411	$	9,866,946		$	(31,806,583	)	$	(21,936,226	)

Balance at January 1, 2023		34,825,971	$	3,411	$	11,107,946		$	(38,606,537	)	$	(27,495,180	)
Vesting of RSUs		276,582		104		(104	)		-			-
Share-based compensation		-		-		2,804,477			-			2,804,477
Note payable allocated to warrants		-		-		526,955			-			526,955
Common stock issued in exchange for services rendered		138,977		14		65,583			-			65,597
Conversion of debt to common stock		2,597,401		260		85,365			-			85,625
Issuance of warrants		-		-		3,843,863			-			3,843,863
Net loss		-		-		-			(16,160,339	)		(16,160,339	)
Balance at September 30, 2023		37,838,931	$	3,789	$	18,434,085		$	(54,766,876	)	$	(36,329,002	)

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

PARTS iD, INC.

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2023 and 2022 (Unaudited)

	Nine Months Ended September 30, 2023			Nine Months Ended September 30, 2022
Cash Flows from Operating Activities:
Net loss	$	(16,160,339	)	$	(11,123,926	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		5,877,025			6,210,590
Deferred tax expense		-			2,314,907
Amortization of right-of-use assets		518,767			239,879
Share-based compensation expense		1,689,867			1,601,848
Change in fair value of derivatives		(634,000	)		-
Amortization of debt discount		1,003,935			-
Gain on sale of property and equipment		-			(63,524	)
Loss on extinguishment of debt		879,045			-
Payment for services in Company’s stock		65,597			-
Write-off of debt discount due to repayment of notes		440,823			-
Loss on extinguishment of warrants		317,000			-
Changes in operating assets and liabilities:
Accounts receivable		593,678			(266,366	)
Inventory		1,275,711			1,059,967
Prepaid expenses and other current assets		(359,370	)		(1,763,818	)
Accounts payable		(1,044,838	)		(4,391,427	)
Customer deposits		(2,282,592	)		(6,659,044	)
Accrued expenses		1,159,477			(281,434	)
Operating lease liabilities		(518,663	)		(239,879	)
Other current liabilities		(1,253,172	)		(1,013,363	)
Net cash used in operating activities		(8,432,049	)		(14,375,590	)

Cash Flows from Investing Activities:
Proceeds from sale of fixed assets		-			90,250
Purchase of property and equipment		(2,892	)		(64,882	)
Proceeds from sale of intangible asset		250,000			-
Website and software development costs		(2,084,470	)		(4,669,002	)
Net cash used in investing activities		(1,837,362	)		(4,643,634	)

Cash Flows from Financing Activities:
Repayment of note payable		(6,410,000	)		-
Proceeds from convertible notes and sale of future receivable, net		14,375,000			-
Net cash provided by financing activities		7,965,000			-
Net change in cash		(2,304,411	)		(19,019,224	)
Cash, beginning of period		3,796,267			23,203,230
Cash, end of period	$	1,491,856		$	4,184,006

Supplemental non-cash disclosure:
Conversion of debt to common stock	$	85,625		$	-
Issuance of convertible warrants related to notes payable	$	4,370,818		$	-
Supplemental disclosure of cash flows information:
Cash paid for interest	$	1,429,725		$	-
Cash paid for taxes	$	1,000		$	5,000

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

PARTS iD, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 – Organization and Description of Business

Description of Business

PARTS iD, Inc., a Delaware corporation (the “Company,” “PARTS iD,” “we,” “our” or “us”), is a technology-driven, digital commerce company focused on creating custom infrastructure and unique user experience within niche markets. PARTS iD has a product portfolio comprised of approximately 18 million SKUs, when fully available, an end-to-end digital commerce platform for both digital commerce and fulfillment, and a virtual shipping network comprising over 2,500 locations, approximately 4,500 active brands, and machine learning algorithms for complex fitment industries such as vehicle parts and accessories. Management believes that the Company is a market leader and proven brand-builder, fueled by its commitment to delivering an engaging shopping experience; comprehensive, accurate and varied product offerings; and continued digital commerce innovation.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The unaudited condensed consolidated financial statements are presented in U.S. dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. The December 31, 2022 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Results for interim periods should not be considered indicative of results for any other interim period or for the full year.

The unaudited condensed consolidated financial statements include the accounts of PARTS iD, Inc. and its wholly owned subsidiary, PARTS iD, LLC. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the level of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements include revenue recognition, return allowances, allowance for credit losses, depreciation, inventory valuation, valuation of deferred income tax assets and the capitalization and recoverability of software development costs.

Stock Compensation

Compensation expense related to stock option awards and restricted stock units granted to certain employees, directors and consultants is based on the fair value of the awards on the grant date. If the service inception date precedes the grant date, accrual of compensation cost for periods before the grant date is based on the fair value of the award at the reporting date. In the period in which the grant date occurs, cumulative compensation cost is adjusted to reflect the cumulative effect of measuring compensation cost based on fair value at the grant date rather than the fair value previously used at the service inception date or any subsequent reporting date. Forfeitures are recorded as they occur. The Company recognizes compensation cost related to time-vested options and restricted stock units with graded vesting features on a straight-line basis over the requisite service period. Compensation cost related to performance-vesting options and performance-based units, where a performance condition or a market condition that affects vesting exists, is recognized over the shortest of the explicit, implicit, or defined service periods. Compensation cost is adjusted depending on whether the performance condition is achieved. If the achievement of the performance condition is probable or becomes probable, the full fair value of the award is recognized. If the achievement of the performance condition is not probable or ceases to be probable, then no compensation cost is recognized or amounts previously recognized are reversed.

Concentration of Credit Risk

Financial instruments that expose the Company to a concentration of credit risk principally include cash and accounts receivable balances. The Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows. The Company manages accounts receivable credit risk through its policy of limiting extensions of credit to customers. Substantially all customer orders are paid by credit card at the point of sale.

Going Concern

These condensed consolidated financial statements have been prepared in accordance with GAAP assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assts and satisfaction of liabilities in the normal course of business. We have operated with a negative working capital model since our inception. The Company has a working capital deficiency of approximately $47 million. We continue to face macro-economic headwinds and the resulting declining revenue and profitability, which increased the working capital deficit, and resulted in the use of approximately $8.4 million in cash from operating activities, of which $2.4 million was attributable to changes in working capital during the nine months ended September 30, 2023. With this, substantial doubt exists about the Company’s ability to continue as a going concern within one year from the date of the issuance of these condensed consolidated financial statements.

The accompanying condensed consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and does not reflect any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to our ability to continue as a going concern.

To address liquidity concerns, the Company is pursuing additional financing and continues to restructure and optimize its operations including moderating capital investments, improving gross margin, reducing expenses, and renegotiating vendor payment terms. In addition, to address its liquidity needs, the Company recently obtained an aggregate of approximately $14 million from the sale and issuance of convertible notes and warrants (as discussed below). In addition, the Company obtained additional financing in October and November 2023. See Note 10 – Subsequent Events for more information.

Additionally, management is implementing cost saving initiatives to reduce operating costs and plans to continue to implement further cost saving initiatives where appropriate. The Company’s plans are dependent on conditions and factors, many of which are outside of the Company’s control. There can be no assurance that the Company will be successful in implementing its plans or that it will be able to generate positive cash flow from operations in any future period, nor can there be any assurance that it will be able to raise additional capital. The result of such inability, whether individually or in the aggregate, will adversely impact the Company’s financial condition and could cause the Company to curtail or cease operations or to pursue other strategic alternatives, including commencing a case under the U.S. Bankruptcy Code. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources” below for additional details.

PARTS iD has also retained Canaccord Genuity Group, Inc. (“Canaccord”) as its financial advisor and DLA Piper LLP (US) as its legal counsel to assist in evaluating potential strategic alternatives.

There can be no assurance that the evaluation of strategic alternatives will result in any potential transaction, or any assurance as to its outcome or timing. PARTS iD has not set a timetable for completion of the process and does not intend to disclose developments related to the process unless and until PARTS iD executes a definitive agreement with respect thereto, or the Board of Directors otherwise determines that further disclosure is appropriate or required.

Accounts Receivable

Accounts receivable balances include amounts due from customers. The Company periodically reviews its accounts receivable balances to determine whether an allowance for credit losses is necessary based on an analysis of past due accounts, historical occurrences of credit losses, existing economic conditions, and other circumstances that may indicate that the realization of an account is in doubt. As of September 30, 2023 and December 31, 2022, the Company determined that an allowance for credit losses was not necessary.

On September 11, 2023, the Company entered into a Purchase and Sale of Future Receivables Agreement (the “Riverside Agreement”) with Riverside Capital NY (“RCNY”). Pursuant to the terms of the Riverside Agreement, the Company agreed to sell, and RCNY agreed to purchase, the Company’s right, title and interest in and to $700,000 of the Company’s future receivables, for a purchase price of $500,000. Pursuant to the terms of the Riverside Agreement, the Company agreed to pay RCNY $35,000 each week until such time as RCNY has been repaid.

Additionally, on September 11, 2023, the Company also entered into a Standard Merchant Cash Advance Agreement (the “WAVE Agreement”) with WAVE ADVANCE INC (“WAVE”). Pursuant to the terms of the WAVE Agreement, the Company agreed to sell, and WAVE agreed to purchase, the Company’s right, title and interest in and to $700,000 of the Company’s future receivables, for a purchase price of $500,000. Pursuant to the terms of the WAVE Agreement, the Company agreed to pay WAVE $35,000 each week until such time as WAVE has been repaid.

Each of the Riverside Agreement and the Wave Agreement provides for the grant of a junior security interest in the future receivables and other related collateral under the Uniform Commercial Code in accounts and proceeds, subordinated to the indebtedness incurred under that certain Securities Purchase Agreement, dated as of July 14, 2023, by and between the Company and Lind Global Fund II LP, as amended.

Inventory

Inventory consists of purchased goods that are immediately available-for-sale and are stated at the lower cost or net realizable value, determined using the first-in, first-out method. Merchandise-in-transit directly from suppliers to customers is recorded in inventory until the product is delivered to the customer. As of September 30, 2023, and December 31, 2022, merchandise-in-transit amounted to $258,935 and $957,735, respectively. The risk of loss is transferred from the supplier to the Company at the shipping point. Since the purchased goods are immediately shipped directly from suppliers to customers the Company deemed that an inventory reserve for obsolete or slow-moving goods was unnecessary.

Other Current Assets

Other current assets include advances to vendors amounting to $2,584,464 and $1,796,680 as of September 30, 2023, and December 31, 2022, respectively, which are included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Website and Software Development

The Company capitalizes certain costs associated with website and software developed for internal use in accordance with ASC 350-50, Intangibles – Goodwill and Other – Website Development Costs, and ASC 350-40, Intangibles – Goodwill and Other – Internal Use Software, when both the preliminary project design and the testing stage are completed and management has authorized further funding for the project, which it deems probable of completion and to be used for the function intended. Capitalized costs include amounts related to website and software development such as contractors’ fees, payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use software project. Capitalization of such costs ceases when the project is complete and ready for its intended use. Capitalized costs are amortized over a three-year period commencing on the date that the specific module or platform is placed in service. Costs incurred during the preliminary stages of development and ongoing maintenance costs are expensed as incurred.

Intangible Assets

Intangible assets consist of indefinite-lived domain names and are stated at cost less impairment losses, if any. The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. When such events occur, the Company compares the carrying amount of the asset to the undiscounted expected future cash flows related to the asset. If the comparison indicates that an impairment exists, the amount of the impairment is calculated as the difference between the excess of the carrying amount over the fair value of the asset. The Company has determined that there were no triggering events in the nine months ended September 30, 2023 and 2022, and no impairment charges were necessary.

During the nine months ended September 30, 2023, the Company sold its Onyx.com domain name for $250,000.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Asset Class		Estimated useful lives
Video and studio equipment		5 years
Website and internally developed software		3 years
Computer and electronics		5 years
Vehicles		5 years
Furniture and fixtures		5 years
Leasehold improvements		Lesser of useful life or lease term

Accounts Payable

Accounts payable as of September 30, 2023, consisted of amounts payable to vendors of $33.2 million and credit card payable of $2.2 million payable to a credit card company. As of December 31, 2022, accounts payable consisted of amounts payable to vendors of $33.1 million and $3.3 million credit card payable to the same credit card company mentioned above.

Revenue Recognition

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard replaced all previous accounting guidance on this topic, eliminated all industry-specific guidance and provided a unified model to determine how revenue is recognized. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard requires companies to use more judgment and make more estimates than under prior guidance. Judgments include identifying performance obligations in the contract, estimating the amount of consideration to include in the transaction price, and allocating the transaction price to each performance obligation.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs the following steps: (i) identifies contracts with customers; (ii) identifies performance obligation(s); (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligation(s); and (v) recognizes revenue when (or as) the Company satisfies each performance obligation.

The Company recognizes revenue on product sales through its website as the principal in the transaction as the Company has concluded it controls the product before it is transferred to the customer. The Company controls products when it is the entity responsible for fulfilling the promise to the customer and takes responsibility for the acceptability of the goods, assumes inventory risk from shipment through the delivery date, has discretion in establishing prices, and selects the suppliers of products sold.

Sales discounts earned by customers at the time of purchase and taxes collected from customers, which are remitted to governmental authorities, are deducted from gross revenue in determining net revenue. Allowances for sales returns are estimated and recorded based on historical experience and reduce product revenue, inclusive of shipping fees, by expected product returns. Allowances for sales returns at September 30, 2023 and December 31, 2022, were $243,099 and $549,250, respectively.

The Company has two types of contractual liabilities: (a) amounts received from customers prior to the delivery of products are recorded as customer deposits in the accompanying condensed consolidated balance sheets and are recognized as revenue when the products are delivered, which amounted to $815,527 and $3,098,119 at September 30, 2023 and December 31, 2022, respectively, and (ii) site credits (which are initially recorded in accrued expenses and are recognized as revenue in the period they are redeemed), amounting to $3,567,138 and $3,414,019 at September 30, 2023 and December 31, 2022, respectively.

Cost of Goods Sold

Cost of goods sold consists of the cost of product sold to customers, plus shipping and handling costs and shipping supplies, net of vendor rebates.

Advertising Costs

Advertising costs are expensed as incurred. The Company incurred $0.5 million in advertising costs during the three months ended September 30, 2023, and $7.3 million during the three months ended September 30, 2022. For the nine months ended September 30, 2023, advertising costs were $2.1 million and $26.5 for the nine months ended September 30, 2022.

Income Taxes

The Company is a C corporation for U.S. federal income tax purposes. Accordingly, the Company accounts for income taxes in accordance with the provisions of ASC 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates for years in which those temporary differences are expected to be recovered or settled. The measurement of deferred tax assets is reduced by the amount of any tax benefit that, based on available evidence, is not expected to be realized, and a corresponding allowance is established. The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on the Company’s various income tax returns for the reporting year.

ASC 740 also provides guidance on the accounting for uncertain tax positions recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Based on the Company’s evaluation, management concluded that there are no significant uncertain tax positions requiring recognition in the Company’s condensed consolidated financial statements. The Company files U.S. federal and State of New Jersey state tax returns and had no unrecognized tax benefits at September 30, 2023 and December 31, 2022.

The Company’s policy for recording interest and penalties associated with audits is to record such expenses as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the nine months ended September 30, 2023 and 2022. Management is currently unaware of any issues under review that could result in significant payments, accruals, or material deviations from its filing positions.

Loss Per Share

For the three and nine months ended September 30, 2023 and 2022, basic net loss per common share was determined by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. For purposes of calculating diluted net loss per common share, the denominator includes both the weighted average common shares outstanding and the number of common stock equivalents if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents potentially include performance-based stock units, unvested restricted stock units, and warrants using the treasury stock method. For all periods presented, there is no difference in the number of shares used to compute basic and diluted net loss per common share due to the Company’s net loss.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), which requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable that a loss has been incurred. This ASU is effective for smaller reporting companies for years beginning January 1, 2023. The Company adopted Topic 326 on January 1, 2023, and the adoption of this guidance did not have a material impact on the condensed consolidated financial statements.

Certain Significant Risks and Uncertainties

In February 2022, the Russian Federation launched a full-scale invasion against Ukraine, and sustained conflict and disruption in the region is ongoing. The Company’s engineering and product data development team as well as back office and part of its customer service center are in Ukraine. The Company’s ability to maintain adequate liquidity for its operations is dependent upon several factors, including its revenue and earnings, the impacts of COVID-19 and Russian-Ukraine conflict on macroeconomic conditions, and its ability to take further cost savings and cash conservation measures if necessary. The Russian-Ukraine conflict could have a material adverse effect upon the Company.

Significant Accounting Policies

There have been no significant changes from the significant accounting policies disclosed in Note 2 of the “Notes to Consolidated Financial Statements” included in our Annual Report on Form 10-K for the year ended December 31, 2022 (our “2022 Form 10-K”).

Note 3 – Property and Equipment

Property and equipment consists of the following as of:

	September 30, 2023			December 31, 2022
Website and software development	$	53,943,353		$	50,697,486
Furniture and fixtures		854,818			851,926
Computers and electronics		1,015,853			1,015,853
Vehicles		325,504			325,504
Leasehold improvements		300,673			300,673
Video and equipment		176,903			176,903
Total - Gross		56,617,104			53,368,345
Less: Accumulated depreciation		(46,329,596	)		(40,452,572	)
Total - Net	$	10,287,508		$	12,915,773

Depreciation of property and equipment for three months ended September 30, 2023 and 2022 was $1,899,995 and $2,113,695, respectively. Depreciation of property and equipment for the nine months ended September 30, 2023 and 2022 was $5,877,025 and $6,210,590, respectively.

Note 4 – Leases

Operating Leases

The Company has lease arrangements for office spaces and an equipment lease. These leases expire at various dates through 2025.

	As of and for the Three and nine Months Ended September 30, 2023

Operating Lease Expense – 3 months ended September 30, 2023	$	91,106
Operating Lease Expense – 9 months ended September 30, 2023	$	287,958
Additional Lease Information:
Weighted average remaining lease term-operating leases (in years)		1.50
Weighted average discount rate-operating leases		7	%

Future minimum lease payments under non-cancellable leases as of September 30, 2023, were as follows:
October 1, 2023 to December 31, 2023	$	170,502
January 1, 2024 to December 31, 2024		276,358
January 1, 2025 to September 30, 2025		197,940
Sub-total		644,800
Less: Portion representing interest		(88,409	)
Total future minimum lease payments		556,391
Less: Current portion of lease obligations		(310,177	)
Long-term portion of lease obligations	$	246,214

Note 5 – Debt

JGB Collateral, LLC Convertible Notes and Warrants

On October 21, 2022, the Company entered into a Loan and Security Agreement with JGB Collateral, LLC (as amended, the “JGB Loan Agreement”), a Delaware limited liability company (“JGB”), in its capacity as collateral agent (the “Agent”) and the several financial institutions or entities that from time to time become parties to the JGB Loan Agreement as lenders (collectively, the “Lender”). As collateral for the obligations, the Company has granted the Lender senior security interest in all the Company’s right, title and interest in, to and under all of the Company’s property.

The loan agreement provided for term loans in an aggregate principal amount of up to $11.0 million under two tranches. The tranches consist of (a) a first tranche consisting of term loans in the aggregate principal amount of $5.5 million, of which the entire amount was funded to the Company on the closing date (the “Initial Term Loan Advance”); and (ii) a second tranche consisting of term loans in the aggregate principal amount of an additional $5.5 million, which may funded to the Company by the Lender in its sole and absolute discretion (subject to the terms and conditions of the Loan Agreement) until the date that is six months after the Closing Date (the “Second Term Loan Advance” and together with the Initial Term Loan Advance, the “Term Loan Advances”). Each of the Term Loan Advances will be issued with an original issue discount of $500,000.

In connection with the entry into the loan agreement, with respect to the Initial Term Loan Advance, the Company issued to the Lender a warrant (the “Warrant”) to purchase 1,000,000 shares (the “Warrant Shares”) of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”). The Warrant will be exercisable for a period of five years from the date of issuance at a per-share exercise price equal to $2.00, subject to certain adjustments as specified in the Warrant. If the Company seeks and obtains the Second Term Loan Advance in accordance with the terms of the Loan Agreement, the Company will issue another Warrant to the Lender to purchase 1,000,000 shares of the Company’s Common Stock at a per-share exercise price equal to $2.00 and otherwise on the same terms and conditions as the Warrant issued with respect to the Initial Term Loan Advance. The Warrant also provides for customary shelf and piggyback registration rights with respect to the Warrant Shares.

The effective interest rate on the Initial Term Loan Advance of $5.5 million was 17.9%. The Company incurred debt issue issuance costs of approximately $165,000 in connection with this loan and recorded a discount of $500,000. As of December 31, 2022 the Company had $4.2 million outstanding on the note net of debt discounts and debt issuance costs. A portion of the note was attributed to the warrants for 1,000,000 shares of the Company’s stock which at the time of issuance had been valued at $799,000 using the Black-Scholes model. As of December 31, 2022, the fair value of the warrant was determined to be approximately $551,000, which is remeasured each reporting period with changes in its value recorded as a change in fair value of warrants on the condensed consolidated statement of operations. The loan requires the Company to make 30 monthly payments of $183,333 beginning on April 30, 2023, with the last payment due September 30, 2025. On January 6, 2023, the Company notified its Agent and Lender that it was not in compliance with the Consolidated Quarterly Net Revenue Covenant (as defined in the Loan Agreement) for the calendar quarter ended December 31, 2022. On February 22, 2023, the Company and JGB executed an amendment to the Loan Agreement (the “Amendment”) and on February 27, 2023, the Company repaid $2.0 million of the loan to JGB.

On February 22, 2023 the Company and the Agent executed an amendment to the Loan Agreement (the “First Amendment”), which, among other things, (i) the Company agreed to repay the principal amount of the term loan to the Agent in the following installments: (A) $2 million on February 23, 2023, (B) $1 million on August 22, 2023 and (C) the entire remaining principal balance and all accrued but unpaid interest which remained at the original loan rate of 8.0% (including the Original Issue Discount, as defined in the Amendment) on August 22, 2024; (ii) the Agent agreed to withdraw the Notice of Default and not exercise its purported rights and remedies thereunder; (iii) the Lender may elect, at any time and from time to time, to convert any outstanding portion of the outstanding term loan into shares of the Company’s common stock at a conversion price of $0.50 per share; (iv) removed the “Cash Minimum” covenant of which the Company had to maintain unrestricted, unencumbered Cash (as defined in the Loan Agreement) of at least $2,000,000; (v) removed the EBITDA (as defined in the JGB Loan Agreement) covenant of which the Company had to maintain at least the applicable EBITDA Target (as defined in the JGB Loan Agreement) for each calendar quarter; (vi) removed the revenue covenant in which the Company had to maintain consolidated quarterly net revenue of at least $75 million each calendar quarter and (vii) provided a lien to JGB in the Company’s claims for trademark infringement against Volkswagen Group of America, Inc. pursuant to the lawsuit currently pending in the United States District Court for the District of New Jersey and captioned as Onyx Enterprises Int’l, Corp v. Volkswagen Group of America, Inc., and all proceeds and products thereof and United States District Court for the District of Massachusetts and captioned as Onyx Enterprises International Corp. v. ID Parts LLC, and all proceeds and products thereof (collectively, the “Volkswagen Trademark Claims”), provided that the Company can secure the Permitted Litigation Indebtedness (as defined in the Amendment) on the terms described in the Amendment.

In connection with the First Amendment, the Company and the Agent entered into an Amended and Restated Intellectual Property and Security Agreement (the “A&R Security Agreement”) which amended and restated that certain Intellectual Property and Security Agreement, dated as of October 21, 2022. The A&R Security Agreement removed the exclusion of the Volkswagen Trademark Claims from the Agent’s security interest in the Company’s intellectual property.

The First Amendment was accounted for as a debt extinguishment in accordance with ASC 470, which resulted in the Initial Term Loan Advance being derecognized and the convertible notes that were issued as a result of the First Amendment being recorded at fair value with the difference resulting in a $879,045 loss on debt extinguishment for the three months ended March 31, 2023 and nine months ended September 30, 2023.

On June 16, 2023, the Company executed a Second Amendment to the JGB Loan Agreement (the “Second Amendment”). Pursuant to the Second Amendment, the Company borrowed an additional $700,000 with an original discount on such additional loan of $100,000. In accordance with the terms of the Second Amendment, the Company shall repay the loan in equal weekly installments of $50,000 commencing on July 7, 2023; provided, however, that in the event the Company receives gross proceeds of at least $2,000,000 from any debt or equity financing following the effective date of the Second Amendment, then the Company shall repay an amount equal to $950,000 on the outstanding balances under the JGB Loan Agreement.

On July 14, 2023, the Company repaid all the outstanding JGB notes of $4.2 million plus accrued interest of $0.1 million. Thereafter, JGB attempted to exercise its put right on all of the warrants issued in connection with the JGB notes, however, the Company has not paid the $350,000 to JGB for the exercise of the put right on such warrants as of September 30, 2023, which is accrued on the balance sheet and was recorded as a loss on extinguishment of warrants on the statement of operations partially offset by the derivative value of the warrants of $33,000 at the time of the attempted exercise of the put right.

March 2023 Convertible Notes and Warrants

On March 6, 2023 (the “Initial Closing Date”), PARTS iD, Inc., a Delaware corporation (the “Company”), entered into a Note and Warrant Purchase Agreement (the “March Purchase Agreement”) whereby the Company agreed to issue and sell to certain investors in a private placement, (a) an aggregate principal amount of up to $10 million in junior secured convertible promissory notes (the “March Convertible Notes”) and (i) an aggregate of up to two million warrants to purchase the Company’s common stock at an exercise price of $0.50 per share (the “March Warrants”), in one or more closings pursuant to the terms of the March Purchase Agreement. All the disinterested directors of the Company’s Board of Directors, as well as the disinterested directors of the Audit Committee, reviewed and approved the terms of the March Purchase Agreement, March Convertible Notes and March Warrants. As of the Initial Closing Date, the Company issued and sold (a) an aggregate principal amount of $2,900,000 of March Convertible Notes and (ii) an aggregate of 580,000 March Warrants, of which $2,650,000 of March Convertible Notes and 530,000 March Warrants were purchased by entities affiliated with certain directors, officers, and beneficial owners of the Company. At the time of issuance, the fair value of the March Warrants was determined to be $158,000 using the Black-Scholes model. As of September 30, 2023, the fair value of the March Warrants was determined to be de-minimis, and accordingly, the decrease in their value was recorded as a change in fair value of warrants on the condensed consolidated statement of operations.

The March Convertible Notes accrue interest at 7.75% per annum, compounded semi-annually and such interest may be paid at the option of the Company either in cash or common stock. Upon the Company’s sale and issuance of equity or equity-linked securities pursuant to which the Company receives aggregate gross proceeds of at least $3 million (a “Qualified Equity Financing”), the March Convertible Notes are mandatorily convertible into shares of such equity securities sold in the Qualified Equity Financing. The Company may, at its option, redeem the March Convertible Notes (including the outstanding principal and any accrued but unpaid interest thereon) for cash, in full or in part, if the March Convertible Notes have otherwise not been converted within 180 days of the date of issuance. In addition, upon a Change of Control (as defined in the March Convertible Notes) of the Company, the March Convertible Notes shall be repaid in full at or before the closing of such transaction in cash.

The March Convertible Notes are strictly subordinated to the (i) senior secured indebtedness incurred or owed by the Company pursuant to the JGB Loan Agreement; and (ii) the Permitted Litigation Indebtedness (as defined in the JGB Loan Agreement).

Subject to the subordination provisions described above the March Convertible Notes are secured by a junior security interest in all the Company’s rights, title, and interest in and to all the Company’s assets. The March Convertible Notes mature on March 6, 2025.

The March Warrants will expire after 5 years from the date of issuance and may not be exercised on a cashless basis. The March Warrants provide that a holder of March Warrants will not have the right to exercise any portion of its March Warrants, if such holder, together with its affiliates, and any other party whose holdings would be aggregated with those of the holder for purposes of Section 13(d) or Section 16 of the Exchange Act would beneficially own in excess of 4.99%, of the number of shares of the Company’s Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that each holder may increase or decrease the Beneficial Ownership Limitation by giving notice to the Company, with any such increase not taking effect until the sixty-first day after such notice is delivered to the Company but not to any percentage in excess of 9.99%; provided that any holder of the Warrants that beneficially owns in excess of 19.99% of the number of shares of the Common Stock outstanding on the issuance date of the Warrants shall not be subject to the Beneficial Ownership Limitation.

The March Convertible Notes and the March Warrants were issued by the Company in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and have not been registered under the Securities Act.

As of September 30, 2023, the Company had $2.8 million outstanding on the March Convertible Notes, net of debt discounts.

May 2023 Convertible Notes and Warrants

On May 19, 2023, the Company issued to certain investors, in a private placement (i) unsecured convertible promissory notes in the aggregate principal amount of $1,000,000 (the “May Convertible Notes”) and (ii) an aggregate of 2,083,333 warrants (the “May Warrants”) to purchase shares of the Company’s Class A common stock at an exercise price of $0.48 per share. Lev Peker, the Chief Executive Officer and a director of the Company purchased an aggregate principal amount of $750,000 May Convertible Notes and received an aggregate of 1,562,500 May Warrants in this offering. All the disinterested directors of the Company’s Board of Directors, as well as the disinterested directors of the Audit Committee, reviewed and approved the terms of the May Convertible Notes and May Warrants.

The Company allocated the proceeds from the private placement between the May Convertible Notes and the May Warrants by applying the relative fair value methodology. The Company allocated $578,704 to the May Convertible Notes and $421,296 to the May Warrants. As of September 30, 2023, the Company had approximately $653,000 outstanding on the May Convertible Notes, net of discounts.

The May Convertible Notes accrue interest at 7.75% per annum compounded semi-annually and mature on May 19, 2025 (the “Maturity Date”). Effective on the Maturity Date, if the convertible notes have not otherwise been repaid by the Company in accordance with the terms and conditions set forth therein, then at the option of the purchasers, the outstanding balance of the convertible notes (including any accrued but unpaid interest thereon) (the “May Note Amounts”) shall convert into that number of fully paid and nonassessable shares of the Company’s common stock at a conversion price equal to the respective May Note Amounts (as defined in the May Convertible Notes) divided by the conversion price (as defined in the May Convertible Notes). The Company may prepay the May Note Amounts at any time prior to the Maturity Date.

The May Convertible Notes are strictly subordinated to the (i) senior secured indebtedness incurred or owed by the Company pursuant to the JGB Loan Agreement and (ii) Permitted Litigation Indebtedness (as defined in the JGB Loan Agreement).

The May Warrants will expire after 5 years from the date of issuance and may not be exercised on a cashless basis. The warrants provide that a holder of May Warrants will not have the right to exercise any portion of its warrants, if such holder, together with its affiliates, and any other party whose holdings would be aggregated with those of the holder for purposes of Section 13(d) or Section 16 of the Exchange Act would beneficially own in excess of 4.99%, of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that each holder may increase or decrease the Beneficial Ownership Limitation by giving notice to the Company, with any such increase not taking effect until the sixty-first day after such notice is delivered to the Company but not to any percentage in excess of 9.99%; provided that any holder of the May Warrants that beneficially owns in excess of 19.99% of the number of shares of the Common Stock outstanding on the issuance date of the May Warrants shall not be subject to the Beneficial Ownership Limitation.

June 2023 Convertible Notes and Warrants

On June 14, 2023, the Company entered into a Note and Warrant Purchase Agreement whereby the Company agreed to issue and sell to an investor in a private placement, (i) an unsecured convertible promissory note in the aggregate principal amount of $250,000 (the “June Convertible Note”) and (ii) a warrant (the “June Warrant”) to purchase an aggregate of 694,444 shares of the Company’s Class A common stock (the “Common Stock”), at an exercise price of $0.36 per share. The June Convertible Note accrues interest at 7.75% per annum, compounded semi-annually. The June Convertible Note matures on June 14, 2025. At maturity, if the June Convertible Note has not otherwise been repaid by the Company, then at the option of the purchaser, the outstanding balance of the June Convertible Note, including any accrued but unpaid interest thereon, shall convert into that number of fully paid and nonassessable shares of the Company’s Common Stock at a Conversion Price (as defined in the June Convertible Note). The Company may prepay the June Note Amount at any time prior to the Maturity Date.

The Company allocated the proceeds from the private placement between the June Convertible Note and the June Warrants by applying the relative fair value methodology. The Company allocated $144,342 to the June Convertible Note and $105,658 to the June Warrants. As of September 30, 2023, the Company had approximately $160,000 outstanding on the June Convertible Note, net of discounts.

The June Convertible Note is strictly subordinated to the (i) senior secured indebtedness incurred or owed by the Company pursuant to the JGB Loan Agreement and (ii) Permitted Litigation Indebtedness (as defined in the Loan Agreement).

The June Warrant will expire after 5 years from the date of issuance and may not be exercised on a cashless basis. The June Warrant provides that the holder will not have the right to exercise any portion of the June Warrant, if the holder, together with its affiliates, and any other party whose holdings would be aggregated with those of the holder for purposes of Section 13(d) or Section 16 of the Exchange Act would beneficially own in excess of 4.99%, of the number of shares of the Company’s Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that the holder may increase or decrease the Beneficial Ownership Limitation by giving notice to the Company, with any such increase not taking effect until the sixty-first day after such notice is delivered to the Company but not to any percentage in excess of 9.99%; provided that the holder of the June Warrant that beneficially owns in excess of 19.99% of the number of shares of the Common Stock outstanding on the issuance date of the June Warrant shall not be subject to the Beneficial Ownership Limitation.

July 2023 Convertible Notes and Warrants

On July 13, 2023, the Company entered into a Note and Warrant Purchase Agreement (the “July Purchase Agreement”) whereby the Company agreed to issue and sell to certain investors affiliated with certain directors, officers and beneficial owners of the Company, in a private placement (i) an aggregate principal amount of up to $3.25 million in junior secured convertible promissory notes (the “July Convertible Notes”) and (ii) an aggregate of up to 7,738,094 warrants (the “July Warrants”) to purchase the Company’s Common Stock at an exercise price of $0.42 per share. All the disinterested directors of the Company’s Board of Directors, as well as the disinterested directors of the Audit Committee, reviewed and approved the terms of the July Purchase Agreement, July Convertible Notes and July Warrants.

The July Convertible Notes issued to the non-insider purchaser accrues interest at 7.75% per annum, compounded semi-annually. Effective on the maturity date, if the July Convertible Notes have not otherwise been repaid by the Company, then at the option of the purchasers, the outstanding balance of the July Convertible Notes, including any accrued but unpaid interest thereon (the “July Note Amounts”), shall convert into that number of fully paid and nonassessable shares of the Company’s Common Stock. Upon the Company’s sale and issuance of equity or equity-linked securities pursuant to which the Company receives aggregate gross proceeds of at least $10.0 million (an “Equity Financing”), the Company shall repay the Note Amounts in cash. In addition, upon a Change of Control (as defined in the July Convertible Notes) of the Company, the July Convertible Notes shall be repaid in full at or before the closing of such transaction in cash. The Convertible Notes are strictly subordinated to the Lind Senior Notes (described below) and are secured by a junior security interest in all the Company’s right, title, and interest in and to all the Company’s assets. The July Convertible Notes mature on July 13, 2024.

The July Warrants will expire after 5 years from the date of issuance and the July Warrants issued to the non-insider Purchaser may be exercised on a cashless basis. The July Warrants provide that a holder of July Warrants will not have the right to exercise any portion of its July Warrants, if such holder, together with its affiliates, and any other party whose holdings would be aggregated with those of the holder for purposes of Section 13(d) or Section 16 of the Exchange Act would beneficially own in excess of 4.99%, of the number of shares of the Company’s Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that each holder may increase or decrease the Beneficial Ownership Limitation by giving notice to the Company, with any such increase not taking effect until the sixty-first day after such notice is delivered to the Company but not to any percentage in excess of 9.99%; provided that any holder of the July Warrants that beneficially owns in excess of 19.99% of the number of shares of the Common Stock outstanding on the issuance date of the July Warrants shall not be subject to the Beneficial Ownership Limitation. The July Convertible Notes and the July Warrants were issued by the Company in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act. The July Purchase Agreement provides for customary shelf registration rights with respect to the shares of Common Stock underlying the July Convertible Notes and July Warrants.

The July Warrants were valued at $2.4 million at issuance using the Black-Scholes model. The Company allocated the proceeds from the July Convertible Notes and the July Warrants by applying the relative fair value methodology. The Company allocated $1.4 million to the July Warrants, which were recorded in shareholders’ equity and as a discount on the notes that will be amortized over the life of the notes. As of September 30, 2023, the outstanding balance related to the July Convertible Notes was $2.1 million, net of discounts.

On July 13, 2023, the Company used proceeds from the July Convertible Notes and the Lind Financing (as described below) to repay JGB and the JGB Loan Agreement was thereby terminated upon the receipt by JGB of a payoff amount of $4,318,444 which included the outstanding principal balance due under the JGB Loan Agreement, accrued but unpaid interest thereon and the Agent’s legal fees and other expenses. The payoff amount paid by the Company in connection with the termination of the JGB Loan Agreement was made pursuant to a payoff letter. As a result, the JGB Loan Agreement, together with all documents and agreements executed in connection therewith, have terminated and all liens associated therewith have been released.

Lind Financing

On July 14, 2023 the Company entered into a Securities Purchase Agreement with Lind Global Fund II LP (the “Lind Purchase Agreement”). The Lind Purchase Agreement provides for loans in an aggregate principal amount of up to $10 million under various tranches (the “Lind Financing”). As of the Initial Closing Date, Lind funded $3.75 million (less commitment fees) to the Company out of the $4.75 million “First Funding Amount” (as defined in the Lind Purchase Agreement) and Lind funded the remaining $1.0 million (less commitment fees) 5 business days after the Company (i) having a registration statement declared effective by the SEC for the registration of the shares of the Company’s Class A common stock (the “Common Stock”) issuable upon conversion of the Lind Note (as defined below) and the Lind Warrant (as defined below) and (ii) the receipt of Stockholder Approval (as defined in the Lind Purchase Agreement), if required. In consideration for the First Funding Amount, the Company issued and sold to Lind, in a private placement, (A) a senior secured convertible promissory note in the aggregate principal amount of $5,367,500 (the “Lind Note”) and (B) 12,837,838 warrants to purchase the Company’s Common Stock at an exercise price of $0.50 per share (subject to certain adjustments) (the “Lind Warrant”).

The Company concluded that the proceeds from the Note should be allocated based on the relative fair values of the Note and the Warrant. The Lind Warrant was valued at $3.7 million on the issue date using the Black-Scholes method. The fair value of the Note is deemed to be the residual value arrived at by subtracting the $0.6 million original issue discount, the $1.1 million fair value of the conversion feature that was deemed to be a bi-furcated embedded derivative and valued on the issuance date using a Monte-Carlo Simulation Model, and the $0.5 million in debt issuance costs. The net proceeds were allocated between the Note and the Warrant based on relative fair value basis. The Company allocated $2.3 million to the Lind Warrant, which was recorded in shareholders’ equity and as a discount on the Lind Note that will be amortized over the life of the note. In addition, the Company booked an additional $2.2 million of debt issuance costs and debt discounts related to the relative fair value allocations and recorded amortization of $0.4 million during the third quarter of 2023. As of September 30, 2023, the outstanding balance related to the Lind Note was $4.8 million, net of $3.6 million unamortized discounts.

At any time while the Lind Note is outstanding and subject to certain conditions, including no event(s) of default has occurred, being satisfied as set forth in the Lind Purchase Agreement, the Company may deliver a written notice to Lind (an “Additional Funding Request”) requesting an increase in the amount of funding provided by Lind to the Company under the Lind Note, and such Additional Funding Request shall be equal to no less than $1.0 million and shall not exceed $5.25 million (the “Additional Funding Limit”). Events of default include but are not limited to having market capitalization of less than $6.0 million for ten (10) consecutive days, the Company’s intention not comply with a conversion request, default on any payment of any amount of principal or interest, not having sufficient number of shares of Common Stock authorized, reserved and available for issuance to satisfy the conversion in full of the Lind note, or failure to observe or perform any other covenant, condition or agreement contained in any transaction document.

Within 7 business days of receiving the Additional Funding Request, Lind shall give a written response to the Company (an “Investor Response”) that provides that Lind has elected (in its sole and absolute discretion) to (i) advance the full requested amount, (ii) advance an amount less than the full requested amount or (iii) not advance any of the requested amount. In addition, Lind may, in its sole discretion and without any action by the Company, deliver written notice to the Company (an “Investor Funding Notice”) of its election to advance up to an aggregate of $2.0 million of increased funding to the Company. Any such increased funding amounts directed by Lind shall count toward the Additional Funding Limit.

On August 2, 2023 (the “Effective Date”), the Company and Lind entered into an amendment to the Lind Purchase Agreement to have the remaining $1.0 million (less commitment fees) of the First Funding Amount (as defined in the Lind Purchase Agreement) payable in two tranches: (i) $500,000 (less a $15,000 commitment fee) on the Effective Date and (ii) $500,000 (less a $15,000 commitment fee) within 5 business days of the Company (A) having a registration statement declared effective by the SEC for the registration of the shares of the Company’s Common Stock issuable upon conversion of the notes and warrants issued to Lind pursuant to the Lind Purchase Agreement and (B) the receipt of Stockholder Approval (as defined in the Lind Purchase Agreement).

On August 18, 2023, the Company and Lind entered into a second amendment to the Lind Purchase Agreement to have the second $500,000 tranche described above payable within 5 business days upon the later of (i) the Company having filed the preliminary proxy statement for the receipt of Stockholder Approval (as defined in the Lind Purchase Agreement) and (ii) the effective date of the second amendment.

The Lind Note does not bear any interest and matures on July 14, 2024. Following the date that is sixty (60) days after the earlier to occur of (A) the date the Registration Statement is declared effective by the SEC or (B) the date that any shares issued pursuant to the Lind Note may be immediately resold under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), the Company may repay all, but not less than all, of the then outstanding principal amount of the Lind Note, subject to a 5% premium. If the Company elects to prepay the Lind Note, Lind has the right to convert up to 33 1/3% of the principal amount of the Lind Note at the Conversion Price (as defined below) into shares of the Company’s Common Stock. The Lind Note is convertible, at the option of Lind, into shares of the Company’s common stock at price per share equal to the lower of $0.50 or 90% of the average of the 3 lowest daily VWAPs (as defined in the Note) during the 20 Trading Days (as defined in the Note) prior to conversion.

As collateral for the obligations under the Lind Purchase Agreement, the Company has granted to Lind a senior security interest in all of Company’s right, title, and interest in, to and under all of Company’s property (inclusive of intellectual property), subject to certain exceptions, as set forth in the LLC Guarantor Security Agreement (as defined in the Lind Purchase Agreement) and the Security Agreement (as defined in the Lind Purchase Agreement).

The Lind Warrant will expire after 5 years from the date of issuance and may be exercised on a cashless basis. The Lind Warrant provides that Lind will not have the right to exercise any portion of the Lind Warrant, if, together with its affiliates, and any other party whose holdings would be aggregated with those of the holder for purposes of Section 13(d) or Section 16 of the Securities Exchange Act of 1934, as amended, would beneficially own in excess of 4.99%, of the number of shares of the Company’s Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that the Beneficial Ownership Limitation by shall automatically increase to 9.99% if Lind, together with its affiliates, owns in excess of 4.99% of the Company’s outstanding Common Stock.

The Lind Purchase Agreement provided for customary shelf and piggyback registration rights with respect to the shares of Common Stock underlying the Lind Note and the Lind Warrant. On July 28, 2023, the Company filed a resale registration statement on Form S-3 (the “Resale S-3”) to register the shares of Common Stock underlying the Lind Note and Lind Warrant. The Resale S-3 was declared effective by the SEC on August 7, 2023.

On August 21, 2023, the Company filed a definitive proxy statement to obtain the Stockholder Approval (as defined in the Lind Purchase Agreement). On October 5, 2023, the Company held a Special Meeting of Stockholders and obtained the requisite votes for the Stockholder Approval.

Placement Agent Warrant

On July 14, 2023, in consideration for its services in respect of the Lind Financing described above, the Company also issued to Titan Partners Group LLC, a division of American Partners, LLC (the “Placement Agent”) warrants to purchase 536,570 shares of the Company’s Common Stock at an exercise price per share of $0.625 (the “Placement Agent Warrant”). These warrants were valued at $148,000 using the Monte-Carlo Simulation Model. The Placement Agent Warrant has a 5-year term. In addition, the Company paid the Placement Agent a commission of $285,000. The Placement Agent Warrant also provides for customary demand and piggyback registration rights with respect to the shares of Common Stock underlying the Placement Agent Warrant.

Conversion of Convertible Notes

On August 8, 2023, Lind converted $250,000 of debt into 1,082,250 shares of the Company’s stock at $0.231 per share. The conversion price was based on 90% of the average of three lowest VWAPs during the twenty Trading Days prior to the conversion.

On September 15, 2023, Lind converted $300,000 of debt into 1,515,151 shares of the Company’s stock at $0.198 per share. The conversion price was based on 90% of the average of three lowest VWAPs during the twenty Trading Days prior to the conversion.

August 2023 Convertible Note

In August 2023, Lev Peker, the Chief Executive Officer and a director of the Company, provided a loan to the Company in the aggregate amount of $1.1 million. On October 9, 2023, the Company entered into a Note Purchase Agreement with Mr. Peker whereby the Company issued to Mr. Peker, in a private placement, a junior secured convertible promissory note in the aggregate principal amount of $1.1 million in consideration for such loan. The convertible note does not bear any interest and matures on October 9, 2024. If on that date the convertible note has not otherwise been repaid by the Company in accordance with the terms and conditions set forth therein, then at the option of Mr. Peker, the outstanding balance of the convertible note (including any accrued but unpaid interest thereon) (the “Note Amount”) shall convert into that number of fully paid and nonassessable shares of the Company’s Common Stock at a conversion price equal to the Note Amount divided by the Conversion Price, as defined in the Convertible Note. In addition, upon a Change of Control, as defined in the convertible note, the Convertible Note shall be repaid in full at or before the closing of such transaction in cash. The convertible note is strictly subordinated to the indebtedness owed by the Company to Lind pursuant to the Lind Purchase Agreement, and the convertible note is secured by a junior security interest in all of the Company’s right, title, and interest in and to all of the Company’s assets, excluding the Existing Commercial Tort Claim (as defined in the Lind Purchase Agreement).

Litigation Funding

On September 29, 2023 the Company entered into a Litigation Funding Agreement (the “Funding Agreement”) with Pravati Capital, LLC (the “Funder”) for the purpose of funding the Company’s currently pending litigation matters (i) in the District of Massachusetts and captioned as Parts iD, Inc. v. ID Parts, LLC (Case No. 1:20-cv-1253-RWZ) and (ii) in the District of New Jersey and captioned as Onyx Enterprises, Int’l Corp. v. Volkswagen Group of America, Inc. (Case No. 20-9976) (collectively, the “Litigation”), which were both initiated by the Company in 2020 for purported trademark infringement. Under the terms of the Funding Agreement, the Funder agreed to pay up to an aggregate of $1,500,000 to fund reasonable legal fees, court costs, and other expenses incurred by the Company in connection with the Litigation. As of September 30, 2023 the Company has not received any funds with respect to the aforementioned agreement.

The Company agreed to pay the Funder from the proceeds of the Litigation an amount that is the greater of the (i) Multiple-Based Payment Amount or (ii) Percentage-Based Payment Amount. Each of such amounts shall include (x) the funded amount of the payment with respect to the applicable funding; plus (y) all of the fees and costs related to such funding; plus (z) (A) for the purposes of the Multiple-Based Payment Amount, one of the following: (1) if a payment is made on or before 15 months from the date of the funding, a 2.3 times multiple on the funded amount of the funding (excluding the fees and costs related to such Funding); (2) if a payment is made after 15 months from the date of the funding but on or before 24 months from the date of the funding, a 2.7 times multiple on the funded amount of the funding (excluding the fees and costs related to such Funding); or (3) if a payment is made after 24 months from the date of the funding, a 3.5 times multiple on the funded amount of the funding (excluding the fees and costs related to such funding) or (B) for the purposes of the Percentage-Based Payment Amount, an amount equal to 2.0% of the outstanding daily balance of such funding, compounded monthly, computed on the basis of a 360-day year for the actual number of days elapsed, to the extent accrued and unpaid. No Percentage-Based Payment Amount shall be charged with respect to any funding that is paid based upon a Multiple-Based Payment Amount.

Additionally, the Company agreed to pay the Funder (i) an underwriting fee of $50,000, (ii) a funding origination fee equal to 3% of each funded amount and (iii) a service fee of $1,500 on the first day of each calendar quarter beginning on October 15, 2023. The underwriting fee and the funding origination fee are fully earned on the Closing Date (as defined in the Funding Agreement) but are only due and payable upon the Receipt of Recoveries (as defined in the Funding Agreement) and only to the extent of the Recoveries (as defined in the Funding Agreement). The service fees are fully earned on each of the dates specified in the foregoing clause (iii) but are only due and payable upon the Receipt of Recoveries and only to the extent of the Recoveries.

The Company also granted to the Funder a first priority security interest in and to all Recoveries from the Litigation.

Although the Company is required under the terms of the Funding Agreement to provide notice to the Funder of any settlement offers, any decision regarding settlement of the Litigation, including the ultimate decision whether and for how much to settle, lies solely with the Company.

Subject to the terms and conditions of the Funding Agreement, the Company shall not owe Funder any repayment of the fundings advanced under the Funding Agreement if (i) there is no recovery by the Company in the Litigation, and (ii) the Company is not in default under the Funding Agreement. The Funding Agreement contains customary events of default, including but not limited to, (i) failure by the Company to remit to Funder any amount owed under the Funding Agreement within 14 business days of such amount becoming due; (ii) the occurrence of a Material Adverse Change (as defined in the Funding Agreement); (iii) the intentional non-disclosure or concealment of material information regarding the Litigation by the Company’s law firm (at the direction of the Company) required to be provided under the Funding Agreement; (iv) voluntary and unreasonable dismissal or voluntary and unreasonable abandonment by the Company or the Company’s law firm (at the Company’s direction) of any Litigation prior to a final resolution; (v) the commencement of any bankruptcy or Insolvency Proceeding (as defined in the Funding Agreement) by or against the Company and such Insolvency Proceeding is not dismissed with 60 days and the Company has not assumed the Funding Agreement in connection with such Insolvency Proceeding; and (vi) any change in control of the Company or any entity or combination of entities that directly or indirectly control the Company, unless upon occurrence of a change in control of the Company, the change of control is acknowledged and waived by a signed writing by the Company and the Funder.

Note 6 – Shareholders’ Deficit

Preferred Stock

As of September 30, 2023, the Company had authorized for issuance a total of 1,000,000 shares of preferred stock, par value of $0.0001 per share (“Preferred Stock”). As of September 30, 2023 and December 31, 2022, no shares of Preferred Stock were issued or were outstanding. The Certificate of Incorporation of the Company authorizes the Board of Directors to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special, and other rights at the time of issue of any Preferred Stock.

Common Stock

As of September 30, 2023, and December 31, 2022, the Company had 37,838,931 and 34,825,971, respectively, shares of Class A common stock outstanding. As of September 30, 2023 and December 31, 2022, the Company had reserved shares of Class A common stock for issuance as follows:

	Nature of Reserve	As of September 30, 2023		As of December 31, 2022
a.	Indemnification reserve: Upon the expiration of the indemnification period of two years as described in the Business Combination agreement, subject to the payments of indemnity claims, if any, the Company will issue up to 750,000 shares to former Onyx shareholders		750,000		750,000
b.	EIP reserve: Shares reserved for future issuance under the stockholder approved Parts iD, Inc. 2020 Equity Incentive Plan		2,935,496		3,212,078
c.	ESPP reserve: Shares reserved for future issuance under the stockholder approved Parts iD, Inc. 2020 Employee Stock Purchase Plan		2,043,582		2,043,582
d.	Warrants Reserve: Shares reserved for warrants issued to investors		25,470,279		1,000,000
	Total shares reserved for future issuance		31,199,357		7,005,660

Note 7 – Commitments and Contingencies

As of September 30, 2023, there were no material changes to the Company’s legal matters and other contingencies disclosed in Note 7 of the “Notes to Consolidated Financial Statements” included in our Annual Report on 2022 Form 10-K for the year ended December 31, 2022.

Note 8 – Share-Based Compensation

During the three months ended September 30, 2023 and 2022, selling, general and administrative expenses included $575,299 and $915,007 of share-based compensation expense, respectively. During the nine months ended September 30, 2023 and 2022, selling general and administrative expenses included $1,689,867 and $1,601,848 of share-based compensation expense, respectively.

During the three months ended September 30, 2023 and 2022, the Company capitalized $326,780 and $435,238, respectively, of share-based compensation expense associated with awards issued to consultants who are directly associated with and who devote time to our internal-use software. During the nine months ended September 30, 2023 and 2022, the Company capitalized $1,114,610 and $1,291,572, respectively, of share based compensation expense associated with awards issued to consultants who are directly associated with and who devote time to our internal-use software.

Equity Incentive Plan

In October 2020, in connection with the Business Combination, the Company’s stockholders approved the Parts iD, Inc. 2020 Equity Incentive Plan (the “2020 EIP”). The 2020 EIP became effective immediately upon the closing of the Business Combination. As of September 30, 2023, of the 4,904,596 shares of Class A common stock reserved for issuance under the 2020 EIP in the aggregate, 2,935,496 shares remained available for issuance.

The 2020 EIP provides for the grant of stock options, restricted stock, restricted stock units (“RSUs”), PSUs, stock appreciation rights, other stock-based awards, and cash awards (collectively, “awards”). The awards may be granted to employees, directors, and consultants of the Company.

Restricted Stock Units

The following table summarizes the activity related to RSUs during the nine months ended September 30, 2023:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Unvested balance on January 1, 2023		1,053,445		$	4.67
Granted		-		$	-
Vested		(276,582	)	$	1.02
Forfeited		(173,364	)	$	5.81
Unvested balance on September 30, 2023		603,499		$	5.98

As of September 30, 2023, approximately $0.4 million of unamortized share-based compensation expense was associated with outstanding RSUs, which is expected to be recognized over a remaining weighted average period of 0.18 years.

Performance-Based Restricted Stock Units

The following table summarizes the activity related to PSUs during the nine months ended September 30, 2023:

PSU Type	Balance at January 1, 2023		Granted		Forfeited		Balance at September 30, 2023
Net revenue based		495,200		-		230,000		265,200
Weighted average grant date fair value	$	8.00	$	-	$	6.71	$	9.12
Cash flow based		123,800		-		57,500		66,300
Weighted average grant date fair value	$	2.44	$	-	$	2.35	$	2.52
Total		619,000		-		287,500		331,500

As of September 30, 2023, the performance criteria included in the PSUs plan are unlikely to be achieved, and accordingly, the Company has no accrual of share-based compensation expenses associated with the outstanding PSUs. The weighted average period of 0.32 years was remaining before the expiration of outstanding PSUs.

Employee Stock Purchase Plan

In October 2020, in connection with the Business Combination, the Company’s stockholders approved the Parts iD, Inc. 2020 Employee Stock Purchase Plan (the “2020 ESPP”). There are 2,043,582 shares of Class A common stock available for issuance under the 2020 ESPP. The 2020 ESPP became effective immediately upon the closing of the Business Combination, but it has not yet been implemented. As of September 30, 2023, no shares had been issued under the 2020 ESPP.

Note 9 – Income Taxes

Deferred tax assets and liabilities are recognized based on temporary differences in financial statements and income tax carrying values using rates in effect for years such differences are to reverse. Due to uncertainties surrounding the Company’s ability to generate future taxable income and consequently realize such deferred income tax assets, a full valuation allowance has been established.

The disclosures regarding deferred tax assets included in our 2022 Form 10-K continue to be accurate for the three and nine months ended September 30, 2023.

The Company does not currently anticipate any significant increase or decrease in the total amount of unrecognized tax benefits within the next twelve months.

None of the Company’s U.S. federal or state income tax returns are currently under examination by the Internal Revenue Service (the “IRS”) or state authorities. However, fiscal years 2017 and later remain subject to examination by the IRS and respective states.

Note 10 – Subsequent Events

On October 6, 2023, the Company entered into a definitive Restructuring Support Agreement (the “RSA”) to restructure the Company’s indebtedness with certain of its trade vendors (the “Consenting Vendors”). Pursuant to the terms and conditions of the RSA, the Company agreed to pay to each holder of a (i) Vendor Claim (as defined in the RSA), an amount equal to 55% of such total Vendor Claim consisting of (A) 12.5% of such Vendor Claim (the “Initial Payment”) on the earlier to occur of (X) two business days following the Company’s receipt of the Restructuring Funds (as defined in the RSA) and (Y) December 15, 2023, and (B) the remaining 42.5% of such Vendor Claim paid monthly over 36 months; and (ii) a Convenience Claim (as defined in the RSA), an amount equal to 65% of such Convenience Claim (A) with respect to a Consenting Vendor, no later than two business days after the Company makes the Initial Payment and (B) with respect to an Additional Consenting Vendor (as defined in the RSA), on the later of (X) two business days after the Company makes the Initial Payment and (Y) five business days after such Additional Consenting Vendor’s execution of an Accession Letter (as defined in the RSA). The RSA will terminate automatically upon the earliest occur of (i) payment of the full amount of the Agreed Vendor Claim (as defined in the RSA) to each Consenting Vendor and (ii) the mutual written consent of the Company and the Consenting Vendors holding at least 80% of the Total Vendor Claim Amount (as defined in the RSA).

On October 9, 2023, Lind Global Partners II, L.P. converted $230,000 of debt into 1,703,704 shares of the Company’s stock at $0.135 per share. The conversion price was based on the three lowest VWAPS during the twenty Trading Days prior to the conversion.

On October 20, 2023, the Company entered into a Note Purchase Agreement whereby the Company agreed to issue and sell to Sanjiv Gomes, the Company’s Chief Information Officer, in a private placement, an unsecured promissory note in the aggregate principal amount of $1,000,000 (the “Unsecured Note”). The Unsecured Note bears interest at the rate of 7.75% per annum, compounded semi-annually, and matures on October 20, 2024. The Unsecured Note is unsecured and is strictly subordinated in right of payment to the prior payment in full of all of the (i) indebtedness owed by the Company to Lind pursuant to the Lind Purchase Agreement and (ii) litigation funding provided by the Funder pursuant to the Funding Agreement. The Unsecured Note also provides that the Company and Mr. Gomes intend for the Unsecured Note to be an emergency loan advance to bridge the Company to a possible debtor-in-possession financing facility and for such advance to be included as part of that facility (if and when applicable).

The Company failed to meet its obligations under the terms of the Lind Agreement and Lind Note after the balance sheet date. In October, the Company did not have sufficient authorized shares to fulfill its obligations to issue shares upon request from the Lind Note and Lind Warrant, which is deemed to be an event of default. Upon occurrence of the event of default, the Company is liable to, among other remedies available to the investor, pay 110% of the outstanding principal amount of the Lind Note resulting in a payoff of $5.3 million or convert, at the request of the investor, all or a portion of the outstanding principal amount into shares of Common Stock at the lower of (i) the then-current Conversion Price (as defined in the Lind Note) and (ii) 80% of the average of the three (3) lowest daily VWAPs during the 20 trading days prior to the delivery by Lind of the applicable notice of conversion. The Company does not currently have sufficient amount of authorized shares of Common Stock to have the outstanding principal balance of the Lind Note convert into, and the Lind Warrant exercised into, shares of the Company’s Common Stock.

On October 25, 2023, Lind Global Partners II, L.P. converted $201,500 of debt into 1,707,627 shares of the Company’s stock at $0.118 per share. The conversion price was based on the three lowest VWAPS during the twenty Trading Days prior to the conversion.

On October 27, 2023 the Company received written notice from the NYSE American LLC indicating that the Company is not in compliance with the continued listing standard set forth in Section 1003(f)(v) of the NYSE American Company Guide (“Section 1003(f)(v)”) because the shares of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”) have been selling for a substantial period of time at a low price per share. The Notice has no immediate effect on the listing or trading of the Company’s Common Stock and the Common Stock will continue to trade on the NYSE American under the symbol “ID” with the designation of “.BC” to indicate that the Company is not in compliance with the NYSE American’s continued listing standards. Additionally, the Notice does not result in the immediate delisting of the Company’s Common Stock from the NYSE American.

Pursuant to Section 1003(f)(v), the NYSE American staff (the “Staff”) determined that the Company’s continued listing is predicated on effecting a reverse stock split of its Common Stock or demonstrating sustained price improvement within a reasonable period of time, which the Staff determined to be no later than April 27, 2024. The Notice further stated that as a result of the foregoing, the Company has become subject to the procedures and requirements of Section 1009 of the NYSE American Company Guide, which could, among other things, result in the initiation of delisting proceedings, unless the Company cures the deficiency in a timely manner. The NYSE American may also accelerate delisting action in the event that the Company’s Common Stock trades at levels viewed by the Staff to be abnormally low.

The Company intends to monitor the price of its Common Stock and consider available options if its Common Stock does not trade at a consistent level likely to result in the Company regaining compliance by April 27, 2024. The Company’s receipt of the Notice does not affect the Company’s business, operations or reporting requirements with the Securities and Exchange Commission.

On October 30, 2023, the Company entered into an interim officer engagement agreement (the “Engagement Agreement”) with SRV Partners, LLC, a Delaware limited liability company (“SRVP”). Pursuant to the Engagement Agreement, Arkady A. Goldinstein was appointed as the interim Chief Financial Officer of the Company, effective November 1, 2023. Mr. Goldinstein also assumed on an interim basis the duties of Principal Financial Officer and Principal Accounting Officer of the Company.

On November 2, 2023, the Company entered into a Note Purchase Agreement whereby the Company agreed to issue and sell to 2642186 Ontario Inc. (“Ontario”), in a private placement, a junior secured promissory note in the aggregate principal amount of $1,000,000. The note bears interest at the rate of 7.75% per annum, compounded semi-annually, and matures on November 2, 2024. The note is (A) secured by a junior security interest in any potential proceeds from the Company’s currently pending litigation matters (i) in the District of Massachusetts and captioned as Parts iD, Inc. v. ID Parts, LLC (Case No. 1:20-cv-1253-RWZ) and (ii) in the District of New Jersey and captioned as Onyx Enterprises, Int’l Corp. v. Volkswagen Group of America, Inc. (Case No. 20-9976) (collectively, the “Litigation”) and (B) strictly subordinated in right of payment to the prior payment in full of all of the Litigation funding provided by the Funder pursuant to the Funding Agreement. The note also provides that the Company and Ontario intend for the note to be an emergency loan advance to bridge the Company to a possible debtor-in-possession financing facility and for such advance to be included as part of that facility (if and when applicable).

On November 3, 2023, Lind Global Partners II, L.P. converted $161,500 of debt into 1,682,291 shares of the Company’s stock at $0.0965 per share. The conversion price was based on the three lowest VWAPS during the twenty Trading Days prior to the conversion.

On November 30, 2023, PARTS iD, Inc., a Delaware corporation (the “Company”) entered into a Purchase and Sale of Future Receivables Agreement (the “Riverside Agreement”) with Riverside Capital NY (“RCNY”). Pursuant to the terms of the Riverside Agreement, the Company agreed to sell, and RCNY agreed to purchase, the Company’s right, title and interest in and to $1,469,700 of the Company’s future receivables, for a purchase price of $1,065,000. Pursuant to the terms of the Riverside Agreement, the Company agreed to pay RCNY $15,400 each day until such time as RCNY has been repaid.

Also on November 30, 2023, the Company also entered into a Standard Merchant Cash Advance Agreement (the “Wave Agreement”) with WAVE ADVANCE INC (“WAVE”). Pursuant to the terms of the Wave Agreement, the Company agreed to sell, and WAVE agreed to purchase, the Company’s right, title and interest in and to $1,518,000 of the Company’s future receivables, for a purchase price of $1,100,000. Pursuant to the terms of the Wave Agreement, the Company agreed to pay RCNY $15,400 each day until such time as WAVE has been repaid.

The Riverside Agreement and the Wave Agreement each provides for the grant of a junior security interest in the future receivables and other related collateral under the Uniform Commercial Code in accounts and proceeds, subordinated to the indebtedness incurred under that certain Securities Purchase Agreement, dated as of July 14, 2023, by and between the Company and Lind Global Fund II LP, as amended.

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

The following management’s discussion and analysis of financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements, together with the related notes thereto, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 (our “2022 Form 10-K”).

The following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed in the section “Risk Factors” included in our 2022 Form 10-K. See also the “Cautionary Note Regarding Forward-Looking Statements” set forth at the beginning of this Quarterly Report on Form 10-Q.

Overview

PARTS iD, Inc. (the “Company”) is a technology-driven, digital commerce company on a mission to transform the U.S. automotive aftermarket and the adjacent complex parts markets we serve by providing customers a differentiated customer experience with advanced product search capabilities, proprietary product options, exclusive shop by service type functionality, visually inspired browsing, easy product discovery, rich custom content, an exhaustive product catalog and competitive prices.

The Company delivers this customer experience vision using our purpose-built technology platform and user interface (UI), proprietary parts and accessories fitment data with more than fourteen billion product and fitment data points powered with machine learning, and a comprehensive product catalog spanning approximately eighteen million parts and accessories, when fully available, from over one thousand suppliers we partner with across eight verticals.

The Company’s technology platform integrates software engineering with catalog management, data intelligence, mining, and analytics, along with user interface development which utilizes distinctive rules-based parts fitment software capabilities. To manage the ever-growing need for accurate product and parts data, we use cutting-edge computational and software engineering techniques, including Bayesian classification, to enhance and improve data records and product information, and ultimately to contribute to the overall development of a rich and engaging user experience. Furthermore, our technology platform is designed to support much more than just car parts and accessories. We believe that we have demonstrated the flexibility and scalability of our technology by launching seven adjacent verticals, including BOATiD.com, MOTORCYCLEiD.com, CAMPERiD.com, and others in August 2018, all of which leverage the same proprietary technology platform and data architecture.

There are several key competitive strengths that management believes highlight the attractiveness of the Company’s platform business model and underscore how PARTS iD, Inc. is differentiated from its competition, including:

The Company’s distinctive technology, customer-first UI, and proprietary fitment data enables a differentiated shopping experience for the automotive parts consumer. Unlike any other consumer product category, we believe that the success or failure of selling automotive parts, and especially aftermarket accessories at scale, comes down to rich and comprehensive fitment data. We believe that the Company has been successful at developing its own proprietary fitment database which is not licensed for use to any other person or entity.

We believe that the Company’s product catalog of approximately eighteen million products, when fully available, and approximately forty-five hundred brands is unrivaled. Our comprehensive catalog is enriched with approximately fourteen billion data points, advanced 3D imagery, in-depth product descriptions, customer reviews, installation, and fitment guides, as well as other rich custom content specifically catering to the needs of the automotive aftermarket industry and is further complemented by our highly trained and specialized customer service.

The Company’s proprietary and asset-light fulfillment model is enabled by a network of hundreds of suppliers with whom we have cultivated relationships with and integrated over the last fifteen years. This has enabled us to further scale our catalog size and to add adjacent verticals which allows us to offer a broader array of product lines over our competitors. Furthermore, our geo-sourcing fulfillment algorithm factors in real-time inventory when available, customer proximity, shipping cost, and profitability to optimize product sourcing. This algorithmic approach allows us to increase fill rate and delivery speed.

The Company’s differentiated customer experience is a result of rich content, wide product range with ease of selection, proprietary fitment data, and highly trained customer service representatives, providing a data-driven engagement platform for discovery and inspiration. This is demonstrated by:

the Company’s Net Promoter Score continues to be between 60 – 70 despite the global supply chain disruptions (primarily due to the COVID-19 pandemic) which began in 2021 and continues today;

the Company’s overall product return rate across all eight verticals is consistently within the range of 5 - 6%; and

repeat customer revenue was 34% of total revenue for the fourth quarter of 2022.

The Company has invested sixteen years in building its proprietary platform and we believe that our investment in technology and data has allowed us to expand into adjacent verticals, leveraging a capital-efficient just-in-time inventory model to offer our consumers an extensive selection and customer experience.

During 2022, we took several measures to reduce operating costs, including reducing advertising expenses, general and administrative overhead, and capital expenditures. In June 2022, we took steps to reduce our costs by reducing our employment base in the United States, and reducing our independent contractors in Ukraine, the Philippines, and Costa Rica, and by reducing other operating expenses. The employees and independent contractors affected by this reduction were informed of the Company’s decision beginning in June 2022. The annualized savings from the measures described above were approximately $12 million. Additionally, in October 2022, the Company successfully negotiated a new shipping contract that will yield more than 15% in lower outbound shipping rates. The shipping cost reduction is expected to reduce shipping losses and the cost of delivery to customers.

In the first quarter of 2023, the Company took additional reductions in its advertising expense by approximately 77%, its US-based salaries by approximately 55%, and outside contractor costs by approximately 35%. These reductions were made in order to bring the cost structure of the Company in line with the current business environment.

In the second quarter of 2023, the Company further reduced SG&A to $5.1 million from $9.9 million compared to the same quarter in 2022. Discretionary spending such as salaries and support costs were reduced significantly. Net loss decreased from $6.5 million in the first quarter of 2023 to $4.0 million in the second quarter of 2023. Gross margin for the three months ended June 30, 2023 increased to 25.2% from 19.7% in the same quarter last year as the Company is focused on increasing gross margins. Gross margin for the nine months ended September 30, 2023 increased to 24.6% from 19.7% for the same period last year.

In the third quarter of 2023, the Company continued reductions in SG&A to $5.9 million compared to $9.5 million in the same quarter in 2022. Net loss decreased from $6.3 million to $5.7 million.

Russian-Ukrainian Conflict

The Russian invasion of Ukraine and resulting response from several nations have impacted, and are expected to continue to impact, our business in the near term. Russia’s invasion of Ukraine has elevated global geopolitical tensions and security concerns as well as having recently created some inflationary pressures. Our engineering and product data development team as well as back office and part of its customer service center are in Ukraine. Therefore, the conflict in Ukraine could have a material adverse effect on our business, financial condition, and results of operations. While the conflict has not caused significant disruptions to our operations to date, it could have a material adverse effect upon the Company in future periods.

Since the onset of the active conflict in February 2022, most of our contractors have been able to continue their work, although at a reduced capacity and/or schedule.

Our websites and call centers have continued to function but could be more negatively impacted in the future. Many of our contractors have moved outside of Ukraine to neighboring countries where they continue to work remotely. Some of our contractors who have remained in Ukraine have moved to other areas in Ukraine, but their ability to continue work is subject to significant uncertainty and potential disruptions.

The situation in Ukraine is complex and continues to evolve. We cannot provide any assurance that our outsourced teams in Ukraine will be able to provide efficient and uninterrupted services, which could have an adverse effect on our operations and business. In addition, our ability to maintain adequate liquidity for our operations is dependent on several factors, including our revenue and earnings, which could be significantly impacted by the conflict in Ukraine. Further, any major breakdown or closure of utility services, any major threat to civilians or any international banking disruption could materially impact the operations and liquidity of the Company. We will continue monitoring the military, social, political, regulatory, and economic environment in Ukraine and Russia, and will consider further actions as appropriate.

Middle East Conflict

As a result of coordinated attacks on Israel by Hamas militants in October 2023, war broke out between the State of Israel and Hamas. Since then, the two sides have traded daily rocket fire, and the subsequent military response by the Israeli government has resulted in significant unrest and uncertainty within that region, including the possibility that escalating violence and involvement of other terrorist groups from neighboring countries may further impact the conflict. In addition, Israel is engaged in ongoing hostilities with Hezbollah in Lebanon. Tensions are rising in the region, and the outcome of the conflict is uncertain. The Company does not have operations in the region and does not believe that the conflict will have a significant impact on its operations.

Key Financial and Operating Metrics

We measure our business using financial and operating metrics, as well as non-GAAP financial measures. See “Results of Operations – Non-GAAP Financial Measures” below for more information on non-GAAP financial measures. We monitor several key business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions, including the following:

Traffic and Engagement Metrics

For the Three Months Ended September 30,

	2023		2022		Change			% Change
Number of Users		13,822,360		25,510,999		(11,688,639	)		(45.8	)%
Number of Sessions		17,371,194		40,708,441		(23,337,247	)		(57.3	)%
% Number of Pageviews		72,496,476		165,705,645		(93,209,169	)		(56.2	)%
Pages/Session		4.17		4.07		(0.10	)		2.5	%
Average Session Duration		0:02:52		0:02:56		(0:00:04	)		(1.6	)%

For the Nine Months Ended September 30,

	2023		2022		Change			% Change
Number of Users		41,324,124		85,496,410		(44,172,286	)		(51.7	)%
Number of Sessions		52,836,439		146,125,666		(93,289,169	)		(63.8	)%
% Number of Pageviews		250,088,232		565,049,869		(314,961,637	)		(55.7	)%
Pages/Session		4.73		3.87		.86			22.2	%
Average Session Duration		0:03:28		0:02:58		0:00:30			11.6	%

We use the metrics above to gauge our ability to acquire targeted traffic and keep users engaged. This information informs us of how effective our proprietary technology, data, and content is, and helps us define our strategic roadmap and key initiatives.

Results of Operations

For the Three Months Ended September 30,

	Three months ended September 30,												Change
	2023			% of Rev.			2022			% of Rev.			Amount			%
Net revenue	$	15,711,394					$	79,884,740					$	(64,173,346	)		(80.3	)%
Cost of goods sold		11,395,872			72.5	%		63,962,534			80.1	%		(52,566,662	)		(82.2	)%
Gross profit		4,315,522			27.5	%		15,922,206			19.9	%		(11,606,684	)		(72.9	)%
Gross margin		27.5	%					19.9	%
Operating expenses
Advertising		486,254			3.1	%		7,329,172			9.2	%		(6,842,918	)		(93.4	)%
Selling, general & administrative		5,863,379			37.3	%		9,458,749			11.8	%		(3,595,370	)		(38.0	)%
Depreciation		1,899,995			12.1	%		2,113,695			2.6	%		(213,700	)		(10.1	)%
Total operating expenses		8,249,628			52.5	%		18,901,616			23.7	%		(10,651,988	)		(56.4	)%
Loss from operations		(3,934,106	)		(25.0	)%		(2,979,410	)		(3.7	)%		(954,696	)		32.0	%
Loss on extinguishment of warrants		317,000			2.0	%		-						317,000			-
Change in fair value of warrants		(93,000	)		(0.6	)%		-						(93,000	)		-
Interest and financing expense		1,513,483			9.6	%		50,000			0.1	%		1,463,483			2,927.0	%
(Loss) before income tax		(5,671,589	)		(36.1	)%		(3,029,410	)		(3.8	)%		(2,642,179	)		87.2	%
Income tax expense		-			0.0	%		3,241,618			(4.1	)%		(3,241,618	)		(100.0	)%
Net loss	$	(5,671,589	)		(36.1	)%	$	(6,271,028	)		(7.9	)%	$	599,439			(9.6	)%

For the Nine Months Ended September 30,

	Nine months ended September 30,												Change
	2023			% of Rev.			2022			% of Rev.			Amount			%
Net revenue	$	48,032,207					$	279,034,366					$	(231,002,159	)		(82.8	)%
Cost of goods sold		36,225,160			75.4	%		224,034,701			80.3	%		(187,809,541	)		(83.8	)%
Gross profit		11,807,047			24.6	%		54,999,665			19.7	%		(43,192,618	)		(78.5	)%
Gross margin		24.6	%					19.7	%
Operating expenses
Advertising		2,053,547			4.3	%		26,468,121			9.5	%		(24,414,574	)		(92.2	)%
Selling, general & administrative		17,021,120			35.4	%		31,072,365			11.1	%		(14,051,245	)		(45.2	)%
Depreciation		5,877,025			12.2	%		6,210,590			2.2	%		(333,565	)		(5.4	)%
Total operating expenses		24,951,692			51.9	%		63,751,076			22.8	%		(38,799,384	)		(60.9	)%
Loss from operations		(13,144,645	)		(27.4	)%		(8,751,411	)		(3.1	)%		(4,393,234	)		50.2	%
Loss on extinguishment of debt		879,045			1.8	%		-						879,045			-
Loss on extinguishment of warrants		317,000			0.7%			-						317,000			-
Change in fair value of warrants		(634,000	)		(1.3	)%		-						(634,000	)		-
Interest expense		2,452,649			5.1	%		50,000			0.0			2,402,649			4,805.3	%
Loss before income tax		(16,159,339	)		(33.6	)%		(8,801,411	)		(3.2	)%		(7,357,928	)		83.6	%
Income tax expense		1,000			0.0	%		2,322,515			0.8	%		(2,321,515	)		(100.0	)%
Net loss	$	(16,160,339	)		(33.6	)%	$	(11,123,926	)		(4.0	)%	$	(5,036,413	)		45.3	%

Revenue

Revenue for the three months ended September 30, 2023, decreased by $64.2 million, or 80.3%, compared to the same prior year period, primarily attributable to supply chain disruptions and the lack of product availability coupled with a decrease in advertising spend because of our liquidity squeeze which peaked in early February and led to vendors not giving us access to their full product catalog. Compared to the same prior year period, traffic declined by 53.6% in the three-month period ended September 30, 2023, the site conversion rate decreased by 53.1% and average order value decreased by 9.6%.

For the nine months ended September 30, 2023, revenue decreased by $231.0 million, or 82.8 %, compared to the same prior year period, also attributable to supply chain disruptions and the lack of product availability coupled with a decrease in advertising spend due to our liquidity squeeze which peaked in early February and led to vendors not giving us access to their full product catalog. Compared to the same prior year period, traffic declined by 61.9% in the nine-month period ended September 30, 2023, the site conversion rate decreased by 50.7% and average order value decreased by 7.4%.

We believe that the decrease in traffic and the site conversion rate was primarily attributed to lower orders because of product unavailability, supply chain interruptions, reduction in discretionary spending and a significant reduction in advertising spending by the Company.

Cost of Goods Sold

Cost of goods sold is composed of product cost, the associated fulfillment and handling costs charged by vendors, if any, and shipping costs. In the three months ended September 30, 2023, cost of goods sold decreased by $52.6 million, or 82.2%, compared to the same prior year period. This decrease in the cost of goods sold was primarily driven by decreases in the number of orders or products sold and related shipping costs.

For the three months ended September 30, 2023, cost of goods sold was 72.5% compared to 80.1% of revenue in the respective prior year period. The 7.6% decrease in cost of goods sold as a percentage of revenue was primarily attributable to changes in product mix, as well as ongoing supply chain disruptions and the lack of product availability as a result of our liquidity squeeze which peaked in early February.

For the nine months ended September 30, 2023, cost of goods sold was 75.4% compared to 80.3% of revenue in the respective prior year period. The 4.9% decrease in cost of goods sold as a percentage of revenue was primarily attributable to changes in product mix, as well as ongoing supply chain disruptions and the lack of product availability as a result of our liquidity squeeze which peaked in early February.

Gross Profit and Gross Margin

Gross profit decreased by $11.6 million, or 72.9%, for the three months ended September 30, 2023, compared to the same prior year period, primarily due to an 80.3% decrease in revenue.

Gross profit decreased by $43.2 million, or 78.5%, for the nine months ended September 30, 2023, compared to the same prior year period, primarily due to an 82.8% decrease in revenue.

Gross margin of 24.6% for the nine months ended September 30, 2023, was higher than the gross margin of 19.7% for the nine months ended September 30, 2022, primarily attributable to a change in the product category revenue mix as discussed above and shipping cost savings which was partially offset by increases in product costs.

Operating Expenses

Advertising expense decreased $6.8 million, or 93.4%, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to reduction in discretionary spending which led to lower traffic and number of clicks. As a percentage of revenue, advertising expenses were 3.1% and 9.2% for the three months ended September 30, 2023 and 2022, respectively. The decrease in percentage was primarily attributable to a significant reduction in advertising expenditures.

Advertising expense decreased $24.4 million, or 92.2%, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, also due to reduction in discretionary spending which led to lower traffic and number of clicks. As a percentage of revenue, advertising expenses were 4.3% and 9.5% for the nine months ended September 30, 2023, and 2022, respectively. The decrease in percentage was also attributable to a significant reduction in advertising expenditures.

Selling, general and administrative (“SG&A”) expenses decreased $3.6 million, or 38.0%, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. This decrease was primarily attributable to a decrease in outsourced sales and customer service expenses of $0.8 million, inhouse direct sales expenses of $0.3 million, research development expenses of $0.4 million, public company expenses $0.5 million, payroll expenses of $0.4 million and various other immaterial decreases.

Selling, general and administrative (“SG&A”) expenses decreased $14.1 million, or 45.2%, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. This decrease was primarily attributable to a decrease in payroll costs of $0.6 million, outsourced costs of $3.7 million, research and development costs of $3.7 million, public company costs of $2.4 million, in-house sales costs of $1.6 million, outsourced office costs of $0.7 million, professional fees of $0.6 million, rent expense of $0.5 million, insurance expense of $0.4 million and various other immaterial decreases.

Depreciation expense decreased $0.2 million or 10.1% for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. Depreciation expense decreased $0.3 million or 5.4% for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

Interest Expense

Interest expense was $1,513,483, an increase of $1,463,483 for the three months ended September 30, 2023, compared to $50,000 for the three months ended September 30, 2022. Interest expense for the nine months ended September 30, 2023 was $2,452,649 an increase of $2,402,649 compared to the $50,000 for the three months ended September 30, 2022.

Income Tax Benefit

Income tax expense was $0 for the three months ended September 30, 2023 and $1,000 for nine months ended September 30, 2023, compared to expense of $3,241,618 for the three months ended September 30, 2022 and expense of $2,322,515 for the nine months ended September 30, 2022. For the three months ended September 30, 2023, the effective income tax rate was 0.0%, compared to (107.00)% for the three months ended September 30, 2022. For the nine months ended September 30, 2022, the effective tax rate was (26.39)%. The Company incurred a loss for the quarter and nine months ended September 30, 2023 and elected a full valuation allowance for the deferred tax asset.

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

This report includes non-GAAP financial measures that differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures may not be comparable to similar measures reported by other companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP. Management uses non-GAAP financial measures internally to evaluate the performance of the business. Additionally, management believes certain non-GAAP measures provide meaningful incremental information to investors to consider when evaluating the performance of the Company.

To this end, we provide EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. EBITDA consists of net income (loss) plus (a) interest expense; (b) income tax provision (or less benefit); and (c) depreciation expense. Adjusted EBITDA consists of EBITDA plus costs, fees, expenses, write-offs, and other items that do not impact the fundamentals of our operations, as described further below following the reconciliation of these metrics. Management believes these non-GAAP measures provide useful information to investors in their assessment of the performance of our business. The exclusion of certain expenses in calculating EBITDA and Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis as these costs may vary independent of business performance. Accordingly, we believe that EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors.

EBITDA and Adjusted EBITDA have limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

●

Although depreciation is a non-cash charge, the assets being depreciated may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

●

EBITDA and Adjusted EBITDA do not reflect changes in our working capital;

●

EBITDA and Adjusted EBITDA do not reflect income tax payments that may represent a reduction in cash available to us;

●

EBITDA and Adjusted EBITDA do not reflect depreciation and interest expenses associated with the lease financing obligations; and

●

Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider EBITDA and Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP results. The following table reflects the reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for each of the periods indicated.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net loss	$	(5,671,589	)	$	(6,271,028	)	$	(16,160,339	)	$	(11,123,926	)
Interest and financing expense		1,513,483			50,000			2,452,649			50,000
Income tax expense		-			3,241,618			1,000			2,322,515
Depreciation		1,899,995			2,113,695			5,877,025			6,210,590
EBITDA		(2,258,111	)		(865,715	)		(7,829,665	)		(2,540,821	)
Share compensation expense included in statement of operations		575,299			915,007			1,689,867			1,601,848
Legal & settlement expenses ⁽¹⁾		-			109,913			102,426			738,654
Adjusted EBITDA Total	$	(1,682,812	)	$	(159,205	)	$	(6,037,372	)	$	(200,319	)
% of revenue		(10.71	)%		0.20	%		(12.57	)%		(0.07	)%

(1)

Represents legal and settlement expenses related to significant matters that do not impact the fundamentals of our operations, pertaining to: (a) causes of action between certain of the Company’s shareholders and which involves claims directly against the Company seeking the fulfillment of alleged indemnification obligations with respect to these matters, and (ii) trademark and IP protection cases. We are involved in routine IP litigation, commercial litigation, and other various litigation matters. We review litigation matters from both a qualitative and quantitative perspective to determine if excluding the losses or gains will provide our investors with useful incremental information. Litigation matters can vary in their characteristics, frequency, and significance to our operating results.

Net loss decreased by $0.6 million for the three months ended September 30, 2023, as compared to the same prior year period, primarily driven by a decrease in operating expenses of $10.7 million, decease in tax expense of $3.2 million partially offset by a decrease in gross profit of $11.6 million. The year-over-year decrease in Adjusted EBITDA for the three months ended September 30, 2023, as compared to the same prior year period, was primarily attributable to a decrease in tax expense of $3.2 million in net loss offset by decrease in depreciation and share based compensation expense.

Free Cash Flow

To provide investors with additional information regarding our financial results, we have also disclosed free cash flow, a non-GAAP financial measure that we calculate as net cash provided by (used in) operating activities less capital expenditures (which consist of purchases of property and equipment and website and software development costs). We have provided a reconciliation below of free cash flow to net cash provided by (used in) operating activities, the most directly comparable GAAP financial measure.

We have included free cash flow in this report because it is an important indicator of our liquidity as it measures the amount of cash we generate. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

Free cash flow has limitations as a financial measure, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. There are limitations to using non-GAAP financial measures, including that other companies, including companies in our industry, may calculate free cash flow differently. Because of these limitations, you should consider free cash flow alongside other financial performance measures, including net cash provided by (used in) operating activities, capital expenditures and our other GAAP results.

The following table presents a reconciliation of net cash used in operating activities to free cash flow for each of the periods indicated.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net cash used in operating activities	$	(3,383,826	)	$	(2,112,554	)	$	(8,432,049	)	$	(14,375,590	)
Purchase of property and equipment		-			(19,522	)		(2,892	)		(64,882	)
Website and software development costs		(607,182	)		(1,091,238	)		(2,084,470	)		(4,669,002	)
Free cash flow	$	(3,991,008	)	$	(3,223,314	)	$	(10,519,411	)	$	(19,109,474	)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net cash from profit and loss account	$	(1,634,557	)	$	(23,879	)	$	(6,002,280	)	$	(820,226	)
Net cash used in working capital changes		(1,749,269	)		(2,088,675	)		(2,429,769	)		(13,555,364	)
Total net cash used in operating activities	$	(3,283,826	)	$	(2,112,554	)	$	(8,432,049	)	$	(14,375,590	)

Liquidity and Capital Resources

The Company’s cash was $1.5 million as of September 30, 2023. We have operated with a negative working capital model since our inception. The Company has a working capital deficiency of approximately $47 million as of September 30, 2023. We continue to face macro-economic headwinds, liquidity issues and the resulting declining revenue and profitability, which increased the working capital deficit in the current year and resulted in the use of approximately $8.4 million in cash from operating activities, of which $2.4 million was attributable to changes in working capital during the year. With this, substantial doubt exists about the Company’s ability to continue as a going concern within one year after filing this Quarterly Report on Form 10-Q.

We obtained additional financing for $3.25 million, from certain insiders, from the sale and issuance of convertible notes and warrants on July 13, 2023 and $5.4 million from Lind Global Partners II, L.P on July 14, 2023. We also received an additional $1.1 million in August 2023 from Lev Pecker, our CEO and financed receivables of $700,000 with Riverside Capital, NY and $700,000 with Wave Advance, Inc. in September 2023 discussed below.

On July 14, 2023, the Company entered into a Securities Purchase Agreement (the “Lind Purchase Agreement”) with Lind Global Partners II, L.P.(“Lind”). The Lind Purchase Agreement provides for loans in an aggregate principal amount of up to $10.0 million under various tranches. As a result, the Company received funding in the amount of $3.75 million and pursuant to the terms of the Lind Purchase Agreement. Lind agreed to fund an additional $1.0 million upon (i) the effectiveness of a registration statement filed with the SEC for the registration of the shares of Common Stock underlying the notes and warrants issued to Lind and (ii) the receipt of Stockholder Approval (as defined in the Lind Purchase Agreement). In consideration for the $4.75 million, the Company issued and sold to Lind, in a private placement, (a) a senior secured convertible promissory note in the aggregate principal amount of $5,367,500 and (b) 12,837,838 warrants to purchase the Company’s Common Stock at an exercise price of $0.50 per share. This note was issued at a discount and matures on July 14, 2024. The warrants expire 5 years from the date of issuance and may be exercised on a cashless basis.

The Company can borrow additional amounts of no less than $1.0 million and shall not exceed $5.25 million in which the lender has discretion as to whether or not to lend the additional amounts, subject to certain conditions, including not being in default. The Company failed to meet its obligations under the terms of the Lind Agreement and Lind Note after the balance sheet date. In October, the Company did not have sufficient authorized shares to fulfill its obligations to issue shares upon request from the convertible note holders and warrant holders. Upon occurrence of an event of default, the Company is liable to, among other remedies available to the investor, pay 110% of the outstanding principal amount of the Lind Note resulting in a payoff of $5.3 million or convert, at the request of the investor, all or a portion of the outstanding principal amount into shares of Common Stock at the lower of (i) the then-current Conversion Price (as defined in the Lind Note) and (ii) 80% of the average of the three (3) lowest daily VWAPs during the 20 trading days prior to the delivery by Lind of the applicable notice of conversion. The Company does not currently have sufficient amount of authorized shares of Common Stock to have the outstanding principal balance of the Lind Note convert into, and the Lind Warrant exercised into, shares of the Company’s Common Stock.

Our ability to meet our obligations as they become due is dependent upon the degree of the success of our plans. Our ability to meet our obligations as they become due is dependent upon increased and stabilized revenue and profitability and additional funding. The Company believes that the operational adjustments that have been implemented, and the funds raised, will improve the financial position.

Additionally, management is evaluating the Company’s existing cost structure and implementing cost saving initiatives to reduce operating costs and plans to continue to implement further cost saving initiatives where appropriate. The Company’s plans are dependent on conditions and factors, many of which are outside of the Company’s control. There can be no assurance that we will be able to generate positive cash flow from operations in any future period, nor can there be any assurance that we will be able to raise additional capital; the result of such inability, whether individually or in the aggregate, will adversely impact our financial condition.

We are continuously reviewing our liquidity and anticipated working capital needs based on overall market and economic factors. Market conditions, future financial performance or other factors may make it difficult or impractical for us to access sources of capital on favorable terms, if at all. The failure to successfully implement our strategy to raise capital while also achieving cost savings will adversely impact our financial condition, which impact could be material, could reduce the period of time for which our anticipated working capital needs will be sufficient, and could result in the Company terminating, curtailing or ceasing operations or pursuing other strategic alternatives, including commencing a case under the U.S. Bankruptcy Code.

See the section titled “Risk Factors” (refer to Part II, Item 1A of this report) for a discussion of the factors that may impact our ability to maintain adequate liquidity, in addition to those risks included in Part I, Item 1A of our 2022 Form 10-K.

Cash Flow Summary

The change in cash was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net cash used in operating activities	$	(3,383,826	)	$	(2,112,554	)	$	(8,432,049	)	$	(14,375,590	)
Net cash used in investing activities		(607,181	)		(1,020,510	)		(1,837,362	)		(4,643,634	)
Net cash provided by financing activities		5,215,000			-			7,965,000			-
Net change in cash	$	1,223,993		$	(3,133,064	)	$	(2,304,411	)	$	(19,019,224	)

Cash Flows from Operating Activities

The net cash used in operating activities consists of net loss, adjustments for certain non-cash items, including depreciation, and the effect of changes in working capital and other activities. Operating cash flows can be volatile and are sensitive to many factors, including changes in working capital and our net income (loss). We have a negative working capital model where current liabilities exceed current assets. Any profitable growth in revenue results in incremental cash for the Company. We receive funds when customers place orders on the website, while accounts payable are paid over a period. Vendor terms range on average from one week to eight weeks.

Net cash used in operating activities in the three months ended September 30, 2023, was $3.4 million, and was driven primarily by the impact of a net loss of $5.7 million, and a negative net change in operating assets and liabilities of $1.7 million primarily comprising of a decrease in accounts payable of $2.5 million, decrease in customer deposits $0.1 million, a decrease in prepaids of $0.1 million partially offset by non-cash depreciation and amortization expense of $2.1 million.

Net cash used in operating activities in the nine months ended September 30, 2023, was $8.4 million, and was driven primarily by the impact of a net loss of $16.2 million, and a negative net change in operating assets and liabilities of $2.4 million primarily comprising of an increase in customer deposits of $2.3 million, accounts payable of $1.0 million offset by non-cash depreciation and amortization expenses of $6.4 million and other non-cash charges of $3.8 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $0.6 million for the three months ended September 30, 2023, compared to $1.0 million for the three months ended September 30, 2022, which consisted of website and software development costs. The current year amount was partially offset by the proceeds from the sale of the Onyx.com domain name. Cash used in investing activities varies depending on the timing of technology and product development cycles.

Cash Flows from Financing Activities

Net cash provided from financing activities for the three months ended September 30, 2023, was $5.2 million, compared to $0 in the three months ended September 30, 2022.

Net cash provided by financing activities for the nine months ended September 30, 2023, was $8.0 million compared to $0 in the nine months ended September 30, 2022, due to borrowings from the issuance of convertible notes of $14.4 million and offset by repayments of $6.4 million which included a repayment of the JGB note of $4.3 million.

Operating Leases

The Company has several non-cancelable lease arrangements for office spaces and an equipment lease that expire at various dates through 2025. Rental expense for operating leases was $91,106 for the three months ended September 30, 2023.

Future minimum lease payments under non-cancelable operating leases as of September 30, 2023, are as follows:

October 1, 2023, to December 31, 2023	$	170,502
January 1, 2024 to December 31, 2024		276,358
January 1, 2024 to September 30, 2025		197,940
Total future minimum lease payments	$	644,800

Warrants

In connection with the entry into the JGB Loan Agreement, with respect to the Initial Term Loan Advance, the Company issued JGB a warrant (the “Warrant”) to purchase 1,000,000 shares (the “Warrant Shares”) of the Company’s Common Stock.

The Company received funding of $5,000,000 in cash on October 21, 2022. The warrant was valued at $799,000 at issuance using the Black-Scholes model. The Company paid approximately $0.2 million in costs in connection with the loan. The loan calls for thirty monthly payments of $183,333 beginning April 30, 2023, with the last payment due on September 30, 2025. On February 22, 2023 the Company and the Agent executed an amendment to the Loan Agreement (the “Amendment”), which, among other things, the Company agreed to repay the principal amount of the term loan to the Agent in the following installments: (A) $2 million on February 23, 2023, (B) $1 million on August 22, 2023 and (C) the entire remaining principal balance and all accrued but unpaid interest which remained at the original loan rate of 8.0% (including the Original Issue Discount, as defined in the Amendment) on August 22, 2024.

In addition, the Company issued convertible notes on March 6, 2023 for an aggregate principal amount of $2.9 million and the Company issued the investors warrants to purchase 580,000 shares of Common Stock. These warrants were valued at approximately $158,000 at issuance using the Black-Sholes model.

During the second quarter 2023 the Company issued the convertible notes in the aggregate principal amount of $1.25 million and warrants to purchase 2,777,777 shares of the Common Stock. These warrants were valued at approximately $911,000 at issuance using the Black-Scholes model. The Company accounted for the warrants by allocating approximately $527,000 as a discount on the debt and this discount will be amortized over the life of the loans. In addition, the Company recorded amortization of approximately $24,000 to interest expense.

During the third quarter 2023, other than pursuant to the Lind Purchase Agreement, the Company issued convertible notes in the aggregate principal amount of $3.25 million and warrants to purchase 7,738,094 shares of Common Stock. These warrants were valued at approximately $1.4 million at issuance using the Black-Scholes model.

The warrants liability balance includes the values of warrants issued in connection with issuance of convertible debt issued by the Company. The Company periodically reviews the values of these warrants based on the historical and future values of the Company’s stock, it’s volatility and the risk-free rate using the Black-Scholes model. As of September 30, 2023 and December 31, 2022 the liability was $0 and $551,000, respectively. A change in any of the aforementioned factors over time could result in a material adjustment to this liability.

The Company continues to evaluate opportunities to sell additional equity or debt securities, obtain credit facilities, obtain finance and operating lease arrangements, and/or enter into financing obligations for strategic reasons or to further strengthen our financial position. The sale of additional equity or convertible debt securities would be dilutive to our shareholders. In addition, we will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services, capital infrastructure, and technologies, which might affect our liquidity requirements or cause us to secure additional financing, or issue additional equity or debt securities. There can be no assurance that additional credit lines or financing instruments will be available in amounts or on terms acceptable to us, if at all.

Capital Expenditures

Capital expenditures consist primarily of website and software development, and the amount and timing thereof vary depending on the timing of technology and product development cycles.

Dividends

The Company has never paid dividends on any of our capital stock and currently intends to retain any future earnings to fund the growth of our business. Any determination to pay dividends in the future will be at the discretion of the Board and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that the Board may deem relevant.

Cash Taxes

The Company paid $0 in taxes in cash for the three months ended September 30, 2023, and $1,000 for the nine months ended September 30, 2023. As of December 31, 2022, the Company had $17,034,462 in federal net operating losses (“NOL”), all remaining from 2019 and onwards and accordingly may be available to offset future taxable income indefinitely. However, the NOL’s are subject to an 80% taxable income limitation for all periods after January 1, 2021. The Company does not currently anticipate any significant increase or decrease in the total amount of unrecognized tax benefits within the next twelve months.

Critical Accounting Estimates

Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operation of the registrant. These items require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing our consolidated financial statements in accordance with GAAP, management has made estimates, assumptions and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

In preparing these condensed consolidated financial statements, management has utilized available information, including our history, industry standards and the current and projected economic environments, among other factors, in forming its estimates, assumptions and judgments, considering materiality. Because the use of estimates is inherent in GAAP, actual results could differ from those estimates. In addition, other companies may utilize different estimates, which may impact comparability of our results of operations to those of companies in similar businesses.

A summary of the accounting estimates that management believes are critical to the preparation of our condensed consolidated financial statements is set forth below. See Note 2 of the Notes to Consolidated Financial Statements included in this report and in our 2022 Form 10-K for our other significant accounting policies and accounting pronouncements that may impact the Company’s consolidated financial position, earnings, cash flows or disclosures.

Revenue Recognition

Our revenue recognition is impacted by estimates of unshipped and undelivered orders at the end of the applicable reporting period. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and as such we estimate delivery dates based on historical data. If actual unshipped and undelivered orders are not consistent with our estimates, the impact on our revenue for the applicable reporting period could be material.

Unshipped and undelivered orders as of September 30, 2023 and December 31, 2022, were $0.8 million and $3.1 million, respectively, which are reflected as customer deposits on our condensed consolidated balance sheets.

The outstanding days from the order date of our unshipped and undelivered orders were, on average, estimated at 11.1 days as of April 30, 2023.

If actual sales returns are not consistent with our estimates, or if we must make adjustments, we may incur future losses or gains that could be material. Adjustments to our estimated net allowances for sales returns over the three and nine months ended September 30, 2023 and 2022 were as follows:

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023			2022
Balance at beginning of period	$	213,535	$	756,107	$	549,250		$	738,465
Adjustment		29,564		8,171		(306,151	)		25,813
Balance at closing of period	$	243,099	$	764,278	$	243,099		$	764,278

Website and Software Development

We capitalize certain costs associated with website and software development (technology platform including the product catalog) for internal use in accordance with Accounting Standards Codification (“ASC”) 350-50, Intangibles — Goodwill and Other — Website Development Costs, and ASC 350-40, Intangibles — Goodwill and Other — Internal Use Software, when both the preliminary project design and the testing stage are completed and management has authorized further funding for the project, which it deems probable of completion and to be used for the function intended. Capitalized costs include amounts related to website and software development such as contractors’ fees, payroll and payroll-related costs for employees who are directly associated with and who devote time to our internal-use software. Capitalization of such costs ceases when the project is substantially complete and ready for its intended use. Capitalized costs are amortized over a three-year period commencing on the date that the specific module or platform is placed in service. Costs incurred during the preliminary stages of development and ongoing maintenance costs are expensed as incurred. Determinations as to when a project is substantially complete and what constitutes ongoing maintenance require judgments and estimates by management. We periodically review the carrying values of capitalized costs and make judgments as to ultimate realization. The amount of capitalized software costs for the nine months ended September 30, 2023 and 2022 were as follows:

Nine months ended September 30,	Capitalized Software
2022	$	5,960,574
2023	$	3,245,867

Stock-Based Compensation

The Company recognizes compensation cost related to time-vested options and restricted stock units with graded vesting features on a straight-line basis over the requisite service period. Compensation cost related to performance-vesting options and performance-based units, where a performance condition or a market condition that affects vesting exists, is recognized over the shortest of the explicit, implicit, or defined service periods. Compensation cost is adjusted depending on whether the performance condition is achieved. If the achievement of the performance condition is probable or becomes probable, the full fair value of the award is recognized. If the achievement of the performance condition is not probable or ceases to be probable, then no compensation cost is recognized or amounts previously recognized are reversed.

Changes in expectations and outcomes different from estimates (such as the achievement or non- achievement of performance conditions) may cause a significant adjustment to earnings in a reporting period as timing and amount of expense recognition is highly dependent on management’s estimate.

Deferred Tax Assets

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates for years in which those temporary differences are expected to be recovered or settled. The measurement of deferred tax assets is reduced by the amount of any tax benefit that, based on available evidence, is not expected to be realized, and a corresponding allowance is established. The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on the Company’s various income tax returns for the reporting year.

Allowance for Credit Losses

Recent Accounting Pronouncements

See Note 2 of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this report for information on how recent accounting pronouncements have affected or may affect our financial position, results of operations or cash flows.

Off-Balance Sheet Arrangements

PARTS iD is not a party to any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies.

Item 4. Controls and Procedures

Management’s 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 conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. 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 September 30, 2023 due to material weaknesses as described herein.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (United States) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified that the Company’s internal control over financial reporting is ineffective with respect to its financial closing process as it relates to the accounting for complex debt and equity transactions.

Planned Remediation

Management continues to work to improve its controls related to our material weaknesses, specifically implementing improved processes and internal controls to ensure the proper application of accounting practices and guidance. These material weaknesses will not be considered to be remediated until the applicable remediated controls are operating for a sufficient period of time and management has concluded that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

Except for the material weakness noted above, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings

We are routinely involved in several legal actions, proceedings, litigation, and other disputes arising in the ordinary course of our business. Other than as described below, there were no material changes to the Company’s legal matters and other contingencies disclosed in Note 7 of the “Notes to Consolidated Financial Statements” included in our 2022 Form 10-K.

Onyx Enterprises Int’l, Corp. v. IDParts, LLC

On June 30, 2020, the Company initiated a trademark infringement action against IDParts, LLC (“IDParts”) for the unlawful use of “ID” to sell automotive products through its e-commerce platform found at www.idparts.com. The Company first used “iD” to sell automotive products in March of 2009 on its e-commerce platform found at www.carid.com. The Civil Action is captioned as Onyx Enterprises Int’l, Corp. v. IDParts, LLC, Civil Action Number 1:20-cv-11253-RMZ and is currently pending before the United States District Court for the District of Massachusetts. On August 4, 2020, the Company filed the First Amended Complaint. Upon being served by the Company, IDParts counterclaimed against the Company for infringement of its alleged common law trademark rights arising from is use of “IDParts” on www.idparts.com in January of 2010. On January 22, 2021, the Company filed the Second Amended Complaint against IDParts. The Company is seeking monetary damages for use of its trademark as well as an order precluding IDParts from continuing to use “ID” as part of its branding. IDParts is seeking similar relief through its counterclaims. Discovery was then completed, and a final pretrial conference was held in January 2023. Trial was held on the matter during the week of November 13, 2023 and concluded on November 20, 2023. The jury found that neither party was able to prove infringement in connection with the “iD” marks. However, the jury did find that the Company infringed IDParts’ name by changing its name in 2020. No damages were awarded. The Company is evaluating its options in light of the jury verdict.

Item 1A. Risk Factors

Other than as described below, there have been no material changes to our risk factors from those previously disclosed in our 2022 Form 10-K.

The Company has experienced significant declines in revenue and is not generating sufficient cash flows to cover its operating expenses, and any failure to obtain additional capital will jeopardize its operations.

As of September 30, 2023, the Company had negative working capital of approximately $47 million and has continued to experience declining revenues. While we have operated with a working capital deficiency since our inception, this combined with declined profitability had caused us to consume approximately $3.3 million in cash from operating activities during the quarter ended September 30, 2023. Since then, we have been unable to generate sufficient cash from our operating activities or obtain sufficient financing to cover our operating expenses to date. If our revenues do not increase and continue to decline, we may be forced to discontinue our operations. We need to raise additional capital in the near future, which may not be available on reasonable terms or at all, to continue funding the operations and development of our business. Even if we are able to raise additional capital, we may raise capital by selling equity securities, which will be dilutive to our existing stockholders. If we incur additional indebtedness, costs of financing may be extremely high, and we will be subject to default risks associated with such indebtedness, which may harm our ability to continue the Company’s operations as a going concern. We have very limited liquidity, and we cannot provide any assurance that we will be able to generate sufficient revenue and positive cash flow to successfully continue our business operations. The continued low trading price of our Common Stock presents a significant challenge to our ability to raise additional funds. If adequate capital is not available to us when needed, or in the amounts required, we may be forced to terminate, significantly curtail or cease our operations or to pursue other strategic alternatives, including commencing a case under the U.S. Bankruptcy Code. Our consolidated results of operations could be materially adversely affected by these decisions and your investment in the Company could be materially impaired.

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, including the ongoing military conflicts between Russia and Ukraine and Israel and Hamas. Russian military action against Ukraine has resulted in disruptions to the operations of our outsourced teams in Ukraine and could have a material adverse effect on our operations, liquidity and business.

U.S. and global markets are experiencing volatility and disruption following the escalation of certain geopolitical tensions. The global economy has been, and may continue to be, negatively impacted by Russia’s invasion of Ukraine. As of November 8, 2023, the Company had approximately 229 contractors, consisting of our outsourced engineering and product data development team as well as our outsourced marketing, back office and part of our customer service teams, located in Ukraine, which has been involved in political confrontation with the Russian Federation since 2014. While initially confined to two eastern provinces and the Crimean Peninsula, the conflict escalated significantly in February 2022 when the Russian Federation launched a full-scale invasion with as many as 190,000 troops across all of Ukraine. Since that time, the conflict has escalated, has caused disruption throughout the country and has provoked strong reactions from countries around the world, including the imposition of broad financial and economic sanctions against Russia. Our outsourced teams in Ukraine are located in the southern part of the country, which has been invaded. The actual hardware, including all servers, involved in operating our business have been located outside Ukraine for several years.

Since the onset of the Russian-Ukranian conflict in February 2022, most our contractors have been able to continue their work, although at a reduced capacity and/or schedule. Our websites and call centers have continued to function, however they could be more negatively impacted in the future. Some of our contractors have moved outside of Ukraine to neighboring countries where they continue to work remotely. Some of our contractors who have remained in Ukraine have moved to areas in western Ukraine, but their ability to continue work is subject to significant uncertainty and potential disruptions. The situation is highly complex and continues to evolve. Although we are working to provide IT support by existing personnel in other countries and planning for temporary work locations in surrounding countries, we cannot provide any assurance that our outsourced teams in Ukraine will be able to provide efficient and uninterrupted services, which could have an adverse effect on our operations and business. In addition, our ability to maintain adequate liquidity for our operations is dependent on several factors, including our revenue and earnings, which could be significantly impacted by the conflict in Ukraine. Further, any major breakdown or closure of utility services in Ukraine or in the neighboring countries of Moldova, Romania, Poland or Hungary or adverse displacement of our teams or disruption of international banking could materially impact our operations and liquidity.

In addition, on October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets. Thereafter, Hamas launched extensive rocket attacks on Israeli population and industrial centers located along the Israeli border with the Gaza Strip. Shortly following the attack, Israel’s security cabinet declared war against Hamas and launched an aerial bombardment of various targets within the Gaza Strip. The Israeli government subsequently called for the evacuation of over one million residents of the northern part of the Gaza Strip and began preparation for a potential ground invasion of the Gaza Strip. It is possible that other terrorist organizations will join the hostilities as well, including Hezbollah in Lebanon, and Palestinian military organizations in the West Bank, resulting in a widening of the conflict. The intensity and duration of Israel’s current war against Hamas is difficult to predict as are such war’s economic implications on the global economy.

Although, to date, our business has not been materially impacted by the ongoing military conflict between Israel and Hamas, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which our business may be impacted. The extent and duration of the conflicts in Ukraine and the Middle East, geopolitical tensions and resulting market disruptions are impossible to predict but could be substantial. Any such disruptions may also magnify the impact of other risks described in our 2022 Form 10-K.

Our failure to maintain compliance with the continuing listing requirements of the NYSE American could result in a delisting of our securities.

Our Common Stock is currently listed for trading on the NYSE American LLC (the “NYSE American”). We must satisfy the continued listing requirements of Nasdaq, to maintain the listing of our Common Stock on the NYSE American. If we fail to satisfy the continuing listing requirements of the NYSE American, such as the corporate governance, minimum closing bid price requirements, or stockholders’ equity or minimum closing bid price requirements, the NYSE American may take steps to delist our securities. Such a delisting would likely have a negative effect on the price of our securities and would impair our shareholders’ ability to sell or purchase our securities. In the event of a delisting, we would likely take actions to restore our compliance with the NYSE American’s listing requirements, but we can provide no assurance that any such action taken by us would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our securities from dropping below the NYSE American minimum bid price requirement or prevent future non-compliance with NYSE American’s listing requirements.

As previously disclosed, on May 23, 2023, we received a letter from the NYSE American stating that we were not in compliance with Sections 1003(a)(i) and 1003(a)(ii), respectively, of the NYSE American Company Guide. Sections 1003(a)(i) and 1003(a)(ii) of the NYSE American Company Guide require an issuer to have (a) shareholders’ equity of $2.0 million or more if it has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years, and (b) shareholders’ equity of $4.0 million or more if it has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years, respectively. As previously disclosed, we submitted a plan of compliance to the NYSE American on June 22, 2023 (the “Plan”) addressing how the Company intends to regain compliance with these requirements by November 23, 2024, and on August 8, 2023, the NYSE American accepted the Plan. If the Company is not in compliance with the continued listing standards by November 23, 2024 or if the Company does not make progress consistent with the Plan during the plan period, the NYSE American may commence delisting procedures.

Additionally, as previously disclosed, on October 27, 2023, we received written notice (the “Notice”) from the NYSE American indicating that we are not in compliance with the continued listing standard set forth in Section 1003(f)(v) of the NYSE American Company Guide because the shares of our Common Stock have been selling for a substantial period of time at a low price per share. Pursuant to Section 1003(f)(v) of the NYSE American Company Guide, the NYSE American staff (the “Staff”) determined that our continued listing is predicated on effecting a reverse stock split of our Common Stock or demonstrating sustained price improvement within a reasonable period of time, which the Staff determined to be no later than April 27, 2024. The NYSE American may also accelerate delisting action in the event that our Common Stock trades at levels viewed by the Staff to be abnormally low. We intend to monitor the price of our Common Stock and consider available options if our Common Stock does not trade at a consistent level likely to result in us regaining compliance by April 27, 2024.

If we fail to continue to meet all applicable NYSE American requirements in the future and the NYSE American determines to delist our Common Stock, the delisting could substantially decrease trading in our Common Stock; adversely affect the market liquidity of our Common Stock as a result of the loss of market efficiencies associated with the NYSE American and the loss of federal preemption of state securities laws; adversely affect our ability to obtain financing on acceptable terms, if at all; and may result in the potential loss of confidence by investors, vendors, customers, and employees and fewer business development opportunities. Additionally, the market price of our Common Stock may decline further and stockholders may lose some or all of their investment.

We have a limited number of unreserved, authorized shares.

We have a limited number of unreserved, authorized shares of Common Stock to meet the obligations of our outstanding convertible notes and warrants. In addition, if we issue securities in an equity or equity-linked financing in the near future, we may need to use a significant percentage of our unreserved authorized shares of Common Stock in such an offering. If we were to increase the authorized shares of Common Stock under our Certificate of Incorporation, we would need to obtain stockholder approval to implement an increase in our authorized shares of Common Stock or to effectuate a reverse stock split in order to issue additional shares of Common Stock in the future. Our Certificate of Incorporation and the Delaware General Corporation Law, or the DGCL, currently require the approval of stockholders holding not less than a majority of all outstanding shares of capital stock entitled to vote in order to approve an increase in our authorized shares of Common Stock or a reverse stock split. There are no assurances that stockholder approval will be obtained, in which event we will be unable to raise additional capital through the issuance of shares of Common Stock to fund our future operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

The information required by this Item 2 related to the issuance of convertible notes and warrants to purchase shares of the Company’s Common Stock (as applicable) issued to certain investors is contained in the Current Reports on Form 8-K filed with SEC on July 17, 2023 and October 13, 2023.

Issuer Purchases of Equity Securities

During the three months ended September 30, 2023, the Company did not repurchase any of its securities.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number		Description
3.1		Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 8-A filed on November 23, 2020).

3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 8-A filed on November 23, 2020).

10.1		Securities Purchase Agreement, dated as of July 14, 2023, by and between PARTS iD, Inc. and Lind Global Fund II LP (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.2		Form of Senior Secured Convertible Promissory Note, dated as of July 14, 2023, issued to Lind Global Fund II LP (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.3		Form of Common Stock Purchase Warrant, dated as of July 14, 2023, issued to Lind Global Fund II LP (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.4		Security Agreement, dated as of July 14, 2023, by and between PARTS iD, Inc. and Lind Global Fund II LP (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.5		Guarantor Security Agreement, dated as of July 14, 2023, by and between PARTS iD, LLC and Lind Global Fund II LP (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.6		Pledge Agreement, dated as of July 14, 2023, by and between PARTS iD, Inc. and Lind Global Fund II LP (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.7		Guaranty, dated as of July 14, 2023, by PARTS iD, LLC in favor of Lind Global Fund II LP (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.8		Trademark Security Agreement, dated as of July 14, 2023, by and between PARTS iD, LLC and Lind Global Fund II LP (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.9		Note and Warrant Purchase Agreement, dated as of July 13, 2023, by and between the Company and the Purchasers party thereto (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.10		Form of Junior Secured Convertible Promissory Note, dated as of July 13, 2023 (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.11		Form of Junior Secured Convertible Promissory Note, dated as of July 13, 2023 (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.12		Form of Common Stock Purchase Warrant, dated as of July 13, 2023 (incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.13		Form of Common Stock Purchase Warrant, dated as of July 13, 2023 (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.14		Placement Agent Common Stock Purchase Warrant, dated as of July 14, 2023, issued to Titan Partners Group LLC (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed on July 17, 2023).

10.15		First Amendment to Securities Purchase Agreement, dated as of August 2, 2023, by and between PARTS iD, Inc. and Lind Global Fund II LP (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 3, 2023).

10.16		Second Amendment to Securities Purchase Agreement, dated as of August 18, 2023, by and between PARTS iD, Inc. and Lind Global Fund II LP (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 18, 2023).

10.17*		Purchase and Sale of Future Receivables Agreement, dated as of September 11, 2023, by and between Riverside Capital NY and PARTS iD, Inc.

10.18*		Standard Merchant Cash Advance Agreement, dated as of September 11, 2023, by and between WAVE ADVANCE INC and PARTS iD, Inc.

10.19		Litigation Funding Agreement, dated as of September 29, 2023, by and among PARTS iD, Inc., PARTS iD, LLC and Pravati Investment Fund VI LP acting through Pravati Capital, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 5, 2023).

10.20		Restructuring Support Agreement, dated as of October 6, 2023, by and among PARTS iD, Inc., PARTS iD, LLC and the Consenting Vendors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 11, 2023).

10.21		Note Purchase Agreement, dated as of October 9, 2023, by and between the Company and Lev Peker (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 13, 2023).

10.22		Form of Junior Secured Convertible Promissory Note, dated as of October 9, 2023 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 13, 2023).

10.23		Note Purchase Agreement, dated as of October 20, 2023, by and between the Company and Sanjiv Gomes (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 26, 2023).

10.24		Form of Unsecured Promissory Note, dated as of October 20, 2023 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 26, 2023).

10.25		Interim Office Engagement Agreement, dated as of October 30, 2023, between SRV Partners, LLC and PARTS iD, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 3, 2023).

10.26		Note Purchase Agreement, dated as of November 2, 2023, by and between the Company and 2642186 Ontario Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 8, 2023).

10.27		Form of Junior Secured Promissory Note, dated as of November 2, 2023 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on November 8, 2023).

31.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2*		Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

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

101.1		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline XBRL: (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Changes in Shareholders’ Deficit, (iv) Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1).

*	Filed herewith.

**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	PARTS iD, INC.

December 8, 2023	By:	/s/ Lev Peker
		Lev Peker
		Chief Executive Officer

December 8, 2023	By:	/s/ James Doss
		James Doss
		Chief Financial Officer

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Exhibit 10.17

PURCHASE AND SALE OF FUTURE RECEIVABLES

Agreement Dated: 09/11/2023 between RIVERSIDE CAPITAL NY (“RCNY”) and the Merchant listed below (“MERCHANT”) and the individual(s) listed below (“Guarantor”)

MERCHANT INFORMATION

Merchant’s Legal Name: PARTS ID, LLC AND ALL ENTITIES LISTED ON THE “EXHIBIT A”

D/B/A: PARTS ID AND ALL ENTITIES LISTED ON THE “EXHIBIT A” State of Incorporation / Organization: CA

Type of Entity LLC

Physical Address: 1 CORPORATE DR

City:

CRANBURY

State:

Zip:

08512-3635

Business Phone:

Guarantor Name:

Cellphone Number:

Email Address:

Mailing Address:

City:

State:

Zip:

Purchase Price: $500,000.00 Purchased Percent: 40% Purchased Amount: $700,000.00

Payment Frequency: WEEKLY Remittance: $35,000.00

PURCHASE AND SALE OF FUTURE RECEIVABLES

Merchant hereby sells, assigns and transfers to RCNY (making RCNY the absolute owner) in consideration of the “Purchase Price” specified above, the Purchased Percentage of all of Merchant’s Future Receipts, contract rights and other entitlements arising from or relating to the payment of monies from Merchant’s customers’ and/or other third party payors (the “Future Receipts” defined as all payments made by cash, check, electronic transfer or other form of monetary payment deposited into Merchants Bank Account), for the payments to Merchant as a result of Merchant’s sale of goods and/or services (the “Transactions”) until the “Purchased Amount has been delivered by or on behalf of Merchant to RCNY

Merchant is selling a portion of a future revenue stream to RCNY at a discount, not borrowing money from RCNY, therefore there is no interest rate or payment schedule and no time period during which the Purchased Amount must be collected by RCNY. The Remittance is a good faith estimate of Purchased Percentage multiplied by revenues of Merchant. Merchant going bankrupt or going out of business, or experiencing a slowdown in business, or a delay in collecting its receivables, in and of itself, does not constitute a breach of this Agreement. RCNY is entering this Agreement knowing the risks that Merchant’s business may slow down or fail, and RCNY assumes these risks based on Merchant’s representations, warranties and covenants in this Agreement, which are designed to give RCNY a reasonable and fair opportunity to receive the benefit of its bargain. Merchant and Guarantor are only guaranteeing their performance of the terms of this Revenue Purchase Agreement, and are not guaranteeing the payment of the Purchased Amount. The initial Remittance shall be as described above. The Remittance is subject to adjustment as set forth in Paragraph 1.4 and Paragraph 1.5.

RCNY will debit the Remittance each business day from only one depositing bank account, which account must be acceptable to, and pre-approved by, RCNY (the “Account”) into which Merchant and Merchant’s customers shall remit the Receipts from each Transaction, until such time as RCNY receives payment in full of the Purchased Amount. Merchant hereby authorizes RCNY to ACH debit the initial Remittance from the Account on the agreed upon Payment Frequency; a daily basis means any day that is not a United States banking holiday. RCNY’s payment of the Purchase Price shall be deemed the acceptance and performance by RCNY of this Agreement. Merchant understands that it is responsible for ensuring that the initial Remittance to be debited by RCNY remains in the Account and will be held responsible for any fees incurred by RCNY resulting from a rejected ACH attempt or an Event of Default. RCNY is not responsible for any overdrafts or rejected transactions that may result from RCNY’s ACH debiting the Agreed Remittance under the terms of this Agreement. Notwithstanding anything to the contrary in this Agreement or any other agreement between RCNY and Merchant, upon the occurrence of an Event of Default of the MERCHANT AGREEMENT TERMS AND CONDITIONS the Purchased Percentage shall equal 100%. A list of all fees applicable under this Agreement is contained in Appendix A and are hereby agreed to by Merchant. THE MERCHANT AGREEMENT “TERMS AND CONDITIONS”, THE “SECURITY AGREEMENT AND GUARANTY” AND THE “ADMINISTRATIVE FORM HEREOF, ARE ALL HEREBY INCORPORATED IN AND MADE A PART OF THIS MERCHANT AGREEMENT.

FOR THE MERCHANT (#1) By:	LEV MICHAILOVICH PEKER
	(Print Name and Title)	(Signature)

FOR THE MERCHANT (#2) By:
	(Print Name and Title)	(Signature)

BY OWNER/GUARANTOR (#1) By:
	(Print Name and Title)	(Signature)

BY OWNER/GUARANTOR (#2) By:
	(Print Name and Title)	(Signature)

Initials: _________

MERCHANT AGREEMENT TERMS AND CONDITIONS

1 TERMS OF ENROLLMENT IN PROGRAM

1.1 Merchant Deposit Agreement and Processor. Merchant shall (A) execute an agreement acceptable to RCNY with a Bank acceptable to RCNY to obtain electronic fund transfer services for the Account, and (B) if applicable, execute an agreement acceptable to RCNY with a credit and debit card processor (the “Processor”) instructing the Processor to deposit all Receipts into the Account. Merchant shall provide RCNY and/or its authorized agent(s) with all of the information, authorizations and passwords necessary for verifying Merchant’s receivables, receipts, deposits and withdrawals into and from the Account. Merchant hereby authorizes RCNY and/or its agent(s) to withdraw from the Account via ACH debit the amounts owed to RCNY for the receipts as specified herein and to pay such amounts to RCNY. These authorizations apply not only to the approved Account but also to any subsequent or alternate account used by the Merchant for these deposits, whether pre- approved by RCNY or not. This additional authorization is not a waiver of RCNY’s entitlement to declare this Agreement breached by Merchant as a result of its usage of an account which RCNY did not first pre-approve in writing prior to Merchant’s usage thereof. The aforementioned authorizations shall be irrevocable without the written consent of RCNY.

1.2 Term of Agreement. This Agreement shall remain in full force and effect until the entire Purchased Amount and any other amounts due are received by RCNY as per the terms of this Agreement.

1.3 Future Purchase of Increments. Subject to the terms of this Agreement, RCNY offers to purchase additional Receipts in the “Increments” stated in on Page 1 of this Agreement, if any. RCNY reserves the right to delay or rescind the offer to purchase any Increment or any additional Receipts, in its sole and absolute discretion.

1.4 Reconciliation. As long as an Event of Default, or breach of this Agreement, has not occurred, once per calendar month Merchant may request a retroactive reconciliation of the total Remittance Amount(for the purposes of this Agreement “total Remittance Amount” shall be defined as all payments made by Merchant to RCNY after RCNY remitted the Purchase Price to Merchant). All requests hereunder must be in writing to Subs@riversidecapitalny.com. Said request must include copies of all of Merchant’s bank account statements, credit card processing statements, and accounts receivable report if applicable, for the requested month. RCNY retains the right the request additional documentation such as bank login or DecisionLogic access to view Merchant’s accounts, refusal to provide access shall be a breach of this Agreement and RCNY shall have no obligation to reconcile. Such reconciliation, if applicable, shall be performed by RCNY within five (5) Business Days following its receipt of Merchant’s request for reconciliation by either crediting or debiting the difference back to, or from, Merchants Bank Account so that the total amount debited by RCNY shall equal the Specific Percentage of the Future Receipts that Merchant Collected from the date of this Agreement up to and including the date of the Reconciliation request. Nothing set forth in this section shall be deemed to provide Merchant with the right to interfere with RCNY’s right and ability to debit Merchant’s Account while the Request is pending or to unilaterally modify the initial Remittance amount, in any method other than the ones listed in this Agreement.

1.5 Adjustments to the Remittance. As long an Event of Default, or breach of this Agreement, has not occurred and should the Merchant experience a decrease in its’ Future Receipts, Merchant may give notice to RCNY to request a decrease in the Remittance. All requests hereunder must be in writing to Subs@riversidecapitalny.com. and must include copies of all of Merchant’s bank account statements, credit card processing statements, and accounts receivable reports for the requested period. RCNY retains the right the request additional documentation such as bank login or DecisionLogic access to view Merchant’s accounts, refusal to provide access shall be a breach of this Agreement and RCNY shall have no obligation to reconcile. The Remittance shall be modified to more closely reflect the Merchant’s actual receipts by multiplying the Merchant’s actual receipts by the Purchased Percentage divided by the number of business days in the previous (2) calendar weeks or by other means that can more accurately estimate the Merchant’s Future Receipts. Merchant shall provide RCNY with viewing access to their bank account as well as all information reasonably requested by RCNY to properly calculate the Merchant’s Remittance. At the end of the two (2) calendar weeks the Merchant may request another adjustment pursuant to this paragraph or it is agreed that the Merchant’s Remittance shall return to the Remittance as agreed upon on Page 1 of this Agreement.

1.6 Financial Condition. Merchant and Guarantor(s) (as hereinafter defined and limited) authorize RCNY and its agents to investigate their financial responsibility and history, and will provide to RCNY any authorizations, bank or financial statements, tax returns, etc., as RCNY deems necessary in its sole and absolute discretion prior to or at any time after execution of this Agreement. A photocopy of this authorization will be deemed as acceptable as an authorization for release of financial and credit information. RCNY is authorized to update such information and financial and credit profiles from time to time as it deems appropriate.

Initials: _________

1.7 Transactional History. Merchant authorizes all of its banks, brokers and processor to provide RCNY with Merchant’s banking, brokerage and/or processing history to determine qualification or continuation in this program and for collections purposes. Merchant shall provide RCNY with copies of any documents related to Merchant’s card processing activity or financial and banking affairs within five days after a request from RCNY.

1.8 Indemnification. Merchant and Guarantor(s) jointly and severally indemnify and hold harmless Processor, its officers, directors and shareholders against all losses, damages, claims, liabilities and expenses (including reasonable attorney’s fees) incurred by Processor resulting from (a) claims asserted by RCNY for monies owed to RCNY from Merchant and (b) actions taken by Processor in reliance upon any fraudulent, misleading or deceptive information or instructions provided by RCNY.

1.9 No Liability. In no event will RCNY be liable for any claims asserted by Merchant or Guarantors under any legal theory for lost profits, lost revenues, lost business opportunities, exemplary, punitive, special, incidental, indirect or consequential damages, each of which is waived by both Merchant and Guarantor(s). In the event these claims are nonetheless raised, Merchant and Guarantors will be jointly liable for all of RCNY’s attorney’s fees and expenses resulting therefrom.

1.10 Reliance on Terms. Section 1.1, 1.6, 1.7, 1.8 and 2.5 of this Agreement are agreed to for the benefit of Merchant, RCNY, Processor, and Merchant’s bank and notwithstanding the fact that Processor and the bank is not a party of this Agreement, Processor and the bank may rely upon their terms and raise them as a defense in any action.

1.11 Sale of Receipts. Merchant and RCNY agree that the Purchase Price under this Agreement is in exchange for the Purchased Amount, and that such Purchase Price is not intended to be, nor shall it be construed as a loan from RCNY to Merchant. Merchant agrees that the Purchase Price is in exchange for the Receipts pursuant to this Agreement, and that it equals the fair market value of such Receipts. RCNY has purchased and shall own all the Receipts described in this Agreement up to the full Purchased Amount as the Receipts are created. Payments made to RCNY in respect to the full amount of the Receipts shall be conditioned upon Merchant’s sale of products and services, and the payment therefore by Merchant’s customers. In no event shall the aggregate of all amounts or any portion thereof be deemed as interest hereunder, and in the event it is found to be interest despite the parties hereto specifically representing that it is NOT interest, it shall be found that no sum charged or collected hereunder shall exceed the highest rate permissible at law. In the event that a court nonetheless determines that RCNY has charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by applicable law and RCNY shall promptly refund to Merchant any interest received by RCNY in excess of the maximum lawful rate, it being intended that Merchant not pay or contract to pay, and that RCNY not receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by Merchant under applicable law. As a result thereof, Merchant knowingly and willingly waives the defense of Usury in any action or proceeding.

1.12 Power of Attorney. Merchant irrevocably appoints RCNY as its agent and attorney-in-fact with full authority to take any action or execute any instrument or document to settle all obligations due to RCNY from Processor, or in the case of a violation by Merchant of Section 1or the occurrence of an Event of Default under Section 3 hereof, including without limitation (i) to obtain and adjust insurance; (ii) to collect monies due or to become due under or in respect of any of the Collateral; (iii) to receive, endorse and collect any checks, notes, drafts, instruments, documents or chattel paper in connection with clause (i) or clause (ii) above; (iv) to sign Merchant’s name on any invoice, bill of lading, or assignment directing customers or account debtors to make payment directly to RCNY; and (v) to contact Merchant’s banks and financial institutions using Merchant and Guarantor(s) personal information to verify the existence of an account and obtain account balances (vi) to file any claims or take any action or institute any proceeding which RCNY may deem necessary for the collection of any of the unpaid Purchased Amount from the Collateral, or otherwise to enforce its rights with respect to payment of the Purchased Amount. In connection therewith, all costs, expenses and fees, including legal fees, shall be payable by merchant.

Initials: _________

1.13 Protections Against Default. The following Protections 1 through 8 may be invoked by RCNY immediately and without notice to Merchant in the event: (a) Merchant takes any action to discourage the use of electronic check processing that are settled through Processor, or permits any event to occur that could have an adverse effect on the use, acceptance, or authorization of checks or other payments or deposits for the purchase of Merchant’s services and products including but not limited to direct deposit of any checks into a bank account without scanning into the RCNY electronic check processor; (b) Merchant changes its arrangements with Processor or the Bank in any way that is adverse or unacceptable to RCNY; (c) Merchant changes the electronic check processor through which the Receipts are settled from Processor to another electronic check processor, or permits any event to occur that could cause diversion of any of Merchant’s check or deposit transactions to another processor; (d) Merchant intentionally interrupts the operation of this business transfers, moves, sells, disposes, or otherwise conveys its business and/or assets without (i) the express prior written consent of RCNY, and (ii) the written agreement of any RCNY or transferee to the assumption of all of Merchant’s obligations under this Agreement pursuant to documentation satisfactory to RCNY; (e) Merchant takes any action, fails to take any action, or offers any incentive—economic or otherwise—the result of which will be to induce any customer or customers to pay for Merchant’s services with any means other than payments, checks or deposits that are settled through Processor; (f) Merchant fails to provide RCNY with copies of any documents related to Merchant’s card processing activity of financial and banking affairs within five days after a request from RCNY, or (g) Merchant breaches any terms of this Agreement, including but not limited any of the Events of Default contained in Section 3.1 herein. These protections are in addition to any other remedies available to RCNY at law, in equity or otherwise pursuant to this Agreement.

Protection 1. The full uncollected Purchased Amount plus all fees (including reasonable attorney’s fees) due under this Agreement and the attached Security Agreement become due and payable in full immediately.

Protection 2. RCNY may enforce the provisions of the Limited Personal Guaranty of Performance against the Guarantor(s).

Protection 3. RCNY may enforce its security interest in the Collateral.

Protection 4. The entire Purchased Amount and all fee (including reasonable attorney’s fees) shall become immediately payable to RCNY from Merchant.

Protection 5. RCNY may proceed to protect and enforce its right and remedies by lawsuit. In any such lawsuit, if RCNY recovers a Judgment against Merchant, Merchant shall be liable for all of RCNY’s costs of the lawsuit, including but not limited to all reasonable attorneys’ fees and court costs.

Protection 6. This Agreement shall be deemed Merchant’s Assignment of Merchant’s Lease of Merchant’s business premises to RCNY. Upon breach of any provision in this Agreement, RCNY may exercise its rights under this Assignment of Lease without prior Notice to Merchant.

Protection 7. RCNY may debit Merchant’s depository accounts wherever situated by means of ACH debit or facsimile signature on a computer-generated check drawn on Merchant’s bank account or otherwise for all sums due to RCNY.

1.14 Protection of Information. Merchant and each person signing this Agreement on behalf of Merchant and/or as Owner or Guarantor, in respect of himself or herself personally, authorizes RCNY to disclose information concerning Merchant’s and each Owner’s and each Guarantor’s credit standing (including credit bureau reports that RCNY obtains) and business conduct only to agents, affiliates, subsidiaries, and credit reporting bureaus. Merchant and each Owner and each Guarantor hereby and each waives to the maximum extent permitted by law any claim for damages against RCNY or any of its affiliates relating to any (i)investigation undertaken by or on behalf of RCNY as permitted by this Agreement or (ii) disclosure of information as permitted by this Agreement.

1.15 Confidentiality. Merchant understands and agrees that the terms and conditions of the products and services offered by RCNY, including this Agreement and any other RCNY documents (collectively, “Confidential Information”) are proprietary and confidential information of RCNY. Accordingly, unless disclosure is required by law or court order, Merchant shall not disclose Confidential Information of RCNY to any person other than an attorney, accountant, financial advisor or employee of Merchant who needs to know such information for the purpose of advising Merchant (“Advisor”), provided such Advisor uses such information solely for the purpose of advising Merchant and first agrees in writing to be bound by the terms of this section. A breach hereof entitles RCNY to not only damages and reasonable attorney’s fees but also to both a Temporary Restraining Order and a Preliminary Injunction without Bond or Security.

Initials: _________

1.16 Publicity. Merchant and each of Merchant’s Owners and all Guarantors hereto all hereby authorizes RCNY to use its, his or her name in listings of clients and in advertising and marketing materials.

1.17 D/B/A’s. Merchant hereby acknowledges and agrees that RCNY may be using “doing business as” or “d/b/a” names in connection with various matters relating to the transaction between RCNY and Merchant, including the filing of UCC-1 financing statements and other notices or filings.

2 REPRESENTATIONS, WARRANTIES AND COVENANTS

Merchant represents warrants and covenants that, as of this date and during the term of this Agreement:

2.1 Financial Condition and Financial Information. Merchant’s and Guarantors’ bank and financial statements, copies of which have been furnished to RCNY, and future statements which will be furnished hereafter at the discretion of RCNY, fairly represent the financial condition of Merchant at such dates, and since those dates there has been no material adverse changes, financial or otherwise, in such condition, operation or ownership of Merchant. Merchant and Guarantors have a continuing, affirmative obligation to advise RCNY of any material adverse change in their financial condition, operation or ownership. RCNY may request statements at any time during the performance of this Agreement and the Merchant and Guarantors shall provide them to RCNY within five business days after request from RCNY. Merchant’s or Guarantors’ failure to do so is a material breach of this Agreement.

2.2 Governmental Approvals. Merchant is in compliance and shall comply with all laws and has valid permits, authorizations and licenses to own, operate and lease its properties and to conduct the business in which it is presently engaged and/or will engage in hereafter.

2.3 Authorization. Merchant, and the person(s) signing this Agreement on behalf of Merchant, have full power and authority to incur and perform the obligations under this Agreement, all of which have been duly authorized.

2.4 Use of Funds. Merchant agrees that it shall use the Purchase Price for business purposes and not for personal, family, or household purposes.

2.5 Electronic Check Processing Agreement. Merchant will not change its Processor, add terminals, change its financial institution or bank account(s)or take any other action that could have any adverse effect upon Merchant’s obligations under this Agreement, without RCNY’s prior written consent. Any such changes shall be a material breach of this Agreement.

2.6 Change of Name or Location. Merchant will not conduct Merchant’s businesses under any name other than as disclosed to the Processor and RCNY, nor shall Merchant change any of its places of business without prior written consent by RCNY.

2.7 Daily Batch Out. Merchant will batch out receipts with the Processor on a daily basis ifapplicable.

2.8 Estoppel Certificate. Merchant will at every and all times, and from time to time, upon at least one (1) day’s prior notice from RCNY to Merchant, execute, acknowledge and deliver to RCNY and/or to any other person, firm or corporation specified by RCNY, a statement certifying that this Agreement is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications) and stating the dates which the Purchased Amount or any portion thereof has been repaid.

2.9 No Bankruptcy. As of the date of this Agreement, Merchant is not insolvent and does not contemplate filing for bankruptcy in the next six months and has not consulted with a bankruptcy attorney or filed any petition for bankruptcy protection under Title 11 of the United States Code and there has been no involuntary petition brought or pending against Merchant. Merchant further warrants that it does not anticipate filing any such bankruptcy petition and it does not anticipate that an involuntary petition will be filed against it.

2.10 Unencumbered Receipts. Merchant has good, complete, unencumbered and marketable title to all Receipts, free and clear of any and all liabilities, liens, claims, changes, restrictions, conditions, options, rights, mortgages, security interests, equities, pledges and encumbrances of any kind or nature whatsoever or any other rights or interests that may be inconsistent with the transactions contemplated with, or adverse to the interests of RCNY.

Initials: _________

2.11 Business Purpose. Merchant is a valid business in good standing under the laws of the jurisdictions in which it is organized and/or operates, and Merchant is entering into this Agreement for business purposes and not as a consumer for personal, family or householdpurposes.

2.12 Defaults under Other Contracts. Merchant’s execution of, and/or performance under this Agreement, will not cause or create an event of default by Merchant under any contract with another person or entity.

2.13 Good Faith. Merchant and Guarantors hereby affirm that Merchant is receiving the Purchase Price and selling RCNY the Purchased Amount in good faith and will use the Purchase Price funds to maintain and grow Merchant’s business.

3 EVENTS OF DEFAULT AND REMEDIES

3.1 Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” hereunder:

(a)

Merchant or Guarantor shall violate any term or covenant in this Agreement;

(b)

Any representation or warranty by Merchant in this Agreement shall prove to have been incorrect, false or misleading in any material respect when made;

(c)

the sending of notice of termination by Merchant or verbally notifying RCNY of its intent to breach this Agreement;

(d)

the Merchant fails to give RCNY 24 hours advance notice that there will be insufficient funds in the account such that the ACH of the Remittance amount will not be honored by Merchant’s bank, and the Merchant fails to supply all requested documentation and allow for daily and/or real time monitoring of its bank account;

(f)

Merchant shall transfer or sell all or substantially all of its assets;

(g)

Merchant shall make or send notice of any intended bulk sale or transfer by Merchant;

(h)

Merchant shall use multiple depository accounts without the prior written consent of RCNY

(i)

Merchant shall change its depositing account without the prior written consent of RCNY; or

(j)

Merchant shall close its depositing account used for ACH debits without the prior written consent of RCNY

(k)

Merchant’s bank returns a code other than NSF cutting RCNY from its collections

(l)

Merchant shall default under any of the terms, covenants and conditions of any other agreement withRCNY.

3.2 Limited Personal Guaranty The Personal Guaranty that is executed in connection with this Agreement is a limited and non-recourse guaranty in that Guarantor shall not be liable hereunder if Merchant ceases operations/goes out of business.

3.3 Remedies. In case any Event of Default occurs and is not waived pursuant to Section 4.4. hereof, RCNY may proceed to protect and enforce its rights or remedies by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or other provision contained herein, or to enforce the discharge of Merchant’s obligations hereunder (including the Guaranty) or any other legal or equitable right or remedy, including but not limited to filing of an ex-parte prejudgment remedy, and/or enforcing the Security Agreement contained herein. All rights, powers and remedies of RCNY in connection with this Agreement may be exercised at any time by RCNY after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

Initials: _________

3.4 Costs. Merchant shall pay to RCNY all reasonable costs associated with (a) an Event or Default, (b) breach by Merchant of the Covenants in this Agreement and the enforcement thereof, and(c) the enforcement of RCNY’s remedies set forth in this Agreement, including but not limited to court costs and attorneys’ fees.

3.5 Required Notifications. Merchant is required to give RCNY written notice within 24 hours of any filing under Title 11 of the United States Code. Merchant is required to give RCNY seven days’ written notice prior to the closing of any sale of all or substantially all of the Merchant’s assets or stock.

4 MISCELLANEOUS

4.1 Modifications; Agreements. No modification, amendment, waiver or consent of any provision of this Agreement shall be effective unless the same shall be in writing and signed by RCNY.

4.2 Assignment. RCNY may assign, transfer or sell its rights to receive the Purchased Amount or delegate its duties hereunder, either in whole or in part.

4.3 Notices. All notices, requests, consents, demands and other communications hereunder shall be delivered by certified mail, return receipt requested, to the respective parties to this Agreement at the addresses set forth in this Agreement. Notices to RCNY shall become effective only upon receipt by RCNY. Notices to Merchant shall become effective three days after mailing.

4.4 Waiver Remedies. No failure on the part of RCNY to exercise, and no delay in exercising any right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies provided hereunder are cumulative and not exclusive of any remedies provided by law or equity.

4.5 Binding Effect; Governing Law, Venue and Jurisdiction. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, except that Merchant shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of RCNY which consent may be withheld in RCNY’s sole discretion. This Agreement shall be governed by and construed in accordance with the laws of the State Connecticut. Any suit, action or proceeding arising hereunder, or the interpretation, performance or breach hereof, shall be, if RCNY so elects, instituted in any Connecticut state court sitting in the county of Fairfield, or the State of New York, county of Kings, without regard to conflict of law provisions (together the “Acceptable Forum”). The parties agree that the Acceptable Forum shall be the sole and exclusive forum for any and all disputes and/or litigation arising out of or relating to this Agreement and the Parties agree that the Acceptable Forum is convenient and submit to the jurisdiction of the Acceptable Forum and irrevocably waive any and all objections to jurisdiction or venue. Should a proceeding be initiated in any other forum, the parties waive any right to oppose any motion or application made by either party to transfer such proceeding to an Acceptable Forum. Merchant and Guarantor hereby agree that the mailing of any Summons and Complaint in any proceeding commenced by RCNY by certified or registered mail, return receipt requested to the Mailing Address listed on this Agreement, or via email to the Email Address listed on this Agreement, or any other process required by any such court will constitute valid and lawful service of process against them without the necessity for service by any other means provided by statute or rule of court, but without invalidating service performed in accordance with such other provisions.

4.6 Survival of Representation, etc. All representations, warranties and covenants herein shall survive the execution and delivery of this Agreement and shall continue in full force until all obligations under this Agreement shall have been satisfied in full and this Agreement shall have terminated.

Initials: _________

4.7 Interpretation. All Parties hereto have reviewed this Agreement with attorney of their own choosing and have relied only on their own attorneys’ guidance and advice. No construction determinations shall be made against either Party hereto as drafter.

4.8 Severability. In case any of the provisions in this Agreement or any security or guaranty of this Agreement is found to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of any other provision contained herein shall not in any way be affected or impaired.

4.9 Entire Agreement. Any provision hereof prohibited by law shall be ineffective only to the extent of such prohibition without invalidating the remaining provisions hereof. This Agreement and the Security Agreement and Guaranty hereto embody the entire agreement between Merchant and RCNY and supersede all prior agreements and understandings relating to the subject matter hereof.

4.10 JURY TRIAL WAIVER. THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING INCONNECTION WITH OR IN ANY WAY RELATED TO THE TRANSACTIONS OR THEENFORCEMENT HEREOF. THE PARTIES HERETO ACKNOWLEDGE THAT EACH MAKES THIS WAIVER KNOWINGLY, WILLINGLY AND VOLUNTARILY AND WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH THEIR ATTORNEYS.

4.11 CLASS ACTION WAIVER. THE PARTIES HERETO WAIVE ANY RIGHT TO ASSERT ANY CLAIMS AGAINST THE OTHER PARTY AS A REPRESENTATIVE OR MEMBER IN ANY CLASS OR REPRESENTATIVE ACTION, EXCEPT WHERE SUCH WAIVER IS PROHIBITED BY LAW AS AGAINST PUBLIC POLICY. TO THE EXTENT EITHER PARTY IS PERMITTED BY LAW OR COURT OF LAW TO PROCEED WITH A CLASS OR REPRESENTATIVE ACTION AGAINST THE OTHER, THE PARTIES HEREBY AGREE THAT: (1) THE PREVAILING PARTY SHALL NOT BE ENTITLED TO RECOVER ATTORNEYS’ FEES OR COSTS ASSOCIATED WITH PURSUING THE CLASS OR REPRESENTATIVE ACTION (NOT WITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT); AND ( 2) THE PARTY WHO INITIATES OR PARTICIPATES AS A MEMBER OF THE CLASS WILL NOT SUBMIT A CLAIM OR OTHERWISE PARTICIPATE IN ANY RECOVERY SECURED THROUGH THE CLASS OR REPRESENTATIVE ACTION.

4.12 Facsimile & Digital Acceptance. Facsimile signatures and digital signatures hereon shall be deemed acceptable for all purposes.

4.13 Prejudgment Remedy Waiver. EACH AND EVERY MERCHANT AND GUARANTOR OF THIS AGREEMENT, AND EACH OTHER PERSON OR ENTITY WHO MAY BECOME LIABLE FOR ALL OR ANY PART OF THIS OBLIGATION, HEREBY ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278a TO 52-278m, INCLUSIVE, OR BY OTHER APPLICABLE LAW EACH AND EVERY MERCHANT AND GUARANTOR OF THIS AGREEMENT HEREBY WAIVE (A) ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER IN CONNECTION WITH ANY AND ALL PREJUDGMENT REMEDIES TO WHICH RCNY MAY BECOME ENTITLED BY VIRTUE OF ANY DEFAULT OR PROVISION OF THIS AGREEMENT OR SECURITY AGREEMENT SECURING THIS AGREEMENTAND (B) ALL RIGHTS TO REQUEST THAT RCNY POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT SAID MERCHANT OR GUARANTOR AGAINST DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY RCNY BY VIRTUE OF ANY DEFAULT OR PROVISION OF THIS AGREEMENT OR SECURITY OR GUARANTY AGREEMENT SECURING THIS AGREEMENT.

AS A CONDITION OF THIS AGREEMENT AND AS PART OF THE SAID PREJUDGMENT REMEDY WAIVER ABOVE, BUT NOT AN EXCLUSIVE REMEDY, EACH AND EVERY MERCHANT AND GUARANTOR OF THIS AGREEMENT, AND EACH OTHER PERSON OR ENTITY WHO MAY BECOME LIABLE FOR ALL OR ANY PART OF THIS OBLIGATION HEREBY ACKNOWLEDGE, UNDERSTAND, AGREE AND CONSENT THAT RCNY MAY ATTACH OR GARNISH ANY AND ALL OF MERCHANT AND GUARANTOR’S MONEY HELD IN ANY BANK ACCOUNT AT ANY BANKING INSTITUTION IF THAT BANKING INSTITUTION HAS A BRANCH OR OFFICE PHYSICALLY LOCATED IN CONNECTICUT AND/OR IS REGISTERED WITH THE SECRETARY OF STATE/AUTHORIZED TO CONDUCT BUSINESS IN CONNECTICUT.

THE PARTIES HERETO AGREE THAT THEY HAVE HAD THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF THEIR OWN CHOOSING WITH RESPECT TO THE TERMS AND CONDITIONS HEREIN AS WELL AS THEIR MEANING

Initials: _________

SECURITY AGREEMENT AND GUARANTY

Merchant’s Legal Name: PARTS ID, LLC AND ALL ENTITIES LISTED ON THE “EXHIBIT A”

D/B/A: PARTS ID AND ALL ENTITIES LISTED ON THE “EXHIBIT A” Federal ID#: ________________________________________________

Physical Address: 1 CORPORATE DR City: CRANBURY State: NJ Zip: 08512-3635

Additional Guarantor(s).

SECURITY AGREEMENT

Security Interest. This Agreement will constitute a security agreement under the Uniform Commercial Code. Merchant and Guarantor(s) grants to RCNY a security interest in and lien upon all of their present and future: (a) accounts (the “Accounts Collateral”), chattel paper, documents, equipment, general intangibles, instruments, and inventory, as those terms are each defined in Article 9 of the Uniform Commercial Code (the “UCC”), now or hereafter owned or acquired by Merchant and/or Guarantor(s), (b) all proceeds, as that term is defined in Article 9 of the UCC (c) funds at any time in the Merchant’s and/or Guarantor(s) Account, regardless of the source of such funds, (d) present and future Electronic Check Transactions, and (e) any amount which may be due to RCNY under this Agreement, including but not limited to all rights to receive any payments or credits under this Agreement (collectively, the “Collateral “). Merchant agrees to provide other security to RCNY upon request to secure Merchant’s obligations under this Agreement. Merchant agrees that, if at any time there are insufficient funds in Merchant’s Account to cover RCNY’s entitlements under this Agreement, RCNY is granted a further security interest in all of Merchant’s assets of any kind whatsoever, and such assets shall then become Collateral. These security interests and liens will secure all of RCNY’s entitlements under this Agreement and any other agreements now existing or later entered into between Merchant, RCNY or an affiliate of RCNY is authorized to file any and all notices or filings it deems necessary or appropriate to enforce its entitlements hereunder.

This security interest may be exercised by RCNY without notice or demand of any kind by making an immediate withdrawal or freezing the Collateral. RCNY shall have the right to notify account debtors at any time. Pursuant to Article 9 of the Uniform Commercial Code, as amended from time to time, RCNY has control over and may direct the disposition of the Collateral, without further consent of Merchant. Merchant hereby represents and warrants that no other person or entity has a security interest in the Collateral.

With respect to such security interests and liens, RCNY will have all rights afforded under the Uniform Commercial Code, any other applicable law and in equity. Merchant will obtain from RCNY written consent prior to granting a security interest of any kind in the Collateral to a third party. Merchant and Guarantor (s) agree(s) that this is a contract of recoupment and RCNY is not required to file a motion for relief from a bankruptcy action automatic stay to realize on any of the Collateral. Nevertheless, Merchant and Guarantor(s) agree(s) not to contest or object to any motion for relief from the automatic stay filed by RCNY. Merchant and Guarantor(s) agree(s) to execute and deliver to RCNY such instruments and documents RCNY may reasonably request to perfect and confirm the lien, security interest and right of setoff set forth in this Agreement. RCNY is authorized to execute all such instruments and documents in Merchant’s and Guarantor(s) name.

Merchant and Guarantor(s) each acknowledge and agree that any security interest granted to RCNY under any other agreement between Merchant or Guarantor(s) and RCNY (the “Cross-Collateral”) will secure the obligations hereunder and under the Merchant Agreement. Merchant and Guarantor(s) each agrees to execute any documents or take any action in connection with this Agreement as RCNY deems necessary to perfect or maintain RCNY’s first priority security interest in the Collateral and the Additional Collateral, including the execution of any account control agreements. Merchant and Guarantor(s) each hereby authorizes RCNY to file any financing statements deemed necessary by RCNY to perfect or maintain RCNY’s security interest. Merchant and Guarantor(s) shall be liable for, and RCNY may charge and collect, all costs and expenses, including but not limited to attorney’s fees, which may be incurred by RCNY in protecting, preserving and enforcing RCNY’s security interest and rights.

Negative Pledge. Merchant and Guarantor(s) each agrees not to create, incur, assume, or permit to exist, directly or indirectly, any lien on or with respect to any of the Collateral or the Additional Collateral, as applicable.

Initials: _________

Consent to Enter Premises and Assign Lease. RCNY shall have the right to cure Merchant’s default in the payment of rent on the following terms. In the event Merchant is served with papers in an action against Merchant for nonpayment of rent or for summary eviction, RCNY may execute its rights and remedies under the Assignment of Lease. Merchant also agrees that RCNY may enter into an agreement with Merchant’s landlord giving RCNY the right: (a) to enter Merchant’s premises and to take possession of the fixtures and equipment therein for the purpose of protecting and preserving same; and/or (b) to assign Merchant’s lease to another qualified business capable of operating a business comparable to Merchant’s at such premises.

Remedies. Upon any Event of Default, RCNY may pursue any remedy available at law (including those available under the provisions of the UCC), or in equity to collect, enforce, or satisfy any obligations then owing to RCNY, whether by acceleration or otherwise.

GUARANTY OF PERFORMANCE

THE TERMS, DEFINITIONS, CONDITIONS AND INFORMATION SET FORTH IN THE “MERCHANT AGREEMENT”, INCLUDING THE “TERMS AND CONDITIONS”, ARE HEREBY INCORPORATED IN AND MADE A PART OF THIS SECURITY AGREEMENT AND GUARANTY. CAPITALIZED TERMS NOT DEFINED IN THIS SECURITY AGREEMENT AND GUARANTY, SHALL HAVE THE MEANING SET FORTH IN THE MERCHANT AGREEMENT, INCLUDING THE TERMS AND CONDITIONS.

RCNY As an additional inducement for RCNY to enter into this Agreement, the undersigned Guarantor(s) hereby provides RCNY with this Guaranty. Guarantor(s) will not be personally liable for any amount due under this Agreement unless Merchant commits an Event of Default pursuant to Paragraph 3.1 of this Agreement. Each Guarantor shall be jointly and severally liable for all amounts owed to RCNY in the Event of Default. Guarantor(s) guarantee Merchant’s good faith, truthfulness and performance of all of the representations, warranties, covenants made by Merchant in this Agreement as each may be renewed, amended, extended or otherwise modified (the “Guaranteed Obligations”).Guarantor’s obligations are due at the time of any breach by Merchant of any representation, warranty, or covenant made by Merchant in the Agreement.

Guarantor Waivers. In the event of a breach of the above, RCNY may seek recovery from Guarantors for all of RCNY’s losses and damages by enforcement of RCNY’s rights under this Agreement without first seeking to obtain payment from Merchant, any other guarantor, or any Collateral or Additional Collateral RCNY may hold pursuant to this Agreement or any other guaranty.

RCNY does not have to notify Guarantor of any of the following events and Guarantor will not be released from its obligations under this Agreement if it is not notified of: (i) Merchant’s failure to pay timely any amount required under the Merchant Agreement; (ii) any adverse change in Merchant’s financial condition or business; (iii) any sale or other disposition of any collateral securing the Guaranteed Obligations or any other guaranty of the Guaranteed Obligations; (iv) RCNY’s acceptance of this Agreement; and (v) any renewal, extension or other modification of the Merchant Agreement or Merchant’s other obligations to RCNY. In addition, RCNY may take any of the following actions without releasing Guarantor from any of its obligations under this Agreement: (i) renew, extend or otherwise modify the Merchant Agreement or Merchant’s other obligations to RCNY; (ii) release Merchant from its obligations to RCNY; (iii) sell, release, impair, waive or otherwise fail to realize upon any collateral securing the Guaranteed Obligations or any other guaranty of the Guaranteed Obligations; and (iv) foreclose on any collateral securing the Guaranteed Obligations or any other guaranty of the Guaranteed Obligations in a manner that impairs or precludes the right of Guarantor to obtain reimbursement for payment under this Agreement. Until the Purchased Amount and Merchant’s other obligations to RCNY under the Merchant Agreement and this Agreement are paid in full, Guarantor shall not seek reimbursement from Merchant or any other guarantor for any amounts paid by it under this Agreement. Guarantor permanently waives and shall not seek to exercise any of the following rights that it may have against Merchant, any other guarantor, or any collateral provided by Merchant or any other guarantor, for any amounts paid by it, or acts performed by it, under this Agreement: (i) subrogation; (ii) reimbursement; (iii) performance; (iv) indemnification; or (v) contribution. In the event that RCNY must return any amount paid by Merchant or any other guarantor of the Guaranteed Obligations because that person has become subject to a proceeding under the United States Bankruptcy Code or any similar law, Guarantor’s obligations under this Agreement shall include that amount.

Guarantor Acknowledgement. Guarantor acknowledges that: (i) He/She is bound by the Class Action Waiver provision in the Merchant Agreement Terms and Conditions; (ii) He/She understands the seriousness of the provisions of this Agreement; (ii) He/She has had a full opportunity to consult with counsel of his/her choice; and (iv) He/She has consulted with counsel of its choice or has decided not to avail himself/herself of that opportunity.

Initials: _________

FOR THE MERCHANT (#1)	By:
		(Print Name and Title)		(Signature)

SSN#

Driver’s License Number

FOR THE MERCHANT (#2)	By:
		(Print Name and Title)		(Signature)

SSN#

Driver’s License Number

FOR THE GUARANTOR(S) (#1)	By:
		(Print Name and Title)		(Signature)

SSN#

Driver’s License Number

FOR THE GUARANTOR(S) (#2)	By:
		(Print Name and Title)		(Signature)

SSN#

Driver’s License Number

Initials: _________

APPENDIX A - THE FEE STRUCTURE:

A.	Underwriting Fee Minimum of $1,000.00 or up to 15% of the purchase price for underwriting fees, broker fees and related expenses. These upfront fees shall be deducted from the Purchase Price stated above with the remaining net being disbursed to Merchant and related expenses.

B.	Origination Fee Minimum of $1,000.00 or up to 28% of the purchase price to cover cost of Origination and ACH Setup. These upfront fees shall be deducted from the Purchase Price stated above, with the remaining net being disbursed to Merchant.

C.	NSF Fee (Standard) $35.00 (each). Each returned payment without notice is a default.

D.	Rejected ACH / Blocked ACH / Default Fee $5,000.00 When Merchant BLOCKS Account from our Debit ACH, or when Merchant directs the bank to reject our Debit ACH, which places them in default (per contract). When Merchant changes bank Account cutting us off from our collections.

E.	Bank Change Fee $50.00 When Merchant requires a change of Bank Account to be Debited, requiring us to adjust our system.

F.	Inaccessible Login Fee: $50.00 per day – When Merchant changes bank account login during duration of the Merchant Agreement. If login will not be provided it will be considered a default.

G.	Wire Fee - Each Merchant shall receive their funding electronically to their designated bank account and will be charged $50.00 for a Fed Wire or $0.00 for a bank ACH.

Attorney’s Fee: RCNY shall be entitled to its reasonable attorney’s fees and costs in addition to any other relief, at law or equity, awarded by a court of competent jurisdiction if it prevails on any claim, causes of action and/or defense, including an appeal. RCNY shall also be permitted to collect its reasonably attorney’s fees if RCNY refers this Agreement to legal counsel, pre-judgment, to collect any balance due resulting from a breach of this Agreement by Merchant or Guarantor.

I.	Unauthorized Account Fee: $5,000.00 (if a merchant blocks RCNY’s ACH debit of the Account, bounces more than 2 debits of the Account, or simultaneously uses multiple bank accounts or credit-card processors to process its receipts).

J.	Default Fee: $5,000.00 or up to 10% of the funded amount (if a merchant changes bank accounts or switches to another credit card processor without RCNY’s consent, or commits another default pursuant to the Agreement) or bounces a debit without notification.

K.	Risk Assessment Fee: $249.00

L.	UCC Fee: $195.00

M.	Management Fee: Commencing at date funded (the “Start Date”), merchant shall pay a fee of $499.00 per month (the “Monthly Fee”), at a minimum of three months.

FOR THE MERCHANT (#1)	By:
		(Print Name and Title)	(Signature)


FOR THE MERCHANT (#2)	By:
		(Print Name and Title)	(Signature)

Initials: _________

AUTHORIZATION AGREEMENT FOR DIRECT DEPOSIT (ACH CREDIT) AND DIRECT
PAYMENTS (ACH DEBITS)

Merchant:

PARTS ID, LLC AND ALL ENTITIES LISTED ON THE “EXHIBIT A”

Tax ID:

(Merchant’s Legal Name)

Merchant Agreement:

Merchant Agreement between RIVERSIDE CAPITAL NY, and Merchant,

09/11/2023

dated as of: Designated Checking Account:

Bank Name:

Routing:

Account:

Bank Name:

Routing:

Account:

Bank Name:

Routing:

Account:

Bank Name:

Routing:

Account:

Bank Name:

Routing:

Account:

Bank Name:

Routing:

Account:

Bank Name:

Routing:

Account:

Capitalized terms used in this Authorization Agreement without definition shall have the meanings set forth in the Merchant Agreement.

By signing below, Merchant attests that the Designated Checking Account was established for business purposes and not primarily for personal, family or household purposes. This Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits), and Check Debit is part of (and incorporated by reference into) the Merchant Agreement. Merchant should keep a copy of this important legal document for Merchant’s records.

DISBURSEMENT OF ADVANCE PROCEEDS. By signing below, Merchant authorizes RCNY, to disburse the Advance proceeds less the amount of any applicable fees upon Advance approval by initiating ACH credits to the Designated Checking Account, in the amounts and at the times specified in the Merchant Agreement. By signing below, Merchant also authorizes RCNY to collect amounts due from Merchant under the Merchant Agreement by initiating ACH debits to the Designated Checking Account, as follows:

Up to the amount of $ 35,000.00 (Or) Percentage of each Banking Deposit: 20%

On the Following Days: MON- FRIDAY.

If any payment date falls on a weekend or holiday, I understand and agree that the payment may be executed on the next business day. If a payment is rejected by Merchant’s financial institution for any reason, including without limitation insufficient funds, Merchant understands that RCNY, may, at its discretion, attempt to process the payment again as permitted under applicable ACH rules. Merchant also authorizes RCNY, to initiate ACH entries to correct any erroneous payment transaction.

MISCELLANEOUS. RCNY, is not responsible for any fees charged by Merchant’s bank as the result of credits or debits initiated under this Authorization Agreement. The origination of ACH debits and credits to the Designated Checking Account must comply with applicable provisions of state and federal law, and the rules and operating guidelines of NACHA (formerly known as the National Automated Clearing House Association). Merchant agrees to be bound by the ACH Rules as set forth by NACHA. This Authorization Agreement is to remain in full force and effect until RCNY, has received written notification from Merchant at the address set forth below at least 5 banking days prior of its termination to afford RCNY, a reasonable opportunity to act on it. The individual signing below on behalf of Merchant certifies that he/she is an authorized signer on the Designated Checking Account. Merchant will not dispute any ACH transaction initiated pursuant to this Authorization Agreement, provided the transaction corresponds to the terms of this Authorization Agreement. Merchant requests the financial institution that holds the Designated Checking Account to honor all ACH entries initiated in accordance with this Authorization Agreement.

Merchant:	PARTS ID, LLC AND ALL ENTITIES LISTED ON THE “EXHIBIT A”		Date:
(Merchant’s Legal Name)			(Month) (Day) (Year)

Title:

X
	(Signature)

Print Name:

Initials: _________

RIVERSIDE CAPITAL NY

ADDENDUM

This is an addendum for your contract dated 09/11/2023 for PARTS ID, LLC. This addendum stipulates the following:

RCNY agrees to allow all and any financing to be accepted by PARTS ID LLC during the course of this contract dated 09/11/2023.

Merchant Signature: LEV MICHAILOVICH PEKER


Title:
Date:

Note

RIVERSIDE CAPITAL NY Approval is good if funded within 10 days.

Thanks

ADDENDUM TO REVENUE PURCHASE AGREEMENT

This ADDENDUM TO REVENUE PURCHASE AGREEMENT (this “Addendum”), dated 09/11/2023, is entered into by and among the following parties:

RIVERSIDE CAPITAL NY (“Company”); and

Business Legal Name: Parts ID INC

D/B/A: Parts ID (“Parts ID”); and

W-I-T-N-E-S-S-E-T-H

WHEREAS, Company and Parts ID entered into that certain REVENUE PURCHASE AGREEMENT dated September 11, 2023 whereby Company purchased $700,000.00 of Parts ID’s future accounts- receivable for an up-front purchase price of $500,000.00 (the “Agreement”); and

WHEREAS, the Agreement was executed by Lev M. Peker (“Peker”) as agent of Parts ID; and

WHEREAS, the parties agree to abide by the terms of this Addendum and that this Addendum will reflect the intent of the Agreement.

NOW, THEREFORE, for good and valuable consideration, the mutual receipts and sufficiency of which is hereby acknowledged, the parties to this Addendum hereby agree to the foregoing and as follows:

1. All capitalized terms used herein shall have the meaning set forth in the respective Agreement, unless otherwise indicated herein.

2. This Addendum incorporates the Agreement by reference. The terms of this Addendum will control to the extent they conflict with any of the terms in the Agreement.

3. Company and Parts ID agree that the Guaranty of Performance section in the Agreement is not applicable.

4. Company and Parts ID agree that Peker executed the Agreement as an agent of Parts ID and not in his personal capacity.

5. Company and Parts ID agree that Peker is not the “Guarantor” as that term is defined in the Agreement and all references to “Guarantor” in the Agreement shall not apply to Peker.

6. Company and Parts ID agree that any references to “Guarantor” in the Agreement shall mean Parts ID.

7. If an “Event of Default” as such term is defined in the Agreement shall occur, Company waives any and all rights and remedies by suit in equity or by action at law against Peker and will not seek any damages or other legal or equitable rights or remedies against Peker. Moreover, Company will not attach or garnish any of Peker’s bank accounts, wages, real property or other assets.

8. Notwithstanding anything in this Addendum or in the Agreement to the contrary, the Company agrees: (i) for the benefit of Lind Global Fund II LP (the “Senior Lender”) that its security interest in any Collateral (“Junior Security Interest”) shall be subordinated and shall rank in right and priority behind any security interest in the Collateral granted to the Senior Lender and (ii) it shall not file any Uniform Commercial Code financing statements in connection with the Junior Security Interest without prior written notice to each of Parts ID and the Senior Lender of the Company’s intention to make such filing.

9. The parties agree that this Addendum shall not modify or change any other terms or obligations of Company or Parts ID under the Agreement. The parties hereto agree that this Addendum represents the complete and final expression of the parties’ intent and that no prior or contemporaneous oral or written agreement may be used to modify the terms herein.

10. Company and Parts ID agree and stipulate that the following portion of “Power of Attorney” shall not apply to Parts ID, and Company does not have authority, “including without limitation... (iv) to sign Parts ID’s name on any invoice, bill of lading, or assignment directing customers or account debtors to make payment directly to Company.”

ADDENDUM TO REVENUE PURCHASE AGREEMENT

Page 2 of 2

IN WITNESS WHEREOF, the parties hereto have executed this Addendum to the Revenue Purchase Agreement as of the date first above written.

{RIVERSIDE CAPITAL NY}

By:			Name:	Joel Geta
Title:	managing member

PARTS ID INC

By:
Name:	LEV M. PEKER
Title:	CHIEF EXECUTIVE OFFICER

Exhibit 10.18

Page 1 of 16

200 South Andrews Ave, Suite 504 Fort Lauderdale, FL 33301

jason@waveadvancegrp.com

STANDARD MERCHANT CASH ADVANCE AGREEMENT

This is an Agreement dated 09/11/2023 by and between WAVE ADVANCE INC (“WAVE”) and each merchant listed below (“Merchant”).

Merchant’s Legal Name: PARTS ID INC., and all entities listed on the “Merchant List”

D/B/A/:

PARTS ID

Fed ID #:

Type of Entity:

☒ Corporation ☐ Limited Liability Company ☐ Limited Partnership ☐ Limited Liability Partnership ☐ Sole Proprietor

Business Address:	1 CORPORATE DR	City:	CRANBURY	State:	NJ	Zip:	08512

Contact Address:	1 CORPORATE DR	City:	CRANBURY	State:	NJ	Zip:	08512

E- mail Address:

ir@partsidinc.com

Phone Number:

Purchase Price This is the amount being paid to Merchant(s) for the Receivables Purchased Amount (defined below). This amount may be paid in installments if there is an Addendum stating that it will be paid in installments.	$	500,000.00

Receivables Purchased Amount This is the amount of Receivables (defined in Section 1 below) being sold. This amount may be sold in installments if there is an Addendum stating that it will be sold in installments.	$	700,000.00

Specified Percentage This is the percentage of Receivables (defined below) to be delivered until the Receivables Purchased Amount is paid in full.		25.28	%

Net Funds Provided This is the net amount being paid to or on behalf of Merchant(s) after deduction of applicable fees listed in Section 2 below. This amount may be paid in installments if there is an Addendum stating that it will be paid in installments.	$	460,000.00

Net Amount to Be Received Directly by Merchant(s) This is the net amount being received directly by Merchant(s) after deduction of applicable fees listed in Section 2 below and the payment of any part of the Purchase Price elsewhere pursuant to any Addendum to this Agreement. This amount may be paid in installments if there is an Addendum stating that it will be paid in installments. If any deduction is being made from the Purchase Price to pay off another obligation by Merchant(s), then the Net Amount to be Received Directly by Merchant(s) is subject to change based on any change in the amount of the other obligation(s) to be paid off.	$	460,000.00

Initial Estimated Payment This is only applicable if an Addendum for Estimated Payments is being signed. This is the initial amount of periodic payments collected from Merchant(s) as an approximation of no more than the Specified Percentage of the Receivables and is subject to reconciliation as set forth in Section 4 below.	$ per	35,000.00 WEEK

Page 2 of 16

STANDARD MERCHANT CASH ADVANCE AGREEMENT

TERMS AND CONDITIONS

1. Sale of Future Receipts. Merchant(s) hereby sell, assign, and transfer to WAVE (making WAVE the absolute owner) in consideration of the funds provided (“Purchase Price”) specified above, all of each Merchant’s future accounts, contract rights, and other obligations arising from or relating to the payment of monies from each Merchant’s customers and/or other third party payors (the “Receivables”, defined as all payments made by cash, check, credit or debit card, electronic transfer, or other form of monetary payment in the ordinary course of each merchant’s business), for the payment of each Merchant’s sale of goods or services until the amount specified above (the “Receivables Purchased Amount”) has been delivered by Merchant(s) to WAVE. Each Merchant hereby acknowledges that until the Receivables Purchased Amount has been received in full by WAVE, each Merchant’s Receivables, up to the balance of the Receivables Purchased Amount, are the property of WAVE and not the property of any Merchant. Each Merchant agrees that it is a fiduciary for WAVE and that each Merchant will hold Receivables in trust for WAVE in its capacity as a fiduciary for WAVE.

The Receivables Purchased Amount shall be paid to WAVE by each Merchant irrevocably authorizing only one depositing account acceptable to WAVE (the “Account”) to remit the percentage specified above (the “Specified Percentage”) of each Merchant’s settlement amounts due from each transaction, until such time as WAVE receives payment in full of the Receivables Purchased Amount. Each Merchant hereby authorizes WAVE to ACH debit the specified remittances and any applicable fees listed in Section 2 from the Account on a daily basis as of the next business day after the date of this Agreement and will provide WAVE with all required access codes and monthly bank statements. Each Merchant understands that it will be held responsible for any fees resulting from a rejected ACH attempt or an Event of Default (see Section 2). WAVE is not responsible for any overdrafts or rejected transactions that may result from WAVE’s ACH debiting the Specified Percentage amounts under the terms of this Agreement.

2. Additional Fees. In addition to the Receivables Purchased Amount, each Merchant will be held responsible to WAVE for the following fees, where applicable:

A. $ 40,000.00 - to cover underwriting and the ACH debit program, as well as related expenses. This will be deducted from payment of the Purchase Price.

B. Wire Fee - Merchant(s) shall receive funding electronically to the Account and will be charged $50.00 for a Fed Wire or $0.00 for a bank ACH. This will be deducted from payment of the Purchase Price.

C. Blocked Account/Default - $2,500.00 - If WAVE considers an Event of Default to have taken place under Section 32.

D. UCC Fee - $195.00 – to cover WAVE filing a UCC-1 financing statement to secure its interest in the Receivables Purchased Amount. A $195.00 UCC termination fee will be charged if a UCC filing is terminated.

E. Court costs, arbitration fees, collection agency fees, attorney fees, expert fees, and any other expenses incurred in litigation, arbitration, or the enforcement of any of WAVE’s legal or contractual rights against each Merchant and/or each Guarantor, if required, as explained in other Sections of this Agreement.

3. Cap on Collection of the Receivables Purchased Amount. The amount that WAVE will collect from Merchant(s) towards the Receivables Purchased Amount during any specific WEEK will be capped at $ 35,000.00 (the “Cap”). If the Specified Percentage of all Receivables for a specific WEEK is less than the Cap, then in addition to the Specified Percentage of Receivables for that WEEK, WAVE will be permitted to collect any Receivables it did not previously collect due to the Cap such that the total amount collected during that WEEK does not exceed the Cap. The Cap is not applicable to make up for a business day on which WAVE is closed and does not ACH debit the Account, to subsequent attempts to collect a rejected or blocked ACH payment, to debit any amount due pursuant to a reconciliation as set forth in Section 4, for the collection of any of the fees listed in Section 2, or if any Event of Default listed in Section 32 is considered by WAVE to have taken place.

Page 3 of 16

STANDARD MERCHANT CASH ADVANCE AGREEMENT

4. Reconciliations. Any Merchant may request that WAVE conduct a reconciliation in order to ensure that the amount that WAVE has collected equals the Specified Percentage of Merchant(s)’s Receivables under this Agreement. A request for a reconciliation by any Merchant must be made by giving written notice of the request to WAVE or by sending an e-mail to jason@waveadvancegrp.com stating that a reconciliation is being requested. In order to effectuate the reconciliation, any Merchant must produce with its request the login and password for the Account and any and all statements covering the period from the date of this Agreement through the date of the request for a reconciliation. WAVE will complete each reconciliation requested by any Merchant within two business days after receipt of proper notice of a request for one accompanied by the information and documents required for it. WAVE may also conduct a reconciliation on its own at any time by reviewing Merchant(s)’s Receivables covering the period from the date of this Agreement until the date of initiation of the reconciliation, each such reconciliation will be completed within two business days after its initiation, and WAVE will give each Merchant written notice of the determination made based on the reconciliation within one business day after its completion. If a reconciliation determines that WAVE collected more than it was entitled to, then WAVE will credit to the Account all amounts to which WAVE was not entitled. If a reconciliation determines that WAVE collected less than it was entitled to, then WAVE will debit from the Account all additional amounts to which WAVE was entitled. Nothing herein limits the amount of times that a reconciliation may be requested or conducted.

5. Prepayments. Although there is no obligation to do so, any Merchant may prepay any amount towards the Receivables Purchased Amount. There will be no penalty for any prepayment made by any Merchant. Any Merchant may elect to terminate this Agreement by prepaying WAVE the amount of the balance of the Receivables Purchased Amount at that time.

6. Merchant Deposit Agreement. Merchant(s) shall appoint a bank acceptable to WAVE, to obtain electronic fund transfer services and/or “ACH” payments. Merchant(s) shall provide WAVE and/or its authorized agent with all of the information, authorizations, and passwords necessary to verify each Merchant’s Receivables. Merchant(s) shall authorize WAVE and/or its agent(s) to deduct the amounts owed to WAVE for the Receivables as specified herein from settlement amounts which would otherwise be due to each Merchant and to pay such amounts to WAVE by permitting WAVE to withdraw the Specified Percentage by ACH debiting of the account. The authorization shall be irrevocable absent WAVE’s written consent.

7. Term of Agreement. The term of this Agreement is indefinite and shall continue until WAVE receives the full Receivables Purchased Amount, or earlier if terminated pursuant to any provision of this Agreement. The provisions of Sections 4, 6, 7, 8, 10, 11, 13, 14, 15, 17, 18, 19, 22, 23, 27, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, and 54 shall survive any termination of this Agreement.

8. Ordinary Course of Business. Each Merchant acknowledges that it is entering into this Agreement in the ordinary course of its business and that the payments to be made from each Merchant to WAVE under this Agreement are being made in the ordinary course of each Merchant’s business.

9. Financial Condition. Each Merchant and each Guarantor (Guarantor being defined as each signatory to the Guarantee of this Agreement) authorizes WAVE and its agent(s) to investigate each Merchant’s financial responsibility and history, and will provide to WAVE any bank or financial statements, tax returns, and other documents and records, as WAVE deems necessary prior to or at any time after execution of this Agreement. A photocopy of this authorization will be deemed as acceptable for release of financial information. WAVE is authorized to update such information and financial profiles from time to time as it deems appropriate.

10. Monitoring, Recording, and Electronic Communications. WAVE may choose to monitor and/or record telephone calls with any Merchant and its owners, employees, and agents. By signing this Agreement, each Merchant agrees that any call between WAVE and any Merchant or its representatives may be monitored and/or recorded. Each Merchant and each Guarantor grants access for WAVE to enter any Merchant’s premises and to observe any Merchant’s premises without any prior notice to any Merchant at any time after execution of this Agreement.

WAVE may use automated telephone dialing, text messaging systems, and e-mail to provide messages to Merchant(s), Owner(s) (Owner being defined as each person who signs this Agreement on behalf of a Merchant), and Guarantor(s) about Merchant(s)’s account. Telephone messages may be played by a machine automatically when the telephone is answered, whether answered by an Owner, a Guarantor, or someone else. These messages may also be recorded by the recipient’s answering machine or voice mail. Each Merchant, each Owner, and each Guarantor gives WAVE permission to call or send a text message to any telephone number given to WAVE in connection with this Agreement and to play pre-recorded messages and/or send text messages with information about this Agreement and/or any Merchant’s account over the phone. Each Merchant, each Owner, and each Guarantor also gives WAVE permission to communicate such information to them by e-mail. Each Merchant, each Owner, and each Guarantor agree that WAVE will not be liable to any of them for any such calls or electronic communications, even if information is communicated to an unintended recipient. Each Merchant, each Owner, and each Guarantor acknowledge that when they receive such calls or electronic communications, they may incur a charge from the company that provides them with telecommunications, wireless, and/or Internet services, and that WAVE has no liability for any such charges.

Page 4 of 16

STANDARD MERCHANT CASH ADVANCE AGREEMENT

11. Accuracy of Information Furnished by Merchant and Investigation Thereof. To the extent set forth herein, each of the parties is obligated upon his, her, or its execution of the Agreement to all terms of the Agreement. Each Merchant and each Owner signing this Agreement represent that he or she is authorized to sign this Agreement for each Merchant, legally binding said Merchant to its obligations under this Agreement and that the information provided herein and in all of WAVE’s documents, forms, and recorded interview(s) is true, accurate, and complete in all respects. WAVE may produce a monthly statement reflecting the delivery of the Specified Percentage of Receivables from Merchant(s) to WAVE. An investigative report may be made in connection with the Agreement. Each Merchant and each Owner signing this Agreement authorize WAVE, its agents and representatives, and any credit-reporting agency engaged by WAVE, to (i) investigate any references given or any other statements obtained from or about each Merchant or any of its Owners for the purpose of this Agreement, and (ii) pull credit report at any time now or for so long as any Merchant and/or Owners(s) continue to have any obligation to WAVE under this Agreement or for WAVE’s ability to determine any Merchant’s eligibility to enter into any future agreement with WAVE. Any misrepresentation made by any Merchant or Owner in connection with this Agreement may constitute a separate claim for fraud or intentional misrepresentation.

Authorization for soft pulls: Each Merchant and each Owner understands that by signing this Agreement, they are providing ‘written instructions’ to WAVE under the Fair Credit Reporting Act, authorizing WAVE to obtain information from their personal credit profile or other information from Experian, TransUnion, and Equifax. Each Merchant and each Guarantor authorizes WAVE to obtain such information solely to conduct a pre-qualification for credit.

Authorization for hard pulls: Each Merchant and each Owner understands that by signing this Agreement, they are providing ‘written instructions’ to WAVE under the Fair Credit Reporting Act, authorizing WAVE to obtain information from their personal credit profile or other information from Experian, TransUnion, and Equifax. Each Merchant and each Guarantor authorizes WAVE to obtain such information in accordance with a merchant cash advance application.

12. Transactional History. Each Merchant authorizes its bank to provide WAVE with its banking and/or credit card processing history.

13. Indemnification. Each Merchant and each Guarantor jointly and severally indemnify and hold harmless each Merchant’s credit card and check processors (collectively, “Processor”) and Processor’s officers, directors, and shareholders against all losses, damages, claims, liabilities, and expenses (including reasonable attorney and expert fees) incurred by Processor resulting from (a) claims asserted by WAVE for monies owed to WAVE from any Merchant and (b) actions taken by any Processor in reliance upon information or instructions provided by WAVE.

14. No Liability. In no event will WAVE be liable for any claims asserted by any Merchant under any legal theory for lost profits, lost revenues, lost business opportunities, exemplary, punitive, special, incidental, indirect, or consequential damages, each of which is waived by each Merchant and each Guarantor.

15. Sale of Receivables. Each Merchant and WAVE agree that the Purchase Price under this Agreement is in exchange for the Receivables Purchased Amount and that such Purchase Price is not intended to be, nor shall it be construed as a loan from WAVE to any Merchant. WAVE is entering into this Agreement knowing the risks that each Merchant’s business may decline or fail, resulting in WAVE not receiving the Receivables Purchased Amount. Any Merchant going bankrupt or going out of business or experiencing a slowdown in business or a delay in collecting Receivables will not on its own without anything more be considered a breach of this Agreement. Each Merchant agrees that the Purchase Price in exchange for the Receivables pursuant to this Agreement equals the fair market value of such Receivables. WAVE has purchased and shall own all the Receivables described in this Agreement up to the full Receivables Purchased Amount as the Receivables are created. Payments made to WAVE in respect to the full amount of the Receivables shall be conditioned upon each Merchant’s sale of products and services and the payment therefor by each Merchant’s customers in the manner provided in this Agreement. Although certain jurisdictions require the disclosure of an Annual Percentage Rate or APR in connection with this Agreement, those disclosures do not change the fact that the transaction encompassed by this Agreement is not a loan and does not have an interest rate.

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STANDARD MERCHANT CASH ADVANCE AGREEMENT

16. Power of Attorney. Each Merchant irrevocably appoints WAVE as its agent and attorney-in-fact with full authority to take any action or execute any instrument or document to settle all obligations due to WAVE, or, if WAVE considers an Event of Default to have taken place under Section 32, to settle all obligations due to WAVE from each Merchant, including without limitation (i) to obtain and adjust insurance; (ii) to collect monies due or to become due under or in respect of any of the Collateral (which is defined in Section 31); (iii) to receive, endorse and collect any checks, notes, drafts, instruments, documents, or chattel paper in connection with clause (i) or clause (ii) above; (iv) to sign each Merchant’s name on any invoice, bill of lading, or assignment directing customers or account debtors to make payment directly to WAVE; and (v) to file any claims or take any action or institute any proceeding which WAVE may deem necessary for the collection of any of the unpaid Receivables Purchased Amount from the Collateral, or otherwise to enforce its rights with respect to payment of the Receivables Purchased Amount.

17. Protections Against Default. The following Protections 1 through 7 may be invoked by WAVE, immediately and without notice to any Merchant in the event WAVE considers any Event of Default listed in Section 32 to have taken place.

Protection 1: The full uncollected Receivables Purchased Amount plus all fees due under this Agreement may become due and payable in full immediately.

Protection 2. WAVE may enforce the provisions of the Guarantee against Guarantor.

Protection 3. WAVE may enforce its security interest in the Collateral identified in Section 31.

Protection 4. WAVE may proceed to protect and enforce its rights and remedies by litigation or arbitration.

Protection 5. If requested by WAVE, Merchant shall deliver to WAVE an executed assignment of lease of each Merchant’s premises in favor of WAVE. Upon breach of any provision in this Section 17, WAVE may exercise its rights under such assignment of lease.

Protection 6. WAVE may debit any Merchant’s depository accounts wherever situated by means of ACH debit or electronic or facsimile signature on a computer-generated check drawn on any Merchant’s bank account or otherwise, in an amount consistent with the terms of this Agreement.

Protection 7. WAVE will have the right, without waiving any of its rights and remedies and without notice to any Merchant and/or Guarantor, to notify each Merchant’s credit card and/or check processor of the sale of Receivables hereunder and to direct such credit card processor to make payment to WAVE of all or any portion of the amounts received by such credit card processor on behalf of each Merchant. Each Merchant hereby grants to WAVE an irrevocable power-of-attorney, which power-of-attorney will be coupled with an interest, and hereby appoints WAVE and its representatives as each Merchant’s attorney-in-fact to take any and all action necessary to direct such new or additional credit card and/or check processor to make payment to WAVE as contemplated by this Section.

18. Protection of Information. Each Merchant and each person signing this Agreement on behalf of each Merchant and/or as Owner, in respect of himself or herself personally, authorizes WAVE to disclose information concerning each Merchant, Owner and/or Guarantor’s credit standing and business conduct to agents, affiliates, subsidiaries, and credit reporting bureaus. Each Merchant, Guarantor, and Owner hereby waives to the maximum extent permitted by law any claim for damages against WAVE or any of its affiliates relating to any (i) investigation undertaken by or on behalf of WAVE as permitted by this Agreement or (ii) disclosure of information as permitted by this Agreement.

19. Confidentiality. Each Merchant understands and agrees that the terms and conditions of the products and services offered by WAVE, including this Agreement and any other WAVE documents (collectively, “Confidential Information”) are proprietary and confidential information of WAVE. Accordingly, unless disclosure is required by law or court order, Merchant(s) shall not disclose Confidential Information of WAVE to any person other than an attorney, accountant, financial advisor, or employee of any Merchant who needs to know such information for the purpose of advising any Merchant (“Advisor”), provided such Advisor uses such information solely for the purpose of advising any Merchant and first agrees in writing to be bound by the terms of this Section 19.

20. D/B/As. Each Merchant hereby acknowledges and agrees that WAVE may be using “doing business as” or “d/b/a” names in connection with various matters relating to the transaction between WAVE and each Merchant, including the filing of UCC-1 financing statements and other notices or filings.

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STANDARD MERCHANT CASH ADVANCE AGREEMENT

21. Financial Condition and Financial Information. Each Merchant represents, warrants, and covenants that its bank and financial statements, copies of which have been furnished to WAVE, and future statements which will be furnished hereafter at the request of WAVE, fairly represent the financial condition of each Merchant at such dates, and that since those dates there have been no material adverse changes, financial or otherwise, in such condition, operation, or ownership of any Merchant. Each Merchant has a continuing affirmative obligation to advise WAVE of any material adverse change in its financial condition, operation, or ownership.

22. Governmental Approvals. Each Merchant represents, warrants, and covenants that it is in compliance and shall comply with all laws and has valid permits, authorizations, and licenses to own, operate, and lease its properties and to conduct the business in which it is presently engaged.

23. Authorization. Each Merchant represents, warrants, and covenants that it and each person signing this Agreement on behalf of each Merchant has full power and authority to incur and perform the obligations under this Agreement, all of which have been duly authorized.

24. Electronic Check Processing Agreement. Each Merchant represents, warrants, and covenants that it will not, without WAVE’s prior written consent, change its Processor, add terminals, change its financial institution or bank account, or take any other action that could have any adverse effect upon any Merchant’s obligations under this Agreement.

25. Change of Name or Location. Each Merchant represents, warrants, and covenants that it will not conduct its business under any name other than as disclosed to WAVE or change any place(s) of its business without prior written consent from WAVE.

26. Estoppel Certificate. Each Merchant represents, warrants, and covenants that it will, at any time, and from time to time, upon at least two day’s prior notice from WAVE to that Merchant, execute, acknowledge, and deliver to WAVE and/or to any other person or entity specified by WAVE, a statement certifying that this Agreement is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications) and stating the dates which the Receivables Purchased Amount or any portion thereof have been paid.

27. No Bankruptcy. Each Merchant represents, warrants, and covenants that as of the date of this Agreement, it does not contemplate and has not filed any petition for bankruptcy protection under Title 11 of the United States Code and there has been no involuntary petition brought or pending against any Merchant. Each Merchant further warrants that it does not anticipate filing any such bankruptcy petition and it does not anticipate that an involuntary petition will be filed against it.

28. Unencumbered Receivables. Each Merchant represents, warrants, and covenants that it has good, complete, and marketable title to all Receivables, free and clear of any and all liabilities, liens, claims, changes, restrictions, conditions, options, rights, mortgages, security interests, equities, pledges, and encumbrances of any kind or nature whatsoever or any other rights or interests that may be inconsistent with this Agreement or adverse to the interests of WAVE, other than any for which WAVE has actual or constructive knowledge as of the date of this Agreement.

29. Stacking. Each Merchant represents, warrants, and covenants that it will not enter into with any party other than WAVE any arrangement, agreement, or commitment that relates to or involves the Receivables, whether in the form of a purchase of, a loan against, collateral against, or the sale or purchase of credits against Receivables without the prior written consent of WAVE.

30. Business Purpose. Each Merchant represents, warrants, and covenants that it is a valid business in good standing under the laws of the jurisdictions in which it is organized and/or operates, and each Merchant is entering into this Agreement for business purposes and not as a consumer for personal, family, or household purposes.

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STANDARD MERCHANT CASH ADVANCE AGREEMENT

31. Security Interest. To secure each Merchant’s performance obligations to WAVE under this Agreement and any future agreement with WAVE, each Merchant hereby grants to WAVE a security interest in collateral (the “Collateral”), that is defined as collectively: (a) all accounts, including without limitation, all deposit accounts, accounts-receivable, and other receivables, chattel paper, documents, and instruments, as those terms are defined by Article 9 of the Uniform Commercial Code (the “UCC”), now or hereafter owned or acquired by any Merchant; and (b) all proceeds, as that term is defined by Article 9 of the UCC. The parties acknowledge and agree that any security interest granted to WAVE under any other agreement between any Merchant or Guarantor and WAVE (the “Cross-Collateral”) will secure the obligations hereunder and under this Agreement. Negative Pledge: Each Merchant agrees not to create, incur, assume, or permit to exist, directly or indirectly, any lien on or with respect to any of the Collateral or the Cross-Collateral, as applicable.

Each Merchant agrees to execute any documents or take any action in connection with this Agreement as WAVE deems necessary to perfect or maintain WAVE’s first priority security interest in the Collateral and the Cross-Collateral, including the execution of any account control agreements. Each Merchant hereby authorizes WAVE to file any financing statements deemed necessary by WAVE to perfect or maintain WAVE’s security interest, which financing statements may contain notification that each Merchant has granted a negative pledge to WAVE with respect to the Collateral and the Cross-Collateral, and that any subsequent lienor may be tortiously interfering with WAVE’s rights. Each Merchant shall be liable for and WAVE may charge and collect all costs and expenses, including but not limited to attorney fees, which may be incurred by WAVE in protecting, preserving, and enforcing WAVE’s security interest and rights. Each Merchant further acknowledges that WAVE may use another legal name and/or D/B/A or an agent when designating the Secured Party when WAVE files the above-referenced financing statement(s).

32. Events of Default. An “Event of Default” may be considered to have taken place if any of the following occur:

(1) Any representation or warranty by any Merchant to WAVE that proves to have been made intentionally false or misleading in any material respect when made;

(2) Any Merchant changes the Account without providing written notice to WAVE within one business day thereafter;

(3) WAVE is not provided with updated login or password information for the Account within one business day after any such change is made by any Merchant;

(4) Any Merchant fails to send bank statements, merchant account statements, or bank login information for the Account within two business days after a written request for same is made by WAVE;

(5) Any Merchant causes any ACH debit to the Account by WAVE to be blocked or stopped without providing any advance written notice to WAVE, which notice may be given by e-mail to jason@waveadvancegrp.com;

(6) Any Merchant intentionally prevents WAVE from collecting any part of the Receivables Purchased Amount; or

(7) Any Merchant causes any ACH debit to the Account by any person or entity to be stopped or otherwise returned that would result in an ACH Return Code of R08, R10, or R29 and that Merchant does not within two business days thereafter provide WAVE with written notice thereof explaining why that Merchant caused the ACH debit to be stopped or otherwise returned, which notice may be given by e-mail to jason@waveadvancegrp.com.

33. Remedies. In case any Event of Default occurs and is not waived, WAVE may proceed to protect and enforce its rights or remedies by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement, or other provision contained herein, or to enforce the discharge of each Merchant’s obligations hereunder, or any other legal or equitable right or remedy. All rights, powers, and remedies of WAVE in connection with this Agreement, including each Protection listed in Section 17, may be exercised at any time by WAVE after the occurrence of an Event of Default, are cumulative and not exclusive, and will be in addition to any other rights, powers, or remedies provided by law or equity. In case any Event of Default occurs and is not waived, WAVE may elect that Merchant(s) be required to pay to WAVE 25% of the unpaid balance of the Receivables Purchased Amount as liquidated damages for any reasonable expenses incurred by WAVE in connection with recovering the unpaid balance of the Receivables Purchased Amount (“Reasonable Expenses”), WAVE will not be required to itemize of prove its Reasonable Expenses, and all Merchant(s) and all Guarantor(s) agree that the Reasonable Expenses bear a reasonable relationship to WAVE’s actual expenses incurred in connection with recovering the unpaid balance of the Receivables Purchased Amount.

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34. Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, except that Merchant(s) shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of WAVE, which consent may be withheld in WAVE’s sole discretion. WAVE may assign, transfer, or sell its rights under this Agreement, including, without limitation, its rights to receive the Receivables Purchased Amount, and its rights under Section 31 of this Agreement, the Guarantee, and any other agreement, instrument, or document executed in connection with the transactions contemplated by this Agreement (a “Related Agreement”), or delegate its duties hereunder or thereunder, either in whole or in part. From and after the effective date of any such assignment or transfer by WAVE, whether or not any Merchant has actual notice thereof, this Agreement and each Related Agreement shall be deemed amended and modified (without the need for any further action on the part of any Merchant or WAVE) such that the assignee shall be deemed a party to this Agreement and any such Related Agreement and, to the extent provided in the assignment document between WAVE and such assignee (the “Assignment Agreement”), have the rights and obligations of WAVE under this Agreement and such Related Agreements with respect to the portion of the Receivables Purchased Amount set forth in such Assignment Agreement, including but not limited to rights in the Receivables, Collateral and Additional Collateral, the benefit of each Guarantor’s guaranty regarding the full and prompt performance of every obligation that is a subject of the Guarantee, WAVE’s rights under Section 17 of this Agreement (Protections Against Default), and to receive damages from any Merchant following a breach of this Agreement by any Merchant. In connection with such assignment, WAVE may disclose all information that WAVE has relating to any Merchant or its business. Each Merchant agrees to acknowledge any such assignment in writing upon WAVE’s request.

35. Notices. All notices, requests, consents, demands, and other communications hereunder shall be delivered by certified mail, return receipt requested, or by overnight delivery with signature confirmation to the respective parties to this Agreement at their addresses set forth in this Agreement and shall become effective only upon receipt. Written notice may also be given to any Merchant or Guarantor by e-mail to the E-mail Address listed on the first page of this Agreement or by text message to the Phone Number listed on the first page of this Agreement if that phone number is for a mobile phone. Each Merchant must set its spam or junk mail filter to accept e-mails sent by jason@waveadvancegrp.com and its domain. This Section is not applicable to service of process or notices in any legal proceedings.

36. Choice of Law. Each Merchant acknowledges and agrees that this Agreement was made in the State of Florida, that the Purchase Price is being paid by WAVE in the State of Florida, that the Receivables Purchased Amount is being delivered to WAVE in the State of Florida, and that the State of Florida has a reasonable relationship to the transactions encompassed by this Agreement. This Agreement, any dispute or claim relating hereto, whether sounding in contract, tort, law, equity, or otherwise, the relationship between WAVE and each Merchant, and the relationship between WAVE and each Guarantor will be governed by and construed in accordance with the laws of the State of Florida, without regard to any applicable principles of conflict of laws. Each Merchant represents that it does not have a principal place of business located in the Commonwealth of Virginia and that therefore the provisions of Chapter 22.1 of Title 6.2 of the Virginia Code are not applicable to this Agreement.

37. Venue and Forum Selection. Any litigation, whether sounding in contract, tort, law, equity, or otherwise, relating to this Agreement or involving WAVE on one side and any Merchant or any Guarantor on the other must be commenced and maintained in any court located in the Counties of Broward or Miami-Dade in the State of Florida (the “Acceptable Forums”). The parties agree that the Acceptable Forums are convenient, submit to the jurisdiction of the Acceptable Forums, and waive any and all objections to the jurisdiction or venue of the Acceptable Forums. If any litigation is initiated in any other venue or forum, the parties waive any right to oppose any motion or application made by any party to transfer such litigation to an Acceptable Forum. Notwithstanding any provision in this Agreement to the contrary, in addition to the Acceptable Forums, any application to obtain injunctive relief in aid of arbitration or to confirm an arbitration award for an arbitration conducted in the State of New York may be made in the Supreme Court of New York for Nassau County or the Civil Court of the City of New York for New York County and any action or proceeding to enforce a judgment or arbitration award against any Merchant or Guarantor or to restrain or collect any amount due to WAVE may be commenced and maintained in any other court that would otherwise be of competent jurisdiction, and each Merchant and each Guarantor agree that those courts are convenient, submit to the jurisdiction of those courts, waive any and all objections to the jurisdiction or venue of those courts, and may oppose any motion or application made by any party to transfer any such litigation to an Acceptable Forum.

38. Jury Waiver. The parties agree to waive trial by jury in any dispute between them.

39. Counterclaim Waiver. In any litigation or arbitration commenced by WAVE, each Merchant and each Guarantor will not be permitted to interpose any counterclaim.

40. Costs. Each Merchant and each Guarantor must pay all of WAVE’s reasonable costs associated with a breach by any Merchant of the covenants in this Agreement and the enforcement thereof, including but not limited to collection agency fees, attorney fees, which may include a contingency fee, expert witness fees, and costs of suit.

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STANDARD MERCHANT CASH ADVANCE AGREEMENT

41. Prejudgment and Postjudgment Interest. If WAVE becomes entitled to the entry of a judgment against any Merchant or any Guarantor, then WAVE will be entitled to the recovery of prejudgment interest at a rate of 18% per annum, or the maximum rate permitted by applicable law if less, and upon entry of any such judgment, it will accrue interest at a postjudgment rate of 18% per annum, or the maximum rate permitted by applicable law if less, which rate will govern over the statutory rate of interest up until actual satisfaction of the judgment.

42. Legal Fees. If WAVE prevails in any litigation or arbitration with any Merchant or any Guarantor, then that Merchant and/or Guarantor must pay WAVE’s reasonable attorney fees, which may include a contingency fee.

43. Class Action Waiver. WAVE, each Merchant, and each Guarantor agree that they may bring claims against each other relating to this Agreement only in their individual capacities, and not as a plaintiff or class action member in any purported class or representative proceedings.

44. Arbitration. Any action or dispute, whether sounding in contract, tort, law, equity, or otherwise, relating to this Agreement or involving WAVE on one side and any Merchant or any Guarantor on the other, including, but not limited to issues of arbitrability, will, at the option of any party to such action or dispute, be determined by arbitration in the State of New York. A judgment of the court shall be entered upon the award made pursuant to the arbitration. The arbitration will be administered either by Arbitration Services, Inc. under its Commercial Arbitration Rules as are in effect at that time, which rules are available at www.arbitrationservicesinc.com, or by Mediation And Civil Arbitration, Inc. under its Commercial Arbitration Rules as are in effect at that time, which rules are available at www.mcarbitration.org. Once an arbitration is initiated with one of these arbitral forums, it must be maintained exclusively before that arbitral forum and the other arbitral forum specified herein may not be used. Notwithstanding any provision to the contrary in the arbitration rules of the arbitral forum selected, the arbitration will be heard by a single arbitrator and not by a panel of arbitrators, any arbitration hearing relating to this Agreement must be held in the Counties of Nassau, New York, Queens, or Kings in the State of New York, and any witness in an arbitration hearing who does not reside in or have a place for the regular transaction of business located in New York City or the Counties of Nassau, Suffolk, or Westchester in the State of New York will be permitted to appear and testify remotely by telephone or video conferencing.

Each Merchant acknowledges and agrees that this Agreement is the product of communications conducted by telephone and the Internet, which are instrumentalities of interstate commerce, that the transactions contemplated under this Agreement will be made by wire transfer and ACH, which are also instrumentalities of interstate commerce, and that this Agreement therefore evidences a transaction affecting interstate commerce. Accordingly, notwithstanding any provision in this Agreement to the contrary, all matters of arbitration relating to this Agreement will be governed by and construed in accordance with the provisions of the Federal Arbitration Act, codified as Title 9 of the United States Code, however any application for injunctive relief in aid of arbitration or to confirm an arbitration award may be made under the arbitration laws of the State in which the arbitration is being conducted, the laws of the State of Florida, or the laws of the jurisdiction in which the application is made, and the application will be governed by and construed in accordance with the laws under which the application is made, without regard to any applicable principles of conflict of laws. The arbitration agreement contained in this Section may also be enforced by any employee, agent, attorney, member, manager, officer, subsidiary, affiliate entity, successor, or assign of WAVE.

45. Service of Process. Each Merchant and each Guarantor consent to service of process and legal notices made by First Class or Priority Mail delivered by the United States Postal Service and addressed to the Contact Address set forth on the first page of this Agreement or any other address(es) provided in writing to WAVE by any Merchant or any Guarantor, and unless applicable law or rules provide otherwise, any such service will be deemed complete upon dispatch. Each Merchant and each Guarantor agrees that it will be precluded from asserting that it did not receive service of process or any other notice mailed to the Contact Address set forth on the first page of this Agreement if it does not furnish a certified mail return receipt signed by WAVE demonstrating that WAVE was provided with notice of a change in the Contact Address.

46. Survival of Representation, etc. All representations, warranties, and covenants herein shall survive the execution and delivery of this Agreement and shall continue in full force until all obligations under this Agreement shall have been satisfied in full and this Agreement shall have terminated unless specified otherwise in this Agreement.

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47. Waiver. No failure on the part of WAVE to exercise, and no delay in exercising, any right under this Agreement, shall operate as a waiver thereof, nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies provided hereunder are cumulative and not exclusive of any remedies provided by law or equity.

48. Independent Sales Organizations/Brokers. Each Merchant and each Guarantor acknowledge that it may have been introduced to WAVE by or received assistance in entering into this Agreement or its Guarantee from an independent sales organization or broker (“ISO”). Each Merchant and each Guarantor agree that any ISO is separate from and is not an agent or representative of WAVE. Each Merchant and each Guarantor acknowledge that WAVE is not bound by any promises or agreements made by any ISO that are not contained within this Agreement. Each Merchant and each Guarantor exculpate from liability and agree to hold harmless and indemnify WAVE and its officers, directors, members, shareholders, employees, and agents from and against all losses, damages, claims, liabilities, and expenses (including reasonable attorney and expert fees) incurred by any Merchant or any Guarantor resulting from any act or omission by any ISO. Each Merchant and each Guarantor acknowledge that any fee that they paid to any ISO for its services is separate and apart from any payment under this Agreement. Each Merchant and each Guarantor acknowledge that WAVE does not in any way require the use of an ISO and that any fees charged by any ISO are not required as a condition or incident to this Agreement.

49. Modifications; Agreements. No modification, amendment, waiver, or consent of any provision of this Agreement shall be effective unless the same shall be in writing and signed by all parties.

50. Severability. If any provision of this Agreement is deemed invalid or unenforceable as written, it will be construed, to the greatest extent possible, in a manner which will render it valid and enforceable, and any limitation on the scope or duration of any such provision necessary to make it valid and enforceable will be deemed to be part thereof. If any provision of this Agreement is deemed void, all other provisions will remain in effect.

51. Headings. Headings of the various articles and/or sections of this Agreement are for convenience only and do not necessarily define, limit, describe, or construe the contents of such articles or sections.

52. Attorney Review. Each Merchant acknowledges that it has had an opportunity to review this Agreement and all addenda with counsel of its choosing before signing the documents or has chosen not to avail itself of the opportunity to do so.

53. Entire Agreement. This Agreement, inclusive of all addenda, if any, executed simultaneously herewith constitutes the full understanding of the parties to the transaction herein and may not be amended, modified, or canceled except in writing signed by all parties. Should there arise any conflict between this Agreement and any other document preceding it, this Agreement will govern. This Agreement does not affect any previous agreement between the parties unless such an agreement is specifically referenced herein. This Agreement will not be affected by any subsequent agreement between the parties unless this Agreement is specifically referenced therein.

54. Counterparts; Fax and Electronic Signatures. This Agreement may be executed electronically and in counterparts. Facsimile and electronic copies of this Agreement will have the full force and effect of an original.

SIGNATURE(S) TO FOLLOW ON NEXT PAGE

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STANDARD MERCHANT CASH ADVANCE AGREEMENT

EACH UNDERSIGNED HEREBY ACCEPTS THE TERMS OF THIS AGREEMENT

FOR THE MERCHANT/OWNER (#1)

By:	LEV MICHAILOVICH PEKER
	(Print Name)	(Print Title)		(Signature)

SS#			Driver License Number

FOR THE MERCHANT/OWNER (#2)

By:
	(Print Name)	(Print Title)		(Signature)

SS#			Driver License Number

Approved for WAVE ADVANCE INC by:

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STANDARD MERCHANT CASH ADVANCE AGREEMENT

GUARANTEE

G1. Personal Guarantee of Performance. This is a personal guaranty of performance, dated , of the Standard Merchant Cash Advance Agreement, dated (“Agreement”), inclusive of all addenda, if any, executed simultaneously therewith, by and between WAVE ADVANCE INC (“WAVE”) and PARTS ID INC., and all entities listed on the “Merchant List” (“Merchant”). Each undersigned Guarantor hereby guarantees each Merchant’s performance of all of the representations, warranties, and covenants made by each Merchant to WAVE in the Agreement, inclusive of all addenda, if any, executed simultaneously herewith, as the Agreement may be renewed, amended, extended, or otherwise modified (the “Guaranteed Obligations”). Each Guarantor’s obligations are due at the time of any breach by any Merchant of any representation, warranty, or covenant made by any Merchant in the Agreement.

G2. Communications. WAVE may use automated telephone dialing, text messaging systems, and e-mail to provide messages to Guarantor(s) about Merchant(s)’s account. Telephone messages may be played by a machine automatically when the telephone is answered, whether answered by an Owner, a Guarantor, or someone else. These messages may also be recorded by the recipient’s answering machine or voice mail. Each Guarantor gives WAVE permission to call or send a text message to any telephone number given to WAVE in connection with this Agreement and to play pre-recorded messages and/or send text messages with information about this Agreement and/or any Merchant’s account over the phone. Each Guarantor also gives WAVE permission to communicate such information to them by e-mail. Each Guarantor agrees that WAVE will not be liable to any of them for any such calls or electronic communications, even if information is communicated to an unintended recipient. Each Guarantor acknowledges that when they receive such calls or electronic communications, they may incur a charge from the company that provides them with telecommunications, wireless, and/or Internet services, and that WAVE has no liability for any such charges.

G3. Guarantor Waivers. If WAVE considers any Event of Default to have taken place under the Agreement, then WAVE may enforce its rights under this Guarantee without first seeking to obtain payment from any Merchant, any other guarantor, or any Collateral or Cross-Collateral WAVE may hold pursuant to this Guarantee or any other agreement or guarantee. WAVE does not have to notify any Guarantor of any of the following events and Guarantor(s) will not be released from its obligations under this Guarantee even if it is not notified of: (i) any Merchant’s failure to pay timely any amount owed under the Agreement; (ii) any adverse change in any Merchant’s financial condition or business; (iii) any sale or other disposition of any collateral securing the Guaranteed Obligations or any other guarantee of the Guaranteed Obligations; (iv) WAVE’s acceptance of the Agreement with any Merchant; and (v) any renewal, extension, or other modification of the Agreement or any Merchant’s other obligations to WAVE. In addition, WAVE may take any of the following actions without releasing any Guarantor from any obligations under this Guarantee: (i) renew, extend, or otherwise modify the Agreement or any Merchant’s other obligations to WAVE; (ii) if there is more than one Merchant, release a Merchant from its obligations to WAVE such that at least one Merchant remains obligated to WAVE; (iii) sell, release, impair, waive, or otherwise fail to realize upon any collateral securing the Guaranteed Obligations or any other guarantee of the Guaranteed Obligations; and (iv) foreclose on any collateral securing the Guaranteed Obligations or any other guarantee of the Guaranteed Obligations in a manner that impairs or precludes the right of Guarantor to obtain reimbursement for payment under the Agreement. Until the Receivables Purchased Amount and each Merchant’s other obligations to WAVE under the Agreement and this Guarantee are paid in full, each Guarantor shall not seek reimbursement from any Merchant or any other guarantor for any amounts paid by it under the Agreement. Each Guarantor permanently waives and shall not seek to exercise any of the following rights that it may have against any Merchant, any other guarantor, or any collateral provided by any Merchant or any other guarantor, for any amounts paid by it or acts performed by it under this Guarantee: (i) subrogation; (ii) reimbursement; (iii) performance; (iv) indemnification; or (v) contribution.

G4. Joint and Several Liability. The obligations hereunder of the persons or entities constituting each Guarantor under this Guarantee are joint and several.

G5. Choice of Law. Each Guarantor acknowledges and agrees that the Agreement and this Guarantee were made in the State of Florida, that the Purchase Price is being paid by WAVE in the State of Florida, that the Receivables Purchased Amount is being delivered to WAVE in the State of Florida, and that the State of Florida has a reasonable relationship to the transactions encompassed by the Agreement and this Guarantee. The Agreement, this Guarantee, any dispute or claim relating to the Agreement or this Guarantee, whether sounding in contract, tort, law, equity, or otherwise, the relationship between WAVE and each Merchant, and the relationship between WAVE and each Guarantor will be governed by and construed in accordance with the laws of the State of Florida, without regard to any applicable principles of conflict of laws.

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STANDARD MERCHANT CASH ADVANCE AGREEMENT

G6. Venue and Forum Selection. Any litigation, whether sounding in contract, tort, law, equity, or otherwise, relating to this Agreement or this Guarantee or involving WAVE on one side and any Merchant or any Guarantor on the other must be commenced and maintained in any court located in the Counties of Broward or Miami-Dade in the State of Florida (the “Acceptable Forums”). The parties agree that the Acceptable Forums are convenient, submit to the jurisdiction of the Acceptable Forums, and waive any and all objections to the jurisdiction or venue of the Acceptable Forums. If any litigation is initiated in any other venue or forum, the parties waive any right to oppose any motion or application made by any party to transfer such litigation to an Acceptable Forum. Notwithstanding any provision in the Agreement or this Guarantee to the contrary, in addition to the Acceptable Forums, any application to obtain injunctive relief in aid of arbitration or to confirm an arbitration award for an arbitration conducted in the State of New York may be made in the Supreme Court of New York for Nassau County or the Civil Court of the City of New York for New York County and any action or proceeding to enforce a judgment or arbitration award against any Merchant or Guarantor or to restrain or collect any amount due to WAVE may be commenced and maintained in any other court that would otherwise be of competent jurisdiction, and each Merchant and each Guarantor agree that those courts are convenient, submit to the jurisdiction of those courts, waive any and all objections to the jurisdiction or venue of those courts, and may oppose any motion or application made by any party to transfer any such litigation to an Acceptable Forum.

G7. Jury Waiver. Each Guarantor agrees to waive trial by jury in any dispute with WAVE.

G8. Counterclaim Waiver. In any litigation or arbitration commenced by WAVE, each Merchant and each Guarantor will not be permitted to interpose any counterclaim.

G9. Costs. Each Merchant and each Guarantor must pay all of WAVE’s reasonable costs associated with a breach by any Merchant of the covenants in this Agreement or this Guarantee and the enforcement thereof, including but not limited to collection agency fees, expert witness fees, and costs of suit.

G10. Prejudgment and Postjudgment Interest. If WAVE becomes entitled to the entry of a judgment against any Merchant or any Guarantor, then WAVE will be entitled to the recovery of prejudgment interest at a rate of 18% per annum, or the maximum rate permitted by applicable law if less, and upon entry of any such judgment, it will accrue interest at a postjudgment rate of 18% per annum, or the maximum rate permitted by applicable law if less, which rate will govern over the statutory rate of interest up until actual satisfaction of the judgment.

G11. Legal Fees. If WAVE prevails in any litigation or arbitration with any Merchant or any Guarantor, then that Merchant and/or Guarantor must pay WAVE’s reasonable attorney fees, which may include a contingency fee.

G12. Class Action Waiver. WAVE, each Merchant, and each Guarantor agree that they may bring claims against each other relating to this Agreement only in their individual capacities, and not as a plaintiff or class action member in any purported class or representative proceedings.

G13. Arbitration. Any action or dispute, whether sounding in contract, tort, law, equity, or otherwise, relating to the Agreement, this Guarantee, or involving WAVE on one side and any Merchant or any Guarantor on the other, including, but not limited to issues of arbitrability, will, at the option of any party to such action or dispute, be determined by arbitration in the State of New York. A judgment of the court shall be entered upon the award made pursuant to the arbitration. The arbitration will be administered either by Arbitration Services, Inc. under its Commercial Arbitration Rules as are in effect at that time, which rules are available at www.arbitrationservicesinc.com, or by Mediation And Civil Arbitration, Inc. under its Commercial Arbitration Rules as are in effect at that time, which rules are available at www.mcarbitration.org. Once an arbitration is initiated with one of these arbitral forums, it must be maintained exclusively before that arbitral forum and the other arbitral forum specified herein may not be used. Notwithstanding any provision to the contrary in the arbitration rules of the arbitral forum selected, the arbitration will be heard by a single arbitrator and not by a panel of arbitrators, any arbitration relating to the Agreement or this Guarantee must be held in the Counties of Nassau, New York, Queens, or Kings in the State of New York, and any witness in an arbitration hearing who does not reside in or have a place for the regular transaction of business located in New York City or the Counties of Nassau, Suffolk, or Westchester in the State of New York will be permitted to appear and testify remotely by telephone or video conferencing.

Page 14 of 16

STANDARD MERCHANT CASH ADVANCE AGREEMENT

Each Guarantor acknowledges and agrees that the Agreement and this Guarantee are the products of communications conducted by telephone and the Internet, which are instrumentalities of interstate commerce, that the transactions contemplated under the Agreement will be made by wire transfer and ACH, which are also instrumentalities of interstate commerce, and that the Agreement and this Guarantee therefore evidence a transaction affecting interstate commerce. Accordingly, notwithstanding any provision in the Agreement or this Guarantee to the contrary, all matters of arbitration relating to the Agreement or this Guarantee will be governed by and construed in accordance with the provisions of the Federal Arbitration Act, codified as Title 9 of the United States Code, however any application for injunctive relief in aid of arbitration or to confirm an arbitration award may be made under the arbitration laws of the State in which the arbitration is being conducted, the laws of the State of Florida, or the laws of the jurisdiction in which the application is made, and the application will be governed by and construed in accordance with the laws under which the application is made, without regard to any applicable principles of conflict of laws. The arbitration agreement contained herein may also be enforced by any employee, agent, attorney, member, manager, officer, subsidiary, affiliate entity, successor, or assign of WAVE.

G14. Service of Process. Each Merchant and each Guarantor consent to service of process and legal notices made by First Class or Priority Mail delivered by the United States Postal Service and addressed to the Contact Address set forth on the first page of the Agreement or any other address(es) provided in writing to WAVE by any Merchant or any Guarantor, and unless applicable law or rules provide otherwise, any such service will be deemed complete upon dispatch. Each Merchant and each Guarantor agrees that it will be precluded from asserting that it did not receive service of process or any other notice mailed to the Contact Address set forth on the first page of the Agreement if it does not furnish a certified mail return receipt signed by WAVE demonstrating that WAVE was provided with notice of a change in the Contact Address.

G15. Severability. If any provision of this Guarantee is deemed invalid or unenforceable as written, it will be construed, to the greatest extent possible, in a manner which will render it valid and enforceable, and any limitation on the scope or duration of any such provision necessary to make it valid and enforceable will be deemed to be part thereof. If any provision of this Guarantee is deemed void, all other provisions will remain in effect.

G16. Survival. The provisions of Sections G2, G3, G4, G5, G6, G7, G8, G9, G10, G11, G12, G13, G14, G15, G16, G17, G18, G19, and G20 shall survive any termination of this Guarantee.

G17. Headings. Headings of the various articles and/or sections of this Guarantee are for convenience only and do not necessarily define, limit, describe, or construe the contents of such articles or sections.

G18. Attorney Review. Each Guarantor acknowledges that it has had an opportunity to review this Guarantee, the Agreement, and all addenda with counsel of its choosing before signing the documents or has chosen not to avail itself of the opportunity to do so.

G19. Entire Agreement. This Guarantee, inclusive of all addenda, if any, executed simultaneously herewith may not be amended, modified, or canceled except in writing signed by all parties. Should there arise any conflict between this Guarantee and any other document preceding it, this Guarantee will govern. This Guarantee does not affect any previous agreement between the parties unless such an agreement is specifically referenced in the Agreement or herein. This Guarantee will not be affected by any subsequent agreement between the parties unless this Guarantee is specifically referenced therein.

G20. Counterparts; Fax and Electronic Signatures. This Guarantee may be executed electronically and in counterparts. Facsimile and electronic copies of this Guarantee will have the full force and effect of an original.

Page 15 of 16

STANDARD MERCHANT CASH ADVANCE AGREEMENT

THE TERMS, DEFINITIONS, CONDITIONS AND INFORMATION SET FORTH IN THE “STANDARD MERCHANT CASH ADVANCE AGREEMENT”, INCLUDING THE “TERMS AND CONDITIONS”, ARE HEREBY INCORPORATED IN AND MADE A PART OF THIS GUARANTEE. CAPITALIZED TERMS NOT DEFINED IN THIS GUARANTEE SHALL HAVE THE MEANING SET FORTH IN THE STANDARD MERCHANT CASH ADVANCE AGREEMENT, INCLUDING THE TERMS AND CONDITIONS.

EACH UNDERSIGNED HEREBY ACCEPTS THE TERMS OF THIS GUARANTEE

GUARANTOR (#1)

By:	LEV MICHAILOVICH PEKER
	(Print Name)	(Signature)

SS#		Driver License Number

GUARANTOR (#2)

By:
	(Print Name)	(Signature)

SS#		Driver License Number

Page 16 of 16

STANDARD MERCHANT CASH ADVANCE AGREEMENT

BANK INFORMATION

Dear Merchant,

We look forward to being your funding partner.

You authorize WAVE ADVANCE INC to collect the Receivables Purchased Amount under this Agreement by ACH debiting your bank account with the bank listed below.

WAVE ADVANCE INC will require viewing access to your bank account each business day.

WAVE ADVANCE INC will also require viewing access to your bank account, prior to funding, as part of our underwriting process.

Please fill out the form below with the information necessary to access your account.

* Be sure to indicate capital or lower case letters.

Name of bank:

Name of account:

PARTS ID, LLC

Account number:

Routing number:

Bank portal website:

Username:

Password:

Security Question/Answer 1:

Security Question/Answer 2:

Security Question/Answer 3:

Any other information necessary to access your account:

If you have any questions please feel free to contact us directly.

ADDENDUM TO STANDARD MERCHANT CASH ADVANCE AGREEMENT

FOR ADDITIONAL FEES

This is an Addendum, dated ________, to the Standard Merchant Cash Advance Agreement (“Agreement”), dated ________, between WAVE ADVANCE INC (“WAVE”) and PARTS ID INC., and all entities listed on the “Merchant List” (“Merchant”). This Addendum incorporates the Agreement by reference. The terms of this Addendum will control to the extent they conflict with any of the terms in the Agreement.

Each Merchant may be held responsible for an NSF/ Rejected ACH Fee of $50.00 for each time an ACH debit to the Account by WAVE is returned or otherwise rejected. No Merchant will be held responsible for such a fee if any Merchant gives WAVE advance notice of no more than one business day in advance that the Account has insufficient funds to be debited by WAVE and no Merchant is otherwise in default of the terms of the Agreement. Each such fee may be deducted from any payment collected by WAVE or may be collected in addition to any other payment collected by WAVE under this Agreement.

FOR THE MERCHANT/OWNER (#1)

By:	LEV MICHAILOVICH PEKER
(Print Name)			(Print Title)		(Signature)

FOR THE MERCHANT/OWNER (#2)

By:

(Print Name)

(Print Title)

(Signature)

ADDENDUM TO STANDARD MERCHANT CASH ADVANCE AGREEMENT

FOR ESTIMATED PAYMENTS

This is an Addendum, dated, to the Standard Merchant Cash Advance Agreement (“Agreement”), dated______, between WAVE ADVANCE INC (“WAVE”) and PARTS ID INC., and all entities listed on the “Merchant List” (“Merchant”). This Addendum incorporates the Agreement by reference. The terms of this Addendum will control to the extent they conflict with any of the terms in the Agreement.

Instead of debiting the 25.28% Specified Percentage of Merchant’s Receivables, WAVE may instead debit $35,000.00 (“Estimated Payment”) from the Account every WEEK. The Estimated Payment is intended to be an approximation of no more than the Specified Percentage. The Estimated Payment is subject to any Cap imposed by Section 3 of the Agreement.

Any Merchant may request that WAVE conduct a reconciliation in order to ensure that the amount that WAVE has collected equals the Specified Percentage of Merchant(s)’s Receivables under the Agreement. Any Merchant may request such a reconciliation by giving written notice of the request to WAVE. A reconciliation may also be requested by e-mail to jason@waveadvancegrp.com. If such reconciliation determines that WAVE collected more than it was entitled to, then WAVE will credit to the Account all amounts to which WAVE was not entitled and decrease the Estimated Payment so that it is consistent with the Specified Percentage of Merchant(s)’s Receivables from the date of the Agreement through the date of the reconciliation. If such reconciliation determines that WAVE collected less than it was entitled to, then WAVE will debit from the Account all additional amounts to which WAVE was entitled and increase the Estimated Payment so that it is consistent with the Specified Percentage of Merchant(s)’s Receivables from the date of the Agreement through the date of the reconciliation, with the increase being subject to any Cap in place on collections. In order to effectuate this reconciliation, any Merchant must produce with its request the login and password for the Account and any and all statements covering the period from the date of the Agreement through the date of the request for a reconciliation. WAVE will complete each such reconciliation within two business days after receipt of a written request for one accompanied by the information and documents required for it. Nothing herein limits the amount of times that such a reconciliation may be requested.

FOR THE MERCHANT/OWNER (#1)

By:	LEV MICHAILOVICH PEKER
(Print Name)			(Print Title)		(Signature)

FOR THE MERCHANT/OWNER (#2)

By:

(Print Name)

(Print Title)

(Signature)

DECLARATION OF ORDINARY COURSE OF BUSINESS

Each undersigned hereby declares the following:

1. I am duly authorized to sign the Standard Merchant Cash Advance Agreement (“Agreement”), dated______, between WAVE ADVANCE INC (“WAVE”) and PARTS ID INC., and all entities listed on the “Merchant List” (“Merchant”) on behalf of Merchant.

2. This Declaration incorporates by reference the Agreement and every addendum to it.

3. I acknowledge that I am authorized to sign the Agreement and every addendum to it on behalf of each Merchant.

4. I acknowledge that I had sufficient time to review the Agreement and every addendum to it before signing it.

5. I acknowledge that I had an opportunity to seek legal advice from counsel of my choosing before signing the Agreement and every addendum to it.

6. I acknowledge that each Merchant is entering into the Agreement voluntarily and without any coercion.

7. I acknowledge that each Merchant is entering into the Agreement in the ordinary course of its business.

8. I acknowledge that the payments to be made from any Merchant to WAVE under the Agreement are being made in the ordinary course of each Merchant’s business.

9. I am aware of each Merchant’s right to request a reconciliation of the payments made under the Agreement at any time.

10. I DECLARE UNDER PENALTY OF PERJURY THAT THE FOREGOING IS TRUE AND CORRECT.

Executed on
	(Date)

FOR THE MERCHANT/OWNER (#1)

By:	LEV MICHAILOVICH PEKER
(Print Name)			(Print Title)		(Signature)

FOR THE MERCHANT/OWNER (#2)

By:

(Print Name)

(Print Title)

(Signature)

STANDARD MERCHANT CASH ADVANCE AGREEMENT

ADDENDUM C

CHANGING FREQUENCY OF ESTIMATED PAYMENTS

C1. Changing Frequency of Estimated Payment. Upon one day’s advance written notice to Merchant(s), WAVE may elect to change the frequency of the Estimated Payment from daily to weekly or from weekly to daily. If the frequency of the Estimated Payment is being changed from weekly to daily, then the amount of the daily Estimated Payment will be one fifth of the amount of the weekly Estimated Payment. If the frequency of the Estimated Payment is being changed from daily to weekly, then the amount of the weekly Estimated Payment will be five times of the amount of the daily Estimated Payment. No Estimated Payment will be debited on a daily basis during a week in which a weekly payment was already successfully collected from the Account. If any Estimated Payment was debited from the Account on a daily basis, then any Estimated Payment debited on a weekly basis during that week must be reduced by the total of all daily payments already successfully collected from the Account for that week.

FOR THE MERCHANT/OWNER (#1)

By:	LEV MICHAILOVICH PEKER
(Print Name)			(Print Title)		(Signature)

FOR THE MERCHANT/OWNER (#2)

By:

(Print Name)

(Print Title)

(Signature)

Page 1 of 1

Page 16 of 16

STANDARD MERCHANT CASH ADVANCE AGREEMENT

BANK INFORMATION

Dear Merchant,

We look forward to being your funding partner.

You authorize WAVE ADVANCE INC to collect the Receivables Purchased Amount under this Agreement by ACH debiting your bank account with the bank listed below.

WAVE ADVANCE INC will require viewing access to your bank account each business day.

WAVE ADVANCE INC will also require viewing access to your bank account, prior to funding, as part of our underwriting process.

Please fill out the form below with the information necessary to access your account.

* Be sure to indicate capital or lower case letters.

Name of bank:

Name of account:

PARTS ID, LLC

Account number:

Routing number:

Bank portal website:

Username:

Password:

Security Question/Answer 1:

Security Question/Answer 2:

Security Question/Answer 3:

Any other information necessary to access your account:

If you have any questions please feel free to contact us directly.

Page 16 of 16

STANDARD MERCHANT CASH ADVANCE AGREEMENT

BANK INFORMATION

Dear Merchant,

We look forward to being your funding partner.

You authorize WAVE ADVANCE INC to collect the Receivables Purchased Amount under this Agreement by ACH debiting your bank account with the bank listed below.

WAVE ADVANCE INC will require viewing access to your bank account each business day.

WAVE ADVANCE INC will also require viewing access to your bank account, prior to funding, as part of our underwriting process.

Please fill out the form below with the information necessary to access your account.

* Be sure to indicate capital or lower case letters.

Name of bank:

Name of account:

PARTS ID, LLC

Account number:

Routing number:

Bank portal website:

Username:

Password:

Security Question/Answer 1:

Security Question/Answer 2:

Security Question/Answer 3:

Any other information necessary to access your account:

If you have any questions please feel free to contact us directly.

ADDENDUM TO STANDARD MERCHANT CASH ADVANCE AGREEMENT – MERCHANT LIST

This is an Addendum, dated__________, to the Standard Merchant Cash Advance Agreement (“Agreement”) of WAVE ADVANCE INC (“WAVE”), dated . This Addendum incorporates the Agreement by reference. Each Contact Address set forth in this Addendum will be treated as if it is set forth as a Contact Address on Page 1 of the Agreement. The terms of this Addendum will control to the extent they conflict with any of the terms in the Agreement.

The following entities and/or sole proprietorships will be a Merchant under the Agreement:

Merchant #1’s Legal Name: QUALITY DISCOUNTERS INC

D/B/A/: QUALITY DISCOUNTERS

Fed ID #:

Type of Entity:

☐ Corporation ☐ Limited Liability Company ☐ Limited Partnership ☐ Limited Liability Partnership ☐ Sole Proprietor

Business Address:

City:

State:

Zip:

Contact Address:

City:

State:

Zip:

FOR MERCHANT #1

By:	LEV MICHAILOVICH PEKER
(Print Name and Title)			(Signature)

Merchant #2’s Legal Name: SOCIAL FEEDR, INC.

D/B/A/: SOCIAL FEEDR

Fed ID #:

Type of Entity:

☐ Corporation ☐ Limited Liability Company ☐ Limited Partnership ☐ Limited Liability Partnership ☐ Sole Proprietor

Business Address:

City:

State:

Zip:

Contact Address:

City:

State:

Zip:

FOR MERCHANT #2

By:	LEV MICHAILOVICH PEKER
(Print Name and Title)			(Signature)

Merchant #3’s Legal Name: PARTS ID, LLC

D/B/A/: PARTS ID

Fed ID #:

Type of Entity:

☐ Corporation ☐ Limited Liability Company ☐ Limited Partnership ☐ Limited Liability Partnership ☐ Sole Proprietor

Business Address:

City:

State:

Zip:

Contact Address:

City:

State:

Zip:

FOR MERCHANT #3

By:	LEV MICHAILOVICH PEKER
(Print Name and Title)			(Signature)

- 1 -

ADDENDUM TO STANDARD MERCHANT CASH ADVANCE AGREEMENT – MERCHANT LIST

Merchant #4’s Legal Name: PARTS ID LLC

D/B/A/: PARTS ID

Fed ID #:

Type of Entity:

☐ Corporation ☐ Limited Liability Company ☐ Limited Partnership ☐ Limited Liability Partnership ☐ Sole Proprietor

Business Address:

City:

State:

Zip:

Contact Address:

City:

State:

Zip:

FOR MERCHANT #4

By:	LEV MICHAILOVICH PEKER OWNER
(Print Name and Title)			(Signature)

Merchant #5’s Legal Name: ONYX ENTERPRISES INT’L

D/B/A/: ONYX ENTERPRISES INT’L

Fed ID #:

Type of Entity:

☐ Corporation ☐ Limited Liability Company ☐ Limited Partnership ☐ Limited Liability Partnership ☐ Sole Proprietor

Business Address:

City:

State:

Zip:

Contact Address:

City:

State:

Zip:

FOR MERCHANT #5

By:	LEV MICHAILOVICH PEKER OWNER
(Print Name and Title)			(Signature)

Merchant #6’s Legal Name: PARTS ID, INC.

D/B/A/: PARTS ID

Fed ID #:

Type of Entity:

☐ Corporation ☐ Limited Liability Company ☐ Limited Partnership ☐ Limited Liability Partnership ☐ Sole Proprietor

Business Address:

City:

State:

Zip:

Contact Address:

City:

State:

Zip:

FOR MERCHANT #6

By:	LEV MICHAILOVICH PEKER
(Print Name and Title)			(Signature)

- 2 -

WAVE ADVANCE CORP

ADDENDUM

This is an addendum for your contract dated 09/11/2023 for PARTS ID, LLC. This addendum stipulates the following:

WAVE ADVANCE CORP agrees to allow all and any financing to be accepted by PARTS ID LLC during the course of this contract dated 09/11/2023.

Merchant Signature: LEV MICHAILOVICH PEKER

___________________

Title: ________

Date: _____

Note

WAVE ADVANCE CORP Approval is good if funded within 10 days.

Thanks

ADDENDUM TO REVENUE PURCHASE AGREEMENT

This ADDENDUM TO REVENUE PURCHASE AGREEMENT (this “Addendum”), dated 09/11/2023, is entered into by and among the following parties:

WAVE ADVANCE LLC (“Company”); and

Business Legal Name: Parts ID INC

D/B/A: Parts ID (“Parts ID”); and

W-I-T-N-E-S-S-E-T-H

WHEREAS, Company and Parts ID entered into that certain REVENUE PURCHASE AGREEMENT dated September 11, 2023 whereby Company purchased $700,000.00of Parts ID’s future accounts-receivable for an up-front purchase price of $500,000.00 (the “Agreement”); and