ID PARTS iD Inc

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.

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.

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:

Restricted Stock Units

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

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:

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.

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.

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.