Item 1.01. Entry
Into a Material Definitive Agreement.
On May 19, 2023, PARTS iD, Inc., a Delaware corporation (the “Company”),
entered into a Note and Warrant Purchase Agreement (the “Purchase Agreement”) whereby the Company agreed to issue and sell
to certain investors (the “Purchasers”), in a private placement, (i) unsecured convertible promissory notes (the “Convertible
Notes”) in the aggregate principal amount of $1,000,000 and (ii) an aggregate of 2,083,333 warrants to purchase shares of the Company’s
Class A common stock (the “Common Stock”), at an exercise price of $0.48 per share (the “Warrants”). Lev Peker,
the Chief Executive Officer and a director of the Company, purchased an aggregate principal amount of $750,000 of Convertible Notes and
received an aggregate of 1,562,500 Warrants in this offering. All of 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 Purchase Agreement, Convertible
Notes and Warrants.
The Convertible Notes accrue interest at 7.75% per
annum, compounded semi-annually. The Convertible Notes 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 “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 Note Amount (as defined in the Convertible Note) divided by the Conversion Price (as defined
in the Convertible Note). The Company may prepay the Note Amounts at any time prior to the Maturity Date.
The Convertible Notes are strictly subordinated
to the (i) senior secured indebtedness incurred or owed by the Company pursuant to that certain Loan and Security Agreement, dated as
of October 21, 2022, by and among the Company, its subsidiary PARTS iD, LLC, a Delaware limited liability company and JGB Collateral,
LLC, a Delaware limited liability company, in its capacity as collateral agent and the several financial institutions or entities that
from time to time become parties thereto, as amended by that certain Amendment to Loan and Security Agreement, dated as of February 22,
2023 (the “Loan Agreement”); and (ii) Permitted Litigation Indebtedness (as defined in the Loan Agreement).
The 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 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 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 foregoing description is only a summary of the terms of the Purchase
Agreement, Convertible Notes and Warrants and it is qualified in its entirety by reference to the full text of the Purchase Agreement,
form of Convertible Note and form of Warrant, copies of which are filed hereto as Exhibits 10.1, 10.2 and 10.3, respectively, and incorporated
herein by reference.
The Company intends to use the proceeds from the issuance
of the Convertible Notes and the Warrants for working capital purposes and the repayment of current indebtedness.
The Convertible Notes and the 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.