Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
As previously disclosed on a Current Report on Form 8-K filed with the SEC on
October 26, 2022, on October 21, 2022 (the "Closing Date"), PARTS iD, Inc. (the
"Company") entered into a Loan and Security Agreement (the "Loan Agreement")
with JGB Collateral, LLC, a Delaware limited liability company, in its capacity
as collateral agent (the "Agent") and the several financial institutions or
entities that from time to time become parties to the Loan Agreement as lenders
(collectively, the "Lender"). Capitalized terms not defined herein shall have
meaning assigned to them in the Loan Agreement.
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 (i) 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 addition, under the Loan Agreement, the Company covenanted to maintain
consolidated quarterly net revenue (as determined in accordance with GAAP and as
set forth in the Company's financial statements) of at least $75,000,000,
measured as of the last day of each calendar quarter commencing with the
calendar quarter ended September 30, 2022 (the "Consolidated Quarterly Net
Revenue Covenant"). Failure to comply with the Consolidated Quarterly Net
Revenue Covenant will constitute an Event of Default under the Loan Agreement.
Pursuant to the terms of the Loan Agreement, upon the occurrence and during the
continuation of an Event of Default, all Secured Obligations, including
principal, interest, compounded interest, and professional fees, shall upon the
election of the Agent or the Lender bear interest at the Term Loan Interest Rate
(i.e., eight percent (8%) per annum), plus five (5) percentage points (the
"Default Interest"). Moreover, upon and during the continuance of any one or
more Events of Default, the Agent may, at its option, accelerate and demand
payment of all or any part of the Secured Obligations and declare them to be
immediately due and payable (the "Acceleration Remedy").
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 Loan Term
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 Company has notified the Agent and the Lender that it will not be in
compliance with the Consolidated Quarterly Net Revenue Covenant for the calendar
quarter ended December 31, 2022. The Company, the Agent and the Lender are in
active negotiations for the Agent and the Lender to waive the Event of Default
triggered by the Company not being in compliance with the Consolidated Quarterly
Net Revenue Covenant for the calendar quarter ended December 31, 2022 and any
penalties or remedies associated therewith, including the Default Interest and
the Acceleration Remedy. Such waiver could extend to the Company a to be
determined grace period to return to compliance with the Quarterly Net Revenue
Covenant and could also grant the Company an extension with respect to its
obligation to file a registration statement in relation to the Warrant Shares.
As a result of the Event of Default triggered by the Company not being in
compliance with the Consolidated Quarterly Net Revenue Covenant for the calendar
quarter ended December 31, 2022, the Company has $5,507,333.33 immediately due
and payable under the Loan Agreement, unless a forbearance agreement is reached
with the Agent and the Lender. Negotiations with the Agent and the Lender remain
ongoing, and the Company cannot provide any assurance as to the outcome of these
negotiations.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are filed as part of this report:
Exhibit No. Description
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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