PARTS ID, INC. Management report and analysis of the financial situation and operating results. (Form 10-K)

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The following discussion and analysis of our financial condition and results of
operations should be read together with our audited consolidated financial
statements as of December 31, 2021 and 2020, together with the related notes
thereto, included in Part II, Item 8, Financial Statements and Supplementary
Data of this Annual Report on Form 10-K.

The following discussion contains forward-looking statements. Our actual results
may differ significantly from those projected in the forward-looking statements.
Factors that might cause future results to differ materially from those
projected in the forward-looking statements include, but are not limited to,
those discussed in the sections entitled "Risk Factors" and "Cautionary Note
Regarding Forward-Looking Statements." For the purposes of this section, "we,"
"us," "our," "Onyx," the "Company" and "PARTS iD" each refer to Onyx prior to
the closing of the Business Combination and PARTS iD, Inc. following the closing
of the Business Combination, as the context indicates, unless the context
otherwise refers to Legacy Acquisition Corp.

Overview

PARTS iD, Inc. is a technology-driven, digital commerce company focused on
creating custom infrastructure and unique user experiences within niche markets.
The success of the Company has inspired pursuit of our long-term strategy to
scale into similar markets via our proprietary built, modular digital commerce
technology platform. While our core focus continues to be automotive, in August
2018, we launched seven additional verticals (including BOATiD.com,
MOTORCYCLEiD.com, CAMPERiD.com and more) which demonstrates fungibility of our
technology platform. These verticals address similar market challenges and focus
on the enthusiasts' needs through our seamless shopping experience using
proprietary tools and techniques.

Although the ongoing COVID-19 pandemic has caused economic disruptions on a
global scale, and created significant uncertainty, we believe it increased the
adoption of online shopping by consumers and, for periods during which stimulus
payments were disbursed by the government, increased demand, which had a
positive effect on the Company's revenue and profitability. However, there was a
decline in traffic after the first quarter of 2021, primarily due to an increase
in the average cost-per-click in the Company's search advertising programs and
lower consumer discretionary spend that adversely impacted marketing
productivity. We also experienced increased order cancellations in 2021 due to
supply chain disruptions. Despite the decrease in traffic and increased order
cancellations, increases in the conversion rate and average order values
resulted in higher revenue for the year ended December 31, 2021, as compared to
the prior year.

COVID-19 and related containment measures have disrupted the supply chain,
negatively affecting the Company and our industry. In 2021, spikes in the price
of steel and other materials, low in-stock rates by our key suppliers, workforce
shortages and shipping and seaport delays led to increases in the cost of goods
sold, which negatively impacted gross margins of the Company. In 2021, supply
chain challenges increased order cancellations and shipping costs. Our real-time
multi-sourced inventory model helped us mitigate some of the risk by sourcing
certain products from secondary and tertiary sources during 2021, but these
measures resulted in increased costs. We continue to pass a portion of the
increased costs through to our customers, while balancing the need to maintain
price competitiveness.

Management continues to focus on efforts to drive growth, including product
cultivation, vendor optimization, distribution network expansion and marketing
diversification with a greater emphasis on the additional verticals, original
equipment ("OE") and repair parts business. We also recently filled a number of
key executive positions to support this growth, including hiring leaders for our
key categories of Boating and Marine and RV/Camper.


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Main financial and operational indicators

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 year ended the 31st of December,

                                               2021               2020             YoY Change        % Change
Number of Users                              127,459,324         139,131,292        (11,671,968 )         (8.4 )%
Number of Sessions                           238,708,556         279,004,608        (40,296,052 )        (14.4 )%
Number of Pageviews                          988,152,867       1,165,312,820       (177,159,953 )        (15.2 )%
Pages/Sessions                                      4.14                4.18              (0.04 )         (0.9 )%
Average Session Duration                         0:03:15             0:03:26           (0:00:11 )         (5.3 )%



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

                                             Years ended December 30,                                   Change
                             2021           % of Rev.           2020           % of Rev.         Amount             %
Revenue, net             $ 448,668,928                      $ 400,832,371                     $  47,836,557          11.9 %
Cost of goods sold         358,439,239            79.9 %      315,027,012            78.6 %      43,412,227          13.8 %
Gross profit                90,229,689            20.1 %       85,805,359            21.4 %       4,424,330           5.2 %
Gross Margin                      20.1 %                             21.4 %
Operating expenses:
Advertising                 42,346,886             9.4 %       33,359,299             8.3 %       8,987,587          26.9 %
Selling, general &
administrative              49,554,126            11.0 %       44,266,151            11.0 %       5,287,975          11.9 %
Depreciation                 7,465,095             1.7 %        6,859,237             1.7 %         605,858           8.8 %
Total operating
expenses                    99,366,107            22.1 %       84,484,687            21.1 %      14,881,420          17.6 %
(Loss) income from
operations                  (9,136,418 )          (2.0 )%       1,320,672             0.3 %     (10,457,090 )      (791.8 )%
Interest expense                 7,172             0.0 %            8,395             0.0 %          (1,223 )       (14.6 )%
(Loss) income before
income tax                  (9,143,590 )          (2.0 )%       1,312,277             0.3 %     (10,455,867 )      (796.8 )%
Income tax (benefit)        (1,180,790 )          (0.3 )%        (801,552 )          -0.2 %        (379,238 )        47.3 %
Net (loss) income        $  (7,962,800 )          (1.8 )%   $   2,113,829  
          0.5 %   $ (10,076,629 )      (476.7 )%



Revenue
Revenue increased $47.8 million, or 11.9%, for the year ended December 31, 2021,
compared to the year ended December 31, 2020. This increase was primarily
attributable to increases in the conversion rate of 11.3% and in the average
order value of 12.9%, partially offset by a decrease in traffic of 14.4%.

Supply chain disruptions adversely impacted net sales. Cancellations of sales
orders increased to 12.8% for the year ended December 31, 2021 compared to 10.9%
for the year ended December 31, 2020. The increase in cancellation rates
resulted in $10 million more in cancellations in 2021 compared to 2020, and $30
million more in cancellations in 2021 compared to 2019.

The increase in the site conversion rate was primarily attributable to search
engine bidding automation and optimization, continuous customer experience
enhancements and pricing initiatives, product cultivation, and continued
e-commerce adoption. The increase in the average order value was primarily
attributable to increases in the average number of items per order, changes in
the mix of categories of items sold and inflation.


                                       35




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 year ended
December 31, 2021, cost of goods sold increased by $43.4 million, or 13.8%,
compared to the year ended December 31, 2020. This increase in cost of goods
sold was primarily driven by an increase in the number of orders or products
sold, as well as increases in cost of product and shipping costs.

For the year ended December 31, 2021, cost of goods sold was 79.9% of revenue,
compared to 78.6% of revenue for the year ended December 31, 2020. The 1.3%
increase in cost of goods sold as a percentage of revenue was primarily
attributable to ongoing supply chain disruptions associated with the COVID-19
pandemic. During the year ended December 31, 2021, we had to source some
products from alternate vendors that had higher price points due to product
price inflation and higher shipping costs, which higher prices were not passed
on to the customer entirely. We have now begun to pass a portion of the
increased costs through to our customers, while balancing the need to maintain
price competitiveness. Management only expects these cost pressures to
materially ease if and when the COVID-19 pandemic and related containment
measures abate, which cannot be currently predicted with any certainty.

Gross profit and gross margin

Gross profit increased $4.4 million, or 5.2%, for the year ended December 31,
2021, compared to the year ended December 31, 2020. This increase was primarily
attributable to the 11.9% increase in revenue in the year ended December 31,
2021, partially offset by the increase in cost of goods sold due primarily to
increases in product costs and ongoing supply chain disruptions associated with
the COVID-19 pandemic.

Gross margin of 20.1% for the year ended December 31, 2021, was lower than the
gross margin of 21.4% for the year ended December 31, 2020, primarily
attributable to increases in product and shipping costs associated with ongoing
supply chain disruptions as discussed above.

Functionnary costs

Advertising expenses increased $9.0 million, or 26.9%, for the year ended
December 31, 2021, compared to the year ended December 31, 2020. This increase
in advertising costs was primarily attributable to (i) an increase in average
cost-per-click, (ii) a change in the mix of advertising channels used, and (iii)
testing of new advertising campaigns and content development. Management
believes investment in advertisement is one of the key drivers of revenue and
its efficiency is measured by management in terms of revenue per advertisement
dollar spent.

Decreases in overall available searches and increasing competition, coupled with
additional campaigns that were transitioned to automated bidding from manual
bidding, led to higher costs-per-click for the year ended December 31, 2021 as
compared to the year ended December 31, 2020.

The consequent higher advertising cost was partly offset by an increase in the
site conversion rate and the average order value. Management continues to take
steps to diversify advertising in new channels, such as paid social and customer
retention programs to drive growth.

Selling, general and administrative ("SG&A") expenses increased $5.3 million, or
11.9%, compared to the year ended December 31, 2020. This increase was primarily
attributable to an increase of (i) $4.9 million in non-cash stock compensation
expense, (ii) $4.0 million in public company operating expenses, and (iii) $1.3
million in merchant services provider processing fees in line with the increase
in revenue, partially offset by a $5.5 million decrease in business combination
transaction expenses which occurred in the year ended December 31, 2020 but did
not reoccur in the year ended December 31, 2021.

Depreciation charges increased $0.6 millionor 8.8%, for the year ended
December 31, 2021 compared to the year ended December 31, 2020.

                                       36




Interest Expense

Interest expense decreased by $1,223or 14.6%, for the year ended December 31, 2021compared to the year ended December 31, 2020.

Tax expenditures

Income tax expenses decreased by $0.4 million for the year ended December 31,
2021, compared to the year ended December 31, 2020. For the year ended December
31, 2021, the effective income tax rate was 12.91% compared to (61.08)% for the
year ended December 31, 2020. The change in rate was primarily attributable to
changes in state taxes and the incurrence of expenses that are not deductible
for income tax purposes.

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 stock compensation expense and other 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 the Board.

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

? Although depreciation is a non-monetary expense, depreciated assets can

need to be replaced in the future, and EBITDA and Adjusted EBITDA will not

reflect cash capital expenditure needs for these replacements or for new ones

capital expenditure requirements;

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

? EBITDA and Adjusted EBITDA do not reflect tax payments that may

represent a reduction in the cash available to us;

? EBITDA and Adjusted EBITDA do not reflect depreciation and interest expense

related to finance lease obligations; and

? Other companies, including companies in our industry, may calculate

EBITDA differently, which reduces its usefulness as a comparative measure.

Due to these limitations, you should consider EBITDA and Adjusted EBITDA along with other measures of financial performance, including various cash flow measures, net income (loss), and our other GAAP results.

                                       37



The following table reflects the reconciliation of net earnings (loss) to EBITDA and adjusted EBITDA for each of the periods indicated.

                                                  Year ended December 31,
                                                   2021             2020
Net income (loss)                              $ (7,962,800 )   $  2,113,829
Interest expense                                      7,172            8,395
Income tax (benefit)                             (1,180,790 )       (801,552 )
Depreciation                                      7,465,095        6,859,237
EBITDA                                           (1,671,323 )      8,179,909
Stock compensation expense                        4,852,985                -
Business combination transaction expenses(1)              -        

5,544,520

Founder's compensation(2)                                 -          

687 692

Legal & settlement expenses (3)                   1,150,247          725,081
Other items(4)                                            -          291,164
Adjusted EBITDA Total                          $  4,331,909     $ 15,428,366
% of revenue                                            1.0 %            3.8 %


(1) Represents expenses incurred solely related to the Business Combination

which closed in November 2020. It mainly includes the fees of investment bankers,

legal fees, professional fees of accountants and SECOND and Hart-Scott-Rodino

filing fees. (2) Represents the overcompensation paid to one of the two founders of Onyx

on the amount that management estimates would have been the remuneration of a

Independent Professional CEO for applicable reporting periods. (3) Represents legal and settlement fees and gains related to

matters that do not impact the fundamentals of our operations, regarding

to: (i) causes of action between certain shareholders of the Company and

which involves claims directly against the Company for the performance of

the alleged indemnification obligations with respect to such matters, and (ii)

trademark and intellectual property protection cases. We are involved in common intellectual property litigation,

commercial litigation and other miscellaneous litigation. We verify

litigation issues from a qualitative and quantitative point of view for

determine whether the exclusion of losses or gains will provide our investors with

useful additional information. Disputes may vary in their

characteristics, their frequency and their importance to our results of operations. (4) Includes write-offs of advances and certain fraud claims

years that we have determined to be uncollectible.

Net income (loss) decreased by $10.1 million to a net loss of $8.0 million for
the year ended December 31, 2021, as compared to net income of $2.1 million for
the year ended December 31, 2020. The decrease in net income (loss) was
primarily driven by increases in advertising costs, non-cash stock compensation
expense and public company operating expenses, as discussed above. The
year-over-year decrease in Adjusted EBITDA for the year ended December 31, 2021,
was attributable to the decrease in net income (loss), partially offset by the
decrease in business combination transaction expenses during 2020 that did not
recur in 2021, as noted in the reconciliation table above.

Free movement of capital

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 operating activities, the most
directly comparable GAAP financial measure.


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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 for investors and others to understand and evaluate our results of operations in the same way 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 provides a reconciliation of net cash provided by operating activities to free cash flow for each of the periods indicated.

                                              Years ended December 31,
                                                2021             2020

Net cash flow generated by operating activities $8,620,390 $21,988,592
Purchase of goods and equipment

              (324,025 )        (58,544 )
Purchase of intangible assets                    (25,214 )        (15,269 )

Website and software development costs (7,250,921 ) (7,283,044 ) Free Cash Flow

                              $  1,020,230     $ 14,631,735



Cash and capital resources

The Company's cash was $23.2 million and $22.2 million as of December 31, 2021
and 2020, respectively. Our ability to maintain adequate liquidity for our
operations is dependent upon a number of factors, including our revenue and
earnings, the impacts of COVID-19 on macroeconomic conditions, and our ability
to take further cost savings and cash conservation measures if necessary. At
this time, we believe that cash flows generated from operations and our cash
will be sufficient to meet our anticipated operating cash needs for at least the
next twelve months. However, any projections of future cash needs and cash flows
are subject to substantial uncertainty. See Item 1A of Part I, "Risk Factors"
for a discussion of the factors that may impact our ability to maintain adequate
liquidity.

Cash Flow Summary

The change in cash and cash equivalents is as follows:

                                              Years ended December 31,
                                                2021             2020

Net cash flow generated by operating activities $8,620,390 $21,988,592
Net cash used in investing activities (7,600,160 ) (7,320,857 ) Net cash used in financing activities

            (19,706 )     (6,083,864 )
Net change in cash                          $  1,000,524     $  8,583,871



Our primary sources of liquidity are cash flow generated from operations, particularly negative working capital.

Cash flow from operating activities

The net cash provided by operating activities consist of our net income (loss),
adjusted for certain non-cash items, including depreciation, and share based
compensation expense, as well as 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 (current liabilities exceed current assets).
Any profitable growth in revenue results in incremental cash for the Company, as
we receive funds when customers place orders on the website, while accounts
payable are paid over a period of time, based on vendor terms, which range on
average from one week to eight weeks.


                                       39




Cash provided by operating activities in the year ended December 31, 2021 was
$8.6 million and was driven primarily by the impact of non-cash depreciation and
amortization expense of $7.5 million, cash provided by changes in operating
assets and liabilities of $5.5 million, and share based compensation expense of
$4.8 million.


Cash provided by operating activities in the year ended December 31, 2020, was
$22.0 million and was driven primarily by cash provided by operating assets and
liabilities of $13.9 million and the impact of non-cash depreciation and
amortization expense of $6.9 million.


Cash flow from investing activities

Net cash used in investing activities was $7.6 million and $7.3 million for the
years ended December 31, 2021 and 2020, respectively, consisting primarily of
website and software development costs in both years. Cash used in investing
activities varies depending on the timing of technology and product development
cycles.

Cash flow from financing activities

Net cash used in financing activities for the year ended December 31, 2021, was
$0.02 million, compared to $6.1 million for the year ended December 31, 2020.
The decrease was primarily related to a cash payout of $5.6 million for the
cancellation of Legacy common stock warrants in the year ended December 31,
2020, that did not reoccur in the year ended December 31, 2021.

Future cash requirements

Operating leases

The Company has several non-cancelable operating leases for facilities and
vehicles that expire over the next four years. Rental expense for operating
leases was $1,207,969 and $1,220,408 for the years ended December 31, 2021 and
2020, respectively.
Future minimum lease payments under non-cancelable operating leases as
of December 31, 2021 are as follows:

Year ending December 31,
2022                       $   947,275
2023                           548,993
2024                            46,092
                           $ 1,542,360


Debt activity and capital structure

We had no borrowings as of December 31, 2021. However, we continually 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 expenditure

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


                                       40




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
Taxes paid in cash in the year ended December 31, 2021 were $4,209 (none in the
year ended December 31, 2020). As of December 31, 2021, the Company had
$8,173,388 in federal net operating losses ("NOL"), all remaining from 2019 and
onwards and accordingly available to offset future taxable income indefinitely.
However, the NOL's are subject to an 80% of taxable income limitation for all
periods after January 1, 2021. The Company does not currently anticipate any
significant increase or decrease of 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 financial statements, management has utilized available
information, including our past history, industry standards and the current and
projected economic environments, among other factors, in forming its estimates,
assumptions and judgments, giving due consideration to 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 consolidated financial
statements is set forth below. See Note 2 of the Notes to Consolidated Financial
Statements included in this report 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

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic
606) ("ASU 2014-09"). This new 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. In doing so, companies need 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, we perform the following steps: (i)
identify contracts with customers; (ii) identify performance obligation(s);
(iii) determine the transaction price; (iv) allocate the transaction price to
the performance obligation(s); and (v) recognize revenue when (or as) we satisfy
each performance obligation.

We recognize revenue on product sales through our website as the principal in
the transaction, as we have concluded we control the product before it is
transferred to the customer. We control products when we are the entity
responsible for fulfilling the promise to the customer and take responsibility
for the acceptability of the goods, assume inventory risk from shipment through
the delivery date, have discretion in establishing prices, and select the
product vendors of products sold.


                                       41




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.
The Company has two types of customer liabilities: (i) amounts received from
customers prior to the delivery of products are recorded as customer deposits on
our balance sheets and are recognized as revenue when the products are
delivered, amounting to $15,497,857 and $16,185,648 as of December 31, 2021 and
2020, 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 $2,855,998 and $2,422,051 as of December 31, 2021 and 2020,
respectively.

The outstanding days from the order date of our unshipped and undelivered orders
based on our actual determination were, on average, 11.6 days as of December 31,
2021, and 12.7 days as of December 31, 2020. The decrease in time between
outstanding days from December 31, 2021 compared to December 31, 2020 was due to
our prioritizing vendors with higher inventory levels.

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. Net allowances
for sales returns as of December 31, 2021 and 2020, were $738,465 and
$1,062,077, respectively.

If actual sales performance does not meet our estimates, or if we have to make adjustments, we may incur future losses or gains which could be material.

Adjustments to our estimated net provisions for sales returns during the years ended December 31, 2021 and 2020 were as follows:

                          Balance at Beginning                         Balance at Close
Year Ended December 31,         of Period            Adjustments          of Period
2021                      $           1,062,077     $    (323,612 )   $          738,465
2020                      $             495,697     $     566,380     $        1,062,077


Website and software development

We capitalize certain costs associated with website and software (technology
platform including the catalog) developed 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 directly 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 makes
judgments as to ultimate realization.

The amount of software costs capitalized for the financial years ended December 31, 2021
and 2020 were as follows:

Year Ended December 31,   Capitalized Software
2021                      $           7,250,921
2020                      $           7,283,044




Stock-Based 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 a 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 or not 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 results that differ from estimates (such as the achievement or non-achievement of performance conditions) may cause results to be materially adjusted during a reporting period because the timing and amount of the Expense recognition is highly dependent on management’s estimate.


                                       42





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 doubtful accounts



Accounts receivable balances include amounts due from customers. The Company
periodically reviews its accounts receivable balances to determine whether an
allowance for doubtful accounts 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 December 31, 2021 and 2020, the Company determined that an
allowance for doubtful accounts was not necessary. As circumstances change, it
could result in material adjustments to the allowance for doubtful accounts.



Off-balance sheet arrangements

parts identifier is not party to any off-balance sheet arrangements.

Recent accounting pronouncements

See Note 2 of the Notes to the 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.

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