<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


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

                For the quarterly period ended September 30, 2001

                          Commission File No. 000-28243


                                 parts.com, Inc.
             (Exact Name of Registrant as specified in its Charter)


                   NEVADA                                88-0344869
        (State or Other Jurisdiction                   (IRS Employer
      of Incorporation or Organization)              Identification No.)


            121 EAST FIRST STREET
              SANFORD, FLORIDA                               32771
    (Address of Principal Executive Offices)               (Zip Code)


                  Registrant's telephone number:(407) 302-1314

               Former name, former address and former fiscal year,
                        If changed since last report: N/A


Check whether the Registrant (1) has filed all reports to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such a shorter period that the Registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.

                           X
                       ---------            ---------
                          YES                   NO


As of September 30, 2001, there were 3,045,165 shares of common stock
outstanding.


                                       1
<PAGE>
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                        <C>
PART I. FINANCIAL INFORMATION

Item 1. Index to Financial Statements

PARTS.COM, INC. AND SUBSIDIARY CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Condensed Consolidated Balance Sheets at
      September 30, 2001 and December 31, 2000                               3-4

Condensed Consolidated Statements of Operations for the Three and
      Nine Months Ended September 30, 2001 and 2000                            5

Condensed Consolidated Statement of Stockholders'Equity for
      the Nine Months Ended September 30, 2001                                 6

Condensed Consolidated Statements of Cash Flows for the
      Nine Months Ended September 30, 2001 and 2000                          7-8

Notes to Condensed Consolidated Financial Statements                        9-16

Item 2. Management's Discussion and Analysis of
        Financial Condition and Results of Operations                      17-19

PART II. OTHER INFORMATION AND SIGNATURES                                  20-21
</TABLE>


SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

This report contains forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
Reference is made in particular to the description of our plans and objectives
for future operations, assumptions underlying such plans and objectives, and
other forward-looking statements included in this report. Such statements may be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "believe," "estimate," "anticipate," "intend," "continue," or similar
terms, variations of such terms or the negative of such terms. Such statements
are based on management's current expectations and are subject to a number of
factors and uncertainties, which could cause actual results to differ materially
from those described in the forward-looking statements. Such statements address
future events and conditions concerning capital expenditures, earnings,
regulatory matters, markets for products and services and liquidity and capital
resources. Actual results in each case could differ materially from those
anticipated in such statements by reason of factors such as future economic
conditions, changes in consumer demand, legislative, regulatory and competitive
developments in markets in which we operate, and other circumstances affecting
anticipated revenues and costs. We expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in our expectations with
regard thereto or any change in events, conditions or circumstances on which any
such statement is based. Additional factors that could cause such results to
differ materially from those described in the forward-looking statements are set
forth in connection with the forward-looking statement.


                                       2
<PAGE>
                          PART I: FINANCIAL INFORMATION
                          ITEM 1: FINANCIAL STATEMENTS

                         PARTS.COM, INC. AND SUBSIDIARY
                CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


                                     ASSETS

<TABLE>
<CAPTION>
                                                           September 30,  December 31,
                                                               2001           2000
                                                               ----           ----
<S>                                                        <C>            <C>
CURRENT ASSETS:

Cash                                                        $    4,850     $    8,683
Accounts receivable, net of allowance for doubtful
  accounts of $0 and $77,863, respectively                      26,000         10,751
Prepaid expenses and other current assets                       11,102         67,323
                                                            ----------     ----------
Total Current Assets                                            41,952         86,757
                                                            ----------     ----------
PROPERTY AND EQUIPMENT, net of accumulated depreciation
  $362,606 and $257,216, respectively                          777,851        929,084

DEFERRED LOAN COSTS, net of accumulated amortization
  $36,746 and $25,343 respectively                             221,754        233,157

OTHER ASSETS, net of accumulated amortization of
  $957,685 and $897,351, respectively                           37,564        104,634

PATENT, net of accumulated amortization
  of $2,288,995 and $1,532,950, respectively                 3,108,187      3,864,232
                                                            ----------     ----------
Total Assets                                                $4,187,308     $5,217,864
                                                            ==========     ==========
</TABLE>


See Accompanying Notes to Condensed Consolidated Financial Statements


                                       3
<PAGE>
                         PARTS.COM, INC. AND SUBSIDIARY
          CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED), CONTINUED


                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                          September 30,     December 31,
                                                              2001              2000
                                                              ----              ----
<S>                                                       <C>               <C>
CURRENT LIABILITIES:

Accounts payable and accrued expenses                     $    618,211      $    915,455
Other current liabilities                                      720,572           801,070
Current portion of mortgages payable                           398,083           381,562
Convertible promissory notes, net of unamortized debt
   discount of $19,523 and $0, respectively                  1,764,644         1,050,000
Notes payable, related party                                   122,876            61,298
Line of credit                                                 100,000                --
Deferred revenue                                                11,091           513,108
                                                          ------------      ------------
Total Current Liabilities                                    3,735,477         3,723,123

LONG-TERM PORTION OF MORTGAGE NOTES PAYABLE                         --            16,521
                                                          ------------      ------------
Total Liabilities                                            3,735,477         3,739,644
                                                          ------------      ------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Preferred Stock, $.001 par value, 10,000,000 shares
   authorized, no shares issued and outstanding                     --                --

Common Stock, $.001 par value, 5,000,000 shares
   authorized, 3,045,165 and 2,778,569 shares
   issued and outstanding, respectively                          3,045             2,778

Additional paid-in capital                                  24,907,004        22,592,466

Accumulated deficit                                        (24,312,612)      (20,623,965)

Deferred stock-based employee compensation                    (145,606)         (493,059)
                                                          ------------      ------------
Total Stockholders' Equity                                     451,831         1,478,220
                                                          ------------      ------------
Total Liabilities and Stockholders' Equity                $  4,187,308      $  5,217,864
                                                          ============      ============
</TABLE>


See Accompanying Notes to Condensed Consolidated Financial Statements


                                       4
<PAGE>
                         PARTS.COM, INC. AND SUBSIDIARY
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


<TABLE>
<CAPTION>
                                                Three Months Ended                Nine Months Ended
                                                   September 30                      September 30
                                                   ------------                      ------------
                                              2001             2000              2001            2000
                                              ----             ----              ----            ----
<S>                                        <C>              <C>              <C>              <C>
NET SALES                                  $   317,879      $   350,716      $   945,063      $   732,846

COST OF SALES                                  140,898          215,442          394,200          684,839
                                           -----------      -----------      -----------      -----------
         GROSS PROFIT                          176,981          135,274          550,863           48,007
                                           -----------      -----------      -----------      -----------
SELLING, GENERAL AND
    ADMINISTRATIVE EXPENSES:

  Stock-based employee compensation          1,330,764           33,280        1,669,398        2,002,159

  Stock-based consulting fees                   16,406          113,223          171,622          324,323

  Other                                        244,134          881,426          927,612        3,793,501

  Amortization                                 258,210          451,296          774,630        1,426,063

  Depreciation                                  35,696           26,132          113,475           98,330

INTEREST, NET (inclusive of noncash
 interest of $107,509, $625,000,
 $460,166, and $625,000, respectively)         158,180          640,680          582,773          662,944
                                           -----------      -----------      -----------      -----------

         TOTAL EXPENSES                      2,043,390        2,146,037        4,239,510        8,307,320
                                           -----------      -----------      -----------      -----------

NET LOSS                                   $(1,866,409)     $(2,010,763)     $(3,688,647)     $(8,259,313)
                                           ===========      ===========      ===========      ===========
BASIC AND DILUTED NET LOSS
    PER COMMON SHARE                       $      (.61)     $      (.80)     $     (1.26)     $     (3.47)
                                           ===========      ===========      ===========      ===========
WEIGHTED AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING                   3,045,165        2,439,300        2,938,474        2,378,698
                                           ===========      ===========      ===========      ===========
</TABLE>


      See Accompanying Notes to Condensed Consolidated Financial Statements


                                       5
<PAGE>
                         PARTS.COM, INC. AND SUBSIDIARY
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
            FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                    Deferred
                                           Common Stock             Additional                     Stock-Based
                                   ----------------------------       Paid-In      Accumulated      Employee
                                      Shares          Amount          Capital        Deficit      Compensation       Total
                                      ------          ------          -------        -------      ------------       -----
<S>                                <C>             <C>             <C>            <C>             <C>             <C>
Balance - December 31, 2000           2,778,569    $      2,778    $ 22,592,466   $(20,623,965)   $   (493,059)   $  1,478,220

Issuance of common stock
  for cash in private placements         60,000              60         119,940                                        120,000

Issuance of common stock to
  employees                             125,577             126         331,443                        (10,800)        320,769

Issuance of convertible
  debt with warrants and
  a beneficial conversion
  feature                                                               479,689                                        479,689

Issuance of common stock
  for services                           81,019              81         227,216                                        227,297

Issuance of employee
  stock options                                                       1,156,250                     (1,156,250)             --

Amortization of employee
  stock-based compensation                                                                           1,514,503       1,514,503

Net loss for the period                                                             (3,688,647)                     (3,688,647)
                                   ------------    ------------    ------------   ------------    ------------    ------------
Balance - September 30, 2001          3,045,165    $      3,045    $ 24,907,004   $(24,312,612)   $   (145,606)   $    451,831
                                   ============    ============    ============   ============    ============    ============
</TABLE>


      See Accompanying Notes To Condensed Consolidated Financial Statements


                                       6
<PAGE>
                         PARTS.COM, INC. AND SUBSIDIARY
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                              Nine Months Ended
                                                                September 30
                                                                ------------
                                                            2001             2000
                                                            ----             ----
<S>                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss                                                $(3,688,647)     $(8,259,313)
Adjustments to reconcile net loss to net cash
  used in operating activities:
   Amortization                                             774,630        1,426,063
   Depreciation                                             113,475           98,330
   Noncash interest expense                                 460,166          625,000
   Stock-based compensation                               1,841,020        2,326,482

Changes in operating assets and liabilities:
   Receivables                                              (15,249)          44,961
   Prepaid expenses and other current assets                 56,221          (63,911)
   Deferred revenue                                        (502,017)          62,194
   Accounts payable and accrued expenses                     85,106          373,976
   Other current liabilities                                (80,498)         270,969
                                                        -----------      -----------
Net cash used in operating activities                      (955,793)      (3,095,249)
                                                        -----------      -----------
CASH FLOWS FROM INVESTING ACTIVITIES:

   Payments for property and equipment                       (2,242)        (180,236)
   Proceeds from sale of property and equipment              15,000               --
   Payments for other assets                                     --           (4,286)
                                                        -----------      -----------
Net cash provided by (used in)
  investing activities                                       12,758         (184,522)
                                                        -----------      -----------
CASH FLOWS FROM FINANCING ACTIVITIES:

Line of credit advances                                     100,000               --
Proceeds from note payable                                       --          126,100
Repayment of note payable                                        --         (126,100)
Proceeds from convertible promissory notes                  681,667          625,000
Proceeds from related party notes payable                   185,500               --
Repayments of related party notes payable                  (147,965)              --
Proceeds from issuance of common stock                      120,000        1,484,958
Repayments of bank and other note payable                        --             (802)
Repayments of capitalized leases                                 --          (10,113)
                                                        -----------      -----------
Net cash provided by financing activities                   939,202        2,099,043
                                                        -----------      -----------

INCREASE/(DECREASE) IN CASH                                  (3,833)      (1,180,728)
CASH, AT BEGINNING OF PERIOD                                  8,683        1,180,333
                                                        -----------      -----------
CASH, AT END OF PERIOD                                  $     4,850      $       105
                                                        ===========      ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for interest:               $     9,329           39,147
                                                        ===========      ===========
</TABLE>


                                       7
<PAGE>
                        SUPPLEMENTAL SCHEDULE OF NONCASH
                        INVESTING & FINANCING ACTIVITIES

Nine Months Ended September 2001:

Accounts payable and accrued expenses in the amount of $281,437 settled through
  issuance of common stock.

Accounts payable and accrued expenses settled through issuance of convertible
  promissory note payable in the amount of $52,500.

Accounts payable and accrued expenses in the amount of $23,413 converted to
  related party notes payable.

Property and equipment returned to vendor for credit, with corresponding
  reduction of accounts payable and accrued expenses, in the amount of $25,000.

Debt discount in the amount of $56,515 (unamortized balance of $19,523 as of
  September 30, 2001) due to issuance of convertible debt with detachable
  warrants.


Nine Months Ended September 30, 2000:

Issuance of 114,000 shares of common stock in connection with employment
  contracts and employee bonuses, in the aggregate amount of $1,168,046.

Issuance of 52,500 shares of common stock in payment of $179,152 of consulting
  fees.

Issuance of 10,000 shares for advertising costs valued at $65,250. At September
  30, 2000, $43,500 of such costs were recorded as a prepaid expense.


See Accompanying Notes to Condensed Consolidated Financial Statements


                                       8
<PAGE>
                         PARTS.COM, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

      ORGANIZATION - Parts.com, Inc. and its wholly owned subsidiary, FlexRadio,
      Inc. (the "Company") is a provider of Internet-based business and online
      buying solutions. The Company was incorporated in Nevada on September 13,
      1995, under the name I.E.L.S., Inc., which had no revenue and
      insignificant expenses, assets and liabilities and whose common stock was
      traded on the OTC Bulletin Board.

      Parts.com is a business-to-business electronic commerce software and parts
      procurement platform provider. The Company's e-procurement solutions
      enable corporations to use electronic automation to streamline business
      transactions and reduce costs. The Company's line of cost-effective,
      scalable, Web-based business-to-business and business-to-consumer sales
      and procurement software fits the needs of any parts business serving any
      vertical industry. In addition to automating existing relationships
      between buyers and sellers, parts.com also provides a marketplace where
      buyers and sellers can conduct transactions electronically. While the
      Company has two principal divisions, "parts.com" and "ReallyKnow.com," it
      has chosen to focus its resources on "parts.com" as the latter division is
      still in an early marketing stage.

      GOING CONCERN - The accompanying condensed consolidated financial
      statements have been prepared on a going concern basis, which contemplates
      the realization of assets and satisfaction of liabilities in the normal
      course of business. Since its inception, the Company has sustained
      recurring losses from operations that to date, total $24,312,612. The
      Company used $955,793 and $3,095,249 of cash in operations for the nine
      months ended September 30, 2001 and 2000, respectively, and anticipates
      additional cash needs in the remainder of 2001. At September 30, 2001, the
      Company had a working capital deficiency of $3,693,525 and cash of $4,850.
      The Company still has not deposited all of the back payroll taxes with the
      Internal Revenue Service ("IRS") for the period April 2000 through
      November 2000. Through September 30, 2001, $100,000 was remitted to the
      IRS, reducing the accrual for back payroll taxes to approximately $291,000
      as of September 30, 2001, including penalties and interest. There have
      been no additional deposits made with the IRS subsequent to September 30,
      2001.

      The IRS issued a levy against two of the Company's three bank accounts on
      April 30, 2001. The Company is currently negotiating a payment plan with
      the IRS, but no formal or informal payment plan or forbearance agreement
      has been reached. Due to cash deficiencies, the Company has also been
      unable to pay a former member and two current members of senior management
      their regular salary when due, which has resulted in an accrual for back
      salaries of approximately $113,000 as of September 30, 2001. The Company
      was also in default of mortgage note obligations encumbering its principal
      offices as of September 30, 2001 (see Notes 3 and 7). These factors, among
      others, raise substantial doubt about the Company's ability to continue as
      a going concern for a reasonable period of time. The accompanying
      condensed consolidated financial statements do not include any adjustments
      relating to the outcome of this uncertainty.

      The Company's continuation as a going concern is dependent upon its
      ability to generate sufficient cash flow to meet its obligations on a
      timely basis. The Company's primary source of liquidity has been from the
      cash generated by its operations and through the private placement of
      equity and debt securities. The Company has altered its business model and
      taken actions to reduce its cash needs, such as significant reductions in
      its workforce to attempt to stabilize its financial condition. The Company
      continues developing its technology known as "TradeMotion Solutions" and
      continues implementation of an aggressive marketing campaign in order to
      gain market acceptance of same and to eventually achieve profitable
      operations. However, there can be no assurance that the Company will be
      successful in achieving profitability or acquiring additional capital.
      Without short or


                                       9
<PAGE>
      long-term financing, in order to meet its current and future capital
      needs, the Company will depend on cash receipts from annual subscription
      fees, fee revenue generated from its e-commerce web site, license fees
      from the sale of its software, and proceeds from the sale of additional
      shares of common stock or the issuance of debt securities. The Company is
      actively pursuing other sources of new cash financing, but has not
      completed such financing and cannot provide any assurances as to whether
      such financing will be completed. Furthermore, there can be no assurance
      that additional financing will be available when needed or that if
      available, such financing will include terms acceptable to the Company's
      stockholders or management. The availability of such financing is
      essential for the Company to continue to meet operating obligations and
      continue as a going concern.

      INTERIM RESULTS AND BASIS OF PRESENTATION - The unaudited condensed
      consolidated financial statements as of and for the quarters and nine
      months ended September 30, 2001 and 2000 have been prepared by management
      of the Company and are unaudited. In management's opinion, the unaudited
      condensed financial statements have been prepared on the same basis as the
      annual financial statements and reflect all adjustments, which include
      only normal recurring adjustments, necessary to present fairly the
      financial position as of September 30, 2001 and the results of the
      Company's operations and its cash flows for the nine months and quarter
      ended September 30, 2001. The financial data and other information
      disclosed in these notes to the interim financial statements related to
      these periods are unaudited. The operating results for the nine-month
      period ended September 30, 2001 are not necessarily indicative of the
      operating results to be expected for any subsequent quarter or the entire
      fiscal year ending December 31, 2001. The condensed consolidated balance
      sheet at December 31, 2000 has been derived from the audited financial
      statements at that date.

      Certain information and footnote disclosures normally included in
      financial statements prepared in accordance with accounting principles
      generally accepted in the United States of America have been condensed or
      omitted as permitted by the Securities and Exchange Commission's rules and
      regulations. It is suggested that these unaudited condensed financial
      statements be read in conjunction with the audited financial statements
      and notes thereto for the year ended December 31, 2000 as included in our
      report on Form 10-KSB as filed with the SEC on April 17, 2001.

      PRINCIPLES OF CONSOLIDATION - The accompanying condensed consolidated
      financial statements include the accounts of parts.com Inc., and its
      wholly owned subsidiary FlexRadio, Inc. All significant intercompany
      transactions and balances have been eliminated for all periods presented.

      STOCK SPLIT - On June 15, 2001, the Board of Directors approved a reverse
      stock split of common stock of 1 share for 10 shares effective June 27,
      2001. All common stock and per share information has been retroactively
      restated to reflect this reverse split for all periods presented.

      USE OF ESTIMATES - The preparation of financial statements in conformity
      with accounting principles generally accepted in the United States of
      America requires management to make estimates and assumptions that affect
      the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements
      and the reported amounts of revenues and expenses during the reported
      period. Actual results could differ from these estimates.

      REVENUE AND EXPENSE RECOGNITION - Revenues are generally recognized when
      the service has been performed and related costs and expenses are
      recognized when incurred. Contracts for the development of software that
      extend over more than one reporting period are accounted for using the
      percentage-of-completion method of accounting. Revenue recognized at the
      financial statement date under these contracts is that portion of the
      total contract price that costs expended to date bears to the total
      anticipated final cost, based on current estimates of cost to complete.
      Revisions in total costs and earnings estimates during the


                                       10
<PAGE>
      course of the contract are reflected in the accounting period in which the
      circumstances necessitating the revisions become known. At the time a loss
      on a contract becomes known, the entire amount of the estimated loss is
      recognized in the financial statements. Costs attributable to contract
      disputes are carried in the accompanying condensed consolidated balance
      sheet only when realization is probable. Amounts received on contracts in
      progress in excess of the revenue earned, based upon the percent of
      completion method, are recorded as deferred revenue and the related costs
      and expenses incurred are recorded as deferred costs.

      Parts.com transaction fee revenues on business-to-business and consumer
      sales will be recognized at the time the transaction is completed. Because
      individual sellers, rather than the Company, make the actual product sale,
      the Company will have no cost of goods sold, no procurement, carrying or
      shipping costs and no inventory. A substantial majority of consumer
      accounts will be settled by directly charging credit card numbers provided
      by sellers. Provisions for estimated uncollectible accounts and authorized
      credits will be recorded as percentages of revenues and will be provided
      for at the time of revenue recognition.

      On September 10, 2001, the Company notified its entire dealership network
      that its parts.com marketplace would no longer be charging transaction
      fees for orders received and forwarded to the Company's distribution
      network. The Company cancelled its transaction fee based model and adopted
      an annual subscription fee based model. The Company did not receive any
      written correspondence objecting to this change and, therefore, on
      September 30, 2001, all parts.com marketplace orders were forwarded to
      dealers within the parts.com distribution network who have subscribed to
      the Company's TradeMotion Storefront software. Service was cancelled prior
      to September 30, 2001, for all dealerships who did not respond to such
      notice by renewing their agreement under the new subscription fee based
      model. Accordingly, the Company recognized all remaining deferred revenues
      at September 30, 2001 pertaining to its old transaction fee based model in
      the amount of approximately $131,000 during the three months ended
      September 30, 2001.

      As of September 30, 2001 the Company no longer charges annual territory
      fees to customers based upon each level of distribution and vehicle line
      that the customer purchases. Initially, annual fees were to be amortized
      into income over a period not to exceed 12 months commencing with the date
      the customer begins fulfilling parts orders for the web site. Effective
      October 2000, the Company extended the customer contracts through December
      31, 2001. On September 30, 2001, however, the Company cancelled all annual
      territory fees to customers and as result of the change, fees were
      amortized into income over a total of 18 months. Unamortized fees under
      the new subscription fee based model are recorded as deferred revenue.
      Sales commissions associated with annual territory fees are recorded as
      prepaid expenses and are charged against income as the revenue is
      recognized.

2.    CONVERTIBLE PROMISSORY NOTES

      JAMES HALL NOTES - On July 20, 2000, the Company executed a convertible
      promissory note with an individual for up to a principal amount of
      $500,000. The note was subsequently modified on March 30, 2001 to allow
      for additional advances totaling $165,000, all of which were received
      during the six months ended June 30, 2001 ($50,000 received March 30;
      $65,000 received April 5; and $50,000 received June 8). The note bears
      interest at 10% per annum and was due and payable in a single balloon
      payment of principal and interest on July 20, 2001; however, the note
      holder has extended the maturity date to December 5, 2001. The note,
      including accrued interest, may be prepaid in full prior to maturity
      without penalty. The note is collateralized by the Company's real property
      located in Sanford, Florida, and the Company's Uniform Resource Locator
      ("URL"), "parts.com," and is subordinate to $380,000 of existing
      indebtedness applicable to such property.

      Provided the note has not been prepaid prior to maturity, the holder may
      convert the principal balance plus any accrued interest, before or at the
      scheduled maturity date of the note into shares of the Company's common
      stock. Of the $665,000 outstanding as of September 30, 2001, $540,000 is
      convertible at the lower of $3.60 per share or 80% of the 5-day average
      closing bid price prior to the conversion date while $125,000 is
      convertible


                                       11
<PAGE>
      at $2.00 per share.

      On September 28, 2001, the Company executed another convertible promissory
      with this same individual for up to a principal amount of $250,000,
      $55,000 of which was received during the three months ended September 30,
      2001. The note bears interest at 10% per annum and all outstanding
      principal and interest is due and payable on December 4, 2001. Provided
      the note has not been prepaid prior to maturity, the holder may convert
      the principal and interest, or any portion thereof in an amount not less
      than $50,000, to shares of common stock of the Company at the lower of
      $0.75 per share or 80% of the average closing ask price for the 5 trading
      days preceding the conversion. The note, including accrued interest, may
      be prepaid in full prior to maturity without penalty and is collateralized
      by the Company's real and intangible property consistent with the original
      note dated July 20, 2000 (as modified on March 30, 2001) described above.

      DOUGLAS NAGEL NOTES - On September 1, 2000, the Company executed a
      $250,000 Unsecured Convertible Promissory Note with an individual. The
      note bears interest at 10% per annum and is due and payable in a single
      balloon payment Of principal and interest on September 1, 2001. The note,
      including accrued interest can be prepaid in full prior to maturity,
      without penalty. Provided the note has not been prepaid prior to maturity,
      the holder can convert the principal balance of the note plus any accrued
      interest, before or at the scheduled maturity date of the note into shares
      of the Company's common stock at a conversion price of $3.75 per share.

      In December 2000, the Company revised the terms of the $250,000 note and
      the holder advanced an additional $300,000 under a new note. The
      outstanding principal under the replacement note ($550,000) plus interest
      at 10% is due and payable December 31, 2001. The note is collateralized by
      the Company's URL "parts.com" and the source code for the Company's
      TradeMotion Software only to the extent of the indebtedness under the
      note. The Company has the right to repay the entire principal under the
      note and in the event that the Company repays the principal, the holder
      loses all collateral rights. The holder may convert the $300,000 in
      additional principal plus interest into common stock at a conversion price
      of $3.00 per share. The previously funded $250,000 remains convertible
      into common stock at $3.75 per share.

      In February and March 2001, the holder advanced the Company an additional
      $200,000 and executed addendums to the note with the same terms as above,
      except that the additional $200,000 is convertible into common stock at
      the price of $2.00 per share. Also, as an inducement to fund the
      additional $200,000, the holder received a 90-day option to acquire 50,000
      shares of the Company's stock at $2.00 per share, which expired April 30,
      2001. In May 2001, the holder advanced an additional $100,000 under an
      amended convertible promissory note; this installment is convertible into
      common stock at the price of $2.00 per share. As an inducement to fund the
      additional $100,000, the holder received a 96-day option to acquire
      100,000 shares of the Company's stock at $2.00 per share. In June 2001,
      the holder advanced the Company an additional $66,667 under an amended
      convertible promissory note; this installment is convertible into common
      stock at the price of $1.00 per share.

      On August 31, 2001, the holder executed a new convertible note agreement
      with the Company and advanced the Company an additional $45,000 during the
      three months ended September 30, 2001. The terms of the new note agreement
      are the same as those noted above with the exception of the rate at which
      the outstanding principal and interest is convertible into the Company's
      common stock. The new note agreement calls for conversion at the option of
      the holder any time prior to the maturity date on all outstanding
      principal and interest at the lower of $0.75 per share or 80% of the
      average closing price of the Company's common stock for the 5 business
      days immediately preceding the date of conversion.

      On August 31, 2001, the Company also executed a credit line with this
      individual for a maximum principal draw of $500,000 at not more than a
      proposed amount of $50,000 per month at the lender's discretion. This
      credit line is effective beginning August 31, 2001 and ends on December
      31, 2001. The credit line bears interest at 10% per annum. Through
      September 30, 2001, $100,000 had been drawn against this line of credit
      agreement.


                                       12
<PAGE>
      OTHER NOTES - On January 23, 2001 the Company executed a convertible
      promissory note with an individual in the amount of $50,000. The note
      bears interest at 10% per annum and is due and payable in a single balloon
      payment on January 23, 2002. The note, including accrued interest may be
      prepaid in full prior to maturity without penalty. Provided the note has
      not been prepaid prior to maturity, the holder may convert the principal
      balance of the note plus any accrued interest, before or at the scheduled
      maturity date of the note into shares of the Company's Common Stock at a
      conversion price of $2.00 per share. The holder of the note had an option
      to loan up to an additional $150,000 prior to April 27, 2001, which the
      holder failed to exercise.

      In April 2001, the Company settled an outstanding payable balance in the
      amount of $107,562 by issuing a convertible promissory note payable in the
      amount of $52,500 with payments beginning August 16, 2001, and ending in
      December 2001. If the Company fails to make the initial payment, the
      balance owed is converted to common stock at $2.75 per share. As a result
      of this transaction, the Company recorded non-cash interest expense in the
      amount of $7,159 for the six months ended June 30, 2001, for the
      beneficial conversion feature.

      NONCASH INTEREST EXPENSE - Due to the fair value of the beneficial
      conversion feature and detachable warrants associated with the notes
      issued and described above during the nine months ended September 30,
      2001, the Company recorded a $479,689 debt discount and corresponding
      credit to additional paid in capital, $460,166 of which was recorded as
      noncash interest expense during this same period.

3.    MORTGAGE NOTES PAYABLE

      As of December 31, 2000 the Company was in default of a mortgage note
      payable for failure to remit monthly principal and interest payments.
      However, the Company entered into an agreement in March 2001 with its
      mortgage lender which provided for the deferral of pursuing any remedies
      available under the mortgage note payable agreement until after May 18,
      2001 in exchange for the transfer of 10,000 total officers' and directors'
      personal shares, which were pledged as collateral for the notes. As
      payments have not resumed and no other agreements have been entered into
      deferring action by the mortgagor, the Company was in default at September
      30, 2001; however, the property subject to this mortgage note payable was
      sold and the note repaid subsequent to September 30, 2001 curing the
      default. See Note 7 for additional description of this transaction.

4.    STOCKHOLDERS' EQUITY

      The Company accounts for stock-based compensation using the intrinsic
      value method prescribed in Accounting Principles Board Opinion No. 25
      "Accounting for Stock Issued to Employees" (APB 25). Compensation cost for
      stock options, if any, is measured as the excess of the quoted market
      price of the Company's stock at the date of grant over the amount the
      employee must pay to acquire the stock. Restricted stock is recorded as
      compensation cost over the requisite vesting periods based upon the market
      value on the date of grant.

      Statement of Financial Accounting Standards No. 123, "Accounting for
      Stock-Based Compensation," (SFAS 123) established accounting and
      disclosure requirements using a fair-value based method of accounting for
      stock-based employee compensation plans. The Company has elected to remain
      on its current method of accounting as described above, and has adopted
      the disclosure requirements of SFAS No. 123.

      The Company awarded a total of 1,000,000 options to two employees during
      the three months ended September 30, 2001 valued at $1,156,250, all of
      which was immediately recognized and recorded as stock-based employee
      compensation expense in the accompanying condensed consolidated financial
      statements. See Note 5 for additional description of these options.

      During the nine months ended September 30, 2001, the Company settled
      several outstanding payables in the amount of $281,437 by issuing common
      stock of the Company.


                                       13
<PAGE>
5.    RELATED PARTY TRANSACTIONS

      During the nine months ended September 30, 2001, Select Media Ltd., owned
      by an individual who indirectly owns more than 10% of the common stock of
      the Company, loaned the Company a total of $28,500, payable on demand and
      bearing interest at 10%. The Company repaid the loans in full during the
      nine months ended September 30, 2001. Also during the nine months ending
      September 30, 2001, the Company repaid this individual $28,408 as partial
      payment on other loans made to the Company prior to 2001. Additionally,
      the Company converted $21,106 of expense reimbursements owed to this
      individual accrued through September 30, 2001 to a note payable bearing
      13% annual interest which is due and payable on demand.

      During the nine months ended September 30, 2001, New Era, Inc., owned by
      an individual who indirectly owns more than 10% of the Common Stock of the
      Company, loaned the Company a total of $80,000 under two notes payable,
      both due and payable on demand and bearing interest at 13% for $50,000 and
      8% for $30,000. The Company repaid the $50,000 note in full (including
      interest) and $2,000 of the other note during the nine months ended
      September 30, 2001.

      During the nine months ended September 30, 2001, George P. Demakos, an
      individual who owns more than 10% of the common stock of the Company,
      loaned the Company three separate notes totaling $57,000 payable on demand
      and bearing interest at 14% per annum. The Company repaid $30,000 of the
      notes in full (including interest) during the nine months ended September
      30, 2001.

      During the nine months ended September 30, 2001, Scott Anderson, a related
      party and employee of the Company loaned the Company a total of $20,000,
      payable on demand and bearing interest at 10%. During the nine months
      ended $7,700 in principal was re-paid (and interest). Additionally, the
      balance of this individual's expense reimbursements accrued through
      September 30, 2001 were converted to a note payable bearing 13% interest
      due and payable on demand. The entire amount of this note has been repaid
      during the nine months ended September 30, 2001.

      During the nine months ended September, 30, 2001, the Company incurred and
      paid a commission in the amount $66,000 to an officer of the Company for
      completion of a software sale and design contract.

      On July 9, 2001, the Company entered into two similar employment
      agreements for a term of 5 years with Shawn Lucas, President and CFO, and
      Scott Anderson, Chief Technical Officer, both of whom are the only active
      members of the Company's Board of Directors. Generally, the employment
      agreements provide for annual salaries of $72,000 each, retroactive to
      January 1, 2001, subject to an increase to $144,000 effective January 1,
      2002. The agreements also provide for sales commissions of 20% of the
      gross sales price of all software, license, and other products sold by
      each employee during the first six months of the employment agreements.

      These employment agreements also provide for the grant of three types of
      options to purchase shares of the Company's common stock: Signing Options,
      Risk Options, and Performance Options. Each employee was granted 250,000
      Signing Options and 250,000 Risk Options for a total of 1,000,000 options.
      Both of these types of options were subject to vesting over 4 years, have
      a $0.01 strike price, and a 10 year contractual life. Both the Signing
      Options and Risk Options, valued at a total of $1,156,250 for both
      employees pursuant to the provisions of APB 25, were determined to be
      granted for past services provided to the Company and, therefore, were
      fully expensed during the three months ended September 30, 2001.
      Additionally, both the Signing Options and Risk Options are subject to
      immediate vesting in the event of either voluntary or involuntary
      termination, with or without cause, of employment with the Company.

      The Performance Options have a $1.00 strike price and a 10 year
      contractual life. Each employee is entitled to receive 100,000 Performance
      Options, subject to immediate vesting, if the per share closing price of
      the Company's common stock is $1.25 or greater for 5 consecutive closes.
      Furthermore, each employee was entitled to receive an additional 100,000
      shares of the Company's common stock for each additional increment of
      $0.25 in stock price (e.g., $1.50, $1.75, $2.00, etc.) for which the
      closing price is at or above that level for 5 consecutive closes. As these
      targets have not yet been achieved, no Performance Options have been
      awarded and, therefore, no compensation expense has been recorded. In the
      event of the employees' termination of employment with the Company,
      voluntary or involuntary and with or without


                                       14
<PAGE>
      cause, Performance Options will only be granted to the extent they have
      been earned pursuant to the criteria noted above. The Performance Options,
      once awarded, will be subject to variable accounting treatment prescribed
      by APB 25, which generally provides that estimated compensation cost will
      be measured and recorded based on the fair value of the Company's common
      stock as of each reporting date (in this instance, September 30, 2001)
      until the options are exercised, forfeited, or expire unexercised.

      On August 29, 2001, the Company was unable to meet its payroll obligations
      to Shawn Lucas and Scott Anderson and, accordingly, was in violation of
      their employment agreements described above. In consideration of the
      breach of these agreements, the Company's Board of Directors modified the
      terms of these agreements so that the Signing Options and Risk Options
      would fully vest on September 28, 2001.

      The initial performance stock price goal for the Performance Options of
      $1.25 was changed to $0.50 and all subsequent increments are to be
      measured from this new price. Furthermore, the Performance Options strike
      price of $1.00 was lowered to $0.40. Due to this modification, an
      additional 100,000 options were awarded to each individual during
      September 2001; however, no compensation expense was recognized as the
      fair value of the stock as of September 30, 2001 was less than the strike
      price.


6.    COMMITMENTS AND CONTINGENCIES

      On March 29, 2001, the Company entered into new employment agreements with
      three of its executives and settlement agreements with two other
      executives. These agreements generally provided for the (1) settlement of
      breaches of their original employment agreements (2) the payment of back
      salary due to these individuals, and (3) the commitment of the Company to
      pay a lump sum amount ranging from $50,000 to $100,000 per employee, only
      in the event the Company does not adhere to the terms of the new
      employment agreements.

      Pursuant to the terms of the new employment agreements and the settlement
      agreements, the Company agreed to pay the employees cash in the total
      amount of $42,000, and issue a total of 119,575 shares of common stock
      valued at $315,909. Total value assigned to the stock was based on the
      market value on the date of the new employment agreements and settlement
      agreements, less a 10% discount.

      Of the total consideration paid or payable in the amount of $357,909 to
      these employees, $244,419 related to settlement of the contracts breached
      or for salaries earned in year 2000. Accordingly, this amount was accrued
      as an expense for the year ended December 31, 2000 and is included in
      "Other current liabilities." The remaining consideration paid or payable
      and valued at $113,490, was related to salaries earned in the first
      quarter of 2001 and was, therefore, recognized as expense during the first
      quarter of 2001.

      On January 4, 2001 and March 20, 2001, the Internal Revenue Service filed
      federal tax liens against the assets of the Company totaling $349,990 for
      undeposited payroll taxes for the period April 2000 through November 2000.
      At September 30, 2001 the Company's unpaid payroll taxes amounted to
      approximately $291,000, including penalties and interest, and are included
      in "Other current liabilities" in the accompanying financial statements.
      The Company remitted $100,000 to the IRS pertaining to these unpaid
      payroll taxes during the nine months ended September 30, 2001.

7.    SUBSEQUENT EVENTS

      Subsequent to September 30, 2001 and prior to November 6, 2001, James Hall
      and Douglas Nagel have loaned the Company a total of $30,000 and $45,000,
      respectively, pursuant to the terms of the convertible notes payable and
      line of credit agreement described in Note 2.

      On October 17, 2001 New Era Partners Inc., a company owned by George
      Demakos an affiliate who owns more than 10% of parts.com purchased from
      the Company the building which houses the Company's corporate
      headquarters, as well as the adjacent parking lot. The contract sales
      price was $550,000. The Company applied $110,000 owed to George Demakos,
      New Era Partners Inc., and Select Media Ltd., to the sale price which
      resulted in a total balance due to George Demakos, New Era


                                       15
<PAGE>
      Partners Inc., and Select Media of $5,671. As of September 30, 2001, this
      liability was listed in the notes payable, related party line item of the
      balance sheet.

      Douglas Nagel and James Hall released their liens against the property
      titled in the aforementioned paragraph in order for the closing to take
      place. The funds paid to the Eugene W. Gramzow Revocable Trust, the
      lender, were insufficient to cover the total liability owed by the Company
      and personally guaranteed by Shawn D. Lucas a related party who owns more
      than 10% of the Company. Subsequently, George P. Demakos, Shawn D. Lucas
      and Scott Anderson personally guaranteed $25,000 owed to the Eugene W.
      Gramzow Revocable Trust and payments of $1,000 a month for 24 months are
      to be made by the Company.

      The Company authorized the issuance of 40,000 shares to parties related to
      or affiliated with the Eugene W. Gramzow Revocable Trust in conjunction
      with the closing. All property taxes due and payable by the Company in the
      approximate amount of $7,000 and listed in accounts payable and accrued
      expenses in the accompanying balance sheet were satisfied at the closing
      date of October 17, 2001. Pursuant to the sale purchase agreement New Era
      Partners Inc. assumed the note payable to Interbay Funding in the amount
      of $17,000 which is listed in the current portion of the mortgage payable
      of the balance sheet dated September 30, 2001.

      On October 1, 2001 the Company entered into a revised representation
      agreement and retainer letter with Kevin J. Hubbart who serves as general
      corporate counsel to the Company. In the agreement the Company issued
      50,000 shares for services rendered through September 30, 2001 and 120,000
      shares for the remainder of the term of said agreement, which is through
      September 30, 2002. As the 50,000 shares were issued for services that
      occurred prior to September 30, 2001, the total fair value of these shares
      in the amount of $16,406, which is based on the closing price of the
      shares on October 1, 2001, was recognized as stock-based consulting fees
      during the three months ended September 30, 2001.


                                       16
<PAGE>
                  ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO
INCLUDED IN THIS QUARTERLY REPORT, AS WELL AS THE AUDITED FINANCIAL STATEMENTS
AND NOTES THERETO INCLUDED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
YEAR ENDED DECEMBER 31, 2000 AS FILED WITH THE SEC ON APRIL 17, 2001.

OVERVIEW

As noted in the Company's Form 10-KSB for the year ended December 31, 2000, the
Company has experienced significant operating losses and an accumulated deficit,
which raise substantial doubt about the Company's ability to continue as a going
concern. The Company incurred additional net losses of $3,688,647 for the nine
months ended September 30, 2001 and had an accumulated deficit of $24,312,612 at
September 30, 2001. The Company is continuing its efforts to increase its sales
volume and attain a profitable level of operations. However, there is no
assurance that the Company's efforts will be successful. There are many events
and factors in connection with the development of and sale of the Company's
products over which the Company has little or no control, including without
limitation, marketing difficulties, lack of market acceptance of our products,
superior competitive products based on future technological innovation and
continued growth of e-commerce businesses. There can be no assurance that future
operations will be profitable or will satisfy future cash flow requirements.

RESULTS OF OPERATIONS - NINE MONTHS ENDING SEPTEMBER 30, 2001

During the nine months ended September 30, 2001, total revenues amounted to
$945,063 versus $732,846 for the nine months ended September 30, 2000. This
increase is due to two factors. First, the commencement and completion of a
contract for software sale and development during the second quarter of 2001.
Secondly, the Company recognized the remainder of unearned territory fees
relating to its old transaction fee based model since service was cancelled in
September 2001 for all customers who had not subscribed to the new subscription
fee based model. The Company is in a state of transition with its expansion
focused on its parts.com e-commerce business-to-business and software solutions.
The Company has collected a total of approximately $1.3 million in annual
territory fees from dealerships participating in its e-commerce initiative, all
of which has now been recognized as revenue through September 30, 2001.

The Company generated a gross profit of $550,863 for the nine months ended
September 30, 2001 compared to a gross profit of $48,007 for the nine months
ended September 30, 2000. The primary reason for the higher profit margin from
2000 to 2001 is due to the Company focusing its efforts and resources on selling
auto parts over its web site in 2001 and licensing its e-commerce software
solutions. Significant expenditures incurred during the nine months ended
September 30, 2001 include web site hosting costs and related telephone,
Internet and T-1 expenses, as well as technical support salaries. The Company
generated minimal transactions from its web site during the first three quarters
of 2001, but has seen a gradual increase in its web site transactions and
believes that increased site traffic will result in sales as its product becomes
known and gains market acceptance; however, there can be no assurance that such
market acceptance can be attained.

The net loss for the nine months ended September 30, 2001 decreased by 55% to
$3,688,647 compared with a net loss of $8,259,313 for the nine months ended
September 30, 2000. This decrease was primarily attributable to a decrease in
operating and other expenses of $4,067,810 or 49% for the nine months ended
September 30, 2001 compared to the same period last year as a result of several
factors. First, the Company decreased its workforce from 42 full-time employees
and 1 full time consultants/programmers at September 30, 2000 to 11 full-time
employees and 1 consultant paid in cash and stock issuances at September 30,
2001. Second, stock-based employee compensation totaled $1,669,398 for the nine
months ended September 30, 2001 as compared to $2,002,159 for the same period
last year reflecting a decrease of $332,761 or 17% and representing a reduction
in the use of stock and option grants and the Company's stock value. Finally,
amortization expense for the nine months ended September 30, 2001 decreased by
651,433, or 46%, to $774,630 as a result of (1) a fourth quarter 2000 impairment
charge reducing the value of the FlexRadio, Inc. patent acquired in October 1999
by $1,019,818, and (2) fourth quarter 2000 impairment charges completely
eliminating goodwill associated with the Company's acquisitions of UEP Inc. MTV
Pinnacle Advertising Group Inc., and Livecode Inc.


                                       17
<PAGE>
Offsetting these decreases was $460,166 in noncash interest expense recorded
during the nine months ended September 30, 2001 due to beneficial conversion
features and warrants associated with the issuance of promissory notes which are
convertible into shares of Company's common stock at prices below the fair
market value of the stock on the dates the notes were issued.

LIQUIDITY AND SOURCES OF CAPITAL

Since its inception, the Company has sustained recurring losses from operations
that to date, total $24,312,612. The Company used $955,793 and $3,095,249 of
cash in operations for the nine months ended September 30, 2001 and 2000,
respectively, and anticipates additional cash needs in the remainder of 2001. At
September 30, 2001, the Company had a working capital deficiency of $3,693,525
and cash of $4,850. The Company still has not deposited all of the back payroll
taxes with the Internal Revenue Service ("IRS") for the period April 2000
through November 2000. Through September 30, 2001, $100,000 was remitted to the
IRS, reducing the accrual for back payroll taxes to approximately $291,000 as of
September 30, 2001, including penalties and interest. There have been no
additional deposits made with the IRS subsequent to September 30, 2001.

The IRS issued a levy against two of the Company's three bank accounts on April
30, 2001. The Company is currently negotiating a payment plan with the IRS, but
no formal or informal payment plan or forbearance agreement has been reached.
Due to cash deficiencies, the Company has also been unable to pay a former
member and two current members of senior management their regular salary when
due, which has resulted in an accrual for back salaries of approximately
$113,000 as of September 30, 2001. The Company was also in default of mortgage
note obligations encumbering its principal offices as of September 30, 2001.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern for a reasonable period of time. The accompanying
condensed consolidated financial statements do not include any adjustments
relating to the outcome of this uncertainty.

The Company's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis. The
Company's primary source of liquidity has been from the cash generated by its
operations and through the private placement of equity and debt securities. The
Company has altered its business model and taken actions to reduce its cash
needs, such as significant reductions in its workforce to attempt to stabilize
its financial condition. The Company continues developing its technology known
as "TradeMotion Solutions" and continues implementation of an aggressive
marketing campaign in order to gain market acceptance of same and to eventually
achieve profitable operations. However, there can be no assurance that the
Company will be successful in achieving profitability or acquiring additional
capital. Without short or long-term financing, in order to meet its current and
future capital needs, the Company will depend on cash receipts from annual
subscription fees, fee revenue generated from its e-commerce web site, license
fees from the sale of its software, and proceeds from the sale of additional
shares of common stock or the issuance of debt securities. The Company is
actively pursuing other sources of new cash financing, but has not completed
such financing and cannot provide any assurances as to whether such financing
will be completed. Furthermore, there can be no assurance that additional
financing will be available when needed or that if available, such financing
will include terms acceptable to the Company's stockholders or management. The
availability of such financing is essential for the Company to continue to meet
operating obligations and continue as a going concern.

During the nine months ended September 30, 2001, the Company's operating cash
requirement was $955,793 attributable to a net loss of $3,688,647 mitigated by
non-cash charges for interest of $460,166, depreciation and amortization of
$888,105 and stock-based compensation of $1,841,020. The net remaining shortfall
was primarily funded by the net sale of common stock of $120,000; proceeds from
the issuance of convertible promissory notes of $681,667; and, related party
promissory notes of $185,500 received during the nine months ended September 30,
2001. Partially offsetting this funding were the repayments of related party
promissory notes of $147,965 during the nine months ended September 30, 2001.


                                       18
<PAGE>
Since its reverse merger and 504 offering conducted in September 1998, the
Company has financed its operations primarily through cash receipts from annual
territory fees, equity private placements and most recently, proceeds from the
issuance of convertible notes payable. As these funds have been largely used for
operating purposes as of the date of this report, the Company requires
additional financing in the near future to fund operations. The Company is
actively pursuing other sources of new cash financing, but has not completed
such financing and cannot provide any assurances to whether such financing will
be completed. Furthermore, there can be no assurance that additional financing
will be available when needed or that if available, such financing will include
terms favorable to the Company or to our stockholders. The availability of such
financing is essential for the Company to continue to meet operating obligations
and continue as a going concern.


                                       19
<PAGE>
                    PART II. OTHER INFORMATION AND SIGNATURES

CHANGES IN SECURITIES AND USE OF UNREGISTERED SECURITIES

From January 2001 through September 2001, the Company sold 60,000 shares of
common stock in private placements to 4 investors (all accredited) for net
proceeds of $120,000 (share price of $2.00). The securities were issued in
reliance on Section 4 (2) of the Securities Act. The investors were provided
information about the Company or had access to such information, and the
investors were provided opportunities to ask questions of management concerning
the information provided or made available. The investors confirmed in writing
their investment intent, and the certificates for the securities bear a legend
accordingly.

EMPLOYMENT AGREEMENTS

In March 2001, the Company entered into new employment agreements with three
executives. These agreements generally provide for the following: (1) settlement
of breaches of their original employment agreements (2) the payment of back
salary due to these individuals, and (3) the commitment of the Company to pay a
lump sum amount of $100,000, per employee, only in the event the Company does
not adhere to the terms of the new employment agreements and settlement terms.

Pursuant to the terms of the settlement agreements, the Company agreed to pay
the employees above cash in the total amount of $15,000, and issue a total of
85,551 shares of common stock valued at $221,836. Total value assigned to the
stock was based on the market value on the date of the new employment agreements
and settlement agreements, less a 10% discount.

All provisions contained in the employment agreements for the above-named
executives are identical. Under each agreement, the individual is entitled to
participate in all employee benefit programs generally available to Company
employees, including participation in health care and disability plans, stock
option plans and any retirement plan. The original term of the agreements is
three years; however, as a result of the settlement agreements with these
individuals, the agreements expired on July 1, 2001. The agreements provide for
payment of commissions related to any sales directly generated by the Company as
a result of the individual's efforts.

The Company may terminate the executives' and/or key employee's employment for
cause or without cause at any time with no notice.

The individuals may terminate their employment at any time upon 90 days' written
notice to the Company, except in the event of a change of control, when 10 days'
notice is required. The Agreements contain nonsolicitation and noncompetition
provisions that are intended to survive the termination of employment for a
period of two years.

In March 2001, the Company entered into a settlement agreement regarding Jeffrey
Odato's breached employment agreement. Under the terms of the agreement, Mr.
Odato received a one-time cash payment of $2,000 and 14,404 shares of common
stock in lieu of $28,807 worth of back salary. The agreement contained a
commitment of the Company to pay a lump sum amount of $50,000, to Odato, only in
the event the Company does not adhere to its terms.

On July 9, 2001, based on the recommendations of a compensation committee of
outside advisors, the Board of Directors approved new employment agreements for
Shawn Lucas and Scott Anderson. Both agreements are for five-year terms and
generally provided for an initial annual salary of $72,000 and stock options
based on performance. In addition, the agreements addressed stock options,
unpaid wages and risks assumed by the employees. No additional shares of stock
were issued to the employees. See Note 7 to the accompanying financial
statements for additional description of these agreements.

In March 2001, the Company entered into a settlement agreement regarding Jon
Palazzo's breached employment agreement. Under the terms of the agreement, Mr.
Palazzo is to receive $25,000 cash paid in monthly installments beginning May
2001 through December 2001. Through September 30, 2001 Mr. Palazzo has received
the first four monthly installments per his agreement. During the third quarter,


                                       20
<PAGE>
the company suspended any further payments to Mr. Palazzo due to a non-compete
breach by Mr. Palazzo. The balance of Mr. Palazzo's settlement remains as a
liability under accrued expenses until this matter is resolved. Mr. Palazzo also
agreed to accept 19,621 shares of common stock in lieu of $30,242 worth of back
salary.

REPORTS ON FORM 8-K

The following items were reported on a Form 8-K during the three months ended
September 30, 2001:

On July 9, 2001, based on the recommendations of a compensation committee of
outside advisors, the Board of Directors approved new employment agreements for
Shawn Lucas and Scott Anderson. Both agreements are for five-year terms and
generally provided for an initial annual salary of $72,000 and stock options
based on performance. In addition, the agreements addressed, stock options,
unpaid wages and risks assumed by the employees. No additional shares of stock
were issued to the employees.

On July 20, 2001, the Board of Directors accepted the extension until August 3,
2001 of the Convertible Promissory Note of July 20, 2001. No compensation was
required for the extension. Further terms and extensions of the Note are being
negotiated.

On August 3, 2001, the Board of Directors accepted the extension until September
4, 2001 of the Convertible Promissory Note of July 20, 2001. No compensation was
required for the extension. Further terms and extensions of the Note are being
negotiated.

On September 4, 2001, the Board of Directors accepted the extension until
October 5, 2001 of the Convertible Promissory Note of July 20, 2001. No
compensation was required for the extension. Further terms and extensions of the
Note are being negotiated.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                       PARTS.COM, INC.



November 19, 2001                        By: /s/ Shawn D. Lucas
                                        ----------------------------------------
                                        Shawn D. Lucas, President and
                                        Chief Financial Officer


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