kplt-20230930

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2023


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

For the transition period from to

Commission file number 001-39116

Katapult Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware						81-4424170
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

5204 Tennyson Parkway, Suite 500 Plano, TX						75024
(Address of Principal Executive Offices)						(Zip Code)

(833) 528-2785

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	KPLT	The Nasdaq Stock Market LLC
Redeemable Warrants	KPLTW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such 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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of November 3, 2023: 4,065,175.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this report, including statements regarding our opportunity, our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “assume” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “should,” “will,” “would,” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

•executing on our business strategy, including launching new product offerings, new brand and expanding information and technology capabilities;

•our market opportunity and our ability to acquire new customers and retain existing customers;

•the timing and impact of our growth initiatives on our future financial performance and the impact of our new executive hires and brand strategy;

•anticipating the occurrence and timing of prime lending tightening and impact on our results of operations;

•customer adoption and continued growth of our mobile app featuring Katapult Pay;

•general economic conditions in the markets where we operate, the cyclical nature of consumer spending, and seasonal sales and spending patterns of customers;

•factors affecting consumer spending that are not under our control, including, among others, levels of employment, disposable consumer income, inflation, prevailing interest rates, consumer debt and availability of credit, pandemics (such as COVID-19), consumer confidence in future economic conditions, political conditions, and consumer perceptions of personal well-being and security and willingness and ability of consumers to pay for the goods they lease through us when due;

•risks relating to uncertainty of our estimates of market opportunity and forecasts of market growth;

•risks related to the concentration of a significant portion of our transaction volume with a single merchant, or type of merchant or industry;

•the effects of competition on our future business;

•meeting future liquidity requirements and complying with restrictive covenants related to long-term indebtedness;

•the impact of unstable market and economic conditions such as rising inflation and interest rates;

•reliability of our platform and effectiveness of our risk models;

•data security breaches or other information technology incidents or disruptions, including cyber-attacks, and the protection of confidential, proprietary, personal and other information, including personal data of consumers;

•attracting and retaining employees, executive officers or directors;

•effectively responding to general economic and business conditions;

•obtaining additional capital, including equity or debt financing and servicing our indebtedness;

•enhancing future operating and financial results;

•anticipating rapid technological changes, including generative AI and other new technologies;

•complying with laws and regulations applicable to our business, including laws and regulations related to rental purchase transactions;

•staying abreast of modified or new laws and regulations applying to our business, including with respect to rental purchase transactions and data privacy;

•maintaining and growing relationships with merchants and partners;

•responding to uncertainties associated with product and service developments and market acceptance;

•impacts from new U.S. federal income tax laws;

•identified material weaknesses in our internal control over financial reporting which, if not remediated, could affect the reliability of our consolidated financial statements;

•successfully defending litigation;

•litigation, regulatory matters, complaints, adverse publicity and/or misconduct by employees, vendors and/or service providers;

•other events or factors, including those resulting from civil unrest, war, foreign invasions (including the conflict involving Russia and Ukraine and Israel-Hamas conflict), terrorism, or public health crises, or responses to such events;

•our ability to meet the minimum requirements for continued listing on the Nasdaq Global Market (“Nasdaq”); and

•the effects of the reverse stock split on our Common Stock (as defined below).

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Form 10-Q. Other sections of this Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, events, or circumstances. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Form 10-Q and the documents that we have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (ir.katapultholdings.com), our filings with the Securities and Exchange Commission, webcasts, press releases and conference calls. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website. The contents of our website are not incorporated into this filing. We have included our investor relations website address only as an inactive textual reference and do not intend it to be an active link to our website.

KATAPULT HOLDINGS, INC.

FORM 10-Q

September 30, 2023

INDEX


		Page
PART 1	Financial Information
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets — September 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss — Three and Nine Months Ended September 30, 2023 and 2022	2
	Condensed Consolidated Statements of Stockholders’ (Deficit) Equity — Three and Nine Months Ended September 30, 2023 and 2022	3
	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2023 and 2022	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	32

PART II	Other Information	33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	60
	Signatures	61

References in this Quarterly Report on Form 10-Q to “KPLT”, “Katapult”, “we”, “us”, “the Company”, or “our” means Katapult Holdings Inc. and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

PART I. Financial Information

Item 1. Financial Statements

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(unaudited)


	September 30,		December 31,
	2023		2022
ASSETS
Current assets:
Cash and cash equivalents	$	32,187	$	65,430
Restricted cash	6,682		4,411

Property held for lease, net of accumulated depreciation and impairment (Note 3)	53,581		50,278
Prepaid expenses and other current assets	6,777		8,515
Total current assets	99,227		128,634
Property and equipment, net (Note 4)	427		557
Security deposits	91		91
Capitalized software and intangible assets, net (Note 5)	2,060		1,847
Right-of-use assets (Note 8)	498		772
Total assets	$	102,303	$	131,901
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	735	$	1,264
Accrued liabilities (Note 6)	15,747		14,532
Term loan (Note 7)	—		25,000
Unearned revenue	2,124		1,552
Lease liabilities (Note 8)	297		382
Total current liabilities	18,903		42,730
Revolving line of credit, net (Note 7)	60,397		57,639
Term loan, net, non-current (Note 7)	24,543		23,057
Other liabilities	131		902
Lease liabilities, non-current (Note 8)	218		445
Total liabilities	104,192		124,773
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock, $.0001 par value-- 250,000,000 shares authorized; 4,065,175 and 3,943,423 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	—		—
Additional paid-in capital	93,225		83,804
Accumulated deficit	(95,114)		(76,676)
Total stockholders' (deficit) equity	(1,889)		7,128
Total liabilities and stockholders' (deficit) equity	$	102,303	$	131,901


See accompanying notes.

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(amounts in thousands, except per share data)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue
Rental revenue	$	54,481	$	49,260	$	163,079	$	160,075
Other revenue	769		1,081		2,418		3,183
Total revenue	55,250		50,341		165,497		163,258
Cost of revenue	42,439		38,417		128,486		131,379
Gross profit	12,811		11,924		37,011		31,879
Operating expenses:

SEC Form 10-Q filed by Katapult Holdings Inc.