Katapult Holdings, Inc. [KPLT] Filings

10-Q 1 kplt-20240630.htm 10-Q kplt-20240630

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 June 30, 2024


☐			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						84-2704291
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

5360 Legacy Drive, Building 2 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 August 12, 2024: 4,168,919.

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. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These statements involve known and unknown risks, including risks described in the section titled “Risk Factors” and elsewhere in this Form 10-Q, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. 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. 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 ability to refinance our indebtedness;

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

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

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

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

•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, including the home furnishings and retail environment;

•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 indebtedness;

•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;

•enhancing future operating and financial results;

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

•staying abreast of modified or new laws and regulations and complying with laws and regulations applicable to our business, including laws and regulations related to rental purchase transactions, U.S. federal income tax, and data privacy;

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

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

•costs and effects of legal and administrative proceedings, settlements, investigations and claims;

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

•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.

Given these uncertainties, you should not place undue reliance on any forward-looking statements. Except as required by applicable law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future, and you should not rely upon these forward looking statements after the date of this Quarterly Report on Form 10-Q.

KATAPULT HOLDINGS, INC.

FORM 10-Q

June 30, 2024

INDEX


		Page
PART 1	Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets — June 30, 2024 (unaudited) and December 31, 2023	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) — Three and Six Months Ended June 30, 2024 and 2023	2
	Condensed Consolidated Statements of Stockholders’ Deficit (unaudited) — Three and Six Months Ended June 30, 2024 and 2023	3
	Condensed Consolidated Statements of Cash Flows (unaudited) — Six Months Ended June 30, 2024 and 2023	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28

PART II	Other Information	29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
	Signatures	58

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)


	June 30,		December 31,
	2024		2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	33,725	$	21,408
Restricted cash	4,649		7,403

Property held for lease, net of accumulated depreciation and impairment (Note 4)	56,887		59,335
Prepaid expenses and other current assets	3,489		4,491
Litigation insurance reimbursement receivable (Note 10)	5,000		5,000
Total current assets	103,750		97,637
Property and equipment, net	287		327
Capitalized software and intangible assets, net	1,767		1,919
Right-of-use assets	736		888
Security deposits	91		91
Total assets	$	106,631	$	100,862
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	1,455	$	903
Accrued liabilities (Note 5)	22,613		24,146
Accrued litigation settlement (Note 10)	12,000		12,000

Unearned revenue	5,493		4,949
Revolving line of credit, net (Note 6)	69,466		—
Term loan, net, current (Note 6)	27,605		—
Lease liabilities	366		297
Total current liabilities	138,998		42,295
Revolving line of credit, net (Note 6)	—		60,347
Term loan, net, non-current (Note 6)	—		25,503
Lease liabilities, non-current	431		614
Other liabilities	148		95
Total liabilities	139,577		128,854
STOCKHOLDERS' DEFICIT
Common stock, $.0001 par value-- 250,000,000 shares authorized; 4,168,919 and 4,072,713 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	—		—
Additional paid-in capital	97,048		94,544
Accumulated deficit	(129,994)		(122,536)
Total stockholders' deficit	(32,946)		(27,992)
Total liabilities and stockholders' deficit	$	106,631	$	100,862


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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
			(As Restated)				(As Restated)
Revenue
Rental revenue	$	58,196	$	53,439	$	122,338	$	107,570
Other revenue	667		697		1,586		1,649
Total revenue	58,863		54,136		123,924		109,219
Cost of revenue	48,935		44,669		97,508		87,882
Gross profit	9,928		9,467		26,416		21,337







Operating expenses	12,549		13,477		25,237		29,044
Income (loss) from operations	(2,621)		(4,010)		1,179		(7,707)
Loss on partial extinguishment of debt	—		—		—		(2,391)
Interest expense and other fees	(4,674)		(4,098)		(9,201)		(9,287)
Interest income	359		427		683		1,047
Change in fair value of warrant liability	109		257		(53)		389
Loss before income taxes	(6,827)		(7,424)		(7,392)		(17,949)
Provision for income taxes	(61)		(14)		(66)		(34)
Net loss	$	(6,888)	$	(7,438)	$	(7,458)	$	(17,983)

Weighted average common shares outstanding - basic and diluted	4,286		4,073		4,264		4,023


Net loss per common share - basic and diluted	$	(1.61)	$	(1.83)	$	(1.75)	$	(4.47)


See accompanying notes.

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(amounts in thousands)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Deficit
	Shares	Amount
Balances at December 31, 2023	4,073	$	—	$	94,544	$	(122,536)	$	(27,992)
Net loss	—	—		—		(7,458)		(7,458)
Stock options exercised	4	—		18		—		18
Vesting of restricted stock units	122	—		—		—		—
Repurchases of restricted stock for payroll tax withholding	(30)	—		(457)		—		(457)
Stock-based compensation expense	—	—		2,943		—		2,943

Balances at June 30, 2024	4,169	$	—	$	97,048	$	(129,994)	$	(32,946)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Deficit
	Shares	Amount
Balances at December 31, 2022 (As Restated)	3,944	$	—	$	83,804	$	(85,870)	$	(2,066)
Net loss (As Restated)	—	—		—		(17,983)		(17,983)
Issuance of warrants in connection with Credit Agreement amendment	—	—		4,060		—		4,060

Vesting of restricted stock units	93	—		—		—		—
Repurchases of restricted stock for payroll tax withholding	(16)	—		(247)		—		(247)
Stock-based compensation expense	—	—		4,303		—		4,303
Balances at June 30, 2023 (As Restated)	4,021	$	—	$	91,920	$	(103,853)	$	(11,933)


See accompanying notes.

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(amounts in thousands)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Deficit
	Shares	Amount
Balances at March 31, 2024	4,106	$	—	$	95,623	$	(123,106)	$	(27,483)
Net loss	—	—		—		(6,888)		(6,888)
Stock options exercised	4	—		18		—		18
Vesting of restricted stock units	67	—		—		—		—
Repurchases of restricted stock for payroll tax withholding	(8)	—		(145)		—		(145)
Stock-based compensation expense	—	—		1,552		—		1,552

Balances at June 30, 2024	4,169	$	—	$	97,048	$	(129,994)	$	(32,946)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Deficit
	Shares	Amount
Balances at March 31, 2023 (As Restated)	3,982	$	—	$	89,791	$	(96,415)	$	(6,624)

Net loss	—	—		—		(7,438)		(7,438)
Vesting of restricted stock units	44	—		—		—		—
Repurchases of restricted stock for payroll tax withholding	(5)	—		(84)		—		(84)
Stock-based compensation expense	—	—		2,213		—		2,213
Balances at June 30, 2023 (As Restated)	4,021	$	—	$	91,920	$	(103,853)	$	(11,933)


See accompanying notes.

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)


	Six Months Ended June 30,
	2024		2023
			(As Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(7,458)	$	(17,983)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	68,730		60,891
Net book value of property held for lease buyouts	14,757		13,296
Impairment on property held for lease expense	11,568		10,600
Change in fair value of warrants liability	53		(389)
Stock-based compensation	2,943		4,303
Loss on partial extinguishment of debt	—		2,391
Amortization of debt discount	1,405		1,592
Amortization of debt issuance costs, net	132		145
Accrued PIK Interest	697		864
Amortization of right-of-use assets	152		198
Increase (decrease) to cash due to changes in:
Property held for lease	(92,078)		(87,422)
Prepaid expenses and other current assets	1,002		2,858
Accounts payable	552		(290)
Accrued liabilities	(1,533)		186
Lease liabilities	(114)		(227)
Unearned revenues	544		436
Net cash provided by (used in) operating activities	1,352		(8,551)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(25)		—
Additions to capitalized software	(312)		(519)
Net cash used in investing activities	(337)		(519)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving line of credit	14,642		9,380
Principal repayments on revolving line of credit	(5,655)		(3,311)
Principal repayment on term loan	—		(25,000)
Payments of deferred financing costs	—		(22)
Repurchases of restricted stock	(457)		(247)
Proceeds from exercise of stock options	18		—
Net cash provided by (used in) financing activities	8,548		(19,200)
Net increase (decrease) in cash, cash equivalents and restricted cash	9,563		(28,270)
Cash, cash equivalents and restricted cash at beginning of period	28,811		69,841
Cash, cash equivalents and restricted cash at end of period	$	38,374	$	41,571

Supplemental disclosure of cash flow information:
Cash paid for interest	$	6,888	$	6,602
Cash paid for income taxes	$	203	$	108
Deferred financing costs included in accrued liabilities	$	—	$	493
Issuance of warrants to purchase common stock in connection with debt refinancing	$	—	$	4,060

Cash paid for operating leases	$	166	$	260


See accompanying notes.

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Business— Katapult Holdings, Inc. (“Katapult” or the “Company”) is a technology driven lease-to-own platform that integrates with omnichannel retailers and e-commerce platforms to power the purchasing of everyday durable goods for underserved U.S. non-prime consumers. Through the Company’s point-of-sale (“POS”) integrations and innovative mobile app featuring Katapult Pay, consumers who may be unable to access traditional financing can shop a growing network of merchant partners.

We experience moderate seasonal fluctuations in our revenue as a result of consumer spending patterns. Historically, our revenue is strongest during the first quarter primarily due to higher gross originations during the fourth quarter holiday season. Our first quarter revenue is also impacted by the federal and state income tax refunds that our customers receive in the first quarter which, in the past, has led to our customers more frequently exercising the early purchase option on their lease agreements. Adverse events that occur could have a disproportionate effect on our financial results throughout the year.

Subsidiaries— The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Katapult Intermediate Holdings, LLC (formerly known as Keys Merger Sub 2, LLC), Katapult Group, Inc. and Katapult SPV-1 LLC. which originates all of the Company’s leases.

Legacy Katapult was incorporated in Delaware in 2016 and changed its headquarters from New York, New York to Plano, Texas in December 2020. Katapult Group, Inc. was incorporated in the state of Delaware in 2012. Katapult SPV-1 LLC is a Delaware limited liability company formed in Delaware in 2019.

Basis of Presentation— The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company believes the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in the Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Annual Report”). The condensed consolidated financial statements include the accounts of Katapult Holdings, Inc. and its wholly owned subsidiaries. In the opinion of management, all adjustments, of a normal recurring nature, considered necessary for a fair presentation have been included in these condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.

2.RESTATEMENT OF PREVIOUSLY ISSUED UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As described in Notes 2 and 16 to the Consolidated Financial Statements included within Part II, Item 8 contained on Form 10-K for the fiscal year ended December 31, 2023, the Company restated its consolidated financial statements as of and for the year ended December 31, 2022 and the unaudited interim condensed consolidated financial statements for each of interim periods within the year ended December 31, 2023.

Description of Restatement Errors

The errors identified as of and for the three and six months ended June 30, 2023 are as follows:

a.Rental revenue - The Company determined that it miscalculated sales tax payable related to certain customer lease payments going back multiple years. The Company performed an assessment of its sales tax liability across all jurisdictions for potential additional exposure and determined that there was an overstatement of rental revenue and an understatement of sales tax payable included in accrued liabilities. The impact to the condensed consolidated financial statements is as follows:

i.Condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 is a decrease to rental revenue of $435 and $1,028, respectively

ii.Condensed consolidated balance sheet as of June 30, 2023 is an increase to sales tax payable included in accrued liabilities of $6,214.

b.Cost of revenue- Correction to depreciation expense for the three and six months ended June 30, 2023 related to property held for lease, net of accumulated depreciation and impairment, included in cost of revenue, of $795 and

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

$1,835, respectively, for certain leases originated on or before December 31, 2022. The impact to the balance sheet as of June 30, 2023 to correct this error is a decrease to property held for lease, net of accumulated depreciation and impairment of $1,705 and a decrease to prepaid expenses and other current assets of $130.

c.Stockholders’ deficit - The impact to the unaudited interim condensed consolidated statement of stockholders’deficit as of June 30, 2023 is an increase to accumulated deficit of $11,653.

d.Other errors - There are other errors not described in items (a), (b) or (c) of this note. These errors and related restatement adjustments were not material for the three and six months ended June 30, 2023.

The following tables present a reconciliation of the as previously reported condensed consolidated financial statements to the restated amounts as of and for the three and six months ended June 30, 2023 which include the following: (1) as restated condensed consolidated balance sheet, (2) as restated condensed consolidated statement of operations and comprehensive loss and (3) as restated condensed consolidated statement of cash flows. Presented below are the changes to each financial statement line item which changed as a result of the restatement.

Condensed Consolidated Balance Sheet


	As of June 30, 2023
	As Previously Reported		Restatement Adjustments		As Restated




Property held for lease, net of accumulated depreciation and impairment	$	54,352	$	(1,567)	$	52,785
Prepaid expenses and other current assets	$	6,485	$	(1,241)	$	5,244
Total current assets	$	102,408	$	(2,808)	$	99,600




Total assets	$	105,565	$	(2,808)	$	102,757



Accrued liabilities	$	14,588	$	6,214	$	20,802
Unearned revenue	$	1,988	$	2,631	$	4,619

Total current liabilities	$	17,854	$	8,845	$	26,699




Total liabilities	$	105,845	$	8,845	$	114,690



Accumulated deficit	$	(92,200)	$	(11,653)	$	(103,853)
Total stockholders' deficit	$	(280)	$	(11,653)	$	(11,933)
Total liabilities and stockholders' deficit	$	105,565	$	(2,808)	$	102,757

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Condensed Consolidated Statement of Operations and Comprehensive Loss


	Three Months Ended June 30, 2023						Six Months Ended June 30, 2023
	As Previously Reported		Restatement Adjustments		As Restated		As Previously Reported		Restatement Adjustments		As Restated

Rental revenue	$	53,874	$	(435)	$	53,439	$	108,598	$	(1,028)	$	107,570

Total revenue	$	54,571	$	(435)	$	54,136	$	110,247	$	(1,028)	$	109,219
Cost of revenue	$	43,874	$	795	$	44,669	$	86,047	$	1,835	$	87,882
Gross profit	$	10,697	$	(1,230)	$	9,467	$	24,200	$	(2,863)	$	21,337







Total operating expenses	$	13,679	$	(202)	$	13,477	$	29,448	$	(404)	$	29,044
Loss from operations	$	(2,982)	$	(1,028)	$	(4,010)	$	(5,248)	$	(2,459)	$	(7,707)




Loss before income taxes	$	(6,396)	$	(1,028)	$	(7,424)	$	(15,490)	$	(2,459)	$	(17,949)

Net loss	$	(6,410)	$	(1,028)	$	(7,438)	$	(15,524)	$	(2,459)	$	(17,983)



Net loss per common share - basic and diluted	$	(1.57)	$	(0.25)	$	(1.83)	$	(3.86)	$	(0.61)	$	(4.47)

Condensed Consolidated Statement of Cash Flow


	Six Months Ended June 30, 2023
	As Previously Reported		Restatement Adjustments		As Restated

Net loss	$	(15,524)	$	(2,459)	$	(17,983)

Depreciation and amortization	$	59,646	$	1,245	$	60,891
Net book value of property held for lease buyouts	$	12,921	$	375	$	13,296
Impairment on property held for lease expense	$	10,515	$	85	$	10,600








Property held for lease	$	(86,725)	$	(697)	$	(87,422)
Prepaid expenses and other current assets	$	2,030	$	828	$	2,858


Accrued liabilities	$	(437)	$	623	$	186



Net cash used in operating activities	$	(8,551)	$	—	$	(8,551)

3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates— The preparation of the condensed consolidated financial statements in accordance with U.S. GAAP 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 condensed consolidated financial statements, and the reported amounts of income and expense during the reporting periods. The most significant estimates relate to the selection of useful lives for property held for lease and the related depreciation method, impairments, and the valuation allowance associated with deferred tax assets. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Changes in estimates are reflected in reported amounts in the period in which they become known. Actual results could differ from those estimates.

Segment Information— The Company conducts business within one business segment, which is defined as providing lease payment options to consumers to obtain durable goods from e-commerce partners. Operations are aggregated into a single reportable operating segment based upon similar economic operating characteristics as well as a similar market.

Rental Revenue— Lease-to-own agreements, which comprise the majority of total revenue, fall within the scope of ASC 842, Leases under lessor accounting and revenue is recognized in the period it is earned and cash is collected. Property held for lease is leased to customers pursuant to lease purchase agreements with an initial term: typically one week, two weeks, or one month, with non-refundable lease payments. Generally, the customer has the right to acquire title either through a 90-day promotional pricing option, an early purchase option (buyout) available prior to completion of the full agreement, or by completing all lease renewal payments, generally over 10, 12 or 18 months. On any current lease, customers have the option to terminate the agreement at any time without penalty in accordance with the lease term. Amounts received from customers who elect early purchase options (buyouts) are included in rental revenue. Lease payments received prior to their due dates are deferred and

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

recorded as unearned revenue and are recognized as rental revenue in the month in which the revenue is earned. Rental revenue also includes agreed-upon charges assessed for customer lease applications. Payments are received upon submission of the applications and execution of the lease-purchase agreements. Services are considered to be rendered and revenue earned over the lease term.

Revenues from direct integration leases are recorded net of sales taxes as sales tax is collected from each customer's lease payment and a sales tax payable is recorded for remittance to the respective state. For Katapult Pay transactions, leases are recorded gross with sales tax included as the amount of the purchased good as sales tax is remitted to the merchant partner. The full amount is capitalized in property held for lease and is depreciated into cost of revenue. Revenue is recognized for our Katapult Pay transactions when lease payments are received from customers in the month due.

Other Revenue— Other revenue consists primarily of the sale of property held for lease (and lease agreements) to third parties and other immaterial sources of income from third party relationships. The Company continues to advance its strategy to focus on additional opportunities to generate revenue, which include the sale of property held for lease to third parties. The sale of property held for lease is considered recurring and ordinary in nature to the Company’s business, and as such, these sales are accounted for within the scope of ASC 606, Revenue from Contracts with Customers. Revenue is recognized when a performance obligation is satisfied by transferring control over an asset to a customer. Revenue is recorded with corresponding costs of revenue, presented on a gross basis. Other revenue of $667 and $697 was recognized for the three months ended June 30, 2024 and 2023, respectively, and $1,586 and $1,649, for the six months ended June 30, 2024 and 2023, respectively.

Concentrations of Credit Risk— The Company’s concentrations of credit risk consist primarily of cash. A portion of the Company’s cash balances exceed those that are federally insured. To date, the Company has not recognized any losses caused by uninsured balances.

Significant customers are those which represent more than 10% of the Company’s total revenue or gross accounts receivable balance at each balance sheet date. As of June 30, 2024 and December 31, 2023, the Company did not have any customers that accounted for 10% or more of outstanding gross accounts receivable or total revenue during the three and six months ended June 30, 2024 and 2023.

A significant portion of the Company’s transaction volume is with a limited number of merchants, including most significantly, Wayfair Inc.

Recent Accounting Pronouncements Not Yet Adopted— In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU will improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. This update is effective for public entities for annual periods beginning after December 15, 2024 with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is still evaluating the impact of this ASU.

4.PROPERTY HELD FOR LEASE, NET OF ACCUMULATED DEPRECIATION AND IMPAIRMENT

Property held for lease consists of furniture, mattresses, consumer electronics, appliances, and other durable goods offered for lease-purchase in the normal course of business. Such property is provided to consumers pursuant to a lease-purchase agreement with a minimum lease term; typically one week, two weeks, or one month. The renewal periods of the initial lease term of the agreement are typically 10, 12 or 18 months. Consumers may terminate a lease agreement at any time without penalty. The average consumer continues to lease the property for 8 months because the consumer either exercises the buyout option (early purchase) or terminates the lease purchase agreement prior to the end of the renewal period. As a result, property held for lease is classified as a current asset in the condensed consolidated balance sheets.

Property held for lease is recorded at cost, excluding shipping costs, and is carried at net book value. Depreciation for property held for lease is determined using the income forecasting method and is included within cost of revenue. Under the income forecasting method, property held for lease is depreciated in the proportion of rents received to total expected rents received based on historical data, which is an activity-based method similar to the units of production method. The Company provides for impairment for the undepreciated balance of the property held for lease assuming no salvage value with a corresponding charge to cost of revenue. Impairment expense includes expense related to property identified as impaired based on historical data, including default trends, such that the recorded amount closely approximates actual impairment expense incurred during the period. The Company derecognizes the undepreciated net book value of property buyouts as buyouts occur with a

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

corresponding charge to cost of revenue. The Company periodically evaluates fully depreciated property held for lease, net and when it is determined there is no future economic benefit, the cost of the assets is written off and the related accumulated depreciation is reversed.

Property held for lease, net of accumulated depreciation and impairment consists of the following:


	June 30,		December 31,
	2024		2023
Property held for lease	$	250,281	$	290,808
Less: accumulated depreciation and impairment	(193,394)		(231,473)
Property held for lease, net	$	56,887	$	59,335

The table below details the cost of revenue for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
			(As Restated)				(As Restated)
Total depreciation expense related to property held for lease	$	34,441	$	30,980	$	68,201	$	60,460
Net book value of property buyouts	7,144		6,549		14,757		13,296
Impairment charges	5,932		5,342		11,568		10,600
Other (1)	1,418		1,798		2,982		3,526
Total cost of revenue	$	48,935	$	44,669	$	97,508	$	87,882

(1) Other consists mainly of payment processing fees, incentives and other lease related costs.

5.ACCRUED LIABILITIES

Accrued liabilities consists of the following:


	June 30,		December 31,
	2024		2023
Bonus accrual	$	2,494	$	4,183
Sales tax payable	15,876		14,527
Unfunded lease payable	2,888		3,578
Interest payable	116		140
Other accrued liabilities	1,239		1,718
Total accrued liabilities	$	22,613	$	24,146

6.DEBT & LIQUIDITY

Debt

On March 6, 2023, the Company entered into the 15th amendment to the loan and security agreement (as amended, the “15th Amendment" to the “Credit Agreement”) with Midtown Madison Management LLC, as agent for various funds of Atalaya Capital Management (the “Lender”). As part of the amendment, the maturity date of the revolving line of credit (“RLOC”) and the senior secured term loan (“Term Loan”) was extended to June 4, 2025 and the commitments under the RLOC were reduced to $75,000 from $125,000. The interest rate for interest paid-in-kind (“PIK”) on the Term Loan (as defined in the 15th Amendment) is (A) if Liquidity is greater than $25,000, 4.5% or (B) if Liquidity is less than $25,000, 6%. The spread on the RLOC was increased to 8.5% from 7.5%, while the spread on the Term Loan remained at 8.0%. Additionally, effective April 1, 2023, the Secured Overnight Financing Rate (“SOFR”) replaced the London Interbank Offered Rate (“LIBOR”), plus a 0.10% credit adjustment spread, for both the RLOC and the Term Loan’s benchmark rate for interest rate calculations. As of June 30,

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

2024, the interest rates for the RLOC and Term Loan, were 13.9% and 17.9%, respectively, (which includes the 4.5% interest rate applicable to PIK with respect to the Term Loan).

In connection with the 15th Amendment, the Company repaid $25,000 of outstanding principal amount of the Term Loan and issued a warrant to purchase up to 80,000 shares of its common stock at an exercise price of $0.25 per share, which vested on September 6, 2023. On December 5, 2023, the Company issued a warrant to purchase an additional 80,000 shares of its common stock at an exercise price of $0.25 per share which vested on March 5, 2024. In conjunction with the 15th Amendment, the Company incurred a loss on partial extinguishment of debt of $2,391 during the six months ended June 30, 2023. The loss on partial extinguishment of debt is attributed to the derecognition of a proportionate amount of the unamortized debt discount, a result of repaying the $25,000 of outstanding principal on the Term Loan.

In addition, the 15th Amendment also updated certain financial covenants each as defined in the 15th Amendment, including the Minimum Adjusted EBITDA levels, Minimum Tangible Net Worth, Minimum Liquidity and compliance with a Total Advance Rate.

As noted above, the RLOC and Term Loan current maturity date are June 4, 2025. Due to the maturity date being less than one year from the balance sheet date of June 30, 2024, debt has been reclassified to a current liability in the condensed consolidated balance sheet. The Company is currently seeking to refinance the loans prior to maturity in June 2025.

A reconciliation of the outstanding principal to the carrying amount of the RLOC is as follows:


	June 30,		December 31,
	2024		2023
Principal balance	$	69,731	$	60,744
Less: Unamortized issuance costs	(265)		(397)
Total carrying amount	$	69,466	$	60,347

The issuance costs are amortized over the life of the RLOC and included in interest expense and other fees in the condensed consolidated statements of operations and comprehensive loss.

A reconciliation of the outstanding principal to the carrying amount of the Term Loan is as follows:


	June 30,		December 31,
	2024		2023
Principal balance	$	25,000	$	25,000
PIK	6,037		5,340
Less: Unamortized debt discount and issuance costs	(3,432)		(4,837)
Total carrying amount	$	27,605	$	25,503

Amortization expense related to the Term Loan discount and issuance costs of $629 and $499 was recognized for the three months ended June 30, 2024 and 2023, respectively; and $1,405 and $1,592 for the six months ended June 30, 2024 and 2023, respectively. Amortization of debt discount and issuance costs is included in interest expense and other fees in the condensed consolidated statements of operations and comprehensive loss.

The RLOC and Term Loan are also subject to certain customary representations, affirmative covenants, which consist of maintaining lease performance metrics, financial ratios related to operating results, and lease delinquency ratios, along with customary negative covenants.

On April 24, 2024, the Company entered into the Limited Waiver and 16th Amendment to the Credit Agreement with the Lender (the "16th Amendment"). Pursuant to such 16th Amendment, the Lender granted the Company a waiver of any Specified Defaults (as defined in the 16th Amendment) related to the accounting errors that led to the restatement of the Company’s financial statements for all reporting periods prior to the date of the amendment. In addition, the 16th Amendment also updated certain financial covenants each as defined in the 16th Amendment, including Minimum Adjusted EBITDA (Trailing 3 Months), Minimum Adjusted EBITDA (YTD) and Minimum Tangible Net Worth. The Company is in compliance with all of its covenants as of June 30, 2024 and December 31, 2023.

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Liquidity

The Company’s principal sources of liquidity are our cash and cash equivalents generated from leases and borrowings from the RLOC. Principal liquidity needs for the next 12 months and beyond are to fund normal recurring operational expenses, including purchases of assets held for lease and debt obligations. As of June 30, 2024 cash and cash equivalents totaled $33,725, restricted cash totaled $4,649, and unused capacity on the RLOC was $5,269.

The Company’s revenue and operating results depend significantly on gross originations, which is defined as the retail price of the merchandise associated with lease-purchase agreements entered into during the period. Gross originations are a leading indicator of potential revenue streams, as a percentage of revenue is realized in the quarter in which the gross originations occur. Revenue is realized in subsequent quarters until 100% of is recognized.

The Company’s financing is generally comprised of cash from leases and borrowings from the RLOC, which is fully collateralized by the Company’s assets. As of August 12, 2024, the Company had a combined principal balance outstanding of approximately $100,131 related to the RLOC and term loan, both of which mature within twelve months of the date that these financial statements are issued. Both loans were previously refinanced on March 6, 2023 to extend the maturity date from December 4, 2023 to June 4, 2025.

The Company projects that it will not have sufficient cash available to pay off the loans upon maturity and is currently seeking to refinance the loans prior to maturity in June 2025. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. Under the Company's debt agreements, the Company is subject to certain covenants. The Company was in compliance with all covenants in the RLOC and Term Loan as of June 30, 2024.

7.STOCK-BASED COMPENSATION

As of June 30, 2024, the Company has two stock incentive plans, the Cognical Holdings, Inc. 2014 Stock Incentive Plan, (the “2014 Plan”) and the Katapult Holdings, Inc. 2021 Stock Incentive Plan, (the “2021 Plan”).

2014 Plan

In accordance with the 2014 Plan, the board of directors of Legacy Katapult could grant equity awards to officers, employees, directors and consultants for common stock. The 2014 Plan has specific vesting for each stock option grant allowing vesting of the options over one to four years. No equity awards have been granted under the 2014 Plan since October 2020 and no new equity awards are expected to be granted under the 2014 Plan.

Stock Options

A summary of the status of the stock options under the 2014 Plan as of June 30, 2024, and changes during the six months then ended is presented below:


	Number of Shares	Weighted- Average Exercise Price
Balance - December 31, 2023	322,405	$	7.30
Granted	—	—
Exercised	(3,802)	4.75
Forfeited	—	—
Balance - June 30, 2024	318,603	$	7.33

The total intrinsic value of stock options exercised during the six months ended June 30, 2024 was $57. No stock options were exercised during the six months ended June 30, 2023.

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

2021 Plan

On June 9, 2021, the 2021 Plan, which was previously approved by the board of directors and stockholders, became effective.

In accordance with the 2021 Plan, directors may issue equity awards, including restricted stock awards (“RSA”), restricted stock unit awards (“RSU”) and stock options to officers, employees, directors and consultants to purchase common stock. The awards granted are subject to either service-based and/or performance-based vesting conditions. Restricted stock units (“RSUs”) are equity awards granted to employees that entitle the holder to shares of common stock when the awards vest. RSUs are measured based on the fair value of the Company’s common stock on the date of grant. Awards granted under the 2021 Plan generally vest over one to four years. The total number of common stock authorized for issuance under the 2021 Plan is 639,467.

The following table summarizes the Company’s RSA activity under the 2021 Plan during the six months ended June 30, 2024:


	Stock Options			Restricted Stock Units
	Shares	Weighted- Average Exercise Price		Shares	Weighted- Average Grant Date Fair Value
Balance - December 31, 2023	13,865	$	261.25	278,290	$	34.05
Granted	—	—		167,615	15.64
Exercised	—	—		(121,797)	29.09
Forfeited	—	—		(11,942)	41.69
Balance - June 30, 2024	13,865	$	261.25	312,166	$	25.81

Stock-Based Compensation Expense— Stock-based compensation expense of $1,552 and $2,213 was recognized for the three months ended June 30, 2024 and 2023, respectively, and $2,943 and $4,303 for the six months ended June 30, 2024 and 2023, respectively. Stock-based compensation expense is included in operating expenses in the condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2024, there was $7,253 of unrecognized compensation costs related to unvested RSU’s. This amount is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of vested RSUs as of their respective vesting dates were $1,977.

8.INCOME TAXES

The income tax provision of $61 and $14 was recorded for the three months ended June 30, 2024 and 2023, respectively. The Company’s effective tax rate was (0.88%) and (0.21%) for the three months ended June 30, 2024 and 2023, respectively. The provision for the three months ended June 30, 2024 relates predominately to state income taxes for states that have net operating loss usage limitations. The Company’s effective tax rate for the three months ended June 30, 2024 and 2023 is different than the statutory rate primarily due to changes in the Company’s valuation allowance.

The income tax provision of $66 and $34 was recorded for the six months ended June 30, 2024 and 2023, respectively. The Company’s effective tax rate was (0.89%) and (0.22%) for the six months ended June 30, 2024 and 2023, respectively. The provision for the six months ended June 30, 2024 relates predominately to state income taxes for states that have net operating loss usage limitations. The Company’s effective tax rate for the six months ended June 30, 2024 and 2023 is different than the statutory rate primarily due to changes in the Company’s valuation allowance.

As of December 31, 2023, the Company had U.S. federal net operating loss carryforward of $132,800 that expire at various dates from 2032 through 2037 and includes $102,200 that have an unlimited carryforward period. As of December 31, 2023, the Company has U.S. state and local net operating loss carryforwards of $96,900 that expire from 2024 to 2043.

In evaluating its ability to realize its net deferred tax assets, the Company considered all available positive and negative evidence, such as past operating results, forecasted earnings, prudent and feasible tax planning strategies, and the future realization of the tax benefits of existing temporary differences. The Company remains in a cumulative tax loss position for the

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

36 months ended June 30, 2024, and determined that it is more likely than not that its net deferred tax assets will not be realized. The Company continues to maintain a full valuation allowance as of June 30, 2024 and December 31, 2023.

9.NET LOSS PER SHARE

As discussed in Note 6, on March 6, 2023, in connection with the 15th amendment to the Credit Agreement, the Company issued a warrant to purchase up to 80,000 shares of the Company common stock at an exercise price of $0.25 per share, which vested on September 6, 2023. On December 5, 2023, the Company issued a warrant to purchase an additional 80,000 shares of our common stock at an exercise price of $0.25 per share which are vested. The warrants are considered exercisable for 160,000 shares for little to no consideration and the shares are therefore included in basic shares outstanding at their issuance date.

The Company’s potentially dilutive securities, which include unvested RSUs, stock options to purchase common stock and warrants to purchase common stock, have been excluded from the computation of diluted net loss per share for certain periods, as the effect would be antidilutive. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same in periods of a net loss. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	Three and Six Months Ended June 30,
	2024	2023
Public warrants	500,000	500,000
Private warrants	13,300	13,300
Stock options	332,468	336,345
Unvested restricted stock units	312,166	303,374
Warrants issued in connection with 15th amendment to Credit Agreement	—	80,000
Total common stock equivalents	1,157,934	1,233,019

10.COMMITMENTS AND CONTINGENCIES

Litigation risk— From time to time, the Company may become involved in various legal actions arising in the ordinary course of business. Management is of the opinion that the ultimate liability, if any, from these actions will not have a material effect on its financial condition or results of operations. The Company is not currently aware of any indemnification or other claims, except as discussed below and has not accrued any material liabilities related to such obligations in the condensed consolidated financial statements as of June 30, 2024 and December 31, 2023.

Except as set forth below, the Company and its subsidiaries are not a party to, and their properties are not the subject of, any material pending legal proceedings.

DCA Litigation

On April 9, 2021, Daiwa Corporate Advisory LLC (“DCA”), filed a complaint filed in the Supreme Court of the State of New York, New York County. The complaint relates to an April 11, 2018 letter agreement (the “Letter Agreement”) entered into by DCA and Legacy Katapult. Among other things, DCA alleges that Katapult breached its obligations to (i) provide DCA a right of first refusal to act as the “exclusive financial advisor” with respect to the 2020 sales transaction and the 2020 PIPE transaction, (ii) pay DCA fees in connection with such advisory roles, and (iii) pay a $100 termination fee when it terminated the Letter Agreement. DCA seeks damages in an amount to be determined by trial and seeks attorneys’ fees and costs, an award of pre- and- post -judgment interest, and such other and further relief as the Court deems just and proper.

On September 12, 2022, DCA filed a motion seeking summary judgment as to its claims, and on September 13, 2022, the Company filed a motion seeking summary judgment as to DCA’s first cause of action. The parties subsequently filed opposition and reply briefs and unsuccessfully attempted to resolve the matter via mediation. On September 6, 2023, the Court issued its decision and order on the motions, granting in part each party’s motion. It found that (1) Katapult breached its obligation to offer DCA the opportunity to act as its advisor on the 2020 sale transaction but that a triable question of fact remains regarding the damages, if any, caused by the breach (2) Katapult did not breach the contract with respect to its failure to offer DCA the opportunity to act as its advisor on the 2020 PIPE transaction; and (3) a triable question of fact remains

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

regarding whether Katapult breached any obligations regarding the termination fee. This matter is scheduled for trial in October 2024. The Company intends to vigorously defend against the claims in this action.

Shareholder Litigation

On August 27, 2021, a putative class action lawsuit, captioned McIntosh v. Katapult Holdings, Inc., et al, was filed in the U.S. District Court for the Southern District of New York (the “New York Action”). The operative second amended complaint was filed on November 4, 2022 against Katapult Holdings, Inc., three current and former Company officers, and two FinServ officers. The second amended complaint alleges violations of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934, and seeks an unspecified amount of damages on behalf of persons and entities that (a) beneficially owned and/or held FinServ common stock as of the close of business on May 11, 2021 and were eligible to vote at FinServ’s June 7, 2021 special meeting (the “FinServ Putative Class”); or (b) purchased or otherwise acquired Katapult securities between June 15, 2021 and August 9, 2021, inclusive (the “Katapult Putative Class”). On May 26, 2022, the Court appointed a lead plaintiff, but on August 8, 2023, the court dismissed the Katapult Putative Class’s claims which were under Sections 10(b) and 20(a) and dismissed two current and former Company officers from the case. The Court declined to dismiss certain of the FinServ Putative Class’s claims under Sections 14(a) and 20(a).

On August 25, 2022, a purported Company stockholder filed a putative class action lawsuit, captioned Saunders v. Einbinder, et al., against directors and officers of FinServ Acquisition Corp. (“FinServ”) and FinServ Holdings LLC in the Delaware Court of Chancery (the “Delaware Action”). The operative amended complaint was filed on January 27, 2023, alleging that defendants breached their fiduciary duties by making false and misleading disclosures to induce FinServ stockholders to approve FinServ’s merger with Katapult. On March 13, 2023, the Court granted the parties’ stipulation to dismiss FinServ Holdings LLC from the case and amended the caption as In re FinServ Acquisition Corp. SPAC Litigation.

On May 20, 2024, the Company reached an agreement in principle to settle for total consideration of $12,000, comprised of: (1) a cash component of $8,500 (the “Cash Component”); and (2) an additional component of $3,500 comprised of the Company’s common stock (the “Settlement Shares”) and/or cash (the “Additional Component”). As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Company had accrued a $12,000 liability, including a $5,000 litigation insurance reimbursement receivable, on its balance sheet for the year ended December 31, 2023 for the New York Action and the Delaware Action. These amounts are included in the condensed consolidated balance sheet as of June 30, 2024. A portion of the Cash Component of $6,725, with $5,000 paid by the insurer, and $2,775 of the Additional Component, will be allocated to the Delaware Action settlement class and $1,775 of the Cash Component and $725,000 of the Additional Component will be allocated to the New York Action settlement class.

The number of Settlement Shares for the Delaware Action (the “Delaware Settlement Shares”) shall be calculated by dividing $2,775 by the volume-weighted average per share price (“VWAP”) of the Company’s common stock for the ten (10) consecutive trading days immediately preceding the date of the hearing on the final approval for the Delaware Action (the “Delaware Settlement Hearing VWAP”); in calculating the Delaware Settlement Shares (1) to the extent the Delaware Settlement Shares are less than 167,797, the difference between the Delaware Settlement Shares and 167,797 shall be the “Delaware Unused Shares” and (2) any amount of Delaware Settlement Shares above 167,797 shall be considered the “Delaware Excess Settlement Shares.” For the settlement of the Delaware Action, the Company may either deliver the Delaware Excess Settlement Shares (reduced by the New York Unused Shares (as defined below)) or pay in cash the full value of the Delaware Excess Settlement Shares (reduced by the New York Unused Shares), calculated by multiplying the number of Delaware Excess Settlement Shares (reduced by the New York Unused Shares) by the Delaware Settlement Hearing VWAP. The number of Settlement Shares for the New York Action (the “New York Settlement Shares”) shall be calculated by dividing $725,000 by the VWAP of the Company’s common stock for the ten (10) consecutive trading days immediately preceding the date of the hearing on final approval for the New York Action (the “New York Settlement Hearing VWAP”); in calculating the New York Settlement Shares (1) to the extent the New York Settlement Shares are less than 43,839, the difference between the New York Settlement Shares and 43,839 shall be the “New York Unused Shares” and (2) any amount of New York Settlement Shares above 43,839 shall be considered the “New York Excess Settlement Shares.” For the settlement of the New York Action, the Company may either deliver the New York Excess Settlement Shares (reduced by the Delaware Unused Shares) or pay in cash the full value of the New York Excess Settlement Shares (reduced by the Delaware Unused Shares), calculated by multiplying the number of New York Excess Settlement Shares (reduced by the Delaware Unused Shares) by the New York Settlement Hearing VWAP.

As part of the settlement, the parties will ask the Southern District of New York and the Delaware Court of Chancery to stay the proceedings pending negotiation and approval by each respective court of the proposed settlement. In agreeing to settle, the

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Company is making no admission of liability. On July 3, 2024, a motion for preliminary approval was filed in the Southern District of New York and a settlement stipulation and proposed scheduling order was filed in the Delaware Court of Chancery. On July 17, 2024, the Delaware Court of Chancery approved the scheduling order and set a settlement hearing date of October 10, 2024. On July 24, 2024, the Southern District of New York approved the scheduling order and set a settlement hearing date of January 23, 2025. The settlement of each of the New York Action and the Delaware Action depends upon approval by the Southern District of New York and the Delaware Court of Chancery, as applicable. There can be no assurance the settlement of the New York Action will be approved by the Southern District of New York or the settlement of the Delaware Action will be approved by the Delaware Court of Chancery.

11.FAIR VALUE MEASUREMENTS

Certain assets and liabilities are required to be carried at fair value in accordance with GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company uses a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3—Inputs are unobservable inputs for the asset or liability.

The Company’s financial instruments consist of accounts payable, accrued expenses, warrant liability, the RLOC, and the Term Loan. The Company’s assets, accounts payable and accrued expenses are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date. The condensed consolidated financial statements also include fair value level 3 measurements of private common stock warrants. The Company uses a third-party valuation firm to determine the fair value of certain of the Company's financial instruments.

RLOC and Term Loan


	June 30, 2024				December 31, 2023
	Carrying amount		Fair value		Carrying amount		Fair value
RLOC	$	69,466	$	71,282	$	60,347	$	64,631
Term Loan	27,605		32,815		25,503		33,900
	$	97,071	$	104,097	$	85,850	$	98,531

The estimated fair values of the Company’s RLOC and Term Loan were determined using Level 2 inputs based on an estimated credit rating for the Company and the trading value of debt for similar debt instruments with similar credit ratings.

KATAPULT HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Warrant Liability


	Warrant liability - Public (Level 1) & Private Warrants (Level 3)
	Fair Value Measurement Using
	Level 1		Level 2		Level 3		Total
Balance at December 31, 2023	$	93	$	—	$	2	$	95
Change in fair value	51		—		2		53
Balance at June 30, 2024	$	144	$	—	$	4	$	148

During the six months ended June 30, 2024 and 2023, there were no transfers between Level 1 and Level 2, nor into or out of Level 3.

12.SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date the condensed consolidated financial statements were issued, for events requiring adjustment to or disclosure in these condensed consolidated financial statements. There are no events that require adjustment to or disclosure in these condensed consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” the “Company”, or “Katapult” refer to Katapult Holdings, Inc and its subsidiaries.

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A, “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included on our Annual Report on Form 10-K filed with the SEC on April 24, 2024. All dollar amounts are in thousands, unless otherwise specified.

OVERVIEW (dollars in thousands)

We are a technology driven lease-to-own platform that integrates with omnichannel retailers and e-commerce platforms to power the purchasing of everyday durable goods for underserved U.S. non-prime consumers. Through our POS integrations and innovative mobile app featuring Katapult Pay, consumers who may be unable to access traditional financing can shop a growing network of our merchants.

Segment Information

We conduct our business within one business segment, which is defined as providing lease payment options to consumers to obtain durable goods from e-commerce partners. Our operations are aggregated into a single reportable operating segment based upon similar economic and operating characteristics as well as similar markets.

Key Performance Metrics

We regularly review several metrics, including the following U.S. GAAP and non-GAAP key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions, which may also be useful to an investor.

Gross Originations

We measure gross originations to assess the growth trajectory and overall size of our lease portfolio. We define gross originations as the retail price of the merchandise associated with lease-purchase agreements entered into during the period through our platform. Gross originations do not represent revenue earned, but are a leading indicator of potential revenue streams as a percentage of revenue is realized in the quarter in which the gross originations occur. We continue to recognize revenue in subsequent quarters until 100% of revenue is recognized (on average over 8 months). Gross originations have historically reached approximately 70-75% of revenue realized within two quarters from when the originations occurred. We believe this is a useful operating metric for investors to use in assessing the volume of transactions that take place on our platform.

The following tables present gross originations for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				Change
	2024		2023		$		%
Gross Originations	$	55,311	$	54,710	$	601	1.1	%

Wayfair represented 48% and 56% of gross originations during the three months ended June 30, 2024 and 2023, respectively.

Katapult Pay represented 28% and 14% of gross originations during the three months ended June 30, 2024 and 2023, respectively.


	Six Months Ended June 30,				Change
	2024		2023		$		%
Gross Originations	$	110,941	$	109,446	$	1,495	1.4	%

Wayfair represented 48% and 53% of gross originations during the six months ended June 30, 2024 and 2023, respectively.

Katapult Pay represented 27% and 12% of gross originations during the six months ended June 30, 2024 and 2023, respectively.

Total Revenue

Total revenue represents the sum of rental revenue and other revenue. We record revenue in accordance with ASC 842, and as a result, we record revenue when earned and cash is collected. The following tables presents total revenue for the three and six months ended June 30, 2024 and 2023, respectively:


	Three Months Ended June 30,			Change
		2024		2023		$	%
				(As Restated)
Total revenue		$	58,863	$	54,136	$4,727	8.7%


	Six Months Ended June 30,			Change
		2024		2023		$	%
				(As Restated)
Total revenue		$	123,924	$	109,219	$14,705	13.5%

Gross Profit

Gross profit represents total revenue less cost of revenue, and is a measure presented in accordance with U.S. GAAP. We also use adjusted gross profit as a key performance indicator to provide an understanding of one aspect of our performance specifically attributable to total revenue and the variable costs associated with total revenue.

Adjusted Gross Profit

Adjusted gross profit represents gross profit less variable operating expenses, which are servicing costs and underwriting fees. We believe that adjusted gross profit provides a meaningful understanding of one aspect of our performance specifically attributable to total revenue and the variable costs associated with total revenue. See “—Non-GAAP Financial Measures” section below for a reconciliation of adjusted gross profit, which is a non-GAAP measure utilized by management, to gross profit.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that is defined as net loss before interest expense and other fees, interest income, change in fair value of warrant liability, provision for income taxes, depreciation and amortization on property and equipment and capitalized software, impairment of leased assets, loss on partial extinguishment of debt and stock-based compensation expense. We believe that adjusted EBITDA provides a meaningful understanding of our operating performance. See “—Non-GAAP Financial Measures” section below for a reconciliation of adjusted EBITDA, which is a non-GAAP measure utilized by management, to net loss.

Components of Results of Operations

Revenue

Total revenue is comprised of rental revenue and other revenue. Rental revenue is recognized as earned, when cash is collected from customers. Other revenue consists primarily of the sale of property held for lease (and lease agreements) to third parties and other immaterial sources of income from third party relationships.

Cost of Revenue

Cost of revenue consists primarily of depreciation expense related to property held for lease, impairment of property held for lease, net book value of property buyouts, payment processing fees, and other costs associated with offering lease-purchase transactions to customers.

Operating Expenses

Operating expenses consist of servicing costs, underwriting fees, professional and consulting fees, technology and data analytics expense, compensation costs and general and administrative expense. Servicing costs primarily consist of permanent and temporary call center support. Underwriting fees primarily consist of data costs related to inputs from customer underwriting models. Professional and consulting fees primarily consist of corporate legal and accounting costs. Technology and data analytics expense primarily consist of salaries and benefits for computer programming and data analytics employees that support our underlying technology and proprietary risk model algorithms. Compensation costs consist primarily of payroll and related costs and stock-based compensation. General and administrative expenses consist primarily of occupancy costs, travel and entertainment, and other general overhead costs, including depreciation and amortization related to office equipment and software.

RESULTS OF OPERATIONS (amounts in thousands, except per share data)

Three Months Ended June 30, 2024 compared to the Three Months Ended June 30, 2023:


	Three Months Ended June 30,
	2024		2023		Change		% Change
Revenue			(As Restated)
Rental revenue	$	58,196	$	53,439	$	4,757	8.9	%
Other revenue	667		697		(30)		(4.3	%)
Total revenue	58,863		54,136		4,727		8.7	%
Cost of revenue	48,935		44,669		4,266		9.6	%
Gross profit	9,928		9,467		461		4.9	%







Operating expenses	12,549		13,477		(928)		(6.9	%)
Loss from operations	(2,621)		(4,010)		1,389		(34.6	%)

Interest expense and other fees	(4,674)		(4,098)		(576)		14.1	%
Interest income	359		427		(68)		(15.9	%)
Change in fair value of warrant liability	109		257		(148)		(57.6	%)
Loss before income taxes	(6,827)		(7,424)		597		(8.0	%)
Provision for income taxes	(61)		(14)		(47)		335.7	%
Net loss	$	(6,888)	$	(7,438)	$	550	(7.4	%)

Weighted average common shares outstanding - basic and diluted	4,286		4,073		213		5.2	%

Net loss per common share - basic and diluted	$	(1.61)	$	(1.83)	$	0.22	(12.0	%)

Revenue

The increase in total revenue of $4,727, or 8.7%, during the three months ended June 30, 2024 as compared to the same period

in 2023 was primarily a result of gross origination growth in 2023 and strong collection efforts. We saw gross origination growth in 2023 primarily as a result of our mobile app featuring Katapult Pay, which we launched in the third quarter of 2022 and growth from our direct merchants. Write-offs as a percentage of total revenue was 9.3% and 9.6% (as restated) during the three months ended June 30, 2024 as compared to the same period in 2023 and remain within our 8% to 10% target range.

Cost of Revenue

The increase in cost of revenue of $4,266, or 9.6%, during the three months ended June 30, 2024 as compared to the same

period in 2023 was a result of higher year-over-year gross origination growth and the associated depreciation expense and impairment charges related to property held for lease, net. Gross profit as a percentage of total revenue decreased to 16.9% for the three months ended June 30, 2024 compared to 17.5% (as restated) for the same period in 2023 as a result of changes in revenue and cost of revenue noted above.

Operating Expenses

The decrease in total operating expenses of $928, or 6.9%, during the three months ended June 30, 2024 as compared to the same period in 2023 was primarily due to a decrease in compensation costs due to a lower number of employees, partially offset by an increase in professional and consulting fees, such as accounting fees related to the restatement.

Interest Expense and Other Fees.

The increase in interest expense and other fees during the three months ended June 30, 2024 as compared to the same period in 2023 was primarily due to an increase in the average outstanding principal under the RLOC period over period.

Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023:


	Six Months Ended June 30,
	2024		2023		Change		% Change
			(As Restated)
Revenue
Rental revenue	$	122,338	$	107,570	$	14,768	13.7	%
Other revenue	1,586		1,649		(63)		(3.8	%)
Total revenue	123,924		109,219		14,705		13.5	%
Cost of revenue	97,508		87,882		9,626		11.0	%
Gross profit	26,416		21,337		5,079		23.8	%







Operating expenses	25,237		29,044		(3,807)		(13.1	%)
Income (loss) from operations	1,179		(7,707)		8,886		(115.3	%)
Loss on partial extinguishment of debt	—		(2,391)		2,391		(100.0	%)
Interest expense and other fees	(9,201)		(9,287)		86		(0.9	%)
Interest income	683		1,047		(364)		(34.8	%)
Change in fair value of warrant liability	(53)		389		(442)		(113.6	%)
Loss before income taxes	(7,392)		(17,949)		10,557		(58.8	%)
Provision for income taxes	(66)		(34)		(32)		94.1	%
Net loss	$	(7,458)	$	(17,983)	$	10,525	(58.5	%)

Weighted average common shares outstanding - basic and diluted	4,264		4,023		241		6.0	%

Net loss per common share - basic and diluted	$	(1.75)	$	(4.47)	$	2.72	(60.9	%)

Revenue

The increase in total revenue of $14,705, or 13.5%, during the six months ended June 30, 2024 as compared to the same period

in 2023 was primarily a result of gross origination growth in 2023. We saw gross origination growth in 2023 primarily as a result of our mobile app featuring Katapult Pay, which we launched in the third quarter of 2022 and growth from our direct merchants. Write-offs as a percentage of total revenue was 8.8% and 9.2% (as restated) during the six months ended June 30, 2024 as compared to the same period in 2023 and remain within our 8% to 10% target range.

Cost of Revenue

The increase in cost of revenue of $9,626, or 11.0%, during the six months ended June 30, 2024 as compared to the same period in 2023 was a result of higher year-over-year gross origination growth and the associated depreciation expense and impairment charges related to property held for lease, net. Gross profit as a percentage of total revenue increased to 21.3% for the six months ended June 30, 2024 compared to 19.5% (as restated) for the same period in 2023 as a result of changes in revenue and cost of revenue noted above.

Operating Expenses

The decrease in total operating expenses of 13.1% during the six months ended June 30, 2024 as compared to the same period in 2023 was primarily due to a decrease in compensation costs primarily due to the head count reduction during the three months ended March 31, 2023.

Loss on partial extinguishment of debt. During the six months ended June 30, 2023, we recorded a $2,391 loss on partial extinguishment of debt, primarily as a result of our debt refinancing in March 2023.

Interest Expense and Other Fees. The decrease in interest expense and other fees during the six months ended June 30, 2024 as compared to the same period in 2023 was primarily due to the refinancing of the Credit Agreement which occurred in March 2023 in which we repaid $25,000 of outstanding principal on the Term Loan partially offset by in an increase of 1% of the spread over the benchmark rate on the RLOC and an increase in average outstanding principal under the RLOC period over period.

Non-GAAP Financial Measures

In addition to gross profit and net loss, which are measures presented in accordance with U.S. GAAP, we believe that adjusted gross profit, adjusted EBITDA, adjusted net loss and fixed cash operating expenses provide relevant and useful information which is widely used by analysts, investors, and competitors in our industry in assessing performance. Adjusted gross profit, adjusted EBITDA, adjusted net loss and fixed cash operating expenses are supplemental measures of our performance that are neither required by nor presented in accordance with U.S. GAAP. Adjusted gross profit, Adjusted EBITDA and adjusted net loss should not be considered as substitutes for U.S. GAAP metrics such as gross profit, operating loss, net loss, or any other performance measures derived in accordance with U.S. GAAP and may not be comparable to similar measures used by other companies.

Adjusted gross profit, adjusted EBITDA and adjusted net loss are useful to an investor in evaluating our performance because these measures:

•Are widely used to measure a company’s operating performance;

•Are financial measurements that are used by rating agencies, lenders and other parties to evaluate our credit worthiness; and

•Are used by our management for various purposes, including as measures of performance and as a basis for strategic planning and forecasting.

Adjusted Gross Profit

Adjusted gross profit represents gross profit less variable operating expenses, which are servicing costs and underwriting fees. We believe that adjusted gross profit provides a meaningful understanding of one aspect of our performance specifically attributable to total revenue and the variable costs associated with total revenue. The reconciliations of gross profit to adjusted gross profit for the three and six months ended June 30, 2024 and 2023 are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
			(As Restated)				(As Restated)
Total revenue	$	58,863	$	54,136	$	123,924	$	109,219
Cost of revenue	48,935		44,669		97,508		87,882
Gross profit	9,928		9,467		26,416		21,337
Less:
Servicing costs	1,141		1,103		2,273		2,093
Underwriting fees	491		480		1,000		948
Adjusted gross profit	$	8,296	$	7,884	$	23,143	$	18,296

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that is defined as net loss before interest expense and other fees, interest income, change in fair value of warrant liability, provision for income taxes, depreciation and amortization on property and equipment and capitalized software, provision for impairment of leased assets, loss on partial extinguishment of debt and stock-based compensation expense. We believe that adjusted EBITDA provides a meaningful understanding of our operating performance.

The reconciliations of net loss to adjusted EBITDA for the three and six months ended June 30, 2024 and 2023 are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
			(As Restated)				(As Restated)
Net loss	$	(6,888)	$	(7,438)	$	(7,458)	$	(17,983)
Add back:
Interest expense and other fees	4,674		4,098		9,201		9,287
Interest income	(359)		(427)		(683)		(1,047)
Change in fair value of warrant liability	(109)		(257)		53		(389)
Provision for income taxes	61		14		66		34
Depreciation and amortization on property and equipment and capitalized software	263		227		529		197
Provision for impairment of leased assets	429		558		602		424
Loss on partial extinguishment of debt	—		—		—		2,391
Stock-based compensation expense	1,552		1,686		2,943		4,303
Adjusted EBITDA	$	(377)	$	(1,539)	$	5,253	$	(2,783)

Adjusted Net Loss

Adjusted net loss is a non-GAAP financial measure that is defined as net loss before change in fair value of warrant liability and stock-based compensation expense. The reconciliations of net loss to adjusted net loss for the three and six months ended June 30, 2024 and 2023 are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
			(As Restated)				(As Restated)
Net loss	$	(6,888)	$	(7,438)	$	(7,458)	$	(17,983)
Add back:
Change in fair value of warrant liability	(109)		(257)		53		(389)
Stock-based compensation expense	1,552		1,686		2,943		4,303
Adjusted net loss	$	(5,445)	$	(6,009)	$	(4,462)	$	(14,069)

Fixed Cash Operating Expenses

Fixed cash operating expenses is a non-GAAP measure that is defined as operating expenses less depreciation and amortization on property and equipment and capitalized software, stock-based compensation expense and variable lease costs such as servicing costs and underwriting fees. We believe fixed cash operating expenses illustrates our controllable ongoing expenses.

The reconciliations of operating expenses to fixed cash operating expenses for the three and six months ended June 30, 2024 and 2023 are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
			(As Restated)				(As Restated)
Operating expenses	$	12,549	$	13,477	$	25,237	$	29,044
Less:
Depreciation and amortization on property and equipment and capitalized software	263		227		529		197
Stock-based compensation expense	1,552		1,686		2,943		4,303
Servicing costs	1,141		1,103		2,273		2,093
Underwriting fees	491		480		1,000		948

Fixed cash operating expenses	$	9,102	$	9,981	$	18,492	$	21,503

LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands)

Our principal sources of liquidity are our cash and cash equivalents generated from leases and borrowings from our RLOC. Our principal liquidity needs for the next 12 months and beyond are to fund normal recurring operational expenses, including purchases of assets held for lease and debt obligations. As of June 30, 2024 cash and cash equivalents totaled $33,725, restricted cash totaled $4,649, and we had unused capacity on our RLOC of $5,269.

Our revenue and operating results depend significantly on gross originations, which is defined as the retail price of the merchandise associated with lease-purchase agreements entered into during the period. Gross originations are a leading indicator of potential revenue streams, as a percentage of revenue is realized in the quarter in which the gross originations occur. We continue to realize revenue in subsequent quarters until 100% of the revenue is realized.

The Company’s financing is generally comprised of cash from leases and borrowings from the RLOC, which is fully collateralized by our assets. As of August 12, 2024, we had a combined principal balance outstanding of approximately $100,131 related to the RLOC and term loan, both of which mature within twelve months of the date that these financial statements are issued. Both loans were previously refinanced on March 6, 2023 to extend the maturity date from December 4, 2023 to June 4, 2025.

We project we will not have sufficient cash available to pay off the loans upon maturity and are currently seeking to refinance the loans prior to maturity in June 2025. The accompanying financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. Under our debt agreements, we are subject to certain covenants. We were in compliance with all covenants in the RLOC and Term Loan as of June 30, 2024.

The following table presents cash used in operating, investing, and financing activities during the six months ended June 30, 2024 and 2023:


	Six Months Ended June 30,
	2024		2023
Cash, cash equivalents and restricted cash at beginning of period	$	28,811	$	69,841
Net cash provided by (used in):
Operating activities	1,352		(8,551)
Investing activities	(337)		(519)
Financing activities	8,548		(19,200)
Cash, cash equivalents and restricted cash at end of period	$	38,374	$	41,571

The change in cash provided by operating activities of $9,903 for the 2024 period compared to cash used in operating activities for the 2023 period was primarily the result of the change in net loss of $10,525, inclusive of an increase of $7,839 for depreciation and amortization on property held for sale, offset by $4,656 of additions to property held for lease. The decrease in

cash used in investing activities of $182 for the 2024 period compared to the 2023 period is primarily due to a decrease in capitalized software additions.

The change in cash provided by financing activities of $27,748 in the 2024 period compared to cash used in financing activities in the 2023 period is primarily due to the $25,000 repayment on the Term Loan in the 2023 period and an increase in net proceeds from the RLOC of $2,918, primarily due to the timing of cash received from our third party loan processor.

Financing Arrangements

Senior Secured Term Loan and RLOC

On May 14, 2019, Katapult SPV-1 LLC, as borrower (the “Borrower”), and Katapult Group, Inc. (f/k/a Cognical, Inc.) entered into a Credit Agreement with Midtown Madison Management, LLC as agent for various funds of Atalaya Capital Management (“Atalaya”), for a RLOC. The RLOC had a commitment of $125,000 that the lenders had the right to increase to $250,000. Total outstanding principal under the RLOC was $69,731 and $60,744 at June 30, 2024 and December 31, 2023, respectively. In December 2023, our third-party loan processor experienced a timing error in their validation processes. We alerted them to the error, temporarily covering the approved leases with $9,622 of our cash and the issue was resolved in January 2024. Excluding this payment delay, as of December 31, 2023, our outstanding debt under the RLOC would have been $70,366, as the RLOC has a 90% advance rate on eligible accounts receivable.

In addition, in connection with a prior amendment to the Credit Agreement entered into on December 4, 2020, Atalaya also provided us with a senior secured term loan (the “Term Loan”) commitment of up to $50,000. We drew down the full $50,000 of the Term Loan on December 4, 2020. The Term Loan bore interest at LIBOR plus 8.0% (with a 1% LIBOR floor) and an additional 3% interest per annum accrued to the principal balance as PIK interest. Total outstanding principal and PIK interest under the Term Loan was $31,037 at June 30, 2024.

The Credit Agreement contains certain financial covenants including minimum Adjusted EBITDA levels, minimum tangible net worth, minimum liquidity and compliance with a total advance rate, which were amended in connection with the most recent amendment in March 2023.

On March 6, 2023, we entered into the 15th amendment to the Credit Agreement. As part of the amendment, the maturity date of the RLOC and Term Loan was extended from December 4, 2023 to June 4, 2025 and the commitments under the RLOC were reduced to $75,000 from $125,000. The spread on the RLOC was increased to 8.5% from 7.5% while the spread on the Term Loan remained at 8%. Additionally, effective April 1, 2023, the benchmark rate for RLOC and Term Loan was changed from LIBOR to SOFR, subject in each case to a 3% floor plus applicable credit adjustment spread, which is fixed at 0.10%. Additionally, the interest rate for PIK interest on the Term Loan is (A) if Liquidity (as defined in the Credit Agreement) is greater than $25,000, 4.5% and (B) if Liquidity is less than $25,000, to 6%.

As noted above, the RLOC and Term Loan current maturity date are June 4, 2025. Due to the maturity date being less than one year from the balance sheet date of June 30, 2024, we have reclassified our debt to a current liability in our condensed consolidated balance sheet. We are currently seeking to refinance the loans prior to maturity in June 2025.

In connection with the 15th Amendment, we repaid $25,000 of outstanding principal amount of the Term Loan and issued a warrant to purchase up to 80,000 shares of our common stock at an exercise price of $0.25 per share, which vested on September 6, 2023. On December 5, 2023, we issued a warrant to purchase an additional 80,000 shares of our common stock at an exercise price of $0.25 per share which are vested.

On April 24, 2024, we entered into the 16th Amendment in which the Lender granted us a waiver of any Specified Defaults (as defined in the 16th Amendment) related to the accounting errors that led to the restatement of our financial statements for all reporting periods prior to the date of the amendment. In addition, the 16th Amendment also updated certain financial covenants each as defined in the 16th Amendment, including Minimum Adjusted EBITDA (Trailing 3 Months), Minimum Adjusted EBITDA (YTD) and Minimum Tangible Net Worth. As a result, we were in compliance with all of our covenants as of June 30, 2024 and December 31, 2023.

The Credit Agreement is also subject to certain negative and affirmative covenants. The negative covenants limit our ability to: incur additional indebtedness; pay dividends, redeem stock or make other distributions; amend our material agreements; make investments; create liens; transfer or sell the collateral under the Credit Agreement; make negative pledges; consolidate, merge,

sell or otherwise dispose of all or substantially all of our assets; and enter into certain transactions with affiliates. Early repayments of certain amounts under the Term Loan are subject to prepayment penalties.

For additional information on our loan obligations, see Note 6 to our Unaudited Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Pledge and Guaranty

Pursuant to the Pledge Agreement, dated as of May 14, 2019, between Katapult Group, Inc. (f/k/a Cognical, Inc.) and Midtown Madison Management, LLC, Katapult Group, Inc. pledged and granted a first priority security interest in all equity interests of the Borrower and any investment property and general intangibles evidenced by or related to such membership interests. Pursuant to the Corporate Guaranty and Security Agreement, dated as of December 4, 2020, by and among Katapult Group, Inc., Legacy Katapult and Midtown Madison Management, LLC, Katapult and Katapult Group, Inc. have granted a first priority security interest in all of their respective assets and Katapult and Katapult Group, Inc. guarantee payment of all obligations of the Borrower under the Credit Agreement.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of June 30, 2024 were as follows:

(in thousands)

Payments Due by Period

Total

2024-2025

2026-2027

Thereafter

RLOC

Katapult Holdings, Inc. [KPLT] Filings
Katapult Holdings, Inc. [KPLTW] Filings
10-Q	[2024-08-14]
S-1	[2024-06-10]
10-Q	[2024-05-15]
10-K	[2024-04-24]
10-Q	[2023-11-08]
10-Q	[2023-08-09]
10-Q	[2023-05-11]
10-K	[2023-03-09]
10-Q	[2022-11-09]
10-Q	[2022-08-09]
10-Q	[2022-05-10]
10-K	[2022-03-15]
10-Q	[2021-11-12]
10-Q	[2021-08-16]
S-1	[2021-06-30]
10-Q	[2021-05-24]
10-K	[2021-03-08]
10-Q	[2020-11-12]
10-Q	[2020-08-14]
10-Q	[2020-05-13]
10-K	[2020-03-27]
S-1	[2019-10-11]

Katapult Holdings, Inc. [KPLT] Filings

Katapult Holdings, Inc. [KPLTW] Filings