10q10k10q10k.net

What changed in Katapult Holdings, Inc.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Katapult Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+403 added−453 removedSource: 10-K (2025-03-28) vs 10-K (2024-04-24)

Top changes in Katapult Holdings, Inc.'s 2024 10-K

403 paragraphs added · 453 removed · 276 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

29 edited+34 added−47 removed38 unchanged
Biggest changeWe believe we provide an affordable path to leasing or purchasing the durable goods that non-prime customers need at a total cost of ownership that is lower than competing lease-to-own products or other financing options that are available to them. 1 Below is an illustrative timeline depicting the total cost a customer would pay at certain points during the life of a typical lease-to-own transaction: (1) The total cost a customer may pay in connection with our lease-purchase transaction depends on certain factors, including, but not limited to: (1) total cost limitations, which vary across states and generally range between 2.0 and 2.75 times, depending on the duration of the renewal periods, the cash price, referred to as the Lease Multiple, (2) the maximum length of the renewal periods (typically 10-18 months), (3) whether the early purchase option is exercised, and (4) whether the customer exercises their right to terminate the lease, without penalty if current, thereby ending additional renewal payment obligations.
Biggest change(1) The total cost a customer may pay in connection with our lease-purchase transaction depends on certain factors, including, but not limited to: (1) total cost limitations, which vary across states and generally range between 2.0 and 2.75 times, depending on the duration of the renewal periods, the cash price, referred to as the Lease Multiple, (2) the maximum length of the renewal periods (typically 12-18 months), (3) whether the early purchase option is exercised, and (4) whether the customer exercises their right to terminate the lease, without penalty if current, thereby ending additional renewal payment obligations.
Competition We compete with national, regional and local operators of LTO stores, virtual LTO companies, traditional and e-commerce retailers (including many that offer layaway programs and/or installment payment options), traditional and online sellers of new and used merchandise, and various types of consumer finance companies that may enable consumers to shop at traditional or online retailers, as well as with rental stores that do not offer their consumers a purchase option.
We compete with national, regional and local operators of LTO stores, virtual LTO companies, traditional and e-commerce retailers (including many that offer layaway programs and/or installment payment options), traditional and online sellers of new and used merchandise, and various types of consumer finance companies that may enable consumers to shop at traditional or online retailers, as well as with rental stores that do not offer their consumers a purchase option.
After ninety (90) days, but prior to reaching the maximum renewal term, the customer may exercise the purchase option at a discount on the remaining lease renewal payments (typically 55–65% of the remaining renewal payments). Customers may renew through the maximum term at which point they will have paid approximately two times the cash price to own the item.
After ninety (90) days, but prior to reaching the maximum renewal term, the customer may exercise the purchase option at a discount on the remaining lease renewal payments (typically 55–65% of the remaining renewal payments). (2) Customers may renew through the maximum term at which point they will have paid approximately two times the cash price to own the item.
Adverse events that occur during these months could have a disproportionate effect on our financial results for the year. 7 Employees and Human Capital Resources At Katapult, our people are our most valuable resource and critical to our success. We believe in an open and collaborative work environment which drives employee accountability and ownership in their performance and development.
Adverse events that occur during these months could have a disproportionate effect on our financial results for the year. 5 Employees and Human Capital Resources At Katapult, our people are our most valuable resource and critical to our success. We believe in an open and collaborative work environment which drives employee accountability and ownership in their performance and development.
See the section titled “Risk Factors” in this Annual Report on Form 10-K for additional information about the laws and regulations to which we are, or may become subject and about the risks to our business associated with such laws and regulations. 9 Intellectual Property Intellectual property and proprietary rights are important to the success of our business.
See the section titled “Risk Factors” in this Annual Report on Form 10-K for additional information about the laws and regulations to which we are, or may become subject and about the risks to our business associated with such laws and regulations. 7 Intellectual Property Intellectual property and proprietary rights are important to the success of our business.
While we hold required licenses, such licensing requirements could unexpectedly change which in turn could impact our results of operations, financial condition and earnings. 8 Regarding federal law, at the present time, no federal law specifically regulates the core lease-purchase transaction offered by us.
While we hold required licenses, such licensing requirements could unexpectedly change which in turn could impact our results of operations, financial condition and earnings. 6 Regarding federal law, at the present time, no federal law specifically regulates the core lease-purchase transaction offered by us.
The SEC maintains an internet site, www.sec.gov, containing reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. 10
The SEC maintains an internet site, www.sec.gov , containing reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. 8
Item 1. Business Company Overview We are a technology driven lease-to-own ("LTO") platform that integrates with omnichannel retailers and e-commerce platforms to power the purchasing of everyday durable goods for underserved U.S. non-prime customers. We were founded and incorporated in Delaware in 2012.
Item 1. Business Company Overview We are a technology driven lease-to-own ("LTO") platform that integrates with omnichannel retailers and e-commerce platforms to power the purchasing of everyday durable goods by underserved U.S. nonprime customers. We were founded and incorporated in Delaware in 2012.
In line with this, our platform is based on a quick three-step application and a fully automated approval process that generates a decision in five seconds or less. We also offer flexible and transparent terms and we never charge our customers late fees.
Our platform is based on a quick three-step application and a fully automated approval process that generates a decision in five seconds or less. Our terms are flexible and transparent and we never charge our customers late fees.
There is also discussion in Congress of a new federal data privacy and security law to which we may become subject if it is enacted. In addition, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to consumers whose personal data has been disclosed as a result of a data breach.
There are also discussions in Congress, from time-to-time, of new federal data privacy and security laws to which we may become subject if they are enacted. In addition, laws in all 50 U.S. states generally require businesses to provide notice under certain circumstances to consumers whose personal data has been disclosed as a result of a data breach.
As of December 31, 2023, we have integrated our leasing solution with more than 200 merchants and we offer customers the ability to shop with more than 25 merchants through our Katapult marketplace powered by Katapult Pay.
As of December 31, 2024, we have integrated our leasing solution with more than 250 merchants and we offer customers the ability to shop with more than 30 merchants through our Katapult marketplace powered by Katapult Pay.
We have an agreement with Wayfair Inc., dated November 24, 2020, (the "Wayfair Agreement") whereby we provide Wayfair customers with lease-purchase options for certain Wayfair products directly on Wayfair’s customer website. We originated approximately 52% and 57% of our gross originations for the years ended December 31, 2023 and 2022, respectively through the Wayfair Agreement.
We have an agreement with Wayfair Inc., dated November 24, 2020, (the "Wayfair Agreement") whereby we provide Wayfair customers with lease-purchase options for certain Wayfair products directly on Wayfair’s customer website. Wayfair (1) represented 36% and 49% of our gross originations for the years ended December 31, 2024 and 2023, respectively through the Wayfair Agreement.
As of December 31, 2023, we had 90 employees located in the United States. We also engage a limited number of consultants and contractors to supplement our permanent workforce. W e have never experienced any work stoppages and maintain good working relationships with our employees.
As of December 31, 2024, we had 94 employees located in the United States. We also engage consultants and contractors to supplement our permanent workforce. We have never experienced any work stoppages and maintain good working relationships with our employees.
NPS is a score that measures the likelihood of users to recommend a company’s products or services to others, and ranges from a low of negative 100 to high of positive 100, and benchmark scores can vary significantly by industry. A score greater than zero represents a company having more promoters than detractors.
NPS is a score that measures the likelihood of users to recommend a company’s products or services to others, and ranges from a low of negative 100 to high of positive 100, and benchmark scores can vary significantly by industry.
We were born and bred to be an e-commerce solution for customers and we believe we are the only non-prime customer lease-purchase platform focused on e-commerce. We offer a fully-digital, seamless and differentiated platform driven by proprietary technology and risk models that have been developed over several years. In 2022, we launched our mobile app featuring Katapult Pay.
We are an e-commerce solution for customers and we believe we are the only non-prime customer lease-purchase platform focused on e-commerce. We offer a fully-digital, seamless and differentiated platform driven by proprietary technology and risk models that have been developed over several years.
Merchants: We provide merchants with a reliable LTO solution that can help them grow their businesses. For merchants, our LTO solution provides access to a new customer base that historically has not qualified for traditional financing. By helping merchants reach this previously inaccessible customer, we believe we deliver incremental sales to merchants and lower their customer acquisition costs.
For merchants, our LTO solution provides access to a new customer base that historically has not qualified for traditional prime financing. By helping merchants reach this customer segment, we believe we deliver incremental sales to merchants and lower their customer acquisition costs.
As of December 31, 2023, we have one provisional patent application filed covering our Katapult Pay technology and three registered trademarks and one trademark application in the United States.
As of December 31, 2024, we have one non-provisional patent application filed covering our Katapult Pay technology and we own three registered trademarks .
Technology is at the core of everything we do - from simplifying the customer experience to driving repeat transactions to launching innovative new products that benefit our merchants and customers to managing risk.
A score greater than zero represents a company having more promoters than detractors. • Proprietary technology that powers our scalable platform. Technology is at the core of everything we do - from simplifying the customer experience, to driving repeat transactions, to launching innovative new products that benefit our merchants and customers, to managing risk.
We primarily operate within the virtual LTO market, which is estimated to have a total addressable market opportunity of $50 - $60 billion. Based on our 2023 gross originations, we believe that we currently capture less than 1% market share. A lease-to-own transaction is a flexible alternative for customers to obtain and enjoy merchandise with no long-term obligation.
Based on our 2024 gross originations, we believe that we currently capture less than 1% market share. A lease-to-own transaction is a flexible alternative for consumers to obtain and enjoy merchandise with no long-term obligation.
Our model is primarily driven by a technology platform that does not require significant increases in operating overhead to support sales growth. • We have no inventory risk and offer a drop-ship option. We do not have the costs associated with buying, storing and shipping inventory. Instead, goods are shipped directly to customers.
We do not incur costs associated with buying, storing and shipping inventory, which eliminates inventory risk. Over time as transaction volume grows, we are positioned to achieve operating leverage because our model is primarily driven by a technology platform that does not require significant increases in operating overhead to support sales growth.
We provide merchants with insightful analytics that help them understand payment activities and risk performance associated with non-prime applications. The platform also offers other key insights into customers’ shopping habits to help merchants optimize customer conversion and customer acquisition costs. • Client success support.
The platform also offers other key insights into customers’ shopping habits to help merchants optimize customer conversion and customer acquisition costs.
We believe this will allow us to grow gross originations even if merchants are not able to immediately integrate our lease-to-own solution into their payment flows. Grow Our Customer Base and Repeat Purchase Rate • Grow our customer base.
We believe this will allow us to grow gross originations even if merchants are not able to immediately integrate our LTO solution into their payment flows. • Partnerships: We intend to enter new partnerships that deliver new customers, increase brand awareness and customer loyalty and enhance our product offering while requiring minimal technical investment.
Our top ten merchants in the aggregate represented approximately 81% and 83% of our total gross originations for the years ended December 31, 2023 and 2022, respectively. Technology: Our proprietary technology is a core pillar of our business.
Our top ten merchants in the aggregate represented approximately 78% and 81% of our total gross originations for the years ended December 31, 2024 and 2023, respectively. (1) Wayfair gross originations exclude transactions through Katapult Pay and only include transactions directly through Wayfair's waterfall platform.
The platform considers data beyond traditional credit scores, such as lease history, behavioral biometrics and mobile device information to predict repayment ability, and leverages this with real-time response data. Our Growth Strategies We estimate that our addressable market opportunity within the vast virtual lease-to-own market is between $50 and $60 billion.
Our behavioral learning-based risk models are designed to effectively price risk and provide customized recommendations. The platform considers data beyond traditional credit scores, such as lease history, behavioral biometrics and mobile device information to predict repayment ability, and leverages this with real-time response data • Market-leading customer experience and service. Our customer experience is grounded in transparency, respect and fairness.
The system is non-FICO based, relying on internally developed scoring and analytics to identify appropriate customers for our LTO offering. Our behavioral learning-based risk models are designed to effectively price risk and provide customized recommendations.
There are no credit checks or requirements for bank account or payroll data. 3 Our proprietary, end-to-end technology platform has been designed and built to handle high volumes of data from e-commerce transactions. The system is non-FICO based, relying on internally developed scoring and analytics to identify appropriate customers for our LTO offering.
Over time, we expect to remain focused on maintaining and creating operational efficiencies that will allow us to expand our margins as we achieve revenue growth.
As we achieve revenue growth, we believe we can maintain and create operational efficiencies that will allow us to expand our operating margins, enhance profitability and grow cash and cash equivalents. Operating Segments We have one operating segment under which we report our total financial and operating performance.
We have integrated our technology with a variety of leading U.S. durable goods merchants and we offer an innovative, mobile app that features Katapult Pay TM , our virtual card technology.
In late 2022, we launched the Katapult mobile app, which includes a feature called Katapult Pay TR ("KPay") that allows consumers to leverage our virtual credit card technology to shop with a variety of durable goods merchants featured in our app marketplace.
Our proprietary technology behind Katapult Pay gives us the unique ability to quickly and reliably differentiate between leasable and non-leasable items in a customer's cart without an integration with that merchant. 4 Developer-First Approach to Integration Our platform can be easily and seamlessly integrated regardless of integration method: • Platform plug-in : Our platform plug-in is fast and easy to integrate with a number of e-commerce platforms, including Salesforce, Shopify, BigCommerce, Magento, NopCommerce and WooCommerce.
Our proprietary technology drives the Katapult app and Katapult Pay by giving us the unique ability to quickly and reliably differentiate between leasable and non-leasable items in a customer's cart without a direct or waterfall integration with a merchant. Our technology also creates many benefits for our merchant-partners.
Lease-purchase transactions, unlike credit or a loan, are not subject to variable interest rates and do not include finance charges. Other customer benefits include: • Access to e-commerce retailers. We are a transaction option at checkout for well-known e-commerce merchants such as Casper, Lenovo, SimpleTire and Wayfair. • Clear path to ownership of durable goods.
Lease-purchase transactions, unlike credit or a loan, are not subject to variable interest rates and do not include finance charges. 2 Our Strategy Our strategy supports our mission to enable consumers to get the durable goods they need when they need them and connect retailers with a growing base of engaged and loyal consumers.
Removed
Our LTO platform offers customers an alternative to traditional financing of automotive goods, computers, electronics, home furnishings and other durable goods. We provide underserved nonprime consumers access to the durable goods they need. We believe we are creating a more inclusive economy by transforming the way non-prime customers can purchase durable goods.
Added
We primarily operate within the virtual LTO market, which is estimated to have a total addressable market opportunity of $50 - $60 billion. We operate exclusively in the U.S. and our platform is available for use by consumers in 46 states and the District of Columbia.
Removed
By using our integrated LTO solution or Katapult Pay, customers who may be unable to access traditional financing can use our product to shop directly with more than 200 merchant partners. Customers can also choose to shop directly with a growing number of merchants in the Katapult marketplace within our mobile app.
Added
Goods are leased in exchange for a weekly, bi-weekly, semi-monthly or monthly payment, and customers have the option to purchase or return the items at any point during the duration of the lease-purchase agreement. These goods are available immediately to our customers upon the consummation of their lease-purchase agreement with Katapult.
Removed
Customers: By offering a best-in-class LTO solution, we have built a loyal and engaged non-prime customer base. For customers, our process is built to be simple, fast, and transparent.
Added
Our LTO platform offers consumers, particularly those with nonprime credit, an alternative path to ownership compared with traditional financing, which may not be accessible to them due to credit or other financial constraints. Many durable goods are eligible for lease-to-own, including home furnishings, automotive goods, computers, electronics, and appliances, among others.
Removed
We empower customers with fair and transparent terms that offer a path to ownership for new and used durable goods with a leasable amount ranging up to $3,500. • Simple application process.
Added
We are mission-driven and focused on providing underserved, nonprime consumers, with a simple, quick, transparent and fair pathway to acquiring the durable goods they need, when they need them.
Removed
Through an easy 3-step application process requiring basic information inputs and no hard credit check, customers receive approval in five seconds or less. • Flexible and convenient repayment options with no late fees. Ever. Payments can be automatically charged to the customer’s authorized credit card, checking account, debit card or the customer can make payments directly via our mobile app.
Added
By valuing the potential in individual consumers and treating them with the dignity they deserve, we believe we are creating a more inclusive economy that can better meet the needs of nonprime consumers. For customers, our process is built to be simple, fast, and transparent.
Removed
Additionally, customers may make additional payments and exercise cost-saving early payment options. 2 • No long-term commitment. Customers can elect to lease an item for the full term, pay off the lease early, or return the item at any time during the term of the lease.
Added
Katapult’s lease-to-own platform is differentiated from traditional installment loans, credit cards, and buy now, pay later options and we believe it can meet the needs of nonprime consumers in a way that traditional options cannot.
Removed
Customers may return the item under the terms of the lease agreement if they do not exercise a purchase option or renew the lease. • Easy-to-use mobile app. In 2022, we launched our mobile app that enables our customers to interact more easily with Katapult on their iOS or Android mobile devices.
Added
Customers benefit from no long-term obligations, the flexibility to terminate their lease at any time without penalty, and they are only responsible for any outstanding balance up to the return date. Payment plans are convenient and tailored to suit individual needs.
Removed
By using the app, customers can: ◦ Make payments and track their account activity in real-time ◦ Use our innovative app feature called Katapult Pay to shop and complete new lease transactions with a variety of merchants such as Amazon, Best Buy and Walmart.
Added
Our flexible terms include renewal periods of varying durations, including 12- and 18-months, and we also offer special pricing for early lease-purchase options (buyouts) within 90 days. In addition, based on our commitment to fairness and our customer-centric approach, Katapult does not increase the cash price of leased items and does not charge late or non-sufficient funds fees ("NSF fees").
Removed
Katapult Pay allows customers to use our powerful one-time use virtual credit card technology to facilitate payment to the merchant at check out. We believe that the work we are doing to create a lease solution that meets the needs of our underserved customer base gives us a strong competitive position among customers across the U.S.
Added
We believe these principles distinguish our offering from many of our competitors. We believe we provide an affordable path to leasing or purchasing the durable goods that non-prime customers need at a total cost of ownership that is lower than many competing lease-to-own products or other financing options that are available to them.
Removed
Since inception through December 31, 2023, we have approved approximately 2.7 million customers. We had a net promoter score (NPS) of 52 as of December 31, 2023.
Added
Ultimately, we believe merchants that work with us and reach this underserved customer segment see higher retail conversion and greater marketing spend efficiency. Currently, we offer four channels by which consumers can access our platform, and these products are our primary customer acquisition channels. These options are: direct integration, waterfall integration, mobile app and text-to-checkout.
Removed
Ultimately, we believe merchants that work with us and reach this underserved customer segment see higher retail conversion and greater marketing spend efficiency. Key merchant benefits of working with Katapult include: • More customers. We help merchants acquire incremental customers from the non-prime segment who otherwise might not be shopping on their site. • Better conversion.
Added
Some merchants can be accessed through more than one of our four acquisition channels. A direct integration is when we integrate with a merchant's digital point of sale ("POS") system to facilitate online transactions via Application Programming Interfaces or through third-party plug-ins such as Shopify, Magento and 1 BigCommerce, among others.
Removed
Merchants have the potential to increase customer conversion when they offer our platform as it provides customers an alternative option. • High rate of repeat customers. Our easy-to-use platfor m has generated a loyal following of repeat customers (defined as customers who have originated more than one lease with Katapult over their lifetime).
Added
This option allows consumers to select a Katapult lease transaction as their method of payment at checkout. Our waterfall integration product allows us to partner with waterfall financing platforms. In a waterfall transaction, the potential customer completes a credit application, which then flows from the prime lender to other financing and lease-purchase options automatically.
Removed
During the year ended December 31, 2023, 54.2% of our gross originations were completed with repeat customers. • Marketing capabilities. We enable merchants to offer non-prime customers a lease-purchase option at the point of sale, which is coupled with Katapult tools and digital resources to attract, identify and educate customers on the Katapult option for paying over time. • Analytics.
Added
If our lease offer is the best match for the potential customer credit profile it will be presented to the consumer at the point of sale. If the consumer decides to accept our offer, they can utilize a Katapult lease to pay for their durable goods purchase at checkout.
Removed
Our client success team partners with merchants to analyze and interpret the insights delivered through our LTO platform.
Added
Both our direct and waterfall options involve some integration support from direct merchant partners.We refer to merchants with whom we have a contractual arrangement to provide either a direct integration or a waterfall integration as “direct merchants”.
Removed
Our team conducts in-depth user experience analyses of merchant online storefronts, providing custom recommendations for the ideal mix and display of our product offerings to present to customers in order to optimize average order values and conversion rates. 3 We typically work with merchants in three key ways.
Added
This option does not require integration support from merchants and the consumer interaction begins and ends in the Katapult app. With the launch of this feature, customers can start and complete lease originations within our ecosystem.
Removed
First, we have integrations with leading e-commerce platforms such as BigCommerce, Magento, Shopify and WooCommerce, among others, that allow us to easily and seamlessly integrate with merchants to offer the Katapult LTO as a payment option for customers at checkout. Second, we have platform integrations with leading prime lenders that allow us to participate in prime lending waterfall partnerships.
Added
This functionality has allowed Katapult to create its app marketplace, where customers can go to shop with more than 250 merchants that have either a direct or waterfall integration with Katapult or that are available for checkout via KPay. We refer to merchants that are available for checkout via KPay as “KPay enabled merchants”.
Removed
A waterfall is where the application will flow from the prime lender to other financing and lease-purchase options automatically; this gives customers the best option for their situations.
Added
Finally, we also offer an in-store POS integration option called text-to-checkout, which simplifies the in-store leasing experience for consumers while allowing Katapult to retain control of the customer journey and ensure adherence to regulatory requirements.
Removed
Our prime lender integrations lead to higher approval rates for merchants who have included us as a payment option, helping ensure that customers have payment options at checkout and merchants make the most of every customer site visit.
Added
To achieve this, we are focused on the following initiatives: • Merchant Engagement: Within this initiative, we are focused on building new, and retaining existing, relationships with merchants and waterfall finance companies by continuing to enhance our innovative integrated products.
Removed
For both of these options, we offer off-the-shelf, integration options that are designed to provide seamless flexibility to merchants seeking efficient and effective rollouts of digital POS solutions. Third, by leveraging our mobile app feature, Katapult Pay, we allow customers to shop with a growing number of merchants directly in the Katapult marketplace.
Added
We believe we have significant opportunity to grow gross origination volumes by increasing our transaction volume with merchants we currently work with and others that have yet to adopt our solution. • Consumer Engagement: We are focused on using our app marketplace and disciplined marketing strategies to increase engagement with existing and potential customers, and grow our conversion and repeat purchase rates.
Removed
This accelerated option allows merchants to benefit from our LTO solution with minimal technology lift and a lower initial investment, while giving Katapult more control to own the end-to-end customer experience and improving conversion and repeat purchase rates. Our largest merchant partner is Wayfair, Inc. ("Wayfair").
Added
Our app marketplace allows consumers to originate leases with merchants through direct or waterfall integrations on merchant websites or within the Katapult marketplace using KPay. Since we launched the app in late 2022, transactions that were completed using KPay have grown to represent 32% of our total gross originations for the year ended December 31, 2024.
Removed
Integrations with these platforms allow merchants to offer the Katapult lease-to-own solution as an option at checkout, process our charges in their respective order management systems, and gain access to Katapult's platform-based analytics software while maintaining control over the customer experience. • Developer documentation.
Added
Approximately 54% of our 2024 gross originations started with an interaction in our mobile app, whereby the customer checked out either through Kpay or a waterfall transaction. We intend to continue to thoughtfully expand the breadth of merchants available in our marketplace as we continue to transform our Katapult app marketplace into a shopping destination.
Removed
Our developer portal contains extensive developer documentation that makes it easy for developers to integrate via turnkey solutions, custom APIs, hosted programs, or other integrations. • Direct API : Our application programming interface ("API") enables merchants to fully control the placement and experience of our offering, which we believe aids the seamless integration of our lease-to-own option into the merchant’s existing infrastructure.
Added
We believe we can leverage our technology to help partners monetize their customer bases and help Katapult grow gross originations and revenue. • Unlock the power of our financial model: We are focused on maintaining fiscal discipline that enables us to invest in our growth opportunities while generating profitable growth.
Removed
Our direct API allows for fast integration with minimal investment; merchants can easily connect the platform to their existing online shopping cart.
Added
Operations We believe our LTO offerings are distinguished by the following core capabilities: • Advanced underwriting. Katapult’s proprietary technology enables frictionless underwriting with minimal customer inputs (seven required fields) and real-time decision-making (five seconds or less).
Removed
Moreover, we provide a dedicated integration team to ensure efficient rollouts. • Waterfall partnerships : A waterfall is where the application will flow from the prime lender to other financing and lease-purchase options automatically; this gives the customer the best option for their situation.
Added
We have built a large and growing customer base of engaged and loyal customers who value the LTO product we offer and the way we treat our customers. We believe our customer-centric model fosters trust and customer retention. We offer hardship programs, flexible repayment options and fair terms to meet the needs of customers throughout the US.
Removed
Our technology supports sophisticated integration with these partners with the goal of ensuring a smooth and efficient customer transaction experience during application and checkout. Our technology-driven underwriting and risk assessment models create a competitive advantage.
Added
Our net promoter score ("NPS") and our repeat purchase rate, defined as the percentage of in-quarter originations from existing customers were 58 and 61.5% respectively, as of December 31, 2024.
Removed
Technology, Engineering Talent and Product Architecture Our proprietary risk models have been built on alternative data sets, including data from more than 1.3 millio n l ease-to-own transactions and over ten plus years of repayments. Furthermore, the platform’s risk management models are built to utilize artificial intelligence and machine learning to incorporate additional data from new lease-purchase transactions.

… 30 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

171 edited+47 added−81 removed181 unchanged
Biggest changeRisks Relating to Our Technology and Our Platform • Real or perceived software errors, failures, bugs, defects, or outages could adversely affect our business, results of operations, financial condition, and prospects. • Our results depend on continued integration and support of our platforms (both the Katapult App and our direct and/or waterfall integration technologies) by our merchant partners. • We rely on third-party merchants to allow access to their stores through our mobile app. • We are subject to stringent and changing laws, regulations, rules, standards and contractual obligations related to data privacy and security, which could increase the cost of doing business, compliance risks and potential liability and otherwise negatively affect our operating results and business regulations. • Any significant disruption in, or errors in, service on our platform or relating to vendors, including events beyond our control, could prevent us from processing transactions on our platform or posting payments and have a material and adverse effect on our business, results of operations, financial condition, and prospects. • Data security breaches or other security incidents with respect to our information technology systems, networks or data, or those of third parties upon which we rely, could result in adverse consequences, including but not limited to regulatory investigations, litigation, fines and penalties, disruption of our business operations, reputational harm, loss of revenue or profits, and loss of customers. • While we take precautions to prevent customer identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of the lease-to-own transactions facilitated through our platform. • Failure to adequately obtain, maintain, protect, defend and enforce our intellectual property and proprietary rights could harm our business, operating results and financial condition. 12 Legal and Compliance Risks • Our business is subject to the requirements of various federal, state and local laws and regulations, which can require significant compliance costs and expose us to government investigations, significant additional costs, fines or other monetary penalties or settlements, and compliance-related burdens. • We are subject to sales, income and other taxes, which can be difficult and complex to calculate due to the nature of our businesses.
Biggest changeIf we fail to comply with the applicable requirements of Visa, Mastercard or other payment processors, those payment processors could seek to fine us, suspend us or terminate our registrations which could have a material adverse effect on our business, results of operations, financial condition, and prospects. 9 Risks Related to Our Technology and Our Platform • Real or perceived software errors, failures, bugs, defects, or outages could adversely affect our business, results of operations, financial condition, and prospects. • Our results depend on continued integration and support of our platforms, including our direct and/or waterfall integration technologies, by our merchant partners. • We rely on KPay enabled merchants to allow access to their stores through our mobile app and our desktop and mobile websites. • We are subject to stringent and changing laws, regulations, rules, standards and contractual obligations related to data privacy and security, which could increase the cost of doing business, compliance risks and potential liability and otherwise negatively affect our operating results and business regulations. • Any significant disruption in, or errors in, service on our platform or relating to vendors, including events beyond our control, could prevent us from processing transactions on our platform or posting payments and have a material and adverse effect on our business, results of operations, financial condition, and prospects. • Data security breaches or other security incidents with respect to our information technology systems, networks or data, or those of third parties upon which we rely, could result in adverse consequences, including but not limited to regulatory investigations, litigation, fines and penalties, disruption of our business operations, reputational harm, loss of revenue or profits, and loss of customers. • Failure to adequately obtain, maintain, protect, defend and enforce our intellectual property and proprietary rights could harm our business, operating results and financial condition.
We are subject to legal proceedings and claims from time to time that may seek material damages or otherwise may have a material adverse effect on our business.
We are subject to legal proceedings and claims from time to time that may seek material damages or otherwise may have a material adverse effect on our business. We are subject to legal proceedings and claims from time to time that may seek material damages or otherwise may have a material adverse effect on our business.
These consequences may include: interruptions to our operations (including availability of data), violation of applicable data privacy and security laws, regulations, rules, standards and contractual obligations; litigation (including class claims), damages, an obligation to notify regulators and affected individuals, the triggering of indemnification and other contractual obligations, government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing personal and other sensitive data; negative publicity; reputational damage; loss of customers and ecosystem partners; monetary fund diversions; financial loss; and other similar harms.
These consequences may include: interruptions 25 to our operations (including availability of data), violation of applicable data privacy and security laws, regulations, rules, standards and contractual obligations; litigation (including class claims), damages, an obligation to notify regulators and affected individuals, the triggering of indemnification and other contractual obligations, government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing personal and other sensitive data; negative publicity; reputational damage; loss of customers and ecosystem partners; monetary fund diversions; financial loss; and other similar harms.
For information on data privacy and security laws, regulations, rules, standards and contractual obligations we are, or may in the future become, subject to, and the associated risks to our business, see the section titled “Risk Factors—Risks Relating to Our Technology and Our Platform—We are subject to stringent and changing laws, regulations, rules, standards and contractual obligations related to data privacy and security, which could increase the cost of doing business, compliance risks and potential liability and otherwise negatively affect our operating results and business.” We are subject to sales, income and other taxes, which can be difficult and complex to calculate due to the nature of our businesses.
For information on data privacy and security laws, regulations, rules, standards and contractual obligations we are, or may in the future become, subject to, and the associated risks to our business, see the section titled “Risk Factors—Risks Related to Our Technology and Our Platform—We are subject to stringent and changing laws, regulations, rules, standards and contractual obligations related to data privacy and security, which could increase the cost of doing business, compliance risks and potential liability and otherwise negatively affect our operating results and business.” We are subject to sales, income and other taxes, which can be difficult and complex to calculate due to the nature of our businesses.
If this were to occur, we could face significant material adverse consequences, including: • a limited availability of market quotations for our securities; • reduced liquidity for our securities; • a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; • a limited amount of news and analyst coverage; and • a decreased ability to issue additional securities or obtain additional financing in the future.
If this were to occur, we could face significant material adverse consequences, including: • a limited availability of market quotations for our securities; • reduced liquidity for our securities; • a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; • a limited amount of news and analyst coverage; and 31 • a decreased ability to issue additional securities or obtain additional financing in the future.
If “ownership changes” within the meaning of Section 382 of the Code have occurred, and if we earn net taxable income, our ability to use our net operating loss carryforwards and other tax credits generated since inception to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability 25 to us and could require us to pay U.S. federal income taxes earlier than would be required if such limitations were not in effect.
If “ownership changes” within the meaning of Section 382 of the Code have occurred, and if we earn net taxable income, our ability to use our net operating loss carryforwards and other tax credits generated since inception to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us and could require us to pay U.S. federal income taxes earlier than would be required if such limitations were not in effect.
In such event, if we are unable to negotiate with our Lender for a waiver or dispensation under the agreement, we would not be able to borrow under the Credit Agreement and our Lender would have the right to terminate the loan commitments under the Credit Agreement and accelerate repayment of all obligations under the 22 Credit Agreement that would become due and payable immediately, which would have a material adverse effect on our business, results of operations and financial position.
In such event, if we are unable to negotiate with our Lender for a waiver or dispensation under the agreement, we would not be able to borrow under the Credit Agreement and our Lender would have the right to terminate the loan commitments under the Credit Agreement and accelerate repayment of all obligations under the Credit Agreement that would become due and payable immediately, which would have a material adverse effect on our business, results of operations and financial position.
The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel will need to continue to devote a substantial amount of time to these compliance initiatives. The increased costs will impact our financial position.
The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable 35 securities rules and regulations impose various requirements on public companies. Our management and other personnel will need to continue to devote a substantial amount of time to these compliance initiatives. The increased costs will impact our financial position.
In addition, common stock reserved for future issuance under our equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.
Common stock reserved for future issuance under our equity incentive plans will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates under Rule 144, as applicable.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, regulations and rules including data breach notification laws, personal data privacy laws, and customer protection laws. For example, the Telephone Consumer Protection Act (“TCPA”) imposes specific requirements relating to marketing to individuals using technology such as telephones, mobile devices, and text messages.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, regulations and rules including data breach notification laws, personal data privacy laws, and consumer protection laws. For example, the Telephone Consumer Protection Act (“TCPA”) imposes specific requirements relating to marketing to individuals using technology such as telephones, mobile devices, and text messages.
We rely on these vendors to protect their systems, networks and facilities against damage or service interruptions from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses, cyber-attacks or other attempts to harm these systems, data security breaches or other security incidents, criminal acts, and similar events.
We also rely on these vendors to protect their systems, networks and facilities against damage or service interruptions from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses, cyber-attacks or other attempts to harm these systems, data security breaches or other security incidents, criminal acts, and similar events.
If we fail to maintain customer satisfaction and trust in our brand, our business, results of operations, financial condition, and prospects would be materially and adversely affected. We provide a lease-to-own financing option for qualified customers seeking to obtain durable goods from e-commerce merchants.
If we fail to maintain customer satisfaction and trust in our brand, our business, results of operations, financial condition, and prospects would be materially and adversely affected. We provide a lease-to-own financing option for qualified customers seeking to obtain durable goods from omnichannel and e-commerce merchants.
We may incur net losses in the future and may not be profitable on a quarterly or annual basis. Our ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all. The failure to raise capital when needed could harm our business, operating results and financial condition.
We may incur net losses in the future and may not be profitable on a quarterly or annual basis. 17 Our ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all. The failure to raise capital when needed could harm our business, operating results and financial condition.
This could reduce our available cash or cause reputational harm, any of which could have a material and adverse effect on our business, results of operations, financial condition, and future prospects. In December 2023, the processor for our loan provider experienced a timing error in their validation processes.
This could reduce our available cash or cause reputational harm, any of which could have a material and adverse effect on our business, results of operations, financial condition, and prospects. In December 2023, the processor for our loan provider experienced a timing error in their validation processes.
For example, we process the personal data, including sensitive personal data, of customers, including Social Security numbers. We are subject to numerous data privacy and security obligations, such as various laws, 26 regulations, rules, standards and contractual obligations that govern the processing of personal data by us or by third parties on our behalf.
For example, we process the personal data, including sensitive personal data, of customers, including Social Security numbers. We are subject to numerous data privacy and security obligations, such as various laws, regulations, rules, standards and contractual obligations that govern the processing of personal data by us or by third parties on our behalf.
We may rely upon third-party service providers and technologies to operate critical business systems to process confidential, proprietary, personal and other information in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, virtual card processing, encryption and authentication technology, employee email, and other functions.
We rely upon third-party service providers and technologies to operate critical business systems to process confidential, proprietary, personal and other information in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, virtual card processing, encryption and authentication technology, employee email, and other functions.
As a result, our business, results of operations, financial condition, and prospects would be materially and adversely affected. 17 If we are unable to attract new customers and retain and grow our relationships with our existing customers, or if attracting or retaining customers is not cost-efficient, our results of operations, financial condition, and prospects would be materially and adversely affected.
As a result, our business, results of operations, financial condition, and prospects would be materially and adversely affected. If we are unable to attract new customers and retain and grow our relationships with our existing customers, or if attracting or retaining customers is not cost-efficient, our results of operations, financial condition, and prospects would be materially and adversely affected.
We are incorporated into the supply chain of a large number of companies worldwide and, as a result, if our products are compromised, a significant number of companies could be simultaneously affected. The potential liability and associated consequences we could suffer as a result of such a large-scale event could be catastrophic and result in irreparable harm.
We are incorporated into the supply chain of a large number of companies worldwide and, as a result, if our products are compromised, a significant number of companies could be simultaneously affected. The potential liability and associated 24 consequences we could suffer as a result of such a large-scale event could be catastrophic and result in irreparable harm.
We are also at risk of potential litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, or other claims arising from the restatement. As of the date of this Annual Report, we are not aware of any such disputes arising out of the restatement.
We are also at risk of potential litigation or other disputes which may include, among others, claims invoking the federal 30 and state securities laws, or other claims arising from the restatement. As of the date of this Annual Report, we are not aware of any such disputes arising out of the restatement.
Our continued success depends on our ability to generate repeat use and increased gross originations from existing customers and to attract new customers to our platform. Our ability to retain and grow our relationships with our customers depends on the willingness of customers to use our products and services, including our mobile app and Katapult Pay.
Our continued success depends on our ability to generate repeat use and increased gross originations from existing customers and to attract new consumers to our platform. Our ability to retain and grow our relationships with our customers depends on the willingness of customers to use our products and services, including our mobile app and Katapult Pay.
The loss of the services of any of our leadership team could materially and adversely affect our business, results of operations, financial condition, and future prospects. The experience of our leadership team are valuable assets to us. Our leadership team has significant experience in the financial technology industry and would be difficult to replace.
The loss of the services of any of our leadership team could materially and adversely affect our business, results of operations, financial condition, and prospects. The experience of our leadership team are valuable assets to us. Our leadership team has significant experience in the financial technology industry and would be difficult to replace.
If we are not permitted to use arbitration agreements and/or class action waivers, or if the enforceability of such agreements and waivers is restricted or eliminated, we could incur increased costs to resolve legal actions brought by customers, employees and others, as we would be forced to participate in more expensive and lengthy dispute resolution processes. 37 Operational Risks Related to Our Business Uncertain market and economic conditions have had, and may in the future have, serious adverse consequences on our business, financial condition and share price.
If we are not permitted to use arbitration agreements and/or class action waivers, or if the enforceability of such agreements and waivers is restricted or eliminated, we could incur increased costs to resolve legal actions brought by customers, employees and others, as we would be forced to participate in more expensive and lengthy dispute resolution processes. 32 Operational Risks Related to Our Business Uncertain market and economic conditions have had, and may in the future have, serious adverse consequences on our business, financial condition and share price.
As a result of the foregoing conclusion, we determined that our previously issued financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022 and the relevant quarterly periods and filings discussed below in the risk factor “ We face risks related to the restatement of our previously issued consolidated financial statements and financial information as of and for the fiscal year ended December 31, 2022, as well as for the interim financial periods for 2022 and 2023, which may adversely impact our business ” should no longer be relied upon and have been restated.
As a result, we determined that our previously issued financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022 and the relevant quarterly periods and filings discussed below in the risk factor “— We face risks related to the restatement of our previously issued consolidated financial statements and financial information as of and for the fiscal year ended December 31, 2022, as well as for the interim financial periods for 2022 and 2023, which may adversely impact our business ” should no longer be relied upon and have been restated.
Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.
Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves its forecasted growth, our business could fail to grow at similar rates, if at all.
As such, we maintain a system of internal control over financial reporting, but there are limitations inherent in internal control systems. 33 A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
As such, we maintain a system of internal control over financial reporting, but there are limitations inherent in internal control systems. A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Moreover, prime lenders may loosen their underwriting standards and provide credit to non-prime customers, which would impact our gross origination as well as the credit quality of our customers and our business and results of operations.
Moreover, prime lenders may loosen their underwriting standards and provide credit to non-prime consumers, which would impact our gross origination as well as the credit quality of our customers and our business and results of operations.
Alternatively, if a court were to find these provisions of our Amended and Restated Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition. 45 Item 1B.
Alternatively, if a court were to find these provisions of our Amended and Restated Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition. 38 Item 1B.
If our decisioning tools are unable to accurately predict and respond to changes to customer behaviors as a result of general economic or other factors, our ability to manage risk and avoid charge-offs may be negatively affected, which may result in insufficient reserves and materially and adversely impact our business, financial condition, results of operations and prospects.
If our decisioning tools are unable to accurately predict and respond to changes to consumer behaviors as a result of general economic or other factors, our ability to manage risk and avoid charge-offs may be negatively affected, which may result in insufficient reserves and materially and adversely impact our business, financial condition, results of operations and prospects.
As a result of these risks, we could experience increased claims, reputational damage, or other adverse effects, which could be material.
As a result of these risks, we could experience increased 14 claims, reputational damage, or other adverse effects, which could be material.
The attractiveness of our Katapult App to customers depends upon, among other things, the number and variety of our merchants and the mix of products and services available through our platform, our brand and reputation, customer experience and satisfaction, trust and perception of the value we provide, technological innovation, and the services, products and customer decisioning standards offered by our competitors.
The attractiveness of our Katapult App to consumers depends upon, among other things, the number and variety of our merchants and the mix of products and services available through our platform, our brand and reputation, customer experience and satisfaction, trust and perception of the value we provide, technological innovation, and the services, products and customer decisioning standards offered by our competitors.
Failure to effectively manage our costs could have a material adverse effect on our profitability. Certain elements of our cost structure are largely fixed in nature. Customer spending remains uncertain, which makes it more challenging for us to maintain or increase our operating margins.
Failure to effectively manage our costs could have a material adverse effect on our profitability. Certain elements of our cost structure are largely fixed in nature. Consumer spending remains uncertain, which makes it more challenging for us to maintain or increase our operating margins.
As a result, our business, results of operations, financial condition, and prospects would be materially and adversely affected. 38 Misconduct and errors by our employees, vendors, and service providers could harm our business and reputation. We are exposed to many types of operational risk, including the risk of misconduct and errors by our employees, vendors, and other service providers.
As a result, our business, results of operations, financial condition, and prospects would be materially and adversely affected. 33 Misconduct and errors by our employees, vendors, and service providers could harm our business and reputation. We are exposed to many types of operational risk, including the risk of misconduct and errors by our employees, vendors, and other service providers.
As a public company, we will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase after we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended.
As a public company, we will continue to incur significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase now that we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended.
The impact of new laws and regulations, or modifications by regulators concerning the interpretation or enforcement of existing laws, on our business is not known; however, any such changes could materially and adversely impact our business. 32 The laws and regulations applicable to our operations are subject to agency, administrative and/or judicial interpretation.
The impact of new laws and 27 regulations, or modifications by regulators concerning the interpretation or enforcement of existing laws, on our business is not known; however, any such changes could materially and adversely impact our business. The laws and regulations applicable to our operations are subject to agency, administrative and/or judicial interpretation.
Our operating results have been below and could continue to be below the expectations of public market analysts and investors due to a number of potential factors, including: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • factors affecting customer spending that are not under our control; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • declines in the market prices of stocks generally; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; • any significant change in our management; • changes in general economic or market conditions or trends in our industry or markets; • changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • future sales of our common stock or other securities; • investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives; 41 • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • the development and sustainability of an active trading market for our stock; • actions by institutional or activist stockholders; • changes in accounting standards, policies, guidelines, interpretations or principles; and • other events or factors, including those resulting from natural disasters, geopolitical conflict (including the conflict involving Russia and Ukraine and the Israel-Hamas conflict), pandemics (including COVID-19), acts of terrorism or responses to these events.
Our operating results have been below and could continue to be below the expectations of public market analysts and investors due to a number of potential factors, including: • results of operations that vary from the expectations of securities analysts and investors; • results of operations that vary from those of our competitors; • factors affecting consumer spending that are not under our control; • changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; • declines in the market prices of stocks generally; • strategic actions by us or our competitors; • announcements by us or our competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments; • any significant change in our management; • changes in general economic or market conditions or trends in our industry or markets; • changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • future sales of our common stock or other securities; • investor perceptions or the investment opportunity associated with our common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • the development and sustainability of an active trading market for our stock; • actions by institutional or activist stockholders; • changes in accounting standards, policies, guidelines, interpretations or principles; and • other events or factors, including those resulting from natural disasters, geopolitical conflict (including the conflict involving Russia and Ukraine and the conflicts in the Middle East), pandemics (including COVID-19), acts of terrorism or responses to these events.
These competitors may have significantly greater financial and operating resources, greater name recognition and more developed products and services, which may allow them to grow faster. Greater name recognition, or better public perception of a competitor’s reputation, may help the competitor divert market share.
These competitors may have significantly greater financial and operating resources, greater name recognition and more developed products and services, which may allow them to grow faster. Greater name recognition, or better public perception of a competitor’s reputation, may help the competitor take market share.
In addition, some of our competitors may be willing to lease certain types of products that we will not agree to lease, enter into customer leases that have services, as opposed to goods, as a significant portion of the lease value, or engage in other practices related to pricing, compliance, and other areas that we will not, in an effort to gain market share at our expense.
In addition, some of our competitors may be willing to lease certain types of products that 13 we will not agree to lease, enter into customer leases that have services, as opposed to goods, as a significant portion of the lease value, or engage in other practices related to pricing, compliance, and other areas that we will not, in an effort to gain market share.
Our success depends on the effective implementation and continued execution of our strategies. We are focused on our mission to provide innovative lease financing solutions to non-prime customers and to enable everyday transactions at the merchant point of sale.
Our success depends on the effective implementation and continued execution of our strategies. We are focused on our mission to provide innovative lease financing solutions to non-prime customers and to enable essential transactions at the merchant point of sale.
Our overall leverage and the terms of our Credit Facility could also: • make it more difficult for us to satisfy obligations; • limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions; • limit our ability to service our indebtedness; 21 • limit our ability to adapt to changing market conditions; • restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; • require us to dedicate a significant portion of our cash flow from operations to paying the principal and interest on our indebtedness, thereby limiting the availability of our cash flow to fund future capital expenditures, working capital and other corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and in our industry generally; and • place us at a competitive disadvantage compared with competitors that have a less significant debt burden.
Our overall leverage and the terms of our Credit Agreement could also: • make it more difficult for us to satisfy obligations; • limit our ability to obtain additional financing in the future for working capital, capital expenditures or acquisitions; • limit our ability to service our indebtedness; • limit our ability to adapt to changing market conditions; 15 • restrict us from making strategic acquisitions or cause us to make non-strategic divestitures; • require us to dedicate a significant portion of our cash flow from operations to paying the principal and interest on our indebtedness, thereby limiting our ability to reach profitability and the availability of our cash flow to fund future capital expenditures, working capital and other corporate purposes; • limit our flexibility in planning for, or reacting to, changes in our business and in our industry generally; and • place us at a competitive disadvantage compared with competitors that have a less significant debt burden.
The success of our business is dependent on customers making payments on their leases when due and other factors affecting customer spending and default behavior that are not under our control.
The success of our business is dependent on customers making payments on their leases when due and other factors affecting consumer spending and default behavior that are not under our control.
We rely on card issuers and payment processors. If we fail to comply with the applicable requirements of Visa, Mastercard or other payment processors, those payment processors could seek to fine us, suspend us or terminate our registrations, which could have a material adverse effect on our business, results of operations, financial condition, and prospects.
If we fail to comply with the applicable requirements of Visa, Mastercard or other payment processors, those payment processors could seek to fine us, suspend us or terminate our registrations, which could have a material adverse effect on our business, results of operations, financial condition, and prospects.
Delayed filing of our Annual Report on Form 10-K has made us currently ineligible to use certain registration statements to register the offer and sale of securities, which could adversely affect our ability to raise future capital or complete acquisitions or to issue equity awards.
Delayed filing of our Annual Report on Form 10-K has made us currently ineligible to use certain registration statements to register the offer and sale of securities, which could adversely affect our ability to raise future capital or complete acquisitions.
We face competition from virtual lease-to-own companies, e-commerce retailers (including those that offer layaway programs and title or installment lending), online sellers of used merchandise, and various types of consumer finance companies that may enable our customers to shop at online retailers, as well as with online rental stores that do not offer their customers a purchase option.
We face competition from virtual lease-to-own companies, e-commerce retailers (including those that offer layaway programs, title or installment lending or buy now, pay later programs), online sellers of used merchandise, and various types of consumer finance companies that may enable our customers to shop at online retailers, as well as with online rental stores that do not offer their customers a purchase option.
Merchants could also develop their own in house product that competes with our product. Furthermore, 18 virtual lease-to-own competitors may deploy different business models, such as direct-to-customer strategies, that forego reliance on merchant relationships that may prove to be more successful.
Merchants could also develop their own in-house product that competes with our product. Furthermore, virtual lease-to-own competitors may deploy different business models, such as direct-to-consumer strategies, that forego reliance on merchant relationships that may prove to be more successful.
We will continue to incur significant costs as a result of operating as a public company, and our management will continue to devote substantial time for new compliance initiatives.
We will continue to incur significant costs as a result of operating as a public company, and our management will continue to devote substantial time to managing new compliance initiatives.
The technologies underlying AI/ML and its uses are subject to a variety of laws and regulations, including intellectual property, data privacy and security, customer protection, competition, and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations.
The technologies underlying AI/ML and its uses are subject to a variety of 19 laws and regulations, including intellectual property, data privacy and security, consumer protection, competition, and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations.
While our operating expenses decreased for the year ended December 2023 compared to the prior year, we may need to increase our operating expenses in the future in order to continue growing our business, attracting customers, merchants and funding sources, and further enhancing and developing our products and platforms.
While our operating expenses decreased for the year ended December 31, 2024 compared to the prior year, we may need to further increase our operating expenses in the future in order to continue growing our business, attracting customers, merchants and funding sources, and further enhancing and developing our products and platforms.
The warrant agreement, dated as of October 31, 2019, between the Company and FinServ Acquisition Corp. entitles each warrant holder thereof to purchase one (1) share of our common stock at a price of $11.50 per whole share, subject to adjustment. Warrants may be exercised only for a whole number of shares of common stock.
The warrant agreement, dated as of October 31, 2019, between the Company and FinServ Acquisition Corp. entitles each warrant holder thereof to purchase 1/25th of a share of our common stock at a price of $287.50 per whole share, subject to adjustment. Warrants may be exercised only for a whole number of shares of common stock.
If we fail to remediate any material weaknesses or if we otherwise fail to establish and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
If we fail to remediate any material weaknesses or if we otherwise fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, our ability to accurately and timely report our financial results could be adversely affected.
Because we were unable to file this Form 10-K with the SEC on a timely basis, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until we have timely filed all periodic reports required under the Exchange Act for one year.
Because we were unable to file our Form 10-K for the year ended December 31, 2023 with the SEC on a timely basis, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until we have timely filed all periodic reports required under the Exchange Act for one year.
If we fail to retain our relationship with existing customers, if we do not attract new customers to our platform, products and services, or if we do not continually expand usage, repeat customers and gross originations, our results of operations, financial condition, and prospects would be materially and adversely affected.
If we fail to attract new customers to our platform, products and services, or if we do not continually expand usage, repeat customers and gross originations, our results of operations, financial condition, and prospects would be materially and adversely affected.
As a public reporting company subject to the rules and regulations established from time to time by the SEC and Nasdaq, we are required to, among other things, establish and periodically evaluate procedures with respect to our disclosure controls and procedures.
We are required to comply with a variety of reporting, accounting and other rules and regulations. As a public reporting company subject to the rules and regulations established from time to time by the SEC and Nasdaq, we are required to, among other things, establish and periodically evaluate procedures with respect to our disclosure controls and procedures.
Any interruptions or delays in our platform availability, whether as a result of a failure to perform on the part of a vendor, any damage to one of our vendor’s systems, networks or facilities, the termination of any of our third-party vendor agreements, software bugs or failures, our or our vendor’s error, natural disasters, terrorism, other man-made problems, or data security breaches or other security incidents, whether accidental or willful, or other factors, could harm our relationships with our merchants and customers and also harm our reputation. 28 In addition, we source certain information from third parties.
Any interruptions or delays in our platform availability, whether as a result of a failure to perform on the part of a vendor, any damage to one of our vendor’s systems, networks or facilities, the termination of any of our third-party vendor agreements, software bugs or failures, our or our vendor’s error, natural disasters, terrorism, other man-made problems, or data security breaches or other security incidents, whether accidental or willful, or other factors, could harm our relationships with our merchants and customers and also harm our reputation.
We use data from third parties as part of our proprietary risk model used to assess whether a customer qualifies for a lease-purchase option from a merchant. We are reliant on these third parties to ensure that the data they provide is accurate.
We use data from third parties as part of our proprietary risk model to assess whether a customer qualifies for one of our lease-purchase options. We are reliant on these third parties to ensure that the data they provide is accurate.
Any real or perceived errors, failures, bugs, defects, or outages in such software may not be found until our customers use our platform and could result in outages or degraded quality of service on our platform that could adversely impact our business (including through causing us not to meet contractually required service levels), as well as negative publicity, loss of or delay in market acceptance of our products and services, and harm to our brand or weakening of our competitive position.
Any real or perceived errors, failures, bugs, defects, or outages in such software could result in outages or degraded quality of service on our platform or errors in our financial reporting or charges to our customers that could adversely impact our business (including through causing us not to meet contractually required service levels), as well as negative publicity, loss of or delay in market acceptance of our products and services, and harm to our brand or weakening of our competitive position.
For example, our risk scoring model is based on algorithms that evaluate a number of factors and currently depend on sourcing certain information from third parties.
In addition, we source certain information from third parties. For example, our risk scoring model is based on algorithms that evaluate a number of factors and currently depend on sourcing certain information from third parties.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the risks actually occur, our business, financial condition, results of operations and prospects could be materially and adversely affected.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the risks actually occur, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our securities could decline.
The loss of our ability to offer our customers access to third-party merchants would have a material and adverse effect on our business, results of operations, financial condition, and prospects.
The loss of our ability to offer our customers access to KPay enabled merchants would have a material and adverse effect on our business, results of operations, financial condition, and prospects.
Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
If we are not able to comply with the requirements of Section 404 in a timely manner or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could fail to meet our reporting obligations or they could result in material misstatements of our financial statements, and we could also be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
Cybersecurity risks may be heightened as a result of ongoing military conflicts such as military conflict between Russia and Ukraine and the related sanctions imposed by the United States and other countries or the ongoing Israel/Hamas conflict.
Cybersecurity risks may be heightened as a result of ongoing military conflicts such as military conflict between Russia and Ukraine and the related sanctions imposed by the United States and other countries or the ongoing conflicts in the Middle East.
In addition to reducing demand for our products, these factors may unfavorably impact our customers' ability or willingness to make the payments they owe us, resulting in increased customer payment delinquencies and lease merchandise write-offs and decreased gross margins, which could also materially and adversely impact our business, financial condition and results of operations.
In addition to reducing demand for our products, these factors may unfavorably impact our customers' ability or willingness to make lease payments in a timely manner or at all, resulting in increased customer payment delinquencies and lease merchandise write-offs and decreased gross margins, which could also materially and adversely impact our business, financial condition and results of operations.
These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock or public warrants is low. The majority of our management has limited experience in operating a public company.
These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock or public warrants is low.
In addition, our platform and our internal systems depend on the ability of such software to store, retrieve, manage and otherwise process immense amounts of data, including personal data.
Our platform and our internal systems rely on software that is highly technical and complex. In addition, our platform and our internal systems depend on the ability of such software to store, retrieve, manage and otherwise process immense amounts of data, including personal data.
The attractiveness of our platform to merchants depends upon, among other things, our brand and reputation, ability to sustain our value proposition to merchants for customer acquisition, the attractiveness to merchants of our digital and data-driven platform, the services, products and consumer decisioning standards offered by our competitors, and our ability to perform under, and maintain, our merchant agreements.
The attractiveness of our platform to merchants depends on, among other things, our brand and reputation, our ability to sustain our value proposition to merchants for consumer acquisition, the attractiveness of our platform to merchants, the services, products and consumer decision standards offered by our competitors, and our ability to perform under, and maintain, our merchant agreements.
Our future success depends on our ability to identify, hire, develop, motivate, and retain highly qualified personnel for all areas of our organization, in particular, a highly experienced sales force, data scientists, and engineers. Competition for these types of highly skilled employees, is extremely intense. Trained and experienced personnel are in high demand and may be in short supply.
Our business depends on our ability to attract and retain highly skilled employees. Our future success depends on our ability to identify, hire, develop, motivate, and retain highly qualified personnel for all areas of our organization, in particular, a highly experienced sales force, data scientists, and engineers. Competition for these types of highly skilled employees, is extremely intense.
In such an event, we may be required, or may choose, to expend significant additional resources in order to correct the problem.
In such an event, we may be required, or may choose, to expend significant additional resources in order to correct the error, failure, bug or defect.
Any loss of the right to use any of this data, technology, or software could result in delays in the provisioning of our products and services until equivalent or replacement data, technology, or software is either developed by us, or, if available, is identified, obtained, and integrated, and there is no guarantee that we would be successful in developing, identifying, obtaining, or integrating equivalent or similar data, technology, or software, which could result in the loss or limiting of our products, services, or features available in our products or services.
Any loss of the right to use any of this data, technology, or software could result in delays in the provisioning of our products and services until equivalent or replacement data, technology, or software is either developed by us, or, if available, is identified, obtained, and integrated, and there is no guarantee that we would be successful in developing, identifying, obtaining, or integrating equivalent or similar data, technology, or software, which could result in the loss or limiting of our products, services, or features available in our products or services. 23 In addition, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.
Further, AI/ML, particularly generative artificial intelligence, has been known to produce false or “hallucinatory” inferences or outputs; AI/ML can present ethical issues and may subject us to new or heightened legal, regulatory, ethical, or other challenges; and inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion of AI/ML, could impair the acceptance of AI/ML solutions, including those incorporated in our products and services.
AI/ML can present ethical issues and may subject us to new or heightened legal, regulatory, ethical, or other challenges; and inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion of AI/ML, could impair the acceptance of AI/ML solutions, including those incorporated in our products and services.
We incurred a net loss of approximately $36.7 million and $40.5 million during the fiscal years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, our accumulated deficit was approxim ately $122.5 million.
We incurred a net loss of $25.9 million and $36.7 million during the fiscal years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, our accumulated deficit was approxim ately $148.5 million.
If our relationship with Wayfair or another key merchant deteriorates, they choose to no longer partner with us, or choose to partner with a competitor, or their business is negatively impacted by one or more factors, our business, results of operations, financial condition and prospects will be materially and adversely affected. 15 If we are unable to attract additional merchant partners and retain and grow our relationships with our existing merchant partners, our results of operations, financial condition, and prospects would be materially and adversely affected.
If our relationship with Wayfair or another key merchant deteriorates, they choose to no longer partner with us, or choose to partner with a competitor, or their business is negatively impacted by one or more factors, our business, results of operations, financial condition and prospects will be materially and adversely affected.
The Credit Agreement governing the Credit Facility includes restrictive covenants and financial maintenance covenants, which could restrict our operations or ability to pursue growth strategies or initiatives.
The Credit Agreement governing the Term Loan and Credit Facility includes restrictive covenants and financial maintenance covenants, which could restrict our operations or ability to pursue growth strategies or initiatives, including potential mergers and acquisitions opportunities.
In connection with the 15th amendment of our Credit Agreement, we repaid $25.0 million of principal on our outstanding Term Loan. As of December 31, 2023, we had $60.7 million of principal outstanding under the RLOC. In addition, we had borrowings under our term loan of $30.3 million (including capitalized paid-in-kind ("PIK") interest) as of December 31, 2023.
In connection with the 15th amendment of our Credit Agreement, we repaid $25.0 million of principal on our outstanding Term Loan. As of December 31, 2024, we had $82.8 million of principal outstanding under the RLOC. In addition, we had borrowings under our Term Loan of $31.8 million (including capitalized PIK interest) as of December 31, 2024.
Due to applicable laws, regulations, rules, standards and contractual obligations, we may be held responsible for data security breaches or other security incidents attributed to our third-party service providers as they relate to the information we share with them. 30 Any actual or perceived failure to comply with legal and regulatory requirements applicable to us, including those relating to data privacy and security, or any failure to protect the information that we collect from our customers and merchants, including personal information, from cyber-attacks, data security breaches or other security incidents, or any such actual or perceived failure by our originating bank partners, may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
Any actual or perceived failure to comply with legal and regulatory requirements applicable to us, including those relating to data privacy and security, or any failure to protect the information that we collect from our customers and merchants, including personal information, from cyber-attacks, data security breaches or other security incidents, or any such actual or perceived failure by our originating bank partners, may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
We use AI/ML, including generative artificial intelligence, in many aspects of our business, including fraud, credit risk analysis, and product personalization. There are significant risks involved in utilizing AI/ML and no assurance can be provided that our use of such AI/ML will enhance our products or services or produce the intended results.
In particular, we use AI/ML to create models which provide data to assist in key aspects of our business, including fraud analysis, credit risk analysis, and product personalization. There are significant risks involved in utilizing AI/ML and no assurance can be provided that our use of such AI/ML will enhance our products or services or produce the intended results.
In addition, even if a potential acquisition target or other strategic investment is identified, we may not be successful in completing such acquisition or integrating such new business or other investment.
We may not be successful in identifying businesses or opportunities that meet our acquisition or expansion criteria. In addition, even if a potential acquisition target or other strategic investment is identified, we may not be successful in completing such acquisition or integrating such new business or other investment.
The completion of the Business Combination may have triggered an “ownership change” limitation. We have not completed a formal study to determine if any “ownership changes” within the meaning of IRC Section 382 have occurred.
The completion of the merger of FinServ and Legacy Katapult and related transactions may have triggered an “ownership change” limitation. We have not completed a formal study to determine if any “ownership changes” within the meaning of IRC Section 382 have occurred.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations; interruptions or stoppages of data collection needed to tr ain our algorithms; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or revision or restructuring of our operations.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations; interruptions or stoppages of data collection needed to tr ain our algorithms; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or revision or restructuring of our operations. 22 Any significant disruption in, or errors in, service on our platform or relating to vendors, including events beyond our control, could prevent us from processing transactions on our platform or posting payments and have a material and adverse effect on our business, results of operations, financial condition, and prospects.
If our key merchant partners, in particular Wayfair, are unable to acquire new customers or retain existing customers or are otherwise negatively impacted by the macroeconomic and geopolitical conditions, our results of operations, financial condition and prospects will be negatively impacted.
If our key merchant partners, in particular Wayfair, are unable to acquire new customers or retain existing customers or are otherwise negatively impacted by the macroeconomic and geopolitical conditions, our results of operations, financial condition and prospects will be negatively impacted. We also depend on continued relationships with key partners that assist in obtaining and maintaining our relationships with merchants.
Growth of our business, including through the launch of new product offerings, requires us to invest in or expand our customer data and technology capabilities, engage and retain experienced management, and otherwise incur additional costs. For example, we launched our mobile app and Katapult Pay in the third quarter of 2022.
Growth of our business, including through the launch of new product offerings, requires us to invest in or expand our customer data and technology capabilities, engage and retain experienced management, and otherwise incur additional costs.
Although we believe that our income tax provisions and accruals are reasonable and in accordance with generally accepted accounting principles in the United States, and that we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits and any related litigation, could be materially different from our historical income tax provisions and accruals.
GAAP, and that we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits and any related litigation, could be materially different from our historical income tax provisions and accruals.

… 219 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

2 edited+1 added−0 removed8 unchanged
Biggest changeDespite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident. For more information about these risks, please see “Risk Factors —Risks Relating to Our Technology and Our Platform” in this annual report on Form 10-K. 46
Biggest changeFor more information about these risks, please see “Risk Factors —Risks Related to Our Technology and Our Platform” in this annual report on Form 10-K. 39
Our cybersecurity risk management program is based on industry best practices and CIS Critical Security Controls for handling cybersecurity threats and incidents, including threats and incidents associated with the use of internally developed applications and services provided by third-party service providers, and facilitate coordination across different departments of our company.
Our cybersecurity risk management program is based on industry best practices and Center for Internet Security Critical Security Controls for handling cybersecurity threats and incidents, including threats and incidents associated with the use of internally developed applications and services provided by third-party service providers, and facilitate coordination across different departments of our company.
Added
In 2024, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties Our principal executive office is located in Plano, Texas. We executed a new lease which commenced December 1, 2023, in which we moved our office to a new location consisting of approximately 4,300 square feet in Plano, Texas that expires on June 30, 2031, subject to our option to extend for five years.
Biggest changeItem 2. Properties Our principal executive office is located in Plano, Texas, consisting of approximately 4,300 square feet. The lease expires on June 30, 2031, subject to our option to extend for five years. Our New York, New York office consists of approximately 4,000 square feet of leased office space under a lease that expires i n June 2025.
Our New York, New York office consists of approximately 4,000 square feet of leased office space under a lease that expires i n June 2025. We believe that our existing facilities are adequate to meet our needs and future growth can be accommodated by leasing alternative or additional space.
We believe that our facilities are adequate to meet our needs and future growth can be accommodated by leasing alternative or additional space if needed.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings From time to time, we may become involved in various legal proceedings. Refer to Note 13, Commitments and Contingencies, included in Part II, Item 8 of this Annual Report on Form 10-K for a description of current legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 47 Part II
Biggest changeItem 3. Legal Proceedings From time to time we may become involved in various legal proceedings. Refer to Note 10 , Commitments and Contingencies, included in Part II, Item 8 of this Annual Report on Form 10-K for a description of current legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 40 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+4 added−0 removed3 unchanged
Biggest changeIn addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Recent Sales of Unregistered Equity Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Biggest changeIn addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future.
This number of holders of record also does not include stockholders and warrantholders whose shares or warrants may be held in trust by other entities. Dividend Policy We have not paid any cash dividends on our common stock to date.
This number of holders of record also does not include stockholders and warrant holders whose shares or warrants may be held in trust by other entities. Dividend Policy We have not paid any cash dividends on our common stock to date.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Prior to the closing of the merger, FinServ’s units, shares of Class A common stock and warrants were publicly traded on The Nasdaq Global Market (the “Nasdaq”).
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Prior to the closing of the merger, FinServ’s units, shares of Class A common stock and warrants were publicly traded on the Nasdaq .
The actual number of stockholders and warrantholders is greater than this number of record holders, and includes stockholders and warrantholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
The actual number of stockholders and warrant holders is greater than this number of record holders, and includes stockholders and warrant holders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Holders of Record As of April 22, 2024, there were 119 holders of record of our common stock and the closing price of our common stock was $9.08 as reported on the Nasdaq and there were 15 holders of record of our warrants and the closing price of our Public Warrants was $0.01 as reported on the Nasdaq.
Holders of Record As of March 24, 2025, there were 147 holders of record of our common stock and the closing price of our common stock was $13.49 as reported on the Nasdaq and there were 17 holders of record of our warrants and the closing price of our Public Warrants was $0.01 as reported on the Nasdaq.
Added
Recent Sales of Unregistered Equity Securities During the year ended December 31, 2024, we issued the following unregistered securities: • On October 24, 2024, we issued 167,797 shares of our common stock in connection with the settlement of a putative class action lawsuit, captioned Saunders v.
Added
Einbinder, et al., against directors and officers of FinServ Acquisition Corp. and FinServ Holdings LLC filed in 2022 in the Delaware Court of Chancery.
Added
We issued the shares without registration in reliance upon Section 3(a)(10) of the Securities Act. • On December 20, 2024, we issued 43,839 shares of our common stock in connection with the settlement of a putative class action lawsuit, captioned McIntosh v. Katapult Holdings, Inc., et al, filed in 2021 in the U.S.
Added
District Court for the Southern District of New York. We issued the shares without registration in reliance upon Section 3(a)(10) of the Securities Act. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved] 41

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

2 edited+0 added−0 removed0 unchanged
Biggest changeFinancial Statements and Supplementary Data 63 Consolidated Balance Sheets 66 Consolidated Statements of Operations and Comprehensive Loss 67 Consolidated Statements of Stockholders’ Equity (Deficit ) 68 Consolidated Statements of Cash Flows 69 Notes to Consolidated Financial Statements 70
Biggest changeFinancial Statements and Supplementary Data 57 Consolidated Balance Sheets 61 Consolidated Statements of Operations and Comprehensive Loss 62 Consolidated Statements of Stockholders’ Deficit 63 Consolidated Statements of Cash Flows 64 Notes to Consolidated Financial Statements 65
Item 6. [Reserved] 48 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 49 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8.
Item 6. [Reserved] 41 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 42 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

57 edited+40 added−47 removed11 unchanged
Biggest changeYear Ended December 31, 2023 2022 Change % Change (As Restated) Revenue Rental revenue $ 218,347 $ 205,371 $ 12,976 6.3 % Other revenue 3,241 4,126 (885) (21.4 %) Total revenue 221,588 209,497 12,091 5.8 % Cost of revenue 179,881 172,092 7,789 4.5 % Gross profit 41,707 37,405 4,302 11.5 % Operating expenses: Servicing costs 4,311 4,337 (26) (0.6 %) Underwriting fees 1,919 1,828 91 5.0 % Professional and consulting fees 6,694 10,539 (3,845) (36.5 %) Technology and data analytics 6,905 9,389 (2,484) (26.5 %) Compensation costs 22,732 25,090 (2,358) (9.4 %) General and administrative 10,938 14,288 (3,346) (23.4 %) Litigation expense, net 7,000 375 6,625 nm Total operating expenses 60,499 65,846 (5,343) (8.1 %) Income (loss) from operations (18,792) (28,441) 9,645 (33.9 %) Loss on partial extinguishment of debt (2,391) — (2,391) — % Interest expense and other fees (17,822) (19,264) 1,442 (7.5 %) Interest income 1,697 744 953 128.1 % Change in fair value of warrant liability 807 6,439 (5,632) (87.5 %) Loss before income taxes (36,501) (40,522) 4,017 (9.9 %) (Provision) benefit for income taxes (165) 50 (215) (430.0 %) Net loss $ (36,666) $ (40,472) $ 3,802 (9.4 %) Weighted average common shares outstanding - basic and diluted 4,088 3,930 158 4.0 % Net loss per common share - basic and diluted $ (8.97) $ (10.30) $ 1.33 (12.9 %) nm - not meaningful 52 Rental revenue.
Biggest changeSee “—Non-GAAP Financial Measures” section below for a reconciliation of adjusted EBITDA, which is a non-GAAP measure utilized by management, to net loss. 43 RESULTS OF OPERATIONS (amounts in thousands, except per share data) Year Ended December 31, 2024 compared to Year Ended December 31, 2023: Year Ended December 31, 2024 2023 $ % Revenue Rental revenue $ 243,978 $ 218,347 $ 25,631 11.7 % Other revenue 3,216 3,241 (25) (0.8 %) Total revenue 247,194 221,588 25,606 11.6 % Cost of revenue 201,423 179,881 21,542 12.0 % Gross profit 45,771 41,707 4,064 9.7 % Operating expenses: Servicing costs 4,589 4,311 278 6.4 % Underwriting fees 2,304 1,919 385 20.1 % Professional and consulting fees 5,201 6,694 (1,493) (22.3 %) Technology and data analytics 7,170 6,905 265 3.8 % Compensation costs 20,076 22,732 (2,656) (11.7 %) General and administrative 10,866 10,938 (72) (0.7 %) Litigation settlement 3,666 7,000 (3,334) (47.6 %) Total operating expenses 53,872 60,499 (6,627) (11.0 %) Loss from operations (8,101) (18,792) 10,691 (56.9 %) Loss on partial extinguishment of debt — (2,391) 2,391 (100.0 %) Interest expense and other fees (18,851) (17,822) (1,029) 5.8 % Interest income 1,163 1,697 (534) (31.5 %) Change in fair value of warrant liability 17 807 (790) (97.9 %) Loss before income taxes (25,772) (36,501) 10,729 (29.4 %) Provision for income taxes (143) (165) 22 (13.3 %) Net loss $ (25,915) $ (36,666) $ 10,751 (29.3 %) Weighted average common shares outstanding - basic and diluted 4,347 4,088 259 6.3 % Net loss per common share - basic and diluted $ (5.96) $ (8.97) $ 3.01 (33.6 %) Revenue Total revenue is comprised of rental revenue and other revenue.
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.
The negative covenants limit our ability to: incur additional indebtedness; pay dividends, redeem stock or make other distributions; amend our 50 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.
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 (benefit) for income taxes, depreciation and amortization on property and equipment and capitalized software, impairment of leased assets, loss on partial extinguishment of debt, stock-based compensation expense and litigation expenses.
Adjusted EBITDA Adjusted EBITDA is a non-GAAP financial measure that is defined as net income/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, stock-based compensation expense and net litigation settlement expenses.
We record interest and penalties related to unrecognized tax benefits in the provision for income taxes. Property Held for Lease, Net of Accumulated Depreciation and Impairment Property held for lease consists of furniture, electronics, appliances, and other durable goods offered for lease-purchase in the normal course of business.
We record interest and penalties related to unrecognized tax benefits in the provision for income taxes. Property Held for Lease, Net of Accumulated Depreciation and Impairment Property held for lease consists of furniture, mattresses, customer electronics, appliances, and other durable goods offered for lease-purchase in the normal course of business.
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.
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 million. We drew down the full $50 million of the Term Loan on December 4, 2020.
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%.
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 million from $125 million . 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, effective April 1, 2023, the benchmark rate for RLOC and Term Loan was changed from LIBOR to Secured Overnight Financing Rate ("SOFR"), subject in each case to a 3% floor plus applicable credit adjustment spread, which is fixed at 0.10%.
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 generally provided using the income forecasting method and is included within cost of revenue.
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.
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.
Pro perty 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.
The average customer continues to lease the property for approximately 8 months because the customer either exercises the buyout (early purchase) options or terminates the lease-purchase agreement prior to the end of the 10 to 18 month renewal periods. As a result, property held for lease is classified as a current asset on the consolidated balance sheets.
The average customer continues to lease the property for approximately 8 months because the customer either exercises the early lease-purchase option (buyout) or terminates the lease- purchase agreement prior to the end of the typical 12 or 18 month renewal periods. As a result, property held for lease is classified as a current asset on the consolidated balance sheets.
There are uncertainties involved when recognizing expenses related to property held for lease due to the subjective nature of the income forecasting method and estimated salvage value, which could vary from actual results.
There are uncertainties involved when recognizing expenses related to property held for lease due to the subjective nature of the income forecasting method and depreciation method, which could vary from actual results.
Such property is provided to customers pursuant to a lease-purchase agreement with a minimum 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. Customers may terminate a lease agreement at any time without penalty.
Such property is provided to customers pursuant to a lease-purchase agreement with a minimum lease term; typically one week, two weeks, or one month. The renewal periods of the leases typically extend the duration to 12 or 18 months. Customers may terminate a lease agreement at any time without penalty.
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.
Cost of Revenue Cost of revenue consists primarily of depreciation expense related to property held for lease, accelerated depreciation for impairment of property held for lease, accelerated depreciation of early lease-purchase options (buyouts), payment processing fees, and other costs associated with offering lease-purchase transactions to customers.
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.
Technology and data analytics expense includes technology costs and 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.
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.
(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.
On April 24, 2024, the Company entered into the Limited Waiver and 16th Amendment to the Loan and Security Agreement with the Lender (the "16th Amendment").
On April 24, 2024, we entered into the Limited Waiver and 16th Amendment to the Credit Agreement with the Lender (the "16th Amendment").
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.
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.
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 to the extent such financial statements and certifications were impacted by the restatement.
Pursuant to the 16th Amendment, 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.
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.
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 amendment in March 2023. The Credit Agreement is also subject to certain negative and affirmative covenants.
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.
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. 51 Contractual Obligations and Commitments Refer to the descriptions of our material cash commitments, financing arrangements, and contractual obligations outlined below within the following notes to our consolidated financial statements.
See Note 2 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for additional information related to the restatement, including descriptions of the errors and the impact to our consolidated financial statements.
For further information, see Note 2 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K.
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.
Adjusted Gross Profit Adjusted gross profit represents gross profit less variable operating expenses related to lease originations, 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.
Recently Issued and Adopted Accounting Pronouncements See Note 3 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our consolidated financial statements. 60 Emerging Growth Company As of December 31, 2023, we are an emerging growth company, as defined in the JOBS Act.
Recently Issued and Adopted Accounting Pronouncements 54 See Note 2 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our consolidated financial statements.
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 $30,340 at December 31, 2023.
The Term Loan bore interest at London Interbank Offered Rate ("LIBOR") plus 8.0% (with a 1% LIBOR floor) and an additional 3% interest per annum accrued to the principal balance as PIK interest.
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.
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. On November 21, 2024, we entered into the 17th Amendment to the Credit Agreement with the Lender (the "17th Amendment").
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%. 57 In connection with the amendment to the Credit Agreement, 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.
In connection with the 15th Amendment, we repaid $25 million 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.
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.
Servicing costs include permanent and temporary call center support. Underwriting fees primarily consist of data costs related to inputs from customer underwriting models. Professional and consulting fees include corporate legal and accounting costs.
We derecognize the undepreciated net book value of property buyouts as buyouts occur with a corresponding charge to cost of revenue. We periodically evaluate fully depreciated property held for lease, net and when it is determined there is no future economic benefit, the cost of the assets are written off and the related accumulated depreciation is reversed.
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 are written off and the related accumulated depreciation is reversed.
Rental Revenue Recognition Our lease-to-own agreements, which comprise the majority of our revenue, fall within the scope of ASC 842, Leases under lessor accounting and we are recognizing revenue from customers when revenue is earned and cash is collected.
Rental Revenue Recognition Lease-purchase 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.
We believe this is a useful operating metric for investors to use in assessing the volume of transactions that take place on our platform.
Revenue from gross originations have historically reached approximately 70-75% of total revenue 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.
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’s income forecasting method evaluates the patterns of the Company’s historical property held for lease portfolio to apply depreciation rates to the Company’s current property held for lease portfolio. Property held for lease is depreciated in the proportion of expected rents received to total expected rents received based on the Company’s historical data of lease performance.
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 10 to 18 months.
Generally, the customer has the right to acquire title either through a 90-day promotional pricing option, an early lease-purchase option (buyout), or by completing all lease renewal payments, generally over 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.
Lease payments received prior to their due dates are deferred and 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 to customer lease applications. Payments are received upon submission of the applications and execution of the lease-purchase agreements.
Amounts received from customers who elect early lease-purchase options (buyouts) are included in rental revenue. Lease payments received prior to their due dates are deferred and recorded as unearned revenue and are recognized as rental revenue in the period in which the revenue is earned. Rental revenue also includes an initial agreed-upon amount for executing customer lease-purchase agreements.
The decrease in cash used in investing activities for the 2023 compared to the 2022 period is primarily due to a decrease in capitalized software additions.
The increase in cash used in investing activities of $0.3 million in 2024 compared to 2023 is primarily due to an increase in capitalized software additions.
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 customers. Through our POS integrations and innovative mobile app featuring Katapult Pay, customers who may be unable to access traditional financing can shop a growing network of our merchants.
OVERVIEW 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.
Early repayments of certain amounts under the Term Loan are subject to prepayment penalties. For additional information on our loan obligations, see Note 8 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K.
For additional information on our loan obligations, see Note 6 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K. Pledge and Guaranty Pursuant to the Pledge Agreement, dated as of May 14, 2019, between Katapult Group, Inc.
The increase in gross originations during the year ended December 31, 2023 was predominately a result of our mobile app featuring Katapult Pay TM. , which we launched in the third quarter of 2022, growth from our direct merchants and higher wallet capture during tax season.
We saw gross origination growth in 2024 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.
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.
We believe that adjusted gross profit provides a meaningful understanding of profitability when variable lease origination costs are included. See “—Non-GAAP Financial Measures” section below for a reconciliation of gross profit to adjusted gross profit.
Under the same warrant, on December 5, 2023, we granted an additional 80,000 shares of our common stock at an exercise price of $0.25 per share which are vested. As of December 31, 2022 , we were in compliance with all covenants of the Credit Agreement.
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. Total outstanding principal and PIK interest under the Term Loan was $31.8 million at December 31, 2024.
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, our outstanding debt under the RLOC would have been $70,366, as the RLOC has a 90% advance rate on eligible accounts receivable.
Excluding this payment delay, as of December 31, 2023, our outstanding debt under the RLOC would have been $70.4 million, as the RLOC has a 90% advance rate on eligible accounts receivable.
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 represents gross profit less variable operating expenses, which are servicing costs and underwriting fees.
GAAP metrics such as gross profit, operating loss, net loss, or any other performance measures derived in accordance with U.S.
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 (benefit) for income taxes, depreciation and amortization on property and equipment and capitalized software, impairment of leased assets, loss on partial extinguishment of debt, stock-based compensation expense and litigation expense, net.
The reconciliations of net loss to adjusted EBITDA for the years ended December 31, 2024 and 2023 are as follows: Year Ended December 31, 2024 2023 Net loss $ (25,915) $ (36,666) Add back: Interest expense and other fees 18,851 17,822 Interest income (1,163) (1,697) Change in fair value of warrants (17) (807) Provision for income taxes 143 165 Depreciation and amortization on property and equipment and capitalized software 1,219 1,133 Provision for impairment of leased assets 2,227 1,727 Loss on partial extinguishment of debt — 2,391 Stock-based compensation expense 5,759 7,034 Litigation settlement and other related expenses, net 3,666 7,000 Adjusted EBITDA $ 4,770 $ (1,898) Adjusted Net Loss Adjusted net loss is a non-GAAP financial measure that is defined as net loss before change in fair value of warrants, stock-based compensation expense, and litigation settlement and other related expenses, net .
Accordingly, we believe these are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. For further information, see Note 3 to our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K.
See Note 10 t o our Consolidated Financial Statements included within Part II, Item 8 contained in this Annual Report on Form 10-K for more details.
Our operations are aggregated into a single reportable operating segment based upon similar economic and operating characteristics as well as similar markets. 49 Key Performance Metrics We regularly review several metrics, including the following 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.
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.
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.
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 forecasted revenue. Revenue is recognized over a period of time subsequent to the gross origination (on average over 8 months).
Services are considered to be rendered and revenue earned over the initial lease term. Revenues from leases from our direct integrations are reported net of sales taxes. For our direct integration transactions, we collect sales tax from each customer's lease payment and set up a sales tax payable for remittance to the state.
Revenues from leases that originated from merchants with a direct or waterfall integration are generally 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.
The following table presents gross originations for the years ended December 31, 2023 and 2022 , respectively: Year Ended December 31, Change 2023 2022 $ % Gross Originations $ 226,553 $ 196,890 $ 29,663 15.1 % Wayfair represented 52% and 57% of gross originations during the years ended December 31, 2023 and 2022 , respectively.
The following tables present gross originations for the years ended December 31, 2024 and 2023 : Year Ended December 31, Change 2024 2023 $ % Gross Originations $ 237,311 $ 226,553 $ 10,758 4.7 % Gross originations from Wayfair represented 36% and 49% of gross originations for the years ended December 31, 2024 and 2023, respectively.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
We review our estimates on an ongoing basis and make judgments about the carrying values of assets and liabilities based on a number of factors. These factors include historical experience and assumptions made by management that are believed to be reasonable under the circumstances.
The increase in cash used in financing activities in the 2023 period compared to the 2022 period is primarily due to the $25,000 repayment on the Term Loan partially offset by a decrease in principal repayments on the RLOC.
The change in cash from financing activities of $44.3 million in 2024 compared to 2023 is primarily due to the $25.0 million repayment on the Term Loan in 2023 and an increase in net proceeds from the RLOC of $19.3 million in 2024.
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, litigation expense, net and variable lease costs such as servicing costs and underwriting fees. Management believes that fixed cash operating expenses provides a meaningful understanding of controllable ongoing expenses.
The reconciliations of net loss to adjusted net loss for the years ended December 31, 2024 and 2023 are as follows: Year Ended December 31, 2024 2023 Net loss $ (25,915) $ (36,666) Add back: Change in fair value of warrants (17) (807) Stock-based compensation expense 5,759 7,034 Litigation settlement and other related expenses, net 3,666 7,000 Adjusted net loss $ (16,507) $ (16,507) $ (23,439) 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, litigation settlement and other related expenses, net and variable lease costs such as servicing costs and underwriting fees.
Excluding this payment delay, total cash, cash equivalents and restricted cash would have been $38,433. 56 The following table presents cash used in operating, investing, and financing activities during the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Cash, cash equivalents and restricted cash at beginning of period $ 69,841 $ 96,431 Net cash used in: Operating activities (17,414) (20,848) Investing activities (974) (1,505) Financing activities (22,642) (4,237) Cash, cash equivalents and restricted cash at end of period (1) $ 28,811 $ 69,841 (1) Total cash, cash equivalent and restricted cash was decreased by $9,622 due to a payment delay with our third-party loan processor in December 2023.
The following table presents cash used in operating, investing, and financing activities during the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Cash, cash equivalents and restricted cash at beginning of period $ 28,811 $ 69,841 Net cash provided by (used in): Operating activities (32,569) (17,414) Investing activities (1,303) (974) Financing activities 21,613 (22,642) Cash, cash equivalents and restricted cash at end of period $ 16,552 $ 28,811 The increase in cash used in operating activities of $15.2 million in 2024 compared to 2023 is primarily driven by sales tax payments of approximately $5.9 million and litigation payments of $5.0 million .
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 $60,744 at December 31, 2023. As noted on the previous page, in December 2023, our third-party loan processor experienced a timing error in their validation processes.
As of September 30, 2024, Atalaya was acquired by Blue Owl Capital Inc. The RLOC had a commitment of $125 million that the lenders had the right to increase to $250 million. Total outstanding principal under the RLOC was $82.8 million and $60.7 million as of December 31, 2024 and 2023, respectively.
The increase in cost of revenue of $7,789, or 4.5% , was primarily due to an increase in depreciation expense and impairment charges related to property held for lease, net, due to higher year-over-year gross originations during 2023 as compared to 2022 partially offset by a decline in early lease buyouts and stronger collections and underwriting performance during 2023 as compared to 2022 Gross profit as a percentage of total revenue decreased to 18.8% for the year ended December 31, 2023 compared to 17.9% (as restated) for the same period in 2022.
The increase in cost of revenue of $21.5 million, or 12.0% , during the year ended December 31, 2024 as compared to the same period in 2023 was a result of higher gross origination growth and capitalized property held for lease.
For our Katapult Pay transactions, the merchant partner is funded the amount of the purchased goods including sales tax which is capitalized as part of the investment and included in property held for sale and is depreciated into cost of revenue.
For Katapult Pay transactions, all sales tax is paid by the Company upon purchase of the goods and is recorded in the cost basis of the capitalized property held for lease.
During the year ended December 31, 2023 , we generated $42,006 of gross originations through Katapult Pay TM . 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.
Gross originations from Wayfair exclude transactions through Katapult Pay and only include transactions directly through the Wayfair waterfall platform. Katapult Pay represented 32% and 19% of gross originations during the years ended December 31, 2024 and 2023, respectively. 42 Total Revenue Total revenue represents the sum of rental revenue and other revenue.
General and administrative. The decrease in general and administrative expenses of $3,346 , or 23.4% , was primarily due to a decrease in insurance related costs, marketing and advertising costs and software related expenses during 2023 as compared to 2022. Litigation expense, net. Litigation expense, net represents litigation settlement expense from our ongoing shareholder litigation.
The decrease in total operating expenses of $6.6 million, or 11.0% during the year ended December 31, 2024 as compared to the same period in 2023 was primarily due to a decrease of $3.3 million in litigation settlement costs and a decrease of $2.7 million in compensation costs for the year ended December 31, 2024 as compared to the same period in 2023.
Stock-Based Compensation In accordance with ASC 718, we measure and record compensation expense related to stock-based awards based on the fair value of those awards as determined on the date of the grant.
The decrease in compensation costs is mainly driven by a decrease in stock-based compensation related to a decline in the fair value of the stock awards granted in 2024 as compared to 2023, based on the Company's stock price on the dates of grant. Interest Expense and Other Fees.
Removed
In this Annual Report on Form 10-K, we have restated our previously issued consolidated financial statements as of and for the year ended December 31, 2022. Refer to the "Explanatory Note" preceding Item 1. Business, for background on the restatement, the fiscal periods impacted and other information.
Added
Our POS integrations and innovative mobile app, featuring Katapult Pay, makes it easier for U.S. non-prime consumers unable to access traditional financing to spend responsibility and with confidence, easier for merchants to convert sales and grow, and easier for commerce to thrive. Key Performance Metrics We regularly review several metrics, including the following U.S.
Removed
We have also restated certain previously reported financial information as of and for the year ended December 31, 2022 in this Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations to conform the discussion with the appropriate restated amounts.
Added
We record rental revenue in accordance with ASC 842, with revenue being recorded when earned and cash is collected. Other revenue is recorded in accordance with ASC 606, with revenue being recorded as performance obligations are satisfied. See “—Results of Operations" section below for total revenue amounts.
Removed
Recent Developments: Reverse Stock Split On July 27, 2023, we amended our Certificate of Incorporation to effect, effective as of 5:00 p.m. Eastern Time, the Reverse Stock Split of our common stock.
Added
Gross Profit Gross profit represents total revenue less cost of revenue, and is a measure presented in accordance with U.S. GAAP. See “—Results of Operations” section below for gross profit amounts. Adjusted Gross Profit Adjusted gross profit is a non-GAAP measure utilized by management representing gross profit less variable operating expenses, which are servicing costs and underwriting fees.
Removed
At the effective time of the Reverse Stock Split, every twenty-five shares of our common stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of our Common Stock.
Added
We believe that adjusted EBITDA provides a meaningful understanding of our operating performance.
Removed
The Reverse Stock Split was approved by our stockholders at the Annual Meeting of Stockholders on June 6, 2023 and approved by our Board of Directors on July 11, 2023.
Added
Rental revenue is recognized in the period it is earned and cash is collected.
Removed
The primary goals of the Reverse Stock Split were to increase the share price in order to meet the minimum per share bid price requirement for continued listing on Nasdaq as well as to improve the perception of our common stock as an investment security and make our common stock more attractive to a broader range of institutional investors that may have minimum share price targets for new investments.
Added
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, and is recognized as performance obligations are satisfied. 44 The increase in total revenue of $25.6 million, or 11.6%, during the year ended December 31, 2024 as compared to the same period in 2023 was primarily a result of gross origination growth becoming more efficient and healthy customer collections.
Removed
However, there can be no assurance that the foregoing goals will be realized or maintained. The common stock began trading on Nasdaq on a reverse split-adjusted basis on July 28, 2023 under the existing trading symbol “KPLT.” The effects of the Reverse Stock Split have been reflected in this Annual Report on Form 10-K for all periods presented.
Added
Write-offs as a percentage of total revenue was 9.2% and 9.2% during the year ended December 31, 2024 as compared to the same period in 2023 and remains within our 8% to 10% target range. The provision for write-offs represents estimated losses based on historical results. Actual write-offs may differ from this estimate.
Removed
For additional information on the Reverse Stock Split, see Note 1 to our Consolidated Financial Statements included within Part II, Item 8, contained in this Annual Report on Form 10-K. Segment Information We conduct our business within one business segment, which is defined as providing lease payment options to customers for the purchase of durable goods from e-commerce partners.
Added
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.
Removed
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 occurs and increases cumulatively over the following quarters. Gross originations have historically reached approximately 70-75% of revenue realized within two quarters from when the originations occurred.
Added
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.
Removed
The following table presents total revenue for the years ended December 31, 2023 and 2022 : Year Ended December 31, 2023 2022 (As Restated) Total revenue $ 221,588 $ 209,497 Gross Profit Gross profit represents total revenue less cost of revenue, and is a measure presented in accordance with U.S. GAAP.
Added
The increase in property held for lease and historical lease portfolio collection patterns impact the associated depreciation expense, which includes accelerated depreciation for early lease-purchase options (buyouts), and accelerated depreciation for impairment charges related to property held for lease.
Removed
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. 50 Adjusted Gross Profit Adjusted gross profit represents gross profit less variable operating expenses, which are servicing costs and underwriting fees.
Added
Gross Profit The increase in gross profit of $4.1 million, or 9.7%, during the year ended December 31, 2024 as compared to the same period in 2023 was due primarily to higher gross originations year-over-year, healthy customer collections. 45 Operating Expenses Operating expenses primarily consist of servicing costs, underwriting fees, professional and consulting fees, technology and data analytics expense, compensation costs, general and administrative expense and litigation settlement expenses.
Removed
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 Revenue consists of rental revenue and other revenue.

… 64 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−2 removed1 unchanged
Biggest changeInterest Rate Risk The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates. We manage our interest rate risk based on an ongoing assessment of trends in interest rates and economic developments, giving consideration to possible effects on both total return and reported earnings.
Biggest changeWe manage our interest rate risk based on an ongoing assessment of trends in interest rates and economic developments, giving consideration to possible effects on both total return and reported earnings. As a result of such assessment, we may enter into swap contracts or other interest rate protection agreements from time to time to mitigate this risk.
The effect of a hypothetical 10% increase or decrease in interest rates would not have had a material impact on the fair market value of our investments as of December 31, 2023 and 2022 .
The effect of a hypothetical 10% increase or decrease in interest rates would not have had a material impact on the fair market value of our investments as of December 31, 2024 and December 31, 2023.
Inflation Risk Although we believe that inflation has indirectly impacted our business by negatively impacting customer spending and the sales of our key merchants, we do not believe that inflation has directly had, or currently directly has, a material effect on our results of operations or financial condition.
Inflation Risk Although we believe that inflation has indirectly impacted our business by negatively impacting consumer spending and the sales of our key merchants, we do not believe that inflation has directly had, or currently directly has, a material effect on our results of operations or financial condition. 56
As of December 31, 2023 , the interest rate on our RLOC was 13.9%. Our Term Loan is a variable rate loan that accrues interest at a variable rate of interest based on SOFR, subject to a 3% floor, plus 8% per annum. The spread was unchanged in connection with the 15th amendment to the Credit Agreement.
Our Term Loan is a variable rate loan that accrues interest at a variable rate of interest based on SOFR, subject to a 3% floor, plus 8% per annum. The spread was unchanged in connection with the 15th amendment to the Credit Agreement.
Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments.
Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. Interest Rate Risk The market risk inherent in our financial instruments and our financial position represents the potential loss arising from adverse changes in interest rates.
Effective April 1, 2023, both the RLOC and the Term Loan replaced LIBOR with SOFR, subject to a 3% floor plus a 0.10% credit adjustment spread. In connection with the 15th amendment to the Credit Agreement, the spread on the RLOC was increased from 7.5% to 8.5% per annum.
In connection with the 15th amendment to the Credit Agreement, the spread on the RLOC was increased from 7.5% to 8.5% per annum. As of December 31, 2024 , the interest rate on our RLOC was 13.1%.
As of December 31, 2023 , the interest rate on our Term Loan was 17.9%, which includes 4.5% PIK interest.
As of December 31, 2024 , the interest rate on our Term Loan was 18.6%, which includes 6.0% PIK interest. PIK interest was 4.5% through November 2024, and increased to 6.0% in December 2024 due to liquidity falling below $25 million. Further discussion is included in Note 6 , Debt & Liquidity.
Removed
As a result of such assessment, we may enter into swap contracts or other interest rate protection agreements from time to time to mitigate this risk. As of December 31, 2023 and 2022, we have variable rate interest bearing debt with a principal amount of $91,084 and $111,783, respectively.
Added
A 100 basis point change in interest rates would cause our RLOC and Term Loan annual interest expense to change by approximately $0.8 million and $0.3 million , respectively.
Removed
Foreign Currency Risk We had no material foreign currency risk for the December 31, 2023 and 2022 . Our activities to date are conducted only in the United States. 62

Other KPLTW 10-K year-over-year comparisons