Katapult Holdings (KPLT) risk factors, FY2024 10-K

Risks Related to Our Indebtedness

1. 01Financial Risks Related to Our Business
2. 15We have substantial indebtedness, which may reduce our capability to withstand adverse developments or business conditions
3. 16We may not be able to refinance our indebtedness on favorable terms, or at all. Our inability to refinance our indebtedness would have a material adverse effect on our business, financial condition, results of operations, and prospects
4. 17A Change of Control as defined by our Credit Agreement could accelerate our obligation to pay our outstanding indebtedness, and we may not have sufficient liquid assets at that time to repay these amounts
5. 18We have a history of operating losses and may not be profitable in the future
6. 19Our ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all
7. 20Our revenue and operating results may fluctuate, which could result in a decline in our profitability and make it more difficult for us to grow our business
8. 21Any significant disruption or errors relating to our loan providers and loan processor, could delay the processing of transactions on our platform or cause temporary fluctuations in cash use and have a material and adverse effect on our business, results of operations, financial condition, and prospects
9. 22Our ability to use our net operating loss carry forwards and certain other tax attributes may be limited

Legal and Compliance Risks

1. 02Operational Risks Related to Our Business
2. 33Our 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
3. 34regulations, 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
4. 35Our auditors have issued a going concern opinion, and we will not be able to achieve our objectives and will have to cease operations if we cannot refinance our indebtedness and adequately fund our operations
5. 36adversely affect our share price and our ability to raise new capital or to enter into critical contractual relationships with third parties
6. 37If we 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
7. 38A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis
8. 39We 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
9. 40Delayed 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
10. 41We have previously fallen out of compliance with Nasdaq’s requirements for continued listing, and any future failure to comply with Nasdaq’s listing requirements could result in our common stock being delisted from the Nasdaq Global Market, which could have a material adverse effect on us and our stockholders
11. 42Changes to tax laws or exposure to additional tax liabilities may have a negative impact on our operating results
12. 43We 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
13. 44Uncertain market and economic conditions have had, and may in the future have, serious adverse consequences on our business, financial condition and share price
14. 45Failure to effectively manage our costs could have a material adverse effect on our profitability
15. 46Negative publicity about us or our industry could adversely affect our business, results of operations, financial condition, and prospects
16. 47Misconduct and errors by our employees, vendors, and service providers could harm our business and reputation
17. 48The loss of the services of any of our leadership team could materially and adversely affect our business, results of operations, financial condition, and prospects
18. 49Our business depends on our ability to attract and retain highly skilled employees
19. 50The price of our securities may change significantly in the future and stockholders could lose all or part of their investment as a result
20. 51We 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
21. 52Because there are no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it
22. 53If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline
23. 54Future sales, or potential future sales, by us or our stockholders in the public market could cause the market price for our common stock to decline
24. 55Warrants are exercisable for our common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our existing stockholders
25. 56We will likely incur increased costs and devote additional management time to public company reporting and compliance obligations as a result of exiting “emerging growth company” status
26. 57Anti-takeover provisions in our organizational documents could delay or prevent a change of control

Risks Related to Our Business, Strategy and Growth

1. 03If we are unable to attract additional direct merchants and retain and grow our relationships with our existing direct merchants, our business, results of operations, financial condition, and prospects would be materially and adversely affected
2. 04The 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
3. 05Unexpected changes to consumer behavior could cause our proprietary algorithms and decisioning tools used in approving customers to no longer be indicative of our customer's ability to perform
4. 06We 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
5. 07have grown to represent 32% of our total gross originations for the year ended December 31, 2024. Approximately 54% of our 2024 gross originations started with an interaction in our mobile app
6. 08If 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
7. 09If 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
8. 10We operate in a highly competitive industry, and our inability to compete successfully would materially and adversely affect our results of operations, financial condition, and prospects
9. 11Our 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
10. 12We rely on the accuracy of third-party data, and inaccuracies in such data could adversely impact our approval process
11. 13The success and growth of our business depends upon our ability to continuously innovate and develop new products and technologies
12. 14To the extent that we seek to grow through future acquisitions, or other strategic investments or alliances, we may not be able to do so effectively

Risks Related to Our Technology and Our Platform

1. 23We utilize AI/ML, which could expose us to liability or adversely affect our business
2. 24Real or perceived software errors, failures, bugs, defects, or outages could adversely affect our business, results of operations, financial condition, and prospects
3. 25Our results depend on continued integration and support of our platforms, including our integration with direct merchants
4. 26We rely on KPay enabled merchants to allow access to their stores through our mobile app and our desktop and mobile websites
5. 27We 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
6. 28If major mobile application distribution channels change their standard terms and conditions in a manner that is detrimental to us, or suspend or terminate their existing relationship with us, our business, financial condition and results of operations may be materially and adversely affected
7. 29consequences we could suffer as a result of such a large-scale event could be catastrophic and result in irreparable harm
8. 30While 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
9. 31Failure to adequately obtain, maintain, protect, defend and enforce our intellectual property and proprietary rights could harm our business, operating results and financial condition
10. 32We have in the past, and may in the future, be accused of infringing intellectual property rights of third parties which may materially and adversely affect our business, financial condition, and results of operations