Business Context and Reporting Period
Company: Katapult Holdings, Inc. (KPLT)
Filing Type: Form 8-K (Current Report)
Date of Report: November 3, 2025
Event: Entry into Material Definitive Agreements, Unregistered Sales of Equity Securities, and Board of Director Changes.
On November 3, 2025, Katapult Holdings, Inc. closed a private placement of convertible preferred stock with HHCF Series 21 Sub, LLC (a subsidiary of Hawthorn Horizon Credit Fund, LLC) and amended its existing credit facility to address prior defaults and adjust financial covenants.
Key Financial Metrics and Capital Structure
- Total Gross Proceeds: $65.0 million raised from the issuance of Series A and Series B Convertible Preferred Stock.
- Series A Issuance: 35,000 shares at $1,000/share ($35.0 million). Proceeds used to repay the Company's term loan in full.
- Series B Issuance: 30,000 shares at $1,000/share ($30.0 million). Proceeds used to partially prepay the revolving loan and for general corporate purposes.
- Dividend Rates:
- 18% per annum (accrued weekly) until Requisite Stockholder Approval is obtained.
- 12% per annum (accrued quarterly) after approval is obtained.
- Rate increases by 1% if approval is not obtained by February 27, 2026.
- Conversion Prices:
- Series A: $12.32 per share (initial).
- Series B: $11.39 per share (initial).
- Debt Covenant Adjustments:
- Waiver granted for failure to meet Minimum Trailing Three-Month Originations for periods ending August 31, September 30, and October 31, 2025.
- Revolving loan advance rate reduced from 99% to 90%.
- Minimum Liquidity covenant threshold increased for future periods.
Material Changes vs. Prior Period
The filing details a significant restructuring of the Company's capital and governance:
- Debt Reduction: The Company repaid its senior secured term loan in full using Series A proceeds and partially prepaid its revolving loan using Series B proceeds.
- Equity Dilution Potential: If fully converted, the Purchaser would beneficially own approximately 54.5% of the Company's issued and outstanding Common Stock. However, conversion is currently subject to a 19.99% Ownership Limitation under Nasdaq rules until stockholder approval is obtained.
- Board Composition:
- Resignations: Brian Hirsch, Chris Masto, and Jane J. Thompson resigned from the Board.
- Appointments: Philip Key Bartow III and Jeffrey Rubin appointed as Class I directors; Derek Medlin appointed as Class III director. Daniel Easley to be appointed as Class III director upon receipt of stockholder approval.
- Covenant Status: The Company moved from a state of default regarding originations thresholds to a waived status with adjusted future thresholds.
Guidance, Outlook, and Risks
- Stockholder Approval Requirement: The Company must obtain "Requisite Stockholder Approval" to remove the 19.99% Ownership Limitation on conversion. A shareholder meeting is scheduled no later than February 27, 2026.
- Support Agreements: Existing stockholders have entered into support agreements to vote in favor of removing the Ownership Limitation.
- Registration Rights: The Company agreed to file a registration statement for the resale of shares issuable upon conversion within 45 days of closing.
- Risks:
- Failure to obtain stockholder approval by the deadline could result in an increased dividend rate (1% penalty).
- Significant dilution to existing common stockholders upon conversion.
- Forward-looking statements regarding the ability to complete transactions and satisfy conditions are subject to risks and uncertainties.
Investor Verification Checklist
- Verify the timeline and outcome of the shareholder meeting required to remove the 19.99% Ownership Limitation (deadline: February 27, 2026).
- Review the full text of the "Limited Waiver and First Amendment to the Loan Agreement" (Exhibit 10.1) to understand the specific adjusted originations and liquidity thresholds.
- Monitor the Company's ability to service the 18% weekly dividend accrual on the $65 million preferred stock issuance.
- Assess the impact of the 54.5% potential ownership concentration by the Purchaser on future corporate governance and liquidity.
- Confirm the filing of the registration statement for the underlying common shares within the 45-day window.