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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Katapult Holdings, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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We are exposed to a variety of market and other risks, including the effects of changes in interest rates, and inflation, as well as risks to the availability of funding sources and other risks. 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. 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. 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.
In connection with the Loan Agreement, the New Revolving Facility accrues interest at a rate per annum equal to SOFR, subject to a 3% floor and an applicable credit adjustment spread of 0.1%, plus 7.0% per annum. As of June 30, 2026, the interest rate on the New Revolving Facility was 11.2%.
The effect of a hypothetical 100 basis point increase or decrease in interest rates would not have had a material impact on the fair market value of our investments as of June 30, 2026 and December 31, 2025. A 100 basis point change in interest rates would cause our New Revolving Facility annual interest expense to change by approximately $0.7 million.
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.