Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.24.3
Debt
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Debt Debt
Total debt consisted of the following (amounts in thousands):
September 30, 2024 December 31, 2023
3.75% Small Business Administration installment loan due May 2050
 $ 111  $ 117 
Convertible note payable, less unamortized costs of $79
 8,392  3,372 
Director and officer (D&O) insurance policy promissory note 1
203  179 
Executive and officer (E&O) insurance policy promissory note 2
54  215 
Total debt 8,760  3,883 
Long-term debt, current portion (3,671) (416)
Long-term debt, net of current portion $ 5,089  $ 3,467 
(1) The D&O note carries a 7.35% interest rate and is payable quarterly with the last quarterly payment due in April 2025.
(2) The E&O note carries 13.5% interest rate and is payable monthly with the last monthly payment being due in September 2024.

In September 2024, the Company sold and issued senior secured convertible promissory notes in aggregate principal amount of $5.0 million (the "2024 Notes") to an existing shareholder, who beneficially owns more than 5% of Fathom's common stock, and the chairman of the Company's Board of Directors in a private placement (the "2024 Offering"). The cash proceeds to the Company from the issuance of the 2024 Note were $4.9 million after deducting the 2024 Offering expense.
Interest on the 2024 Notes will be paid quarterly commencing on September 25, 2024, in cash on the principal amount at a rate which fluctuates every calendar month and is equal to (i) the monthly average Secured Overnight Financing Rate (SOFR) plus (ii) 4% per annum, subject to certain adjustments and a minimum rate of 8%. The 2024 Notes have a conversion price of $4.25 per share of common stock, representing an initial conversion premium of approximately 85% above the last reported sale price of Fathom's common stock on September 26, 2024. The 2024 Notes will mature on October 1, 2026, unless repurchased or converted in accordance with their terms prior to such date. The 2024 Notes may not be converted by either purchaser into shares of common stock if such conversion would result in the purchaser and its affiliates owning an aggregate of in excess of 19.99% of the then-outstanding shares of the Company’s common stock.
On April 13, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Holder”) and issued a Senior Secured Convertible Promissory Note in the principal amount of
$3.5 million (the “2023 Note”), in a private placement (combined with the 2024 Offering, the “Offerings”). The Company paid a placement agent fee in the amount of $175,000 in connection with the Offering. The cash proceeds to the Company from the issuance of the 2023 Note were $3.3 million, after deducting the placement agent fee and approximately $25,000 in purchaser expenses.
The Company shall pay interest to the Holder quarterly in cash on the principal amount of the 2023 Note at a rate that fluctuates every calendar month, and is equal to (i) the monthly average SOFR plus (ii) 5%, per annum (which interest rate may be increased as provided by the Purchase Agreement); provided, however, that in no event will the rate of interest for any month be less than 8% per annum. Interest shall be due and payable on the last calendar day of each quarter and on the maturity date, April 12, 2025 (the “Fixed Interest Payment Date”); provided, however, notwithstanding anything to the contrary provided in the Purchase Agreement or the Note, interest accrued but not yet paid will be due and payable upon any conversion, prepayment, and/or acceleration whether as a result of an Event of Default, as defined, or otherwise with respect to the principal amount being so converted, prepaid and/or accelerated.
In connection with the Offerings, the Company also entered into Security Agreements pursuant to which the 2023 Note and the 2024 Note are secured by all the Company’s existing and future assets.
All or any portion of the principal amount of the 2023 Note, plus accrued and unpaid interest and any late charges thereon, is convertible at any time, in whole or in part, at the Investor’s option, into shares of the Company’s common stock at an initial fixed conversion price of $6.00 per share, subject to certain customary adjustments. The 2023 Note imposes penalties on the Company for any failure to timely deliver any shares of the Company’s common stock issuable upon conversion. The 2023 Note may not be converted by the Investor into shares of common stock if such conversion would result in the Investor and its affiliates owning an aggregate of in excess of 4.99% of the then-outstanding shares of the Company’s common stock, provided that upon 61 days’ notice, such ownership limitation may be adjusted by the Investor, but in any case, to no greater than 9.99%.