Hot off the heels of the company’s acquisition by Bed Bath & Beyond, Fathom Holdings is claiming that former executives failed to “maintain an effective control environment” over financial reporting, admitting that there was a possibility of “material misstatements” in previous statements or reports put out by the company.
In a recent SEC filing disclosing financials for Q1 2026, Fathom identified that the company’s disclosure controls and procedures in financial reporting were not effective, due to “material weaknesses” (meaning a reasonable possibility that a significant misstatement in financial statements could go undetected) allegedly stemming from the former CEO and CFO.
The filing did not provide further details on what types of misstatements may have occurred, while committing to a “remediation plan” that may require “additional measures,” apart from replacing executives at the top.
Fathom did not respond for comment at press time. Bed Bath & Beyond also did not respond to emailed requests for comment.
The filing alleges that the “primary factor” causing the issues with financial reporting came during negotiations for an acquisition in 2021, when then-CEO Joshua Harley and then-CFO Marco Fregenal signed an agreement—noted as the “Side Agreement” in the filing—that purportedly bound Fathom without board authorization or knowledge. The board only discovered the existence of this deal in April 2026, according to the filling.
That deal “did not have a material effect on financial information,” the filing claims, adding the company “concluded” it is not bound by the unidentified agreement.
“However, the tone at the top set by our former Chief Financial Officer and former Chief Executive Officer was insufficient to create the proper environment for effective internal control over financial reporting,” the filing states.
Harley—also the founder of the company—left Fathom back in 2023, citing family reasons for his departure. Harley could not be reached for comment.
Fregenal was made CEO following Harley’s departure, where he remained until he was ousted from Fathom the day before the Bed Bath & Beyond announcement, with the company citing unspecified policy violations as the reason for the removal.
However, Fathom alleges that in Harley and Fregenal signing this agreement, they failed to set the “tone” for internal control over financial reporting, thereby not following the company’s ethical values or the COSO Framework (a framework designed by the Committee of Sponsoring Organizations of the Treadway Commission to provide guidance for how organizations implement controls to handle fraud risks in financial reporting).
Specific “deficiencies” named in the filing include not maintaining effective risk assessment and failure to provide quality information and communication, all of which could have led to “material misstatements to the Company’s quarterly consolidated financial statements that would not have been prevented or detected on a timely basis.”
Moving forward, Fathom outlined several measures in its remediation plan to address the above issues, starting with the appointment of a new interim CEO and new CFO, as well as reviewing and enhancing the Company’s Code of Ethics to “clarify roles and responsibilities” related to financial reporting.
Several other measures were outlined, all culminating in implementing new training, coupled with evaluating and enhancing current financial reporting and disclosure policies and procedures and creating a new formal, written process to follow moving forward.
The company also noted its “history of negative cash flow” and disclosed that Bed Bath & Beyond has committed to “provide financial support” to Fathom for a year and a day after the date of the filing, adding that management believes this and other measures will address “conditions that raised substantial doubt about (Fathom’s) ability to continue.”
Fathom still expressed optimism that its “low-overhead business model” and other initiatives have positioned the company for “profitable growth in the future.”
