Fatpipe Inc/UT

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes to the consolidated financial statements included elsewhere in this prospectus. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “Special Note Regarding Forward-Looking Statements” and “Risk Factors” and those included elsewhere in this prospectus.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “Special Note Regarding Forward-Looking Statements” and “Risk Factors” and those included elsewhere in this Annual Report.

Previous wording

FatPipe is a pioneer in enterprise-grade, application-aware, secure SD-WAN solutions for organizations, including enterprises, communication service providers, security service providers, government organizations, and other middle-market companies. FatPipe also develops FatPipe Total Security 360, a comprehensive cybersecurity and Security Information and Event Management product. FatPipe announced this solution in April 2025. We sell our software solutions to a diverse group of end-users predominately on a subscription basis, and rely on our network of distributors, value-added resellers, ISPs, and other third parties for distribution. We typically maintain a contractual relationship directly with the end-user customer and provide product deployment and ongoing support. We sell our products in the U.S. and South Asia.

Current wording

FatPipe is a pioneer in enterprise-grade, application-aware, secure SD-WAN solutions for organizations, including enterprises, communication service providers, security service providers, government organizations, and other middle-market companies. FatPipe also develops FatPipe Total Security 360, a comprehensive cybersecurity and Security Information and Event Management product. We sell our software solutions to a diverse group of end-users predominately on a subscription basis, and rely on our network of distributors, value-added resellers, ISPs, and other third parties for distribution. We typically maintain a contractual relationship directly with the end-user customer and provide product deployment and ongoing support. We sell our products in the U.S. and South Asia.

Previous wording

FatPipe’s fiscal year ends March 31 st.

Current wording

FatPipe’s fiscal year ends March 31. The fiscal year ended March 31, 2026 (“FY2026”) was our first full fiscal year as a publicly traded company, having completed our initial public offering on April 9, 2025.

Previous wording

FatPipe derives its revenues from the sale of its software solutions and services, which include an integrated suite of SD-WAN, security and network management capabilities. These solutions are delivered to customers on commodity network servers, or virtually for deployment in public, private or hybrid cloud environments. Revenues are reported net of marketing development funds provided to our distribution partners for sales and marketing support. FatPipe Technologies, FatPipe’s subsidiary and consulting group, generally provides consulting, staffing, and engineering services on a project basis.

Current wording

FatPipe derives its revenues from the sale of its software solutions and services, which include an integrated suite of SD-WAN, security and network management capabilities. These solutions are delivered to customers on commodity network servers, or virtually for deployment in public, private or hybrid cloud environments. Revenues are reported net of marketing development funds provided to our distribution partners for sales and marketing support. FatPipe Technologies, our consulting subsidiary, generally provides consulting, staffing, and engineering services on a project basis.

Previous wording

The Company launched software licenses that resulted in increased market acceptance and accelerated revenue growth. Our customer contracts generally range from 36 – 60 months and are typically billed on a monthly basis; however, the accounting treatment varies based on the nature of the service. The majority of our revenue is recognized at a point-in-time once the software solution has been delivered or ownership has been transferred, and our performance obligations have been satisfied. For clarity, the Company delivers software licenses that are valid for the duration of the contract term (i.e., 36-60 months) along with the product. Therefore, the Company recognizes the software license revenue at the time of delivery or transfer of control. At that point, the performance obligation for the software license has been satisfied. The contract value is recorded as contracts receivable and is transferred to accounts receivables upon invoicing the customer. The Company’s contracts receivable is classified as accounts receivable when the Company’s right to consideration becomes unconditional. The remaining obligation of the contract value is recorded as contract liability. Our deferred revenue consists of the amounts from the service portion of the contract and is amortized pro-rata over the term of the service agreement. For further details on our revenue recognition policies, please refer to the notes to the consolidated financial statements incorporated in this document.

Current wording

Our customer contracts generally range from 36 to 60 months and are typically billed on a monthly basis; however, the accounting treatment varies based on the nature of the service. The majority of our revenue is recognized at a point-in-time once the software solution has been delivered or ownership has been transferred, and our performance obligations have been satisfied. The Company delivers software licenses that are valid for the duration of the contract term (i.e., 36-60 months) along with the product. Therefore, the Company recognizes the software license revenue at the time of delivery or transfer of control. The contract value is recorded as contracts receivable and is transferred to accounts receivable upon invoicing the customer. The remaining obligation of the contract value is recorded as contract liability. Our deferred revenue consists of the amounts from the service portion of the contract and is amortized pro-rata over the term of the service agreement. For further details on our revenue recognition policies, please refer to Note 1 to the consolidated financial statements.

Previous wording

Our operating expenses consist of marketing and sales (M&S) expense, general and administrative (“G&A”) expense and product development and expense. Historically, we have not capitalized any material portion of our product development expense, and we do not have a stock-based compensation plan in place for our employees.

Current wording

Our operating expenses consist of sales and marketing (“S&M”) expense, general and administrative (“G&A”) expense, product development expense, and employee cost. Historically, we have not capitalized any material portion of our product development expense. The Company’s 2024 Equity Incentive Plan was adopted by the Board in connection with our initial public offering and provides for stock-based compensation.

Previous wording

Marketing and sales expenses include the costs associated with our sales and product marketing professionals and marketing expenses in support of our distribution partners and direct sales efforts. We incur expenses for such activities as co-marketing, trade show support, travel, promotional materials, and product training.

Current wording

Sales and marketing expenses include the costs associated with our sales and product marketing professionals and marketing expenses in support of our distribution partners and direct sales efforts. We incur expenses for such activities as co-marketing, trade show support, travel, promotional materials, and product training. Following our initial public offering, we have substantially expanded our sales organization, which has driven incremental sales and marketing expense in the current fiscal year.

Previous wording

Our G&A expenses primarily include the direct costs associated with corporate functions such as accounting, human resources, administrative support, legal and professional fees, and rent and provisions for bad debt. Additionally, intangible charges, such as depreciation and amortization expenses, are included in G&A. Depreciation and amortization expenses are primarily related to the amortization of our intellectual property and capitalized leases. We expect that G&A expenses will increase in absolute dollars as we hire additional personnel, improve our information technology infrastructure, and incur other costs for the compliance requirements of operating as a public company.

Current wording

Our G&A expenses primarily include the direct costs associated with corporate functions such as accounting, human resources, administrative support, legal and professional fees, and rent and provisions for bad debt. Additionally, intangible charges, such as depreciation and amortization expenses, are included in G&A. Depreciation and amortization expenses are primarily related to the amortization of our intellectual property and capitalized leases. Following our initial public offering, we have incurred increased G&A expenses associated with operating as a public company, including legal, audit, investor relations, listing, transfer agent, and director and officer insurance costs.

Previous wording

FatPipe invests in ongoing research and development as a core component of its product innovation. These expenses consist primarily of the direct costs of engineers and technicians who design and test our highly complex software solutions. We record all research and development R&D expenses as incurred. Our research and development teams are primarily located at our main offices in Salt Lake City, Utah and Chennai, India.

Current wording

FatPipe invests in ongoing research and development as a core component of its product innovation. These expenses consist primarily of the direct costs of engineers and technicians who design and test our highly complex software solutions. We record all research and development expenses as incurred. Our research and development teams are primarily located at our main offices in Salt Lake City, Utah and Chennai, India.

Previous wording

The following table sets for our results of operations for the years ended March 31, 2025 and 2024:

Current wording

The following table sets forth our results of operations for the years ended March 31, 2026 and 2025:

Previous wording

Product development expense in the fiscal year ended March 31, 2025, was $1,787,128 an increase of $49,540 or 3% compared to the prior fiscal year, as the Company continued its development plans for its cybersecurity products.

Current wording

Product development expense in the fiscal year ended March 31, 2026 was $1,905,042, an increase of $117,914, or 6.6%, compared to the prior fiscal year, as the Company continued its development plans for its cybersecurity products and platform integration features.

Previous wording

Depreciation and amortization expense in the fiscal year ended March 31, 2025 was $545,709, a decrease of $153,548, or 22%, compared to the prior fiscal year. These expenses are categorized under general and administrative expenses.

Current wording

Depreciation and amortization expense in the fiscal year ended March 31, 2026 was $369,249, a decrease of $176,460, or 32.3%, compared to $545,709 in the prior fiscal year. The decrease primarily reflects the continued amortization of patent costs against a smaller remaining basis. These expenses are categorized within general and administrative expenses.

Previous wording

Other income during the fiscal year ended March 31, 2025 was $1,831, a decrease of 205,830, or 99%, compared to the prior fiscal year due to recovery of receivables originally set aside as potential bad debt in 2024.

Current wording

Other income during the fiscal year ended March 31, 2026 was nil, compared to $1,831 in the prior fiscal year.

Previous wording

The foreign exchange gain/(loss) results from currency conversion from U.S. dollars to Indian rupees.

Current wording

The foreign exchange gain in the fiscal year ended March 31, 2026 was $246,874, compared to $101,383 in the prior fiscal year, and results from currency conversion from U.S. dollars to Indian rupees and is associated with our India subsidiary.

Previous wording

We believe we have sufficient sources of funding to meet our business requirements and plans for the next 12 months and in the longer term. Cash generated by operations and a credit line are our primary source of liquidity for funding our strategic business requirements.

Current wording

We believe we have sufficient sources of funding to meet our business requirements and plans for the next 12 months and in the longer term. Cash generated by operations, our cash balances (which were materially increased by net proceeds of approximately $3,935,522 received in our April 2025 initial public offering, including partial exercise of the underwriters’ over-allotment option), and the Fortis Bank term loan, are our primary sources of liquidity for funding our strategic business requirements.

Previous wording

To fund our cash requirements in the ordinary course of business, we anticipate that we will continue to primarily rely on operating cash flows, supplemented by our total cash and cash equivalents, together with the cash raised from the public offering of our common stock conducted in April 2025. Our capital requirements, including but not limited to, servicing our lease obligations and fixed asset purchases, will depend on many factors, including our growth rate and the timing and extent of operating expenses.

Current wording

To fund our cash requirements in the ordinary course of business, we anticipate that we will continue to primarily rely on operating cash flows, supplemented by our total cash and cash equivalents. Our capital requirements, including but not limited to, servicing our lease obligations and fixed asset purchases, will depend on many factors, including our growth rate and the timing and extent of operating expenses.

Previous wording

As the company expands in the India and South Asian market, the Company can expect a lower gross margin from sales in that cost sensitive region. Further, the impact on margins will be offset by lower costs of sales, as the wages in that region are also lower than in the U.S. Also, general economic conditions, the demand for the Company’s offerings and changes in customer preferences in the future may have an impact on the revenue and income. In the future as the Company exhausts its Net Operating Losses from the past, it will be expected to pay income taxes.

Current wording

As the Company expands in the India and South Asian market, the Company can expect a lower gross margin from sales in that cost-sensitive region. Further, the impact on margins will be offset by lower costs of sales, as wages in that region are lower than in the U.S. As the Company exhausts its U.S. net operating losses from prior periods, it expects to begin paying additional U.S. income taxes in future periods.

Previous wording

In March 2025, the Company obtained a $5 million term loan from Fortis Bank, of which $3 million was used to repay an outstanding loan from the bank loan noted above. The Fortis Bank loan is repayable in 120 equal monthly installments commencing from March 1, 2025 and the interest is charged at the Prime Rate plus 1%. The “Prime Rate” is the Prime Rate in effect on the first business day of the month (as published in the Wall Street Journal newspaper) in which SBA received the application, or the first day of the month in which any interest rate change occurs. The interest rate will be adjusted every calendar quarter (the “change period”) beginning April 1, 2025 (date of first rate adjustment). The interest rate works out to 8.75% as on the reporting date. The loan is secured by substantially all assets of the Company, certain personal properties of Directors of the Company, along with a personal guarantee given by them and a Trust, where the directors are trustees. During the year ended March 31, 2025, the Company made principal payments totaling $27,913.

Current wording

On January 25, 2023, the Company entered into a three-year term loan with Celtic Bank Corporation that was secured by substantially all assets of the Company, with a corporate guarantee given by our subsidiary FatPipe Networks Private Limited. The Company received $2.5 million of the $5 million loan sanctioned by the bank. In November 2024, the Company received an additional $500,000 in proceeds under that arrangement. In March 2025, the Company obtained a $5 million term loan from Fortis Bank, of which $3 million was used to repay the outstanding Celtic loan. The Fortis Bank loan is repayable in 120 equal monthly installments commencing March 1, 2025 and bears interest at the Prime Rate plus 1%. The interest rate is adjusted every calendar quarter beginning April 1, 2025. The loan is secured by substantially all of the Company’s assets, certain personal property of directors of the Company, a personal guarantee given by them, and a Trust where directors are trustees. During the year ended March 31, 2026, the Company made principal payments totaling $347,083.

Previous wording

Interest expense was $329,892 and $302,124 for the years ended March 31, 2025 and 2024, respectively.

Current wording

Interest expense was $474,116 and $329,892 for the years ended March 31, 2026 and 2025, respectively.

Previous wording

On June 15, 2023, the Company received an interest free loan of $120,000 from Stay in Business Inc., repayable on demand. During the year ended March 31, 2025, the Company received an additional $13,652 under the same arrangement.

Current wording

On June 15, 2023, the Company received an interest-free loan of $120,000 from Stay in Business Inc., a related party, repayable on demand. During the year ended March 31, 2025, the Company received an additional $13,652 under the same arrangement. During the fiscal year ended March 31, 2026, the Company repaid the entire outstanding balance of $133,652 under this arrangement, and no balance was outstanding as of March 31, 2026.

Previous wording

Net cash used in investing activities in the fiscal year ended March 31, 2025, was $19,762, an increase of $574 compared to the prior fiscal year due to higher investment in facilities.

Current wording

Net cash used in investing activities in the fiscal year ended March 31, 2026 was $52,483, compared to $19,762 in the prior fiscal year. The change reflects increased purchases of computer equipment and office equipment to support headcount growth following the initial public offering.

Previous wording

In addition to our financial results determined in accordance with the generally accepted accounting principles in the United States (“GAAP”), our management uses earnings before interest, taxes, depreciation, and amortization expenses to net income (“EBITDA”), a non-GAAP measure, as a key measure in operating our business. We use EBITDA to make strategic decisions, establish business plans and forecasts, identify trends affecting our business, and evaluate performance. For example, we use adjusted EBITDA as a measure of our operating performance. Adjusted EBITDA is presented for supplemental informational purposes only, should not be considered a substitute for, or a more meaningful measure than, financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided below for adjusted EBITDA to the most directly comparable financial measure presented in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of adjusted EBITDA to its most directly comparable GAAP financial measure.

Current wording

In addition to our financial results determined in accordance with the generally accepted accounting principles in the United States (“GAAP”), our management uses earnings before interest, taxes, depreciation, and amortization (“EBITDA”), adjusted EBITDA, Non-GAAP Net Income, and Non-GAAP Earnings Per Share, non-GAAP measures, as key measures in operating our business. We use these measures to make strategic decisions, establish business plans and forecasts, identify trends affecting our business, and evaluate performance. EBITDA, adjusted EBITDA, Non-GAAP Net Income, and Non-GAAP Earnings Per Share are presented for supplemental informational purposes only, should not be considered a substitute for, or a more meaningful measure than, financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided below for adjusted EBITDA, Non-GAAP Net Income, and Non-GAAP Net Income Per Share to the most directly comparable financial measure presented in accordance with GAAP.

Previous wording

Fatpipe Annual and Monthly Recurring billings from products and services in 2025, excluding consulting services increased by 23%. This reflects the continuing billings for existing customers as well as new business. In fiscal year 2023-24, the growth was 14% We expect this growth in recurring billings to continue as sales staff, existing and new hires, book new contracts as well as renewals of 36 month contracts from 2022 as they come due. The addition of the new cybersecurity product is expected to add to the new revenues and recurring billings going forward

Current wording

FatPipe annual and monthly recurring billings from products and services in fiscal year 2026, excluding consulting services, increased by approximately 14% compared to the prior fiscal year. This reflects continuing billings for existing customers as well as new business. We expect this growth in recurring billings to continue as our sales staff, including newly added headcount, continue to book new contracts as well as renewals of 36-month contracts coming due, and as our newly introduced cybersecurity offerings contribute to recurring billings going forward.

Previous wording

On an ongoing basis, management evaluates its estimates, including those related to intangible assets, and deferred taxes. We base our estimates, assumptions and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from the results implied by these estimates and judgments under different assumptions or conditions.

Current wording

On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance for credit losses on accounts receivable and contracts receivable, intangible assets, defined benefit obligations, and deferred taxes. We base our estimates, assumptions and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from the results implied by these estimates and judgments under different assumptions or conditions.

Previous wording

Our financial statements include IP-related intangible assets consisting primarily of legal and related costs associated with our patents and capitalized lease obligations adjusted by accumulated amortization. The identification and recognition of those intangible assets involve significant judgements, relating to, among other things, the projected cash flows attributable to these intangible assets and the estimated useful lives of these intangible assets. We amortize intangible assets that are subject to amortization over their estimated useful lives. The useful lives are determined by management at the time of creation of the intangible assets and based on historical experience and the economic life of the underlying technology and are regularly reviewed for appropriateness. We perform a quarterly review of significant finitely lived identified intangible assets to make a judgement on whether facts and circumstances indicate that the carrying amount may not be recoverable and an impairment may be required.

Current wording

Our financial statements include IP-related intangible assets consisting primarily of legal and related costs associated with our patents and capitalized lease obligations adjusted by accumulated amortization. The identification and recognition of those intangible assets involve significant judgments, relating to, among other things, the projected cash flows attributable to these intangible assets and the estimated useful lives of these intangible assets. We amortize intangible assets that are subject to amortization over their estimated useful lives. The useful lives are determined by management at the time of creation of the intangible assets and based on historical experience and the economic life of the underlying technology and are regularly reviewed for appropriateness. We perform a quarterly review of significant finitely lived identified intangible assets to make a judgement on whether facts and circumstances indicate that the carrying amount may not be recoverable and an impairment may be required.

Previous wording

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the combined financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. Use of the term “more likely than not” indicates the likelihood of occurrence is greater than 50%.

Current wording

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is continually assessed based on a more-likely-than-not realization threshold.

Previous wording

We intend to take advantage of these and other exemptions available to “emerging growth companies.” We could remain an “emerging growth company” until the earliest of (i) the last day of our fiscal year following the fifth anniversary of the closing of this offering, (ii) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (iii) the last day of our fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (which would occur if the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter), or (iv) the date on which we have issued more than $1 billion in nonconvertible debt during the preceding three-year period.

Current wording

We intend to take advantage of these and other exemptions available to “emerging growth companies.” We could remain an “emerging growth company” until the earliest of (i) the last day of our fiscal year following the fifth anniversary of the closing of our initial public offering, (ii) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (iii) the last day of our fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (which would occur if the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter), or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

Previous wording

The JOBS Act permits an “emerging growth company” like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to delay such adoption of new or revised accounting standards.

Current wording

The JOBS Act permits an “emerging growth company” like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We have elected to delay such adoption of new or revised accounting standards.

Previous wording

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million as of the last trading day of our second quarter and our annual revenue is less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million as of the last trading day of our second quarter or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million as of the last trading day of our second quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. For example, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Current wording

We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million as of the last trading day of our second quarter and our annual revenue is less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million as of the last trading day of our second quarter or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million as of the last trading day of our second quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.