Fatpipe Inc/UT

FatPipe Inc and Subsidiaries

Notes to the Consolidated Financial Statements

Years Ended March 31, 2026 and 2025

NOTE 1: SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Company Overview and Significant Accounting Policies

(A) Company Overview

FatPipe, Inc. (“FatPipe,” “the Company,” “we,” “us,” or “our”) was incorporated in Utah on October 14, 2009. FatPipe is a leading developer of enterprise-class, application-aware, secure software-defined wide area network (“SD-WAN”) solutions and single stack cybersecurity solutions for organizations, including enterprises, communication service providers, security service providers, government organizations, and other middle-market companies.

FatPipe holds thirteen software and technology patents, which it leverages through an integrated suite of software solutions to offer our customers a reliable, accelerated, and secure platform to support mission-critical applications running on cloud, hybrid cloud, and on-premises networks. Its core offerings include SD-WAN, secure access service edge (“SASE”), single stack cybersecurity (“Cybersecurity”), and network monitoring service (“NMS”) software solutions, each of which is typically offered to customers as a subscription service. These solutions address a broad set of network management needs and include an integrated set of capabilities designed to manage multi-line network traffic and routing.

FatPipe sells in geographies around the world, with its largest customer populations located in the United States and South Asia. It plans to continue expanding its presence throughout North America and parts of Southeast Asia.

FatPipe operates through its wholly owned subsidiaries, FatPipe Technologies, Inc. (“FT”), a Delaware corporation, and FatPipe Networks Private Limited (“FP India”), an Indian private limited company. FT and FP India provide consulting and engineering services and product development support to FatPipe.

Initial Public Offering

On April 7, 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with D. Boral Capital LLC, as representative (the “Representative”) of the underwriters named therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters, in a firm commitment initial public offering (the “Offering”), an aggregate of 695,656 shares of the Company’s common stock, no par value per share (the “Common Stock”), at an initial public offering price of $5.75 per share. The Common Stock was offered pursuant to a registration statement on Form S-1, as amended (File No. 333-280925), originally filed with the U.S. Securities and Exchange Commission (the “Commission”) on July 19, 2024, as amended, and which was declared effective by the Commission on February 12, 2025. A post-effective amendment to the registration statement related to the Offering was filed with the Commission on March 11, 2025, and was declared effective by the Commission on March 17, 2025.

On April 9, 2025, the Company closed the Offering and, including partial exercise of the underwriters’ over-allotment option, issued and sold an aggregate of 800,004 shares of common stock. Gross proceeds were approximately $4,600,023, and net proceeds, after deducting underwriting discounts and offering expenses, were approximately $3,935,522.

A final prospectus relating to the Offering was filed with the Commission on April 7, 2025. The Common Stock was previously approved for listing on The Nasdaq Capital Market and commenced trading under the ticker symbol “FATN” on April 8, 2025.

(B) Significant Accounting Policies

Basis of Preparation of Financial Statements

This summary of significant accounting policies of FatPipe is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been consistently applied in the preparation of the financial statements.

Use of Estimates

The preparation of the Company’s consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

These estimates are based upon information available through the date of the issuance of the financial statements, and actual results could differ from those estimates. Areas requiring significant estimates and assumptions by the Company include, but are not limited to:

Actual results could differ from these estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, which form the basis for making judgments about the carrying values of assets and liabilities.

Principles of Consolidation

These financial statements include the accounts of FatPipe, Inc. and its wholly owned subsidiaries, FT and FP India. All significant intercompany transactions and balances have been eliminated.

As of March 31, 2024, the Company owned 95.6% of the outstanding shares of capital stock of FP India, and the remaining 4.4% of the outstanding shares of capital stock of FP India were owned by certain individual stockholders (collectively, the “Limited non-controlling interests”). In July 2024, pursuant to the terms of a stock purchase and sale agreement, the Company issued an aggregate of 577,156 shares of common stock in exchange for the Limited non-controlling interests. As of March 31, 2026 and March 31, 2025, FP India was a wholly owned subsidiary of the Company.

Reclassifications

Certain amounts in the prior year financial statements have been reclassified to conform with the current year presentation. These reclassifications had no effect on previously reported total assets, total liabilities, total stockholders’ equity, net income, or cash flows.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income, which includes foreign currency translation adjustments related to the Company’s Indian subsidiary. The functional currency of FP India is the Indian rupee. Assets and liabilities of FP India are translated into U.S. dollars at the exchange rate in effect at the consolidated balance sheet date. Revenues and expenses are translated using average exchange rates during the period. Translation adjustments are recorded in accumulated other comprehensive income, a separate component of stockholders’ equity.

Segment Reporting

In accordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business activities are managed and evaluated. The Company’s chief operating decision-maker is its Chief Executive Officer, who makes resource allocation decisions and assesses performance based on financial information presented on an aggregate basis. There are no segment managers who are held accountable by the chief operating decision-maker, or anyone else, for any planning, strategy and key decision-making regarding operations. We have determined that each of our products and services share similar economic and other qualitative characteristics, and therefore the results of our operating businesses are aggregated into one reportable segment. All of the operating businesses have met the aggregation criteria and have been aggregated and are presented asone reportable segment, as permitted by ASC 280. We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the Company applies a five-step model: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations; and (5) recognize revenue when (or as) the entity satisfies the performance obligations.

The Company derives its revenue from three primary sources, each of which is delivered through subscription-based or service contracts:

*Software product and license revenue.*Software product and license revenue is generated through the sale of perpetual licenses for our proprietary SD-WAN, SASE, NMS, and cybersecurity software, including delivery of the related network server hardware components, where applicable. The Company has determined that delivery of the software license, including any related network server hardware, represents a single performance obligation that is satisfied at a point in time when control of the product transfers to the customer. Accordingly, the Company recognizes software product and license revenue at the point of delivery or transfer of control.

*Service and support revenue.*Service and support revenue is generated through the provision of technical support, software updates, monitoring services, and other ongoing services associated with the customer’s subscription. The Company has determined that these services represent a single performance obligation satisfied over time. Service and support revenue is recognized ratably over the contractual term of the customer’s subscription, which generally ranges from 36 to 60 months.

*Consulting and other revenue.*Consulting and other revenue is generated primarily through FT, which provides networking, programming, and professional services on a project basis. Revenue from these arrangements is recognized over time, as services are rendered, in accordance with the terms of the underlying customer contract.

Customer contracts may contain multiple performance obligations, including the delivery of software licenses, technical support, implementation, configuration, and training services. The Company allocates the transaction price to each performance obligation based on the relative standalone selling price of each obligation. The Company has selected the cost of technical support personnel plus a 20% margin as the standalone selling price for service and support, with the residual contract value allocated to software product and license delivery. The Company has consistently applied this methodology across all periods presented.

Customer contracts are typically billed monthly. Amounts billed in advance of revenue recognition are recorded as deferred revenue. Amounts representing the future contractual rights to consideration in exchange for delivered software products and licenses are recorded as contracts receivable.

Remaining Performance Obligations

Remaining performance obligations represent contracted revenue that has not yet been recognized as the related performance obligations have not been satisfied. The Company’s remaining performance obligations as of March 31, 2026 and 2025 consisted of the following:

Deferred Revenue

Deferred revenue represents amounts billed to customers for which revenue has not yet been recognized. Deferred revenue is recognized as revenue ratably over the underlying contract term as the Company satisfies the related performance obligation.

All deferred revenue at March 31, 2026 and 2025 is classified as current on the consolidated balance sheets.

Contract Balances

Contract assets primarily relate to the Company’s rights to consideration for performance obligations that have been satisfied, but for which the right to consideration is conditional on something other than the passage of time. Contract liabilities consist of deferred revenue and customer prepayments. Contracts receivable represents amounts that are unconditionally due to be collected from customers based on satisfied performance obligations and are presented separately on the consolidated balance sheets, distinguished between current and non-current portions based on the timing of expected billings.

Disaggregated Revenue

The Company disaggregates revenue from contracts with customers by major revenue category and by geography. The following table presents revenue by major source for the fiscal years ended March 31, 2026 and 2025:

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term maturities of these financial instruments. The carrying amount of the Company’s notes payable approximates fair value because the interest rate adjusts at quarterly intervals based on the Prime Rate, and accordingly the loan reprices to market rates.

ASC Topic 820, Fair Value Measurement, establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three broad levels: Level 1 — quoted prices in active markets for identical assets or liabilities; Level 2 — inputs other than Level 1 that are observable, either directly or indirectly; and Level 3 — unobservable inputs that are significant to the fair value of the assets or liabilities. The Company did not have any assets or liabilities measured at fair value on a recurring basis as of March 31, 2026 or March 31, 2025.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents consist of cash deposited with financial institutions in the United States and India.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable consist of amounts billed and currently due from customers. The Company maintains an allowance for credit losses, which represents the Company’s best estimate of probable credit losses inherent in the accounts receivable balance. Management evaluates the adequacy of the allowance based on historical experience, current market and economic conditions, the customer’s creditworthiness, and the aging of receivables. The company provides for any and all of the accounts receivable which are due over the period of one year if it meets the criteria for allowance estimated by the management. Accounts are charged off against the allowance after all reasonable means of collection have been exhausted and the potential for recovery is considered remote.

Contracts Receivable and Allowance for Credit Losses

Contracts receivable represent amounts contractually due from customers in connection with delivered software products and licenses, with collection scheduled in accordance with the underlying subscription billing terms (generally 36 to 60 months). The Company maintains an allowance for credit losses on contracts receivable, which is estimated based on historical loss experience, the aging of receivables, customer creditworthiness, and forward-looking economic conditions. The Company applies a provisioning rate of approximately 7% on its portfolio of contracts receivable, consistent with management’s historical loss experience and current expected credit loss assessment.

During the fiscal year ended March 31, 2026, in connection with assessment under ASC 326, the Company recognized an impairment of contract assets of $916,419 reflecting a reserve on expected collections on overall contracts. The charge is presented within general and administrative line item within operating expenses in the consolidated statements of operations. $292,810 impairment was recognized in the fiscal year ended March 31, 2025.

Inventories

Inventories consist of network server hardware components used to deliver the Company’s software solutions and are stated at the lower of cost (determined on a weighted average cost basis) or net realizable value. The Company periodically evaluates inventory for obsolescence and writes down the value of inventory items deemed unlikely to be sold or used in the foreseeable future.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally as follows:

Repair and maintenance costs that do not extend the life of the asset are expensed as incurred. Upon retirement or disposal, the cost and related accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is recognized in the consolidated statements of operations.

Intangible Assets

Intangible assets consist primarily of legal and related costs associated with the Company’s patents and capitalized product development assets. Intangible assets are amortized on a straight-line basis over their estimated useful lives, assumed as 15 years. The Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Long-Lived Assets

Long-lived assets, including property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to the future undiscounted cash flows expected to be generated by the asset. If the carrying amount exceeds the undiscounted cash flows, an impairment charge is recognized in an amount equal to the excess of the carrying amount over the fair value of the asset. No impairment charges were recognized for the fiscal years ended March 31, 2026 or 2025.

Deferred Offering Costs

Direct, incremental costs incurred in connection with the Company’s initial public offering, including legal, accounting, and other professional service fees, were deferred and capitalized prior to the consummation of the offering. Upon completion of the offering on April 9, 2025, deferred offering costs were reclassified to additional paid-in capital as a reduction of the proceeds received. As of March 31, 2026, no deferred offering costs remained on the consolidated balance sheets.

Defined Benefit Plan

The Company maintains a defined benefit gratuity plan for eligible employees of FP India in accordance with applicable Indian labor laws. The gratuity plan is accounted for in accordance with ASC 715,Compensation—Retirement Benefits. The Company’s obligation under the gratuity plan is determined using the projected unit credit method based on annual actuarial valuations performed by an independent actuary. Actuarial gains and losses arising from changes in actuarial assumptions or differences between actual and expected experience are recognized in other comprehensive income in the period in which they arise. Service cost and interest cost are recognized in the consolidated statements of operations. Key assumptions used in the actuarial valuation include discount rate, salary growth rate, and employee turnover rates.

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Deferred tax assets and liabilities are recognized for 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, and for operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company assesses the realizability of its deferred tax assets in accordance with ASC 740-10-30. A valuation allowance is established when, based on the weight of available evidence, it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company evaluates uncertain tax positions in accordance with ASC 740-10-25 and recognizes the financial statement effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718, Compensation — Stock Compensation. Compensation expense for share-based awards is measured at fair value at the grant date and recognized as expense, net of estimated forfeitures, on a straight-line basis over the requisite service period. The Company adopted the FatPipe, Inc. 2024 Equity Incentive Plan in connection with the IPO. The Company recognized stock-based compensation expense of $770,220 during the fiscal year ended March 31, 2026, which is included within general and administrative expenses in the consolidated statements of operations. No stock-based compensation expense was recognized for the fiscal year ended March 31, 2025.

Warranties

The Company provides standard warranties for its software solutions and network server hardware. Warranty obligations have not historically been material, and no material warranty accruals have been recorded as of March 31, 2026 or March 31, 2025.

Leases

The Company accounts for leases in accordance with ASC Topic 842, Leases. The Company determines whether an arrangement is, or contains, a lease at inception. For leases with an initial term greater than 12 months, the Company recognizes a right-of-use (“ROU”) asset and a lease liability based on the present value of the future lease payments over the lease term. The Company uses an estimated incremental borrowing rate to discount future lease payments, as the rates implicit in the leases are not readily determinable. The Company has elected the practical expedient to not separate lease and non-lease components for its real estate leases. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Related Parties

The Company has identified related parties consisting of officers, directors, and entities under common control or significant influence. Related party transactions are described in Note 9.

Concentrations

The Company has no significant geographic concentrations in either trade accounts receivable or revenue.

Revenue by geography:

At March 31, 2026, the carrying amount of cash was $5,214,775, only a portion of which is covered by federal depository insurance. At March 31, 2025, the carrying amount of cash was $2,920,550, only a portion of which is covered by federal depository insurance.

Concentrations of Credit Risk

The Company’s financial instruments that may be exposed to concentrations of credit risk consist primarily of temporary cash investments and trade accounts receivable. The Company maintains its cash balances at financial institutions it believes to be financially sound. At times such balances may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk in cash.

We perform ongoing credit evaluations of our customers and, with the exception of certain financing transactions, do not require collateral from our customers.

Channel Partner Concentration

For the fiscal year ended March 31, 2026, three major channel partners accounted for approximately 64.59% of the Company’s consolidated revenues, compared to two major channel partners that accounted for approximately 53.77% of consolidated revenues for the fiscal year ended March 31, 2025. The following tables present channel partner concentration for the fiscal years ended March 31, 2026 and 2025:

Recent Accounting Pronouncements

*Recently Adopted Accounting Pronouncements.*In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments require enhanced disclosures about significant segment expenses and other segment items, the title and position of the chief operating decision maker, and additional segment disclosures for entities with a single reportable segment. The Company adopted ASU 2023-07 effective for the fiscal year beginning April 1, 2025 on a retrospective basis. The Company’s adoption did not have a material impact on its consolidated financial statements but resulted in additional disclosures about its single reportable segment, which are presented under “Segment Reporting” above.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require disaggregated information about reconciling items in the rate reconciliation and additional disaggregation of income taxes paid by jurisdiction. The Company adopted ASU 2023-09 effective for the fiscal year beginning April 1, 2025 on a prospective basis. The Company’s adoption did not have a material impact on its consolidated financial statements but resulted in additional disclosures, which are presented in Note 10.

*Accounting Pronouncements Issued But Not Yet Adopted.*In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires public business entities to disclose, in a tabular format, additional information about specified categories of expenses included in each relevant expense caption presented on the face of the income statement. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that adoption of this standard will have on its consolidated financial statement disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments modify the threshold and measurement guidance for capitalization of internal-use software development costs. The amendments are effective for annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that adoption of this standard will have on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The amendments include 33 narrow-scope improvements that, among other items, clarify the diluted earnings per share calculation when a loss from continuing operations exists. The amendments have varying effective dates and transition requirements. The Company is currently evaluating the impact that adoption of this standard will have on its consolidated financial statements.

Other accounting pronouncements that have been issued but are not yet effective are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

NOTE 2: PROPERTY AND EQUIPMENT, NET

The Company’s property and equipment consist of the following:

Depreciation expense for the fiscal years ended March 31, 2026 and 2025 amounted to $36,910 and $34,416, respectively.

NOTE 3: INTANGIBLE ASSETS, NET

The Company’s intangible assets consist of the following:

Amortization expense for the fiscal years ended March 31, 2026 and 2025 amounted to $332,339 and $511,293, respectively.

Future amortization of intangible assets as of March 31, 2026 is as follows:

NOTE 4: DEFINED BENEFIT PLAN

The subsidiary company “FatPipe Networks Private Limited” provides a defined benefit gratuity plan to eligible employees in accordance with applicable labor laws of India. The gratuity benefit is payable upon separation from service and is based on the last drawn salary and years of credited service. The plan is unfunded, and the Company meets the liability as it becomes due.

The following is a summary of the Company’s plan:

Reconciliation of Benefit Obligation

Net Periodic Benefit Cost

Assumptions

The following assumptions, which are the weighted average for all plans, are used to calculate the benefit obligation at March 31 of each year and the net periodic benefit cost for the subsequent year.

The discount rate as of March 31, 2026 is based on 12 year government bond yields of India.

NOTE 5: NOTES PAYABLE

On January 25, 2023, the Company entered into a three-year term loan with Celtic Bank Corporation (“Celtic”) in the amount of $5,000,000, secured by substantially all assets of the Company and a corporate guarantee given by FP India. The Company received $2,500,000 of the principal amount upon execution. In November 2024, the Company received an additional $500,000 in proceeds under the Celtic facility.

On March 1, 2025, the Company entered into a $5,000,000 term loan with Fortis Bank, of which approximately $3,000,000 was used to repay the outstanding balance under the 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%, adjusted at the beginning of each calendar quarter beginning April 1, 2025. The interest rate works out to 7.75% as on the reporting date The Fortis Bank loan is secured by substantially all of the Company’s assets, certain personal property of directors of the Company, personal guarantees provided by such directors, and a Trust where directors are trustees.

During the fiscal year ended March 31, 2026, the Company made principal payments totaling $347,803 on the Fortis Bank loan. As of March 31, 2026, outstanding borrowings under the Fortis Bank loan totaled $4,624,283, of which $391,397 was classified as current and $4,232,886 was classified as non-current.

Future maturities of long-term debt as of March 31, 2026 are as follows:

Interest expense recognized on notes payable for the fiscal years ended March 31, 2026 and 2025 was $403,391 and $329,892, respectively.

Short-Term Note Payable to Related Party

On June 15, 2023, the Company received an interest-free demand loan of $120,000 from Stay in Business Inc., a related party controlled by the Company’s Chief Executive Officer. During the fiscal year ended March 31, 2025, the Company received an additional $13,652 under this arrangement. During the fiscal year ended March 31, 2026, the Company repaid the entire outstanding balance of the loan, and accordingly there wasno outstanding balance under this arrangement at March 31, 2026 (March 31, 2025: $133,652).

NOTE 6: STOCKHOLDERS’ EQUITY

Authorized Capital Stock

On June 19, 2024, our Board of Directors and stockholders approved an increase in our authorized capital stock from 15,000,000 shares of common stock, no par value, to 50,000,000 shares of common stock, no par value. As of March 31, 2026 and March 31, 2025, there were 14,024,468 and 13,026,464 shares of common stock issued and outstanding, respectively.

Common Stock

We are authorized to issue up to a total of 50,000,000 shares of common stock, no par value per share. Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of our stockholders, including the election of directors. Holders of our common stock have no cumulative voting rights. Further, holders of our common stock have no preemptive or conversion rights or other subscription rights.

Additionally, if a quorum is present, an action by stockholders entitled to vote on a matter is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action (other than the election of directors). The vote of a majority of the shares of our common stock held by stockholders present in person or represented by proxy and entitled to vote at a stockholder meeting will be sufficient to elect directors or to approve a proposal.

Initial Public Offering

During the fiscal year ended March 31, 2026, the Company issued an aggregate of 800,004 shares of common stock for total net proceeds of $3,935,522 pursuant to the April 2025 initial public offering, including the partial exercise of the underwriters’ over-allotment option. The Company’s common stock began trading on The Nasdaq Capital Market under the ticker symbol “FATN” on April 8, 2025.

Acquisition of Non-Controlling Interest

In July 2024, the Company acquired the remaining 4.4% non-controlling interest in FP India in exchange for 577,156 shares of common stock. As a result of this transaction, FP India became a wholly owned subsidiary of the Company, and there are no non-controlling interests as of March 31, 2026 or March 31, 2025.

Issuances to Consultants and Employees

During the fiscal year ended March 31, 2026, the Company issued an aggregate of 198,000 shares of common stock to consultants and employees as consideration for cash and services rendered. The aggregate fair value of the shares, determined based on the market price of the Company’s common stock on the date of issuance, totaled $853,220, of which $83,000 was received in cash. The Company recognized total stock-based compensation expense of $770,220 during the fiscal year ended March 31, 2026, comprising $625,220 attributable to share issuances to consultants and employees and $145,000 attributable to stock options exercised by directors and officers during the fourth quarter of the fiscal year. Stock-based compensation expense is included within general and administrative expenses in the consolidated statements of operations.

Preferred Stock

The Company is not currently authorized to issue preferred stock under its Articles of Incorporation, but may choose to do so in the future.

Stock-Based Compensation

The Company adopted the FatPipe, Inc. 2024 Equity Incentive Plan (the “2024 Plan”) in connection with the IPO. The 2024 Plan provides for the grant of stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock awards, restricted stock units, performance awards, and other stock or cash awards to officers, directors, employees, and consultants of the Company and its affiliates. The 2024 Plan is administered by our Compensation Committee.

Stock-based compensation expense for the fiscal year ended March 31, 2026 was $770,220, all of which was recognized within general and administrative expenses. No stock-based compensation expense was recognized for the fiscal year ended March 31, 2025.

The maximum aggregate number of shares of common stock that may initially be issued under the 2024 Plan is 2,600,000 shares (the “Share Reserve”), representing approximately 5.2% of the Company’s authorized common stock. The Share Reserve will automatically increase on the first day of each calendar year, beginning in 2024 and ending in (and including) 2034, by an amount equal to 3% of the total number of shares of capital stock outstanding on March 31 immediately preceding the applicable evergreen date, subject to the Board’s discretion to provide for a lesser increase or no increase. During any fiscal year, no participant may receive awards covering more than 130,000 shares (combined across stock options, restricted stock, and restricted stock units). The maximum value of awards (and cash subject to cash-based awards) granted to any non-employee director during any fiscal year, taken together with cash fees paid to such director for service on the Board, may not exceed $500,000 in total value. Stock options have a maximum term of five years from the date of grant, and the per-share exercise price must be no less than 85% of the fair market value per share on the date of grant (or 100% of fair market value in the case of an incentive stock option granted to a holder of more than 10% of the voting power of the Company). The 2024 Plan has a term of 10 years from its effective date in 2024 and will continue in effect, unless terminated earlier, until 2034.

Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding for the period, increased to include all additional common shares that would have been outstanding had potentially dilutive common shares been issued. The following table presents the computation of basic and diluted earnings per share for the fiscal years ended March 31, 2026 and 2025:

NOTE 7: LEASES

The Company leases certain office space under operating leases. Lease commencement occurs on the date the Company takes possession or control of the property. The original terms for facility related leases are generally between three to five years. Some of the Company’s leases also include rental escalation clauses and/or termination provisions. Renewal options and termination options are included in determining the lease payments when management determines the options are reasonably certain of exercise.

If readily determinable, the rate implicit in the lease is used to discount lease payments to present value; however, substantially all of the Company’s leases do not provide a readily determinable implicit rate. When the implicit rate is not determinable, the Company’s estimated incremental borrowing rate is utilized, determined on a collateralized basis, to discount lease payments based on information available at lease commencement.

The Company’s leases typically require payment of common area maintenance and real estate taxes which represent the majority of variable lease costs. Certain lease agreements also provide for variable rental payments based on sales performance in excess of specified minimums, usage measures, or changes in the consumer price index. Variable rent payments based on future performance, usage, or changes in indices were not significant for any of the periods presented. Variable lease costs are excluded from the present value of lease obligations. The Company’s lease agreements do not contain any material restrictions, covenants, or any material residual value guarantees.

Future minimum lease payments under non-cancellable operating leases as of March 31, 2026 are as follows:

NOTE 8: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The following is a summary of accrued expenses and other current liabilities:

The provision for tax decreased from $2,967,305 at March 31, 2025 to $1,483,701 at March 31, 2026, primarily reflecting the reversal of $1,483,653 of prior-period accrued income tax payable recognized as a change in accounting estimate during the fiscal year ended March 31, 2026, partially offset by the current-year tax provision. See Note 10 for additional information.

NOTE 9: RELATED PARTY TRANSACTIONS

The Company’s related party transactions include the following:

Lease Arrangements with Back Office Xtensions India Pvt. Ltd.

FP India leases office space in Chennai, India from Back Office Xtensions India Pvt. Ltd. (“Back Office”), an entity owned and controlled by the Company’s Chief Executive Officer and President. Lease payments under these arrangements are recorded as operating lease expense in accordance with ASC 842 (see Note 7). The arrangements include premises located on the first floor (commenced during the fiscal year ended March 31, 2026) and on the third floor of the leased property. Total lease payments amounted to $93,750 and $77,423 for the years ended March 31 2026 and 2025 respectively.

As of March 31, 2026, the right-of-use asset and lease liability associated with these related party arrangements totaled approximately $268,046 and $363,988, respectively. As of March 31, 2025, the corresponding amounts were approximately $285,089 and $371,400, respectively.

Short-Term Loan from Stay in Business Inc.

On June 15, 2023, the Company received an interest-free demand loan of $120,000 from Stay in Business Inc., an entity owned by the Company’s Chief Executive Officer. During the fiscal 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. There wasno outstanding balance under this arrangement as of March 31, 2026 (March 31, 2025: $133,652). See also Note 5.

Personal Guarantees and Property Pledged in Connection with Bank Debt

The Company’s outstanding term loan with Fortis Bank is secured in part by certain personal property of directors of the Company, personal guarantees provided by such directors, and a Trust where directors are trustees, in addition to substantially all of the Company’s assets. No fees or other consideration are paid by the Company in connection with these guarantees or pledges.

Other Related Party Matters

Routine compensation arrangements with executive officers and directors are governed by the Company’s Compensation Committee. Information about director and officer compensation is provided in Item 11 of Part III of this Annual Report.

NOTE 10: INCOME TAXES

The Company accounts for income taxes in accordance with ASC 740, Income Taxes. The Company files a consolidated U.S. federal income tax return and an Arizona state return covering FatPipe, Inc. and FatPipe Technologies, Inc. The Company’s wholly owned Indian subsidiary, FatPipe Networks Private Limited, files separate income tax returns in India.

Effective for fiscal years beginning after December 15, 2024, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures. The standard requires enhanced disaggregation of information presented in the rate reconciliation and disaggregation of income taxes paid by jurisdiction. The Company has applied the new requirements prospectively in this Note.

Income (Loss) Before Income Taxes

Income (loss) before income taxes for the years ended March 31 consisted of the following:

Components of Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes for the years ended March 31 consisted of the following:

The current federal provision for the fiscal year ended March 31, 2026 reflects (i) a current-year tax provision of $24,027 calculated under ASC 740 after utilization of $4,896,738 of available net operating loss carryforwards, and (ii) a $1,483,653 reduction representing the partial reversal of prior-period accrued income tax payable, recognized as a change in accounting estimate. See “Change in Accounting Estimate” below for additional information.

Effective Income Tax Rate Reconciliation

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate, presented in accordance with ASU 2023-09, is as follows. Reconciling items are presented separately if they exceed 5% of the product of pre-tax income and the statutory rate.

The Company’s effective tax rate for FY2026 of(42.55%) differs from the U.S. federal statutory rate of 21.00% primarily because of (i) utilization of net operating loss carryforwards substantially eliminating current-year federal and state income tax, (ii) a change in accounting estimate associated with management’s refinement of prior-period income tax obligations following completion of the Company’s FY2025 tax return and the related application of available net operating loss carryforwards, (iii) utilization of general business credit carryforwards, and (iv) the foreign rate differential associated with losses generated by the Indian subsidiary.

Deferred Tax Assets and Valuation Allowance

Significant components of the Company’s deferred tax assets, with the change for the year ended March 31, 2026, are presented below.

The Company hasno deferred tax liabilities as of March 31, 2026 or March 31, 2025.

Valuation Allowance Assessment

In assessing the realizability of deferred tax assets in accordance with ASC 740-10-30-17 through 30-25, the Company considers all available positive and negative evidence to determine whether it is more likely than not that some portion or all of its deferred tax assets will be realized. The weight given to potential evidence is commensurate with the extent to which it can be objectively verified.

Positive evidence

Negative evidence

Based on the weight of available evidence, the Company has concluded that it is not more likely than not that deferred tax assets in excess of $76,905 will be realized. Accordingly, a valuation allowance of $2,264,157 has been maintained at March 31, 2026 ($1,880,754 at March 31, 2025). The Company will reassess this conclusion in future periods; partial release of the valuation allowance will be considered upon completion of a fourth consecutive profitable fiscal year.

Net Operating Loss Carryforwards

At March 31, 2026, the Company had U.S. federal net operating loss carryforwards of $6,523,957 available to offset future taxable income. The composition by vintage is as follows:

Net operating losses generated in tax years prior to 2018 are not subject to the 80% taxable income limitation and have no expiration date. Net operating losses generated in tax years after 2017 are subject to the 80% taxable income limitation under IRC §172(a)(2) and have an indefinite carryforward period. During FY2026, the Company applied $3,334,752 of pre-2018 net operating losses at the 100% offset and $2,465,289 of post-2017 net operating losses subject to the 80% limitation, totaling $4,896,738 of utilization.

The Indian subsidiary has unused tax losses of approximately $2,582,089 carried forward under Indian local tax law for which no deferred tax asset has been recognized in the consolidated financial statements. See “Foreign Subsidiary Losses” below.

Capital Loss Carryforwards

At March 31, 2026, the Company had a capital loss carryforward of $1,505,901 (deferred tax asset of $316,239), which is available only to offset future capital gains. Under IRC §1212(a), capital loss carryforwards have a five-year carryforward period.

A full valuation allowance has been recorded against the deferred tax asset associated with the capital loss carryforward, reflecting management’s assessment that it is not more likely than not that sufficient capital gains will be generated within the carryforward period to absorb the loss.

Income Taxes Paid (ASU 2023-09)

Income taxes paid, net of refunds received, disaggregated by jurisdiction in accordance with ASU 2023-09, is as follows:

No individual jurisdiction within “State” exceeds 5% of total income taxes paid; accordingly, separate disaggregation by individual state is not required.

Foreign Subsidiary Losses

FatPipe India Private Limited has generated tax losses in the current and prior fiscal years that are available for carryforward under Indian local tax law. At March 31, 2026, the Indian subsidiary had unused tax losses of approximately $2,582,089. The comparable amount at March 31, 2025 was $1,352,277.

No deferred tax asset has been recognized in respect of these unused tax losses, as management has determined it is not more likely than not that sufficient future taxable income will be available in India against which the losses can be utilized within the applicable local-law carryforward period. The cumulative unrecognized deferred tax asset at the applicable Indian statutory rate of 25.17% is approximately $649,912 at March 31, 2026.

Change in Accounting Estimate

During the fiscal year ended March 31, 2026, in connection with the preparation and filing of the Company’s FY2025 federal and state income tax returns, management refined its estimate of the income tax obligation associated with prior fiscal years. The previously recorded accrued income tax payable balance of $2,967,305 at March 31, 2025 was based on a flat-rate estimation methodology that did not give effect to the Company’s available net operating loss carryforwards. Upon completion of the FY2025 tax filings and the related ASC 740 computation, management determined that, after application of available net operating loss carryforwards, no material federal or state income tax was due for FY2025.

Considering the magnitude of the adjustment relative to FY2026 consolidated pre-tax income, and forecasting uncertainty regarding future U.S. taxable income, management elected to recognize the reversal of the prior over-accrual ratably over fiscal years 2026 and 2027 rather than in a single period. During FY2026, the Company reversed $1,483,653 (approximately 50%) of the $2,967,305 prior balance. The remaining $1,483,652 has been retained as accrued income tax payable at March 31, 2026 and is expected to be released in FY2027 as part of the ongoing tax provision process.

In accordance with ASC 250-10-45-17 and ASC 740-10-45-25, the refinement has been accounted for as a change in accounting estimate and recognized in the period of change. The effect of the change for the fiscal year ended March 31, 2026 was an increase in income tax benefit of $1,483,653, an increase in net income of $1,483,653, and an increase in basic and diluted earnings per share of $0.11 in accordance with the disclosure requirements of ASC 250-10-50-4.

Uncertain Tax Positions

The Company evaluates uncertain tax positions in accordance with ASC 740-10-25 and the related measurement, recognition, and disclosure provisions of ASC 740-10-50-15. As of March 31, 2026 and March 31, 2025, the Company has not identified any tax positions for which it is not more likely than not that the position would be sustained upon examination by the relevant taxing authorities. Accordingly, no liability for unrecognized tax benefits has been recorded, and there are no related accruals for interest or penalties.

The Company’s U.S. federal and state income tax returns generally remain subject to examination for the three most recent tax years under the applicable statutes of limitation, which corresponds to fiscal years ended March 31, 2024 through March 31, 2026. Tax returns of the Indian subsidiary remain subject to examination by Indian tax authorities for assessment years 2024-25 through 2026-27 in accordance with applicable Indian tax law.

Recently Adopted Accounting Pronouncements — ASU 2023-09

In December 2023, the Financial Accounting Standards Board issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires public business entities to disclose specific categories within the rate reconciliation, additional information for reconciling items meeting a quantitative threshold, and disaggregation of income taxes paid by jurisdiction. The Company adopted ASU 2023-09 effective for the fiscal year beginning April 1, 2025 on a prospective basis. Adoption of the standard did not have a material effect on the Company’s consolidated financial position, results of operations, or cash flows; the impact is limited to the additional disclosures presented in this Note.

NOTE 11: COMMITMENTS AND CONTINGENCIES

Commitments

The Company’s commitments primarily relate to (i) operating lease arrangements (see Note 7) and (ii) repayment of outstanding bank debt (see Note 5). The Company has no other material commitments outstanding as of March 31, 2026.

Contingencies

From time to time, the Company is involved in various legal proceedings and claims arising in the ordinary course of business. As of the date of this Annual Report, the Company is not a party to any pending legal proceedings the outcome of which would, in the opinion of management, be expected to have a material adverse effect on its consolidated financial position, results of operations, or cash flows. Where loss contingencies are considered probable and reasonably estimable, the Company accrues an amount equal to its best estimate of the loss in accordance with ASC 450, Contingencies.

NOTE 12: SUBSEQUENT EVENTS

The Company has evaluated subsequent events through May 18, 2026, the date these consolidated financial statements were available to be issued.