Fatpipe Inc/UT

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. This discussion and analysis contain forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements” below. We have no obligation to update any of these forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements due to many factors, including, but not limited to, those set forth under the heading “Risk Factors” in this Quarterly Report. Factors that could cause or contribute to such differences include, but are not limited to, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Quarterly Report.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements” below. We have no obligation to update any of these forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements due to many factors, including, but not limited to, those set forth under the heading “Risk Factors” in this Quarterly Report. Factors that could cause or contribute to such differences include, but are not limited to, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Quarterly Report.

Previous wording

FatPipe is a pioneer in enterprise-class, application-aware, secure SD-WAN and cybersecurity solutions for organizations, including enterprises, communication service providers, security service providers, government organizations, and other middle-market companies.

Current wording

FatPipe is a pioneer in enterprise-class, application-aware, secure SD-WAN solutions for organizations, including enterprises, communication service providers, security service providers, government organizations, and other middle-market companies.

Previous wording

We strive to be the global leader in delivering leading-edge enterprise-class networking and cybersecurity software technology. We are dedicated to continually improving the way organizations connect, ensuring their networks are secure, reliable, and supporting their continued success. Our commitment lies in empowering our customers with a seamless and dependable connectivity infrastructure that safeguards their critical data and fosters business continuity. We further aim to ensure our customers have unparalleled insights into their network operations and to ensure our customers have greater control of security in their network operations through our full cybersecurity offering suite.

Current wording

We strive to be the global leader in delivering leading-edge enterprise-class networking software technology. We are dedicated to continually improving the way organizations connect, ensuring their networks are secure, reliable, and supporting their continued success. Our commitment lies in empowering our customers with a seamless and dependable connectivity infrastructure that safeguards their critical data and fosters business continuity. We further aim to ensure our customers have unparalleled insights into their network operations.

Previous wording

To deliver on this vision, we hold over a dozen software and technology patents, which we leverage through an integrated suite of software solutions to offer our customers a reliable and secure platform to support mission-critical applications running on cloud, hybrid cloud and on-premise networks. Our core offerings include SD-WAN, SASE, NMS, and single-stack Cybersecurity software solutions, each of which is typically offered to our customers as a subscription service. These network 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. When customers have multiple data lines, and one of the lines fails, FatPipe automatically and dynamically transfers network traffic from one data line to another (failover) without disconnecting the application session. When all lines are functional, FatPipe is able to improve data traffic speed and optimize bandwidth. Our cybersecurity solutions address a broad set of cybersecurity management needs and include integrated software functions such as firewalling, intrusion detection and prevention, content filtering, and secure VPN connectivity. These tools are designed to protect network traffic traversing across multiple WAN links and cloud environments, providing consistent security enforcement at the edge and core of the network. By combining these capabilities within the same software stack as its network management offerings, FatPipe enables enterprises to monitor, control, and secure data flows across hybrid infrastructures, supporting continuous protection of applications and users while maintaining network performance and reliability.

Current wording

To deliver on this vision, we hold over a dozen software and technology patents, which we leverage through an integrated suite of software solutions to offer our customers a reliable and secure platform to support mission-critical applications running on cloud, hybrid cloud and on-premise networks. Our core offerings include SD-WAN, SASE, and NMS software solutions, each of which is typically offered to our 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. When customers have multiple data lines, and one of the lines fails, FatPipe automatically and dynamically transfers network traffic from one data line to another (failover) without disconnecting the application session. When all lines are functional, FatPipe is able to improve data traffic speed and optimize bandwidth.

Previous wording

Our objective is to offer a suite of solutions to ensure our customers can securely support their networks in this cloud-first world. We are committed to driving a trusted customer experience through innovation and a diverse set of capabilities. Our core offerings are based on a complete, integrated suite of software solutions, including SD-WAN, SASE, NMS, and Cybersecurity capabilities, each of which can be individually licensed to create an experience tailored to a customer’s needs and network configuration. Additionally, all of our technologies are available for commercial sale. Further, our product pipeline consists of new SD-WAN security features and enhancements to the NMS as well as single-stack cybersecurity features to serve all a customer’s cybersecurity requirements from a single vendor.

Current wording

Our objective is to offer a suite of solutions to ensure our customers can securely support their networks in this cloud-first world. We are committed to driving a trusted customer experience through innovation and a diverse set of capabilities. Our core offerings are based on a complete, integrated suite of software solutions, including SD-WAN, SASE, and NMS capabilities, each of which can be individually licensed to create an experience tailored to a customer’s needs and network configuration. Additionally, all of our technologies are available for commercial sale. Further, our product pipeline consists of new SD-WAN security features and enhancements to the NMS.

Previous wording

Net revenue was $4,087,786, an increase of $939,109, or 30%, from the prior period ended December 31, 2024. In the three months ended December 31, 2025, product revenue was $2,572,879 compared to $1,953,706 during the same period in 2024, representing an increase of 32%. Product revenue increased by $619,173 over the prior period, driven by continued execution of FatPipe’s go-to-market strategy and improved core sales activity. Service revenue increased by $459,171, partially offset by a decrease in consulting revenue of $139,235. The increase in service revenue was primarily due to the timing of service engagements, while the decrease in consulting revenue reflects fewer consulting projects completed during the period.

Current wording

In the three months ended June 30, 2026, product revenue was $3,538,734 compared to $2,392,303 during the same period in 2025, representing an increase of $1,146,431, or 47.9%. Overall, net revenue was $5,031,538, an increase of $1,095,615, or 27.8%, from the prior period ended June 30, 2025. The increase was driven primarily by product revenue, partially offset by decreases in service revenue of $8,900 and consulting revenue of $41,916. The increase in product revenue was primarily due to increased sales of our product solutions due to the Company’s ability to fully execute on its core business following the closing of the IPO in April 2025. Service revenue marginally decreased due to contract timings. Consulting revenue decreased due to the timing of consulting engagements.

Previous wording

In the three months ended December 31, 2025, our cost of revenue was $503,816, an increase of $123,946, or 33%, from the prior period ended December 31, 2024. Cost of revenue increased as costs of inputs increased due to macroeconomic factors. The cost of revenue includes costs associated with providing services to our customers, such as costs associated with hosting our cloud services.

Current wording

In the three months ended June 30, 2026, our cost of revenue was $390,062, an increase of $163,128, or 71.9%, from the prior period ended June 30, 2025. Cost of revenue increased in line with higher product sales volumes. The cost of revenue includes costs associated with providing services to our customers, such as costs associated with hosting our cloud services.

Previous wording

In the nine months ended December 31, 2025, our gross profit was $10,939,286, a decrease of $662,421, or 6%, from prior period. The decrease in gross profit reflects a decrease in net revenue.

Current wording

In the three months ended June 30, 2026, our gross profit was $4,641,476, an increase of $932,487, or 25.1%, from the prior period. The increase in gross profit reflects an increase in net revenue.

Previous wording

Our gross margin decreased to 91% in the nine months ended December 31, 2025 from 93% in the prior period.

Current wording

Our gross margin decreased to 92.2% in the three months ended June 30, 2026 from 94.2% in the prior period, reflecting a higher proportion of product sales.

Previous wording

Product development expense in the three months ended December 31, 2025 was $453,539, an increase of $4,971 compared to the prior period, as the Company continued its development plans for its cybersecurity and satellite products. The Company has ramped up its product development in early 2025 following its April 2025 IPO.

Current wording

Product development expense in the three months ended June 30, 2026 was $527,045, an increase of $52,588, or 11.1%, compared to the prior period, as the Company continued its development plans for its cybersecurity products.

Previous wording

Employee cost expenses in the three months ended December 31, 2025 were $616,955, a decrease of $56,004, compared to the prior period.

Current wording

Employee cost expenses in the three months ended June 30, 2026 were $694,010, an increase of $100,819, or 17.0%, compared to the prior period, attributable to headcount added to support revenue growth.

Previous wording

Depreciation and amortization expense in the three months ended December 31, 2025 was $102,837, a decrease of $29,825, compared to the prior period. These expenses are categorized under general and administrative expenses.

Current wording

Depreciation and amortization expense in the three months ended June 30, 2026 was $43,114, a decrease of $48,843, compared to the prior period. These expenses are categorized under general and administrative expenses.

Previous wording

Interest income during the nine months ended December 31, 2025 was $89,893 as compared to $25,856 in the prior fiscal year. The increase was due to interest on larger cash reserves.

Current wording

Interest income during the three months ended June 30, 2026 was $41,682 as compared to $5,799 in the prior fiscal year. The increase was due to higher average cash balances and interest rates.

Previous wording

Interest expense during the three months ended December 31, 2025 was $104,072, as compared to $118,081 in the prior fiscal year. The increase was due to lower loan amount in 2025.

Current wording

Interest expense during the three months ended June 30, 2026 was $95,112, as compared to $69,888 in the prior year, reflecting the higher outstanding term-loan balance.

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 nine months ended December 31, 2025, the Company made principal payments totaling $254,594.

Current 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 three months ended June 30, 2026, the Company made principal payments totaling $92,728.

Previous wording

On June 15, 2023, the company received an interest free loan for $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 During the nine months ended December 31, 2025, the Company repaid the entire outstanding balance of the loan.

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. An additional loan of $13,652 was received under the same arrangement during the year ended March 31, 2026. The Company repaid the outstanding balance in full during the fiscal year ended March 31, 2026, and there was no outstanding balance as of June 30, 2026 or March 31, 2026.

Previous wording

Net cash used in investing activities in the nine months ended December 31, 2025 was $43,969 as compared to $12,748 in the prior period. Cash used in investing activities was primarily due to the purchase of equipment.

Current wording

Net cash used in investing activities in the three months ended June 30, 2026 was $4,520 as compared to $42,449 in the prior period. Cash used in investing activities was primarily due to the purchase of equipment.

Previous wording

Net cash provided by financing activities in the nine months ended December 31, 2025 was $3,295,802. Cash provided by financing activities included $3,742,472 in proceeds from the Company’s April 2025 IPO and proceeds from issue of share to consultant, partially offset by $446,670 in net repayments of debt. Net cash provided by financing activities in the nine months ended December 31, 2024 was $513,652. Cash provided by financing activities included $513,652 proceeds from debt.

Current wording

Net cash used in financing activities in the three months ended June 30, 2026 was $92,728, consisting of repayments of the term loan. In the three months ended June 30, 2025, net cash provided by financing activities was $3,593,250, which included $3,784,472 in proceeds from the Company’s April 2025 IPO, partially offset by $191,222 in repayment of debt.

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 adjusted earnings before interest, taxes, depreciation, and amortization expenses to net income (“Adjusted EBITDA”), a non-GAAP measure, as a key measure in operating our business. We use Adjusted 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.

Previous wording

During the years presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.

Current wording

During the period presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.

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 the IPO, (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.