Fatpipe Inc/UT

FatPipe and its Subsidiaries

Notes to Consolidated Financial Statements

NOTE 1 : SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Company Overview and Significant Accounting Policies

(A) Company Overview

FatPipe Inc. (“FatPipe” or the “Company” or “us” or “we” or “our”) is a leading developer of enterprise-class, application-aware, secure software-defined wide area network (“SD-WAN”) 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”), 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.

Initial Public Offering

On April 7, 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with D. Boral Capital LLC, as 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” or “IPO”), 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 “SEC”) 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 which was declared effective by the Commission on March 17, 2025.

On April 9, 2025, the Company closed the Offering and the Company issued and sold an aggregate of 800,004 shares of common stock, including an exercise of the over-allotment option by the underwriters. The total gross proceeds to the Company from the Offering, and before deducting discounts and expenses, were approximately $4,500,000. The Company received net proceeds of approximately $3,700,000 pursuant to the Offering.

The Common Stock commenced trading on The Nasdaq Capital Market 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 (GAAP) and have been consistently applied in the preparation of the financial statements.

Use of Estimates

The preparation of Company’s consolidated financial statements in accordance with US 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, 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 those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, which forms 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 and majority owned subsidiaries, FatPipe Technologies, Inc. and FatPipe Networks Private Limited (“Limited”). All significant intercompany transactions and balances have been eliminated.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Comprehensive Income

Comprehensive income includes net income as well as other changes in Stockholders’ equity that result from transactions and economic events other than those with stockholders.

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 intoone reportable segment. All of the operating businesses have met the aggregation criteria and have been aggregated and are presented as one 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 term 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 FatPipe Technologies, which provides networking, cybersecurity, 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 variable 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 September 30, 2026 and March 31, 2026 consisted of the following:

Amount to be recognized as revenue over next 12 months

Deferred Revenue

Contract Balances

Disaggregated revenue

We disaggregate our revenue into products, services and consulting revenue that depict the nature, amount, and timing of revenue and cash flows for our various offerings.

Disaggregation of Revenue – By Type

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. A hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The financial and nonfinancial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The hierarchy is presented down into three levels based on the reliability of the inputs.

The carrying amounts of cash, accounts receivable, accounts payable, notes payable and accrued liabilities are approximately fair value because of the short-term nature of these instruments. The carrying amount of long-term debt approximates fair value because the debt is based on current rates at which the Company could borrow funds with similar maturities.

Cash and Cash Equivalents

Cash equivalents are generally comprised of certain highly liquid investments with maturities of three months or less at the date of purchase.

For the purposes of the statement of cash flows, the Company considers all highly liquid financial instruments with a maturity of less than three months to be cash equivalents.

Trade Accounts Receivable

Accounts Receivable are recorded at the invoiced amount and do not bear interest. Accounts receivables are due from various customers and are shown net of applicable reserves for doubtful accounts as shown on the face of the balance sheet. There were no accounts that had been placed on non-accrual status. The allowance for doubtful accounts has been estimated by management based on historical experience, current market trends and, for larger customer accounts, their assessment of the ability of the customers to pay outstanding balances. Past due balances and other higher risk amounts are reviewed individually for collectability. Changes in circumstances relating to the collectability of accounts receivable may result in the need to increase or decrease the allowance for doubtful accounts in the future. 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.

Inventories

Inventories are recorded at lower of cost and net realizable value on the weighted average cost method of accounting.

Property and Equipment

Property and equipment are recorded at cost. Expenditures that increase value or extend useful lives are capitalized and routine maintenance and repairs are charged to expense in the year incurred. Gains and losses from disposition of fixed assets are reflected in other income. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Major renewals and improvements are capitalized. Replacements, maintenance and repairs, which do not significantly improve or extend the useful life of the assets, are expensed when incurred.

Upon the sale or retirement of assets, costs and the related accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in the results of operations.

Intangible Assets

Intangible assets primarily consist of patent legal costs and are recorded at cost. Amortization is computed using the straight-line method over the estimated useful lives of the assets which is assumed as 15 years. The Company capitalizes product development costs in accordance with ASC 350-40 and ASC 985-20. Amortization is computed using the straight-line method over the estimated useful lives of the assets which is assumed as 15 years.

Long-Lived Assets

The Company evaluates its long-lived assets or asset groups for indicators of possible impairment by determining whether there were any triggering events that could impact the Company’s assets. If events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable the Company performs a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by such asset or asset group. Should an impairment exist, the impairment loss is measured based on the excess carrying value of the asset over the asset’s fair value generally determined by estimates of future discounted cash flows.

The Company has not identified any such impairment losses for the period ended September 30, 2026 and March 31, 2026.

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 based on the employee’s last drawn salary and years of continuous service, and is payable upon resignation, retirement, or termination of employment.

The gratuity plan is accounted for in accordance with ASC 715,Compensation—Retirement Benefits. The liability for the defined benefit obligation is determined using the projected unit credit method and is based on actuarial valuations performed annually by independent actuaries. Actuarial gains and losses are recognized immediately in the statement of operations in the period in which they occur and this method is applied consistently.

The benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as of the reporting date. The discount rate used to determine the present value of the obligation reflects the yields available on high-quality corporate bonds of similar duration. The Company does not fund the plan, and benefits are paid as they become due.

Key assumptions used in the actuarial valuation include discount rate, salary growth rate, and employee turnover rates.

Income Taxes

The Company is subject to federal and state income taxes. Its taxable income and deductions are included on a consolidated income tax return. The consolidated entities have a net loss carryover which may be fully utilized. Deferred tax assets are recognized in these financial statements after considering valuation allowances. A subsidiary of the Company is subject to foreign income taxes in India. The Indian subsidiary is subjected to income tax audits annually and tax assessments in accordance with the applicable Income Tax laws.

Warranties

The Company offers aone-year tothree-year warranty on the hardware products it sells. The cost of fulfilling the warranty obligation has historically been insignificant. No provision for future warranty costs has been made in these financial statements.

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. Awards are made under the FatPipe, Inc. 2024 Equity Incentive Plan adopted in connection with the Company’s initial public offering. The Company recognized stock-based compensation expense of $219,040 during the six months ended September 30, 2026, compared to $625,220 during the six months ended September 30, 2025, which is included within general and administrative expenses in the consolidated statements of operations.

**Leases **

The Company accounts for its leases under ASC 842,Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.

In calculating the right of use asset and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term.

Related Parties

Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of the management and policies of the Company. The Company discloses related party transactions that are outside of normal compensatory agreements, such as salaries. The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

Concentrations

The Company is primarily concentrated in the United States for trade accounts receivable and revenue.

Disaggregation of Revenue – By Geography

At September 30, 2026, the carrying amount of cash was $3,102,944, only a portion of which is covered by federal depository insurance. At March 31, 2026, the carrying amount of cash was $5,214,775, only a portion of which is covered by federal depository insurance.

Concentrations of 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.

The Company has three major partners that account for approximately 67.11% of the Company’s consolidated revenues for the six months ended September 30, 2026 and three major partners that accounted for 56.33% for the six months ended September 30, 2025. As reflected in the table below, partner A contributed $6,450,900 or 65.39% in revenue for the six months ended September 30, 2026, and $3,870,963 or 49.03% for the six months ended September 30, 2025. Separately, Partner B contributed $85,816 or 0.87% for the six months ended September 30, 2026, and $326,338 or 4.13% for the six months ended September 30, 2025. Partner C contributed $84,507 or 0.86% for the six months ended September 30, 2026, and $250,422 or 3.17% for the six months ended September 30, 2025.

Recent Accounting Pronouncements

*Recently Adopted Accounting Pronouncements.*In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The Company adopted ASU 2023-07 effective for the fiscal year beginning April 1, 2025 on a retrospective basis. The adoption did not have a material impact on the Company’s condensed consolidated financial statements but resulted in additional disclosures about its single reportable segment.

In December 2023, the FASB issued Accounting Standards Update 2023-09 (“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 adoption did not have a material impact on the Company’s consolidated financial statements but resulted in additional income tax disclosures.

*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). The amendments require public business entities to disclose, in a tabular format, additional information about specified categories of expenses. 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 of adoption on its consolidated financial statement disclosures.

NOTE 2: PROPERTY AND EQUIPMENT, NET

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

Depreciation expense for the three months ended September 30, 2026 and 2025 amounted to $11,534 and $691, respectively. Depreciation expense for the six months ended September 30, 2026 and 2025 amounted to $16,707 and $8,193, respectively.

NOTE 3: INTANGIBLE ASSETS, NET

The Company’s intangible assets consist of the following:

Amortization expense for the three months ended September 30, 2026 and 2025 amounted to $30,892 and $103,416, respectively. Amortization expense for the six months ended September 30, 2026 and 2025 amounted to $68,833 and $187,871, respectively.

The estimated future amortization expense for the next five years and thereafter is as follows:

NOTE 4: NOTE PAYABLE

In January 2023, the Company entered into a three-year term loan with a local bank that is secured by substantially all assets of the Company with a corporate guarantee given by subsidiary - FatPipe Networks Private Limited. The loan was repayable in full during the Fiscal year 2025-26.

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 six months ended September 30, 2026, the Company made principal payments totaling $183,586.

On October 1, 2026, the Company repaid the Fortis Bank loan in full with proceeds from a new term loan with KeyBank National Association, and the Fortis Bank loan was terminated. See Note 11.

Future maturities of long-term debt as of September 30, 2026, which reflect the Fortis Bank loan prior to its refinancing, are as follows:

Interest expense was $101,846 and $126,033 for the three months ended September 30, 2026 and 2025, respectively, and $196,958 and $195,921 for the six months ended September 30, 2026 and 2025, respectively.

Short Term Debt

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 wasno outstanding balance as of September 30, 2026 or March 31, 2026.

NOTE 5: STOCKHOLDERS’ EQUITY

ATM Offering

On July 2, 2026, the Company filed a shelf registration statement on Form S-3 registering up to $20.0 million of common stock and/or debt securities. Concurrently, the Company entered into an At-the-Market Offering Agreement with H.C. Wainwright & Co., LLC, pursuant to which the Company may, from time to time, offer and sell up to $10.0 million of its common stock. The ATM program forms part of, and is not in addition to, the $20.0 million registered under the shelf registration statement.

Net proceeds from any future issuances are expected to be used for working capital, general corporate purposes, and potential acquisitions. As of the issuance date of these financial statements, no securities had been issued or sold under the shelf registration statement or the ATM program. Any future issuances under these arrangements may increase the number of shares outstanding and result in shareholder dilution.

Authorized Capital Stock

On June 19, 2024, our Board and Shareholders 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.

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 the Meeting will be sufficient to elect directors or to approve a proposal.

During the six months ended September 30, 2026, the Company issued an aggregate of 104,000 shares of common stock for employee services.

As of September 30, 2026, the total number of outstanding shares is 14,128,468.

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.

NOTE 6: 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.

NOTE 7: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

NOTE 8: RELATED PARTY TRANSACTIONS

The subsidiary company “FatPipe Networks Private Limited” has taken a lease from a company “Back Office Extensions India Pvt Ltd” in which the Company’s directors are management. The total lease payments amounted to $49,318 and $42,468 for the six months ended September 30, 2026 and 2025, respectively.

The Company had received a short-term interest free loan from a related entity which is controlled by the Company’s Chief Executive Officer, Stay in Business Inc., for $120,000. The loan was repayable on demand during the year 2023-24. 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 September 30, 2026 or March 31, 2026.

NOTE 9: INCOME TAXES

The Company records its interim income tax provision (benefit) based on the estimated annual effective tax rate expected to apply for the full fiscal year, adjusted for discrete items recognized in the period, in accordance with ASC 740-270, Income Taxes — Interim Reporting.

For the three months ended September 30, 2026, the Company recognized an income tax benefit of $370,815, compared to an income tax benefit of $12,595 for the three months ended September 30, 2025. For the six months ended September 30, 2026, the Company recognized an income tax benefit of $741,740, compared to an income tax provision of $202,590 for the six months ended September 30, 2025. The Company’s effective tax rate applicable to ordinary income for the current period was minimal, reflecting the utilization of available U.S. federal net operating loss carryforwards against taxable income.

The income tax benefit for the three and six months ended September 30, 2026 reflects a change in estimate, recognized as a discrete item in each quarter of the current fiscal year, relating to the phased reduction of a previously accrued income tax payable balance following the Company’s application of available net operating loss carryforwards. Consistent with ASC 740-270, this discrete item was recognized in the period in which it arose and was excluded from the estimated annual effective tax rate applied to ordinary income.

NOTE 10. COMMITMENTS AND CONTINGENCIES

From time to time, the Company is involved in legal proceedings arising in the ordinary course of business. The Company, in conjunction with its legal counsel, assesses the need to record liability for litigation or loss contingencies. A liability is recorded when and if it is determined that such a liability for litigation or loss contingencies is both probable and estimable.

Although the results of legal proceedings and claims cannot be predicted with certainty, management is of the opinion, after consulting legal counsel, that the Company is not currently a party to any legal proceedings, which would, individually or in the aggregate, have a material adverse effect on its results of operations, cash flows, or financial position.

At this time, there are no legal proceedings that require the Company to assess the need to record a liability.

NOTE 11. SUBSEQUENT EVENTS:

The Company evaluated the subsequent events through November 4, 2026, the date at which the financial statements were issued.

Refinancing of Note Payable

On October 1, 2026, the Company entered into a $4.5 million secured term loan (the “Term Loan”) and a secured revolving line of credit of up to $1.5 million (the “Revolving Facility” and, together with the Term Loan, the “Credit Facilities”) with KeyBank National Association. On October 1, 2026, the Company used approximately $4.47 million of the Term Loan proceeds to repay in full the outstanding balance of the Fortis Bank loan described in Note 4, and the Fortis Bank loan was terminated. Borrowings under the Credit Facilities bear interest at the Adjusted Daily SOFR Index plus 3.00%. The Term Loan requires 35 monthly principal payments of $75,000 beginning November 1, 2026, plus accrued interest, with the remaining balance due at maturity on October 1, 2029. The Revolving Facility is available for working capital and matures on September 30, 2027. The Credit Facilities are guaranteed by the Company’s wholly owned subsidiary, FatPipe Technologies, Inc., are secured by substantially all personal property assets of the Company and FatPipe Technologies, Inc., and contain financial covenants, tested quarterly, that require a ratio of Total Funded Debt to EBITDA of no greater than 2.50 to 1.00 and a Fixed Charge Coverage Ratio of at least 1.20 to 1.00.

Acquisition of ViewVertical Technologies LLC

On October 1, 2026, the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) to acquire 100% of the membership interests of ViewVertical Technologies LLC (“ViewVertical”), a Georgia limited liability company, and completed the acquisition on October 1, 2026. ViewVertical provides managed IT and consulting services. The Company acquired ViewVertical to expand market presence, and FatPipe’s IT and cybersecurity offerings. The purchase price is up to $810,000, consisting of $410,000 paid in cash at closing, and up to $400,000 of contingent consideration. The contingent consideration includes meeting various financial criteria post-closing. The acquisition will be accounted for as a business combination under ASC 805, Business Combinations. Because the acquisition closed shortly before the issuance of these consolidated financial statements, the initial accounting for the business combination, including the fair value of the contingent consideration and the allocation of the purchase price to the assets acquired and liabilities assumed, is incomplete. Accordingly, the Company is unable to provide these disclosures at this time.