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 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 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:

 SCHEDULE OF REMAINING PERFORMANCE OBLIGATION

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.

 SCHEDULE OF DEFERRED RECOGNIZED REVENUE

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.

  SCHEDULE OF CONTRACT BALANCES

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:

 SCHEDULE OF DISAGGREGATED REVENUE

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:

 SCHEDULE OF ESTIMATED USEFUL LIVES

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.

 SCHEDULE OF REVENUE FROM GEOGRAPHIC CONCENTRATIONS

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:

 SCHEDULE OF CONCENTRATION RISK

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.