{"url_path":"/sec/fatn/10-k/2026/item-8","section_key":"item-8","section_title":"Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-05-18","source_url":"https://www.sec.gov/Archives/edgar/data/1993400/0001493152-26-024184-index.html","accession_number":"0001493152-26-024184","cik":"0001993400","ticker":"FATN","issuer_name":"Fatpipe Inc/UT","edgar_url":"https://www.sec.gov/Archives/edgar/data/1993400/0001493152-26-024184-index.html","primary_entity_key":"0001993400","primary_entity_name":"Fatpipe Inc/UT"},"word_count":10516,"has_tables":true,"body_markdown":"**ITEM\n8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA**\n\n \n\n**Consolidated\nFinancial Statements**\n\n \n\n**Table\nof Contents**\n\n \n\n[Report of Independent Registered Public Accounting Firm](#V_0000001) (Firm ID: 6727)\nF-2\n\n[Consolidated Balance Sheets](#V_0000002)\nF-3\n\n[Consolidated Statements of Operations and Comprehensive Income](#V_0000003)\nF-4\n\n[Consolidated Statements of Stockholders’ Equity](#V_0000004)\nF-5\n\n[Consolidated Statements of Cash Flows](#V_0000005)\nF-6\n\n[Notes to the Consolidated Financial Statements](#V_0000006)\nF-7\n\n \n\nF-1\n\n \n\n \n\n**REPORT\nOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**\n\n \n\nTo\nthe Shareholders and Board of Directors of FatPipe, Inc.\n\n \n\n**Opinion\non the Financial Statements**\n\n \n\nWe\nhave audited the accompanying consolidated balance sheets of FatPipe, Inc. and its subsidiaries (the “Company”) as of March\n31, 2026 and 2025, the related consolidated statements of operations and comprehensive income, statements of stockholders’ equity,\nand statements of cash flows, for each of the two fiscal years in the period ended March 31, 2026, and the related notes (collectively\nreferred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,\nin all material respects, the financial position of the Company as of March 31, 2026 and 2025, and the results of its operations and\nits cash flows for each of the two fiscal years in the period ended March 31, 2026, in conformity with accounting principles generally\naccepted in the United States of America (“U.S. GAAP”).\n\n \n\n**Basis\nfor Opinion**\n\n \n\nThese\nconsolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion\non the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public\nCompany Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company\nin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission\nand the PCAOB.\n\n \n\nWe\nconducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain\nreasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.\nThe Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part\nof our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing\nan opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.\n\n \n\nOur\naudits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether\ndue to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence\nregarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles\nused and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.\nWe believe that our audits provide a reasonable basis for our opinion.\n\n \n\n/s/\nSuri & Co., Chartered Accountants\n\n \n\nWe\nhave served as the Company’s auditors since 2022.\n\n \n\nPlace:\nChennai, India\n\nDate:\nMay 18, 2026\n\n \n\nF-2\n\n \n\n \n\n**FatPipe\nInc and Subsidiaries**\n\n \n\n**Consolidated\nBalance Sheets**\n\n \n\n  \n2026  \n2025 \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nASSETS \n   \n  \n\nCurrent assets: \n    \n   \n\nCash \n$5,214,775  \n$2,920,550 \n\nAccounts receivable, net \n 4,295,370  \n 3,764,945 \n\nInventory \n 445,842  \n 419,677 \n\nOther current assets \n 125,271  \n 666,376 \n\nContracts receivable - current, net \n 6,375,651  \n 5,191,136 \n\nTotal current assets \n 16,456,909  \n 12,962,684 \n\nProperty and equipment, net \n 95,506  \n 57,844 \n\nIntangible assets, net \n 694,192  \n 1,048,620 \n\nOperating lease right of use assets, net \n 1,042,476  \n 1,455,373 \n\nContracts receivable - non current, net \n 15,784,746  \n 12,307,266 \n\nOther assets \n 372,353  \n 379,077 \n\nDeferred tax asset \n 76,905  \n 76,905 \n\nTotal assets \n$34,523,087  \n$28,287,769 \n\n  \n    \n   \n\nLIABILITIES AND STOCKHOLDERS’ EQUITY \n    \n   \n\nCurrent liabilities: \n    \n   \n\nAccounts payable \n$390,174  \n$437,253 \n\nAccrued expenses and other current liabilities \n 1,993,899  \n 3,863,096 \n\nDeferred revenue \n 1,093,440  \n 1,358,632 \n\nOperating lease liabilities, current \n 401,406  \n 366,677 \n\nNotes payable, current \n 391,397  \n 463,422 \n\nTotal current liabilities \n 4,270,316  \n 6,489,080 \n\nNotes payable, non-current \n 4,232,886  \n 4,642,317 \n\nOperating lease liabilities, non-current \n 682,437  \n 1,114,067 \n\nOther non-current liabilities \n 121,818  \n 116,988 \n\nTotal liabilities \n 9,307,457  \n 12,362,452 \n\n  \n    \n   \n\nCommitments and contingencies (Note 9) \n -  \n - \n\n  \n    \n   \n\nStockholders’ equity: \n    \n   \n\nCommon stock, $0.01 par value; 50,000,000 shares authorized, 14,024,468 and\n13,026,464 shares of common stock issued and outstanding as of March 31, 2026 and March 31, 2025, respectively \n 132,245  \n 130,265 \n\nAdditional paid-in capital \n 6,098,507  \n 1,588,105 \n\nRetained earnings \n 16,076,024  \n 11,106,063 \n\nAccumulated other comprehensive income \n 2,908,854  \n 3,100,884 \n\nTotal stockholders’ equity \n 25,215,630  \n 15,925,317 \n\nTotal liabilities and stockholders’ equity \n$34,523,087  \n$28,287,769 \n\n \n\nF-3\n\n \n\n \n\n**FatPipe\nInc and Subsidiaries**\n\n \n\n**Consolidated\nStatements of Operations and Comprehensive Income**\n\n \n\n  \n2026  \n2025 \n\n  \nYear Ended \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nRevenues \n$19,208,294  \n$16,288,881 \n\nCost of revenues \n 1,728,384  \n 1,061,647 \n\nGross profit \n 17,479,910  \n 15,227,234 \n\n  \n    \n   \n\nOperating expenses: \n    \n   \n\nSales and marketing \n 4,791,906  \n 3,753,948 \n\nGeneral and administrative \n 4,759,653  \n 3,422,596 \n\nProduct development \n 1,905,042  \n 1,787,128 \n\nEmployee cost \n 2,433,939  \n 2,791,816 \n\nTotal operating expenses \n 13,890,540  \n 11,755,488 \n\n  \n    \n   \n\nIncome (loss) from operations \n 3,589,370  \n 3,471,746 \n\n  \n    \n   \n\nOther income (expense), net: \n    \n   \n\nInterest income \n 125,185  \n 42,688 \n\nOther Income \n -  \n 1,831 \n\nForeign exchange gain/(loss) \n 246,874  \n 101,383 \n\nInterest expense \n (475,071) \n (329,892)\n\nTotal other income (expense), net \n (103,012) \n (183,990)\n\n  \n    \n   \n\nIncome (loss) before benefit/(provision) for taxes \n 3,486,358  \n 3,287,756 \n\nIncome tax benefit/(provision) \n 1,483,603  \n (1,294,312)\n\nDeferred tax asset / (liability) \n -  \n (40,550)\n\nNet income \n 4,969,961  \n 1,952,894 \n\nLess: Net loss attributable to non-controlling interests \n -  \n (13,514)\n\nNet income attributable to stockholders \n$4,969,961  \n$1,966,408 \n\n  \n    \n   \n\nNet income per common share - basic \n$0.36  \n$0.15 \n\nNet income per common share - diluted \n$0.35  \n$0.15 \n\nWeighted average common shares outstanding - basic \n 13,882,787  \n 12,858,852 \n\nWeighted average common shares outstanding - diluted \n \n14,006,392\n  \n \n12,858,852\n \n\n  \n    \n   \n\nNet income \n$4,969,961  \n$1,952,894 \n\nOther comprehensive income (loss): \n    \n   \n\nForeign currency translation adjustment \n (192,030) \n (153,822)\n\nTotal other comprehensive income, net of tax \n (192,030) \n (153,822)\n\nComprehensive income (loss) \n 4,777,931  \n 1,799,072 \n\nLess: Comprehensive loss attributable to non-controlling interests \n -  \n (13,139)\n\nComprehensive income attributable to stockholders \n$4,777,931  \n$1,812,211 \n\n \n\nF-4\n\n \n\n \n\n**FatPipe\nInc and Subsidiaries**\n\n**Consolidated\nStatements of Stockholders’ Equity**\n\n**Years\nEnded March 31, 2026 and 2025**\n\n \n\n  \nShares  \nAmount  \nin capital  \nEarnings  \nIncome  \nEquity  \nInterests  \nEquity \n\n  \nCommon stock  \nAdditional paid  \nRetained  \nAccumulated\nOther Comprehensive  \nTotal Fatpipe Stockholders’  \nNon-controlling  \n**Total** \n\n  \nShares  \nAmount  \nin capital  \nEarnings  \nIncome  \nEquity  \nInterests  \nEquity \n\nBalance as of March 31, 2024 \n 12,449,308  \n$124,493  \n$1,517,753  \n$9,040,515  \n$3,254,706  \n$13,937,467  \n$112,654  \n$14,050,121 \n\nNet income (loss) \n -  \n -  \n -  \n 1,966,408  \n -  \n 1,966,408  \n (13,514) \n 1,952,894 \n\nOther comprehensive income (loss) \n -  \n -  \n -  \n -  \n (154,197) \n (154,197) \n 375  \n (153,822)\n\nIssuance of shares for purchase of non-controlling interest \n 577,156  \n 5,772  \n 70,352  \n 99,140  \n 375  \n 175,639  \n (99,515) \n 76,124 \n\nBalance as of March 31, 2025 \n 13,026,464  \n 130,265  \n 1,588,105  \n 11,106,063  \n 3,100,884  \n 15,925,317  \n -  \n 15,925,317 \n\nBalance \n 13,026,464  \n 130,265  \n 1,588,105  \n 11,106,063  \n 3,100,884  \n 15,925,317  \n -  \n 15,925,317 \n\nIssuance of shares pursuant to initial public offering \n 800,004  \n -  \n 3,935,522  \n -  \n -  \n 3,935,522  \n -  \n 3,935,522 \n\nShares issued for cash and services \n 198,000  \n 1,980  \n 851,240  \n -  \n -  \n 853,220  \n -  \n 853,220 \n\nOffering costs \n -  \n -  \n (276,360) \n -  \n -  \n (276,360) \n -  \n (276,360)\n\nNet income \n -  \n -  \n -  \n 4,969,961  \n -  \n 4,969,961  \n -  \n 4,969,961 \n\nNet income (loss) \n -  \n -  \n -  \n 4,969,961  \n -  \n 4,969,961  \n -  \n 4,969,961 \n\nOther comprehensive loss \n -  \n -  \n -  \n -  \n (192,030) \n (192,030) \n -  \n (192,030)\n\nOther comprehensive income (loss) \n -  \n -  \n -  \n -  \n (192,030) \n (192,030) \n -  \n (192,030)\n\nBalance as of March 31, 2026 \n 14,024,468  \n$132,245  \n$6,098,507  \n$16,076,024  \n$2,908,854  \n$25,215,630  \n$-  \n$25,215,630 \n\nBalance \n 14,024,468  \n$132,245  \n$6,098,507  \n$16,076,024  \n$2,908,854  \n$25,215,630  \n$-  \n$25,215,630 \n\n \n\nF-5\n\n \n\n \n\n**FatPipe\nInc and Subsidiaries**\n\n**Consolidated\nStatements of Cash Flows**\n\n \n\n  \n2026  \n2025 \n\n  \nYear Ended \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nCash Flows From Operating Activities \n    \n   \n\nNet income \n$4,969,961  \n$1,952,894 \n\nAdjustments to reconcile net income to net cash provided by operating activities: \n    \n   \n\nDepreciation and amortization \n 369,249  \n 545,709 \n\nAllowance for contract receivables \n 916,419  \n 272,057 \n\nStock based compensation \n 770,220  \n - \n\nAllowance for accounts receivables \n 132,308  \n 443,804 \n\nBad debts written off during the year \n 57,167  \n 52,942 \n\nChanges in operating assets and liabilities: \n    \n   \n\nAccounts receivable \n (719,900) \n (1,098,120)\n\nContracts receivable \n (5,578,414) \n (3,447,334)\n\nInventories \n (26,165) \n (306,155)\n\nRight of use assets \n -  \n - \n\nOther current assets \n 541,105  \n (83,984)\n\nOther assets \n 6,724 \n (192,171)\n\nAccounts payable \n (47,079) \n 19,726 \n\nAccrued expenses and other current liabilities \n (1,869,197) \n 1,480,674 \n\nDeferred revenue \n (265,192) \n (160,780)\n\nOther non current liabilities \n (53,595) \n 981 \n\nOperating lease liability, net \n 15,996 \n 15,633 \n\nNet cash used in operating activities \n (780,393) \n (504,124)\n\n  \n    \n   \n\nCash Flows From Investing Activities \n    \n   \n\nPurchase of equipment \n (52,483) \n (19,762)\n\nNet cash used in investing activities \n (52,483) \n (19,762)\n\n  \n    \n   \n\nCash Flows From Financing Activities \n    \n   \n\nNet repayment of debt \n (423,031) \n (3,027,913)\n\nProceeds from debt \n -  \n 5,513,652 \n\nIssuance of shares pursuant to initial public offering \n 3,659,162  \n - \n\nProceeds from issuance of common stock for cash \n 83,000  \n - \n\nNet cash provided by (used in) financing activities \n 3,319,131  \n 2,485,739 \n\n  \n    \n   \n\nEffect of exchange rate changes on cash and cash equivalents \n (192,030) \n (153,822)\n\nNet change in cash and cash equivalents \n 2,294,225  \n 1,808,031 \n\nCash and cash equivalents: \n    \n   \n\nBeginning of the period \n 2,920,550  \n 1,112,519 \n\nEnd of the period \n$5,214,775  \n$2,920,550 \n\n  \n    \n   \n\nSupplemental Disclosure of Cash Flow Information \n    \n   \n\nCash paid for interest \n$475,071  \n$329,892 \n\nCash paid for income taxes \n$-  \n$- \n\n  \n    \n   \n\nSupplemental Disclosure of Non-Cash Investing Activities and Financing Activities: \n    \n   \n\nRight of use assets obtained in exchange of lease liabilities \n$-  \n$1,319,422 \n\nIssuance of shares for purchase of non-controlling interest \n$-  \n$\n17,124\n \n\n \n\nF-6\n\n \n\n \n\n**FatPipe\nInc and Subsidiaries**\n\n**Notes\nto the Consolidated Financial Statements**\n\n**Years\nEnded March 31, 2026 and 2025**\n\n \n\n**NOTE\n1: SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES**\n\n \n\n**Company\nOverview and Significant Accounting Policies**\n\n \n\n**(A)\nCompany Overview**\n\n \n\nFatPipe,\nInc. (“FatPipe,” “the Company,” “we,” “us,” or “our”) was incorporated in\nUtah on October 14, 2009. FatPipe is a leading developer of enterprise-class, application-aware, secure software-defined wide area network\n(“SD-WAN”) solutions and single stack cybersecurity solutions for organizations, including enterprises, communication service\nproviders, security service providers, government organizations, and other middle-market companies.\n\n \n\nFatPipe\nholds thirteen software and technology patents, which it leverages through an integrated suite of software solutions to offer our customers\na reliable, accelerated, and secure platform to support mission-critical applications running on cloud, hybrid cloud, and on-premises\nnetworks. Its core offerings include SD-WAN, secure access service edge (“SASE”), single stack cybersecurity (“Cybersecurity”),\nand network monitoring service (“NMS”) software solutions, each of which is typically offered to customers as a subscription\nservice. These solutions address a broad set of network management needs and include an integrated set of capabilities designed to manage\nmulti-line network traffic and routing.\n\n \n\nFatPipe\nsells in geographies around the world, with its largest customer populations located in the United States and South Asia. It plans to\ncontinue expanding its presence throughout North America and parts of Southeast Asia.\n\n \n\nFatPipe\noperates through its wholly owned subsidiaries, FatPipe Technologies, Inc. (“FT”), a Delaware corporation, and FatPipe Networks\nPrivate Limited (“FP India”), an Indian private limited company. FT and FP India provide consulting and engineering services\nand product development support to FatPipe.\n\n \n\n*Initial\nPublic Offering*\n\n \n\nOn\nApril 7, 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with D. Boral Capital LLC, as representative\n(the “Representative”) of the underwriters named therein (the “Underwriters”), pursuant to which the Company\nagreed to sell to the Underwriters, in a firm commitment initial public offering (the “Offering”), an aggregate of 695,656\nshares of the Company’s common stock, no par value per share (the “Common Stock”), at an initial public offering price\nof $5.75 per share. The Common Stock was offered pursuant to a registration statement on Form S-1, as amended (File No. 333-280925),\noriginally filed with the U.S. Securities and Exchange Commission (the “Commission”) on July 19, 2024, as amended, and which\nwas declared effective by the Commission on February 12, 2025. A post-effective amendment to the registration statement related to the\nOffering was filed with the Commission on March 11, 2025, and was declared effective by the Commission on March 17, 2025.\n\n \n\nOn\nApril 9, 2025, the Company closed the Offering and, including partial exercise of the underwriters’ over-allotment option, issued\nand sold an aggregate of 800,004 shares of common stock. Gross proceeds were approximately $4,600,023, and net proceeds, after deducting\nunderwriting discounts and offering expenses, were approximately $3,935,522.\n\n \n\nA\nfinal prospectus relating to the Offering was filed with the Commission on April 7, 2025. The Common Stock was previously approved for\nlisting on The Nasdaq Capital Market and commenced trading under the ticker symbol “FATN” on April 8, 2025.\n\n \n\nF-7\n\n \n\n** **\n\n**(B)\nSignificant Accounting Policies**\n\n \n\n**Basis\nof Preparation of Financial Statements**\n\n \n\nThis\nsummary of significant accounting policies of FatPipe is presented to assist in understanding the Company’s consolidated financial\nstatements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible\nfor their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States\nof America (“U.S. GAAP”) and have been consistently applied in the preparation of the financial statements.\n\n \n\n**Use\nof Estimates**\n\n \n\nThe\npreparation of the Company’s consolidated financial statements in accordance with U.S. GAAP requires management to make estimates\nand assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the\ndate of the financial statements, and the reported amounts of revenues and expenses during the reporting period.\n\n \n\nThese\nestimates are based upon information available through the date of the issuance of the financial statements, and actual results could\ndiffer from those estimates. Areas requiring significant estimates and assumptions by the Company include, but are not limited to:\n\n \n\n●Fair\nvalue of long-term debt and notes receivable;\n\n \n\n●Recognition\nof revenue;\n\n \n\n●Credit\nloss on trade receivables and contract receivables;\n\n \n\n●Valuation\nof inventory;\n\n \n\n●Recoverability\nof long-lived assets including intangible assets and their related estimated lives;\n\n \n\n●Accruals\nfor estimated liabilities such as property tax accruals and litigation settlement accruals;\n\n \n\n●Accruals\nfor income tax and deferred tax;\n\n \n\n●Determination\nof standalone selling price of performance obligations for revenue contracts with multiple\nperformance obligations;\n\n \n\n●Actuarial\nassumptions for the Indian gratuity defined benefit plan, including discount rate, salary\ngrowth rate, and employee turnover rate.\n\n \n\nActual\nresults could differ from these estimates. The Company bases its estimates on historical experience and on various other assumptions\nthat are believed to be reasonable, which form the basis for making judgments about the carrying values of assets and liabilities.\n\n \n\n**Principles\nof Consolidation**\n\n \n\nThese\nfinancial statements include the accounts of FatPipe, Inc. and its wholly owned subsidiaries, FT and FP India. All significant intercompany\ntransactions and balances have been eliminated.\n\n \n\nAs\nof 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\nshares of capital stock of FP India were owned by certain individual stockholders (collectively, the “Limited non-controlling interests”).\nIn July 2024, pursuant to the terms of a stock purchase and sale agreement, the Company issued an aggregate of 577,156 shares of common\nstock in exchange for the Limited non-controlling interests. As of March 31, 2026 and March 31, 2025, FP India was a wholly owned subsidiary\nof the Company.\n\n \n\n**Reclassifications**\n\n \n\nCertain\namounts in the prior year financial statements have been reclassified to conform with the current year presentation. These reclassifications\nhad no effect on previously reported total assets, total liabilities, total stockholders’ equity, net income, or cash flows.\n\n \n\n**Comprehensive\nIncome**\n\n \n\nComprehensive\nincome consists of net income and other comprehensive income, which includes foreign currency translation adjustments related to the\nCompany’s Indian subsidiary. The functional currency of FP India is the Indian rupee. Assets and liabilities of FP India are translated\ninto U.S. dollars at the exchange rate in effect at the consolidated balance sheet date. Revenues and expenses are translated using average\nexchange rates during the period. Translation adjustments are recorded in accumulated other comprehensive income, a separate component\nof stockholders’ equity.\n\n \n\nF-8\n\n \n\n** **\n\n**Segment\nReporting**\n\n \n\nIn\naccordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business\nactivities are managed and evaluated. The Company’s chief operating decision-maker is its Chief Executive Officer, who makes resource\nallocation decisions and assesses performance based on financial information presented on an aggregate basis. There are no segment managers\nwho are held accountable by the chief operating decision-maker, or anyone else, for any planning, strategy and key decision-making regarding\noperations. We have determined that each of our products and services share similar economic and other qualitative characteristics, and\ntherefore the results of our operating businesses are aggregated into one reportable segment. All of the operating businesses have met\nthe aggregation criteria and have been aggregated and are presented as one reportable segment, as permitted by ASC 280. We continually\nmonitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred\nthat would impact our reportable segments.\n\n \n\n**Revenue\nRecognition**\n\n \n\nThe\nCompany recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts\nwith Customers (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer of\npromised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange\nfor those goods or services. To achieve this core principle, the Company applies a five-step model: (1) identify the contract with a\ncustomer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction\nprice to the performance obligations; and (5) recognize revenue when (or as) the entity satisfies the performance obligations.\n\n \n\nThe\nCompany derives its revenue from three primary sources, each of which is delivered through subscription-based or service contracts:\n\n \n\n*Software\nproduct and license revenue.*Software product and license revenue is generated through the sale of perpetual licenses for our proprietary\nSD-WAN, SASE, NMS, and cybersecurity software, including delivery of the related network server hardware components, where applicable.\nThe Company has determined that delivery of the software license, including any related network server hardware, represents a single\nperformance obligation that is satisfied at a point in time when control of the product transfers to the customer. Accordingly, the Company\nrecognizes software product and license revenue at the point of delivery or transfer of control.\n\n \n\n*Service\nand support revenue.*Service and support revenue is generated through the provision of technical support, software updates, monitoring\nservices, and other ongoing services associated with the customer’s subscription. The Company has determined that these services\nrepresent a single performance obligation satisfied over time. Service and support revenue is recognized ratably over the contractual\nterm of the customer’s subscription, which generally ranges from 36 to 60 months.\n\n \n\n*Consulting\nand other revenue.*Consulting and other revenue is generated primarily through FT, which provides networking, programming, and professional\nservices on a project basis. Revenue from these arrangements is recognized over time, as services are rendered, in accordance with the\nterms of the underlying customer contract.\n\n \n\nCustomer\ncontracts may contain multiple performance obligations, including the delivery of software licenses, technical support, implementation,\nconfiguration, and training services. The Company allocates the transaction price to each performance obligation based on the relative\nstandalone selling price of each obligation. The Company has selected the cost of technical support personnel plus a 20% margin as the\nstandalone selling price for service and support, with the residual contract value allocated to software product and license delivery.\nThe Company has consistently applied this methodology across all periods presented.\n\n \n\nCustomer\ncontracts are typically billed monthly. Amounts billed in advance of revenue recognition are recorded as deferred revenue. Amounts representing\nthe future contractual rights to consideration in exchange for delivered software products and licenses are recorded as contracts receivable.\n\n \n\nF-9\n\n \n\n** **\n\n**Remaining\nPerformance Obligations**\n\n \n\nRemaining\nperformance obligations represent contracted revenue that has not yet been recognized as the related performance obligations have not\nbeen satisfied. The Company’s remaining performance obligations as of March 31, 2026 and 2025 consisted of the following:\n\n SCHEDULE OF REMAINING PERFORMANCE OBLIGATION\n\n  \n2026  \n2025 \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nProduct \n$3,120,564  \n$776,426 \n\nService \n 1,520,941  \n 2,294,906 \n\nTotal \n 4,641,505  \n 3,071,332 \n\n  \n    \n   \n\nShort Term – RPO – within 12 months \n 2,902,049  \n 1,358,632 \n\nLong Term – RPO – from 13 to 36 months \n 761,128  \n 729,037 \n\nLong Term RPO (37 month to 60 months) \n 978,328  \n 983,663 \n\nTotal \n$4,641,505  \n$3,071,332 \n\n \n\n**Deferred\nRevenue**\n\n \n\nDeferred\nrevenue represents amounts billed to customers for which revenue has not yet been recognized. Deferred revenue is recognized as revenue\nratably over the underlying contract term as the Company satisfies the related performance obligation.\n\n SCHEDULE OF DEFERRED RECOGNIZED REVENUE\n\n  \n2026  \n2025 \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nProduct \n$-  \n$- \n\nService \n 1,093,440  \n 1,358,632 \n\nTotal \n$1,093,440  \n$1,358,632 \n\n \n\nAll\ndeferred revenue at March 31, 2026 and 2025 is classified as current on the consolidated balance sheets.\n\n \n\n**Contract\nBalances**\n\n \n\nContract\nassets primarily relate to the Company’s rights to consideration for performance obligations that have been satisfied, but for\nwhich the right to consideration is conditional on something other than the passage of time. Contract liabilities consist of deferred\nrevenue and customer prepayments. Contracts receivable represents amounts that are unconditionally due to be collected from customers\nbased on satisfied performance obligations and are presented separately on the consolidated balance sheets, distinguished between current\nand non-current portions based on the timing of expected billings.\n\n  SCHEDULE OF CONTRACT BALANCES\n\n  \n2026  \n2025 \n\n  \nYear Ended \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nAllowance for bad debts at the beginning of the year \n$(1,018,756) \n$(875,518)\n\n(Provisions) / reversal \n (957,424) \n (143,238)\n\nRecoveries \n -  \n - \n\nAllowance for bad debts at the end of the year \n$(1,976,180) \n$(1,018,756)\n\n \n\nF-10\n\n \n\n** **\n\n**Disaggregated\nRevenue**\n\n \n\nThe\nCompany disaggregates revenue from contracts with customers by major revenue category and by geography. The following table presents\nrevenue by major source for the fiscal years ended March 31, 2026 and 2025:\n\n SCHEDULE OF DISAGGREGATED REVENUE\n\n  \n2026  \n2025 \n\n  \nYear Ended \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nProduct revenue \n$13,041,271  \n$10,706,169 \n\nService revenue \n 3,768,998  \n 3,110,230 \n\nConsulting revenue \n 2,398,025  \n 2,472,482 \n\nTotal \n$19,208,294  \n$16,288,881 \n\n \n\n**Fair\nValue of Financial Instruments**\n\n \n\nThe\ncarrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due\nto the short-term maturities of these financial instruments. The carrying amount of the Company’s notes payable approximates fair\nvalue because the interest rate adjusts at quarterly intervals based on the Prime Rate, and accordingly the loan reprices to market rates.\n\n \n\nASC\nTopic 820, Fair Value Measurement, establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three\nbroad levels: Level 1 — quoted prices in active markets for identical assets or liabilities; Level 2 — inputs other than\nLevel 1 that are observable, either directly or indirectly; and Level 3 — unobservable inputs that are significant to the fair\nvalue of the assets or liabilities. The Company did not have any assets or liabilities measured at fair value on a recurring basis as\nof March 31, 2026 or March 31, 2025.\n\n \n\n**Cash\nand Cash Equivalents**\n\n \n\nThe\nCompany considers all highly liquid investments with original maturities of three months or less at the date of acquisition to be cash\nequivalents. Cash and cash equivalents consist of cash deposited with financial institutions in the United States and India.\n\n \n\n**Accounts\nReceivable and Allowance for Credit Losses**\n\n \n\nAccounts\nreceivable consist of amounts billed and currently due from customers. The Company maintains an allowance for credit losses, which\nrepresents the Company’s best estimate of probable credit losses inherent in the accounts receivable balance. Management\nevaluates the adequacy of the allowance based on historical experience, current market and economic conditions, the customer’s\ncreditworthiness, and the aging of receivables. The company provides for any and all of the accounts receivable which are due over\nthe period of one year if it meets the criteria for allowance estimated by the management. Accounts are charged off against the\nallowance after all reasonable means of collection have been exhausted and the potential for recovery is considered\nremote.\n\n \n\n**Contracts\nReceivable and Allowance for Credit Losses**\n\n \n\nContracts\nreceivable represent amounts contractually due from customers in connection with delivered software products and licenses, with collection\nscheduled in accordance with the underlying subscription billing terms (generally 36 to 60 months). The Company maintains an allowance\nfor credit losses on contracts receivable, which is estimated based on historical loss experience, the aging of receivables, customer\ncreditworthiness, and forward-looking economic conditions. The Company applies a provisioning rate of approximately 7% on its portfolio\nof contracts receivable, consistent with management’s historical loss experience and current expected credit loss assessment.\n\n \n\nDuring\nthe fiscal year ended March 31, 2026, in connection with assessment under ASC 326, the Company recognized an impairment of contract\nassets of $916,419\nreflecting a reserve on expected collections on overall contracts. The charge is presented within general and administrative line\nitem within operating expenses in the consolidated statements of operations. $292,810 impairment was recognized in the fiscal year\nended March 31, 2025.\n\n \n\n**Inventories**\n\n \n\nInventories\nconsist of network server hardware components used to deliver the Company’s software solutions and are stated at the lower of cost\n(determined on a weighted average cost basis) or net realizable value. The Company periodically evaluates inventory for obsolescence and\nwrites down the value of inventory items deemed unlikely to be sold or used in the foreseeable future.\n\n \n\nF-11\n\n \n\n \n\n**Property\nand Equipment**\n\n \n\nProperty\nand equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated\nuseful lives of the related assets, generally as follows:\n\n SCHEDULE OF ESTIMATED USEFUL LIVES\n\n**Asset\nCategory**\n \n**Estimated\nUseful Life**\n\nFurniture\nand fixtures\n \n5-10\nyears\n\nOffice\nequipment and computers\n \n3-5\nyears\n\n \n\nRepair\nand maintenance costs that do not extend the life of the asset are expensed as incurred. Upon retirement or disposal, the cost and related\naccumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is recognized in the consolidated\nstatements of operations.\n\n \n\n**Intangible\nAssets**\n\n \n\nIntangible\nassets consist primarily of legal and related costs associated with the Company’s patents and capitalized product development assets.\nIntangible assets are amortized on a straight-line basis over their estimated useful lives, assumed as 15 years.\nThe Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount\nof an asset may not be recoverable.\n\n \n\n**Long-Lived\nAssets**\n\n \n\nLong-lived\nassets, including property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances\nindicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparing the carrying amount to\nthe future undiscounted cash flows expected to be generated by the asset. If the carrying amount exceeds the undiscounted cash flows,\nan impairment charge is recognized in an amount equal to the excess of the carrying amount over the fair value of the asset. No impairment\ncharges were recognized for the fiscal years ended March 31, 2026 or 2025.\n\n \n\n**Deferred\nOffering Costs**\n\n \n\nDirect,\nincremental costs incurred in connection with the Company’s initial public offering, including legal, accounting, and other professional\nservice fees, were deferred and capitalized prior to the consummation of the offering. Upon completion of the offering on April 9, 2025,\ndeferred offering costs were reclassified to additional paid-in capital as a reduction of the proceeds received. As of March 31, 2026,\nno deferred offering costs remained on the consolidated balance sheets.\n\n \n\n**Defined\nBenefit Plan**\n\n \n\nThe\nCompany maintains a defined benefit gratuity plan for eligible employees of FP India in accordance with applicable Indian labor laws.\nThe gratuity plan is accounted for in accordance with ASC 715, *Compensation—Retirement Benefits*. The Company’s obligation\nunder the gratuity plan is determined using the projected unit credit method based on annual actuarial valuations performed by an independent\nactuary. Actuarial gains and losses arising from changes in actuarial assumptions or differences between actual and expected experience\nare recognized in other comprehensive income in the period in which they arise. Service cost and interest cost are recognized in the\nconsolidated statements of operations. Key assumptions used in the actuarial valuation include discount rate,\nsalary growth rate, and employee turnover rates.\n\n \n\n**Income\nTaxes**\n\n \n\nThe\nCompany accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Deferred tax assets and liabilities are recognized\nfor the future tax consequences attributable to temporary differences between the consolidated financial statement carrying amounts of\nexisting assets and liabilities and their respective tax bases, and for operating loss, capital loss and tax credit carryforwards. Deferred tax assets\nand liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences\nare expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period\nthat includes the enactment date.\n\n \n\nThe\nCompany assesses the realizability of its deferred tax assets in accordance with ASC 740-10-30. A valuation allowance is established\nwhen, 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\nbe realized. The Company evaluates uncertain tax positions in accordance with ASC 740-10-25 and recognizes the financial statement effect\nof a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination.\n\n \n\nF-12\n\n \n\n** **\n\n**Stock-Based\nCompensation**\n\n \n\nThe\nCompany accounts for stock-based compensation in accordance with ASC Topic 718, Compensation — Stock Compensation. Compensation\nexpense for share-based awards is measured at fair value at the grant date and recognized as expense, net of estimated forfeitures, on\na straight-line basis over the requisite service period. The Company adopted the FatPipe, Inc. 2024 Equity Incentive Plan in connection\nwith the IPO. The Company recognized stock-based compensation expense of $770,220 during the fiscal year ended March 31, 2026, which\nis included within general and administrative expenses in the consolidated statements of operations. No stock-based compensation expense\nwas recognized for the fiscal year ended March 31, 2025.\n\n \n\n**Warranties**\n\n \n\nThe\nCompany provides standard warranties for its software solutions and network server hardware. Warranty obligations have not historically\nbeen material, and no material warranty accruals have been recorded as of March 31, 2026 or March 31, 2025.\n\n \n\n**Leases**\n\n \n\nThe\nCompany accounts for leases in accordance with ASC Topic 842, Leases. The Company determines whether an arrangement is, or contains,\na lease at inception. For leases with an initial term greater than 12 months, the Company recognizes a right-of-use (“ROU”)\nasset and a lease liability based on the present value of the future lease payments over the lease term. The Company uses an estimated\nincremental borrowing rate to discount future lease payments, as the rates implicit in the leases are not readily determinable. The Company\nhas elected the practical expedient to not separate lease and non-lease components for its real estate leases. Lease expense for operating\nleases is recognized on a straight-line basis over the lease term.\n\n \n\n**Related\nParties**\n\n \n\nThe\nCompany has identified related parties consisting of officers, directors, and entities under common control or significant influence.\nRelated party transactions are described in Note 9.\n\n \n\n**Concentrations**\n\n \n\nThe\nCompany has no significant geographic concentrations in either trade accounts receivable or revenue.\n\n SCHEDULE OF REVENUE FROM GEOGRAPHIC CONCENTRATIONS\n\n*Revenue\nby geography:*\n\n \n\n  \n2026  \n2025 \n\n  \nYear Ended \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nUS \n$18,510,010  \n$15,404,512 \n\nRest of the World \n 698,284  \n 884,369 \n\nTotal \n$19,208,294  \n$16,288,881 \n\n \n\nAt\nMarch 31, 2026, the carrying amount of cash was $5,214,775, only a portion of which is covered by federal depository insurance. At March\n31, 2025, the carrying amount of cash was $2,920,550, only a portion of which is covered by federal depository insurance.\n\n \n\n*Concentrations\nof Credit Risk*\n\n \n\nThe\nCompany’s financial instruments that may be exposed to concentrations of credit risk consist primarily of temporary cash investments\nand trade accounts receivable. The Company maintains its cash balances at financial institutions it believes to be financially sound.\nAt times such balances may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company\nbelieves it is not exposed to any significant credit risk in cash.\n\n \n\nWe\nperform ongoing credit evaluations of our customers and, with the exception of certain financing transactions, do not require collateral\nfrom our customers.\n\n \n\nF-13\n\n \n\n \n\n*Channel\nPartner Concentration*\n\n \n\nFor\nthe fiscal year ended March 31, 2026, three major channel partners accounted for approximately 64.59% of the Company’s consolidated\nrevenues, compared to two major channel partners that accounted for approximately 53.77% of consolidated revenues for the fiscal year\nended March 31, 2025. The following tables present channel partner concentration for the fiscal years ended March 31, 2026 and 2025:\n\n SCHEDULE OF CONCENTRATION RISK\n\nPartner \n2026  \n2025 \n\n  \nYear Ended \n\n  \nMarch 31, \n\nPartner \n2026  \n2025 \n\nPartner A (%) \n 60.73% \n 47.34%\n\nPartner B (%) \n 2.26% \n 3.39%\n\nPartner C (%) \n 1.59% \n 3.04%\n\nTotal \n 64.59% \n 53.77%\n\nConcentration risk percentage \n 64.59% \n 53.77%\n\n \n\nPartner \n2026  \n2025 \n\n  \nYear Ended \n\n  \nMarch 31, \n\nPartner \n2026  \n2025 \n\nPartner A (Revenue) \n$11,665,341  \n$7,710,820 \n\nPartner B (Revenue) \n 434,522  \n 552,941 \n\nPartner C (Revenue) \n 305,979  \n 494,797 \n\nRevenue \n$12,405,842  \n$8,758,558 \n\n \n\n**Recent\nAccounting Pronouncements**\n\n \n\n*Recently\nAdopted Accounting Pronouncements.*In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07,\nSegment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments require enhanced disclosures about significant\nsegment expenses and other segment items, the title and position of the chief operating decision maker, and additional segment disclosures\nfor entities with a single reportable segment. The Company adopted ASU 2023-07 effective for the fiscal year beginning April 1, 2025\non a retrospective basis. The Company’s adoption did not have a material impact on its consolidated financial statements but resulted\nin additional disclosures about its single reportable segment, which are presented under “Segment Reporting” above.\n\n \n\nIn\nDecember 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require\ndisaggregated information about reconciling items in the rate reconciliation and additional disaggregation of income taxes paid by jurisdiction.\nThe Company adopted ASU 2023-09 effective for the fiscal year beginning April 1, 2025 on a prospective basis. The Company’s adoption\ndid not have a material impact on its consolidated financial statements but resulted in additional disclosures, which are presented in\nNote 10.\n\n \n\n*Accounting\nPronouncements Issued But Not Yet Adopted.*In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive\nIncome — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires\npublic business entities to disclose, in a tabular format, additional information about specified categories of expenses included in\neach relevant expense caption presented on the face of the income statement. The amendments are effective for annual reporting periods\nbeginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.\nThe Company is currently evaluating the impact that adoption of this standard will have on its consolidated financial statement disclosures.\n\n \n\nF-14\n\n \n\n \n\nIn\nSeptember 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40):\nTargeted Improvements to the Accounting for Internal-Use Software. The amendments modify the threshold and measurement guidance for capitalization\nof internal-use software development costs. The amendments are effective for annual reporting periods beginning after December 15, 2027,\nwith early adoption permitted. The Company is currently evaluating the impact that adoption of this standard will have on its consolidated\nfinancial statements.\n\n \n\nIn\nDecember 2025, the FASB issued ASU 2025-12, Codification Improvements. The amendments include 33 narrow-scope improvements that, among\nother items, clarify the diluted earnings per share calculation when a loss from continuing operations exists. The amendments have varying\neffective dates and transition requirements. The Company is currently evaluating the impact that adoption of this standard will have\non its consolidated financial statements.\n\n \n\nOther\naccounting pronouncements that have been issued but are not yet effective are not expected to have a material impact on the Company’s\nconsolidated financial statements upon adoption.\n\n \n\n**NOTE\n2: PROPERTY AND EQUIPMENT, NET**\n\n \n\nThe\nCompany’s property and equipment consist of the following:\n\n SCHEDULE OF PROPERTY AND EQUIPMENT, NET\n\n  \n2026  \n2025 \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nFurniture and fixtures \n$269,079  \n$256,415 \n\nOffice equipment and computers \n 512,416  \n 493,873 \n\n Property and equipment, gross  \n 781,495  \n 750,288 \n\nLess: Accumulated depreciation \n (685,989) \n (692,444)\n\nProperty and equipment,\nnet \n$95,506  \n$57,844 \n\n \n\nDepreciation\nexpense for the fiscal years ended March 31, 2026 and 2025 amounted to $36,910 and $34,416, respectively.\n\n \n\n**NOTE\n3: INTANGIBLE ASSETS, NET**\n\n \n\nThe\nCompany’s intangible assets consist of the following:\n\n SCHEDULE OF INTANGIBLE ASSETS, NET\n\n  \n2026  \n2025 \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nProduct development \n$218,383  \n$218,383 \n\nPatent costs \n 7,216,758  \n 7,790,890 \n\nIntangible assets, gross \n 7,435,141  \n 8,009,273 \n\nLess: Accumulated amortization \n (6,740,949) \n (6,960,653)\n\nIntangible assets, net \n$694,192  \n$1,048,620 \n\n \n\nAmortization\nexpense for the fiscal years ended March 31, 2026 and 2025 amounted to $332,339 and $511,293, respectively.\n\n \n\nF-15\n\n \n\n \n\nFuture\namortization of intangible assets as of March 31, 2026 is as follows:\n\n SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE\n\nYear\nending March 31, \n  \n\n2027 \n$230,007 \n\n2028 \n 156,350 \n\n2029 \n 102,283 \n\n2030 \n 79,750 \n\nThereafter \n 125,802 \n\nTotal \n$694,192 \n\n \n\n**NOTE\n4: DEFINED BENEFIT PLAN**\n\n** **\n\nThe\nsubsidiary company “FatPipe Networks Private Limited” provides a defined benefit gratuity plan to eligible employees in accordance\nwith applicable labor laws of India. The gratuity benefit is payable upon separation from service and is based on the last drawn salary\nand years of credited service. The plan is unfunded, and the Company meets the liability as it becomes due.\n\n \n\nThe\nfollowing is a summary of the Company’s plan:\n\n \n\n*Reconciliation\nof Benefit Obligation*\n\n* *SCHEDULE\nOF RECONCILIATION OF BENEFIT OBLIGATION\n\n  \n2026  \n2025 \n\n  \nMarch\n31, \n\n  \n2026  \n2025 \n\nBeginning\nbalance \n$146,063  \n$121,392 \n\nService\ncost \n 45,318  \n 13,581 \n\nInterest\ncost \n 9,612  \n 8,650 \n\nActuarial\n(gain)/loss \n (4,992) \n 7,535 \n\nGross\nbenefits paid \n (13,459) \n (1,592)\n\nExchange\nrate adjustment \n (16,447) \n (3,503)\n\nEnding\nbalance \n$166,095  \n$146,063 \n\n \n\n*Net\nPeriodic Benefit Cost*\n\n* *SCHEDULE OF NET PERIODIC BENEFIT COST\n\n  \n2026  \n2025 \n\n  \n\nYear Ended\n\nMarch 31,\n \n\n  \n2026  \n2025 \n\nService\ncost \n$45,318  \n$13,581 \n\nInterest\ncost \n 9,612  \n 8,650 \n\nRecognized\nnet actuarial loss/(gain) \n (4,992) \n 7,534 \n\nNet\nperiodic benefit cost included in income from operations \n$49,938  \n$29,765 \n\n \n\nF-16\n\n \n\n \n\n*Assumptions*\n\n \n\nThe\nfollowing assumptions, which are the weighted average for all plans, are used to calculate the benefit obligation at March 31 of each\nyear and the net periodic benefit cost for the subsequent year.\n\n SCHEDULE OF DEFINED BENEFIT PLAN, ASSUMPTIONS\n\n  \nMarch\n31, \n\n  \n2026  \n2025 \n\nDiscount\nrate \n 7.30% \n 6.79%\n\nExpected\nreturn on plan assets \n NA  \n NA \n\nRate\nof compensation increase \n 7% \n 7%\n\n \n\nThe\ndiscount rate as of March 31, 2026 is based on 12 year government bond yields of India.\n\n \n\n**NOTE\n5: NOTES PAYABLE**\n\n \n\nOn\nJanuary 25, 2023, the Company entered into a three-year term loan with Celtic Bank Corporation (“Celtic”) in the amount of\n$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\nof the principal amount upon execution. In November 2024, the Company received an additional $500,000 in proceeds under the Celtic facility.\n\n \n\nOn\nMarch 1, 2025, the Company entered into a $5,000,000\nterm loan with Fortis Bank, of which approximately $3,000,000 was\nused to repay the outstanding balance under the Celtic loan. The\nFortis Bank loan is repayable in 120 equal monthly installments commencing March 1, 2025, and bears interest at the Prime Rate plus\n1%, adjusted at the beginning of each calendar quarter beginning April 1, 2025. The interest rate works out to 7.75% as on\nthe reporting date The Fortis Bank loan is secured by substantially all of the Company’s assets, certain personal property of\ndirectors of the Company, personal guarantees provided by such directors, and a Trust where directors are trustees.\n\n \n\nDuring\nthe fiscal year ended March 31, 2026, the Company made principal payments totaling $347,803 on the Fortis Bank loan. As of March 31,\n2026, outstanding borrowings under the Fortis Bank loan totaled $4,624,283, of which $391,397 was classified as current and $4,232,886\nwas classified as non-current.\n\n \n\nFuture\nmaturities of long-term debt as of March 31, 2026 are as follows:\n\n SCHEDULE OF LONG TERM DEBT\n\nYear\nEnded March 31, \nAmount \n\n2026 \n 391,397 \n\n2027 \n 422,007 \n\n2028 \n 456,724 \n\n2029 \n 493,404 \n\n2030 \n 533,031 \n\nThereafter \n 2,327,720 \n\nTotal\nprincipal repayments \n 4,624,283 \n\nLess:\nCurrent portion \n 391,397 \n\nLong-term\nportion of notes payable \n$4,232,886 \n\n \n\nInterest\nexpense recognized on notes payable for the fiscal years ended March 31, 2026 and 2025 was $403,391 and $329,892, respectively.\n\n \n\n**Short-Term\nNote Payable to Related Party**\n\n \n\nOn\nJune 15, 2023, the Company received an interest-free demand loan of $120,000 from Stay in Business Inc., a related party controlled by\nthe Company’s Chief Executive Officer. During the fiscal year ended March 31, 2025, the Company received an additional $13,652\nunder this arrangement. During the fiscal year ended March 31, 2026, the Company repaid the entire outstanding balance of the loan, and\naccordingly there was no outstanding balance under this arrangement at March 31, 2026 (March 31, 2025: $133,652).\n\n \n\nF-17\n\n \n\n \n\n**NOTE\n6: STOCKHOLDERS’ EQUITY**\n\n** **\n\n**Authorized\nCapital Stock**\n\n \n\nOn\nJune 19, 2024, our Board of Directors and stockholders approved an increase in our authorized capital stock from 15,000,000 shares of\ncommon 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\nand 13,026,464 shares of common stock issued and outstanding, respectively.\n\n** **\n\n**Common\nStock**\n\n \n\nWe\nare 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\nto one vote for each share held on all matters submitted to a vote of our stockholders, including the election of directors. Holders\nof our common stock have no cumulative voting rights. Further, holders of our common stock have no preemptive or conversion rights or\nother subscription rights.\n\n \n\nAdditionally,\nif 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\naction exceeds the number of votes cast in opposition to the action (other than the election of directors). The vote of a majority of\nthe shares of our common stock held by stockholders present in person or represented by proxy and entitled to vote at a stockholder meeting\nwill be sufficient to elect directors or to approve a proposal.\n\n** **\n\n**Initial\nPublic Offering**\n\n \n\nDuring\nthe 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\npursuant to the April 2025 initial public offering, including the partial exercise of the underwriters’ over-allotment option.\nThe Company’s common stock began trading on The Nasdaq Capital Market under the ticker symbol “FATN” on April 8, 2025.\n\n** **\n\n**Acquisition\nof Non-Controlling Interest**\n\n \n\nIn\nJuly 2024, the Company acquired the remaining 4.4% non-controlling interest in FP India in exchange for 577,156 shares of common stock.\nAs a result of this transaction, FP India became a wholly owned subsidiary of the Company, and there are no non-controlling interests\nas of March 31, 2026 or March 31, 2025.\n\n** **\n\n**Issuances\nto Consultants and Employees**\n\n \n\nDuring\nthe fiscal year ended March 31, 2026, the Company issued an aggregate of 198,000 shares of common stock to consultants and employees\nas consideration for cash and services rendered. The aggregate fair value of the shares, determined based on the market price of the\nCompany’s common stock on the date of issuance, totaled $853,220, of which $83,000 was received in cash. The Company recognized\ntotal stock-based compensation expense of $770,220 during the fiscal year ended March 31, 2026, comprising $625,220 attributable to share\nissuances to consultants and employees and $145,000 attributable to stock options exercised by directors and officers during the fourth\nquarter of the fiscal year. Stock-based compensation expense is included within general and administrative expenses in the consolidated\nstatements of operations.\n\n** **\n\n**Preferred\nStock**\n\n \n\nThe\nCompany is not currently authorized to issue preferred stock under its Articles of Incorporation, but may choose to do so in the future.\n\n** **\n\n**Stock-Based\nCompensation**\n\n \n\nThe\nCompany adopted the FatPipe, Inc. 2024 Equity Incentive Plan (the “2024 Plan”) in connection with the IPO. The 2024 Plan\nprovides for the grant of stock options (both incentive stock options and non-qualified stock options), stock appreciation rights, restricted\nstock awards, restricted stock units, performance awards, and other stock or cash awards to officers, directors, employees, and consultants\nof the Company and its affiliates. The 2024 Plan is administered by our Compensation Committee.\n\n \n\nStock-based\ncompensation expense for the fiscal year ended March 31, 2026 was $770,220, all of which was recognized within general and administrative\nexpenses. No stock-based compensation expense was recognized for the fiscal year ended March 31, 2025.\n\n \n\nThe\nmaximum aggregate number of shares of common stock that may initially be issued under the 2024 Plan is 2,600,000 shares (the “Share\nReserve”), representing approximately 5.2% of the Company’s authorized common stock. The Share Reserve will automatically increase\non 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\nof shares of capital stock outstanding on March 31 immediately preceding the applicable evergreen date, subject to the Board’s discretion\nto provide for a lesser increase or no increase. During any fiscal year, no participant may receive awards covering more than 130,000\nshares (combined across stock options, restricted stock, and restricted stock units). The maximum value of awards (and cash subject to\ncash-based awards) granted to any non-employee director during any fiscal year, taken together with cash fees paid to such director for\nservice 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,\nand 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\nvalue 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\nhas a term of 10 years from its effective date in 2024 and will continue in effect, unless terminated earlier, until 2034.\n\n** **\n\nF-18\n\n \n\n \n\n**Earnings\nPer Share**\n\n \n\nBasic\nearnings per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares\noutstanding for the period. Diluted earnings per share is computed by dividing net income attributable to common stockholders by the\nweighted-average number of common shares outstanding for the period, increased to include all additional common shares that would have\nbeen outstanding had potentially dilutive common shares been issued. The following table presents the computation of basic and diluted\nearnings per share for the fiscal years ended March 31, 2026 and 2025:\n\n \n\n SCHEDULE\nOF COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE\n\n  \n2026  \n2025 \n\n  \n\nYear Ended\n\nMarch 31,\n \n\n  \n2026  \n2025 \n\nNet\nincome attributable to stockholders \n$4,969,961  \n$1,966,408 \n\n  \n    \n   \n\nWeighted-average\nshares of common stock outstanding - basic \n 13,882,787  \n 12,858,852 \n\nEffect\nof dilutive securities \n 123,605  \n - \n\nWeighted-average\nshares of common stock outstanding - diluted \n 14,006,392  \n 12,858,852 \n\n  \n    \n   \n\nEarnings per share\n- basic \n$0.36  \n$0.15 \n\nEarnings per share\n- diluted \n$0.35  \n$0.15 \n\n \n\n**NOTE\n7: LEASES**\n\n \n\nThe\nCompany leases certain office space under operating leases. Lease commencement occurs on the date the Company takes possession or control\nof the property. The original terms for facility related leases are generally between three to five years. Some of the Company’s\nleases also include rental escalation clauses and/or termination provisions. Renewal options and termination options are included in\ndetermining the lease payments when management determines the options are reasonably certain of exercise.\n\n \n\nIf\nreadily determinable, the rate implicit in the lease is used to discount lease payments to present value; however, substantially all\nof the Company’s leases do not provide a readily determinable implicit rate. When the implicit rate is not determinable, the Company’s\nestimated incremental borrowing rate is utilized, determined on a collateralized basis, to discount lease payments based on information\navailable at lease commencement.\n\n \n\nThe\nCompany’s leases typically require payment of common area maintenance and real estate taxes which represent the majority of variable\nlease costs. Certain lease agreements also provide for variable rental payments based on sales performance in excess of specified minimums,\nusage measures, or changes in the consumer price index. Variable rent payments based on future performance, usage, or changes in indices\nwere not significant for any of the periods presented. Variable lease costs are excluded from the present value of lease obligations.\nThe Company’s lease agreements do not contain any material restrictions, covenants, or any material residual value guarantees.\n\n \n\nF-19\n\n \n\n SCHEDULE\nOF LEASE ASSETS AND LIABILITIES\n\n \n\n  \n2026  \n2025 \n\n  \n\nYear Ended\n\nMarch 31,\n \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nOperating\nlease right of use assets, net \n$1,042,476  \n$1,455,373 \n\n  \n    \n   \n\nOperating\nlease liabilities — current \n 401,406  \n 366,677 \n\nOperating\nlease liabilities — non-current \n 682,437  \n 1,114,067 \n\nTotal\noperating lease liabilities \n$1,083,843  \n$1,480,744 \n\n \n\n SCHEDULE OF OPERATING LEASE EXPENSE\n\n  \n2026  \n2025 \n\n  \n\nYear Ended\n\nMarch 31,\n \n\n  \n2026  \n2025 \n\nOperating\nlease expense: \n    \n   \n\nOperating\nlease cost \n$468,763  \n$494,509 \n\nShort-term\nlease cost \n 30,047  \n 60,105 \n\nTotal\noperating lease expense \n$498,810  \n$554,614 \n\n \n\n SCHEDULE OF CASH PAID MEASUREMENT OF LEASE LIABILITIES \n\n  \n2026  \n2025 \n\n  \n\nYear Ended\n\nMarch 31,\n \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nOperating\ncash flows for operating leases \n$445,028  \n$446,980 \n\nRight-of-use\nassets obtained in exchange for new lease liabilities \n$-  \n$1,319,422 \n\n \n\nFuture\nminimum lease payments under non-cancellable operating leases as of March 31, 2026 are as follows:\n\nSCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES \n\nYear\nEnded March 31, \nOperating\nleases \n\n2027 \n$462,098 \n\n2028 \n 478,588 \n\n2029 \n 183,512 \n\n2030 \n 70,350 \n\nTotal\nminimum lease payments \n$1,194,548 \n\nLess:\nimputed interest \n (110,705)\n\nTotal\nlease obligations \n$1,083,843 \n\nLess:\nCurrent portion \n 401,406 \n\nLong-term\nportion of lease obligations \n$682,437 \n\n \n\nF-20\n\n \n\n \n\n**NOTE\n8: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES**\n\n \n\nThe\nfollowing is a summary of accrued expenses and other current liabilities:\n\n SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES\n\n  \n2026  \n2025 \n\n  \nMarch\n31, \n\n  \n2026  \n2025 \n\nProvision\nfor tax \n$1,483,701  \n$2,967,305 \n\nAccrued\nemployer expenses \n 304,225  \n 18,969 \n\nCredit\ncard payables \n 54,287  \n 352,792 \n\nEmployee\npayables \n 30,545  \n 429,366 \n\nOther\ncurrent liabilities \n 117,342  \n 91,669 \n\nProvisions \n 3,799  \n 2,995 \n\nTotal accrued expenses\nand other current liabilities \n$1,993,899  \n$3,863,096 \n\n \n\nThe\nprovision 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\nof prior-period accrued income tax payable recognized as a change in accounting estimate during the fiscal year ended March 31, 2026,\npartially offset by the current-year tax provision. See Note 10 for additional information.\n\n** **\n\n**NOTE\n9: RELATED PARTY TRANSACTIONS**\n\n \n\nThe\nCompany’s related party transactions include the following:\n\n** **\n\n**Lease\nArrangements with Back Office Xtensions India Pvt. Ltd.**\n\n \n\nFP\nIndia leases office space in Chennai, India from Back Office Xtensions India Pvt. Ltd. (“Back Office”), an entity owned and\ncontrolled by the Company’s Chief Executive Officer and President. Lease payments under these arrangements are recorded as operating\nlease expense in accordance with ASC 842 (see Note 7). The arrangements include premises located on the first floor (commenced during\nthe 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.\n\n \n\nAs\nof March 31, 2026, the right-of-use asset and lease liability associated with these related party arrangements totaled approximately\n$268,046 and $363,988, respectively. As of March 31, 2025, the corresponding amounts were approximately $285,089 and $371,400, respectively.\n\n** **\n\n**Short-Term\nLoan from Stay in Business Inc.**\n\n \n\nOn\nJune 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\nChief Executive Officer. During the fiscal year ended March 31, 2025, the Company received an additional $13,652 under the same arrangement.\nDuring the fiscal year ended March 31, 2026, the Company repaid the entire outstanding balance of $133,652. There was no outstanding\nbalance under this arrangement as of March 31, 2026 (March 31, 2025: $133,652). See also Note 5.\n\n** **\n\nF-21\n\n \n\n** **\n\n**Personal\nGuarantees and Property Pledged in Connection with Bank Debt**\n\n \n\nThe\nCompany’s outstanding term loan with Fortis Bank is secured in part by certain personal property of directors of the Company, personal\nguarantees provided by such directors, and a Trust where directors are trustees, in addition to substantially all of the Company’s\nassets. No fees or other consideration are paid by the Company in connection with these guarantees or pledges.\n\n** **\n\n**Other\nRelated Party Matters**\n\n \n\nRoutine\ncompensation arrangements with executive officers and directors are governed by the Company’s Compensation Committee. Information\nabout director and officer compensation is provided in Item 11 of Part III of this Annual Report.\n\n \n\n**NOTE\n10: INCOME TAXES**\n\n \n\nThe\nCompany accounts for income taxes in accordance with ASC 740, Income Taxes. The Company files a consolidated U.S. federal income tax\nreturn and an Arizona state return covering FatPipe, Inc. and FatPipe Technologies, Inc. The Company’s wholly owned Indian subsidiary,\nFatPipe Networks Private Limited, files separate income tax returns in India.\n\n \n\nEffective\nfor fiscal years beginning after December 15, 2024, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures. The standard\nrequires enhanced disaggregation of information presented in the rate reconciliation and disaggregation of income taxes paid by jurisdiction.\nThe Company has applied the new requirements prospectively in this Note.\n\n** **\n\n**Income\n(Loss) Before Income Taxes**\n\n \n\nIncome\n(loss) before income taxes for the years ended March 31 consisted of the following:\n\n SCHEDULE OF INCOME BEFORE INCOME TAXES\n\n  \n2026  \n2025 \n\n  \n\nYear Ended\n\nMarch 31,\n \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nUnited\nStates \n$4,802,182  \n$4,707,601 \n\nForeign\n(India) \n (1,315,824) \n (1,419,845)\n\nTotal\nincome before income taxes \n$3,486,358  \n$3,287,756 \n\n \n\nF-22\n\n \n\n \n\n**Components\nof Provision (Benefit) for Income Taxes**\n\n \n\nThe\nprovision (benefit) for income taxes for the years ended March 31 consisted of the following:\n\n SCHEDULE OF PROVISION FOR INCOME TAX EXPENSE\n\n  \n2026  \n2025 \n\n  \n\nYear Ended\n\nMarch 31,\n \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nCurrent: \n    \n   \n\nFederal \n$(1,483,653) \n$1,030,279 \n\nState \n 50  \n 264,033 \n\nForeign \n -  \n - \n\nTotal\ncurrent \n$(1,483,603) \n$1,294,312 \n\n  \n    \n   \n\n*Deferred:* \n   \n   \n\nFederal \n -  \n - \n\nState \n -  \n - \n\nForeign \n -  \n - \n\nTotal\ndeferred \n -  \n - \n\n  \n    \n   \n\nTotal\nprovision (benefit) for income taxes \n$(1,483,603) \n$1,294,312 \n\n \n\nThe\ncurrent federal provision for the fiscal year ended March 31, 2026 reflects (i) a current-year tax provision of $24,027 calculated under\nASC 740 after utilization of $4,896,738 of available net operating loss carryforwards, and (ii) a $1,483,653 reduction representing the\npartial reversal of prior-period accrued income tax payable, recognized as a change in accounting estimate. See “Change in Accounting\nEstimate” below for additional information.\n\n** **\n\n**Effective\nIncome Tax Rate Reconciliation**\n\n \n\nA\nreconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate, presented in accordance\nwith ASU 2023-09, is as follows. Reconciling items are presented separately if they exceed 5% of the product of pre-tax income and the\nstatutory rate.\n\n SCHEDULE OF RECONCILIATION EFFECTIVE INCOME TAX RATE\n\n  \n2026\nRate  \n2025\nRate \n\n  \n\nYear Ended\n\nMarch 31,\n \n\n  \n2026\nRate  \n2025\nRate \n\n  \n   \n  \n\nFederal\nstatutory rate \n 21.00% \n 21.00%\n\nState\ntaxes, net of federal benefit \n 0.00% \n 5.11%\n\nStock-based\ncompensation (permanent) \n 4.64% \n 0.00%\n\nForeign\nrate differential (India) \n -1.57% \n 0.00%\n\nNOL\nutilization \n -29.01% \n 0.00%\n\nChange\nin estimate — application of NOL carryforwards \n -42.55% \n 0.00%\n\nGeneral\nbusiness credit utilization \n -3.02% \n 0.00%\n\nValuation allowance on impairment / other \n 7.96% \n 2.25%\n\nEffective\ntax rate / Total provision (benefit) \n -42.55% \n 28.36%\n\n \n\nThe\nCompany’s effective tax rate for FY2026 of (42.55%) differs from the U.S. federal statutory rate of 21.00% primarily because of\n(i) utilization of net operating loss carryforwards substantially eliminating current-year federal and state income tax, (ii) a change\nin accounting estimate associated with management’s refinement of prior-period income tax obligations following completion of the\nCompany’s FY2025 tax return and the related application of available net operating loss carryforwards, (iii) utilization of general\nbusiness credit carryforwards, and (iv) the foreign rate differential associated with losses generated by the Indian subsidiary.\n\n \n\nF-23\n\n \n\n \n\n**Deferred\nTax Assets and Valuation Allowance**\n\n \n\nSignificant\ncomponents of the Company’s deferred tax assets, with the change for the year ended March 31, 2026, are presented below.\n\nSCHEDULE\nOF DEFERRED TAX ASSETS\n\n  \n2026  \n2025 \n\n  \n\nYear Ended\n\nMarch 31,\n \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nNet\noperating loss carryforward \n$1,370,031  \n$1,356,779 \n\nTemporary\ndifferences \n 549,341  \n 207,352 \n\nCapital\nloss carryforward \n 316,239  \n 393,528 \n\nGeneral\nbusiness credit \n 105,451  \n - \n\nTotal\ngross deferred tax asset \n 2,341,062  \n 1,957,659 \n\nLess:\nValuation allowance \n (2,264,157) \n (1,880,754)\n\nNet\ndeferred tax asset \n$76,905  \n$76,905 \n\n \n\nThe\nCompany has no deferred tax liabilities as of March 31, 2026 or March 31, 2025.\n\n \n\n**Valuation\nAllowance Assessment**\n\n \n\nIn\nassessing the realizability of deferred tax assets in accordance with ASC 740-10-30-17 through 30-25, the Company considers all available\npositive and negative evidence to determine whether it is more likely than not that some portion or all of its deferred tax assets will\nbe realized. The weight given to potential evidence is commensurate with the extent to which it can be objectively verified.\n\n \n\n*Positive\nevidence*\n\n \n\n \n●\nThree\nconsecutive years of U.S. profitability (fiscal years 2024, 2025, and 2026)\n\n \n \n \n\n \n●\nExisting\ncustomer contracts providing future revenue visibility\n\n \n \n \n\n \n●\nDemonstrated\nutilization of net operating loss carryforwards in the current fiscal year\n\n* *\n\n*Negative\nevidence*\n\n \n\n \n●\nCumulative\nloss history in periods prior to fiscal year 2024\n\n \n \n \n\n \n●\nContinuing\nlosses generated by the Indian subsidiary\n\n \n \n \n\n \n●\nRisk\nthat capital loss carryforwards may expire prior to generation of offsetting capital gains\n\n \n\nBased\non the weight of available evidence, the Company has concluded that it is not more likely than not that deferred tax assets in excess\nof $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\n31, 2025). The Company will reassess this conclusion in future periods; partial release of the valuation allowance will be considered\nupon completion of a fourth consecutive profitable fiscal year.\n\n** **\n\n**Net\nOperating Loss Carryforwards**\n\n \n\nAt\nMarch 31, 2026, the Company had U.S. federal net operating loss carryforwards of $6,523,957 available to offset future taxable income.\nThe composition by vintage is as follows:\n\n \n\n SCHEDULE\nOF NET OPERATING LOSS CARRYFORWARDS\n\nTax\nYear of Origination \nBeginning\nBalance  \nEnding\nBalance \n\nPre-2018\nvintages \n$3,334,752  \n - \n\nPost-2017\nvintages \n 8,004,879  \n 6,523,957 \n\nTotal\nUS federal NOL carryforward \n$11,339,631  \n$6,523,957 \n\nIndia\nloss carryforward \n$-  \n$2,582,089 \n\n \n\nF-24\n\n \n\n \n\nNet\noperating losses generated in tax years prior to 2018 are not subject to the 80% taxable income limitation and have no expiration date.\nNet operating losses generated in tax years after 2017 are subject to the 80% taxable income limitation under IRC §172(a)(2) and\nhave an indefinite carryforward period. During FY2026, the Company applied $3,334,752 of pre-2018 net operating losses at the 100% offset\nand $2,465,289 of post-2017 net operating losses subject to the 80% limitation, totaling $4,896,738 of utilization.\n\n \n\nThe\nIndian subsidiary has unused tax losses of approximately $2,582,089 carried forward under Indian local tax law for which no deferred\ntax asset has been recognized in the consolidated financial statements. See “Foreign Subsidiary Losses” below.\n\n** **\n\n**Capital\nLoss Carryforwards**\n\n \n\nAt\nMarch 31, 2026, the Company had a capital loss carryforward of $1,505,901 (deferred tax asset of $316,239), which is available only to\noffset future capital gains. Under IRC §1212(a), capital loss carryforwards have a five-year carryforward period.\n\n \n\nA\nfull valuation allowance has been recorded against the deferred tax asset associated with the capital loss carryforward, reflecting management’s\nassessment that it is not more likely than not that sufficient capital gains will be generated within the carryforward period to absorb\nthe loss.\n\n** **\n\n**Income\nTaxes Paid (ASU 2023-09)**\n\n \n\nIncome\ntaxes paid, net of refunds received, disaggregated by jurisdiction in accordance with ASU 2023-09, is as follows:\n\n \n\nSCHEDULE\nOF  INCOME TAXES PAID\n\nJurisdiction \n**FY2026**  \n**FY2025** \n\n  \nMarch 31, \n\nJurisdiction \n**FY2026**  \n**FY2025** \n\nU.S.\nFederal \n *—*  \n *—* \n\nState\n— Arizona \n *—*  \n *—* \n\nForeign\n— India \n -  \n - \n\nTotal\nincome taxes paid, net of refunds \n **—**  \n **—** \n\n \n\nNo\nindividual jurisdiction within “State” exceeds 5% of total income taxes paid; accordingly, separate disaggregation by individual\nstate is not required.\n\n** **\n\n**Foreign\nSubsidiary Losses**\n\n \n\nFatPipe\nIndia Private Limited has generated tax losses in the current and prior fiscal years that are available for carryforward under Indian\nlocal tax law. At March 31, 2026, the Indian subsidiary had unused tax losses of approximately $2,582,089. The comparable amount\nat March 31, 2025 was $1,352,277.\n\n \n\nNo\ndeferred tax asset has been recognized in respect of these unused tax losses, as management has determined it is not more likely than\nnot that sufficient future taxable income will be available in India against which the losses can be utilized within the applicable local-law\ncarryforward period. The cumulative unrecognized deferred tax asset at the applicable Indian statutory rate of 25.17% is approximately\n$649,912 at March 31, 2026.\n\n** **\n\n**Change\nin Accounting Estimate**\n\n \n\nDuring\nthe fiscal year ended March 31, 2026, in connection with the preparation and filing of the Company’s FY2025 federal and state income\ntax returns, management refined its estimate of the income tax obligation associated with prior fiscal years. The previously recorded\naccrued income tax payable balance of $2,967,305 at March 31, 2025 was based on a flat-rate estimation methodology that did not give\neffect to the Company’s available net operating loss carryforwards. Upon completion of the FY2025 tax filings and the related ASC\n740 computation, management determined that, after application of available net operating loss carryforwards, no material federal or\nstate income tax was due for FY2025.\n\n \n\nF-25\n\n \n\n \n\nConsidering\nthe magnitude of the adjustment relative to FY2026 consolidated pre-tax income, and forecasting uncertainty regarding future U.S. taxable\nincome, management elected to recognize the reversal of the prior over-accrual ratably over fiscal years 2026 and 2027 rather than in\na single period. During FY2026, the Company reversed $1,483,653 (approximately 50%) of the $2,967,305 prior balance. The remaining $1,483,652\nhas 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\nprovision process.\n\n \n\nIn\naccordance 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\nin 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,\nan 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\nrequirements of ASC 250-10-50-4.\n\n** **\n\n**Uncertain\nTax Positions**\n\n \n\nThe\nCompany evaluates uncertain tax positions in accordance with ASC 740-10-25 and the related measurement, recognition, and disclosure provisions\nof 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\nlikely than not that the position would be sustained upon examination by the relevant taxing authorities. Accordingly, no liability for\nunrecognized tax benefits has been recorded, and there are no related accruals for interest or penalties.\n\n \n\nThe\nCompany’s U.S. federal and state income tax returns generally remain subject to examination for the three most recent tax years\nunder the applicable statutes of limitation, which corresponds to fiscal years ended March 31, 2024 through March 31, 2026. Tax returns\nof the Indian subsidiary remain subject to examination by Indian tax authorities for assessment years 2024-25 through 2026-27 in accordance\nwith applicable Indian tax law.\n\n \n\n**Recently\nAdopted Accounting Pronouncements — ASU 2023-09**\n\n \n\nIn\nDecember 2023, the Financial Accounting Standards Board issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires public\nbusiness entities to disclose specific categories within the rate reconciliation, additional information for reconciling items meeting\na quantitative threshold, and disaggregation of income taxes paid by jurisdiction. The Company adopted ASU 2023-09 effective for the\nfiscal year beginning April 1, 2025 on a prospective basis. Adoption of the standard did not have a material effect on the Company’s\nconsolidated financial position, results of operations, or cash flows; the impact is limited to the additional disclosures presented\nin this Note.\n\n \n\n**NOTE\n11: COMMITMENTS AND CONTINGENCIES**\n\n** **\n\n**Commitments**\n\n \n\nThe\nCompany’s commitments primarily relate to (i) operating lease arrangements (see Note 7) and (ii) repayment of outstanding bank\ndebt (see Note 5). The Company has no other material commitments outstanding as of March 31, 2026.\n\n** **\n\n**Contingencies**\n\n \n\nFrom\ntime to time, the Company is involved in various legal proceedings and claims arising in the ordinary course of business. As of the date\nof this Annual Report, the Company is not a party to any pending legal proceedings the outcome of which would, in the opinion of management,\nbe expected to have a material adverse effect on its consolidated financial position, results of operations, or cash flows. Where loss\ncontingencies are considered probable and reasonably estimable, the Company accrues an amount equal to its best estimate of the loss\nin accordance with ASC 450, Contingencies.\n\n \n\n**NOTE\n12: SUBSEQUENT EVENTS**\n\n \n\nThe\nCompany has evaluated subsequent events through May 18, 2026, the date these consolidated financial statements were available to be issued.\n\n \n\nF-26"}