FatPipe Inc(FATN) - 2026 Q1 - Quarterly Report

Part I. Financial Information Financial Statements The company's financial statements for the quarter ended June 30, 2025, reflect significant changes primarily due to its April 2025 IPO, boosting assets and equity Consolidated Balance Sheets As of June 30, 2025, total assets increased to $32.0 million, driven by a doubling of cash post-IPO, while equity grew significantly Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2025 (USD) | March 31, 2025 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash | $5,906,988 | $2,920,550 | | Total current assets | $16,337,553 | $12,962,684 | | Total assets | $32,018,369 | $28,287,769 | | Liabilities & Equity | | | | Total current liabilities | $6,303,286 | $6,489,080 | | Total liabilities | $11,623,144 | $12,362,452 | | Total stockholders' equity | $20,395,225 | $15,925,317 | | Total liabilities and stockholders' equity | $32,018,369 | $28,287,769 | Consolidated Statements of Operations For the three months ended June 30, 2025, the company reported a 5.0% increase in revenues to $3.94 million and a 7.0% growth in gross profit Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | | :--- | :--- | :--- | | Revenues | $3,935,923 | $3,750,319 | | Gross Profit | $3,708,989 | $3,466,639 | | Income from Operations | $1,002,677 | $859,843 | | Net Income Attributable to Stockholders | $741,195 | $625,493 | | Net Income per Common Share (basic and diluted) | $0.05 | $0.05 | Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $20.4 million, primarily driven by the April 2025 IPO and the period's net income - The company's Initial Public Offering in April 2025 resulted in the issuance of 800,004 shares, generating proceeds of $3,935,522 and significantly increasing additional paid-in capital[18] - As of June 30, 2025, the company had 13,826,468 shares of common stock issued and outstanding, an increase from 13,026,464 at the end of the previous quarter[18][93] Consolidated Statements of Cash Flows For the three months ended June 30, 2025, the company experienced negative operating cash flow but a significant net increase in cash due to IPO proceeds Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Three Months Ended June 30, 2025 (USD) | Three Months Ended June 30, 2024 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($508,604) | ($252,465) | | Net cash used in investing activities | ($42,449) | ($4,955) | | Net cash provided by financing activities | $3,593,250 | $0 | | Net change in cash and cash equivalents | $2,986,438 | ($344,676) | | Cash and cash equivalents, end of period | $5,906,988 | $767,843 | - The company received $3,784,472 in cash from its initial public offering during the quarter[20] Notes to Consolidated Financial Statements The notes detail accounting policies, the April 2025 IPO, debt structure, and significant customer concentration - The company is a developer of software-defined wide area network (SD-WAN) solutions, holding thirteen patents, with core offerings including SD-WAN, SASE, and NMS software solutions[22][23] - The company closed its IPO on April 9, 2025, selling 791,024 shares and receiving net proceeds of approximately $3.7 million, with stock trading on The Nasdaq Capital Market under "FATN"[26][27] Disaggregated Revenue (Three Months Ended June 30) | Revenue Type | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | Product revenue | $2,392,303 | $2,105,347 | | Service revenue | $953,287 | $868,231 | | Consulting revenue | $590,333 | $776,742 | | Total | $3,935,923 | $3,750,319 | - In March 2025, the company obtained a new $5 million term loan from Fortis Bank, with an interest rate of Prime Rate plus 1% (8.75% at reporting date)[86] - The company has significant customer concentration, with three major partners accounting for 43.51% of consolidated revenues for the three months ended June 30, 2025, down from 54.11% in the same period of 2024[78] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's performance, highlighting a 5% year-over-year revenue increase to $3.9 million, improved gross margin, and strengthened liquidity post-IPO Results of Operations For the quarter ended June 30, 2025, revenue increased 5% YoY to $3.9 million, driven by product sales, with gross margin expanding to 94% - Net revenue increased by $185,604 (5%) YoY, driven by a $372,012 increase in product and service revenue attributed to core business execution post-IPO[132] - Gross margin improved to 94% from 92% in the prior-year period, reflecting higher net revenue and a 20% decrease in the cost of revenue due to lower hardware costs[133][134][135] - Product development expenses increased by $50,957 YoY as the company ramped up development for its cybersecurity products following the IPO[138] Liquidity and Capital Resources The company's liquidity was significantly boosted by the April 2025 IPO and a new $5 million term loan, despite negative operating cash flow - The company believes cash generated by operations and cash raised from the IPO are sufficient to meet business requirements for the next 12 months[144] - Net cash used in operating activities was $508,604 for the quarter, an increase from $252,465 in the prior year, partly due to NASDAQ listing fees and related expenses[152] - Net cash provided by financing activities was $3,593,250, consisting of $3,784,472 in IPO proceeds offset by $191,222 in debt repayment[154] Critical Accounting Policies and Estimates The company identifies critical accounting policies and estimates related to intangible assets and deferred taxes, requiring significant judgment - The valuation and amortization of IP-related intangible assets, primarily patents, involve significant judgments regarding projected cash flows and estimated useful lives[161] - The company continually assesses the need for a valuation allowance against deferred tax assets based on a 'more likely than not' realization threshold, considering forecasts of profitability and other factors[163][164] Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," FatPipe, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a "smaller reporting company" and is not required to provide the information for this item[174] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[177] - There have been no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[178] Part II. Other Information Legal Proceedings The company reported no legal proceedings during the period - None[184] Risk Factors There were no material changes to the risk factors previously disclosed, except concerning ongoing liquidity needs - No material changes in risk factors were disclosed since the Annual Report on Form 10-K filed on June 30, 2025, except concerning on-going liquidity needs[185] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities and confirmed the closing of its April 2025 IPO, which raised approximately $3.7 million net proceeds - The company reported no unregistered sales of equity securities for the period[186] - The company closed its IPO on April 9, 2025, receiving net proceeds of approximately $3.7 million from the sale of 791,024 shares of common stock[188] Other Information The company reported no other information for the period - None[194] Exhibits This section lists the exhibits filed as part of the Quarterly Report, including underwriting agreements, articles of incorporation, bylaws, and various certifications - A list of exhibits filed with the report is provided, including governance documents, material contracts, and certifications by the CEO and CFO[196]