Item 1A. Risk Factors 16
Item 1B. Unresolved Staff Comments 36
Item 1C. Cybersecurity 36
Item 2. Properties 37
Item 3. Legal Proceedings 37
Item 4. Mine Safety Disclosures 37
PART II
Item 6. [Reserved] 38
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50
Item 8. Financial Statements and Supplemental Data F-1
Item 9A. Controls and Procedures 51
Item 9B. Other Information 51
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 51
PART III
Item 10. Directors, Executive Officers and Corporate Governance 52
Item 11. Executive Compensation 55
Item 14. Principal Accountant Fees and Services 57
PART IV
Item 15. Exhibits, Financial Statements and Schedules 58
Signatures 59
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements about us and our industry that involve substantial risks and uncertainties.
Forward-looking statements give our current expectations or forecasts of future events and can be identified by the fact that they do
not relate strictly to historical or current facts. In particular, these include statements relating to future actions, prospective products,
market acceptance, future performance or results of current and anticipated products, sales efforts, expenses, and the outcome of contingencies
such as legal proceedings and financial results. Forward-looking statements involve risks and uncertainties and include statements regarding,
among other things, our projected revenue growth and profitability, our growth strategies and opportunity, anticipated trends in our
market and our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,”
“should,” “anticipate,” “estimate,” “plans,” “potential,” “continuing,”
“ongoing,” “expects,” “management believes,” “we believe,” “we intend” or
the negative of these words or other variations on these words or comparable terminology.
Examples
of forward-looking statements in this Annual Report include, but are not limited to, our expectations regarding our business strategy,
business prospects, operating results, operating expenses, working capital, liquidity and capital expenditure requirements. Important
assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our offerings, the cost,
terms and availability of components, pricing levels, the timing and cost of capital expenditures, competitive conditions and general
economic conditions. You should not rely on forward-looking statements as predictions of future events. These statements are based on
our management’s expectations, beliefs and assumptions concerning future events affecting us, which are based on currently available
information. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations
and assumptions may prove to be incorrect.
Important
factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking
statements include, but are not limited to:
● changes in the market acceptance of our software solutions and offerings;
● our ability to expand in existing and new markets;
● increased levels of competition;
● our relationships with our key customers and channel partners;
● our ability to retain and attract senior management and other key employees;
We
operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict
all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual
results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this Annual Report
are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements,
you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date
they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light
of new information, future events, or otherwise.
PART I
ITEM
1. BUSINESS
Overview
FatPipe
is a leading developer of enterprise-class, application-aware, secure SD-WAN solutions and integrated single-stack cybersecurity solutions
for organizations, including enterprises, communication service providers, security service providers, government organizations, and
other middle-market companies.
We
strive to be the global leader in delivering leading-edge enterprise-class networking software technology. We are dedicated to continually
improving the way organizations connect, ensuring their networks are secure, reliable, and supporting their continued success. Our commitment
lies in empowering our customers with a seamless and dependable connectivity infrastructure that safeguards their critical data and fosters
business continuity. We further aim to ensure our customers have unparalleled insights into their network operations.
We
focus on enabling organizations to connect, secure, and monitor their networks through a unified software platform. Our solutions are
designed to operate across cloud, hybrid cloud, and on-premise environments, supporting distributed applications, users, and infrastructure.
By integrating networking, cybersecurity, and monitoring capabilities within a single software stack, we aim to reduce the complexity
associated with deploying and managing multiple point solutions, while providing consistent policy enforcement, centralized visibility,
and coordinated network and security operations.
To
deliver on this vision, we hold over a dozen software and technology patents, which we leverage through an integrated suite of software
solutions to offer our customers a reliable and secure platform to support mission-critical applications running on cloud, hybrid cloud
and on-premise networks. Our core offerings include SD-WAN, SASE, single stack cybersecurity (“Cybersecurity”), and network
monitoring service (“NMS”) software solutions, each of which is typically offered to our customers as a subscription service.
Our
SD-WAN / SASE platform includes integrated traffic management and routing capabilities that address a broad set of network management
needs to manage multi-line network traffic and routing. When customers have multiple data lines, and one of the lines fails, FatPipe
automatically and dynamically transfers network traffic from one data line to another (failover) without disconnecting the application
session. When all lines are functional, FatPipe is able to improve data traffic speed and optimize bandwidth.
Our
cybersecurity platform is designed as an integrated component of our software stack and includes a range of security capabilities intended
to protect network traffic, users, and applications across distributed environments. These capabilities include firewall functionality,
intrusion detection and prevention, secure web gateway controls, content filtering, encrypted connectivity, secure virtual private network
(“VPN”) access, and application-aware policy enforcement. Our platform is also designed to support advanced threat protection
techniques, including traffic inspection, anomaly detection, and controls intended to mitigate unauthorized access and data exfiltration.
These security capabilities are designed to operate consistently across WAN links, cloud environments, and network endpoints, providing
coordinated protection across both edge and core network infrastructure.
In
addition to our software capabilities, we provide cybersecurity testing and protection services designed to support customer security
operations. These services include web application penetration testing, internal network and server penetration testing, vulnerability
and port scanning of internet-facing assets, and managed web application firewall (“WAF”) services. These services are intended
to complement our software platform by enabling customers to assess, validate, and enhance their security posture.
Our
network monitoring capabilities provide visibility into network performance, device health, and traffic behaviour, enabling customers
to monitor and manage their environments through centralized reporting and analytics. By integrating monitoring functionality within
the same platform as networking and security, we aim to provide customers with a unified operational view of their network and security
environments.
We
service customers in geographies around the world, with our largest customer populations located in the United States and India. We plan
to continue expanding our presence throughout North America and parts of Southeast Asia. Further, FatPipe is in discussions with potential
partners to offer geography specific software license bundles to address these market needs. Customers in different geographies require
different licenses and network servers specific to their needs and prices. We plan to expand its presence in Mexico and Asia markets
with products and services bundles to address geography specific markets.
Industry
SD-WAN
is a network architecture that allows enterprises to utilize software and virtualization technologies to enhance the performance, security,
and manageability of their WANs that connect offices, data centers, cloud applications, and cloud storage. This innovative architecture
has emerged as a force in the world of networking and connectivity, revolutionizing the way organizations manage and optimize their WANs.
SD-WAN technology enables organizations to leverage multiple types of connection, such as broadband, multiprotocol label switching, and
LTE, to create a unified and intelligent network that can be centrally managed and orchestrated. This flexibility not only improves network
efficiency but also reduces costs associated with expensive dedicated circuits, and the technology represents a seismic shift from traditional
static network architectures to dynamic, agile, and cloud-centric solutions. SD-WAN applications have gained tremendous momentum in recent
years due to its ability to address many evolving needs of modern businesses.
SASE
technology enhances network security by enabling centralized policy enforcement and encryption. It allows for granular control over traffic,
ensuring that sensitive data is transmitted securely across the network. This is particularly significant in today’s cyber-threat
landscape, where data breaches and network vulnerabilities are constant concerns for businesses of all sizes, and trends such as remote
work and distributed organizations have only served to exacerbate potential susceptibility.
NMS
allows for the systematic monitoring and management of computer networks. Generally consisting of an integrated set of tools, NMS solutions
provide network administrators with the ability to remotely detect and address network issues or anomalies before they affect network
performance, integrity, or end-user experience. Many NMS solutions combine multiple data collection methods to offer comprehensive insights
into a range of network performance metrics, allowing administrators to continuously and remotely optimize network configurations, troubleshoot
problems, manage capacity, identify suspicious network activity and generate analytics for further assessment.
Cybersecurity
solutions are designed to protect networks, applications, and data from unauthorized access, disruption, or attack. These solutions may
include a range of capabilities such as firewalling, intrusion detection and prevention, secure access controls, traffic inspection,
and threat detection. As organizations increasingly operate in distributed, cloud-based environments, cybersecurity has become a critical
component of network infrastructure, requiring protection across endpoints, network layers, and cloud applications. Enterprises are increasingly
adopting integrated approaches to cybersecurity that combine multiple security functions within unified platforms in order to reduce
complexity and improve coordination across security operations.
The
continued evolution of enterprise IT environments, including increased reliance on cloud computing, remote access, and distributed applications,
has contributed to the convergence of networking, security, and monitoring functions. As a result, organizations are increasingly seeking
solutions that provide integrated capabilities across these domains, rather than deploying and managing multiple independent systems.
Total
Addressable Market
SD-WAN.
The market for SD-WAN products was estimated to be approximately $4.5 billion in 2023 (according to the research published via the Maia
Research Report) with expected market size to grow to over $17.6 billion by 2030. The North America and Asia-Pacific (“APAC”)
segments of the market, which represent FatPipe’s primary markets, are expected to achieve continued growth in the near term. According
to Gartner, Inc., the North America market for SD-WAN solutions will grow at an estimated 18% compound annual growth rate (“CAGR”)
through 2025, while growth in APAC is projected to exceed 60% CAGR. This significant growth trajectory has been attributed to several
factors, including the rise in remote work, need for enhanced network security, migration of applications to the cloud, and overall digital
transformation efforts of enterprises.
SASE.
According to the Maia Research Report, total revenues for SASE software and platform solutions is expected to grow from $6.4 billion
in 2022 to $27.2 billion by 2030, resulting in a CAGR of almost 20.0% during the forecast period. This is driven by the rise of work-from-home
mandating secure zero-trust remote connectivity, cloud-adoption broadening the definition of a corporate network, and the convergence
of cloud and on-premise networks creating the need for a unified solution.
NMS.
The total NMS market, including both cloud-based and on-premise solutions, is projected by the Maia Research Report to grow at a more
modest CAGR of 10.0% for the period from 2022 to 2030. Total market revenues for NMS solutions is estimated at $2.0 billion in 2022,
approximately three-quarters of which is categorized at cloud-based, and is projected to grow to approximately $4.4 billion, when cloud-based
solutions will account for almost 85% of the total market.
Cybersecurity.
According to a report by Grand View Research, the global cybersecurity market was valued at approximately $245.6 billion in 2024 and
is projected to reach approximately $500.7 billion by 2030, representing a CAGR of approximately 12.9% over the forecast period. Growth
in this market is being driven by increasing adoption of cloud computing, the expansion of connected devices, the growing complexity
of cyber threats, and evolving regulatory requirements. As organizations continue to operate in distributed and hybrid environments,
demand for cybersecurity solutions has expanded beyond traditional perimeter defenses to include protection across endpoints, network
infrastructure, and cloud-based applications. In addition, enterprises are increasingly adopting integrated security approaches that
combine multiple security functions within unified platforms in order to reduce operational complexity and improve coordination across
security operations.
FatPipe
Software Solutions
Our
objective is to offer a suite of solutions to ensure our customers can securely support their networks in this cloud-first world. We
are committed to driving a trusted customer experience through innovation and a diverse set of capabilities. Our core offerings are based
on a complete, integrated suite of software solutions, including SD-WAN, SASE, NMS, and Cybersecurity capabilities, each of which can
be individually licensed to create an experience tailored to a customer’s needs and network configuration. Additionally, all of
our technologies are available for commercial sale. These capabilities are designed to operate together as part of a single software
stack, allowing customers to manage networking, security, and monitoring functions through a centralized platform. By integrating these
functions, our solutions are intended to reduce the complexity associated with deploying and maintaining multiple independent systems,
while enabling consistent policy enforcement, centralized visibility, and coordinated network and security operations across distributed
environments. Further, our product pipeline consists of new SD-WAN security features and enhancements to the NMS, as well as single-stack
cybersecurity features to serve all of a customer’s cybersecurity requirements from a single vendor.
As
networks become increasingly critical to business operations and more exposed to cyber threats, organizations require continuous monitoring
and protection across both network infrastructure and application environments. Our platform incorporates built-in and automated capabilities
designed to monitor network status, detect potential intrusion activity, enforce geographic access controls, and regulate external web
access based on defined policies.
Our
SD-WAN capabilities provide application-aware traffic management and dynamic routing across multiple network connections. When multiple
data connections are available, our platform is designed to manage traffic across those connections and, in the event of a disruption,
transfer traffic between available links without interrupting application sessions. When multiple links are active, our platform is designed
to optimize bandwidth utilization and improve overall network performance.
Our
cybersecurity capabilities are integrated within the same software platform and are designed to protect network traffic, users, and applications
across distributed environments. These capabilities include firewall functionality, intrusion detection and prevention, secure web gateway
controls, content filtering, encrypted connectivity, and secure virtual private network (“VPN”) access. Our platform also
supports application-aware policy enforcement, enabling organizations to define and apply security policies based on application behavior
and traffic characteristics.
In
addition, our cybersecurity functionality is designed to support advanced threat protection techniques, including traffic inspection,
anomaly detection, and controls intended to mitigate unauthorized access and data exfiltration. These capabilities are designed to operate
consistently across WAN links, cloud environments, and network endpoints, providing coordinated protection across both edge and core
network infrastructure. To support these capabilities, we also provide cybersecurity testing and protection services, including web application
penetration testing, internal network and server penetration testing, vulnerability and port scanning of internet-facing assets, and
managed web application firewall (“WAF”) services. These services are designed to assist customers in identifying vulnerabilities,
validating security controls, and maintaining the effectiveness of their security environments.
Our
network monitoring capabilities provide centralized visibility into network performance, device health, and traffic activity. By integrating
monitoring functionality within the same platform as networking and security, our solutions are designed to enable customers to correlate
performance metrics with security and traffic patterns, supporting more efficient troubleshooting and operational decision-making. Our
monitoring and reporting capabilities may also be utilized in conjunction with our cybersecurity services to provide customers with ongoing
visibility into network activity, security events, and system performance.
Software-Defined
Wide Area Network (SD-WAN)
Our
primary offering is an SD-WAN software platform that integrates a broad array of network traffic management and routing, security, and
monitoring functions and is predominately sold on a subscription basis. The platform can be delivered on a dedicated commodity appliance
or virtual configuration, and can be installed in a variety of network environments, including cloud, hybrid or on-premise.
Our
SD-WAN solution is designed to enable organizations to manage multiple network connections simultaneously and dynamically control the
flow of application traffic across those connections. By supporting multiple connectivity types, including broadband, fiber, and wireless
networks, our platform provides flexibility in network design and supports distributed enterprise environments.
A
key capability of our platform is its ability to maintain continuous application connectivity in the event of network disruptions. When
one connection becomes unavailable, our software is designed to transfer traffic across alternate connections without interrupting active
application sessions. This functionality is intended to support business continuity for applications that require persistent connectivity,
including voice, video, and transactional systems.
When
multiple connections are active, our platform is designed to distribute traffic across available links in order to improve bandwidth
utilization and optimize application performance. These capabilities are intended to reduce reliance on higher-cost dedicated circuits
while maintaining performance and reliability across the network.
Our
SD-WAN solution offers a number of benefits for managing and maintaining network infrastructure, including:
Our
SD-WAN solution is suitable for multi-location, single location with high density, and multi-cloud environments, and offers these features
in a single device for network end-point (or edge) and branch network needs. The solution enables multi-path VPN for hybrid connectivity,
intelligent WAN edge management, cloud disaster recovery for hybrid cloud management, and other capabilities, all at enterprise-class
performance levels. Its application-aware network optimization capabilities are suitable for virtual machines (“VMs”) for
all major hypervisors, including AWS, Azure Cloud, Oracle and Google.
According
to research published in 2026 by Software Reviews, an independent research organization and division of Info-Tech Research Group, FatPipe’s
SD-WAN solutions are the top-ranked solutions for middle-market companies, based on Software Review’s assessment of the complete
software experience, which includes measurement of product features and satisfaction, as well as vendor experience and capabilities.
FatPipe has also been previously rated as top-ranked in InfoTech’s 2024 and 2025 reports.
Secure
Access and Service Edge (SASE)
Our
SASE solution seamlessly integrates a WAN-Edge appliance with an SASE software access solution, to provide connectivity, consistent security
and optimized user experience for hybrid workforce, branch office and retail locations. Our SASE capabilities are designed to operate
as part of our broader software platform, enabling organizations to apply networking and security policies across users, devices, and
locations within a unified architecture. By combining connectivity and security functions, our solution is intended to support secure
access to applications and data while reducing the operational complexity associated with managing multiple independent systems. Our
SASE solution offers virtual network functions, which combine networking and network security services into a single cloud-delivered
solution, and are available for major virtual customer premise equipment (vCPE) hardware providers. Additionally, our SASE offerings
include the following features:
● Encryption: Supports data encryption protocol suite to ensure data security.
Network
Monitoring Service (NMS)
Our
EnterpriseView reporting system for network monitoring provides a platform to monitor customer network environments, including wide area
network performance and the operation of deployed devices. The system is designed to support centralized visibility across distributed
network infrastructures, including branch locations and cloud-based environments. Our NMS capabilities are integrated within our broader
software platform and are designed to operate in conjunction with our SD-WAN and cybersecurity functionality. By incorporating monitoring
within the same platform as networking and security, our solution is intended to enable customers to observe network performance, traffic
behavior, and security-related events through a unified interface. This integration is designed to allow customers to correlate network
performance metrics with traffic patterns and security activity, supporting more efficient identification of performance issues, anomalous
behavior, and potential security concerns.
Our
NMS solution is a scalable solution that supports large data loads, maintains seamless connectivity across thousands of branches, boosts
network performance to handle intensive demands, ensures comprehensive network monitoring and management, and provides real-time insights
into a network or device’s health and performance. The platform provides real-time visibility into network and device performance,
including connection status, utilization, and operational health. Device health information is presented through centralized dashboards
and reporting tools in real time, and a tabular dashboard gives a detailed view of each device’s line condition and utilization
in real time, enabling administrators to monitor network conditions and performance trends. The system is designed to provide detailed
views of network line conditions, traffic utilization, and device status in real time, supporting proactive management and troubleshooting.
Cybersecurity
Our
cybersecurity capabilities are designed as an integrated component of our software platform and are intended to provide protection for
network traffic, users, and applications across distributed and cloud-based environments. These capabilities are delivered within the
same software stack as our SD-WAN, SASE, and network monitoring solutions, enabling coordinated enforcement of security policies and
centralized visibility across network and application environments.
Our
cybersecurity software functionality includes a range of security controls designed to operate across network infrastructure and endpoints.
These capabilities include firewall functionality, intrusion detection and prevention, secure web gateway controls, content filtering,
encrypted connectivity, and secure virtual private network (“VPN”) access. In addition, our platform supports application-aware
policy enforcement, enabling organizations to define and apply security policies based on application behavior, user activity, and traffic
characteristics.
Our
platform is also designed to support advanced threat protection techniques, including traffic inspection, detection of anomalous behavior,
and controls intended to mitigate unauthorized access and data exfiltration. These capabilities are designed to operate consistently
across wide area network connections, cloud environments, and network endpoints, providing coordinated protection across both edge and
core network infrastructure.
By
integrating cybersecurity capabilities within the same platform as networking and monitoring functions, our solutions are designed to
enable customers to manage security and network operations through a unified interface. This integration is intended to reduce the complexity
associated with deploying multiple standalone security products while supporting consistent policy enforcement and improved visibility
across network environments.
In
addition to our software-based cybersecurity capabilities, we provide cybersecurity testing and protection services designed to support
customer security operations and risk management efforts. These services include web application penetration testing, internal network
and server penetration testing, vulnerability and port scanning of internet-facing assets, and managed web application firewall (“WAF”)
services.
These
services are designed to assist customers in identifying potential vulnerabilities, validating the effectiveness of implemented security
controls, and maintaining the integrity of their network and application environments. Our cybersecurity services may be utilized in
conjunction with our software platform to provide ongoing visibility into security posture and to support continuous monitoring and improvement
of customer security environments.
Technology
and Architecture
Our
core technology has been developed internally by its founding management team and supported by a long-tenured group of engineers and
software developers. We hold a portfolio of 13 patents that cover a range of SD-WAN and related capabilities. Specifically, our patented
claims cover key SD-WAN and related functionality, including:
FatPipe’s
Services
Our
software solutions are provided through a subscription-based model. During the fixed term of the subscription, we include a portfolio
of services, which offer our customers technical support, professional services, training, and cybersecurity services.
Technical
Support Services
We
maintain our own team of technical support specialists to ensure quality control and build and retain trust throughout the entire customer
experience. Our technical support services, incorporating both remote and on-site support, include installation services, configuration
assistance, monitoring and alerts notification, and development of performance reports.
Professional
Services
We
offer limited professional services to our customers and channel partners. We may also provide more customized services for more complex
use cases, such as implementation design, network analysis, and projected capacity requirements.
Training
Services
We
offer training to our customers and channel partners directly through our support staff. These services are designed to educate end-users
and partners on implementation, use, functionality, and maintenance of FatPipe solutions.
Cybersecurity
Services
We
provide cybersecurity services designed to support customers in identifying vulnerabilities, assessing security controls, and maintaining
the effectiveness of their security environments. These services are intended to complement our software platform and may be delivered
in conjunction with deployments of our networking and cybersecurity solutions.
Our
cybersecurity services include web application penetration testing, internal network and server penetration testing, vulnerability and
port scanning of internet-facing assets, and managed web application firewall (“WAF”) services. These services are designed
to simulate real-world attack scenarios, identify potential weaknesses in network and application environments, and provide customers
with actionable insights to address identified risks.
Web
application penetration testing is designed to evaluate the security of customer-facing applications by identifying vulnerabilities in
application logic, configuration, and underlying systems. Internal network and server penetration testing is intended to assess potential
risks associated with internal access, including the ability of unauthorized actors to move laterally within a network environment.
Vulnerability
and port scanning services are used to identify exposed services, open ports, and known vulnerabilities across internet-facing infrastructure.
Managed WAF services are designed to provide protection for web-based applications by monitoring and filtering incoming traffic based
on defined security rules and threat patterns.
Technology
Development Services
Through
our FatPipe Technologies division, we offer a diverse set of consulting services for the development and deployment of highly optimized
and often complex wide area network (“WAN”) and local area network (“LAN”) solutions. We provide a host of networking,
programming, and professional services as part of our engagement, which often include a mix of web, software, and application development,
ERP integrations, outsourced staffing assistance and a range of IT consulting services. These services are generally independent of our
core software solution offerings, and typically serve enterprises involved with such technologies as telemedicine, university and educational
institution management, kiosk development, and multimedia communications. In addition, network design services further assist in marketing
FatPipe’s core software solutions.
Reseller
and Channel Partnerships
We
primarily offer our software solutions to end-user customers through our distributors, value-added resellers, ISPs, and other third parties,
with whom we build and maintain relationships through our territory managers. We leverage a diverse network of over 100 partnerships
to generate revenues, and have maintained many of these relationships for over a decade.
Our
revenues are primarily generated in the United States, with India generating an increasing share of sales since 2022. FatPipe has invested
considerable resources in developing these relationships, and our distribution arrangements are not exclusive with any partner.
In
2023, we began an extensive program to train our sales force to support domestic and international commercial accounts. The program focused
on enhancing our partners’ product knowledge and technical capabilities, and has been instrumental in driving sales growth. Further,
to minimize barriers during the sales process, FatPipe software solutions are sold off a pre-approved price list and customer contracts
between FatPipe and the end-user customer are embedded within the partner’s master agreement. After a sale, FatPipe maintains a
direct relationship with the end-user by providing installation, maintenance, and support services.
We
plan to replicate our reseller and channel partner model to enter or expand in new markets or geographies. We are currently exploring
options to grow our global sales, with emphasis on expansion opportunities within the burgeoning India information technology market.
We are in discussions with multiple potential partners in Southeast Asia, which does not include China, to address these local markets.
Further, FatPipe is in discussions with potential partners to offer geography specific software license bundles to address these market
needs. Customers in different geographies require different licenses and network servers specific to their needs and prices. We plan
to expand our presence in Mexico and Asia markets with products and services bundles to address geography specific markets.
Diverse
End Customers
FatPipe’s
software solutions have been deployed by over 2,500 end-user customers across a diverse set of sectors including education, financial
services, government, healthcare, hospitality, legal, manufacturing, retail, and transportation and in various deployment models, including
hybrid, SaaS, and managed services. The Company’s end-user customers range in size from smaller businesses to Fortune 1000 enterprise
users, but its core customer base can be classified as mid-market companies. No end-user customer accounted for over 10% of total revenue
in fiscal year 2026 or 2025.
Channel
partner concentration in our revenue base is significant. For the fiscal year ended March 31, 2026, three channel partners accounted
for approximately 39.31% of total revenue (fiscal year 2025: two channel partners accounted for approximately 49.54% of total revenue,
with one channel partner accounting for approximately 45.09% of total revenue). Channel partner concentration is described in further
detail in Note 1 to the consolidated financial statements.
Competition
FatPipe
faces competition from companies with varying capabilities in SD-WAN, SASE, NMS, and Cybersecurity, some of which are larger companies
with greater access to capital and other resources.
Sales
and Marketing
Our
marketing strategy is focused on building our brand and driving end-user customer awareness for our solutions. Our internal marketing
team is responsible for developing marketing materials and allocating our marketing resources across various channels and activities.
We supplement our marketing activities with a variety of sales tools, including product literature, awards, technical materials, training,
seminars, conference attendance, webinars, and various other activities.
Software
Development (Research and Development)
FatPipe
has maintained a robust research and development team of employees, many of whom have 15 or more years of experience with us. We continue
to develop new technologies and features that help us maintain or improve our position in the market. We also have enhanced our support
database to enable faster resolution of complex problems and to train our engineers to address problems faster, enabling us to grow without
the need to linearly add personnel as we scale. We are automating our testing processes to reduce the time to introduce new features
and new versions of software to control and manage engineering costs.
Intellectual
Property
We
primarily rely upon patent, trademark, copyright, and trade secret laws, confidentiality procedures, and contractual provisions to protect
our IP and proprietary technology. As of the date of this Annual Report, we had 13 U.S. patents and seven U.S. trademarks for FatPipe,
Inc. and FatPipe Networks Private Limited.
Issued
Patents, per data of the United States Patent and Trademark Office (USPTO) as of March 31, 2026.
Number Issue Date Assignee
Trademark
Registrations, per data of the United States Patent and Trademark Office (USPTO) as of March 31, 2026.
Number Reg. Date Mark Last Listed Owner
Recent
Developments
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 the partial exercise of the underwriters’ over-allotment option,
issued and sold an aggregate of 800,004 shares of common stock. The total gross proceeds to the Company from the Offering, before deducting
discounts and expenses, were approximately $4,600,023. The Company received net proceeds of approximately $3,935,522 pursuant to the
Offering.
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.
Platform
and Sales Organization Expansion
Since
our initial public offering, we have expanded our platform capabilities and expanded our sales organization. We introduced an integrated
single-stack architecture that combines our networking, security, and monitoring functionality within a unified software platform. As
part of this expansion, we enhanced our product offerings to include additional cybersecurity capabilities designed to operate within
the same software environment as our SD-WAN, SASE, and network monitoring solutions.
In
addition, we have doubled the headcount of our sales organization, increasing the number of sales personnel, which has resulted in an
increase in sales capacity. This expansion has contributed to growth in our sales pipeline and the number of customer opportunities processed
during the fiscal year.
Based
on current business trends and internal expectations, we anticipate continued growth in sales activity and overall revenue. These expectations
are subject to various risks and uncertainties, including those described in the “Risk Factors” section of this Annual Report.
Human
Capital Management
As
of March 31, 2025, we had 172 full-time employees, with 56 in the United States, 112 in India, and 4 in the Philippines. None of our
employees are represented by labor unions and we consider our employee relations to be good. Due to our consistent presence as an employer
in India, which dates back to 2002, we believe we enjoy a more stable workforce than many technology companies in the region.
We
do not currently have any employment agreements with our co-founders or other employees. Compensation arrangements with our executive
officers and directors are governed by our Compensation Committee.
Facilities
FatPipe,
Inc. and FatPipe Technologies, Inc. are headquartered in Salt Lake City, Utah. FatPipe Networks (India) Private Limited is headquartered
in Chennai, India. We conduct sales, marketing, research and development, and customer support activities from each of these locations.
Corporate
Information
FatPipe,
Inc. was incorporated in Utah on October 14, 2009. Our principal executive offices are located at 392 East Winchester Street, Fifth Floor,
Salt Lake City, Utah 84107, and our telephone number is (801) 281-3434. Our website address is www.fatpipe.com. The information contained
on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should
not consider information on our website to be part of this Annual Report.
Available
Information
We
make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as
reasonably practicable after we electronically file or furnish them to the SEC. The SEC also maintains an Internet website (www.sec.gov)
that contains such reports, proxy statements and other information about us.
ITEM 1A. RISK FACTORS
Below
is a summary of the principal factors that make an investment in our securities speculative or risky. This summary does not address all
of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can
be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this
Annual Report on Form 10-K and our other filings with the SEC, before making an investment decision regarding our securities.
● Our operating results are likely to vary significantly and be unpredictable.
● We operate in a highly competitive market.
Risks
Related to Our Business and Financial Position
Our
operating results are likely to vary significantly and be unpredictable.
Our
operating results have historically varied from period to period, and we expect that they will continue to do so as a result of a number
of factors, many of which are outside of our control or may be difficult to predict, including:
● compliance with existing laws and regulations;
● changes in customer renewal rates or attach rates for our software solutions;
Any
one of the factors above or the cumulative effect of some of the factors referred to above may result in significant fluctuations in
our quarterly financial and other operating results. This variability and unpredictability could result in our failing to meet our internal
operating plan or the expectations of securities analysts or investors for any period. If we fail to meet or exceed such expectations
for these or any other reasons, the market price of our shares could fall substantially and we could face costly lawsuits, including
securities class action suits. Accordingly, in the event of revenue shortfalls, we are generally unable to mitigate the negative impact
on margins in the short term.
We
rely heavily on our reselling partners and our ability to work with suitable partners may impact our growth plans.
Within
our partner network, our three and two largest reselling partners accounted for over 53.8% of our total revenues in our fiscal year ended
March 31, 2025, and 49.5% of our total revenues in our fiscal year ended March 31, 2024, respectively. To reduce this risk, we continue
to engage with new partners and expand our existing relationships to mitigate customer concentration risk. Additionally, we are in discussions
with multiple potential partners in Southeast Asia to address the Southeast Asia market and there are no assurances we will find a suitable
qualified partners.
If
we are unable to develop and introduce new software solutions and improve existing software solutions in a cost-effective and timely
manner, then our competitive position may be negatively impacted and our business, results of operations, and financial condition may
be adversely affected.
If
we are unable to adapt to rapidly evolving technological advancements and market demands within the enterprise network software sector,
our competitive position could be undermined, leading to adverse effects on our business, results of operations, and financial condition.
The network software industry is characterized by swift changes in customer preferences, emerging security threats, and evolving performance
expectations. Failing to anticipate and address these shifts could result in our solutions becoming outdated or less effective, which
may cause customers to seek alternatives from our competitors. Additionally, the complex nature of SD-WAN, SASE, and SIEM solutions demand
continuous R&D efforts to ensure compatibility with new networking protocols, hardware platforms, and cloud architectures. Delays
or inefficiencies in the development processes could hinder our ability to capture new market opportunities and retain existing customers.
Therefore, our inability to proactively develop and introduce innovative solutions, as well as enhance our existing offerings, could
weaken our competitive stance and negatively impact our overall business prospects.
We
invest significantly in research and development, and to the extent our research and development efforts are unsuccessful, our competitive
position may be negatively impacted and our business, results of operations, and financial condition may be adversely affected.
Our
success depends heavily on our ability to attract and retain highly skilled and experienced R&D personnel. The network software industry
is marked by rapid technological advancements, evolving market trends, and intense competition. If we fail to effectively recruit and
retain top-tier R&D personnel, our capacity to innovate, develop new solutions, and enhance existing software solutions may be compromised.
Competition for skilled engineers and developers is strong, and an inability to assemble a proficient R&D team could hinder our ability
to respond promptly to market demands and stay ahead of technological shifts. Though we mitigate this with our robust talent development
pipeline, a shortage of qualified candidates may negatively impact our performance. Furthermore, if key R&D personnel were to leave
or if we encounter challenges in maintaining a collaborative and innovative work environment, our research outcomes might suffer, negatively
impacting the quality and speed of our software development. In such scenarios, our competitive standing could weaken, potentially leading
to a decline in market share, revenue, and overall business performance.
We
operate in a highly competitive market.
The
intense competition within our market poses a risk to our business operations, financial performance, and overall market position. Our
industry is comprised of a number of players, including both established companies and emerging startups. As a result, we face pressure
to differentiate our offerings, maintain competitive pricing, and consistently deliver high-quality solutions. If we fail to navigate
this competitive landscape, we could experience challenges in acquiring new customers, expanding our market share, and retaining existing
customers. Furthermore, the emergence of new competitors or the rapid advancement of alternative technologies could disrupt our current
business model. Therefore, our ability to successfully compete is critical to our long-term success.
Increases
in costs of the materials and other components that we use in our solutions would adversely affect our business, results of operations,
and financial condition.
Fluctuations
or increases in the costs of materials and components to our hardware or software solutions pose a risk to our business. When customers
cannot host our software solutions, we procure hardware components to deploy to customer sites. Any significant rise in these costs,
whether due to supply chain disruptions, market volatility, or external factors, could lead to elevated production expenses and impact
our profit margins or customer demand if the cost is passed on. Failure to manage and mitigate these cost pressures could impact profitability
or revenue. Additionally, if we are unable to adapt to changing cost dynamics, it could impede our ability to invest in R&D or expansion
efforts, further limiting our growth prospects. Therefore, our capability to effectively manage material and component costs is a factor
in our operational resilience and long-term financial success.
Adverse
economic conditions, such as a possible recession and possible impacts of inflation or stagflation, increasing or decreasing interest
rates, reduced information technology spending or any economic downturn or recession, may adversely impact our business.
Our
business depends on the overall demand for information technology and on the economic health of our current and prospective customers.
In addition, the purchase of our software solutions is often discretionary and may involve a significant commitment of capital and other
resources. Weak global and regional economic conditions, fluctuating spending environments, a potential recession, the effects of ongoing
or increased inflation, possible stagflation in certain geographies, variable interest rates, geopolitical instability and uncertainty,
a reduction in information technology spending regardless of macroeconomic conditions, the effects of epidemics and pandemics, and the
impact of the war in Ukraine each could have a material adverse impact on our financial condition, results of operations, and our business.
Our inability to mitigate any of the foregoing events may result in longer sales cycles, a decrease in prices of our software solutions,
increased component costs, higher default rates among our channel partners, reduced unit sales, or a decline in growth.
The
existence of inflation in certain economies has resulted in, and may continue to result in, increasing or decreasing interest rates and
capital costs, increased component or shipping costs, increased costs of labor, weakening exchange rates and other similar effects. We
may not be able to successfully mitigate these risks in a timely manner. These economic challenges may also adversely impact spending
patterns by our distributors, resellers and end-customers.
Our
billings, revenue and free cash flow growth may slow or may not continue, and our operating margins may decline.
We
may experience slowing growth or a decrease in billings, revenue, operating margin and free cash flow for a number of reasons, including
a slowdown in demand for our hardware or software solutions, a shift in demand from hardware to software solutions, decrease in revenue
growth, increased competition, worldwide or regional economic challenges based on inflation or possible stagflation, a regional or global
recession, rising interest rates, the war in Ukraine, a decrease in the growth of our overall market or softness in demand in certain
geographies or industry verticals, such as the service provider industry, changes in our strategic opportunities, execution risks, lower
sales productivity and our failure for any reason to continue to capitalize on sales and growth opportunities due to other risks identified
in the risk factors described in this prospectus. Our expenses, as a percentage of total revenue, may be higher than expected if our