FatPipe Inc. 10-Q Summary: Quarter Ended June 30, 2026
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for FatPipe Inc. (NASDAQ: FATN), a developer of enterprise-class SD-WAN, SASE, and network monitoring software solutions. The report covers the three-month period ended June 30, 2026. The Company is classified as a non-accelerated filer, a smaller reporting company, and an emerging growth company. As of July 30, 2026, there were 14,128,468 shares of common stock outstanding.
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 |
|---|---|---|
| Revenue | $5,031,538 | $3,935,923 |
| Gross Profit | $4,641,476 | $3,708,989 |
| Gross Margin | 92.2% | 94.2% |
| Net Income | $1,226,328 | $741,195 |
| Diluted EPS | $0.09 | $0.05 |
| Cash and Equivalents (End of Period) | $4,308,342 | $5,906,988 |
| Total Debt (Current + Non-Current) | $4,531,555 | N/A |
| Operating Cash Flow | ($679,047) | ($508,604) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 27.8% year-over-year, driven primarily by a 47.9% increase in product revenue ($3.54M vs. $2.39M). This growth followed the Company's April 2025 IPO. Service and consulting revenues declined slightly due to contract timing.
- Profitability: Net income increased 65.5% to $1.23M. This was significantly aided by a discrete income tax benefit of $370,925 (compared to a provision of $215,185 in the prior year) resulting from the utilization of net operating loss carryforwards.
- Operating Expenses: Total operating expenses rose 38.2% to $3.74M. General and Administrative expenses nearly doubled (up 98.2%) due to public company compliance costs, professional fees, and provisions for contract receivables. Sales and Marketing expenses increased 28.9% to support growth.
- Liquidity: Cash balances decreased by $906,433 during the quarter. Operating activities consumed $679,047, primarily due to increased contracts receivable and inventory to support higher sales volumes.
Outlook, Risks, and Unusual Items
- Subsequent Events: On July 2, 2026, the Company filed a shelf registration statement for up to $20.0 million in securities and entered into an At-the-Market (ATM) offering agreement to sell up to $10.0 million of common stock. No securities have been sold under this program as of the filing date.
- Debt Obligations: The Company holds a $5 million term loan from Fortis Bank (interest rate 8.75% as of reporting date), secured by substantially all company assets and personal guarantees from directors. Principal payments of $92,728 were made in the quarter.
- Customer Concentration: Three major partners accounted for approximately 38.44% of total revenue for the quarter. Partner A alone contributed 33.92% of revenue.
- Risk Factors: The Company notes risks related to market acceptance of SD-WAN solutions, competition, reliance on key customers, and the impact of foreign exchange rates on its India operations. As an emerging growth company, it may delay adoption of certain new accounting standards.
Investor Verification Checklist
- Revenue Quality: Verify the sustainability of the 47.9% product revenue growth and the timing of large contract receivables ($24M total).
- Tax Benefit Sustainability: Confirm the extent of remaining net operating loss (NOL) carryforwards, as the current quarter's net income was significantly boosted by a discrete tax benefit.
- Cash Burn: Monitor the negative operating cash flow ($679k) against the $4.3M cash balance to assess runway without further capital raises.
- Customer Concentration: Assess the risk associated with Partner A contributing nearly 34% of quarterly revenue.
- Debt Servicing: Review the impact of the 8.75% interest rate on the $4.5M debt balance on future profitability.