FATN 10-K & 10-Q changes, risk factors and insider trading

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. WeTo 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 qualified partners.

Dr. Bhaskar and Ms. Datta are the primary inventors of our Company’s technology and have been instrumental in developing key partnerships. While our management team also supports the continuing operations, our two founders continue to play a key role in the company and in developing new ideas and building new partnerships. FatPipe is developing middle management to help reduce senior management risk.

Although we have a channel sales model, sales in our industry are complex and members of our sales organization often engage in direct interaction with our prospective end-customers, particularly for larger deals involving larger end-customers. Therefore, we continue to be substantially dependent on our sales organization to obtain new end-customers and sell additional software solutions and services to our existing end-customers. There is significant competition for sales personnel with the skills and technical knowledge that we require, including experienced enterprise sales employees and others. Our ability to grow our revenue depends, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth and on the effectiveness of our sales strategy, sales execution, and sales personnel selling successfully in different contexts, each of which has its own different complexities, approaches and competitive landscapes, such as managing and growing the channel business for sales to small businesses and more actively selling to the end-customer for sales to larger organizations. New hires require substantial training and may take significant time before they achieve full productivity. Our recent hires and planned hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the markets where we do business or plan to do business. Furthermore, hiring sales personnel in new countries requires additional setup and upfront costs that we may not recover if the sales personnel fail to achieve full productivity. IfSales oureffectiveness saleshas employeesa doramp notup becomeperiod fullywhich productivewe must carefully account for before we see full impact on theadditional timelinesheadcount that we have projected, our revenue may not increase at anticipatedrevenues. levels and our ability to achieve long-term projections may be negatively impacted. If we are unable to hire and train sufficient numbers of effective sales personnel, the sales personnel are not successful in obtaining new end-customers or increasing sales to our existing customer base or sales personnel do not effectively sell our Enhanced Platform Technology software solutions, our business, operating results and prospects may be adversely affected. If we do not hire properly qualified and effective sales employees and organize our sales team effectively to capture the opportunities in the various customer segments we are targeting, our growth and ability to effectively support growth may be harmed.

As of March 31, 2025,2026, we incurred an aggregate of $5,000,000$4.6 million of indebtedness outstanding under the Fortis Bank replacement loan.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes to the consolidated financial statementsthereto included elsewhere in this prospectus.Annual Report. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “Special Note Regarding Forward-Looking Statements” and “Risk Factors” and those included elsewhere in this prospectus.Annual Report.

FatPipe is a pioneer in enterprise-grade, application-aware, secure SD-WAN solutions for organizations, including enterprises, communication service providers, security service providers, government organizations, and other middle-market companies. FatPipe also develops FatPipe Total Security 360, a comprehensive cybersecurity and Security Information and Event Management product. FatPipe announced this solution in April 2025. We sell our software solutions to a diverse group of end-users predominately on a subscription basis, and rely on our network of distributors, value-added resellers, ISPs, and other third parties for distribution. We typically maintain a contractual relationship directly with the end-user customer and provide product deployment and ongoing support. We sell our products in the U.S. and South Asia.

FatPipe derives its revenues from the sale of its software solutions and services, which include an integrated suite of SD-WAN, security and network management capabilities. These solutions are delivered to customers on commodity network servers, or virtually for deployment in public, private or hybrid cloud environments. Revenues are reported net of marketing development funds provided to our distribution partners for sales and marketing support. FatPipe Technologies, FatPipe’s subsidiary andour consulting group,subsidiary, generally provides consulting, staffing, and engineering services on a project basis.

TheOur Company launched software licenses that resulted in increased market acceptance and accelerated revenue growth. Our customer contracts generally range from 36 –to 60 months and are typically billed on a monthly basis; however, the accounting treatment varies based on the nature of the service. The majority of our revenue is recognized at a point-in-time once the software solution has been delivered or ownership has been transferred, and our performance obligations have been satisfied. For clarity, theThe Company delivers software licenses licenses that are valid for the duration of the contract term (i.e., 36-60 months) along with the product. Therefore, the Company recognizes the the software license revenue at the time of delivery or transfer of control. At that point, the performance obligation for the software license has been satisfied. The contract value is recorded as contracts receivable and is transferred to accounts receivablesreceivable upon invoicing the customer. The Company’s contracts receivable is classified as accounts receivable when the Company’s right to consideration becomes unconditional. The remaining obligation of the contract value is recorded as contract liability. Our deferred revenue consists of the amounts from the service portion of the contract and is amortized pro-rata over the term of the service agreement. For further details on our revenue recognition policies, please refer to theNote notes1 to the consolidated financial statements incorporated in this document.statements.

Our operating expenses consist of marketingsales and salesmarketing (“S&M&S”) expense, general and administrative (“G&A”) expense, expenseproduct development expense, and product developmentemployee and expense.cost. Historically, we have not capitalized any material portion of our product development expense. expense,The Company’s 2024 Equity Incentive Plan was adopted by the Board in connection with our initial public offering and we do notprovides have afor stock-based compensation plan in place for our employees.compensation.

MarketingSales and SalesMarketing Expense

MarketingSales and salesmarketing expenses include the costs associated with our sales and product marketing professionals and marketing expenses in support of our distribution partners and direct sales efforts. We incur expenses for such activities as co-marketing, trade show support, travel, promotional materials, and product training. Following our initial public offering, we have substantially expanded our sales organization, which has driven incremental sales and marketing expense in the current fiscal year.

Our G&A expenses primarily include the direct costs associated with corporate functions such as accounting, human resources, administrative support, legal and professional fees, and rent and provisions for bad debt. Additionally, intangible charges, such as depreciation and amortization expenses, are included in G&A. Depreciation and amortization expenses are primarily related to the amortization of our intellectual property and capitalized leases. WeFollowing expectour thatinitial public offering, we have incurred increased G&A expenses will increase in absolute dollars as we hire additionalassociated personnel, improve our information technology infrastructure, and incur other costs for the compliance requirements ofwith operating as a public company.company, including legal, audit, investor relations, listing, transfer agent, and director and officer insurance costs.

FatPipe invests in ongoing research and development as a core component of its product innovation. These expenses consist primarily of the direct costs of engineers and technicians who design and test our highly complex software solutions. We record all research and development R&D expenses as incurred. Our research and development teams are primarily located at our main offices in Salt Lake City, Utah and Chennai, Chennai, India.

For the yearyears ended March 31, 20252026 and March 31, 20242025

The following table sets forforth our results of operations for the years ended March 31, 20252026 and 20242025:

Comparison of for the Years Ended March 31, 20232026 and 20242025

In the fiscal year ended March 31, 2025,2026, our cost of revenue was $1,061,647,$1,728,384, aan decreaseincrease of $7,927,$666,737, or 0.74%62.8%, from the fiscal year ended March 31, 2024. Cost of revenue decreased as hardware product costs were lower.2025. The increase in cost of revenue includesreflects higher variable hardware costs associated with providingincreased product unit shipments servicesto tosupport the expansion of our customers,customer suchbase, as well as additional personnel costs associated with hostingin our cloudcustomer services.support and implementation organizations.

In the fiscal year ended March 31, 2025,2026, our gross profit was $15,227,234$17,479,910, aan decreaseincrease of $1,564,101$2,252,676, or 9%,14.8%, from the fiscal year ended March March 31, 2024.2025. Gross margin was approximately 91.0% in the current fiscal year compared to 93.5% in the prior fiscal year. The decrease in gross profitmargin reflects a decrease in net revenue as well asthe higher proportion of cost of revenue relative to revenue growth, primarily attributable to product mix and increased hardwarecustomer productsupport costs.headcount.

MarketingSales and SalesMarketing Expense

InSales and marketing expense in the fiscal year ended March 31, 2025, our marketing and sales expense2026 was $3,753,948,$4,791,906, an increase of $357,812,$1,037,958, or 10.5%,27.6%, compared to the prior fiscal year. This was primarily due to anThe increase inreflects staff,continued advertising and other promotional effortsinvestment in theour fiscalsales yearorganization, including a substantially expanded sales team, in endedsupport Marchof 2025.pipeline growth following our initial public offering.

Product development expense in the fiscal year ended March 31, 2025,2026 was $1,787,128$1,905,042, an increase of $49,540$117,914, or 3%6.6%, compared to the prior fiscal year, as the Company continued its development plans for its cybersecurity products.products and platform integration features.

Employee Cost Expense

Employee cost expenses in the fiscal year ended March 31, 2025,2026 werewas $2,791,816,$2,433,939, a decrease of $75,544$357,877, or a 3% decrease12.8%, compared to the prior fiscal year. The decrease decreaseprimarily reflects shifts in employeethe costallocation expenseof ispersonnel attributablecosts toacross functional categories and a reduced headcount in certain support functions following the decreasecompletion of public-company readiness activities in professionalthe servicesprior revenues.year.

Depreciation and amortization expense in the fiscal year ended March 31, 20252026 was $545,709,$369,249, a decrease of $153,548,$176,460, or 22%,32.3%, compared to $545,709 in the prior fiscal year. The decrease primarily reflects the continued amortization of patent costs against a smaller remaining basis. These expenses are categorized underwithin general and administrative expenses.

Interest income during the fiscal year ended March 31, 20252026 was $42,688, an increase of $15,427,$125,185, compared to $42,688 in the prior fiscal year. This increase wasyear, primarily duereflecting tointerest earned an increase inon the interestCompany’s ratesexpanded oncash cash.balances following the initial public offering.

Other income during the fiscal year ended March 31, 20252026 was $1,831, a decrease of 205,830, or 99%,nil, compared to $1,831 in the prior fiscal year due to recovery of receivables originally set aside as potential bad debt in 2024.year.

Interest expense during the fiscal year ended March 31, 20252026 was $329,892, an increase of $27,768, or 9%,$475,071, compared to $329,892 in the prior fiscal year. This The increase wasreflects a duefull toyear of interest on the higherFortis Bank term loan obtained in March 2025, which carries a Prime Rate plus 1% interest rates and the increase in the debt balance.rate.

The foreign exchange gain/(loss) in the fiscal year ended March 31, 2026 was $246,874, compared to $101,383 in the prior fiscal year, and results from currency conversion from U.S. dollars to Indian rupees.rupees and is associated with our India subsidiary.

We believe we have sufficient sources of funding to meet our business requirements and plans for the next 12 months and in the longer term. Cash generated by operationsoperations, our cash balances (which were materially increased by net proceeds of approximately $3,935,522 received in our April 2025 initial public offering, including partial exercise of the underwriters’ over-allotment option), and athe creditFortis Bank lineterm loan, are our primary sourcesources of liquidity for funding our strategic business requirements.

To fund our cash requirements in the ordinary course of business, we anticipate that we will continue to primarily rely on operating cash cash flows, supplemented by our total cash and cash equivalents, together with the cash raised from the public offering of our common stock conducted in April 2025.equivalents. Our capital requirements, including but not limited to, servicing our lease obligations and fixed asset purchases, will depend on many factors, including our growth rate and the timing and extent of operating expenses.

As the companyCompany expands in the India and South Asian market, the Company can expect a lower gross margin from sales in that cost sensitivecost-sensitive region. Further, the impact on margins will be offset by lower costs of sales, as the wages in that region are also lower than in the U.S. Also, general economic conditions, the demand for the Company’s offerings andAs changes in customer preferences in the future may have an impact on the revenue and income. In the future as the Company exhausts its Net OperatingU.S. Lossesnet operating losses from theprior past,periods, it will be expectedexpects to paybegin paying additional U.S. income taxes.taxes in future periods.

On January 25, 2023, the Company entered into a three-year term loan with Celtic Bank Corporation that was secured by substantially all assets of the Company, with a corporate guarantee given by our subsidiary FatPipe Networks Private Limited. The Company received $2.5 million of the $5 million loan sanctioned by the bank. In November 2024, the Company received an additional $500,000 in proceeds under that arrangement. In March 2025, the Company obtained a $5 million term loan from Fortis Bank, of which $3 million was used to repay an the outstanding loanCeltic from the bank loan noted above.loan. The Fortis Bank loan is repayable in 120 equal monthly installments commencing from March 1, 2025 and thebears interest interest is charged at the Prime Rate plus 1%. The “Prime Rate” is the Prime Rate in effect on the first business day of the month (as published in the Wall Street Journal newspaper) in which SBA received the application, or the first day of the month in which any interest rate change occurs. The interest rate will beis adjusted every calendar quarter (thebeginning “change period”) beginning April 1, 2025 (date of first rate adjustment). The interest rate works out to 8.75% as on the reporting date.2025. The loan is secured by substantially substantially all assetsof the Company’s assets, certain personal property of directors of the Company, certain personal properties of Directors of the Company, along with a personal guarantee given by themthem, and a Trust, Trust where the directors are trustees. During the year ended March 31, 2025,2026, the Company made principal payments totaling $27,913. $347,083.

On June 15, 2023, the Company received an interest freeinterest-free loan of $120,000 from Stay in Business Inc., a related party, repayable on demand. During the year ended March 31, 2025, the Company received an additional $13,652 under the same arrangement. During the fiscal year ended March 31, 2026, the Company repaid the entire outstanding balance of $133,652 under this arrangement, and no balance was outstanding as of March 31, 2026.

The following table sets forth certain combined statements ofour cash flow dataactivities for the years ended March 31, 2026 and 2025:

Net cash used in investing activities in the fiscal year ended March 31, 2025,2026 was $19,762, an increase of $574$52,483, compared to $19,762 in the prior fiscal year. yearThe duechange reflects increased purchases of computer equipment and office equipment to highersupport investmentheadcount ingrowth facilities.following the initial public offering.

In addition to our financial results determined in accordance with the generally accepted accounting principles in the United States (“GAAP”), our management uses earnings before interest, taxes, depreciation, and amortization expenses to net income (“EBITDA”), aadjusted EBITDA, Non-GAAP Net Income, and Non-GAAP Earnings Per Share, non-GAAP non-GAAP measure,measures, as a key measuremeasures in operating our business. We use EBITDAthese measures to make strategic decisions, establish business plans and forecasts, identify trends affecting our business, and evaluate performance. For example, we useEBITDA, adjusted EBITDAEBITDA, asNon-GAAP aNet measureIncome, ofand our operatingNon-GAAP performance.Earnings AdjustedPer EBITDAShare isare presented for supplemental informational purposes only, should not be considered a substitute for, or a more meaningful measure than, financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided below for adjusted EBITDAEBITDA, Non-GAAP Net Income, and Non-GAAP Net Income Per Share to the most directly comparable financial measure presented in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of adjusted EBITDA to its most directly comparable GAAP financial measure.

In the fiscal year ended March 31, 2025,2026, our adjusted EBITDA decreasedincreased by $2,320,129approximately $1,375,601, or 34.2%, compared to the prior fiscal year year, primarily due to a decreaserevenue ingrowth of approximately 18% combined with disciplined operating incomeexpense management, partially offset by increased operating expenses related to public company costs and increasesales inorganization IPO-related expenses.expansion.

FatpipeFatPipe Annualannual and Monthlymonthly Recurringrecurring billings from products and services in 2025,fiscal year 2026, excluding consulting servicesservices, increased by 23%.approximately 14% compared to the prior fiscal year. This reflects the continuing billings for existing customers as well as new business. InWe fiscal year 2023-24, the growth was 14% Weexpect expect this growth in recurring billings to continue as our sales staff, existingincluding andnewly newadded hires,headcount, continue to book new contracts as well as renewals of 36 month36-month contracts fromcoming 2022due, and as theyour comenewly due. The addition of the newintroduced cybersecurity productofferings is expectedcontribute to add to the new revenues and recurring billings going forwardforward.

On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance for credit losses on accounts receivable and contracts receivable, intangible assets, defined benefit obligations, and deferred taxes. We base our estimates, assumptions and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may materially differ from the results implied by these estimates and judgments under different assumptions or conditions.

Except with respect to the Company’s on-going liquidity needs, thereThere were no material changes in the risk factors we previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025,2026, filed with the SEC on JuneMay 30,18, 2025.2026.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. This discussion and analysis containcontains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note Regarding Forward-Looking Statements” below. We have no obligation to update any of these forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements due to many factors, including, but not limited to, those set forth under the heading “Risk Factors” in this Quarterly Report. Factors that could cause or contribute to such differences include, but are not limited to, capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Quarterly Report.

FatPipe is a pioneer in enterprise-class, application-aware, secure SD-WAN and cybersecurity solutions for organizations, including enterprises, communication 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 and cybersecurity 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 and to ensure our customers have greater control of security in their network operations through our full cybersecurity offering suite.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, NMS, and single-stack CybersecurityNMS software solutions, each of which is typically offered to our customers as a subscription service. These network solutions address a broad set of network management needs and include an integrated set of capabilities designed to manage multi-line network traffic and routing. 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 solutions address a broad set of cybersecurity management needs and include integrated software functions such as firewalling, intrusion detection and prevention, content filtering, and secure VPN connectivity. These tools are designed to protect network traffic traversing across multiple WAN links and cloud environments, providing consistent security enforcement at the edge and core of the network. By combining these capabilities within the same software stack as its network management offerings, FatPipe enables enterprises to monitor, control, and secure data flows across hybrid infrastructures, supporting continuous protection of applications and users while maintaining network performance and reliability.

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 CybersecurityNMS 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. 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 a customer’s cybersecurity requirements from a single vendor.NMS.

For the Three Months Ended DecemberJune 31,30, 20252026 and 20242025

In the three months ended DecemberJune 31,30, 2025,2026, our cost of revenue was $503,816,$390,062, an increase of $123,946,$163,128, or 33%,71.9%, from the prior period ended endedJune December30, 31, 2024.2025. Cost of revenue increased asin costsline ofwith inputshigher increasedproduct duesales to macroeconomic factors.volumes. The cost of revenue includes costs associated with providing services to our customers, such as costs associated with hosting our cloud services.

In the three months ended DecemberJune 31,30, 2025,2026, our gross profit was $3,583,970$4,641,476, an increase of $815,163,$932,487, or 29%,25.1%, from the prior period. The increase increase in gross profit wasreflects primarilyan dueincrease to a higherin net revenue as well as lower cost of revenue.

Our gross margin remaineddecreased consistentto at 88%92.2% in the three months ended DecemberJune 31,30, 2025,2026 comparedfrom to94.2% in the prior period.period, reflecting a higher proportion of product sales.

In the three months ended DecemberJune 31,30, 2025,2026, our sales and marketing expense was $1,282,706,$1,355,250, an increase of $394,160,$303,585, or 44%,28.9%, compared to the prior period. This was primarily due to anincreased increaseadvertising inand salarypromotional expenses as FatPipe invested in scaling sales headcount across its sales divisionsefforts to investsupport in long-termrevenue growth. This use of funds was disclosed in the previously filed S-1.

In the three months ended DecemberJune 31,30, 2025,2026, our general and administrative expense was $828,350,$1,163,706, an increase of $254,444$576,707, or 98.2%, compared to the prior period. General and administrative expenses increasedperiod, primarily due to higher complianceprofessional costs,fees, offsetintra-year byprovisions overallon costcontract cutting viareceivables, automationand effortspublic-company inoperating 2025.costs.

Product development expense in the three months ended DecemberJune 31,30, 20252026 was $453,539,$527,045, an increase of $4,971$52,588, or 11.1%, compared to the prior period, as as the Company continued its development plans for its cybersecurity and satellite products. The Company has ramped up its product development in early 2025 following its April 2025 IPO.

Employee cost expenses in the three months ended DecemberJune 31,30, 20252026 were $616,955,$694,010, aan decreaseincrease of $56,004,$100,819, or 17.0%, compared to the prior period.period, attributable to headcount added to support revenue growth.

Depreciation and amortization expense in the three months ended DecemberJune 31,30, 20252026 was $102,837,$43,114, a decrease of $29,825,$48,843, compared to the prior period. These These expenses are categorized under general and administrative expenses.

Interest expenseincome during the three months ended DecemberJune 31,30, 20252026 was $104,072,$41,682 as compared to $118,081$5,799 in the prior fiscal year. The increase was due to higher loweraverage loancash amountbalances inand 2025.interest rates.

In March 2025, the Company obtained a $5 million term loan from Fortis Bank, of which $3 million was used to repay an outstanding loan from the bank loan noted above. The Fortis Bank loan is repayable in 120 equal monthly installments commencing from March 1, 2025 and the interest is charged at the Prime Rate plus 1%. The “Prime Rate” is the Prime Rate in effect on the first business day of the month (as published in the Wall Street Journal newspaper) in which SBA received the application, or the first day of the month in which any interest rate change occurs. The interest rate will be adjusted every calendar quarter (the “change period”) beginning April 1, 2025 (date of first rate adjustment). The interest rate works out to 8.75% as on the reporting date. The loan is secured by substantially all assets of the Company, certain personal properties of Directorsdirectors of the Company, along with a personal guarantee given by them and a Trust,trust, where the directors are trustees. During the ninethree months ended DecemberJune 31,30, 2025,2026, the Company made principal payments totaling $254,594.$92,728.

On June 15, 2023, the companyCompany received an interest freeinterest-free loan forof $120,000 from Stay in Business Inc., a related party, repayable on demand. During the year ended March 31, 2025, the Company received anAn additional loan of $13,652 was received under the same arrangement Duringduring the nine monthsyear ended DecemberMarch 31, 2025, the2026. The Company repaid the entire outstanding balance ofin full during the loan.fiscal year ended March 31, 2026, and there was no outstanding balance as of June 30, 2026 or March 31, 2026.

Net cash provideused byin operating activities in the ninethree months ended DecemberJune 31,30, 20252026 was $132,132$679,047 compared to net cash used$508,604 in $314,150 in the prior period. The increase in cash provided by operating activitiesused was primarily due to stock based compensation expensegrowth in 2025.contracts receivable and inventory to support higher sales volumes, partially offset by higher net income.

Net cash used in investing activities in the ninethree months ended DecemberJune 31,30, 20252026 was $43,969$4,520 as compared to $12,748$42,449 in the prior period. Cash Cash used in investing activities was primarily due to the purchase of equipment.

In addition to our financial results determined in accordance with the generally accepted accounting principles in the United States (“GAAP”), our management uses adjusted earnings before interest, taxes, depreciation, and amortization expenses to net income (“Adjusted EBITDA”), a non-GAAP measure, as a key measure in operating our business. We use Adjusted EBITDA to make strategic decisions, establish business plans and forecasts, identify trends affecting our business, and evaluate performance. For example, we use adjustedAdjusted EBITDA as a measure of our operating performance. Adjusted EBITDA is presented for supplemental informational purposes only, should not be considered a substitute for, or a more meaningful measure than, financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided below for adjustedAdjusted EBITDA to the most directly comparable financial measure presented in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of adjustedAdjusted EBITDA to its most directly comparable GAAP financial measure.

Net income for In the three months ended DecemberJune 31,30, 20252026, our Adjusted EBITDA was $310,662,$1,287,426, an increase of $192,793 compared to $84,372$1,094,633 forin the threeprior fiscal monthsyear, ended December 31, 2024, primarily due to higher revenues inand operating income and the 2025add-back period.of stock-based compensation.