Company: ZRCN
Filing Date: 2025-09-10
Form Type: 10-K
Source: 0001641172-25-027037
Chunk: 289

Company: ZRCN Inc.
Filing Date: 2025-09-10
Form: 10-K
Item: Item 1A
Chunk 289
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2025 AND 2024

The
Credit Agreement bears interest measured by such outstanding amounts on receivable advances and inventory advances that accrue interest
at the greater of 5.25% per annum or 3.00% above the base rate. Interest is charged on the last day of each month on a daily net balance
of funds advanced or otherwise charged to the Company.

The
Credit Agreement requires the Company to comply with a maximum total net leverage of $15.0 million and a minimum fixed charge coverage
ratio of 1.10. As of March 31, 2025, the Company was not in compliance with the fixed charge coverage ratio and is working with the lender
to obtain a waiver. See Note 17.

The
Company recognized deferred financing costs of approximately $0.3 million for bank fees which will be amortized over three years and
recorded as interest expense. For the year ended March 31, 2025, the Company recognized approximately $0.1 million as interest expense
for the amortization of deferred financing costs. For the years ended March 31, 2025 and 2024, interest expense on the line of credit
totaled $0.8 million and $0.7 million, respectively.

Notes
payable to Stauss Family Administrative Trust

The
Company has notes payable to the Stauss Family Administrative Trust to repay loans made to the Company. As of March 31, 2025, the
outstanding principal balance was approximately $0.7 million.
Under the original terms of the agreement, the note was due and payable in December 2025 with interest accruing at 5.5%
per annum, which was to be paid quarterly and is included in accrued expenses. The entire principal balance of $0.7
million and the accrued interest of
approximately $9,000 will now be due and payable on December
31, 2027. The note is subordinated to the Credit Agreement and no payment is to be made on the note without prior approval
from the lender.

On
March 27, 2025, the Board of Directors of Zircon Corporation and the Stauss Family Administrative Trust agreed to extend the maturity
dates of both promissory notes to December 31, 2027. There was no change to the principal amount or the annual interest rate.

For
the years ended March 31, 2025 and 2024 the interest expense on the notes payable to the Stauss