Company: ZRCN
Filing Date: 2025-09-10
Form Type: 10-K
Source: 0001641172-25-027037
Chunk: 838

Company: ZRCN Inc.
Filing Date: 2025-09-10
Form: 10-K
Item: Item 7A
Chunk 838
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 Affiliates are guarantors of all
of the obligations under the Credit Agreement and the Company’s four principal shareholders are limited guarantors thereof.

The
Credit Agreement stipulates a base rate measured by the sum of Term SOFR for a period of one month, as published by the CME Group Benchmark
Administration Limited (or any successor administration of Term SOFR) two business days prior to the beginning of the calendar month
and a percentage equal to 0.10% (10 basis points) per annum. If at any time the displayed Term SOFR is less than 0.00%, Term SOFR is
deemed to be 0.00% for the purposes of the credit facility.

    F-20

ZRCN
                                            Inc.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED MARCH 31, 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