Company: ZRCN
Filing Date: 2025-09-10
Form Type: 10-K
Source: 0001641172-25-027037
Chunk: 799

Company: ZRCN Inc.
Filing Date: 2025-09-10
Form: 10-K
Item: Item 7
Chunk 799
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, Zircon provides materials, technical assistance, and expertise to the contractor, and the contractor assembles
certain of Zircon’s products. Zircon paid the contractor for costs incurred in manufacturing Zircon’s products, as defined
in the contract, plus a profit percentage of approximately 5% of actual cost during the 12-month periods ended March 31, 2025, and 2024.
Total payments including the profit percentage amounted to $3.1 million and $3.0 million for the 12month periods ended March 31, 2025
and 2024, respectively.

Zircon
has a note payable to the contractor. The note was established for the purpose of reducing the payable balance and to satisfy the company’s
lender’s requirements. During the period December 31, 2021, Zircon increased the borrowings by $0.4 million to reduce the payable
balance and to control the timing of the expected cash payments. The outstanding loan balance on December 31, 2022, was at $0.8 million.
The note bears interest at the current Federal funds rate not to exceed 5% and is limited to an increase of no more than 2% annually.
The entire principal balance is due and payable in December 2024 and is subordinated to the line of credit agreement the company has
with the bank. On March 27, 2025 the maturity date for both notes was extended to December 31, 2027.

In
September 2017, an affiliated company, Zircon Corporation Limited, was established in the United Kingdom to facilitate the sale of Zircon’s
products to European customers and operations began during the year ended March 31, 2019. The ownership structure of the affiliate is
similar to the ownership of Zircon. The company pays certain administrative and selling expenses of the affiliate. During the 12-month
periods ended March 31, 2025, and 2024, the company recorded sales to the affiliate of approximately $35,000 and $35,000, respectively.
As of December 31, 2025, and 2024, the company had a receivable from the affiliate of approximately $0.1 million and $0.1 million, respectively.

Notes
Payable

The
Company has notes payable to the Stauss Family Administrative Trust to repay loans made to the Company. As of March 31, 2025, the principal
balance of approximately $0