Company: ZRCN
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001493152-25-006748
Chunk: 39

Company: ZRCN Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Item 8
Chunk 39
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 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 the premerger ownership of Zircon.

The
Company leases from the Stauss Family Administrative Trust a 14,000 square foot facility owned by the Trust.

The
Company has notes payable to the Stauss Family Administrative Trust to repay loans made to the Company. As of March 31, 2024, principal
balance of $0.7 million is due and payable in December 2025. Interest accrued at 5.5% per annum is paid quarterly and included in accrued
expenses. The note is subordinated to the line of credit note payable to the bank and no payment is to be made on the note without prior
approval from the bank. In the second quarter of 2023, a portion of the note payable to Stauss Family Administrative Trust was settled
as a non-cash transaction against the note receivable from one stockholder for $0.2 million. For the three and nine months ended December
31, 2024, the interest expense on notes payable to the Stauss Family Administrative Trust totaled less than $0.1 million, respectively.

For
the three and nine months ended December 31, 2023, the interest expense on notes payable to the Stauss Family Administrative Trust totaled
less than $0.1 million, respectively.

On
March 31, 2024 the Stauss Family Administrative Trust and the Company agreed to extend the maturity date of the Notes Payable to the
trust to December 31, 2025.

During
the nine months ended December 31, 2024, the Company made a distribution of $0.7 million to certain related party shareholders and one
director shareholder for taxes due resulting from the Company converting from an S corporation to a C corporation. $0.3 million of this
distribution was in cash and the remaining $0.4 million is recorded in accrued expenses on the balance sheet. During October 2024 the
Company made a cash distribution of approximately $0.4 million to settle the remaining liability.

Off-Balance
Sheet Arrangements

ZRCN
has no off-balance sheet arrangements.

Estimates,
Judgments and Assumptions

ZRCN
prepares its consolidated financial statements