Company: ZRCN
Filing Date: 2025-09-10
Form Type: 10-K
Source: 0001641172-25-027037
Chunk: 590

Company: ZRCN Inc.
Filing Date: 2025-09-10
Form: 10-K
Item: Item 3
Chunk 590
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N Inc.) upon the closing of the Merger. Under this method of accounting, Harmony was treated as the
“acquired” company and Zircon is treated as the acquirer for financial reporting purposes.

Accordingly,
for accounting purposes, the Merger was treated as the equivalent of Zircon issuing stock for the net assets of Harmony, accompanied
by a recapitalization. The net assets of Harmony were stated at historical cost, with no goodwill or other intangible assets recorded.

2.
Liquidity

As
of March 31, 2025, the Company had $1.4 million in cash and working capital of $3.5 million. To date, ZRCN has been financed primarily
through secured loans and a revolving line of credit. The
Company’s line of credit expires on May 31, 2027 (Note 10).
The line of credit is secured by accounts receivable, inventory and fixed assets. 

We
do not believe our existing cash and cash equivalents along with borrowing capacity from our current lender will be sufficient to
meet our anticipated cash needs over the next 12 months. The Company has incurred losses and anticipates that existing cash and
available credit may not be sufficient to meet its operating and debt service needs for the next 12 months. As of March 31, 2025,
the Company is not in compliance with its Credit Agreement covenants and is operating under a forbearance agreement. These
conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing
options to improve liquidity, including negotiating waivers or amendments to existing debt covenants  (Note 16), reducing discretionary
spending, and evaluating potential capital raises. While these plans are intended to mitigate the risk, there can be no assurance
that they will be successful in eliminating the substantial doubt.

3.
Summary of Significant Accounting Policies

Basis
of Presentation

The
accompanying consolidated financial statements of the Company are prepared on the accrual basis of accounting in accordance with accounting
principles generally accepted in the United States of America (GAAP). On this basis, revenue and the related assets are recognized when
services are performed and products are sold, and expenses and related liabilities are recorded when the obligation is incurred.

    F-6

ZRCN
Inc.

NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR
THE YEARS ENDED MARCH 31, 2025 AND 2024