UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~June 3130, ~~2024~~2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission File Number: 000-56380

ZRCN INC.

(Exact name of registrant as specified in its charter)

Delaware		83-2756695
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1580 Dell Avenue Campbell, CA		95008
(Address of principal executive offices)		(Zip Code)

(408) 963-4550

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☐

Non-Accelerated filer	☒	Smaller Reporting Company	☒

		Emerging Growth Company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of ~~February~~March 149, ~~2025~~2026, 10,~~075~~385,~~264~~923 shares of common stock were issued and outstanding.

Securities registered pursuant to Section 12(b) of the Act: None

Forward-Looking Statements

This Current Report on Form 10-Q (the “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. The forward-looking statements are contained in this Report in some cases you can identify forward-looking statements by terminology such as “may”, “is expected to”, “anticipates”, “estimates”, “intends”, “plans”, “projection”, “could”, “vision”, “goals”, “objective” and “outlook” and similar expressions. These statements are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements, many of which are difficult to predict and generally beyond our control.

You should refer to “Risk Factors” of this Report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We do not undertake any obligation to update any forward-looking statements. Unless the context requires otherwise, references to “we,” “us,” “our,” and “Company,” refer to registrant, ZRCN Inc. (“ZRCN” - formerly known as Harmony Energy Technologies Corporation (“Harmony”)) and/or ZRCN’s wholly owned subsidiary, Zircon Corporation (“Zircon”).

Our forward-looking statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual future results, performance, or achievements to differ materially from any future results expressed or implied in this Report. Reported results should not be considered an indication of future performance.

Because some of these risks and uncertainties cannot be predicted or quantified and some are beyond our control, you should not rely on our forward-looking statements as predictions of future events. More information about potential risks and uncertainties that could affect our business and financial results is included in the section of this ~~Annual~~Quarterly Report titled “Risk Factors” and our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available on the SEC’s web site at www.sec.gov. Moreover, we operate in a very competitive and rapidly changing environment; new risks and uncertainties may emerge from time to time, and it is not possible for us to predict all risks nor identify all uncertainties. The events and circumstances reflected in our forward-looking statements might not be achieved and actual results could differ materially from those projected in the forward-looking statements. Except as otherwise noted, all forward-looking statements are made as of the date we file this Report, and are based on information and estimates available to us at this time. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Except as required by law, we assume no obligation to update any of the statements in this Report whether as a result of any new information, future events, changed circumstances, or otherwise. You should read this Report with the understanding that our actual future results, performance, events, and circumstances might be materially different from what we expect.

Table of Contents

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of December 31, 2024 (Unaudited) and March 31, 2024	3
	Consolidated Balance Sheets as of June 30, 2025 (Unaudited) and March 31, 2025	3
	Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended December 31, 2024 and 2023 (Unaudited)	4
	Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended June 30, 2025 and 2024 (Unaudited)	4
	Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended December 31, 2024 and 2023 (Unaudited)	5
	Consolidated Statements of Changes in Shareholders’ Equity for the three months ended June 30, 2025 and 2024 (Unaudited)	5
	Consolidated Statements of Cash Flows for the nine months ended December 31, 2024 and 2023 (Unaudited)	7
	Consolidated Statements of Cash Flows for the three months ended June 30, 2025 and 2024 (Unaudited)	6
	Condensed Notes to the Unaudited Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2522
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3127
Item 4.	Controls and Procedures	3227
PART II	OTHER INFORMATION	29
Item 1.	Legal Proceedings	3329
Item 1A.	Risk Factors	3329
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3329
Item 3.	Defaults Upon Senior Securities	3329
Item 4.	Mine Safety Disclosures	3329
Item 5.	Other Information	3329
Item 6.	Exhibits	3430
SIGNATURES		3531

PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements.

ZRCN Inc.

~~CONSOLIDATED~~CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share ~~and per share~~ data)

	December 31, 2024			March 31, 2024
	(Unaudited)			(Audited)
ASSETS
Current assets:
Cash	$	1,870		$	502
Accounts receivable, net of provision for credit losses of $133 and $14, respectively		6,922			8,644
Inventory, net		12,887			14,057
Prepaid expenses and other assets		420			335
Total current assets		22,099			23,538
Property and equipment, net		1,740			1,803
Deferred tax asset		499			499
Operating lease right-of-use assets		610			751
Federal tax deposit		279			213
Intangible assets, net		715			792
Deposits		19			19
Deferred financing costs		263			—
Total assets	$	26,224		$	27,615
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		5,755			7,050
Accrued expenses		1,941			2,130
Operating lease liability, current		209			195
Notes payable, current portion		—			75
Notes payable to Stauss Family Administrative Trust, current portion		667			—
Notes payable, current portion		667			—
Total current liabilities		8,572			9,450
Line of credit		8,964			8,026
Notes payable to Stauss Family Administrative Trust, net of current portion		—			667
Operating lease liability, net of current portion		427			545
Total liabilities		17,963			18,688
Commitments and Contingencies (Note 14)		-			-
Stockholders’ equity:
Common stock; at $0.0001 par value, 200,000,000 shares authorized, 10,075,264 and 10,016,936 shares issued and outstanding as of December 31, 2024 and March 31, 2024, respectively		1			1
Additional paid-in capital		89			—
Accumulated other comprehensive loss		(214	)		(187	)
Retained earnings		6,793			7,421
Total equity attributable to ZRCN Inc. stockholders		6,669			7,235
Non-controlling interests in variable interest entities		1,592			1,692
Total stockholders’ equity		8,261			8,927
Total liabilities and stockholders’ equity	$	26,224		$	27,615

(Unaudited)

	June 30, 2025			March 31, 2025
					Audited
ASSETS
Current assets:
Cash	$	655		$	1,407
Accounts receivable, net of provision for credit losses of $39 and $53, respectively		5,814			6,102
Inventory, net		11,533			12,456
Prepaid expenses and other assets		257			294
Total current assets		18,259			20,259

Property and equipment, net		1,535			1,594
Operating lease right-of-use assets		505			558
Federal tax deposit		28			28
Intangible assets, net		664			684
Deposits		19			19
Deferred financing costs		208			236
Total assets	$	21,218		$	23,378

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	7,719		$	8,413
Accounts payable		6,640			6,453
Accrued expenses		1,861			1,720
Operating lease liability, current		216			213
Total current liabilities		16,436			16,799

Operating lease liability, net of current portion		317			373
Notes payable to Stauss Family Administrative Trust, net of current portion		667			676
Total liabilities		17,420			17,848

Commitments and Contingencies (Note 13)		-			-

Stockholders’ equity:
Common stock; at $0.0001 par value, 200,000,000 shares authorized, 10,333,425 and 10,306,426 shares issued and outstanding as of June 30, 2025 and March 31, 2025, respectively		1			1
Additional paid-in capital		8,604			8,532
Accumulated other comprehensive loss		(217	)		(347	)
Accumulated deficit		(6,349	)		(4,297	)
Total equity attributable to ZRCN Inc. stockholders		2,039			3,889
Non-controlling interests in variable interest entities		1,759			1,641
Total stockholders’ equity		3,798			5,530
Total liabilities and stockholders’ equity	$	21,218		$	23,378

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ZRCN Inc.

~~CONSOLIDATED~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE ~~INCOME (~~LOSS)

(in thousands, except share ~~and per share~~ data)

(Unaudited)

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2025			2024
	2024			2023			2024			2023
	For the Three Months Ended June 30,
Net sales	$	7,236		$	7,539		$	22,409		$	23,368
	2025			2024
Cost of sales		4,208			4,485			13,024			12,980
Net sales	$	6,062		$	5,811
Gross profit		3,028			3,054			9,385			10,388
Cost of sales		4,684			3,460
Operating expenses:
Gross profit		1,378			2,351
General and administrative		1,715			1,510			5,201			4,899
Operating expenses:
Marketing and selling		1,332			1,176			3,340			3,351
General and administrative		1,447			1,461
Research and development		391			465			1,248			1,453
Marketing and selling		1,160			903
Total operating expenses		3,438			3,151			9,789			9,703
Research and development		411			425
(Loss) income from operations		(410	)		(97	)		(404	)		685
Total operating expenses		3,018			2,789
Other income (expenses):
Loss from operations		(1,640	)		(438	)
Other income		800			—			800			—
Other expenses:
Interest expense		(204	)		~~(229~~223	)		~~(630~~	)		~~(562~~	)
Other expenses		(78	)		~~(11~~7	)		~~(23~~	)		~~(30~~	)
(Gain) loss on foreign currency transactions		19			(52	)		184			(59	)
Loss (gain) on foreign currency transactions		64			(103	)
Total other income (expenses)		608			(292	)		331			(651	)
Total other expenses		276			127
Income (loss) before income taxes		198			(389	)		(73	)		34
Loss before income taxes		(1,916	)		(565	)
(Provision for) benefit from income taxes		(150	)		(23	)		4			(56	)
Income tax expense		(18	)		(21	)
Net income (loss)	$	48		$	(412	)	$	(69	)	$	(22	)
Net loss	$	(1,934	)	$	(586	)
Less: Net (loss) income attributable to non-controlling interests		(2	)		67			(100	)		(28	)
Less: Net loss (income) attributable to non-controlling interests		118			78
Net income (loss) attributable to ZRCN Inc. common stockholders	$	50		$	(479	)	$	31		$	6
Net loss attributable to ZRCN Inc. common stockholders	$	(2,052	)	$	(664	)
Net income (loss)	$	48		$	(412	)	$	(69	)	$	(22	)
Net loss	$	(1,934	)	$	(586	)
(Loss) gain on change in foreign currency translation adjustment		(19	)		(11	)		(27	)		89
Gain on change in foreign currency translation adjustment		130			117
Comprehensive (loss) gain		29			(423	)		(96	)		67
Comprehensive loss		(1,804	)		(469	)
Net (loss) income attributable to non-controlling interests		(2	)		67			(100	)		(28	)
Net loss (income) attributable to non-controlling interests		118			78
Other comprehensive income (loss) attributable to non-controlling interest		(19	)		(11	)		(27	)		89
Other comprehensive income attributable to non-controlling interest		130			117
Comprehensive income (loss) attributable to ZRCN common stockholders	$	50		$	(479	)	$	31		$	6
Comprehensive loss attributable to ZRCN common stockholders	$	(2,052	)	$	(664	)
Net income (loss) per share attributable to ZRCN Inc.:
Net loss per share attributable to ZRCN Inc.:
Basic	$	0.00		$	(0.05	)	$	0.00		$	0.00
Basic and diluted	$	(0.20	)	$	(0.07	)
Diluted		0.00		$	(0.05	)	$	0.00		$	0.00
Weighted average common shares outstanding:
Weighted average common shares outstanding:
Basic and diluted		10,328,623			10,029,436
Basic		10,050,265			9,948,272			10,006,385			9,475,858
Diluted		10,682,275			9,948,272			10,519,547			9,514,468

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ZRCN Inc.

~~CONSOLIDATED~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’' EQUITY

(in thousands, except share ~~and per share~~ data)

(Unaudited)

	Common Stock				Accumulated Other Comprehensive			Additional Paid-in			Retained			Total Equity Attributable			Non- controlling			Total Stockholders’
	Shares		Amount		Loss			Capital			Deficit			to ZRCN			Interests			Equity
	Shares		Amount		Loss			Capital			Earnings			to ZRCN			Interests			Equity
	Common Stock				Accumulated Other Comprehensive			Additional Paid-in			Accumulated			Total Equity Attributable			Non-controlling			Total Stockholders’
Balance - March 31, 2024		10,016,936	$	1	$	(187	)	$	—	-	$	7,421		$	7,235		$	1,692		$	8,927
	Shares		Amount		Loss			Capital			Deficit			to ZRCN			Interests			Equity
Stockholder distributions		—		—		—			—			(659	)		(659	)		—			(659	)
Balance - March 31, 2025		10,306,426	$	1	$	(347	)	$	8,532		$	(4,297	)	$	3,889		$	1,641		$	5,530
Gain on change in foreign currency translation adjustment		—		—		117			—			—			117			—			117
Change in foreign currency translation adjustment		—		—		130			—			—			130			—			130
Common stock issued for advisory services		2526,~~000~~999		—		—			405			—			405			—			405
Net (loss) income		—		—		—			—	-		(664	)		(664	)		78			(586	)
Share based compensation		—		—		—			67			—			67			—			67
Balance - June 30, 2024		10,041,936	$	1	$	(70	)	$	40	-	$	6,098		$	6,069		$	1,770		$	7,839
Net loss		—		—		—			—			(2,052	)		(2,052	)		118			(1,934	)
Loss on change in foreign currency translation adjustment		—		—		(125	)		—			—			(125	)		—			(125	)
Balance - June 30, 2025		10,333,425	$	1	$	(217	)	$	8,604		$	(6,349	)	$	2,039		$	1,759		$	3,798
Common stock issued for advisory services		8,329		—		—			7			—			7			—			7
Share based compensation		—		—		—			10						10			—			10
Net income (loss)		—		—		—			—	-		645			645			(176	)		469
Balance - September 30, 2024		10,050,265	$	1	$	(195	)	$	57	-	$	6,743		$	6,606		$	1,594		$	8,200
Loss on change in foreign currency translation adjustment		—		—		(19	)		—			—			(19	)		—			(19	)
Common stock issued for advisory services		24,999		—		—			18			—			18			—			18
Share based compensation		—		—		—			14			—			14			—			14
Net income (loss)		—		—		—			—	-		50			50			(2	)		48
Balance - December 31, 2024		10,075,264	$	1	$	(214	)	$	89	-	$	6,793			6,669		$	1,592		$	8,261

The accompanying notes are an integral part of these unaudited consolidated financial statements.

	Common Stock				Accumulated Other Comprehensive			Additional Paid-in		Retained			Total Equity Attributable			Non-controlling		Total Stockholders’
	Shares		Amount		Loss			Capital		Earnings			to ZRCN			Interests		Equity
Balance - March 31, 2024 - as reported		10,016,936	$	1	$	(187	)		—	$	7,421		$	7,235		$	1,692	$	8,927
Shareholder distributions (as revised)		—		—		—			—		(659	)		(659	)		—		(659	)
Balance - March 31, 2024 - as revised		10,016,936	$	1	$	(187	)		—	$	6,762		$	6,576		$	1,692	$	8,268
Balance		10,016,936	$	1	$	(187	)		—	$	6,762		$	6,576		$	1,692	$	8,268
Change in foreign currency translation adjustment		—		—		117			—		—			117			—		117
Common stock issued for advisory services		25,000		—		—			—		40			40			—		40
Net loss (income)		—		—					—		(664	)		(664	)		78		(586	)
Balance - June 30, 2024		10,041,936	$	1	$	(70	)	$	—	$	6,138		$	6,069		$	1,770	$	7,839
Balance		10,041,936	$	1	$	(70	)	$	—	$	6,138		$	6,069		$	1,770	$	7,839

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ZRCN Inc.

~~CONSOLIDATED~~CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES~~CASH ~~IN STOCKHOLDERS’ EQUITY~~FLOWS

(in thousands~~, except share and per share data~~)

(Unaudited)

	Common Stock						Accumulated Other Comprehensive			Note Receivable from			Retained			Total Equity Attributable			Non- controlling			Total Stockholders’
	2025			2024
	Shares			Amount			Income (Loss)			Stockholder			Earnings			to ZRCN			Interests			Equity
	For the Three Months Ended June 30,
Balance - March 31, 2023		500,000		$	—		$	16		$	(240	)	$	8,630		$	8,406		$	1,422		$	9,828
	2025			2024
Merger with Harmony		9,448,272			1			—			—			(1,099	)		(1,098	)		—			(1,098	)
CASH FLOWS FROM OPERATING ACTIVITIES:
Change in foreign currency translation adjustment		—			—			117			—			—			117			—			117
Net loss	$	(1,934	)	$	(586	)
Net loss		—			—						—			(383	)		(383	)		(83	)		(466	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Balance - June 30, 2023		9,948,272		$	1		$	133		$	(240	)	$	7,148		$	7,042		$	1,339		$	8,381
Depreciation expense		221			218
Change in foreign currency translation adjustment		—			—			(16	)		—			—			(16	)		—			(16	)
Amortization of intangible assets		21			29
Repayment of Note Receivable from Stockholder		—			—			—			240			—			240			—			240
Amortization of right-of-use assets		53			52
Net income (loss)		—			—			—			—			867			867			(13	)		854
Inventory obsolescence impairment		134			98
Balance - September 30, 2023		9,948,272		$	1		$	117		$	—		$	8,015		$	8,133		$	1,326		$	9,459
Recovery for credit losses		(14	)		(7	)
Balance		9,948,272		$	1		$	117		$	—		$	8,015		$	8,133		$	1,326		$	9,459
Amortization of financing costs		28			—
Change in foreign currency translation adjustment		—			—			(11	)		—			—			(11	)		—			(11	)
Share based compensation expense		67			—
Net income (loss)		—			—			—			—			(479	)		(479	)		67			(412	)
Common stock issued for advisory services		5			40
Balance - December 31, 2023		9,948,272		$	1		$	106		$	—		$	7,536		$	7,643		$	1,393		$	9,036
(Gain) loss on foreign currency transactions		—			(103	)
Balance		9,948,272		$	1		$	106		$	—		$	7,536		$	7,643		$	1,393		$	9,036
Changes in operating assets and liabilities:
Accounts receivable		303			2,806
Inventory		789			812
Prepaid expenses and other assets		38			(100	)
Deferred expenses		—			(326	)
Accounts payable		167			(1,823	)
Accrued expenses		133			(65	)
Operating lease liabilities		(53	)		(62	)
Net cash (used in) provided by operating activities		(42	)		983
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of intangible assets		(1	)		—
Purchase of property and equipment		(92	)		(285	)
Net cash used in investing activities		(93	)		(285	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of debt assumed in Harmony Merger		—			(75	)
Borrowing on line of credit		5,823			2,349
Repayment on line of credit		(6,517	)		(2,882	)
Stockholder distributions		—			(245	)
Net cash used in financing activities		(694	)		(853	)
Effect of exchange rate fluctuations on cash		77			27
Net decrease in cash		(752	)		(128	)
Cash at beginning of period		1,407			502
Cash at end of period	$	655		$	374
Supplemental disclosure of cash flow information:
Cash paid for interest	$	195		$	223
Cash paid for taxes	$	—		$	—

The accompanying condensed notes are an integral part of these unaudited condensed consolidated financial statements.

ZRCN Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	For the Nine Months Ended December 31,
	2024			2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(69	)	$	(22	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation expense		701			411
Amortization of intangible assets		79			62
Amortization of right-of-use assets		173			157
Increased reserves for obsolete inventory		130			—
Provision for credit losses		119			3
Amortization of financing costs		63			—
Share based compensation expense		24			—
Common stock issued for advisory services		65			—
(Gain) loss on foreign currency transactions		(184	)		59
Deferred tax asset		—			—
Changes in operating assets and liabilities:
Accounts receivable		1,593			393
Inventory		1,040			(727	)
Prepaid expenses and other assets		(102	)		174
Federal tax deposit		(66	)		(36	)
Deferred financing costs		(326	)		—
Accounts payable		(1,441	)		961
Accrued expenses		(37	)		(38	)
Operating lease liabilities		(136	)		(167	)
Net cash provided by operating activities		1,626			1,230
CASH FLOWS FROM INVESTING ACTIVITIES
Effect of Harmony Merger, net of cash acquired		—			(519	)
Investment in intangible assets		(3	)		(68	)
Purchase of property and equipment		(705	)		(628	)
Net cash used in investing activities		(708	)		(1,215	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable		—			(268	)
Repayment of debt assumed in Harmony Merger		(75	)		(317	)
Borrowing on line of credit		19,535			10,913
Repayment on line of credit		(18,597	)		(8,756	)
Stockholder distributions		(659	)		—
Net cash provided by financing activities		204			1,572
Effect of exchange rate fluctuations on cash		246			4
Net increase in cash		1,368			1,591
Cash at beginning of period		502			29
Cash at end of period	$	1,870		$	1,620
Supplemental disclosure of cash flow information:
Cash paid for interest	$	141		$	540
Cash paid for taxes	$	—		$	149
Noncash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liability	$	(32	)	$	—
Common stock issued in connection with Harmony merger	$	—		$	19
Fair value of Advisor Warrants issued to effectuate Harmony Merger	$	—		$	302
Assets acquired in Harmony Merger	$	—		$	1
Liabilities assumed in Harmony Merger	$	—		$	(579	)
Noncash settlement of Stauss note payable for settlement of note receivable from	$	—		$	240

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

1. Organization

The Business

Zircon Corporation (“Zircon”), ZRCN’s Inc. (“ZRCN” or the “Company”) wholly-owned subsidiary, was incorporated in California in 1977. The Company, through Zircon, is principally engaged in the design and manufacture of electronic-based consumer hardware and sells its products primarily to retail outlets located throughout the United States, Canada, Japan and Europe. The Company and Zircon operate from their headquarters located in Campbell, California and an affiliate entity of Zircon, Zircon de Mexico S.A. de C.V., located in Ensenada, Mexico. The operations of the Company and Zircon are supported also by an affiliated entity of Zircon, Zircon Corporation Limited, located in the United Kingdom.

On April 14, 2023 (the “Closing Date”), Zircon Corporation ~~(“Zircon”)~~ effectuated a merger and reorganization with Harmony Energy Technologies, Inc. (“Harmony”), a Delaware Corporation, ZRCN Inc., a California corporation and a wholly owned subsidiary of Harmony (the “Merger Sub”). The merger leverages Zircon’s sensor-based, ASIC (“Application-Specific Integrated Circuits”) processor technology and patent portfolio, to accelerate growth in its product lines and global markets as a publicly disclosed company, in accordance with the Securities Act of 1933 and the Exchange Act of 1934, both as amended. The combination of Harmony and Zircon was effectuated through a merger (the “Merger”) of Merger Sub into Zircon. The separate existence of Merger Sub ceased, and Merger Sub was merged with and into Zircon (Zircon, as the surviving corporation following the Merger). Upon completion of the Merger, Harmony changed its name to ZRCN Inc. (“ZRCN” or the “Company”). While Harmony was the legal acquirer of Zircon in the Merger, the Merger is treated as a reverse recapitalization, whereby Zircon is deemed to be the accounting acquirer, and the historical financial statements of Zircon became the historical financial statements of Harmony (renamed ZRCN 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,~~2. ~~for~~Liquidity ~~accounting~~and ~~purposes,~~Going 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.Concern

2As of June 30, 2025, the Company had $0.7 million in cash and working capital of $1.8 million. To date, ZRCN has been financed primarily ~~Liquidity~~through secured loans and a revolving line of credit. The Company has incurred recurring losses and believes that its existing cash resources are not sufficient to meet its anticipated cash needs over the next 12 months. As of June 30, 2025, the Company was not in compliance with certain covenants under its revolving credit facility with FGI Worldwide, LLC (“FGI”) and entered into a series of forbearance agreements with FGI. These conditions raised substantial doubt about the Company’s ability to continue as a going concern at that time.

AsFrom ofJuly ~~December~~2025 ~~31,~~through ~~2024~~March 2026, the Company ~~had~~and ~~$1.9~~FGI ~~million~~entered ininto ~~cash~~multiple ~~and~~forbearance ~~working~~agreements ~~capital~~and ofamendments ~~$13.5~~to ~~million.~~the ToCredit ~~date~~Agreement, which ~~ZRCN~~temporarily ~~has~~waived ~~been~~existing ~~financed~~covenant ~~primarily through~~defaults ~~retained~~and ~~earnings,~~imposed ~~secured~~additional ~~loans~~operational and areporting ~~revolving~~requirements ~~line~~while ofthe ~~credit. The~~ Company’s ~~line of credit was scheduled to expire on~~pursued ~~July~~strategic ~~31,~~and ~~2024~~financing ~~but~~alternatives. onManagement ~~May~~considered ~~31, 2024,~~ the ~~Company~~refinancing ~~entered~~and ~~into~~repayment aof ~~revolving~~the FGI credit ~~agreement~~facility ~~with~~subsequent ato ~~new~~the balance ~~lender~~sheet ~~that~~date ~~matures~~as onpart ~~May~~of ~~31,~~its ~~2027 (Note~~evaluation ~~10). The line~~ of ~~credit~~the ~~is secured by accounts receivable, inventory and fixed assets. The~~ Company’s ~~believes that it has sufficient~~ liquidity ~~to fund its operations~~ and ~~operating~~ability ~~capital~~to ~~needs~~continue ~~for the next 12 months~~ as ~~well~~a asgoing ~~meet its obligations as they become due in 2025~~concern.

On March 17, 2026 (the “Effective Date”), the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Altriarch Holdings SPV, LLC, as lender (“Lender”). The Loan Agreement provides for a $12.5 million senior secured revolving credit facility (the “Credit Facility”) available to be used by the Company and Zircon for, among other things, replacement and discharge of the Company’s current loan of $15.0 million with FGI Worldwide, LLC and the ability to increase its borrowings from the Lender for working capital purposes. As a result of this repayment, the Company has no continuing obligation to FGI under the former Credit Agreement.

The Loan Agreement matures on March 17, 2029 (the “Maturity Date”), subject to the right of the Debtor to request to extend the Maturity Date for up to an additional one (1) year period. Prior to the Maturity Date or an Event of Default, the interest rate shall be the lesser of (a) the Maximum Rate (as defined in the Loan Agreement), and (b) the 3-month term SOFR (as defined in the Loan Agreement) plus the 8.75%. Accrued and unpaid interest on the outstanding principal balance of Credit Facility shall be due and payable monthly commencing on April 14, 2026 and continuing on the tenth (10^th) Business Day of each month thereafter and on the Maturity Date.

So long as no Event of Default (as defined in the Loan Agreement) has occurred and is continuing, upon notice to Lender, Debtor may, request increases in the Credit Facility (each, a “Commitment Increase”) by an amount not exceeding Five Million Dollars ($5,000,000.00) in the aggregate; provided that (i) Debtor may make a maximum of two (2) such requests and (ii) Lender may grant or deny all or any portion of such Commitment Increase in its sole discretion.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2025 AND 2024

The Loan Agreement requires the Company to comply with maximum tangible net worth and minimum fixed charge coverage ratios. However, the lender has waived compliance with the financial covenants through August 31, 2026. In addition, the Credit Agreement contains other standard affirmative and negative covenants such as those which (subject to certain thresholds) limit the ability of the Company and its subsidiary and affiliates to, among other things, incur debt, incur liens, engage in any Change of Control (as defined in the Loan Agreement), enter into new lines of business not related to the Company’s current lines of business, make certain investments, issue equity securities, engage in transactions with affiliates, or prepay any debt without the approval of the Lender. Events of default under the Loan Agreement include, among other things, payment defaults, breaches of representations, warranties or covenants, defaults under material indebtedness, certain events of bankruptcy or insolvency, judgment defaults, certain defaults or events relating to employee benefit plans or a change in control of the Company. The events of default would permit the lender to terminate commitments and accelerate the maturity of borrowings under the Loan Agreement if not cured within applicable grace periods.

If the Loan Agreement is terminated by Debtor anytime prior to the first (1^st), second (2^nd) or third (3^rd) anniversary of the Effective Date (including without limitation as a result of acceleration of the outstanding balance of the Loan Agreement as a result of the occurrence of an Event of Default), Debtor will pay to Lender, as a prepayment premium (the “Prepayment Premium”) and not as a penalty, an amount equal to one and one-half percent (1.50%), one percent (1%) and one-half percent (0.5%) of the Maximum Amount, respectively, provided that the Prepayment Premium will be waived if the Loan Agreement is terminated on or after the second (2^nd) anniversary of the Effective Date and the Loan Agreement is contemporaneously refinanced by a Federal Deposit Insurance Corporation insured financial institution.

3. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting ~~principles~~ principles generally accepted in the United States (“GAAP”) applicable to interim financial information and with the instructions to to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company and its subsidiaries’ financial position and interim results as of and for the periods presented have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Results for interim periods are not necessarily indicative of those that may be expected for a full year.

The ~~financial~~Company’s ~~information~~significant ~~included~~accounting ~~herein~~policies ~~should~~and berecent ~~read~~accounting instandards ~~conjunction~~are ~~with~~summarized ~~our~~in ~~audited~~Note ~~consolidated~~3 ~~financial~~of ~~statements~~the ~~and~~Company’s ~~related notes~~consolidated ~~included~~financial instatements ~~our Annual Report~~ for the year ended March 31, ~~2024,~~2025. inThere ~~our~~were ~~Form~~no ~~10-K~~significant changes to these accounting policies during the three months ended June 30, 2025.

During the preparation of the Company’s consolidated financial statements for the year ended March 31, 2025, the Company’s management identified an immaterial error related to previously issued consolidated financial statements in the prior year.

Management determined that the Shareholder distribution for approximately $0.7 million should have been reported in the year ended March 31, 2024 financial statements. The Company previously reported the Shareholder distribution in the first quarter of the 2025 fiscal year.

In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the correction and has determined that the related impact was not material to the previously issued financial statements that contained the error, based on overall considerations of both quantitative and qualitative factors. The Company has concluded that prior period financial statements as of and for the year ended March 31, 2024, were not materially misstated and can continue to be relied upon. Accordingly, the Company has corrected the previously reported immaterial error in the current period financial statements by adjusting the opening balances of the affected accounts.

In accordance with ASC 250, Accounting Changes and Error Corrections, the Company has recorded the impact of the prior period error through opening retained earnings in the current period financial statements. The affected prior period balances are displayed below and had no change on the Condensed Consolidated Statements of Operations and Comprehensive Loss, or Net Loss per Share.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

~~The~~Management ~~merger~~and ~~between~~the ~~Harmony’s~~Audit ~~wholly~~Committee ~~owned~~have ~~subsidiary~~reviewed this adjustment and ~~Zircon~~concluded ~~was~~that ~~accounted~~the ~~for~~financial statements, as acorrected, ~~reverse~~present ~~asset~~fairly, ~~acquisition~~ in ~~accordance with~~all ~~GAAP.~~material ~~Under this method of accounting~~respects, ~~Harmony,~~the ~~through~~balance ~~its merger subsidiary~~sheet, ~~was~~results ~~treated~~of asoperations ~~the “acquired” company~~ and ~~Zircon~~ ~~was~~cash ~~treated~~flows asof the ~~acquirer~~Company ~~for~~in ~~financial~~accordance ~~reporting~~with ~~purposes~~U.S. GAAP.

~~The~~As ~~consolidated~~a ~~assets,~~result ~~liabilities~~of ~~and~~the ~~results~~restatement, ofthe ~~operations~~Company ~~prior~~prepared to the ~~merger~~following ~~are~~table ~~those~~to ofillustrate ~~Zircon.~~the ~~Refer~~effect toon ~~Note~~the 4financial statements for ~~additional~~the ~~information~~year onended ~~the~~March ~~transaction~~31, 2024.

	As Reported		As Revised
	March 31, 2024		March 31, 2024		Difference
Liabilities
Accrued expenses	$	2,130	$	2,789	$	(659	)

Total equity attributable to ZRCN Inc. stockholders
Retained earnings	$	7,421	$	6,762	$	659

As a result of the restatement, the Company prepared the following table to illustrate the effect on the financial statements for the three months ended June 30, 2024.

	As Reported		As Revised
	June 30, 2024		June, 2024		Difference
Liabilities
Accrued expenses	$	2,246	$	2,660	$	(414	)

Total equity attributable to ZRCN Inc. stockholders
Retained earnings	$	5,530	$	5,116	$	414

The financial information included herein should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in our Annual Report for the year ended March 31, 2025, on Form 10-K.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of ZRCN as well as its variable interest entities. ~~The~~ The Company consolidates all entities over which the Company has the power to govern the financial and operating policies and therefore ~~exercises~~ exercises control, and upon which the Company has a controlling financial interest. The entities are consolidated from the date at which the Company obtains control and are de-consolidated from the date at which control ceases. All intercompany balances and transactions have been eliminated. Accounting policies of the entities have been revised where necessary to ensure consistency with the policies adopted by the Company.

Under Accounting Standards Codification (“ASC”) Topic 810-10-25, Consolidation, Zircon de Mexico S.A. de C.V. (“ZDM”) and Zircon Corporation Limited (“Zircon UK”) have been determined to be variable interest entities with Zircon as the primary beneficiary. Therefore, the financial statements of ZDM and Zircon UK are consolidated with Zircon and the Company, and all significant intercompany transactions and balances have been eliminated.

Variable Interest Entities

In accordance with ASC 810, Consolidation (“ASC 810”), the Company assesses whether it has an explicit or implicit variable interest in legal entities in which it has a financial relationship and, if so, whether or not those entities are variable interest entities (“VIEs”). Variable interests are contractual, ownership, or other pecuniary interests in an entity whose value changes with changes in the fair value of the entity’s net assets, exclusive of variable interests. Explicit variable interests are those which directly absorb the variability of a VIE and can include contractual interests such as loans or guarantees as well as equity investments. An implicit variable interest acts the same as an explicit variable interest except it involves the absorbing of variability indirectly, such as through related party arrangements or implicit guarantees. The analysis includes consideration of the design of the entity, its organizational structure, including decision making ability over the activities that most significantly impact the VIE’s economic performance. For those entities that qualify as VIEs, ASC 810 requires the Company to determine if the Company is the primary beneficiary of the VIE, and if so, to consolidate the VIE.

If an entity is determined to be a VIE, the Company evaluates whether the Company is the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. The Company consolidates a VIE if both power and benefits belong to the Company - that is, the Company (i) has the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (benefits). The Company consolidates VIEs whenever it is determined that the Company is the primary beneficiary.

The Company has determined that ZDM and Zircon UK are variable interest entities with the Company’s wholly owned subsidiary, Zircon, as the primary beneficiary, and thus the Company, with the ability to exercise control, as determined under the guidance of ASC 810. In its determination, management considered the following qualitative and quantitative factors:

a. the overall purpose and design of the entities, which exist primarily for the benefit of or on behalf of the Company and;

b. the Company’s contractual and common control arrangements with the VIEs, through which it gains both the power to direct the activities that most significantly impact their economic performance, and the obligation to absorb losses and receive benefits that potentially could be significant to the VIEs;

c. the equity at risk of the entities is not sufficient to finance the entities’ activities without additional subordinated financial support by the Company (i.e., the entities are thinly capitalized).

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

Non-controlling Interests

The Company follows ASC 810, which governs the accounting for and reporting of non-controlling interests (“NCIs”) in partially owned consolidated entities and the loss of control of those entities. Non-controlling interest positions, which represent 100% of the activity in the Company’s consolidated entities before intercompany transactions have been eliminated, are reported as a separate component of consolidated stockholders’ equity from the equity attributable to ZRCN’s stockholders for all years presented. 100% of Zircon de Mexico (“ZDM”) and 85% of Zircon UK are held by common shareholders. As of June 30, 2025, these same shareholders held collectively approximately 73% of ZRCN Inc. The net (loss) income attributed to the NCI’s is separately designated in the accompanying unaudited condensed consolidated statements of operations and comprehensive ~~income (~~loss).

Variable Interest Entities

In accordance with ASC 810, the Company consolidates entities determined to be variable interest entities (“VIE’s”) for which it is the primary beneficiary. The Company has determined that ZDM and Zircon UK are VIE’s with the Company’s wholly owned subsidiary, Zircon, as the primary beneficiary. This determination reflects the entities’ design and purpose, contractual and common control arrangements granting the Company power and benefits, and the need for additional subordinated financial support by the Company.

Use of Estimates

The preparation of these unaudited, condensed consolidated financial statements in conformity with ~~generally~~U.S. ~~accepted~~GAAP ~~accounting principles~~ requires management to make ~~estimates~~ estimates and assumptions that affect ~~the~~ reported amounts of assets, ~~and~~ liabilities, ~~the~~revenues, ~~disclosure of contingent assets~~ and ~~liabilities~~expenses, ~~and the~~as ~~reported~~well ~~amounts~~as ofrelated ~~revenues and expenses~~disclosures. Significant estimates ~~used in preparing these unaudited consolidated financial statements~~ include ~~the~~provisions ~~provision~~ for credit losses, ~~allowance for~~ inventory ~~obsolescence~~valuation, ~~allocation~~intangible ofasset ~~overhead to inventory, estimated future benefit and~~ fair ~~value of intangible assets~~values, accrued rebates ~~and advertising allowances~~, useful lives ~~and depreciation methods~~ of property and equipment, ~~and~~ uncertain tax positions., Itand isshare-based atcompensation. ~~least~~Actual ~~reasonably~~results ~~possible~~may ~~that~~differ ~~the~~from ~~significant~~these estimates ~~used will change within the next year~~.

Cash

The carrying value of cash approximates fair value due to the short-term nature of the instruments. From time to time, the Company may be in the position of a “book overdraft” in which outstanding checks exceed cash. The Company classifies book overdrafts in accounts payable within its unaudited consolidated balance sheets, and classifies the change in accounts payable associated with book overdrafts as an operating activity within the unaudited consolidated statement of cash flows. As of December 31, 2024, the book overdraft included within accounts payable was $0.1 million. As of March 31, 2024, the book overdraft included within accounts payable was $0.4 million.

Accounts Receivable, Net

Accounts receivables are stated at the amount the Company expects to collect. The Company provides credit without requiring collateral, in the normal course of business, to credit-worthy customers as determined by management’s review of references and credit reports. Bad debts are charged against the provision for credit losses. The provision for credit losses is adjusted to provide a specific and general allowance for estimated uncollectible accounts, which is based on management’s judgment based on a number of factors, including the length of time the receivables are past due, significant one-time events and historical experience. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the provision for credit losses and a credit to accounts receivable. Based on management’s assessment of the credit history with customers having outstanding balances and current relationships with them, management believes that losses on balances outstanding will not exceed the provision for credit losses.

Accounts receivable consisted of the following:

Schedule of Accounts Receivable

	December 31, 2024			March 31, 2024
(In thousands)	June 30, 2025			March 31, 2025
(In thousands)	(Unaudited)			(Audited)
Accounts receivable	$	5,853		$	6,155
Accounts receivable	$	7,055		$	8,658
Less provision for credit losses		(39	)		(53	)
Less provision for credit losses		(133	)		(14	)
Accounts receivable, net	$	5,814		$	6,102
Accounts receivable, net	$	6,922		$	8,644

Activity related to the Company’s provision for credit losses was as follows:

	December 31, 2024			March 31, 2024
(In thousands)	June 30, 2025			March 31, 2025
(In thousands)	(Unaudited)			(Audited)
Balance, beginning of period	$	53		$	14
Balance, beginning of period	$	14		$	10
Credit loss (recovery) provision		(14	)		195
Credit loss provision		119			4
Write-offs		—			(156	)
Balance, end of period	$	~~133~~39		$	1453

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606 when control of goods transfers to the customer, which is generally upon shipment. Transaction prices are allocated to performance obligations and adjusted for variable consideration such as rebates, returns, discounts, and allowances, which are estimated using historical experience and current conditions. Cooperative advertising is recorded as a reduction of revenue unless a distinct service is provided at fair value. Sales taxes are excluded from revenue and recorded as liabilities. Advertising expenses were less than $0.1 million for the three months ended June 30, 2025 and 2024.

There have been no changes in our revenue recognition policy since filing the Company’s audited, consolidated financial statements and related notes included in our Annual Report for the year ended March 31, 2025 on Form 10-K.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

Inventory

Inventories, which consist primarily of raw materials and finished goods, are stated at the lower of cost or net realizable value. The Company states inventory cost utilizing the first-in, first-out (FIFO) method. Labor and overhead associated with inventory purchases are estimated and capitalized in inventory. The need for an allowance for inventory obsolescence is based on an evaluation of slow-moving or obsolete inventory.

Revenue Recognition

The Company’s revenues result from the sale of products and reflect the consideration to which the Company expects to be entitled. The Company records revenue based on a five-step model in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). For its contracts with customers, the Company identifies the performance obligations (goods or services), determines the transaction price, allocates the contract transaction price to the performance obligations, and recognizes the revenue when (or as) the performance obligation is transferred to the customer. A good or service is transferred when (or as) the customer obtains control of that good or service. The Company satisfies its performance obligation and recognizes revenue at the time the customer obtains the rights to the product, which is generally when goods are shipped. As a result, the majority of the Company’s revenue is recognized at a point in time.

Provisions for customer volume rebates, product returns, discounts and allowances are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded. Such provisions are calculated using historical averages adjusted for any expected changes due to current business conditions. Consideration given to customers for cooperative advertising is recognized as a reduction of revenue except to the extent that there is a distinct good or service and evidence of the fair value of the advertising, in which case the expense is classified as marketing and selling expense. Advertising expenses included within marketing and selling expenses were $0.1 million and $0.2 million for the three and nine months ended December 31, 2024. Advertising expenses included within marketing and selling expenses were less than $0.1 million for the three and nine months ended December 31, 2023, respectively. Sales tax for the sale of products is applied to the invoice and recorded as an accrued liability.

Research and Development

The Company incurs research and development costs of products for use in scanning behind opaque surfaces. The Company will continue to invest in research and development to develop additional components and products of its scanning product offerings and remains committed to providing its customers and partners with best-in-class scanning products and services. Such research and development costs, software development costs, and any new product development costs, are expensed as incurred, and include personnel-related costs, depreciation related to engineering and test equipment, allocated costs of facilities and information technology, outside services and consultant costs, supplies, software tools and product certification.

Share Based Compensation

The Company expenses share based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Share-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. For awards with performance conditions, compensation cost is recognized over the requisite service period based on the actual or expected achievement of the performance condition. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The Company estimates the fair value of restricted stock award grants on the date of issuance. All share-based compensation costs are recorded in general and administrative or research and development costs in the condensed consolidated statements of operations and comprehensive income (loss) based upon the underlying individual’s role at the Company. Share based awards that do not meet the criteria for equity classification are recorded as liabilities and adjusted to fair value at the end of each reporting period.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2024 AND 2023

Comprehensive Income (Loss)

Comprehensive income (loss) of all periods presented is comprised primarily of net income (loss) and foreign currency translation adjustments.

Segment Reporting

The Company determines its reporting units in accordance with FASB ASC 280, Segment Reporting (“ASC 280”). The Company evaluates a reporting segment by first identifying its operating segments under ASC 280. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”) to allocate resources and assess performance. The Company defines its CODM to be its president and chief operating officer. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. The ~~president and chief operating officer reviews the financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating the~~ Company~~’s financial performance. The Company~~ has one operating segment and therefore one reporting segment. ~~Management reviews its business as a consolidated segment, using financial and other information rendered meaningful only by the fact that such information is presented and reviewed in the aggregate.~~

The CODM reviews the financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating the Company’s financial performance. The CODM utilizes financial metrics, such as consolidated revenue, gross profit, and income (loss) from operations, as the financial measures for making decisions. This enables the CODM to assess the overall level of available resources and determine how best to deploy these resources across research and development projects in line with the long-term company-wide strategic goals. Management reviews its business as a consolidated segment, using financial and other information rendered meaningful only by the fact that such information is presented and reviewed in the aggregate. The measure of segment assets is reported in the accompanying unaudited condensed consolidated balance sheets as “Total assets.” There are no significant segment expenses as the expenses that are included in the unaudited condensed consolidated loss from operations are general and administrative and research and development. There is no change in the Company’s operating or reporting segments for the three months ended June 30, 2025.

Concentration of Business and Credit Risk

As of ~~December~~June 3130, ~~2024~~2025, the Company maintained deposits in a single bank that exceeded the federal insured deposit limit of the Federal ~~Deposit~~ Deposit Insurance Corporation (FDIC).

During the three months ended ~~December~~June 3130, ~~2024~~2025 and ~~2023 the Company generated approximately 62% and 59% of its total revenue from three customers~~2024, ~~respectively.~~ ~~During the nine months ended December 31~~respectively, ~~2024 and 2023~~ the Company generated approximately 6263% and 6265% of its total revenue from three ~~two~~ customers~~, respectively~~.

As of ~~December~~June 3130, ~~2024~~2025 and March 31, ~~2024~~2025, 76respectively, 71% and 7764% of its total accounts receivable, ~~respectively,~~ were from three customers.

Fair Value of Financial Instruments

In accordance with FASB ASC 820 Fair Value Measurements and Disclosures, the Company uses a three-level hierarchy for fair value measurements of certain assets and liabilities for financial reporting purposes that distinguishes between market participant assumptions developed from market data obtained from outside sources (observable inputs) and our own assumptions about market participant assumptions developed from the best information available to us in the circumstances (unobservable inputs). The fair value hierarchy is divided into three levels based on the source of inputs as follows:

a. Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; b. Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active; and c. Level 3 – inputs to the valuation methodology are unobservable and insignificant to the fair value measurement.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2024 AND 2023

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company believes the carrying amounts of its cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses, and other current liabilities approximated their fair values as of December 31, 2024 and March 31, 2024 due to their short-term nature. Management measures intangible assets at fair value on a non-recurring basis using internally developed assumptions about the market as there is no market activity available. All carrying amounts of other applicable assets and liabilities on the Company’s balance sheet approximate fair value. For long-term debt, the estimated fair value approximates its carrying value, as the interest rate is in line with the market interest rates for this type of debt.

Income Taxes

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. Management believes estimates related to income tax uncertainties are appropriate based on current facts and circumstances. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations thereof, as well as, other factors. Any interest and penalties related to income tax matters are classified as a component of income tax expense.

~~As of April 14, 2023, Zircon’s election to be an S Corporation under the Internal Revenue Code was no longer in effect.~~11

Net Income (Loss) Per Share

Basic net income (loss) per share of common stock is computed by dividing net income or loss attributable to ZRCN by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share excludes, when applicable, the potential impact of stock options, warrant shares, and other dilutive instruments because their effect would be anti-dilutive. Diluted net income per share, when applicable, includes the stock options and warrant shares because their effect would be dilutive. The dilutive securities outstanding are as follows:

Schedule of Dilutive Securities Outstanding

	December 31, 2024		March 31, 2024
Stock options		419,000		—
Warrants		217,184		217,184

Leases

In February 2016, the FASB issued an accounting standard, ASC Topic 842, related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most significant among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under this standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

~~The~~On ~~Company’s~~July ~~lease~~4, ~~arrangements~~2025, ~~relate~~subsequent ~~primarily~~ to ~~office~~the ~~space,~~balance asheet ~~vehicle~~date, ~~and~~the ~~office~~One ~~equipment~~Big Beautiful Bill Act (“OBBBA”) was signed into law. The ~~Company’s~~OBBBA makes ~~leases~~significant ~~may include~~changes ~~renewal~~to ~~options~~US ~~and~~tax ~~rent~~law, ~~escalation~~including ~~clauses~~allowing for an immediate deduction for research & development expenses, among other changes. The ~~Company~~financial iseffects ~~typically~~of ~~required~~the toOBBBA ~~make~~are ~~fixed~~still ~~minimum~~being ~~rent~~evaluated ~~payments~~and ~~relating~~an toestimate of the financial impact is not yet practicable ~~its~~at ~~right~~the totime ~~use~~of anissuance ~~underlying~~of ~~leased~~these ~~asset~~condensed consolidated unaudited financial statements.

~~The~~Net ~~Company~~Loss ~~determines~~Per if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liabilities, current and operating lease liabilities on the Company’s unaudited consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset, and lease liabilities represent the Company’s obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term. The Company does not recognize short term leases that have a term of twelve months or less as ROU assets or lease liabilities.Share

~~ROU~~Basic ~~assets~~net ~~and~~loss ~~lease~~per ~~liabilities~~share ~~are~~of ~~recognized~~common atstock ~~commencement~~is ~~date~~computed ~~and~~by ~~determined~~dividing ~~using~~net ~~the~~income ~~present~~or ~~value~~loss ofattributable to ZRCN by the ~~future~~weighted ~~minimum~~average ~~lease~~number ~~payments~~of ~~over~~shares ~~the~~of ~~lease~~common ~~term.~~stock ~~The~~outstanding ~~Company~~for ~~uses~~the anperiod. ~~incremental~~Diluted ~~borrowing~~loss ~~rate~~per ~~based~~share onexcludes, ~~estimated~~when ~~rate~~applicable, ofthe ~~interest~~potential ~~for~~impact ~~collateralized~~of ~~borrowing~~stock options, ~~since~~warrant ~~the~~shares, ~~Company’s~~and ~~leases~~other dodilutive ~~not~~instruments ~~include~~because antheir ~~implicit~~effect ~~interest~~would ~~rate~~be anti-dilutive. ~~The~~Diluted ~~estimated~~net ~~incremental~~income ~~borrowing~~per ~~rate~~share, ~~considers~~when ~~market data~~applicable, includes ~~actual~~the ~~lease~~stock ~~economic~~options ~~environment,~~ and ~~actual~~warrant ~~lease~~shares ~~term~~because attheir ~~commencement~~effect ~~date.~~would ~~The~~be ~~lease~~dilutive. ~~term~~Potentially ~~may~~dilutive ~~include~~securities ~~options~~outlined toin ~~extend when~~the ittable isbelow ~~reasonably~~have ~~certain~~been ~~that~~excluded from the ~~Company~~computation ~~will~~of ~~exercise~~diluted ~~that~~net ~~option.~~loss ~~The~~per ~~Company~~share ~~recognizes~~because ~~lease~~the ~~expense~~effect onof atheir ~~straight-line~~inclusion ~~basis~~would ~~over~~have been ~~the~~anti-dilutive. ~~lease~~The ~~term.~~potentially dilutive securities outstanding are as follows:

~~The~~ Schedule ~~Company~~of ~~has~~Dilutive ~~lease~~Securities agreements which contain both lease and non-lease components, which it has not elected to account for as a single lease component. As such, minimum lease payments exclude fixed payments for non-lease components within a lease agreement, in addition to excluding variable lease payments not dependent on an index or rate, such as common area maintenance, operating expenses, utilities, or other costs that are subject to fluctuation from period to period.Outstanding

Warrants

	For the Three Months Ended June 30,
	2025		2024
Stock options		3,216,500		3,216,500
Warrants		217,184		217,184

~~The~~As ~~Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment~~ of ~~the~~June ~~warrant’s specific terms and applicable authoritative guidance in ASC 480~~30, ~~Distinguishing~~2025 ~~Liabilities~~these ~~from~~securities ~~Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants~~ are ~~freestanding~~not financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classificationdilutive. ~~This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.~~

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of stockholders’ equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be liability classified and recorded at their initial fair value on the date of issuance and remeasured at fair value and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the private placement warrants was estimated using a Black Scholes valuation approach with assumptions relevant on the date of issuance and the fair value of the advisor warrants issued in connection with the Merger was estimated using the intrinsic value method (see note 13).

Recently Issued Accounting Pronouncements

As an emerging growth company, the Company will have the option of adopting new accounting pronouncements on a delayed basis and has opted to take advantage of this option. As a result, the Company has been adopting new accounting standards based on the timeline for adoption afforded to privately held companies, unless it chooses to early adopt a new accounting standard.

Accounting Standards Adopted

In December 2023, the FASB also issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. The Company did not early adopt the new standard. The new standard will be applied prospectively. The Company adopted ASU 2023-09 on April 1, 2024.

Recently Issued Accounting Standards Not Yet Adopted

In November ~~2023~~2024, the FASB issued ASU ~~2023~~2024-0703, ~~Segment~~Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (~~Topic~~Subtopic ~~280~~220-40), -the ~~Improvements~~intent of which is to ~~Reportable~~improve ~~Segment~~financial ~~Disclosures.~~reporting ~~The~~and ~~new~~respond ~~standard requires~~to ainvestor ~~company~~input by requiring public business entities to disclose ~~incremental~~additional ~~segment~~ information onabout ancertain ~~annual~~expenses ~~and~~in the notes to financial statements in interim ~~basis~~and annual reporting periods. Among other provisions, ~~including~~the ~~significant~~new ~~segment~~standard requires disclosure of disaggregated amounts for expenses such as employee compensation, depreciation, and ~~measures~~intangible asset amortization included in each expense caption presented on the face of ~~profit~~the orincome ~~loss~~statement. Public business entities are required to include certain amounts that are ~~regularly~~already ~~provided~~required to be disclosed under GAAP in the ~~chief~~same ~~operating~~disclosure ~~decision~~as ~~maker~~the other disaggregation requirements as well as a qualitative description of any amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The new standard isalso ~~effective~~requires ~~for~~disclosure of the ~~Company beginning~~total inamount ~~fiscal~~of ~~year~~selling ~~2024~~expenses and, ~~interim~~in annual reporting periods, ~~within~~an entity’s ~~fiscal~~definition ~~year~~of ~~2025,~~selling expenses. An entity is not precluded from providing additional voluntary disclosures that may provide investors with ~~early~~additional ~~adoption~~decision-useful ~~permitted~~information. ~~The~~In ~~Company~~January ~~does~~2025, ~~not~~the ~~expect~~FASB issued ASU Update 2025-01, “Income Statement-Reporting toComprehensive ~~early~~Income-Expense ~~adopt~~Disaggregation ~~the~~Disclosures ~~new~~(Subtopic ~~standard~~220-40).” The ~~Company~~Board isissued ~~currently~~this ~~evaluating~~Update to clarify the ~~impact~~effective date of ~~ASU~~Accounting ~~2023~~Standards Update 2024-0703 onto ~~its~~be ~~unaudited~~effective ~~consolidated~~for ~~financial~~public business entities for annual reporting periods beginning after ~~statements~~December 15, 2026, and ~~related~~interim ~~disclosures~~reporting ~~and~~periods ~~will~~beginning ~~adopt~~after December 15, 2027, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The amendments in the new standard should ~~using~~be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. Management does not expect this guidance to have a ~~retrospective~~material ~~approach~~impact to its unaudited condensed consolidated financial statements or related disclosures.

1412

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

In ~~December~~May ~~2023~~2025, the FASB ~~also~~ issued ASU ~~2023~~2025-0903, ~~Income~~Business ~~Taxes~~Combinations (Topic ~~740~~805) -and ~~Improvements~~Consolidation to(Topic ~~Income~~810) ~~Tax~~(“ASU ~~Disclosures.~~2025-03”), ~~The new standard~~which ~~requires~~clarifies athe ~~company~~requirements tofor ~~expand~~determining ~~its~~the ~~existing~~accounting ~~income~~acquirer ~~tax~~in ~~disclosures, specifically related to~~ the ~~rate~~acquisition ~~reconciliation~~of ~~and~~a ~~income~~variable ~~taxes~~interest ~~paid~~entity. ~~The~~ ~~standard~~ASU 2025-03 is effective for ~~the Company for~~ annual periods beginning after December 15, ~~2024~~2026, ~~with~~and ~~early~~interim ~~adoption~~reporting ~~permitted~~periods within those annual reporting periods. The ~~Company~~amendments ~~does~~in ~~not~~this ~~expect~~update torequire ~~early~~that ~~adopt~~an entity apply the new ~~standard.~~guidance ~~The~~prospectively ~~new~~to ~~standard~~any isacquisition ~~expected~~transaction tothat beoccurs ~~applied~~after ~~prospectively,~~the ~~but~~initial application ~~retrospective~~date. ~~application~~ Early adoption is permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact ofthat ASU ~~2023~~2025-0903 may have on its unaudited condensed consolidated financial ~~statements~~statement presentation and ~~related~~ disclosures.

In ~~March~~May ~~2024~~2025, the FASB issued ASU ~~No. 2024~~2025-0104, “Compensation - Stock Compensation (Topic 718): ~~Scope~~and ~~Application~~Revenue offrom ~~Profits~~Contracts ~~Interest~~with ~~and~~Customers (Topic ~~Similar~~606) ~~Awards.”~~ (“ASU ~~2024~~2025-0104”), ~~provides~~which anclarifies ~~illustrative~~the ~~example~~requirements ~~that~~for ~~includes~~share-based ~~four~~consideration ~~fact~~payable ~~patterns~~ to ~~demonstrate~~a ~~how~~customer. anThe ~~entity should~~amendments ~~apply~~in ~~the~~this ~~scope~~update ~~guidance~~are ineffective ~~paragraph~~for ~~718-10-15-3~~all toentities ~~determine~~for ~~whether~~annual areporting ~~profits~~periods ~~interest~~(including ~~award~~interim ~~should~~reporting beperiods ~~accounted~~within ~~for~~annual ~~in accordance~~reporting ~~with~~periods) ~~Topic~~beginning ~~718~~after December 15, 2026. ~~ASU~~Early ~~2024-01~~adoption is ~~effective~~permitted for ~~fiscal~~all ~~years beginning after December 15, 2024~~entities. The Company is currently evaluating the disclosure impact ofthat ASU ~~2024~~2025-0104 may have on its unaudited condensed consolidated financial ~~statements~~statement presentation and ~~related~~ disclosures.

In ~~November~~July ~~2024~~2025, the FASB issued ASU ~~2024~~2025-0305, ~~the~~Measurement ~~intent~~ of ~~which~~Credit isLosses tofor ~~improve~~Accounts ~~financial~~Receivable ~~reporting~~ and ~~respond~~Contract toAssets ~~investor~~(“ASU ~~input by requiring~~2025-05”). ~~public~~This ~~business~~standard ~~entities~~introduces toa ~~disclose~~practical ~~additional~~expedient ~~information~~that ~~about~~companies ~~certain~~can ~~expenses~~choose ~~in the notes~~ to ~~financial~~apply ~~statements~~when indetermining ~~interim~~allowances ~~and annual~~for ~~reporting~~credit ~~periods~~losses. ~~Among other provisions~~Specifically, it ~~the~~permits ~~new~~companies ~~standard~~to ~~requires~~assume ~~disclosure~~that ofthe ~~disaggregated~~current ~~amounts~~conditions ~~for expenses such~~ as ~~employee~~ ~~compensation,~~of ~~depreciation,~~the ~~and~~balance ~~intangible~~sheet ~~asset~~date ~~amortization~~remain ~~included~~unchanged inthroughout ~~each expense caption presented on~~ the ~~face~~remaining life of the ~~income~~ ~~statement~~assets. ~~Public~~This ~~business~~standard ~~entities~~is ~~are~~effective ~~required~~for ~~to include certain amounts that are already required to be disclosed under GAAP in~~ the ~~same~~Company ~~disclosure~~for asannual ~~the~~reporting ~~other~~periods ~~disaggregation~~beginning ~~requirements~~after asDecember ~~well~~15, as2025, aand ~~qualitative description of any amounts remaining in relevant~~requires ~~expense~~prospective ~~captions that are not separately disaggregated quantitatively~~application. The ~~new~~Company ~~standard~~is ~~also~~currently ~~requires~~evaluating ~~disclosure of~~ the ~~total~~impact ~~amount~~ of ~~selling~~ASU ~~expenses and~~2025-05, ~~in annual reporting periods~~however, andoes ~~entity’s~~not ~~definition~~expect ofit ~~selling~~to ~~expenses.~~have Ana ~~entity is not precluded from~~material ~~providing~~impact ~~additional~~on ~~voluntary~~its ~~disclosures~~unaudited ~~that~~condensed ~~may~~consolidated ~~provide~~financial ~~investors with additional decision-useful information~~statements.

The amendments in the new standard are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted4. ~~The amendments in the new standard should be applied either prospectively~~ to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. Management is evaluating the new standard and has not yet determined when, or the method by which, the Company will adopt its amendments.Revenue

4. Merger with Harmony Energy Technologies Corporation

On April 14, 2023 (the “Closing Date”), Harmony closed the Merger with Zircon, as a result of which Zircon became a wholly-owned subsidiary of Harmony. While Harmony was the legal acquirer of Zircon in the Merger, for accounting purposes, the Merger is treated as a reverse recapitalization, whereby Zircon is deemed to be the accounting acquirer, and the historical financial statements of Zircon became the historical financial statements of Harmony (renamed ZRCN 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.

As part of the Merger and reverse recapitalization, the Company assumed certain operating liabilities of Harmony, including certain payables due to vendors and employees, as well as notes payable to noteholders. In addition, Zircon and Harmony effectuated a share exchange whereby the shareholders of Zircon exchanged 500,000 common shares representing 100% of the total outstanding shares of Zircon, for 8,865,234 newly issued common shares of Harmony, or approximately 89% of the total outstanding shares of Harmony. Harmony shareholders thus retained 1,057,754 common shares according to the terms of the merger. In connection with the Merger, the Company entered into a warrant exchange agreement, dated April 14, 2023 (the “Warrant Exchange Agreement”), with certain holders of the Company’s warrants under which such holders received 25,284 shares of Common Stock in exchange for their warrants, bringing the total shares of the combined organization owned by Harmony’s pre-Merger shareholders to 1,083,038 shares.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2024 AND 2023

Zircon agreed to pay the operating liabilities of Harmony, up to and including an aggregate of $0.2 million through December 31, 2022, which amount included outstanding operating liabilities related to auditing fees, services fees, transfer agent fees, travel reimbursements and accrued and unpaid salaries as of such date; Harmony loans and notes outstanding totaling $0.6 million were fully settled for $0.4 million, with $0.1 million paid upon closing of the Acquisition and $0.1 million being paid in four subsequent quarterly payments commencing on the last day of the first full calendar quarter following closing.

Zircon paid transaction costs of $0.5 million for legal and advisory services and issued warrants to purchase an aggregate 217,184 shares of common stock to advisors who provided services to effectuate the Merger which had a fair value determined to be $0.3 million and are included in the transaction costs and advisory fees allocated to ZRCN equity (refer to Note 13 for further detail regarding these warrants).

The following table reconciles the elements of the Merger to the unaudited consolidated statements of changes in stockholders’ equity for the nine months ended December 31, 2023:

Schedule of Consolidated Statements of Changes in Stockholders Equity

(In thousands)	Recapitalization
Cash	$	—
Non-cash net working capital assumed from Harmony		(579	)
Less: cash transaction costs and advisory fees allocated to ZRCN equity		(519	)
Effect of Merger, net of transaction costs	$	(1,098	)

The following table details the number of shares of common stock issued immediately following the consummation of the Merger:

Schedule of Number of Shares of Common Stock

	Number of Shares
Common stock of Harmony prior to Merger		1,057,754
Shares issued for Warrant Exchange Agreement		25,284
Common stock owned by Harmony’s pre-Merger shareholders		1,083,038
Common stock issued in exchange for Zircon common stock		8,865,234
Total shares of common stock immediately after Merger		9,948,272

Debt Settlement Agreement

In connection with the Merger, the Company entered into debt settlement agreements (the “Debt Settlement Agreements”) with certain third-party creditors of the Company under which the Company agreed to make certain payments over the 12 months following the Merger to the creditors in satisfaction of an aggregate of $0.4 million which was owed to them. As of December 31, 2024, the Company has repaid $0.4 million to the creditors and there was no remaining balance.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2024 AND 2023

5. Revenue

Disaggregation of Revenue from Contracts with Customers

Revenue disaggregated according to the ~~timing~~major ofproduct ~~transfer~~line ~~of goods or services (e.g., at a point in time)~~ for the three ~~and nine~~ months ended ~~December~~ 31June 30, ~~2024~~2025 and ~~2023~~2024, respectively, were as follows:

(In thousands)

2024

2023

2024

2023

For the Three Months Ended June 30,

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

2025

2024

(In thousands)

~~2024~~(Unaudited)

~~2023~~

~~2024~~

~~2023~~

Revenue generated per major product line

~~(Unaudited)~~

Stud sensor edge

3,~~368~~931

42,~~183~~997

~~12,844~~

~~13,873~~

Multifunctional scanners

~~345~~748

~~1,236~~775

~~2,708~~

~~3,489~~

Stud sensor center

~~2,886~~857

1,~~474~~154

~~4,582~~

~~3,921~~

Target control products

~~342~~148

~~433~~460

~~1,288~~

~~1,211~~

Other

~~295~~378

~~213~~425

~~987~~

~~874~~

Total Revenue

76,~~236~~062

75,~~539~~811

~~22,409~~

~~23,368~~

~~Revenue disaggregated according to the geographical location of customers for the three and nine months ended December 31, 2024 and 2023, respectively, were as follows:~~13

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2025 AND 2024

Revenue disaggregated according to the geographical location of customers for the three months ended June 30, 2025 and 2024, respectively, were as follows:

(In thousands)

2024

2023

2024

2023

For the Three Months Ended June 30,

For the Three Months Ended December 31,

For the Nine Months Ended December 31,

2025

2024

(In thousands)

~~2024~~(Unaudited)

~~2023~~

~~2024~~

~~2023~~

Revenue by geographic location of customers

~~(Unaudited)~~

United States

65,~~262~~107

65,~~456~~101

~~19,781~~

~~20,682~~

Canada

~~420~~452

~~611~~274

~~1,243~~

~~1,395~~

Japan

~~348~~247

~~244~~266

~~347~~

~~673~~

Europe

105

~~113~~119

~~804~~

~~233~~

Others

~~101~~151

~~115~~51

~~234~~

~~385~~

Total Revenue

76,~~236~~062

75,~~539~~811

~~22,409~~

~~23,368~~

65. Inventory

Inventory consisted of the following:

Schedule of Inventory

	December 31, 2024		March 31, 2024
	June 30, 2025		March 31, 2025
(In thousands)	(Unaudited)		~~(Audited)~~
Finished goods, net	$	7,~~803~~013	$	6,~~930~~948
Raw materials, net		3,~~728~~228		4,~~909~~233
Work in process, net		1,~~356~~292		21,~~218~~275
Inventory net	$	1211,~~887~~533	$	1412,~~057~~456

Allowance for slow moving and obsolete inventory was estimated at $01.62 million and $01.41 million as of ~~December 31~~June 30, ~~2024~~2025 and March 31, ~~2024~~2025, respectively.

176. Property and Equipment

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2024 AND 2023

7. Property and Equipment

Property and equipment consisted of the following:

Schedule of Plant and Equipment

	December 31, 2024			March 31, 2024
	June 30, 2025			March 31, 2025
(In thousands)	(Unaudited)			~~(Audited)~~
Manufacturing equipment	$	9,~~932~~844		$	9,~~315~~806
Computer equipment		2,824			2,~~774~~824
Leasehold improvements		1,~~150~~196			1,~~218~~155
Furniture and office equipment		~~904~~925			~~955~~908
Vehicles		~~272~~273			~~275~~272
Property and equipment, gross		15,~~082~~062			14,~~537~~965
Construction in progress		~~176~~438			~~423~~363
Property and equipment before accumulated depreciation and amortization		15,~~258~~500			1415,~~960~~328
Less accumulated depreciation and amortization		(13,~~518~~965	)		(13,~~157~~734	)
Property and equipment, net	$	1,~~740~~535		$	1,~~803~~594

For the three and nine months ended December 31, 2024, depreciation and amortization expense was $0.5 million and $0.7 million, respectively. For the three and nine months ended December 31, 2023, depreciation and amortization expense was $0.1 million and $0.4 million, respectively.14

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JUNE 30, 2025 AND 2024

For the three months ended June 30, 2025 and 2024, depreciation and amortization expense was approximately $0.2 million.

Construction in progress consists of assets and technologies under development. The Company starts depreciation once the assets are completed and placed in service.

87. Intangible Assets

The Company’s intangible assets consisted of the following:

Schedule of Intangible Assets

December 31, 2024

March 31, 2024

June 30, 2025

March 31, 2025

(In thousands)

(Unaudited)

~~(Audited)~~

Finite-lived intangible assets (1):

~~Intangibles, Gross~~

Intangibles, Gross

~~Accumulated Amortization~~

Accumulated Amortization

~~Intangibles, Net~~

Intangibles, Net

~~Intangibles, Gross~~

Intangibles, Gross

~~Accumulated Amortization~~

Accumulated Amortization

~~Intangibles, Net~~

Intangibles, Net

Patents issued and pending

2,~~342~~336

(1,~~685~~727

)

~~657~~609

2,~~340~~335

(1,~~615~~708

)

~~725~~627

Exclusivity rights and licenses

168

(~~110~~113

)

5855

168

(~~101~~111

)

6757

Total finite-lived intangible assets

2,~~510~~504

(1,~~795~~840

)

~~715~~664

2,~~508~~503

(1,~~716~~819

)

~~792~~684

Finite-lived intangible assets (1):	~~December~~June 3130, ~~2024~~2025 Weighted Average Life
Patents issued and pending		1312.38
Exclusivity rights and licenses		54.17

(1) Finite-lived intangible assets have estimated useful lives of five to twenty years, and are being amortized to operating expenses on a straight-line basis.

For the three ~~and nine~~ months ended ~~December~~June 3130, ~~2024,~~2025 ~~amortization expense was less than $0.1 million~~ and ~~approximately $0.1 million~~2024, ~~respectively. For the three and nine months ended December 31, 2023,~~ amortization expense was less than $0.1 million ~~in each respective period~~.

18Expected future amortization expense of acquired finite-lived intangible assets as of June 30, 2025 is as follows:

Schedule of Future Amortization Expense

For the Years Ending March 31, (In thousands)	Amount
Remainder of 2026	$	119
2027		130
2028		125
2029		100
2030		95
Thereafter		95
Total	$	664

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

~~Expected~~8. ~~future~~Accrued ~~amortization expense of acquired finite-lived intangible assets as of December 31, 2024 is as follows:~~Expenses

Schedule of Future Amortization Expense

For the Years Ending March 31, (In thousands)	Amount
Remainder of fiscal 2025	$	25
2026		73
2027		73
2028		72
2029		72
Thereafter		400
Total	$	715

9. Accrued Expenses

Accrued expenses consisted of the following:

Schedule of Accrued Liabilities

	December 31, 2024		March 31, 2024
	June 30, 2025		March 31, 2025
(In thousands)	~~(Unaudited)~~	(Unaudited)	~~(Audited)~~
Rebates	$	~~380~~369	$	~~538~~278
Accrued taxes		~~308~~124		~~361~~129
Sales expense		~~336~~388		~~205~~267
Payroll and related		~~240~~310		~~334~~303
Advertising allowance		~~195~~52		~~134~~87
Vacation		~~310~~335		~~389~~359
Professional services		~~172~~274		94297
Interest		—9		75—
Accrued liabilities	$	1,~~941~~861	$	21,~~130~~720

109. Debt

Line of Credit

On May 31, 2024, the Company entered into a Revolving Credit, Security, and Guaranty Agreement (the “Credit Agreement”) with FGI Worldwide LLC, as Agent for the lender (“FGI”). The Credit Agreement provides for a $15.0 million senior secured revolving credit facility (the “Credit Facility”) available to be used by the Company, Zircon and its Affiliates for replacement and discharge of the Company’s ~~current~~ USprior ~~Bank~~line ~~loan~~of credit balance of $8.8 million, and matures on May 31, 2027. The Company, Zircon and the Affiliates are guarantors of all of the obligations under the Credit Agreement and the Company’s four principal shareholders are limited guarantors thereof.

~~The~~As ~~Credit Agreement stipulates a base rate measured by the sum~~ of ~~Term~~June ~~SOFR~~30, ~~for a period of one month~~2025, ~~as published by~~ the ~~CME~~Company ~~Group~~was ~~Benchmark Administration~~not ~~Limited~~in ~~(or~~compliance ~~any~~with ~~successor~~certain ~~administration~~covenants ofunder ~~Term~~its ~~SOFR)~~revolving ~~two~~credit ~~business~~facility ~~days~~with ~~prior~~FGI toWorldwide, ~~the beginning of the calendar month~~LLC ~~and a percentage equal to 0.10%~~ (~~10 basis points~~“FGI”) ~~per~~and ~~annum.~~entered Ifinto ata ~~any~~series ~~time~~of ~~the~~forbearance ~~displayed~~agreements ~~Term~~with ~~SOFR is less than 0~~FGI.~~00%,~~ ~~Term SOFR is deemed to be 0.00% for the purposes of the credit facility.~~

~~The~~From ~~Credit~~July ~~Agreement~~2025 ~~bears~~through ~~interest~~March ~~measured~~2026, bythe ~~such~~Company ~~outstanding~~and ~~amounts~~FGI onentered ~~receivable~~into ~~advances~~multiple forbearance agreements and ~~inventory~~amendments ~~advances~~to ~~that~~the ~~accrue~~Credit ~~interest~~Agreement, atwhich ~~the~~temporarily ~~greater~~waived ofexisting ~~5.25%~~covenant ~~per~~defaults ~~annum~~and orimposed ~~3.00%~~additional ~~above~~operational and reporting requirements while the ~~base~~Company ~~rate~~pursued strategic and financing alternatives. ~~Interest~~On isMarch ~~charged~~17, on2026, the ~~last~~Company ~~day~~repaid ofin ~~each~~full ~~month~~and onextinguished aits ~~daily~~revolving ~~net~~credit ~~balance~~facility with ofFGI ~~funds~~Worldwide, ~~advanced~~LLC orusing ~~otherwise~~proceeds ~~charged~~from toa new senior secured revolving credit facility. Upon repayment, the FGI Credit Agreement was terminated and the Company was released from all remaining obligations.

~~The~~On ~~Credit~~March ~~Agreement~~17, ~~requires~~2026 (the “Effective Date”), the Company toentered ~~comply~~into a Loan and Security Agreement (the “Loan Agreement”) with aAltriarch ~~maximum~~Holdings ~~total~~SPV, ~~net~~LLC, ~~leverage~~as oflender ~~$15~~(“Lender”).0 ~~million~~The ~~and~~Loan Agreement provides for a ~~minimum~~$12.5 ~~fixed~~million ~~charge~~senior ~~coverage~~secured revolving ~~ratio~~credit offacility ~~1.10.~~(the As“Credit ofFacility”) ~~December~~available 31to be used by the Company and Zircon for, ~~2024~~among other things, replacement and discharge of the Company’s ~~was~~current ~~not~~loan inof ~~compliance~~$15.0 million with FGI Worldwide, LLC and the ~~fixed~~ability ~~charge~~to ~~coverage~~increase ~~ratio~~its ~~and~~borrowings from isthe Lender for working ~~with~~capital purposes. As a result of this repayment, the ~~lender~~ Company has no continuing obligations to ~~obtain~~FGI aunder ~~waiver~~the former Credit Agreement.

19The Loan Agreement matures on March 17, 2029 (the “Maturity Date”), subject to the right of the Debtor to request to extend the Maturity Date for up to an additional one (1) year period. Prior to the Maturity Date or an Event of Default, the interest rate shall be the lesser of (a) the Maximum Rate (as defined in the Loan Agreement), and (b) the 3 month term SOFR (as defined in the Loan Agreement) plus the 8.75%. Accrued and unpaid interest on the outstanding principal balance of Credit Facility shall be due and payable monthly commencing on April 14, 2026 and continuing on the tenth (10th) Business Day of each month thereafter and on the Maturity Date.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

The ~~Company~~Loan ~~recognized~~Agreement ~~deferred~~requires ~~financing~~the ~~costs~~Company ofto ~~approximately~~comply ~~$0.3~~with ~~million~~maximum ~~for~~tangible ~~bank~~net ~~fees~~worth ~~which~~and ~~will~~minimum befixed ~~amortized~~charge ~~over~~coverage ~~three~~ratios. ~~years~~However, ~~and~~the ~~recorded~~lender ashas ~~interest~~waived ~~expense.~~compliance ~~For~~with the ~~three~~financial ~~and~~covenants ~~nine~~through ~~months~~August ~~ended December~~ 31, ~~2024~~2026. In addition, the ~~Company~~Credit ~~recognized~~Agreement ~~approximately~~contains ~~$0.1~~other ~~million~~standard affirmative and negative covenants such as ~~interest~~those ~~expense~~which ~~for~~(subject ~~the~~to ~~amortization~~certain ofthresholds) ~~deferred~~limit ~~financing~~the ~~costs.~~ability ~~For~~of the ~~three~~Company and ~~nine~~its ~~months~~subsidiary and ~~ended~~affiliates ~~December~~to, 31among other things, ~~2023~~incur debt, ~~the~~incur ~~Company recognized~~liens, $0engage asin ~~interest~~any ~~expense~~Change ~~for~~of Control (as defined in the ~~amortization~~Loan Agreement), enter into new lines of ~~deferred~~business ~~financing~~not ~~costs.~~related ~~For~~to the ~~three~~Company’s ~~and~~current ~~nine~~lines ~~months~~of ~~ended~~business, ~~December~~make 31certain investments, issue equity securities, ~~2024~~engage in transactions with affiliates, ~~interest~~or ~~expense~~prepay onany debt without the ~~line~~approval of ~~credit~~the ~~totaled $0~~Lender.2 ~~million~~Events ~~and~~of ~~$0.6~~default ~~million~~under the Loan Agreement include, ~~respectively.~~among ~~For~~other ~~the~~things, ~~three~~payment ~~and~~defaults, ~~nine~~breaches ~~months~~of ~~ended~~representations, warranties or covenants, defaults under material indebtedness, ~~December~~certain 31events of bankruptcy or insolvency, ~~2023~~judgment defaults, ~~interest~~certain ~~expense~~defaults onor events relating to employee benefit plans or a change in control of the ~~line~~Company. The events of ~~credit~~default ~~totaled~~would ~~$0.3~~permit ~~million~~the lender to terminate commitments and ~~$0.6~~accelerate ~~million,~~the ~~respectively~~maturity of borrowings under the Loan Agreement if not cured within applicable grace periods.

~~The~~If the Loan Agreement is terminated by Debtor anytime prior to the first (1st), second (2nd) or third (3rd) anniversary of the Effective Date (including without limitation as a result of acceleration of the outstanding ~~balances~~balance of the ~~Credit~~Loan Agreement as a result of ~~December~~the 31occurrence of an Event of Default), ~~2024~~Debtor ~~and~~will ~~March~~pay 31to Lender, ~~2024~~as a prepayment premium (the “Prepayment Premium”) and not as a penalty, ~~respectively~~an ~~were~~amount ~~$8.9~~equal ~~million~~to one and $8one-half percent (1.50%), one percent (1%) and one-half percent (0.5%) ~~million,~~of the Maximum Amount, respectively, provided that the Prepayment Premium will be waived if the Loan Agreement is terminated on or after the second (2nd) anniversary of the Effective Date and the Loan Agreement is contemporaneously refinanced by a Federal Deposit Insurance Corporation insured financial institution.

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 three months ended June 30, 2025 and 2024, the Company recognized less than $0.1 million, respectively, as interest expense for the amortization of deferred financing costs. For the three months ended June 30, 2025 and 2024, interest expense on the line of credit totaled $0.2 million and $0.2 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 ~~December~~June 3130, ~~2024~~2025, the outstanding principal balance ofwas approximately $0.7 million. isUnder the original terms of the agreement, the notes were due and payable in December 2025. ~~Interest~~with ~~accrues~~interest accruing at 5.5% per annum, iswhich was to be paid quarterly and is included in accrued expenses. ~~The~~On ~~note~~March is27, ~~subordinated~~2025, the toBoard ~~the~~of ~~Credit~~Directors ~~Agreement~~of Zircon Corporation and nothe ~~payment~~Stauss isFamily toAdministrative beTrust ~~made~~agreed onto extend the ~~note~~maturity ~~without~~dates ~~prior~~of both promissory ~~approval~~notes ~~from~~to ~~the~~December ~~bank~~31, 2027. InThere ~~the~~was ~~second~~no ~~quarter~~change ofto ~~2023,~~the aprincipal ~~portion~~amount ofor the annual interest rate. The notes ~~payable~~are subordinated to ~~Stauss~~the Credit ~~Family~~Agreement ~~Administrative~~and ~~Trust~~no ~~was~~payment ~~settled as~~is ato ~~noncash~~be ~~transaction~~made ~~against~~on the note ~~receivable~~without ~~from~~prior ~~one~~approval ~~stockholder~~from ~~for $0~~FGI.~~2 million.~~

OnFor ~~March~~the ~~31,~~three ~~2024~~months ~~the~~ended ~~Stauss~~June ~~Family~~30, ~~Administrative~~2025 ~~Trust~~ and 2024 the ~~Company~~interest ~~agreed~~expense toon ~~extend~~ the ~~maturity~~notes ~~date~~payable ofto the ~~Notes~~Stauss ~~Payable~~Family toAdministrative ~~the~~Trust totaled ~~trust~~less tothan ~~December~~$0.1 ~~31,~~million ~~2025~~in each respective period.

~~For~~10. ~~the~~Profit ~~three~~Sharing and ~~nine~~401(k) months ended December 31, 2024 the interest expense on the notes payable to the Stauss Family Administrative Trust totaled less than $0.1 million in each respective period. For the three and nine months ended December 31, 2023 the interest expense on the notes payable to the Stauss Family Administrative Trust totaled less than $0.1 million in each respective period.Plan

~~Loan~~The ~~Repayment~~Company has a defined contribution profit sharing plan for all eligible employees. Contributions to the profit sharing plan are determined annually by the Board of Directors. There were no profit sharing contributions made during the three months ended June 30, 2025 and 2024.

~~Section~~All ~~13(k)~~eligible ofemployees ~~the~~are ~~Exchange~~also ~~Act~~allowed ~~provides that it is unlawful for a company, such as ours, that has a class of securities registered under Section 12 of the Exchange Act~~ to, ~~directly~~participate ~~or indirectly, including through any subsidiary, extend or maintain credit~~ in the ~~form~~Company’s of401(k) ~~a personal loan to or for any director or executive officer of the Company~~plan. InThe ~~March 2022, Zircon Corporation, the~~ Company’s ~~wholly-owned subsidiary,~~contributions ~~loaned our chief executive officer funds~~ to ~~pay~~the ~~certain~~plan are ~~tax~~based ~~obligations,~~on ~~which~~a ~~was~~specified ~~still~~percentage ~~outstanding~~of ~~when~~each weparticipant’s ~~acquired~~eligible ~~Zircon in April 2023~~contribution, ~~which~~decided ~~may~~annually ~~have~~by ~~violated Section 13(k) of~~ the ~~Exchange~~Board ~~Act as a result~~ of ~~the~~Directors, ~~transition from private to public company~~as ~~accounting.~~defined ~~The loan was repaid~~ in ~~August 2023 as soon as management became aware of~~ the ~~possible~~plan ~~violation~~document. ~~The~~For ~~loan~~the ~~repayment~~three ~~was~~months ~~made~~ended byJune ~~means~~30, of2025 anand ~~offset~~2024, ~~to beneficial amounts of our chief executive officer in certain loans to~~ the Company tomade ~~which~~contributions ~~offset he did not object. Issuers that are found~~ to ~~have~~the ~~violated Section 13~~401(k) ofplan the Exchange Act may be subject to civil sanctions, including injunctive remedies and monetary penalties, as well as criminal sanctions. In accordance with ASC 450, Contingencies, no amounts have been accrued for a loss contingency as it is not estimable as of ~~December~~less ~~31,~~than ~~2024~~$0.1 ~~The imposition of any of such sanctions on us could have a material adverse effect on our business, financial position, results of operations or cash flows~~million.

~~11. Profit Sharing and 401(k) Plan~~17

The Company has a defined contribution profit sharing plan for all eligible employees. Contributions to the profit-sharing plan are determined annually by the Board of Directors. There were no profit-sharing contributions made during the three and nine months ended December 31, 2024 and 2023.

All eligible employees are also allowed to participate in the Company’s 401(k) plan. The Company’s contributions to the plan are based on a specified percentage of each participant’s eligible contribution, decided annually by the Board of Directors, as defined in the plan document. The Company’s contributions of less than $0.1 million were accrued for the nine months ended December 31, 2024. The Company’s contributions of less than $0.1 million for the year ended March 31, 2024 were paid during the nine months ended December 31, 2024. The Company’s contributions of less than $0.1 million for the year ended March 31, 2023 were paid in May 2023.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

1211. Equity

On February 28, 2024 the Company adopted a 2024 Equity Incentive Plan (the “Equity Plan”). The Plan provides for granting of stock options (“Options”), restricted stock units (“RSUs”), and other equity-based awards tied to the value of shares of common stock to key personnel, including directors, officers, employees, consultants, and advisors of the Company and its subsidiaries. The Plan provides for the grant of options (which may include “incentive stock options” (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”)), stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), and other stock-based awards. As of ~~December~~June 3130, ~~2024,~~ 2025, 40,000,000 shares are authorized for issuance, ~~419~~and 36,~~000~~783,500 ~~stock~~shares remain ~~options~~available ~~have~~for ~~been~~issuance ~~awarded,~~under ~~and~~the ~~39,581,000~~Equity Plan. The number of shares ~~remain~~of Common Stock available for grant and issuance under this Plan will be automatically increased on the first day of each calendar year beginning with the first January 1 following the effective date and ending with the last January 1 during the initial ten-year term of the Equity Plan, equal to the lesser of (A) five percent (5%) of the shares of Common Stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year and (B) such lesser number of shares of Common Stock as determined by the Board. The Board has determined that there will be no adjustment.

The following table summarizes the Company’s employee and non-employee Option activity under the Equity Plan for the following periods:

	Number of shares		Weighted average exercise price		Weighted average remaining term (years)		Aggregate intrinsic value (in thousands)
Outstanding as of March 31, 2024		—	$	—		—	$	—
Outstanding as of March 31, 2025		3,216,500	$	0.79		3.44	$	—
Options granted		~~100,000~~—		~~0.88~~—		~~4.8~~—		—
Outstanding as of June 30, 2024		100,000		0.88		4.8		—
Options forfeited		—		—		—		—
Options granted		198,000		0.88		3.7		—
Outstanding as of June 30, 2025		3,216,500	$	0.79		3.19	$	—
Outstanding as of September 30, 2024		298,000	$	0.88		3.5	$	—
Exercisable as of June 30, 2025		40,000	$	0.88		3.92	$	—
Options granted		121,000		0.88		2.3		—
Outstanding as of December 31, 2024		419,000		0.88		2.9		—
Vested and exercisable as of December 31, 2024		—	$	—		2.9	$	—

~~During~~No ~~the three and nine months ended December 31, 2024, the Company issued 121,000 and 419,000 common~~ stock options, ~~respectively,~~were ~~with an aggregate grant date fair value of $0.2 million~~granted, ~~as determined utilizing the Black Scholes model~~vested, tonor ~~employees~~exercised ~~and~~during ~~a nonemployee member of~~ the ~~Board~~three ofmonths ~~Directors.~~ended ~~The~~June 4830,~~000~~ ~~stock options awarded to the member of the Board of Directors for continual service will vest on August 14,~~ 2025. ~~The remaining 371,000 stock options awarded to employees will vest on an annual basis over five years from each awards’ respective grant date.~~

AsFor ofthe ~~December~~three 31months ended June 30, 2025 and 2024, ~~there~~the ~~was~~Company recognized $0.1 million and $0.1 million in stock based compensation, respectively, included in general and administrative expenses in the accompanying statements of operations and comprehensive loss. As of June 30, 2025 there was $0.8 million of unrecognized share-based compensation expense related to unvested stock options ~~which will be amortized~~ over a weighted- average term of 3.2 years.

During the ~~nine~~three months ended ~~December~~June 3130, ~~2024~~2025, the Company issued an aggregate of 26,999 common shares to ~~a consultant~~consultants, with ~~each~~an ~~issuance~~aggregate ~~valued~~value of at less than $0.1 million. atAs these common shares were fully vested upon the ~~following~~date ~~dates:~~of grant, the grant date fair value was expensed in the respective period of the grant date . The Company used the Black-Scholes model to value the option grants.

●The assumptions ~~During~~used ~~the~~to ~~three~~calculate ~~months ended June 30, 2024,~~ the ~~Company~~fair ~~issued~~value anof ~~additional 25,000 common shares ● During~~ the ~~three~~options ~~months~~are ~~ended~~summarized ~~September~~as ~~30, 2024, the Company issued an additional 8,329 common shares ● During the three months ended December 31, 2024 the Company issued an additional 24,999 common shares~~follows:

As Schedule ~~these common shares were fully vested upon the date~~ of ~~grant,~~Fair ~~the~~Value ~~grant date fair value was expensed in the respective period of the grant date.~~Assumptions

During the nine months ended December 31, 2024 the Company made distributions of $0.7 million to certain related party shareholders and one director shareholder for taxes due as a result of the Company converting from an S corporation to a C corporation, of which the total distribution was paid in cash.

		March 31, 2025
Volatility		36% - 75	%
Risk-free rate		3.5% - 4.6	%
Expected life (in years)		3 - 5
Stock price	$	0.75 - 0.83
Exercise price	$	0.75 - 0.83

2118

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

1312. Warrants

AtThe ~~the~~following ~~closing~~table ofprovides the ~~Merger,~~activity ~~the~~for ~~Company~~all ~~issued certain consultants and advisors~~ warrants for ~~to purchase an aggregate of 217,184 shares of Company common stock (~~the ~~“Advisor~~three ~~Warrants”).~~months ~~The~~ended ~~Advisor~~June ~~Warrants are exercisable any time ten years from the date of issuance~~30, ~~have~~ an exercise price of $0.20 per share, and are classified within equity. The Company determined the fair value of the Advisor Warrants of $0.3 million using the intrinsic value method based on a stock price established in the Merger of $1.60 per share.2025:

The following table provides the activity for all warrants for the nine months ended December 31, 2024:

Schedule of Warrants Activity

	Total Warrants		Weighted Average Remaining Term		Weighted Average Exercise Price
Outstanding as of March 31, 2024		217,184		9.2	$	0.20
Outstanding as of March 31, 2025		217,184		8.2	$	0.20
Outstanding as of December 31, 2024		217,184		8.5	$	0.20
Outstanding as of June 30, 2025		217,184		8.0	$	0.20

~~14.~~The ~~Commitments~~Advisor Warrants are exercisable any time ten years from the date of issuance and ~~Contingencies~~have been recorded as stockholders’ equity in the Company’s balance sheet

13. Commitments and Contingencies

Legal Proceedings

Zircon isengages ~~engaged~~ in procedures to protect its proprietary rights and has filed complaints with the Federal Trade Commission and the Customs and Border Patrol. As of June 30, 2025, no material contingencies exist.

Zircon Corporation v. Stanley Black & Decker, Inc.

A stay, placed on Zircon’s patent infringement suit filed against Stanley Black & Decker, Inc. (“SBD”) in the Federal District Court in the Northern District of California in December 2019, was released on May 8, 2024 following disposition of the International Trade Commission (“ITC”) matter between the parties filed by Zircon. The parties met and conferred and participated in a Court supervised mediation on September 18, 2024 that resulted in a Settlement Agreement entered into on October 15, 2024. Pursuant to the Settlement Agreement, Zircon and Stanley provided releases to one another and their respective subsidiaries and affiliates and Stanley received a fully paid, perpetual patent license under certain Zircon patents in exchange for payment to Zircon of $0.8 million and dismissal with prejudice of the subject litigation. The payment has been made and dismissal filed. Zircon included the settlement amount in the other income line item in the Consolidated Statement of Operations for the three and nine months ended December 31, 2024. The matter is closed.

Claim Asserted by Mr. Michael Green

In April 2024, Mr. Michael Green, an individual in Great Britain, asserted violation by Zircon in its U.S. website of certain privacy protections under the laws of Great Britain. The Company believes its U.S. website has not violated the laws of Great Britain and that, in any event, has responded stating such laws do not apply outside Great Britain. As of the date of filing these financial statements, Mr. Green has not responded to the Company and has not asserted any claim for damages.

Leases

The Company’s corporate headquarters in Campbell, California are leased from the ~~trust~~Stauss ofFamily ~~one~~Administrative ofTrust ~~the former shareholders of Corporation~~ for approximately $~~0.2~~19,000 ~~million~~ per month under a lease expiring in December 2027. The lease requires the Company to pay utilities, maintenance and real estate taxes. Rent expense was ~~less~~approximately ~~than~~ $~~0.1~~58,000 ~~million~~for ~~and~~both ~~$0.2~~of ~~million for~~ the three ~~and nine~~ months ended ~~December~~June 3130, ~~2024,~~ 2025 and ~~2023~~2024, respectively.

22The Company leases office equipment through a lease that expires in June 2026 and requires monthly lease payments of less than $0.1 million for a period of five years. The total lease expense for the three months ended June 30, 2025 and 2024 amounted to less than $0.1 million in each respective period.

~~ZRCN~~The ~~Inc~~Company had leased a vehicle that expired on July 2024 and required monthly lease payments of less than $0.1 million for a period of three years. In July 2024 the Company leased a new vehicle under the same terms, that expires in June 2027 with required monthly lease payments of less than $0.1 million for a period of three years. The total lease expense for the three months ended June 30, 2025 and 2024 amounted to less than $0.1 million in each respective period.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2024 AND 2023

The Company leases office equipment through a lease that expires in June 2026 and requires monthly lease payments of less than $0.1 million for a period of five years. The total lease expense for the three and nine months ended December 31, 2024 amounted to less than $0.1 million in each respective period. The total lease expense for the three and nine months ended December 31, 2023 amounted to less than $0.1 million in each respective period.

The Company had leased a vehicle that expired in July 2024 and required monthly lease payments of less than $0.1 million for a period of three years. In July of 2024 the Company leased a new vehicle under the same terms, that expires in June 2027 with required monthly lease payments of less than $0.1 million for a period of three years. The total lease expense for the three and nine months ended December 31, 2024 amounted to less than $0.1 million in each respective period and the three and nine months ended December 31, 2023 amounted to less than $0.1 million in each respective period.

As of December 31, 2024, the Company had an operating lease right-of-use asset of $0.6 million.

The components of lease expense, which include short-term and variable lease expense and are included in selling, general and administrative expense, are as follows:

Schedule of Components of Lease Expense

	December 31, 2024		December 31, 2023
	2025		2024
	For the Three Months Ended June 30,
	2025		2024
(In thousands)	(Unaudited)
Components of lease cost:
Operating lease expense	$	62	$	52
Operating lease expense	$173		$157
Total lease cost	$	62	$	52
Short-term lease cost		—
Total lease cost	$	173	$	157

~~The following table provides the weighted average lease term and weighted average discount rate as of December 31, 2024 and 2023, respectively:~~19

Schedule of Weighted Average Remaining Lease Terms and Discount Rate

	December 31, 2024			December 31, 2023
	(Unaudited)
Weighted average remaining lease term (in years)		3.39			3.91
Weighted average discount rate		7.00	%		7.00	%

Future minimum lease payment under non-cancellable lease as of December 31, 2024 are as follows:

Schedule of Future Minimum Lease Payment Under Non-cancellable Lease

Maturities of lease liabilities (In thousands)	Operating Leases
Year ending March 31,
Remainder of fiscal 2025	$	55
2026		219
2027		169
2028		193
2029 and thereafter		—
Total Minimum Lease Payments		636
Less effects of discounting		—
Present value of future minimum lease liabilities		636
Less current portion of operating lease liability		(209	)
Operating lease liability, net of current portion	$	427

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~DECEMBER~~JUNE 3130, ~~2024~~2025 AND ~~2023~~2024

~~15.~~The ~~Related~~following ~~Party~~table ~~Transactions~~provides the weighted average lease term and weighted average discount rate for the three months ended June 30, 2025 and 2024, respectively:

	For the Three Months Ended June 30,
	2025			2024
	(Unaudited)
Weighted average remaining lease term (in years)		2.87			3.10
Weighted average discount rate		7.00	%		7.00	%

Future minimum lease payment under non-cancellable lease as of June 30, 2025 are as follows:

Maturities of lease liabilities (In thousands)	Operating Leases
Year ending March 31,
Remainder of fiscal 2026	$	186
2027		239
2028		174
2029		—
2030 and thereafter		—
Total Minimum Lease Payments		599
Less effects of discounting		(66	)
Present value of future minimum lease liabilities		533
Less current portion of operating lease liability		(216	)
Operating lease liability, net of current portion	$	317

14. Related Party Transactions

Zircon is a member of a controlled group of companies and has revenue and cost-sharing activities with other members of the controlled group. Results of operations and financial condition may not represent amounts that would have been reported if Zircon operated as an unaffiliated entity.

Zircon has an exclusive manufacturing and technical assistance agreement with Zircon de Mexico S.A. de C.V. (the “Contractor”), an entity which is owned by certain shareholders of ~~Zircon~~the Company. Under the terms of the agreement, Zircon provides materials, technical assistance, and expertise to the Contractor, and the Contractor assembles certain of Zircon’s products.

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 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~~June 3130, ~~2024~~2025, principal balance of $0.7 million is due and payable in December ~~2025~~2027. Interest accrued at 5.5% per annum is paid quarterly and included in accrued expenses. The ~~note~~notes isare subordinated to ~~the~~FGI ~~line of credit note payable to the bank~~ and no payment is to be made on the ~~note~~notes without prior approval from ~~the bank~~FGI. 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~~June 30, 2025 and 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.~~20

OnZRCN ~~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~~ Inc.

~~During~~CONDENSED ~~the~~NOTES ~~nine~~TO ~~months~~THE ~~ended~~UNAUDITED ~~December~~CONSOLIDATED ~~31,~~FINANCIAL 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.STATEMENTS

~~16.~~FOR ~~Subsequent~~THE ~~Events~~THREE MONTHS ENDED JUNE 30, 2025 AND 2024

~~On January~~ 15~~, 2025, the Company issued an additional 24,999 common shares to an outside service provider~~. Subsequent Events

OnFrom ~~January~~July ~~28,~~ 2025 through March 2026, the Company’s ~~Board~~and ofFGI ~~Directors~~Worldwide, ~~approved~~LLC ~~grants~~(“FGI”) ofentered ~~2,818,000~~into ~~options~~multiple forbearance agreements and amendments to ~~purchase~~the Credit Agreement, which temporarily waived existing covenant defaults and imposed additional operational and reporting requirements while the Company’s ~~common shares~~pursued strategic and financing alternatives. On March 17, 2026, the Company repaid in ~~accordance~~full ~~with~~and extinguished its ~~Equity~~revolving ~~Compensation~~credit ~~Plan~~facility with FGI Worldwide, LLC using proceeds from a new senior secured revolving credit facility. Upon repayment, the FGI Credit Agreement was terminated and the Company was released from all remaining obligations.

24As a result of the extinguishment, the Company recognized a loss on extinguishment of debt of approximately $0.4M, which primarily consisted of the write-off of an early termination fee of $225,000 and unamortized deferred financing costs of $136,000.

On March 17, 2026 (the “Effective Date”), ZRCN Inc., a Delaware corporation (the “Company”), and its wholly owned subsidiary, Zircon Corporation, a California corporation (“Zircon” and collectively with the Company, the “Debtor”), entered into a Loan and Security Agreement (the “Loan Agreement”) with Altriarch Holdings SPV, LLC, as lender (“Lender”). The Loan Agreement provides for a $12.5 million senior secured revolving credit facility (the “Credit Facility”) available to be used by the Company and Zircon for, among other things, replacement and discharge of the Company’s current loan of $15.0 million with FGI Worldwide, LLC and the ability to increase its borrowings from the Lender for working capital purposes. As a result of this repayment, the Company has no continuing obligations to FGI under the former Credit Agreement.

The Loan Agreement matures on March 17, 2029 (the “Maturity Date”), subject to the right of the Debtor to request to extend the Maturity Date for up to an additional one (1) year period. Prior to the Maturity Date or an Event of Default, the interest rate shall be the lesser of (a) the Maximum Rate (as defined in the Loan Agreement), and (b) the 3 month term SOFR (as defined in the Loan Agreement) plus the 8.75%. Accrued and unpaid interest on the outstanding principal balance of Credit Facility shall be due and payable monthly commencing on April 14, 2026 and continuing on the tenth (10^th) Business Day of each month thereafter and on the Maturity Date (See Note 9).

In accordance with an agreement with S.C.E. Partners (“SCE”) dated May 15, 2023 and amended on July 15, 2024, the Company issued an additional 49,998 common shares to SCE on July 15, 2025 and recorded stock-based compensation expense of less than $0.1 million in general and administrative expense.

The Company has evaluated all subsequent events through the date these financial statements were issued. Except for the events described above, no other material subsequent events requiring disclosure or adjustment were identified.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management discussion and analysis of the financial position and results of operations (“MD&A”) should be read in conjunction with the ~~audited~~unaudited consolidated financial statements and related notes to the financial statements included elsewhere in in this Report. This discussion contains forward-looking statements that relate to future events or our future financial performance. ~~These~~ These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, ~~performance~~ performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include, among others, those listed under “Forward-Looking Statements” and “Risk Factors” and those included elsewhere in this report.

OVERVIEW

Zircon is a Silicon Valley-based company operating in Northern California since 1977. leveraging its proprietary sensor-based technology across a mix of global markets, including commercial and residential buildings, government infrastructure and building information modeling. Zircon is focused on creating new, technical solutions for global applications in the areas of home and workplace safety, project efficiency, and structural data analysis.

Zircon benefits from a multi-generational customer base of professional contractors and do-it-yourselfers who rely on Zircon’s innovative and easy-to-use products to get the job done.

RESULTS OF OPERATIONS

During the ~~nine~~three months ended ~~December~~June 3130, ~~2024~~2025, and at March 31, ~~2024~~2025, Zircon’s selected financial information is the following (in thousands):

Financial Position Analysis

The information presented below as of ~~December~~June 3130, ~~2024~~2025 as compared to March 31, ~~2024~~2025 for ZRCN Inc (in thousands):

	December 31, 2024
In thousands	June 30,2025		March 31, 2025
In thousands	(Unaudited)		March 31, 2024
Assets	$	21,218	$	23,378
Assets	$	26,224	$	27,615
Liabilities	$	17,420	$	17,848
Liabilities	$	17,963	$	18,688
Equity	$	3,798	$	5,530
Equity	$	8,261	$	8,927

Assets

Total assets on ~~December~~June 3130, ~~2024~~2025 were $2621.2 million compared to $2723.64 million on March 31, ~~2024~~2025, which was a decrease of approximately $12.4 2 million. This decrease was driven primarily by ~~decreases~~a decrease in ~~accounts~~cash ~~receivable~~ of $10.78 million, ~~inventories~~a decrease in accounts receivable of $10.23 million, ~~and~~a ~~intangible~~decrease ~~and~~in ~~right-of-use~~inventory ~~assets~~ of $0.29 million, ~~offset~~a bydecrease anin ~~increase~~property, inplant, ~~cash~~and equipment and right-of-use assets of $10.41 ~~million,~~ and ~~deferred~~decreases ~~financing~~in ~~costs~~all other assets of $0.31 million.

Liabilities

Total liabilities on ~~December~~June 3130, ~~2024~~2025 were $1817.04 million compared to $1817.78 million on March 31, ~~2024~~2025, which was a decrease of approximately $0.7 4 million. This decrease was driven primarily by a decrease in ~~accounts~~our ~~payable~~line ~~and accrued expenses~~ of ~~$1.4~~credit ~~million, a decrease in our operating lease liability~~ of $0.17 million, ~~a decrease in notes payable of $75,000~~ offset by an increase in ~~our~~accounts ~~line~~payable and ofaccrued ~~credit~~expenses of $0.93 million.

Equity

Total equity on ~~December~~June 3130, ~~2024~~2025 was $8.3.8 million compared to $85.95 million on March 31, ~~2024~~2025, which was a decrease of approximately $01.67 million. This decrease was driven primarily by a ~~distribution~~comprehensive toloss ~~certain related party shareholders and one director~~ of $01.78 million offset by an increase in ~~additional~~other ~~paid-in~~comprehensive ~~capital~~loss of ~~approximately~~ $0.1 million.

2522

Operating Results Analysis

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	For the Three Months Ended June 30,
(In thousands)	~~2024~~2025			~~2023~~2024			~~2024~~			~~2023~~
Net Sales	$	76,~~236~~062		$	75,~~539~~811		$	~~22,409~~		$	~~23,368~~
Cost of goods sold		4,~~208~~684			43,~~485~~460			~~13,024~~			~~12,980~~
Gross Profit		31,~~028~~378			32,~~054~~351			~~9,385~~			~~10,388~~
Gross Margin		4122.87	%		40.5	%		~~41.9~~	%		~~44.5~~	%
Operating Expenses
General & administrative		1,~~715~~447			1,~~510~~461			~~5,201~~			~~4,899~~
Marketing & selling		1,~~332~~160			~~1,176~~903			~~3,340~~			~~3,351~~
Research and development		~~391~~411			~~465~~425			~~1,248~~			~~1,453~~
Total Operating Expenses		3,~~438~~018			32,~~151~~789			~~9,789~~			~~9,703~~
(Loss) income from operations		(410	)		(97	)		(404	)		685
Operating loss		(1,640	)		(438	)
Other (Income) Expense
Other income		800			0			800			0
Interest expense		204			223
Interest expense		(204	)		(229	)		(630	)		(562	)
Other expense		8			7
Other expense		(7	)		(11	)		(23	)		(30	)
(Income) loss on foreign currency translation		64			(103	)
(Income) loss on foreign currency translation		19			(52	)		184			(59	)
Total other expenses		276			127
Total other income (expenses)		608			(292	)		331			(651	)
Loss before income taxes		(1,916	)		(565	)
Income (Loss) before income taxes		198			(389	)		(73	)		34
Benefit from (Provision for) income taxes		(18	)		(21	)
(Provision for) benefit from income taxes		(150	)		(23	)		4			(56	)
Net loss	$	(1,934	)	$	(586	)
Net income (loss)	$	48		$	(412	)	$	(69	)	$	(22	)
Foreign currency translation adjustment		130			117
(Loss) gain on change in foreign currency translation adjustment		(19	)		(11	)		(27	)		89
Comprehensive income (loss)	$	(1,804	)	$	(469	)
Comprehensive income (loss)	$	29		$	(423	)	$	(96	)	$	67

Sales revenue and gross margin

Revenue for the three months ended ~~December~~June 3130, ~~2024~~2025 was $76.21 million compared to $7.5.8 million for the three months ended ~~December~~June 3130, ~~2023~~2024 which ~~was~~ was a ~~decrease~~increase of $0.3 million, or 4%. This ~~decrease~~ was driven primarily by ~~reductions~~increased insales ~~Stud~~from ~~Sensor~~one ~~Edge~~of ~~products~~our ~~and~~major ~~Multifunctional Scanners offset by increases in Stud Sensor Center products~~customers. Gross profit for the three months ended ~~December~~June 3130, ~~2024~~2025 was $31.04 million, or ~~a 42~~22.8% ~~gross margin~~ compared to $32.14 million, or 4140.5%, during the three months ended ~~December~~June 3130, ~~2023~~ 2024, which was a decrease of $~~26,000 in~~1.0 ~~gross profit~~million, or 141%, and ~~an increase of 1~~17.6% ~~gross margin~~, respectively. The decrease in gross profit was primarily driven by aan ~~small~~increase in ~~change~~duty expense resulting from increase tariffs on our products manufactured in ~~product~~ ~~mix~~China.

~~Revenue~~During ~~for~~ the ~~nine~~three months ended ~~December~~June 3130, ~~2024~~2025, ~~was $22.4 million compared to $23.4 million for~~ the ~~nine months ended December 31, 2023 which was a decrease of $1~~U.~~0 million, or 4%~~S. ~~This~~government ~~decrease~~implemented ~~was driven primarily by decreased sales for Stud Sensor Edge~~ and/or ~~Multifunctional Scanner~~expanded ~~products~~tariffs ~~offset~~pursuant byto ~~increases~~authorities inunder ~~Stud Sensor Center products. Gross profit for~~ the ~~nine months ended December 31, 2024 was $9.4~~International ~~million,~~Emergency orEconomic ~~42%~~Powers ~~compared~~Act ~~to $10.4 million~~(‘IEEPA”), ortargeting ~~44%,~~imports ~~during~~from ~~the~~certain ~~nine~~countries ~~months~~that ~~ended~~are ~~December~~significant ~~31,~~sources ~~2023, which was a decrease in gross profit~~ of ~~$1.0~~raw ~~million~~materials, ~~or 10%~~ components, and afinished 2%goods ~~decrease~~used in ~~gross margin, respectively. The decrease in gross profit is driven by reduced unit volumes for~~ the ~~aforementioned~~Company’s ~~products~~operations.

As a result, we experienced increased input costs associated with imported materials and products subject to these tariffs. The increased tariff expense recognized during the three months ended June 30, 2025 was approximately $1.4 million compared to $0.3 million during the three months ended June 30, 2024 which was an increase of $1.1 million. These costs were recognized primarily within cost of goods sold and contributed to a gross margin decrease of 1,800 basis points.

The Company has taken the following actions to mitigate the impact of these tariffs going forward including:

	1.	Adjusting sourcing strategies, including shifting to alternative vendor locations and jurisdictions where feasible (primarily from subcon locations in China to Malaysia and our facility in Ensenada, Mexico,
	2.	Implementing selective price increases to our major customers; however, these increases are temporary,
	3.	Improving operational efficiencies.

However, these mitigation efforts have not fully offset the increased costs from the tariffs and the timing and effectiveness of such actions may vary.

In addition, tariffs have contributed to supply chain disruptions, including longer lead times and increased logistics costs, which have affected inventory levels and fulfillment timing during the period.

Research and development

Research and development expenses for the three months ended ~~December~~June 3130, ~~2024~~2025 were $0.4 million compared to $0.54 million for the three months ended June ~~December 31~~30, ~~2023~~2024. This decrease of $7414,000, or 163%, and was driven primarily by reduced ~~payroll~~consulting expenses.

Research and development expenses for the nine months ended December 31, 2024 were $1.2 million compared to $1.5 million for the nine months ended December 31, 2023. This decrease of $0.2 million, or 14%, was driven primarily by reduced payroll expenses.

General and Administrative expenses

General and administrative expenses for the three months ended ~~December~~June 3130, ~~2024~~2025 were $1.7,4 million compared to $1.5 million for the three months ended ~~December~~June 3130, ~~2023~~2024 which was ana increase of $~~0.2 million~~14,000, or 141%. This ~~increase~~decrease was driven primarily by ~~increased~~an ~~payroll,~~decrease ~~bank fees,~~in ~~and~~outside ~~legal~~service expenses.

General and administrative expenses for the nine months ended December 31, 2024 were $5.2 million compared to $4.9 million for the nine months ended December 31, 2023 which was an increase of $0.3 million, or 6%. This increase was driven primarily by increased bank fees and payroll expenses.23

Marketing and Selling expenses.

Marketing and selling expenses for the three months ended ~~December~~June 3130, ~~2024~~2025 were $1.32 million compared to $10.29 million for the three months ended ~~December~~ 31June 30, ~~2023~~2024 which was aan increase of $0.23 million, or 1328%. This increase was driven primarily by an increase in ~~sales~~consulting ~~payroll expenses~~ and ~~marketing consulting~~ advertising expenses.

~~Marketing~~Other ~~and selling~~ expenses for the nine months ended December 31, 2024 were $3.3 million compared to $3.4 million for the nine months ended December 31, 2023 which was a decrease of $11,000 million, or less than 1%. This decrease was driven primarily by a reduction in the consulting.

~~Stock~~Other ~~based~~expenses ~~compensation~~for the three months ended June 30, 2025 were approximately $0.3 million compared to $0.1 million for the three months ended June 30, 2024 which was an increase of approximately $0.2 million, or 117%. This increase was driven primarily by an increase in foreign exchange losses of $0.2 million.

During the three months ended December 31, 2024 the company recorded stock compensation expense of approximately $13,000. During the three months ended December 31, 2023, Zircon did not record any stock-based compensation. The increase is due to the implementation of a new stock option plan for the Company.

During the nine months ended December 31, 2024 the Company recorded stock-based compensation expense of approximately $22,000. During the nine months ended December 31, 2023, Zircon did not record any stock-based compensation.

Warrants with a fair value of $0.3 million were issued during the year ended March 31, 2024.

Other income and expenses

Other income related to a settlement of litigation was $0.8 million for the three and nine months ended December 31, 2024. There was no other income for the three and nine months ended December 31, 2023.

Other expenses for the three months ended December 31, 2024 were approximately $0.2 million compared to $0.3 million for the three months ended December 31, 2023 which was a decrease of approximately $0.1 million, or 34%. This decrease was driven primarily by a decrease in foreign exchange losses of $71,000.

Other expenses for the nine months ended December 31, 2024 were approximately $0.5 million compared to $0.7 million for the nine months ended December 31, 2023 which was a decrease of approximately $0.2 million, or 28%. This decrease was driven primarily by an increase in interest expense of $68,000 and a decrease in foreign exchange losses of $0.2 million.

Zircon has notes payable to the Stauss Family Administrative Trust to repay loans made to Zircon. The 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 payable to the bank and no payment is to be made on the note without prior approval from the bank. 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. The principal amount was classified from non-current to current liabilities as of December 31, 2024,

Interest expense on these notes for the three months ended December 31, 2024 and 2023, respectively, was approximately $9,000 and $9,000 respectively. Interest expense on these notes for the nine months ended December 31, 2024 and 2023, respectively, was approximately $37,000 and $35,000, respectively.

Benefit from/Provision for income taxes

The provision for income taxes for the three months ended December 31, 2024 was approximately $0.2 million compared to a provision for income taxes of approximately $23,000 for the three months ended December 31, 2023 which was an unfavorable change of approximately $0.1 million. This unfavorable change was driven by a change in the deferred tax position in our US entity.

The benefit from income taxes for the nine months ended December 31, 2024 was approximately $4,000 compared to a provision for income taxes of approximately $56,000 for the nine months ended December 31, 2023 which was a favorable change of approximately $60,000 million. This favorable change was driven by a change in our deferred tax asset position in the US entity.

Other comprehensive income (loss)

Comprehensive income (loss) for all periods presented is comprised primarily of net income (loss) and foreign currency translation adjustments. The change in foreign currency translation adjustment was a loss of $8,000 for the three months ended December 31, 2024 and approximately $0.1 million for the nine months ended December 31, 2024.

Cash Flow Analysis

	For the Nine Months Ended December 31,
	For the Three Months Ended March 31,
In thousands	~~2024~~2025			~~2023~~2024
Operating activities	$	~~1,626~~(42	)	$	~~1,230~~983
Investing activities		(~~708~~93	)		(~~1,215~~285	)
Financing activities		~~204~~(694	)		~~1,572~~(853	)
Effect of exchange rate changes		~~246~~77			427
Net increase (decrease) in cash	$	1,368		$	1,591
Net decrease in cash	$	(752	)	$	(128	)

28Operating Activities

~~Operating~~During the three months ended June 30, 2025, net cash used in operating activities was $42,000. This decrease was due to a net loss of $1.9 million offset by non-cash expenses for depreciation, amortization, inventory obsolescence impairment and credit loss recovery of $0.4 million, total stock based compensation of $0.1 million, a decrease in accounts receivable of $0.3 million, a decrease in inventories of $0.8 million, and an increase in accounts payable and accrued expenses of $0.3 million.

During the ~~nine~~three months ended ~~December~~June 3130, 2024, net cash provided by operating activities was $1.60 million. This increase was due ~~primarily~~ to a ~~small~~ net loss of ~~approximately~~ $~~69,000~~0.6 million offset by non-cash expenses for depreciation, amortization, ~~a provision for credit losses~~ and inventory obsolescence impairment of $10.24 million, acommon stock ~~decrease~~issued infor ~~accounts~~advisory ~~receivable~~services of $~~1.6~~40,000 ~~million~~, a decrease in ~~inventories~~accounts receivable of $12.08 million, and ~~common~~a ~~stock~~decrease ~~issued~~in ~~for~~inventories ~~advisory services~~ of $650.8 million,~~000~~ offset by aan decrease in accounts payable, and accrued expenses, ~~and operating lease liabilities~~ of $1.68 million, an increase in deferred ~~financing~~expenses ~~costs~~ of $0.3 million, an aincrease ~~foreign~~in ~~currency~~prepaid ~~gain~~expenses of $0.2 1 million, a decrease in operating lease liabilities of $62,000, and ana ~~increase~~provision infor ~~prepaids~~bad debt and foreign ~~other~~currency ~~assets~~losses of $0.1 million.

During the nine months ended December 30, 2023, net cash provided by operating activities was $1.2 million. This increase was due to a net loss of $22,000 in addition to non-cash expenses for depreciation and amortization, inventory obsolescence impairment, and provisions for bad debt and currency losses of $0.7 million, a decrease in accounts receivable, prepaids and other assets of $0.5 million, an increase in accounts payable, accrued expenses, and operating lease liabilities of $0.7 million, offset by an increase in inventories of $0.7 million.

Investing Activities

During the ~~nine~~three months ended ~~December~~June 3130, ~~2024~~2025, net cash used in investing activities was $0.71 million. This decrease was due to purchases of ~~property~~ property and equipment of $0.71 million.

During the ~~nine~~three months ended ~~December~~June 3130, ~~2023~~2024, net cash used in investing activities was $10.23 million. This decrease was due to ~~the impact of the Harmony merger, net of cash acquired of $0.5 million,~~ purchases of property and equipment of $0.63 million ~~and purchases if intangible assets of $0~~.~~1 million.~~

Financing Activities

During the ~~nine~~three months ended ~~December~~June 3130, ~~2024~~2025, net cash ~~provided~~used byin financing activities was $0.27 million. This ~~increase~~decrease was due to ~~borrowings~~net repayments on ~~lines~~our line of credit of $~~19.5 million offset by repayments of $18.6 million, shareholder distributions of $~~0.67 million ~~and repayment of debt assumed as part of the Harmony merger of $75,000~~.

During the ~~nine~~three months ended ~~December~~June 3130, ~~2023~~2024, net cash ~~provided~~used byin financing activities was $10.69 million. This ~~increase~~decrease was due to ~~net~~repayments ~~borrowings~~on ~~under~~our ~~the Company’s~~ line of credit of $20.25 million, ~~offset~~prior bySubchapter ~~repayments~~S ofshareholder ~~debt~~tax ~~assumed~~distributions ~~as part~~ of ~~the Harmony merger of~~ $0.3 million, and repayment of ~~notes~~debt ~~payable~~assumed as part of the Harmony merger of $075,000.~~3 million.~~

Liquidity, Capital Resources and Sources of Financing

As of ~~December~~June 3130, ~~2024~~2025 the Company had a cash balance of $10.97 million and working capital of $131.58 million. Working capital as of March 31, 2025 ~~2024~~ was $143.15 million. The decrease of $01.67 million was driven primarily by a decrease in ~~accounts~~cash ~~receivable~~ of $10.78 million, a decrease in ~~inventories~~accounts receivable of 1$0.23 million, a ~~reclass~~decrease toin ~~short-term~~inventory of ~~the note payable to the Status Family Trust of~~ $0.79 million, ~~offset by~~ an increase in ~~cash of $1.4 million and a decrease in~~ accounts payable and accrued expenses of $10.43 million, offset by a decrease ofin ~~other~~our ~~notes payable~~line of ~~$0.1~~credit ~~million, and an increase in prepaids~~ of $0.17 million. To date the Company has been financed primarily through retained earnings, loans and credit lines secured by accounts receivable, inventory and fixed assets. ~~The Company believes that it has sufficient liquidity and access to loans and credit lines to fund its operations and working capital requirements for the next 12 months.~~

~~On May~~The ~~31,~~increased ~~2024,~~tariff-related ~~the~~costs ~~Company~~have ~~entered~~placed ~~into~~additional apressure ~~Revolving~~on ~~Credit~~our ~~Agreement~~working ~~(the~~capital ~~“Credit Agreement”) with FGI Worldwide LLC, as Agent for the lender (“FGI”)~~requirements. The ~~Credit~~decrease ~~Agreement~~in ~~provides~~gross ~~for~~profit ~~a $15 million senior secured revolving credit facility (the “Credit~~and ~~Facility”)~~gross ~~available~~margin toand beextended ~~used~~supply bychain ~~the~~cycles ~~Company,~~have ~~Zircon~~resulted ~~and~~in ~~its~~a ~~Affiliates~~decrease ~~for~~in ~~replacement~~our ~~and~~cash ~~discharge~~balance of ~~the~~approximately ~~Company’s current US Bank loan of~~ $0.8~~,750,000~~ ~~and~~million ~~matures~~from ~~on May~~ March 31, ~~2027~~2025. ~~The~~Continued ~~Company,~~or ~~Zircon~~escalated ~~and~~tariffs ~~the~~will ~~Affiliates~~require ~~are~~additional ~~guarantors~~financing ofand ~~all~~changes ~~obligations under~~in ~~the~~capital ~~Credit~~allocation ~~Agreement~~priorities ~~and~~including shifting payments to the ~~Company’s~~U.S. ~~four~~Government ~~principal~~from ~~shareholders~~inventory ~~are~~suppliers ~~limited~~to ~~guarantors~~other ~~thereof~~vendors.

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 June 30, 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, 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.

On May 31, 2024, the Company entered into a Revolving Credit Agreement (the “Credit Agreement”) with FGI Worldwide LLC, as Agent for the lender (“FGI”). The Credit Agreement provides for a $15 million senior secured revolving credit facility (the “Credit Facility”) available to be used by the Company, Zircon and its Affiliates for replacement and discharge of the Company’s then current US Bank loan of $8,750,000 and matures on May 31, 2027. The Company, Zircon and the Affiliates are guarantors of all obligations under the Credit Agreement and the Company’s four principal shareholders are limited guarantors thereof. As of June 30, 2025, the outstanding balance on the FGI Credit Facility was approximately $7.7 million.

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.

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 maximum total net leverage of $15.0 million and a minimum fixed charge coverage ratio ~~ratios~~of 1.10. As of ~~December 31~~June 30, ~~2024~~2025, the Company ~~had~~was anot ~~liability~~in ofcompliance ~~approximately~~with ~~$9.0~~the ~~million~~fixed ~~outstanding~~charge ~~under~~coverage ~~the~~ratio ~~Credit Agreement~~ and ~~was~~is ~~compliant~~working with the lender ~~maximum~~to ~~total~~obtain ~~net~~a ~~leverage~~waiver and ~~but~~has ~~not~~entered ~~the~~into ~~fixed~~a ~~charge~~third ~~coverage~~forbearance ~~ratio.~~agreement ~~The~~and ~~Company~~Credit isAgreement ~~working~~amendment with ~~the~~regard ~~lender~~thereto toalong ~~get~~with ~~a waiver regarding~~additional ~~the fixed charge coverage ratio~~covenants.

Remediation of Material Weakness

Subsequent to June 30, 2025, we have initiated steps to remediate the material weaknesses in our internal control over financial reporting related to (i) inadequate segregation of duties due to limited personnel and (ii) insufficient formalized policies and procedures for accounting, financial reporting and record keeping.

In furtherance of these efforts, we hired a Corporate Controller with significant accounting and financial reporting experience. The Corporate Controller is responsible for strengthening our financial reporting processes and internal control environment. As part of these efforts, the Corporate Controller has implemented enhanced review procedures, including the review and approval of all journal entries prior to posting.

In addition, we have begun to formalize and document key accounting and operational processes and controls. These efforts include the development and implementation of written policies and procedures related to, among other areas, journal entry preparation and review, revenue recognition and accounts receivable cycles, and the purchase order and procurement process. These policies are designed to improve consistency, establish clear control ownership, and enhance oversight across key transaction cycles.

We are also evaluating further enhancements to our control environment, including the potential addition of personnel or third-party resources, to improve segregation of duties and strengthen financial reporting oversight.

While these actions are intended to remediate the identified material weaknesses, the material weaknesses cannot be considered remediated until the applicable controls have been fully implemented and have operated effectively for a sufficient period of time and management has concluded, through testing, that these controls are effective. We continue to monitor the effectiveness of these remediation efforts and plan to complete the remediation process as promptly as possible.

Information on Outstanding Securities

The following table sets out the number of common shares and warrants outstanding as of the date hereof:

Information on Outstanding Securities as of December 31, 2024
Information on Outstanding Securities as of June 30, 2025
Common shares issued and outstanding			10,~~075~~333,~~264~~425
Potential issuance of common shares
Warrants			217,184
Stock options			~~419~~3,~~000~~216,500
Fully diluted shares			1013,~~711~~767,~~448~~109

AsDuring ofthe ~~February~~three 14months ended June 30, 2025, the Company ~~had~~issued 1026,~~075,264~~999 common shares ~~outstanding~~primarily to two service providers with the associated stock-based compensation being recorded in general and administrative expenses.

Related Party Transactions

The Company leases ~~from the Stauss Family Administrative Trust~~ a 14,000 square foot facility from a trust owned by the 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~~June 3130, ~~2024~~2025, principal balance of $0.7 million is due and payable inon December ~~2025~~31, 2027. Interest accrued at 5.5% `per annum is paid quarterly and included in ~~accrued~~ accrued expenses. The ~~note~~notes isare subordinated to the ~~line of~~ credit note payable to ~~the~~FGI ~~bank~~ and no payment is to be made on the note without prior approval from the ~~bank~~lender. 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~~June 3130, ~~2023,~~2025 and 2024 the interest expense on notes payable to the Stauss Family Administrative Trust ~~totaled less~~was ~~than~~ approximately $~~0.1 million~~9,000, respectively.

On March 3127, ~~2024~~2025 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~~2027.

During the ~~nine~~three months ended ~~December~~June 3130, 2024, the Company made a distribution of $0.7 million to certain related party shareholders and one ~~director~~ director shareholder for taxes due ~~resulting~~as ~~from~~a result of the Company converting from an S corporation to a C corporation., ~~$0.3 million~~ of ~~this distribution~~which ~~was in cash and~~ the ~~remaining~~total ~~$0.4~~distribution was ~~million~~paid ~~is recorded~~ in ~~accrued~~cash ~~expenses~~from onthose ~~the~~shareholders’ ~~balance~~prior ~~sheet.~~earnings ~~During~~previously ~~October~~taxed ~~2024~~that ~~the Company~~they ~~made~~had anot ~~cash~~yet ~~distribution~~withdrawn offrom ~~approximately $0.4 million to settle~~ the ~~remaining liability~~Company.

Off-Balance Sheet Arrangements

ZRCN has no off-balance sheet arrangements.

Estimates, Judgments and Assumptions

ZRCN prepares its consolidated financial statements in accordance with US GAAP, which require management to make estimates and assumptions that affect the amounts of its assets and liabilities, the information provided with regard to future assets and liabilities as well as the amounts of revenues and expenses for the relevant periods. Readers are invited to refer to Note 3 of the financial statements for the ~~nine~~three months ended ~~December~~June 3130, ~~2024~~2025, for details.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Interest~~Trade ~~Rate~~Policy and ~~Foreign~~Tariff ~~Currency~~ Risk

Our business is exposed to risk arising from changes in trade policy, including tariffs imposed under IEEPA. These tariffs may:

	●	Increase the cost of imported goods and materials,
	●	Reduce demand for our products due to higher prices,
	●	Disrupt supply chains and increase sourcing complexity, and
	●	Introduce volatility in gross margins.

Interest Rate Risk

ZRCN’s exposure to changes in interest rates relates primarily to Zircon’s cash, cash equivalents and outstanding debts.

Foreign Currency & Exchange Risk

ZRCN sources parts from foreign vendors and sells its products in various foreign markets around the world. Changes in foreign currency exchange for the purchase of components from vendors and the sale of products in foreign markets can have a material impact on the Company’s results of operations and liquidity. The Company ~~hedge~~hedges or ~~take~~takes other steps to mitigate the impact from foreign currency exchange rates, but there is no guarantee that these efforts will be successful in every instance.

Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal accounting and financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal accounting and financial officer has concluded that as of December 31, 2024, our disclosure controls and procedures were not effective as of such date as a result of material weaknesses in our internal control over financial reporting due to inadequate segregation of duties within account processes due to limited personnel and insufficient written policies and procedures for accounting, IT and financial reporting and record keeping. Under the direction of our principal executive officer and principal financial and accounting officer, we continue to develop a plan to remediate the material weaknesses.27

Our management, with the participation of our principal executive officer and principal accounting and financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal accounting and financial officer have concluded that as of June 30, 2025, our disclosure controls and procedures were not effective as of such date as a result of material weaknesses in our internal control over financial reporting due to inadequate segregation of duties within account processes due to limited personnel and insufficient written policies and procedures for accounting, IT and financial reporting and record keeping. Under the direction of our principal executive officer and principal financial and accounting officer, we are developing a plan to remediate the material weaknesses.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the U.S All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

As of ~~December~~June 3130, ~~2024~~2025, under the supervision and with the participation of our management, including our principal executive officer and ~~principal~~ principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that, as of ~~December~~June 3130, ~~2024~~2025, our internal control over financial reporting had material weaknesses that lack adequate segregation of duties within account processes due to limited personnel and insufficient written ~~policies~~ policies and procedures for accounting, IT and financial reporting and record keeping and we are implementing plans to improve such internal control.

Changes in Internal Control Over Financial Reporting

~~There~~Subsequent to June 30, 2025, we initiated remediation actions in response ~~has~~to ~~been~~the nomaterial ~~change~~weaknesses identified in our internal control over financial reporting. ~~during~~These actions include the ~~three~~hiring ~~months~~of ~~ended~~a ~~December~~Corporate Controller, 31the implementation of enhanced review procedures over journal entries, ~~2024~~and ~~that~~the ~~has~~development ~~materially~~and documentation of key accounting ~~affected,~~policies orand isprocedures. ~~reasonably~~These ~~likely~~changes toare ~~materially~~intended ~~affect,~~to strengthen our internal control ~~over financial reporting~~environment.

32Other than the foregoing, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

From time to time and in the normal course of operations, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Other than as indicated below, we are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows.

Zircon is engaged in procedures to protect its proprietary rights and Zircon has filed complaints with the Federal Trade Commission and the Customs and Border Patrol.

Zircon previously reported a claim asserted by Mr. Michael Green, an individual in Great Britain, that Zircon violated in its U.S. website of certain privacy protections under the laws of Great Britain. The Company believes its U.S. website has not violated the laws of Great Britain and that, in any event, has responded stating such laws do not apply outside Great Britain. As of the date of filing this quarterly report on Form 10-Q, Mr. Green has not responded to the Company and has not asserted any claim for damages.

Item 1A. Risk Factors

Information regarding the primary risks and uncertainties that could materially and adversely affect our future performance or could cause actual results to differ materially from those expressed or implied in our forward-looking statements, appears in Part I, Item 1A - “Risk Factors” of our ~~2024~~2025 Form 10-K filed with the Securities and Exchange Commission on ~~July~~September 1610, ~~2024~~2025 . ~~Additionally,~~There ~~the~~have ~~Company~~been ~~has~~no material ~~identified~~changes from the ~~following~~ risk ~~factor:~~factors set forth in our Form 10-K filed on September 10th .

Tariffs applied to the Import or Export of Company Products would negatively impact the Company’s financial position, cash flows and potential returns to investors.

The Company’s principal products are nearly all conceived, designed, engineered, performance specification established, developed, protyped, first article approved, materials and components selected, and manufacturing process determined at the Company’s headquarters in Campbell, California. The Company currently relies on the timely delivery of various components, production of certain subassemblies and finished goods, production and use of packaging and shipments of products through or into geographical areas and/or locations that have the power and/or ability to charge the Company, in the form of a tariff, on goods shipped from, through or into such locations. The assessment or application of such a tariff without the ability of the Company to pass the amount thereof to purchasers of the Company’s goods, or otherwise collect such tariffs placed thereon, would negatively impact the financial performance of the Company and an investor’s return on investment in the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We have not made any sales of unregistered securities of our common stock during the period from April 1, ~~2024~~2025, through ~~December~~June 3130, ~~2024~~2025.

Item 3. Defaults Upon Senior Securities

~~Not~~See the Company’s 10-K for the fiscal year ended March 31, 2024 and its 8-K’s filed subsequent to the ~~applicable~~filing of its 10-K for the fiscal year ended March 31, 2024 for Forbearance Agreements executed with the Company’s former Senior Securities Lender, FGI Worldwide LLC, and the Company’s 8-K filed on March 23, 2026 describing its Loan and Security Agreement dated March 17, 2026 with Altriarch Holding SPV, LLC, the Company’s successor Senior Securities Lender.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the last fiscal quarter, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated by any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement.”

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Item 6. Exhibits

Exhibit Number		Description
3.1		Certificate of Incorporation, dated June 19, 2018 (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 filed by the Company on December 27, 2021)
3.2		Certificate of Amendment to Certificate of Incorporation, dated August 28, 2020 (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form 10 filed by the Company on December 27, 2021)
3.3		Certificate of Amendment to Certificate of Incorporation, dated July 9, 2021 (incorporated by reference to Exhibit 3.3 to the Registration Statement on Form 10 filed by the Company on December 27, 2021)
3.4		Certificate of Amendment to Certificate of Incorporation, dated June 17, 2022 (incorporated by reference to Exhibit 3.5 to the Current Report on 8-K filed by the Company on June 21, 2022)
3.5		Certificate of Amendment to Certificate of Incorporation, dated June 17, 2023 (incorporated by reference to Exhibit 3.1 to the Current Report on 8-K filed by the Company on June 27, 2023)
3.6		Bylaws of the Company (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form 10 filed by the Company on December 27, 2021)
4.1		Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities and Exchange Act (incorporated by reference to Exhibit 4.1 to the Current Report on Form 10-K filed by the Company on July 16, 2024)
10.1		Union Bank Loan Agreement (incorporated by reference to Exhibit 1 to the Current Report on Form 8-K/A filed by the Company on August 22, 2023)
10.2+		ZRCN Inc. 2024 Omnibus Equity Incentive Plan (Incorporated by reference to Exhibit 4.7 to the Registration Statement filed on Form S-8 filed by the Company on March 6, 2024)
10.3+		Form of Stock Option Agreement under the Plan (Incorporated by reference to Exhibit 4.8 to the Registration Statement filed on Form S-8 filed by the Company on March 6, 2024)
10.4†		Revolving Credit, Security And Guaranty Agreement, dated as of May 31, 2024, by and among Zircon Corporation, ZRCN Inc.,Zircon De Mexico, S.A. DE C.V.,, Zircon Corporation Limited, And FGI Worldwide LLC, As Agent For Lenders (incorporated by reference to Exhibit 10.4 to the Current Report on Form 10-K filed by the Company on July 16, 2024)
21.1		List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Current Report on Form 10-K filed by the Company on July 16, 2024)
31.1		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ZRCN INC.
Date: February 14, 2025	By:	/s/ John Stauss
Date: May 27, 2026	By:	/s/ John Stauss
	Name:	John Stauss
	Title:	Chairman and Chief Executive Officer
Date: February 14, 2025		/s/ Jeff Parsons
Date: May 27, 2026	By:	/s/ Jeff Parsons
	Name:	Jeff Parsons
	Title:	Chief Financial Officer

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Filing Compare · ZRCN Inc.