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 generally accepted in the United States (“GAAP”) applicable to interim financial information and with the instructions 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 Company’s significant accounting policies and recent accounting standards are summarized in Note 3 of the Company’s consolidated financial statements for the year ended March 31, 2025. There were no significant changes to these accounting policies during the six months ended September 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.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

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.

Management and the Audit Committee have reviewed this adjustment and concluded that the financial statements, as corrected, present fairly, in all material respects, the balance sheet, results of operations and cash flows of the Company in accordance with U.S. GAAP.

As a result of the restatement, the Company prepared the following table to illustrate the effect on the financial statements for the year ended March 31, 2024.

 Schedule of Restatement of Financial Statements

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.

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 Company consolidates all entities over which the Company has the power to govern the financial and operating policies and therefore 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.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

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.

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 September 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 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 U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosures. Significant estimates include provisions for credit losses, inventory valuation, intangible asset fair values, accrued rebates, useful lives of property and equipment, uncertain tax positions, and share-based compensation. Actual results may differ from these estimates.

Accounts Receivable, Net

Accounts receivable consisted of the following:

Schedule of Accounts Receivable 

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

 Schedule of  Provision for Credit losses

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 and six months ended September 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 SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

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 Company has one operating segment and therefore one reporting segment.

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 six months ended September 30, 2025.

Concentration of Business and Credit Risk

As of September 30, 2025, the Company maintained deposits in a single bank that exceeded the federal insured deposit limit of the Federal Deposit Insurance Corporation (FDIC).

During the three months ended September 30, 2025 and 2024, respectively, the Company generated approximately 74% and 78% of its total revenues from three customers. During the six months ended September 30, 2025 and 2024, respectively, the Company generated approximately 74% and 73% of its total revenue from three customers.

As of September 30, 2025 and March 31, 2025, respectively, 83% and 64% of its total accounts receivable were from three customers.

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.

On July 4, 2025 , during the six months ended September 30, 2025, the President signed into law the One Big Beautiful Bill Act (“the OBBBA”), which among other provisions made various changes to the US federal income tax treatment of research and experimentation expenses. On August 28, 2025, the Internal Revenue Service released Revenue Procedure 2025-28, detailing the methods by which a Company is allowed to adopt the research and experimentation-related provisions of the OBBBA.

Under the OBBBA and Rev. Proc. 2025-28, the Company is allowed to amend prior year US federal income tax returns to deduct the research and experimentation expenses in the year incurred. This is expected to result in a net refund to the Company of approximately $215,000 of federal taxes. This results in a current tax benefit. The Company’s deferred tax assets and related valuation allowance will also be reduced by approximately $397,000 to reflect the deduction of research and experimentation expenses in the year incurred; however, as the Company’s deferred tax assets are fully offset by a valuation allowance, this reduction of deferred tax assets will not result in any net tax expense. As the OBBBA and related guidance allowing this change were passed during the six months ended September 30, 2025, the tax benefit is recorded in this period.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

Net Loss Per Share

Basic net 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. Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. The potentially dilutive securities outstanding are as follows:

 Schedule of Dilutive Securities Outstanding

As of September 30, 2025 these securities are not dilutive.

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 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.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), the intent of which is to improve financial reporting and respond to investor input by requiring public business entities to disclose additional information about certain expenses in the notes to financial statements in interim and annual reporting periods. Among other provisions, the new standard requires disclosure of disaggregated amounts for expenses such as employee compensation, depreciation, and intangible asset amortization included in each expense caption presented on the face of the income statement. Public business entities are required to include certain amounts that are already required to be disclosed under GAAP in the same disclosure as 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 also requires disclosure of the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. In January 2025, the FASB issued ASU Update 2025-01, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40).” The Board issued this Update to clarify the effective date of Accounting Standards Update 2024-03 to be effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning 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 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 material impact to its unaudited condensed consolidated financial statements or related disclosures.

In July 2025 , the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). This standard introduces a practical expedient that companies can choose to apply when determining allowances for credit losses. Specifically, it permits companies to assume that the current conditions as of the balance sheet date remain unchanged throughout the remaining life of the assets. This standard is effective for the Company for annual reporting periods beginning after December 15, 2025, and requires prospective application. The Company is currently evaluating the impact of ASU 2025-05, however, does not expect it to have a material impact on its unaudited condensed consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06 - Intangibles - Goodwill and Other - Internal-Use Software (“ASU 2025-06”). This standard removes all references to project stages throughout ASC 350-40 and clarifies the threshold entities apply to begin capitalizing costs. This standard is effective for the Company for annual reporting periods beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently evaluating the impact of ASU 2025-06, however, does not expect it to have a material impact on its unaudited condensed consolidated financial statements.

In September 2025 , the FASB issued ASU 2025-07 - Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606) (“ASU 2025-07”). This standard issues final guidance to exclude from the scope of derivative accounting certain contracts with underlyings that are based on the operations or activities of one of the parties to the contract. The guidance clarifies that an entity receiving share-based noncash consideration from a customer that is consideration for the transfer of goods or services in a revenue contract is required to apply the guidance on noncash consideration in ASC 606. An entity would not apply the guidance in other topics (e.g., ASC 815, ASC 321) to share-based noncash consideration from a customer for the transfer of goods or services unless and until the entity’s right to receive or retain the share-based noncash consideration is unconditional under ASC 606. This standard is effective for the Company for annual reporting periods beginning after December 15, 2026, and interim periods within those annual periods. Entities may apply the guidance either on a modified retrospective or prospective basis. Early adoption is permitted. The Company is currently evaluating the disclosure impact that ASU 2025-07 may have on its unaudited condensed consolidated financial statement presentation and disclosures.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

In November 2025 , the FASB issued ASU 2025-08 - Financial Instruments - Credit Losses (“ASU 2025-08”). This standard issues final guidance requiring entities to apply the gross-up approach in ASC 326 to all “purchased seasoned loans.” Purchased seasoned loans are loans (excluding purchased financial assets with credit deterioration, credit card receivables, debt securities and trade receivables) that are (1) acquired in a business combination or (2) obtained through a transfer that is not a business combination or initially recognized through the consolidation of a variable interest entity, if certain seasoning criteria are met. A loan is considered seasoned if it is obtained more than 90 days after its origination date and the transferee was not involved in the origination. This standard is effective for the Company for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Entities are required to apply the guidance prospectively. Early adoption is permitted. The Company is currently evaluating the disclosure impact of ASU 2025-08, however, does not expect it to have a material impact on its unaudited condensed consolidated financial statements.

In November 2025 , the FASB issued ASU 2025-09 - Derivatives and Hedging (“ASU 2025-09”). This standard amends certain aspects of its hedge accounting guidance to better reflect an entity’s risk management activities in the financial statements. The guidance expands the hedged risks permitted to be aggregated in a group of individual forecasted transactions and increases the variable price components eligible to be designated as the hedged risk in the forecasted purchase or sale of nonfinancial assets. It also eliminates the requirement to apply the net written option test when certain compound derivatives are used in interest rate hedges. In addition, the guidance simplifies the application of hedge accounting for entities hedging forecasted interest payments on choose-your-rate debt instruments and addresses application issues related to “dual hedges,” where a foreign-currency denominated debt instrument is designated as a hedging instrument and a hedged item. This standard is effective for the Company for fiscal years beginning after December 15, 2026, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the disclosure impact that ASU 2025-09 may have on its unaudited condensed consolidated financial statement presentation and disclosures.

In December 2025 , the FASB issued ASU 2025-10 - Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities (“ASU 2025-10”). This standard issues final guidance on the recognition, measurement and presentation of a government grant received by a business entity to reduce diversity in practice. The Board leveraged the guidance in IAS 20 on accounting for government grants, with certain targeted improvements, to develop the ASU. This standard is effective for the Company for fiscal years beginning after December 15, 2028 and interim periods within those fiscal years. Entities may apply the guidance using a modified prospective, modified retrospective or retrospective approach. Early adoption is permitted. The Company is currently evaluating the disclosure impact that ASU 2025-10 may have on its unaudited condensed consolidated financial statement presentation and disclosures.

In December 2025, the FASB issued ASU 2025-11 - Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). This standard issues final guidance clarifying the current interim disclosure requirements and the applicability of ASC 270. The guidance creates a comprehensive list of interim disclosures required under US GAAP and incorporates a disclosure principle that requires disclosures at interim periods when an event or change that has a material effect on an entity has occurred since the previous year end. This standard is effective for the Company for interim reporting periods within annual reporting periods beginning after December 15, 2027. The ASU may be applied prospectively or retrospectively by all entities that provide interim financial statements and notes in accordance with US GAAP. The Company is currently evaluating the disclosure impact that ASU 2025-11 may have on its unaudited condensed consolidated financial statement presentation and disclosures.

In December 2025, the FASB issued ASU 2025-12 - Codification Improvements (“ASU 2025-12”). This standard issues final guidance to clarify, correct errors in or make other improvements to a variety of topics in the Codification that are intended to make it easier to understand and apply. The amendments apply to all reporting entities in the scope of the affected accounting guidance. The amendments, among other things, clarify the guidance in ASC 260 on how to calculate diluted earnings per share when an entity has a loss from continuing operations and a contract that may be settled in stock or cash that is reported as an asset or liability for accounting purposes. This standard is effective for the Company for annual reporting periods beginning after December 15, 2026, and interim periods within those annual periods. Entities are required to apply the amendments to ASC 260 retrospectively. All other amendments may be applied prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the disclosure impact that ASU 2025-12 may have on its unaudited condensed consolidated financial statement presentation and disclosures, however, does not expect it to have a material impact on its unaudited condensed consolidated financial statements.

ZRCN Inc.

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2025 AND 2024