Debt |
6 Months Ended |
|---|---|
Sep. 30, 2025 | |
| Debt Disclosure [Abstract] | |
| Debt | 9. 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 prior line of credit balance of $8.8 million, and matures on May 31, 2027. The Company, Zircon and the Affiliates are guarantors of all the obligations under the Credit Agreement and the Company’s four principal shareholders are limited guarantors thereof.
As of September 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.
From July 2025 through March 2026, the Company and FGI entered into multiple forbearance agreements and amendments to the Credit Agreement, which temporarily waived existing covenant defaults and imposed additional operational and reporting requirements while the Company pursued strategic and financing alternatives. On March 17, 2026, the Company repaid in full and extinguished its revolving credit 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.
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 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 (10th) 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 SIX MONTHS ENDED SEPTEMBER 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 (1st), second (2nd) or third (3rd) 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 (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 and six months ended September 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 and six months ended September 30, 2025 and 2024, interest expense on the line of credit totaled $0.2 million and $0.4 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 September 30, 2025, the outstanding principal balance was approximately $0.7 million. Under the original terms of the agreement, the notes were due and payable in December 2025 with interest accruing at 5.5% per annum, which was to be paid quarterly and is included in accrued expenses. On March 27, 2025, the Board of Directors of Zircon Corporation and the Stauss Family Administrative Trust agreed to extend the maturity dates of both promissory notes to December 31, 2027. There was no change to the principal amount or the annual interest rate. The notes are subordinated to the Credit Agreement, and no payment is to be made on the note without prior approval from FGI.
For the three and six months ended September 30, 2025 and 2024 the interest expense on the notes payable to the Stauss Family Administrative Trust totaled less than $0.1 million in each respective period.
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