Annual Report for Fiscal Year Ending March 31, 2026 (Form 10-K)

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 consolidated financial statements and related notes to the financial statements included elsewhere in this Report. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, 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

The Company's selected financial information for fiscal 2026 and fiscal 2025 is as follows. All the data are presented in United States dollars.

Financial Position Analysis

The information presented as of March 31, 2026 and March 31, 2025 represents the information for ZRCN Inc.

In thousands		March 31, 2026				March 31, 2025
Total assets		$	20,321			$	23,378
Total liabilities		$	21,413			$	17,848
Total stockholders' (deficit) equity		$	(1,092	)		$	5,530

Assets

Total assets as of March 31, 2026, were $20.3 million compared to $23.4 million as of March 31, 2025, which was a decrease of approximately $3.1 million. This decrease was driven primarily by a decrease in cash of $0.6 million, a decrease in inventory of $2.2 million, a decrease in operating use assets of $0.2 million offset by a decrease in accounts receivable of $0.7 million and an increase in deferred financing cost of $0.6 million resulting from our new line of credit with Altriarch Holdings.

Liabilities

Total liabilities as of March 31, 2026, were $21.4 million compared to $17.9 million as of March 31, 2025, which was an increase of approximately $3.6 million. This increase was driven primarily by an increase in accounts payable and accrued expenses of $4.2 million which was offset by a decrease in operating lease liabilities of $0.2 million and a decrease in the line of credit of $0.4 million.

Equity

The total net deficit as of March 31, 2026, was $1.1 million compared to equity of $5.5 million as of March 31, 2025, which was a decrease of approximately $6.6 million. This decrease was driven primarily by a net loss of $7.1 million offset by increased stock-based compensation of $0.3 million and an increase in accumulated other comprehensive income of $0.2 million.

Operating Results Analysis

Readers are invited to take into consideration the consolidated operating results of Zircon Corporation for the fiscal years ended March 31, 2026 and 2025.

		For the Year Ended March 31,
(In thousands)		2026				2025
Net Sales		$	26,889			$	28,075
Cost of goods sold			19,001				16,936
Gross Profit			7,888				11,139
Gross Margin			29.3	%			39.7	%
Operating Expenses
General & administrative			7,340				7,354
Marketing & selling			4,756				4,528
Research and development			1,660				1,712
Total Operating Expenses			13,756				13,594
Operating Income (Loss)			(5,868	)			(2,455	)
Other (Income) Expense
Settlement of litigation			0				(800	)
Interest expense			739				804
Other expense			32				30
Loss on extinguishment of debt			396				-
Loss (Gain) on foreign currency transactions			143				(172	)
Total other expenses			1,310				(138	)
Income (Loss) before income taxes			(7,178	)			(2,317	)
Benefit from (Provision for) income taxes			129				(573	)
Net income (loss)		$	(7,049	)		$	(2,890	)
Foreign currency translation adjustment			170				(160	)
Comprehensive income (loss)		$	(6,879	)		$	(3,050	)

Sales revenue and gross margin

Revenue for fiscal 2026 was $26.9 million compared to $28.1 million in fiscal 2025 which was a decrease of $1.2 million, or 4%. This decrease was driven primarily by decreased sales in the United States from one major customer. Revenue from Stud Senor Edge products increased by $1.0 million which was offset by decreases in Stud Sensor Center and Target Control Products of $2.0 million. Gross profit for fiscal 2026 was $7.9 million, or 29.3% compared to $11.1 million, or 39.7%, which was a decrease of $3.2 million, or 29% and 10.4%, respectively. While one reason for the decrease in gross profit was reduced revenue from one key customer, additional decreases in gross profit and gross margin were driven by increased cost of sales of $1.8 million from tariffs on products manufactured in China and Malaysia, an increase of $0.2 million in the allowance for slow moving and obsolete inventory, and an increase in standard cost of sales of $0.1 million due to an unfavorable change in the product mix

During the year ended March 31 2026, the U.S. government implemented and/or expanded tariffs pursuant to authorities under the International Emergency Economic Powers Act ('IEEPA"), targeting imports from certain countries that are significant sources of raw materials, components, and finished goods used in the Company's operations.

As a result, the Company experienced increased input costs associated with imported materials and products subject to these tariffs, primarily China and Malaysia. The tariff expense recognized during the year ended March 31, 2026, was approximately $2.9 million compared to $1.1 million during the year ended March 31, 2025, which was an increase of $1.8 million, or 164%. Less than $50,000 of tariff expenses incurred were capitalized within inventory on the Company's balance sheet as of March 31, 2026. The remainder of these costs were recognized within cost of goods sold as incurred and contributed to a gross margin decrease of approximately 1,000 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. Earlier in calendar 2026 certain tariffs have been declared illegal by the Court of International Trade and could result in material refunds accruing to the Company. In July 2026 and September 2026, the Company received refunds of approximately $0.7 million and $1.0 million, respectively.

Research and development

Research and development expenses for fiscal 2026 were $1.7 million compared to $1.7 million in fiscal 2025. The decrease in 2026 was $52,000, or 3%, and was driven primarily by reduced consulting expenses.

Marketing and selling

Marketing and selling expenses for fiscal 2026 were $4.8 million compared to $4.5 million in fiscal 2025 which was an increase of $0.3 million, or 5%. This increase was driven primarily by an increase in payroll expenses.

Administrative expenses

General and administrative expenses for fiscal 2026 were $7.3 million compared to $7.3 million in fiscal 2025 which was a decrease of $14,000, or less than 1%. This decrease was driven primarily by reduced consulting and outside service fees.

Other income/expense

Interest and other expenses for fiscal 2026 were $1.3 million compared to $0.7 million in fiscal 2025 which was an increase of $0.6 million or 98%.

Other income for fiscal 2026 was $ nil compared to $0.8 million in fiscal 2025 which was a decrease of $0.8 million. This decrease was driven by a one-time settlement benefit reduction of $0.8 million resulting from the Stanley Black & Decker litigation. This litigation was closed in October 2024.

Interest expense for fiscal 2026 was $0.7 million compared to $0.8 million in fiscal 2025 which was a decrease of $65,000 or 8%. This decrease was driven primarily a reduction in average borrowings with our prior lender, FGI, resulting in lower interest expense during the year.

We incurred a loss on the extinguishment of the FGI line of credit of $0.4 million during fiscal 2026. This loss was due to an early termination fee paid to FGI of $0.2 million, a write-off of deferred financing costs of approximately $0.1 million and additional legal fees of $35,000. No gain or loss was recognized during fiscal 2025.

We incurred a foreign currency transaction loss of $0.1 million in fiscal 2026 compared to a gain of $0.2 million during fiscal 2025. The loss was driven by various currency movements in Euros, Canadian dollars, and Mexican pesos against the U.S. dollar.

Income taxes

The Company moved from a provision for income taxes of $0.6 million during the year ended March 31, 2025, to a benefit position of $0.1 million for the year ended March 31, 2026. The provision recorded in fiscal 2025 was due primarily to a full valuation allowance being recorded against all deferred tax assets recorded through that fiscal year. The benefit recorded during fiscal 2026 is due primarily to an expected refund of $0.2 million resulting from a change in accounting for research and development expense in accordance with the One Big Beautiful Bill Act ("OBBBA").

Cash Flow Analysis

		For the Years Ended March 31,
In thousands		2026				2025
Operating activities		$	1,504			$	2,153
Investing activities			(436	)			(788	)
Financing activities			(1,267	)			(667	)
Effect of exchange rate changes			(424	)			207
Net increase (decrease) in cash		$	(623	)		$	905

Operating Activities

During the year ended March 31, 2026, net cash provided by operating activities was $1.5 million. This increase was due to a net loss of $7.0 million offset by non-cash operating expenses of $1.8 million and foreign currency losses of $0.1 million, a decrease inventory of $1.9 million, an increase in accounts payable and accrued expenses of $4.2 million, a decrease in accounts receivable of $0.7 million and a decrease in operating lease liabilities of $0.2 million. The Company's accounts payable as of March 31, 2026, were $10.0 million of which $4.5 million were over 90 days old.

During the year ended March 31, 2025, net cash provided by operating activities was $2.2 million. This increase was due to a decrease in accounts receivable of $2.3 million, a decrease in inventory and prepaids of $1.0 million, depreciation of $1.0 million, amortization of intangibles, right-of-use assets, and deferred financing costs of $0.4 million, inventory obsolescence impairment of $0.6 million, provision for credit losses of $0.2 million, stock based compensation of $0.3 million, a reduction in deferred tax assets of $0.5 million, and a reduction in tax deposits of $0.2 million all offset by a net loss of $2.9 million, a decrease in accounts payable and accrued expense of $1.0 million, a decrease in lease liabilities of $0.2 million, and a foreign exchange gain of $0.2 million.

Investing Activities

During the year ended March 31, 2026, net cash used in investing activities was $0.4 million. This decrease was due to purchases of property and equipment of $0.3 million and purchases of intangible assets of $0.1 million.

During the year ended March 31, 2025, net cash used in investing activities was $0.8 million. This decrease was due to purchases of property and equipment of $0.8 million.

Financing Activities

During the year ended March 31, 2026, net cash used in financing activities was $1.3 million. This decrease was due to borrowings under the Company's line of credit of $25.5 million offset by repayment of borrowings of $26.0 million and deferred financing costs of $0.8 million.

During the year ended March 31, 2025, net cash used in financing activities was $0.7 million. This decrease was due to borrowings under the Company's line of credit of $25.0 million offset by repayment of borrowings of $24.6 million, net shareholder distributions of approximately $0.7 million, deferred financing costs of $0.3 million, and repayment of debt assumed as part of the Harmony merger of $0.1 million.

Liquidity, Capital Resources and Sources of Financing

As of March 31, 2026, the Company had a cash balance of $0.8 million and working capital of $4.2 million. Working capital as of March 31, 2025, was $3.4 million. This increase of $0.8 million was driven primarily by a decrease in cash of $0.6 million, a decrease in accounts receivable of $0.6 million and a decrease in inventory of $2.2 million offset by an increase in accounts payable and accrued expenses of $4.2 million, and a decrease in the current portion of the line of credit of $8.4 million. To date the Company has been financed primarily through loans and credit lines secured by accounts receivable, inventory and fixed assets.

The increased tariff-related costs have placed additional pressure on our working capital requirements. The decrease in gross profit and gross margin and extended supply chain cycles have resulted in a decrease in our cash balance of approximately $0.6 million from March 31, 2025. Continued or escalated tariffs will require additional financing and changes in capital allocation priorities including shifting payments to the U.S. Government from inventory suppliers to other vendors. For fiscal year 2026, the Company incurred total tariff expense, including IEEPA tariffs, of $2.9 million. The Company has received tariff refunds of $1.7 million during the first six months of fiscal 2027.

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, which raises substantial doubt about the Company's ability to continue as a going concern without any additional management actions. As of March 31, 2026, our additional borrowing capacity against the line of credit was $4.5 million. For fiscal 2026, the Company incurred a net loss of $7.0 million, had an accumulated deficit of $11.4 million, and a net capital deficiency of $1.1 million. We are dependent on the line of credit and our financial covenants have only been waved through August 31. 2026. Management is actively pursuing options to improve liquidity, including negotiating waivers or amendments to existing debt covenants, reducing discretionary spending and capital expenditures, working with inventory vendors to reduce product costs, continuing to improve inventory turns, and evaluating potential capital raises. These plans should help the Company improve its liquidity position over the next fiscal year and enable the Company to continue as a going concern; however, while these plans are intended to mitigate the risk, there can be no assurance that they will be successful in eliminating the substantial doubt about the Company's ability to continue as a going concern

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 $8.8 million 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.

From July 2025 until March 17, 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. As of March 31, 2025, due to being in default of the loan covenants, the Company classified the line of credit as a current liability. As of March 31, 2026, borrowings under the Company's new revolving credit facility are classified as long-term debt because the facility does not mature until March 17, 2029, and no events of default existed that would require repayment within one year of the balance sheet date. 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 (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.

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. The Fixed Charge Coverage Ratio ("FCCR") is calculated by adding back non-cash expense amounts, such as depreciation and amortization, changes in inventory and bad debt allowances, stock-based compensation, and net interest expense to income before taxes and subtracting capital expenditures then dividing that result by the sum of interest expense and rent expense. The initial reporting period begins in September 2026 and incorporates the prior six months of data to calculate the FCCR ratio. Subsequent periods add one month of data until the calculation reaches 12 months. At that time, calculation is performed for the prior 12 months and remains at that level going forward. The target ratio for the first five months is 1.1 with the subsequent ratio being 1.2 thereafter. The Company has forecasted that it will be in compliance with both covenants when the measurement period begins with the September 2026 accounting period. Tangible net worth is calculated by summing accounts and other receivables, inventory, fixed and subordinated debt and dividing by the outstanding balance of the Altriarch line of credit. The initial reporting period begins in September 2026. The ratio for the first five months is 15%, increasing to 25% thereafter. The Company is currently forecasting that it will meet the covenants once they begin. 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. Repayments on the loan are made as customer cash payments are deposited into the Company's bank account and remitted daily to Altriarch under a Blocked Account Control Agreement ("BACA").

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.

As of March 31, 2026, the amount outstanding under the Altriarch line of credit was $8.0 million compared to $8.4 million under the FGI facility as of March 31, 2025.

Subsequent to March 31, 2026, on September 9, 2026, the Lender notified the Company that the Company had not delivered its audited financial statements and related compliance certificate for the fiscal year ended March 31, 2026 within the 90-day period required under the Loan Agreement, which constituted a default. The Lender waived this default on a one-time basis and required the Company to deliver such audited financial statements and compliance certificate on or before October 15, 2026, which the Company expects to satisfy in connection with the filing of this Annual Report on Form 10-K. See Note 16 to the consolidated financial statements included in this Annual Report on Form 10-K.

REMEDIATION OF SIGNIFICANT DEFICIENCIES

During the year ended March 31, 2026, we have initiated steps to remediate the significant deficiencies 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 significant deficiencies, the significant deficiencies 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 reasonably 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 March 31, 2026
Common shares issued and outstanding			10,360,924
Potential issuance of common shares
Warrants			217,184
Stock options			3,176,500
Fully diluted shares			13,754,608

During the year ended March 31, 2026, the Company issued another 54,498 common shares to various service providers. The Company also had stock option forfeitures of 40,000 shares.

During the year ended March 31, 2025, the Company issued 289,490 common shares primarily to two legal firms in lieu of cash payments to settle outstanding liabilities for services related to patent infringement litigation and patent acquisition.

In accordance with a services agreement with Semi-Cap Equity Partners ("SCE"), an investment bank, dated May 15, 2023 and amended on July 15, 2024, the Company issued an additional 24,999 common shares to SCE earned during the period from March 31, 2025 through September 4, 2025. As of September 4, 2025, the Company's agreement with SCE has been terminated.

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. 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 Zircon.

The Company leases 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 31, 2026, principal balance of $0.7 million is due and payable on December 31, 2027. Interest accrued at 5.5% per annum is paid quarterly and included in accrued expenses. The note is subordinated to the line of credit note payable to Altriarch Holdings SPV, LLC and no payment is to be made on the note without prior approval from Altriarch.

For the years ended March 31, 2026 and 2025 the interest expense on notes payable to the Stauss Family Administrative Trust totaled $37,000 and $37,000 respectively.

On March 27, 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, 2027.

Off-Balance Sheet Arrangements

ZRCN has no off-balance sheet arrangements.

Contractual Obligations and Commitments

As of March 31, 2026, we had contractual obligations for building leases, interest on our line of credit with Altriarch SPV LLC, notes payable with the Stauss Family Administrative Trust including interest on the notes, and commitments based on outstanding purchase orders. Inventory is purchased on purchase orders as required; there are no long-term contracts or take or pay agreements for inventory. The building leases include our corporate office in Campbell, CA that will expire in December 2027. As of March 31, 2026, our future contractual commitments for our leases were $0.4 million, our line of credit was $8.0 million and is set to expire in March 2029, and our long-term debt obligations were $0.7 million which mature in December 2027. For additional information on our leases and timing of future payments, please see Note 9 and Note 13 to the consolidated financial statements included in this Annual Report on this Form 10-K.

Contractual Obligations
		Within				Beyond
in thousands		12 months				12 months
Altriarch loan		$	-			$	8,000
Altriarch interest		$	1,000			$	2,000
Building leases		$	200			$	200
Shareholder notes		$	-			$	667
Interest on shareholder notes		$	37			$	28
Outstanding purchase orders		$	1,400			$	-
Total		$	2,637			$	10,895

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 regarding 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 year ended March 31, 2026, for details.

Critical Accounting Policies and Estimates

Please refer to Note 3 Summary of Significant Accounting Policies of the Financial Statements for disclosures regarding the critical accounting policies related to our business. Critical estimates associated with revenue would be related to discounts, rebates and marketing co-op accruals not based on contractual percentages but on prior trends and history. These estimates can vary as the Company's revenues vary. The bad debt allowance is based on customer quality in terms of reputation, sales and payment history with the Company, and its current financial position including its liquidity position including net working capital. Inventory allowances are dependent on product sales forecasts and history, price changes, technology changes which could render products obsolete, quality of product shipped by our suppliers, or disruptions to our supply chains.

Recently Issued Accounting Standards

Our recently issued accounting standards are included in Note 3 Summary of Significant Accounting Policies of the Financial Statements for disclosures regarding the critical accounting policies related to our business. The Company is currently evaluating the disclosure impacts of recently issued accounting standards, however, does not expect them to have a material impact on its audited consolidated financial statements.