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ZRCN Inc. (OTC:ZRCN) disclosed Monday that it received a notice of default on its Revolving Credit, Security, and Guaranty Agreement with FGI Worldwide LLC as of April 30, 2025. According to a press release statement, the default was triggered by non-compliance with the agreement’s Fixed Cost Coverage Ratio covenant and one additional non-financial covenant, both of which the company did not cure.
The company reported that the defaults were primarily due to reduced revenues and duties incurred on products imported from China. Despite the notice, ZRCN Inc. stated it remains able to borrow and receive advances under the existing credit agreement.
The notice constitutes a default under Section 10.5 of the credit agreement. The lender has requested that ZRCN Inc. cure the defaults. Under the agreement, the lender has the right to accelerate the due date of the unpaid principal and accrued interest, foreclose on the company’s assets, or exercise other remedies allowed by law or equity.
As of the date of the filing, FGI Worldwide LLC has not accelerated or demanded payment, applied default interest rates, foreclosed on any liens or security interests, or exercised other rights or remedies. ZRCN Inc. and the lender have engaged in discussions and reached an agreement in principle to amend the terms of the credit agreement and forbear on the existing defaults. However, the amendment and forbearance remain subject to review and approval of appropriate documentation, and there is no assurance that a final agreement will be reached.
The information is based on a statement from an SEC filing.
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