Company: ZRCN
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001493152-25-006748
Chunk: 11

Company: ZRCN Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Item 8
Chunk 11
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 twelve
months or less as ROU assets or lease liabilities.

ROU
assets and lease liabilities are recognized at commencement date and determined using the present value of the future minimum lease payments
over the lease term. The Company uses an incremental borrowing rate based on estimated rate of interest for collateralized borrowing
since the Company’s leases do not include an implicit interest rate. The estimated incremental borrowing rate considers market
data, actual lease economic environment, and actual lease term at commencement date. The lease term may include options to extend when
it is reasonably certain that the Company will exercise that option. The Company recognizes lease expense on a straight-line basis over
the lease term.

The
Company has lease 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.

Warrants

The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”)
and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding 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 classification. 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