Company: ZRCN
Filing Date: 2025-02-14
Form Type: 10-Q
Source: 0001493152-25-006748
Chunk: 2

Company: ZRCN Inc.
Filing Date: 2025-02-14
Form: 10-Q
Item: Item 8
Chunk 2
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ger between Harmony’s wholly owned subsidiary and Zircon was accounted for as a reverse asset acquisition in accordance with
GAAP. Under this method of accounting, Harmony, through its merger subsidiary, was treated as the “acquired” company and
Zircon was treated as the acquirer for financial reporting purposes.

The
consolidated assets, liabilities and results of operations prior to the merger are those of Zircon. Refer to Note 4 for additional information
on the transaction.

Principles
of Consolidation 

The
accompanying unaudited 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.

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.

Variable
Interest Entities

In
accordance with ASC 810, Consolidation (“ASC 810”), the Company assesses whether it has an explicit or implicit variable
interest in legal entities in which it has a financial relationship and, if so, whether or not those entities are variable interest entities
(“VIEs”). Variable interests are contractual, ownership, or other pecuniary interests in an entity whose value changes with
changes in the fair value of the entity’s net assets, exclusive of variable interests. Explicit variable interests are those which
directly absorb the variability of a VIE and can include contractual interests such as loans or guarantees as well as equity investments.
An implicit variable interest acts the same as an explicit variable interest except it involves the absorbing of variability indirectly,
such as through related party arrangements or implicit guarantees. The analysis includes consideration of the design of the entity, its