NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company prepares its financial statements in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“GAAP”) in the United States of America. The accompanying interim financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the Company’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2026, are not necessarily indicative of the results for the full year. While management of the Company believes that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited financial statements and the footnotes thereto for the year ended December 31, 2025, contained in the Company’s Form 10-K filed with the SEC on March 31, 2026. 

The Company’s unaudited consolidated financial statements are expressed in United States dollars.

Consolidation Policy

Throughout these consolidated financial statements, Quantum Cyber N.V. and its directly and indirectly wholly owned subsidiaries, Quantum Drones Corp., Mainz Biomed USA, Inc., and Mainz Biomed GmbH are referred to, collectively and individually as the “Company”).

All significant intercompany balances and transactions have been eliminated in consolidation.

Going concern

The Company’s consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.

As of June 30, 2026, the Company had an accumulated deficit of approximately $121.0 million, net working capital of approximately $13.7 million, and a cash balance of approximately $13.4 million. During the six months ended June 30, 2026, the Company incurred a net loss of approximately $16.1 million.

The Company has incurred recurring losses from operations and does not yet have an established source of revenues sufficient to cover its operating costs. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management evaluated conditions and events that raise substantial doubt and the Company’s plans to mitigate those conditions over the one-year look-forward period from the date these consolidated financial statements are issued.

The Company’s ability to continue as a going concern depends on its ability to successfully execute its business plan and eventually achieve profitable operations. During the next year, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business and maintaining its good standing in the industry. The Company may experience a cash shortfall and be required to raise additional capital.

Historically, the Company has relied upon funds from its shareholders and loans from third parties. Management may raise additional capital through future public or private offerings of the Company’s share or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material and adverse effect upon its operations and its shareholders.

Management’s plans may also include reducing or deferring certain discretionary expenditures and pursuing strategic partnerships and/or revenue-generating contracts, however, there can be no assurance these plans will be effectively implemented or be successful.

The Company believes that its currently available cash on hand, together with additional financing described above, will be sufficient to meet its planned expenditures and obligations for at least the one-year period following the issuance of its consolidated financial statements.

These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities, the reported revenues and expenses, and the statement of financial position classifications used, that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying consolidated financial statements for the valuation of debt, leases, useful life of equipment, impairment analysis, warrants and stock options and other financial instruments.

Foreign Currency Translation

The Company translates its foreign operations to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”.

The functional currency of Mainz Biomed GmbH is the Euro (EUR, €). These subsidiary financial statements are translated into U.S. dollars using the period-end exchange rates for assets and liabilities, average exchange rates during the corresponding period for revenue and expenses, and historical rates for equity. The gains and losses resulting from the translation of financial statements are recorded as a separate component of accumulated other comprehensive income (loss).

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.

As of June 30, 2026 and December 31, 2025, the Company did not have cash equivalents.

Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution in the U.S. The amount in excess of the Federal Deposit Insurance Corporation insurance as of June 30, 2026, was approximately $13.0 million. The Company has not experienced losses on account balances and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

Intangible Assets

Intangible assets consist primarily of exclusive license agreements acquired from third parties. Acquired intangible assets with a finite life are initially recognized at fair value as of the acquisition date and are subsequently amortized on a straight-line basis over their estimated useful lives. Acquired indefinite-lived intangible assets are not amortized and are tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired.

The Company reviews the estimated useful lives of acquired intangible assets with a finite life at least annually.

Impairment of Long-Lived Assets and Definite-Lived Intangible Assets

Long-lived assets with finite lives, primarily, property and equipment and operating lease right-of-use assets, and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.

Financial Instruments

The Company follows ASC 820, “Fair Value Measurements and Disclosures,” which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

The carrying values of the Company’s financial instruments include: cash, accounts receivable, prepaid and other current assets, accounts payable, accrued liabilities and other current liabilities, loan payable, convertible notes, notes payable and due from/to related parties. These financial instruments approximate their fair values due to their short-term maturities.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due to related parties due to their related party nature.

Revenue Recognition

Revenue is recognized upon the satisfaction of performance obligations. Performance obligations are satisfied at the point at which control of the goods or services are transferred to customers, in an amount that reflects the consideration the Company is entitled to receive for those goods and services.

Amounts collected from customers on behalf of third parties (e.g., sales and value-added taxes) are excluded from the transaction price and, therefore, from revenue under ASC 606. Such amounts are recorded as a liability until remitted to the respective authorities.

During the period ended June 30, 2026, the Company sold its genetic diagnostic testing kits to both laboratory partners and directly to patients who are the end users of the product. Upon the delivery of the Company’s products to laboratory partners the Company has completed its performance obligations and as such revenue is recorded upon delivery. Sales to patients, or end users, where samples are sent to the Company’s diagnostic lab for testing and evaluation, are recognized when they are delivered to the end user, returned to the Company’s laboratory, and testing results have been delivered. Until there is recognition from these sales, it is presented as deferred revenue on the Company’s statement of financial position. 

During the six months ended June 30, 2026, the Company did not generate any revenue from continuing operations. Prior revenue-generating operations are now classified as discontinued.

Research and Development (R&D)

R&D expenses consist primarily of costs related to personnel expenses, clinical studies and outside services, in process research and development (IPR&D) projects acquired via asset acquiring that have no alternative future use and other R&D expenses. Clinical studies and outside services costs relate primarily to services performed by clinical research organizations and related clinical or development manufacturing costs, materials, and supplies, filing fees, regulatory support, and other third-party fees. Personnel expenses relate primarily to salaries and benefits. R&D expenditures are charged to operations as incurred.

Share-Based Compensation

The Company utilizes the Black-Scholes option pricing model to estimate the fair value of stock option awards at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of the Company’s share-based compensation. These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value, some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from the Company’s historical experience with share-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances. The Company accounts for stock option forfeitures as they occur.

The Black-Scholes model, which requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The current stock price is based on the Company’s Nasdaq-listed share price. Expected volatility is based on the historical stock price volatility of the Company’s common stock. Risk-free interest rates were obtained from U.S. Treasury rates for the applicable periods. The Company uses a simplified method for stock options in the expected term.

Net Income (Loss) Per Ordinary Share

Net loss per share requires presentation of basic and diluted earnings per ordinary share on the face of the Statements of Comprehensive Loss for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation to diluted earnings per share. In the accompanying financial statements, basic net loss per share is computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares and potentially dilutive outstanding shares during the period to reflect the potential dilution that could occur from ordinary shares issuable through contingent share arrangements and warrants unless the result would be antidilutive.

The dilutive effect of share-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase ordinary shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares are included in the denominator of the diluted calculation for the entire period being presented.

For the six months ended June 30, 2026 and 2025, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result was anti-dilutive.

Recently issued accounting pronouncements not yet adopted

In November 2024, the FASB issued ASU 2024-03 Final Standard on Income Statement: Disaggregation of Income Statement Expenses, which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This guidance will be effective for us on January 1, 2027. The Company is currently evaluating the impact of adopting ASU 2024-03.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which establishes authoritative guidance on the recognition, measurement, presentation, and disclosure of government grants. Under ASU 2025-10, government grants are recognized when it is probable that the entity will both comply with the conditions of the grant and the grant will be received. The ASU provides specific accounting models for grants related to assets and grants related to income, including options to recognize government grants as deferred income or as a reduction of the asset’s cost basis. The ASU also requires enhanced disclosures regarding the nature of government grants, significant terms and conditions, accounting policies applied, and amounts recognized in the financial statements. ASU 2025-10 is effective for fiscal years beginning after December 15, 2028, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-10.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.

The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on the Company’s financial statements.