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”). 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 nine months ended September 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 Annual Report on Form 10-K filed with the SEC on March 31, 2026. 

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

Reclassifications

Certain amounts previously reported for the three and six months ended June 30, 2026 have been reclassified to conform to the current period presentation. Compensation paid to the Board of Directors (the “Board”) in the aggregate amount of $199,128, which was previously presented within other expense in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2026, has been reclassified to general and administrative expense and is included in general and administrative expense for the nine months ended September 30, 2026. The reclassification had no effect on previously reported net loss, net loss per share, total shareholders’ equity or cash flows.

Consolidation Policy

Throughout these consolidated financial statements, Quantum Cyber N.V. and its directly and indirectly wholly owned subsidiaries, Quantum Drones, Mainz Biomed USA, Inc., and Mainz Biomed Germany 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 satisfaction of liabilities in the normal course of business.

As of September 30, 2026, the Company had an accumulated deficit of approximately $126.4 million, net working capital of approximately $6.3 million, and a cash balance of approximately $4.9 million. During the nine months ended September 30, 2026, the Company incurred a net loss of approximately $21.5 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 raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date these condensed consolidated financial statements are issued. Management evaluated the significance of these conditions in relation to the Company’s ability to meet its obligations, together with the Company’s plans to mitigate those conditions, over the one-year period from the date these condensed consolidated financial statements are issued.

The Company’s long-term ability to fund its operations 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 shares 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.

On October 9, 2026, the Company entered into a Sales Agreement (the “Titan Sales Agreement”) with Titan Partners Securities LLC (“Titan”) under which the Company may offer and sell, from time to time, ordinary shares having an aggregate offering price of up to $100,000,000 in an “at the market” offering (Note 15). The Company is not obligated to sell any shares under the Titan Sales Agreement, and through the date these condensed consolidated financial statements were issued, the Company had not sold any shares under the Titan Sales Agreement. The amount and timing of any sales will depend on, among other things, the market price and trading volume of the Company’s ordinary shares.

On November 11, 2026, David Lazar, the Company’s Chief Executive Officer and Chair of the Board, provided the Company with a written funding commitment (the “Funding Commitment”), under which he committed to provide funding of up to $8.0 million, on an as needed basis, to address any funding shortfalls of the Company through November 30, 2027. Any such funding will be provided in the form of an equity investment, debt, or a combination of the two, as mutually agreed between Mr. Lazar and the independent members of the Board. Mr. Lazar represented that he has, and will have, through November 30, 2027, the funding and liquidity necessary to provide the committed amount (Notes 10 and 15).

Based on the Company’s cash on hand and the Funding Commitment, management has concluded that its plans alleviate the substantial doubt about the Company’s ability to continue as a going concern, and that the Company will have sufficient resources to meet its obligations as they become due for at least one year after the date these condensed consolidated financial statements are issued.

Use of Estimates

The preparation of condensed 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, stock options and other share-based payments, the fair values of assets acquired in the Arcade Acquisition, and other financial instruments.

Foreign Currency Translation

The Company translates its foreign operations to U.S. dollars in accordance with Accounting Standards Codification (“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).

Upon the sale or substantially complete liquidation of an investment in a foreign entity, the related cumulative translation adjustment is reclassified from accumulated other comprehensive loss to earnings and is included in loss from discontinued operations.

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of deposit with original maturities of three months or less, 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 September 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 September 30, 2026, was approximately $4.3 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.

Accounts Receivable

The Company records accounts receivable at net realizable value. This value includes an appropriate allowance for estimated credit losses, which is charged to the provision for credit losses, to reflect any expected loss on the trade accounts receivable balances. The Company calculates this allowance based on available relevant information, in addition to historical loss information, the level of past-due accounts based on the contractual terms of the receivables, and its relationships with, and the economic status of its customers. As of September 30, 2026, the Company recorded an allowance for credit losses of $5,000. The accounts receivable balance arose entirely from sales made by the business acquired in the Arcade Acquisition after the Acquisition Date. The Company had no accounts receivable as of December 31, 2025. The Company’s customers operate in a variety of industries, including appliance, automotive, electrical and electronics, government and defense, medical, telecommunications, and transportation equipment. See Note 14 for concentrations of credit risk.

Accounts receivable consisted of the following:

Inventories

Inventories consist primarily of raw materials (which include steel coil, wire, and other raw material stock), work-in-progress, and finished goods (which include stamped metal parts, components, and assemblies). Inventories are valued at the lower of cost or net realizable value. The Company determines cost of inventory using the first-in, first-out (FIFO) method.

Inventories consisted of the following:

Marketable Securities

The Company’s marketable securities consist of investments in publicly traded equity securities. These investments are accounted for under ASC 321, Investments—Equity Securities, and are measured at fair value at each reporting date, with changes in fair value recognized in net income (loss). Realized gains and losses and dividend income are also recognized in net income (loss). The fair value of the Company’s marketable securities is based on quoted market prices in active markets (Level 1).

During the nine months ended September 30, 2026, the Company recorded an unrealized gain of $32,323, which is included in other income in the condensed consolidated statements of comprehensive loss.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Repair and maintenance costs that do not improve service potential or extend economic life are expensed as incurred. Depreciation is recorded principally by the straight-line method over the estimated useful lives of the Company’s assets, which are reviewed periodically and generally have the following ranges:

Construction in progress is not depreciated until ready for service.

Intangible Assets

Intangible assets consist primarily of exclusive license agreements acquired from third parties. Intangible assets acquired in a business combination are initially recognized at fair value as of the acquisition date, and intangible assets acquired in an asset acquisition are initially recognized at cost. Finite-lived intangible assets 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.

Business Combinations and Goodwill

The Company accounts for business combinations using the acquisition method under ASC 805, Business Combinations. Identifiable assets acquired and liabilities assumed are recognized at their acquisition-date fair values, and any excess of the consideration transferred over those fair values is recorded as goodwill. Acquisition-related costs are expensed as incurred. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to provisional amounts for new information about facts and circumstances that existed as of the acquisition date.

Goodwill is not amortized. In accordance with ASC 350-20, goodwill is tested for impairment at the reporting unit level annually as of December 31, or more frequently if events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount. The Company may first assess qualitative factors to determine whether a quantitative test is necessary. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for the excess, limited to the goodwill allocated to that reporting unit.

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

Long-lived assets with finite lives, primarily, property, plant and equipment, 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.

Leases

The Company determines whether an arrangement is or contains a lease at inception. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. Because the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, based on information available at the commencement date, to determine the present value of lease payments. The lease term includes options to extend or terminate the lease only when it is reasonably certain that the Company will exercise those options. Operating lease cost is recognized on a straight-line basis over the lease term. Payments for non-lease components, such as utilities, and variable lease payments, such as the Company’s share of increases in real estate taxes, are excluded from the measurement of lease liabilities and are expensed as incurred. The Company does not recognize ROU assets or lease liabilities for leases with an initial term of twelve months or less.

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 following table presents the Company’s assets measured at fair value on a recurring basis as of September 30, 2026:

The Company held no marketable securities at December 31, 2025.

The carrying values of the Company’s financial instruments include: cash, accounts receivable, prepaid and other current assets, accounts payable, and accrued liabilities and other current liabilities. 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

The Company derives its revenue primarily from the sale of precision metal stamping products across three product lines: electrical components, tooling, and general metal stamping products, along with related manufactured components and assemblies, to customers across a variety of industries. Revenue is recognized when control of these products is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products. The Company records revenue based on a five-step model which includes: (1) identifying a contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price among the performance obligations; and (5) recognizing revenue as each performance obligation is satisfied.

The Company identifies customer purchase orders as contracts. Pricing for the Company’s products is established on a customer-by-customer basis pursuant to negotiated purchase orders or customer agreements, and may vary across customers based on product specifications, volume, and other negotiated terms. Revenue is measured as the net amount of consideration expected to be received in exchange for fulfilling the Company’s performance obligations, which generally consist of a single performance obligation for each product ordered. The amount of consideration expected to be received includes estimates of variable consideration, consisting of sales discounts and allowances, which are estimated based on historical experience and recorded as a reduction of the transaction price. The Company reviews these estimates at the end of each reporting period, and the impact of any adjustments is recognized in the period identified. In assessing whether collection of consideration from a customer is probable, the Company considers both the customer’s ability and intent to pay the amount of consideration when due.

Revenue is recognized at the point in time that the Company’s performance obligation is satisfied and control of the ordered product transfers to the customer. For products delivered by the Company, this transfer occurs upon shipment, as the Company’s standard shipping terms are free on board (“FOB”) shipping point; for products picked up directly by the customer, this transfer occurs upon pickup from the Company’s facility. Revenue is disaggregated as presented in Note 14, Disaggregated Revenue and Concentrations.

Payment of invoices is due as specified in the underlying customer agreement, which is typically 30 to 60 days from the invoice date. Invoices are generally issued on the date the product is shipped or picked up by the customer.

Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Shipping and handling costs are accounted for as described in “Shipping and Handling” below and are not treated as a separate performance obligation. The Company does not have any significant financing components, as payment is received within a short period following satisfaction of the Company’s performance obligations. Except for product nonconformance or defects, no right of return generally exists on the sale of the Company’s products.

Shipping and Handling

The Company incurs shipping and handling costs in connection with the delivery of finished goods. The Company has elected to account for shipping and handling activities performed after control of a promised good has transferred to the customer as a fulfillment cost rather than as a separate performance obligation, consistent with the practical expedient permitted under ASC 606-10-25-18B. Accordingly, shipping and handling costs are expensed as incurred and are included in cost of revenue. Shipping and handling costs were $7,844 and $0 for the nine months ended September 30, 2026 and 2025, respectively.

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 in asset acquisitions 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 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 price volatility of the Company’s ordinary shares. Risk-free interest rates were obtained from U.S. Treasury rates for the applicable periods. The Company uses the simplified method to estimate the expected term of stock options.

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 stock options, warrants, convertible preferred shares and contingent share arrangements unless the result would be antidilutive. Ordinary shares issuable upon the exercise of pre-funded warrants are included in the weighted average number of ordinary shares outstanding because they are issuable for little or no consideration.

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.

As of September 30, 2026 and 2025, the following potentially dilutive securities were excluded from the computation of diluted net loss per share for the three and nine months then ended because their effect would have been anti-dilutive:

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), 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. ASU 2024-03, as clarified by ASU 2025-01, is effective for the Company for its annual period beginning January 1, 2027 and for interim periods beginning January 1, 2028. 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 expect the future adoption of any such pronouncements to have a material impact on the Company’s financial statements.