Quantum Cyber N.V. Income Taxes Disclosure
NOTE 15 – PROVISION FOR INCOME TAXES
The Company provides for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
The Company has not made provisions for income taxes for the years ended December 31, 2025, and 2024 since the Company has not generated taxable income and has the benefit of net operating losses in these periods.
The provision for income taxes differs from the amount that would have resulted in applying the combined as follows:
| December 31, 2025 | December 31, 2024 | |||||||||||||||
| Net loss for the period | $ | (16,210,718 | ) | $ | (21,598,772 | ) | ||||||||||
| Statutory income tax rate | 25.0 | % | 25.0 | % | ||||||||||||
| Expected in tax recovery at statutory income tax rates | $ | (4,053,000 | ) | 25 | % | $ | (5,400,000 | ) | 25 | % | ||||||
| Permanent differences | 1,360,000 | (8 | )% | 771,000 | (4 | )% | ||||||||||
| Difference in tax rates, foreign exchange, and other | 2,715,000 | (17 | )% | 4,763,000 | (22 | )% | ||||||||||
| Changes in valuation allowances | (22,000 | ) | 0 | % | (134,000 | ) | 1 | % | ||||||||
| Income tax expense | $ | 0 | % | $ | 0 | % | ||||||||||
Temporary differences that give rise to the following deferred tax assets and liabilities at are:
| December 31, 2025 | December 31, 2024 | |||||||
| Deferred tax assets | ||||||||
| Net operating loss carryforwards | $ | 2,453,532 | $ | 2,541,532 | ||||
| Deferred tax assets not recognized | (2,453,532 | ) | (2,541,532 | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize deferred income tax assets arising as a result of net operating losses carried forward, the Company has not recorded any deferred income tax assets as of December 31, 2025. The Company has incurred an aggregate net operating loss of $222 million, of which approximately 78% is attributed to Germany and 22% is attributed to the United States. These losses may be carried forward on an indefinite basis and do not expire. The Company has not recognized the deferred tax assets due to the uncertainty around utilizing all of the losses carry-forwards. Tax attributes are subject to review, and potential adjustment, by tax authorities. The Company’s net operating loss carry forwards may be subject to annual limitations, The status of state and non-U.S. tax examinations varies due to the numerous legal entities and jurisdictions in which the Company operates.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.