Notes to the Group Financial Statements

1.    Accounting policies

Company information

Quantum Base Holdings PLC is a public company limited by shares incorporated in England and Wales. The registered office is Alpha House, 4 Greek St, Stockport, Cheshire, United Kingdom, SK3 8AB. The Group's principal activity continued to be that of the development of practical, simply quantum security systems with mass market appeal.

The Group consists of Quantum Base Holdings PLC and all of its subsidiaries.

The consolidated financial information (or "interim financial statements") incorporates the financial information of the Company and entities (its subsidiaries) controlled by the Company (collectively comprising the "Group").

1.1     Accounting convention

The interim financial statements have been prepared in accordance with UK-adopted International Accounting Standards (UK-adopted IAS) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements are prepared in sterling, which is the functional currency of the Group. Monetary amounts in these financial statements are rounded to the nearest £'000.

The financial statements have been prepared under the historical cost convention. The material accounting policies adopted are set out below.

The financial information set out in these interim consolidated financial statements for the six months ended 31 October 2025 is unaudited. The financial information presented is not statutory accounts prepared in accordance with the Companies Act 2006, and is prepared only to comply with AIM requirements for interim reporting. It should be read in conjunction with the 30 April 2025 Annual Report and Financial Statements. The financial information for the half years ended 31 October 2025 and 31 October 2024 do not constitute statutory accounts within the meaning of Section 434 (3) of the Companies Act 2006 and both periods are unaudited. The financial information has not been prepared (and is not required to be prepared) in accordance with IAS 34 Interim Financial Reporting.

The Group's annual report and financial statements for the year ended 30 April 2025 have been filed with the Registrar of Companies. The independent auditor's report on the annual report and financial statements for the year ended 30 Apri 2025 was i) unqualified, ii) did not draw attention to any matters by way of emphasis, and iii) did not contain a statement under 498(2) - (3) of the Companies Act 2006.

1.2     Basis of consolidation

The interim financial statements consist of the financial statements of the parent company Quantum Base Holdings PLC together with all entities controlled by the parent Company (its subsidiaries).

All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

A subsidiary is an entity controlled by the parent company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

Subsidiaries are consolidated in the group's financial statements from the date that control commences until the date that control ceases.

Merger accounting

The combination of companies under common control has been treated as if the companies had always been combined and is usually referred to as merger accounting.

IFRS does not prescribe how such a merger is accounted for in the preparation of consolidated financial statements. The use of merger accounting has been applied to treat the combining entities as if they had always been a single entity, with adjustments made for the elimination of transactions between the merged companies.

1.3     Significant accounting policies

The Group has presented below key extracts of its accounting policies. The Group has applied the same accounting policies and methods of computation in its interim financial statements as in its 2025 Annual financial statements with the addition of accounting policy 1.7 in relation to new leases recognised in the interim period. Those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 May 2025 will be adopted in the 2026 financial statements. Adoption of these new standards and interpretations is not expected to have a material impact on the Group's financial statements. The accounting policies applied are based on the recognition and measurement principles of IFRS in issue as adopted by the UK and are effective at 30 April 2026 or are expected to be adopted and effective at 30 April 2026.

1.4     Intangible assets other than goodwill

The Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Development costs are capitalised, provided that the recognition criteria of an intangible asset are met. Capitalised development costs are stated at cost less accumulated amortisation and impairment losses. Research costs are expensed when incurred.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Patents and licences    10% straight line

Development costs       10% straight line

1.5     Equity instruments

Equity instruments issued by the parent company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer payable at the discretion of the company.

The following describes the nature and purpose of each reserve within equity:

·      Share capital - Ordinary Shares are classified as equity. The nominal value of Ordinary Shares is included within share capital.

·      Share premium - Represents the excess of the subscription price over the nominal value of shares issued.

·      Retained earnings - Represents all other net gains and losses and transactions with shareholders (e.g. dividends) not recognised elsewhere.

·      Merger reserve - Represents the transactions in reserves under the merger acquisition rules where the entities are under common control.

·      Share-based payment reserve - Represents the fair value of options granted, valued using a Black- Scholes option pricing model and spread across the vesting period. Warrants have also been valued using a Black-Scholes option pricing model and recognised when the service that they relate to is considered to be delivered.

·      Share capital to be issued - Represents advanced subscriptions for share capital which was not issued as at the year end.

1.6     Share-based payments

Equity-settled share-based payments are measured at fair value at the date of grant by reference to the fair value of the equity instruments granted using the Black-Scholes model. The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the estimate of shares that will eventually vest. A corresponding adjustment is made to equity.

When the terms and conditions of equity-settled share-based payments at the time they were granted are subsequently modified, the fair value of the share-based payment under the original terms and conditions and under the modified terms and conditions are both determined at the date of the modification. Any excess of the modified fair value over the original fair value is recognised over the remaining vesting period in addition to the grant date fair value of the original share-based payment.

Cancellations or settlements (including those resulting from employee redundancies) are treated as an acceleration of vesting and the amount that would have been recognised over the remaining vesting period is recognised immediately.

1.7     Leases

At inception, the group assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the group recognises a right-of-use asset and a lease liability at the lease commencement date.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the group's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the group is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the group's estimate of the amount expected to be payable under a residual value guarantee; or the group's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.

2.    Critical accounting estimates and judgements

In the application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets, liabilities and equity instruments are outlined below.

Critical judgements

Capitalised development costs

Development expenditure is recognised as an expense except that costs incurred on development projects are capitalised as intangible assets to the extent that such expenditure is expected to generate future economic benefits. Significant judgement is applied in determining if development costs meet the criteria to be capitalised as intangible assets. IAS 36 also requires that an assessment of recoverable amount is prepared for all intangible assets not available for use at the reporting date, and for any intangible asset where there is an indicator of impairment.

Useful lives

Amortisation is provided so as to write down intangible assets, comprising capitalised development costs, patents and trademarks, to their residual values over their estimated useful lives.

All intangible assets are currently amortised on a 10% straight-line basis, reflecting a typical useful life of ten years. This period has been selected because it aligns with the expected commercial life of the Group's technologies and the duration of patent protection, which together represent the period over which future economic benefits are expected to be realised. The useful lives are reviewed annually to confirm that this assumption remains appropriate in light of technological and commercial developments.

The principal area of judgement relates to determining which development costs meet the criteria for capitalisation under IAS 38 and confirming on review that the ten-year life remains reasonable.

By contrast, property, plant and equipment (principally laboratory and computer equipment) are depreciated over short, fixed lives of approximately three years on a straight-line basis. Given their limited carrying value and predictable consumption pattern, these assets are not considered a significant source of estimation uncertainty.

Share-based payments

The determination of the fair values of share options has been made by reference to the Black-Scholes model. The input with the greatest amount of estimation being volatility, which has been benchmarked against historic share price movements of comparable listed competitors due to the company not having a sufficient historic trading record. Other key inputs are set out in note 10.

Deduction of share issuance costs

Costs directly attributable to the issue of new shares are recognised as a deduction to share premium. Management have applied judgement by using a two-tiered approach to determine costs to recognise against share premium and costs to expense in the statement of comprehensive income, in line with IAS 32 Financial instruments: presentation. Costs clearly and wholly related to the placing (such as broker commissions and placing fees) have been allocated in full against share premium, while costs of a mixed nature (principally legal, accounting, and NOMAD fees) have been apportioned using a 32.3%. This percentage corresponds to the proportion of new shares issued on admission (20.83 million) relative to the enlarged share capital (64.50 million). On this basis, total costs deductible and recognised in the statement of comprehensive income amount to approximately £nil (period to 31 October 2024 - £137,000, year ended 30 April 2025 - £650,000).

Warrant valuation and classification

The determination of the fair value of warrants has been made by reference to the Black-Scholes model. The input with the greatest amount of estimation being volatility which has been estimated using historic share price movements.

Additionally, the classification of the warrants as share-based payment under IFRS 2 was a key judgement with management basing the classification on the vesting conditions attached to the warrants.

3.    Revenue

IFRS 8, Operating Segments, states that an operating segment is a component of an entity; that engages in business activities from which it may earn revenue and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker, and, for which discrete financial information is available. The chief operating decision maker of the Group is considered to be the Board of Directors. The Group has one single operating segment and therefore all revenue is derived from the licensing of the Q-ID technology.

There is only one customer in place with a major security printer, whereby the group has signed the Call-off Agreement to apply its Q-ID technology to tax stamps for a government customer.

4.   Adjusted EBITDA

The calculation of Adjusted EBITDA is consistent with the presentation of Adjusted Earnings before Interest, Tax, Depreciation, and Amortisation, as presented on the face of the Group Statement of Comprehensive Income.

The Directors have presented this Alternative Performance Measure ("APM") because they feel it most suitably represents the underlying performance and cash generation of the business, and allows comparability between the current and comparative period in light of the rapid changes in the business, and will allow an ongoing trend analysis of this performance based on current plans for the business.

Adjusted EBITDA is not an IFRS measure of performance and, as such, may not be comparable with similar metrics reported by other entities.

The loss per Ordinary Share is calculated based on the weighted average number of Ordinary Shares in issue and the reported loss of the Group for each reporting period. There has been no dilution due to losses.

An impairment review was carried out as at 31 October 2025, which concluded that no impairment charge was required.

Trade receivables are stated net of a specific impairment for estimated irrecoverable amounts of £312k (October 2024 - £nil, April 2025 - £312k).

10. Share-based payments

Quantum Base Holdings Plc operates two equity-settled share-based remuneration schemes: a United Kingdom tax authority approved scheme for certain employees and an unapproved scheme for advisers of Quantum Base Holdings Plc. For the avoidance of doubt, the 49,704 options present below cover both schemes.

Options outstanding

All options were exercised on 31 March 2025. No options were outstanding at the period end (October 2024 - 49,704 options outstanding at an exercise price of 0.005 pence, April 2025 - none).

The following information is relevant in the determination of the fair value of options granted during the period/year under the equity share-based schemes operated by the Group.