V. Notes to the consolidated statement of comprehensive income

Adjustments to earnings

In relation to certain matters, the Management Board defines adjustments for non-operating or non-recurring effects up to the level of EBITDA. The following table shows the reconciliation of reported EBITDA to adjusted EBITDA excluding the aforementioned earnings and expenses as described in the table.

1 Revenue

The Group’s revenue includes revenue from the sale of goods and products totaling € 44,953 thousand (previous year: € 38,974 thousand), remuneration from research and development partnerships amounting to € 7,634 thousand (previous year: € 9,378 thousand), utilization fees of € 2,558 thousand (previous year: € 1,157 thousand) and other revenue of € 190 thousand (previous year: € 0 thousand).

Fees from research and development partnerships consist of one-off fees, ongoing research and development fees, and performance-related fees from milestones and project success points.

The composition of revenue by segments and regions is presented in IV Segment reporting.

2 Research and development grant revenue

R&D grant revenue amounting to € 890 thousand (previous year: € 786 thousand) consists of non-repayable grants received for specific research and development projects, mainly for projects sponsors acting on behalf of the Federal Ministry of Education and Research (BMBF). The BMBF has the right to examine whether the funds granted are being used for the designated purpose.

3 Other income

Other income consists of:

4 Cost of materials

The cost of materials contains the cost of raw materials, consumables, and supplies, the cost of purchased merchandise, and the cost of services, in particular for third-party research and development expenses relating to R&D partnerships with universities and with other technology companies.

5 Personnel expenses

Share-based payment and other long-term employee benefits

The following overview shows the measurement date and the exercise price.

When the options were issued in the 2022/23 financial year for the ESOP 2022/23-Oct, the grant date was 1 October 2022, for the ESOP 2022/23-Sep-I the grant date was 20 September 2023, and for the ESOP 2022/23-Sep-II the grant date was 27 September 2023.

The following overview presents the options granted, expired, forfeited, and exercised in the financial year under review per type:

The following parameters were applied as at the measurement date:

As the company receives the consideration in the form of work and similar service, pursuant to IFRS 2 an amount of € 797 thousand (previous year: € 748 thousand) for these share-based payment schemes is recognized at BRAIN Biotech AG. Of this amount, € 242 thousand relates to Management Board members (previous year: € 227 thousand).

Growth equity program at Biocatalysts Ltd.

In the 2018/19 financial year, a share-based compensation scheme was established to incentivize and retain managers at Biocatalysts Ltd., which was acquired in the 2017/18 financial year, in which managers at local company level participate. In the 2018/19 financial year, the managers acquired 50,197 shares at a nominal price of GBP 0.1, in other words, at a total amount of GBP 5,020. The shares carry neither voting rights nor profit participation rights.

The program was settled in the financial year under review. In the financial year under review, a corresponding income in personnel expenses of € 82 thousand (previous year: expenses of € 636 thousand) was recognized as an adjustment to the liability. The resulting liability of € 1,273 thousand is recognized under other liabilities [22].

“CoPerBo” Corporate Performance Bonus for employees of BRAIN Biotech AG

In the 2015/16 financial year, a performance-based compensation scheme was set up for BRAIN Biotech AG employees. This scheme was continued in the financial year under review and commits an annual bonus to BRAIN Biotech AG staff depending on their respective basic salary received in the financial year and certain development factors. The bonus level is significantly affected in this context by three development factors, each of which affect one third of the bonus payable. All employees of BRAIN Biotech AG with separate target agreements are not entitled to this program.

The first factor is the year-to-year percentage change in the BRAIN Biotech Group’s revenue in the respective financial year. The second factor is the change in BRAIN Biotech Group’s adjusted EBITDA. A change in these factors of one million is defined as 10 %. The third factor is the change in the weighted average share price over the financial year. The bonus payments for the financial year elapsed are always scheduled to occur in the January of the subsequent year, as the audited segment information is available on that date. The payout range is fixed at between 0 and 30 % of the basic salary paid to an employee. Only ten percentage points may result from each factor.

The information from these financial statements was utilized to calculate the level of the obligation. The provision’s effect on adjusted EBITDA was taken into consideration through applying an iterative calculation.

The periodic expense from this program amounted to € 0 thousand for the 2022/23 financial year. A liability of € 0 thousand was formed as at 30 September 2023. An obligation of € 0 thousand arose for the 2021/22 financial year.

Pension commitments

The effects from measuring defined benefit pension commitments for two former Management Board members, which are included in the statement of comprehensive income, consist of the following:

The benefit entitlements of two former Management Board members consist of a retirement pension from the age of 65 as well as surviving dependents’ and invalidity benefits, which are paid out through an occupational pension plan (defined benefit plans).

The defined benefit obligation (DBO) reports the following changes:

The actuarial gains arise mainly from the adjustment of the actuarial interest rate.

The obligation was covered by reinsurance. Plan assets report the following changes:

The plan assets arise exclusively from claims from reinsurance in the form of life insurance policies. To this extent, the fair value cannot be derived from a price in an active market and for this reason is also calculated actuarially.

After offsetting the obligation with the assigned plan assets, the amounts recognized on the balance sheet are as follows:

In relation to pension obligations hedged through corresponding reinsurance, the “Richttafeln 2018G, Heubeck-Richttafeln GmbH, Köln 2018” mortality tables were utilized to measure the pension obligation as at 30 September 2023.

When measuring the pension obligation, an actuarial interest rate of 4.05 % (previous year: 3.65 %) and a pension trend of 1.00 % (previous year: 1.00 %) was applied. The cashflow-weighted duration of the payment obligation scope amounts to 17.7 years (previous year: 19.1 years).

The significant valuation assumptions show the following sensitivities with regard to changes in the defined benefit obligation:

The expected contributions to plan assets in the 2023/24 financial year amount to approximately € 243 thousand. No pension payments are expected for the 2023/24 financial year.

These include € 438 thousand (previous year: € 405 thousand) of expenses for pensions (occupational pension scheme, life insurance and pension insurance association contributions).

The employer contributions to the statutory pension insurance scheme amounted to € 1,417 thousand in the financial year under review (prior year: € 1,307 thousand).

Post-employment benefit costs of approximately € 448 thousand and employer contributions to the statutory pension insurance scheme (defined contribution benefit pension plan) of approximately € 1,464 thousand are expected in the 2023/24 financial year.

6 Depreciation, amortization and impairment

Depreciation, amortization and impairment charges are presented in the statements of changes in intangible assets and property, plant and equipment in the notes to the balance sheet.

7 Other expenses

Other expenses consist of the following:

8 Finance income

Finance income consists of the following:

Income from the subsequent measurement of financial liabilities derives mainly from the change in measurement and exercise of put option rights relating to non-controlling interests of the Breatec Group in an amount of € 0 thousand (previous year: € 1,234 thousand).

9 Finance costs

Finance costs consist of the following:

The expense from the subsequent measurement of financial liabilities derives mainly from the change in measurement and exercise of put option rights relating to non-controlling interests of Biocatalysts Ltd. in an amount of € 235 thousand (previous year: € 816 thousand) and of the Breatec Group in an amount of € 130 thousand (previous year: € 0 thousand).

10 Current and deferred taxes

Deferred taxes are measured using the tax rates expected to apply in the period when the asset is realized, or the liability is settled. For all German entities included in the Group, this is 15.825 % for corporate income tax, including the solidarity surcharge (previous year: 15.825 %). The trade tax rate for domestic Group companies and the combined tax rate are shown below:

Of the income tax assets of € 56 thousand (previous year: € 0 thousand), € 39 thousand (previous year: € 0 thousand) relate to corporation tax and the solidarity surcharge, and € 17 thousand (previous year: € 0 thousand) relate to trade tax. Of the income tax liabilities of € 44 thousand (previous year: € 190 thousand), € 35 thousand (previous year: € 18 thousand) relate to corporation tax and the solidarity surcharge, and € 9 thousand (previous year: € 172 thousand) relate to trade tax.

Deferred tax assets and liabilities and their changes in the financial year are as follows:

The differences between the expected income tax income based on the IFRS loss before taxes for the period and combined tax rate of BRAIN Biotech AG of 29.125 % (previous year: 29.125 %) and the income tax expense reported in the consolidated statement of comprehensive income are shown in the following table:

The following table shows the maturity of the deferred taxes recognized at the end of the reporting period. Deferred taxes are classified as current if the entity expects to realize the asset or settle the liability within twelve months after the reporting period.

Based on the detailed planning horizon of three financial years modelled in the consolidated entities’ tax projections, no deferred tax assets were recognized for tax loss carryforwards with an (in principle) unlimited carryforward period resulting from financial year 2022/23 and prior financial years amounting to € 84,299 thousand (corporation tax; previous year: € 77,277 thousand) and € 82,696 thousand (trade tax; previous year: € 77,007 thousand). The potential tax benefits that have consequently not been recognized amount to € 24,503 thousand (prior year: € 22,517 thousand).

No deferred taxes arose from a difference between tax valuations of participating interests and the net assets of subsidiaries included in the consolidated financial statements.

11 Earnings per share

Earnings per share attributable to the shareholders of BRAIN Biotech AG were calculated based on the loss for the period of € -8,279,463 as reported in the consolidated income statement (previous year: € -6,589,514).

Earnings per share are calculated by dividing the loss accruing to the shareholders of BRAIN Biotech AG for the period by the average number of shares of BRAIN Biotech AG issued in the financial year. The average number of shares in financial year 2022/23 amounted to 21,847,495 no-par value shares (previous year: 21,847,495 no-par value shares).

No dilutive effects arise at present.