VI. Notes to the consolidated balance sheet

12 Intangible assets

The following table shows the composition and changes:

The goodwill reported as at 30 September 2024 arises from the acquisition of AnalytiCon Group (AnalytiCon Discovery GmbH, AnalytiCon Discovery LLC) in the 2013/14 financial year, the acquisition of Biocatalysts Group (Biocatalysts Ltd., Biocatalysts Inc.) in the 2017/18 financial year, and the acquisition of Breatec Group (Weriol Group BV, Breatec BV and Panei BV) in the 2021/22 financial year.

Impairment tests

Goodwill existed at the following cash-generating units (CGUs) as at the reporting date:

^{3 Weighted average total cost of capital rate before tax}

The “Biocatalysts” CGU consists of the goodwill from the acquisition of Biocatalysts Ltd., including its subsidiary Biocatalysts Inc., and is attributable to the BioProducts segment.

The “Breatec” CGU comprises the goodwill from the acquisition of Weriol Group BV, including its subsidiary Breatec BV, and is attributable to the BioProducts segment.

The “Natural Products Chemistry” CGU consists of the goodwill from the acquisition of AnalytiCon Discovery GmbH and its subsidiary AnalytiCon Discovery LLC, and is attributable to the BioScience segment.

Biocatalysts

For the Biocatalysts unit, an IAS 36 impairment test was performed again as at 30 September 2024. Planning is based on significant revenue growth and successive margin improvements. Continued strong growth is to be achieved by further expanding business relationships with both existing and new customers. Furthermore, an even stronger focus on customer-specific enzymes and proprietary product developments is planned, which should contribute to a further improvement in revenue as well as to a margin improvement. Net cash flows beyond the detailed planning phase were modelled on a terminal growth rate that reflects growth rates derived from current market information (financial year under review: 1.00 %, previous year: 1.00 %). A value-in-use applying discounted cash flows was calculated based on five-year planning. No impairment was determined in the impairment test on 30 September 2024.

An increase in the weighted average cost of capital by 1.0 percentage points or a reduction in the EBITDA margin in the perpetual return by 2.0 percentage points would also have led to no impairment.

The Management Board assumes that the calculated sensitivities suitably and sufficiently reflect the potential deviations from plan in each case.

Breatec

For the Breatec unit, an IAS 36 impairment test was performed again as at 30 September 2024. Planning is based on significant revenue growth and successive margin improvements. Continued strong growth is to be achieved by further expanding business relationships with both existing and new customers. Furthermore, an even stronger focus on customer-specific enzymes is planned, which should contribute to a further improvement in revenue as well as to a margin improvement. Net cash flows beyond the detailed planning phase were modelled on a terminal growth rate that reflects growth rates derived from current market information (financial year under review: 1.00 %, previous year: 1.00 %). A value-in-use applying discounted cash flows was calculated based on five-year planning. No impairment was determined in the impairment test on 30 September 2024.

An increase in the weighted average cost of capital by 1.0 percentage points or a reduction in the EBITDA margin in the perpetual return by 2.0 percentage points would also have led to no impairment.

The Management Board assumes that the calculated sensitivities suitably and sufficiently reflect the potential deviations from plan in each case.

Natural Products Chemistry

For the Natural Products Chemistry unit, an IAS 36 impairment test was performed again as at 30 September 2024. Planning is based on constant revenue growth and successive margin improvements. The expected trend in revenue and earnings is mainly driven by the growth potential in the area of projects/services (including the project of AnalytiCon Discovery with Pharvaris N.V. regarding the novel oral bradykinin B2 receptor antagonist (PHA121)) as well as the resultant positive effects on the personnel expense ratio. Net cash flows beyond the detailed planning phase were modelled on a terminal growth rate that reflects growth rates derived from current market information (financial year under review: 1.00 %, previous year: 1.00 %). A value-in-use applying discounted cash flows was calculated based on five-year planning. No impairment was determined in the impairment test on 30 September 2024.

An increase in the weighted average cost of capital by 1.0 percentage points or a reduction in the EBITDA margin in the perpetual return by 2.0 percentage points would have also led to no impairment.

The Management Board assumes that the calculated sensitivities suitably and sufficiently reflect the potential deviations from plan in each case.

The other intangible assets that are material to the consolidated financial statements consist of the intangible assets identified as part of the purchase price allocation, as shown in the following table.

^{4 Remaining useful life in years}

In accordance with the accounting policies presented above, no development costs were capitalized in the 2023/24 financial year or in the previous year, as it is not possible to distinguish research and development phases due to the alternating process, and consequently not all of the criteria specified in IAS 38 were met.

Research and development expenses of € 6,244 thousand (previous year: € 4,979 thousand) are reported in the statement of comprehensive income mainly under the items “personnel expenses”, “cost of materials” and “other expenses”, as well as in amortization charges.

13 Property, plant and equipment

Investments in property, plant and equipment in the 2023/24 financial year were attributable primarily to the technical expansion of research, development, and manufacturing infrastructure. The following table shows the composition and changes of property, plant and equipment:

Land and buildings serve partly as collateral for bank loans. Not all of the land and buildings of BRAIN Biotech AG that are included in this item were assigned as collateral. More detail can be found in the section (21) Financial liabilities.

Information about lease liabilities is provided in section (21) Financial liabilities.

The following table presents the total cash outflows for leases.

14 Equity-accounted investments

Enzymicals AG

The carrying amount of the interest in the associated company Enzymicals AG⁵ reports the following changes:

^{5 Financial year = calendar year; the difference arises from the historical difference between the financial year of BRAIN Biotech AG and the calendar year}

In the 2023/24 financial year, the 24.10 % voting rights interest in Enzymicals AG was divested (in September 2024). As a consequence, the pro rata equity as at 30 September 2024 amounts to € 0 thousand (previous year: € 83 thousand).

The following tables show the aggregated results and balance sheet data of Enzymicals AG and the amounts of profit or loss for the period and equity attributable to BRAIN Biotech AG in line with its interest (24.10 %). The figures for Enzymicals AG were calculated based on the accounting principles of the German Commercial Code (HGB), as the Management Board is of the opinion that no material valuation differences exist in relation to IFRS.

SolasCure Ltd.

The carrying amount of the interest in the associated company SolasCure Ltd. reports the following changes:

This participating interest is allocated to the BioScience segment. There were no unrecognized losses in the current financial year (previous year: € 0 thousand).

The following tables show the aggregated results and balance sheet data of SolasCure Ltd. and the amounts of profit or loss for the period and equity attributable to BRAIN Biotech AG in line with its 34.16 % interest (34.16 % on 30 September 2023). The disclosures reflect the financial statements of SolasCure Ltd. prepared in accordance with IFRS as adopted by the European Union.

In addition to the remaining elimination of unrealized results of intra-group transactions, the difference between the amount recognized for the participating interest and the proportionate equity attributable to BRAIN Biotech AG is attributable to goodwill of € 254 thousand.

15 Inventories

Inventories consist of the following:

Inventories included impairment losses on raw materials and supplies of € 88 thousand (prior year: € 54 thousand), and work in progress and finished goods of € 545 thousand (prior year: € 441 thousand).

16 Trade receivables

Trade receivables consist of the following:

The presented carrying amounts of receivables correspond to the fair values.

Trade receivables generally have a term of up to one year. Credit default rates in a range of between 0.5 % and 10 % were applied in order to calculate the total lifetime ECL. Total lifetime ECLs of € 95 thousand (previous year: € 52 thousand) were recognized on the portfolio as at the 30 September 2024 reporting date, which are recorded in a separate allowance account.

The following table shows the past due structure of trade receivables as at 30 September 2024.

The following table shows the past due structure of trade receivables as at 30 September 2023.

The following table shows the changes in impairment losses:

The impairment rate amounted to 1.2 % in the 2023/24 financial year (previous year: 0.5 %).

Further information on impairments and the credit risks pertaining to trade receivables is provided in section VII. Financial instruments / risks from financial instruments.

17 Other financial assets

Other financial assets consist of the following:

18 Other non-current and current assets

Other non-current assets consist of the following:

Other current assets consist of the following:

All current assets have a remaining term of up to one year. The portfolio of other assets was neither overdue nor impaired as at the reporting date. Default risk is regarded as low, as in the previous year.

19 Cash and cash equivalents / statement of cash flows

Cash and cash equivalents are held mainly at banks in Germany and in the UK.

In the statement of cash flows, other non-cash expenses and income include the following items:

20 Equity

Changes to the equity capital position are shown in the consolidated statement of changes in equity.

Subscribed capital

The subscribed share capital amounts to € 21,847,495 (previous year: € 21,847,495) and is divided into 21,847,495 ordinary shares (previous year: 21,847,495), to each of which a proportional amount of the share capital of € 1.00 is attributable. The shares are fully paid-in registered shares. The shares are listed in the Prime Standard stock market segment of the Frankfurt Stock Exchange.

Authorized capital

With an AGM resolution on 9 March 2022, authorized capital of € 4,369,499 was created (Authorized Capital 2022/I). Authorized Capital 2022/I was entered in the commercial register on 28 March 2022. The Management Board was authorized, with Supervisory Board assent, to increase the company’s share capital in the period until 8 March 2027, once or on several occasions, albeit by a maximum nominal amount of € 4,369,499 through issuing up to 4,369,499 new ordinary registered shares against cash capital contributions and/or non-cash capital contributions, whereby shareholders’ statutory subscription rights can be wholly or partly excluded. If the new shares are issued against cash capital contributions, shareholders’ statutory subscription rights can be wholly or partially excluded if the new shares’ issue price is not significantly less than the stock market price of the company’s shares already listed on the date when the issue price is finally determined, and the total number of shares issued in this manner under exclusion of subscription rights does not exceed 10 % of the share capital.

Accordingly, authorized capital of € 4,369,499 was reported as at the 30 September 2024 reporting date.

Conditional capital

Pursuant to Section 5 (3), (4), (5) and (6) of the company’s bylaws, the share capital is conditionally increased by € 2,184,749 through the issue of up to 2,184,749 new ordinary registered shares (Conditional Capital 2023/I) and by a further € 63,000 through the issue of up to 63,000 new ordinary registered shares (Conditional Capital 2015/II), by issuing up to 1,233,600 new ordinary registered shares (Conditional Capital 2019/I) and by issuing up to 888,148 new ordinary registered shares (Conditional Capital 2023/II).

Conditional Capital 2023/I serves exclusively to grant shares to the holders of bonds with warrants and convertible bonds that the company issues based on the authorization of the Management Board by way of AGM resolution passed on 8 March 2023. The conditional capital increase is to be implemented through issuing up to 2,184,749 new ordinary registered shares only to the extent that the holders of convertible bonds and/or bonds with warrants utilize their conversion rights or warrant rights, or the holders of convertible bonds that are obligated to convert satisfy their obligation to convert, and to the extent that other forms of satisfaction are not deployed to service the bonds. In the 2023/24 financial year, a convertible bond with a nominal value of € 5.0 million was issued by way of a private placement, in partial utilization of Conditional Capital 2023/I. An increase in the share capital from Conditional Capital 2023/I had not been implemented as at the 30 September 2024 reporting date.

Conditional Capital 2015/II serves exclusively to service subscription rights arising from stock options that are granted – pursuant to the AGM resolution dated 8 July 2015 as part of a stock option plan comprising up to 63,000 stock options that carry subscription rights to shares of BRAIN Biotech AG with a term of up to eight years – to the members of the company’s Management Board, members of affiliated companies’ management boards, as well as managers and other company employees in senior positions. The conditional capital increase is to be implemented only to the extent that the holders of issued subscription rights utilize them, and the company does not grant treasury shares or cash settlement to satisfy these subscription rights. An increase in the share capital from Conditional Capital 2015/II had not been implemented as at the 30 September 2024 reporting date.

At the Annual General Meeting on 7 March 2019, Conditional Capital 2015/II was reduced from the original € 1,272,581 to € 123,000, as this capital was to remain exclusively for hedging stock options already issued. At the Annual General Meeting on 8 March 2023, the conditional capital was reduced by a further € 60,000 to € 63,000. The authorization to issue further stock options from Conditional Capital 2015/II was revoked at the same Annual General Meeting and replaced by a new authorization (see following section).

By resolution of the Annual General Meeting on 7 March 2019, the share capital was conditionally increased by € 1,682,578 through the issue of up to 1,682,578 new no-par-value registered shares (Conditional Capital 2019/I). At the Annual General Meeting on 8 March 2023, Conditional Capital 2019/I was reduced by € 448,978 from the original € 1,682,578 to € 1,233,600. The conditional capital serves exclusively to service subscription rights from stock options granted to members of the company’s Management Board and other senior company managers. The Management Board is authorized, with the approval of the Supervisory Board, to determine the further details of the implementation of the conditional capital increase. The conditional capital increase is to be implemented only to the extent that the holders of issued subscription rights utilize them, and the company does not grant treasury shares or cash settlement to satisfy these subscription rights. An increase in the share capital from Conditional Capital 2019/I had not been implemented as at the 30 September 2024 reporting date.

Conditional Capital 2023/II serves exclusively to service subscription rights arising from stock options that are granted – pursuant to the AGM resolution dated 8 March 2023 as part of a stock option plan comprising up to 888,148 stock options that carry subscription rights to shares of BRAIN Biotech AG with a term of up to six years – to the members of the company’s Management Board and other company employees in senior positions. The conditional capital increase is to be implemented only to the extent that the holders of issued subscription rights utilize them, and the company does not grant treasury shares or cash settlement to satisfy these subscription rights. An increase in the share capital from Conditional Capital 2023/II had not been implemented as at the 30 September 2024 reporting date.

Stock options

An AGM resolution dated 8 March 2023 authorized the Management Board, with Supervisory Board approval, to issue as part of a stock option plan until 7 March 2028 up to 888,148 stock options with subscription rights to shares of BRAIN Biotech AG with a term of up to six years, with the condition that each stock option grant the right to subscribe for one share, and according to further provisions. As far as issuing shares to members of the Management Board of BRAIN Biotech AG is concerned, this authorization is valid for the Supervisory Board alone. The AGM conditionally increased the share capital by € 888,148 to hedge and service the stock options (Conditional Capital 2023/II).

Capital reserves

The capital reserves contain the share premium from the issuance of shares, net of transaction costs after taxes, as well as the expenses from granting stock options. For more information about share-based compensation, please refer to the remarks in Section “Share-based payment and other long-term employee benefits”. Capital reserves as per German commercial law are published in the separate financial statements for BRAIN Biotech AG prepared according to German Commercial Code (HGB) accounting policies.

The € 600 thousand allocation to the capital reserves relates to the € 609 thousand equity component of the € 5.0 million convertible loan less € 9 thousand in transaction costs. See note (22) Convertible bonds.

Other reserves

Currency translation differences are recognized in other reserves.

Retained earnings

Retained earnings in the 2023/24 financial year reduced mainly to reflect profit or loss attributable to shareholders of BRAIN Biotech AG.

The following table shows the non-controlling interests during the 2023/24 financial year:

The previous year’s non-controlling interests are shown in the following table:

^{6 Including the subsidiary Biocatalysts Inc. and taking into consideration the amortization of disclosed hidden reserves}

The changes in the non-controlling interests are as follows:

Breatec Group

The following section presents summarized financial information for subsidiaries with non-controlling interests of significance to the Group.

Apart from legal restrictions, no restrictions exist on the ability of BRAIN Biotech AG to access or utilize these subsidiaries’ assets, or to fulfil these subsidiaries’ liabilities.

21 Financial liabilities

The financial liabilities consist of the following:

In the financial year under review, 60 % of a contribution from Hessen Kapital I GmbH was repaid as planned on 30 June 2024. As a consequence, the original contribution of € 1,500 thousand was repaid in full.

The following contributions from silent partners existed as at the 30 September 2024 balance sheet date:

• Hessen Kapital II GmbH, Wiesbaden, in the amount of € 3,000 thousand (previous year: € 3,000 thousand)
• Hessen Kapital I GmbH (a), Wiesbaden, in the amount of € 2,000 thousand (previous year: € 0 thousand)
• Hessen Kapital I GmbH (b), Wiesbaden, in the amount of € 1,500 thousand (previous year: € 0 thousand)
• MBG H Mittelständische Beteiligungsgesellschaft Hessen mbH, Wiesbaden, in the amount of € 1,500 thousand (previous year: € 0 thousand)

Of the contribution by Hessen Kapital II GmbH, 20 % is repayable on 31 March 2026, a further 20 % on 31 March 2027 and 60  % on 31 March 2028. The company pays fixed remuneration equivalent to nominal 6.0 % p. a. (previous year: 6.0 %) on the contribution of Hessen Kapital II GmbH and a profit participation equivalent to the ratio between the nominal level of the silent partnership and the nominal level of the equity of BRAIN Biotech AG, albeit to a maximum of 1.5 % of the contribution and not more than 50 % of the profit for the year. Interest liabilities amounted to € 0 thousand as at 30 September 2024 (previous year: € 61 thousand).

Of the contribution by Hessen Kapital I GmbH (a), 30 % is repayable on 30 September 2032, a further 35 % on 30 September 2033 and 35  % on 30 September 2034. The company pays fixed remuneration equivalent to nominal 8.0 % p. a. on the contribution of Hessen Kapital I GmbH (a) and a profit participation equivalent to the ratio between the nominal level of the silent partnership and the nominal level of the equity of BRAIN Biotech AG, albeit to a maximum of 1.5 % of the contribution and not more than 50 % of the profit for the year. No interest liabilities existed as at 30 September 2024.

Of the contribution by Hessen Kapital I GmbH (b), 30 % is repayable on 30 September 2030, a further 35 % on 30 September 2031 and 35  % on 30 September 2032. The company pays fixed remuneration equivalent to nominal 8.0 % p. a. on the contribution of Hessen Kapital I GmbH (b) and a profit participation equivalent to the ratio between the nominal level of the silent partnership and the nominal level of the equity of BRAIN Biotech AG, albeit to a maximum of 1.5 % of the contribution and not more than 50 % of the profit for the year. No interest liabilities existed as at 30 September 2024.

Of the contribution by MBG H Mittelständische Beteiligungsgesellschaft Hessen mbH, 30 % is repayable on 30 September 2030, a further 35 % on 30 September 2031 and 35  % on 30 September 2032. In relation to the contribution of MBG H, the company pays a fixed fee of nominally 6.5 % p.a., an annual guarantee commission of 1.5 % p.a. of the respective contribution, and a profit share in the amount of the ratio of the nominal amount of the silent participation to the nominal amount of the equity of BRAIN Biotech AG, albeit no more than 1.5 % of the contribution and no more than 50 % of the annual profit. No interest liabilities existed as at 30 September 2024.

BRAIN Biotech AG is entitled to call the aforementioned contributions before the agreed dates. However, due to the negative consequences this would have for the company (prepayment penalties), effectively this option has no economic value for the company. The silent partnerships do not participate in any losses. No obligation exists to provide additional funding.

Land charges exist with compulsory enforcement clauses on land owned by BRAIN Biotech AG with a notional value of € 2.5 million (previous year: € 2.5 million). All land charges serve to secure bank borrowings, which amounted to € 1,071 thousand at the end of the reporting period (previous year: € 1,661 thousand). The land charges rank behind an unassigned land charge in favor of the owner amounting to € 0.5 thousand (previous year: € 0.5 thousand).

At the Biocatalysts Ltd. subsidiary, € 2,699 thousand (previous year: € 2,753 thousand) of financial liabilities are secured by € 3,711 thousand (previous year: € 3,585 thousand) of land charges on operating property.

Other than standard retention of title from individual contracts, no other liabilities are secured by liens or similar rights. The carrying amount of the collateral furnished at the end of the reporting period stood at € 5,104 thousand (€ 5,212 thousand as of 30 September 2023).

The nominal interest rate on fixed-interest loans lies between 1.15 % (previous year: 1.15 %) and 8.00 % (previous year: 8.12 %) p.a. Some of the Group’s liabilities are subject to variable interest rates depending on the Bank of England’s base rate.

The following table shows the undiscounted nominal amounts due at the financial liabilities’ terms:

The contractually agreed due dates for principal and interest payments and for profit- related payments are shown in the following overview:

The following table shows the change in financial liabilities analyzed by cash and non-cash changes:

22 Convertible bonds

Convertible bonds in the amount of € 5.0 million were placed with MP Beteiligungs-GmbH on 5 March 2024 by way of a private placement. The maturity date is 5 September 2026 and the conversion price is € 5.04.

The equity component (€ 609 thousand) was calculated by comparing the contractual interest rate (6.515 %) with the standard market interest rate for the company (12.70 %).

The changes are as follows:

23 Financial liability for future payments to Royalty Pharma

The agreement concerning the sale of future royalties from the license agreement with Pharvaris N.V. to Royalty Pharma came into force on 20 September 2024.

In accordance with this agreement, Royalty Pharma made a non-refundable pre-payment of € 18.41 million to BRAIN Biotech AG upon signing of the agreement. In addition, potential future payments from Royalty Pharma to BRAIN Biotech AG of up to € 110.47 million were agreed, which are to be paid depending on the achievement of certain contractually defined regulatory and commercial milestones for the investigative drug deucrictibant.

In return, BRAIN Biotech AG has undertaken under the agreement to pass on to a third party (i.e. Royalty Pharma) the majority of the royalties to which it will be entitled in future under the existing license agreement with Pharvaris N.V. for the successful sublicensing of deucrictibant by Pharvaris N.V.

Deucrictibant is currently still in clinical development and has not yet received market approval. For this reason, it is uncertain whether BRAIN Biotech AG will receive any royalties and generate revenue from this drug in the future. Based on the management planning prepared by BRAIN Biotech AG, however, it is expected that deucrictibant will be ready for market approval in the coming years and that royalties from net sales will be passed on to Royalty Pharma after successful market approval.

As the agreements concluded with Royalty Pharma were concluded on arm’s length terms, the total consideration paid by Royalty Pharma corresponds to the fair value of the liability entered into by BRAIN Biotech AG.

The financial liabilities to Royalty Pharma are subsequently recognized at amortized cost applying the effective interest method (18.51 %). The resultant effective interest is recognized in the financial result.

The changes are as follows:

Due to deucrictibant’s current development stage, at present it is not expected that any liabilities to Royalty Pharma will fall due within the 12 months following the balance sheet date, as a consequence of which no current financial liability from future payments to Royalty Pharma is to be recognized.

24 Other liabilities

Other liabilities include € 658 thousand (previous year: € 1,273 thousand) for the Biocatalysts Ltd. growth share program, of which € 658 thousand is current (previous year: € 578 thousand) and € 0 thousand non-current (previous year: € 694 thousand).

Current other liabilities consist of the following:

Miscellaneous other liabilities include customer credits of € 27 thousand (previous year: € 45 thousand).

25 Deferred income

Deferred income consists of current deferred income of € 620 thousand (compared with € 2,932 thousand in the previous year) and non-current deferred income of € 1,124 thousand (compared with € 518 thousand in the previous year).

Deferred income totaling € 0 thousand (previous year: € 196 thousand) arises from transactions with SolasCure Ltd. The deferred income partly includes advance payments received from customers for performance obligations not yet fulfilled as at the reporting date. A contribution of € 581 thousand is attributable to benefit obligations that have not yet been fulfilled (previous year: € 2,901 thousand). It is expected that a contribution of € 500 thousand of this amount can be recognized in revenue within one year. Deferred income of € 4,113 thousand (previous year: € 3,125 thousand) was fully recognized in revenue in the 2023/24 financial year.

26 Provisions

27 Trade payables

Trade payables have a term of up to one year.