Annual Report (ESEF) • Feb 11, 2022
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Download Source FileUntitled Annual Report 2021 Contents 2021 at a glance 4 About NX Filtration 6 Report of the Management Board 8 Business review 10 Sustainability report 16 2021 month-by-month 36 Financial performance 44 Risks and Uncertainties 48 Corporate governance 76 Report of the Supervisory Board 88 Financial statements 100 Consolidated nancial statements 102 Company nancial statements 134 Other information 144 Independent auditor’s report 146 3NX Filtration - Annual Report2 Contents 2021 at a glance 281% gross income growth 87 pilot projects 121 billion liters of clean water enabled First externally certied Green IPO at Euronext Amsterdam Key leadership additions with new CCO and CFO Expanded global presence in Canada, USA, Singapore, India and UAE Step-up in production capacity with second membrane spinning line Secured plot of land for the construction of new high-tech membrane megafactory Winner of Frost & Sullivan Global New Product Innovation Award 5NX Filtration - Annual Report4 2021 at a glance About NX Filtration NX Filtration is a provider of direct nanoltration membrane technology for producing pure and aordable water to improve quality of life. Its direct nanoltration technology removes micropollutants (including pharmaceuticals, medicines, PFAS and insecticides), colour and selective salts, but also bacteria, viruses and nanoplastics, from water in one step whilst oering strong sustainability benets. NX Filtration sells its ltration membrane modules in its two business lines: Clean Municipal Water and Sustainable Industrial Water. Business lines Clean Municipal Water In its Clean Municipal Water business line, NX Filtration’s membrane technology enables its customers to produce drinking water from surface water by removing, amongst others, micropollutants, nanoplastics and medicine residues in one single step, to treat wastewa- ter streams to prevent discharge of polluting substances in the environment, and to reuse treated wastewater for purposes that also include the production of drinking water. Sustainable Industrial Water In its Sustainable Industrial Water business line, NX Filtration’s membrane technology enables its customers to treat surface or well water to optimise quality and characteristics for process water, prevent discharge of polluting waste- water and reuse wastewater for industrial processes and recover and recycle valuable raw materials from wastewater streams, such as indigo in the textile industry or cleaning chemi- cals in beer breweries. Environmental Social Governance Recurring replacements Repeat projects ReplacementsFull-scale US Sustainable Development Goal 6 - Pure and affordable water for all Energy efficient operation Green chemistry Production energy savings Safety Training and development Diversified employee base Sustainable supply chain Knowledge sharing Avoiding chemicals in pre-treatment Demo plantsPilots Clean water for all Avoiding emissions at our customers Our internal initiatives Gross income (€ ‘000) 704 2,789 1,301 784 2021 H2 192 1,280 2021 H1 771 317 536 2020 H2 242 237 57 533 2020 H1 156 249 128 Other income Sustainable Industrial Water Clean Municipal Water Commercialisation strategy NX Filtration’s scalable commercial model is based on investing in pilot systems that, over time, convert into demo or full-scale plants. As such, NX Filtration aims to grow its installed base of pilot systems to create a strong basis for recurring revenues from repeat projects and module replace- ments in the longer term. The route-to-market for NX Filtration’s membrane modules is based on relationships with original equipment manufacturers (OEMs), who are responsible for the overall ltration system at the end-users facilities. Once these OEM customers have been trained and have worked with NX Filtration’s products, they become an important element in the further commercial roll-out of NX Filtration’s products. 7NX Filtration - Annual Report6 About NX Filtration Report of the Management Board 9NX Filtration - Annual Report8 Report of the Management Board Business review 2021 was a very exciting year for NX Filtration in which we were able to embark on the next stage of our growth journey. We are experiencing strong traction in the market with our direct nanoltration (dNF) membrane technology that can produce pure and aordable water in one step by removing micropollutants (including e.g., pharmaceuticals, medicines and PFAS) whilst oering our customers strong sustainability benets. Through our green IPO in June we were able to accelerate our commercial roll-out, our capacity expansion program and our innovation agenda. Strong growth and progress on our strategic agenda 2021 has been a year of strong growth for NX Filtration, with an increase of 281% in gross income and 373% in revenues from the sale of goods. We also made strong progress on our strategic agenda, that centers around the roll-out of pilot projects, the expansion of our production capacity and further inno- vation of our products. At the same time, the global COVID-19 pandemic clearly continued to impact people’s lives and the wider econ- omy, including NX Filtration’s employees and end-markets. We want to thank our employees and customers for their continued commitment and dedication, also in these times. Revenues in our Sustainable Industrial Water business line increased with 468%, driven by strong traction with customers in, amongst others, the food & beverage, textile and paper industries looking to reduce their water foot- print and optimize their water systems in a sus- tainable way. Clients in this business line include PepsiCo, Grundfos (a global water technology company) and Nijhuis Saur Industries (OEM in the Netherlands / France). Revenues in our Clean Municipal Water business line increased with 260%, primarily driven by projects in Asia. These include repeat projects for, amongst others, PT Bayu (Indonesian OEM partner) and Aquarius H2O Dynamics (Indian OEM partner). Our current focus in Europe and North America is on realizing pilot projects with leading players, amongst whom Veolia (a global leader in water treatment), Aqualia (the fourth largest water management company in Europe) and Aigües de Barcelona (the public-private company responsible for managing the water cycle in the metropolitan area of Barcelona, Spain), with visibility on future large projects. In January 2021, we signed a contract with Hydranautics to produce and supply HYDRAcap ultraltration (UF) modules, with a gradual ramp-up in volumes during the year. We further internationalized our presence with additional sales force in the USA, Canada, UAE, India and Singapore, on top of the sales force we already employed in the Netherlands, Belgium and Spain, and a growing number of OEM relation- ships. Based on this global expansion we have been able to grow our share of revenues outside Europe from 24% in 2020 to 66% in 2021. Market developments Water scarcity and water quality are major global and structural issues and key drivers of the water market. For example, it is estimated that 1.1 billion people worldwide lack access to water, and a total of 2.7 billion people nd wa - ter scarce for at least one month of the year. By 2025, approximately two-thirds of the world’s population may face water shortages 1 . The use of biologically treated wastewater is generally seen as an important source for producing high quality water for industrial use and drinking wa - ter. In addition, the discharge of wastewater in- creasingly poses challenges for the environment (for example the presence of antibiotic resistant 1 World Wildlife Fund, https://www.worldwildlife.org/threats/water-scarcity Michiel Staatsen CEO and COO Erik Roesink Founder and CTO 11NX Filtration - Annual Report10 Business review enabled 2,127 ton CO 2 e savings during the deployment lifetime of our modules, by avoiding the use of 3.9 million kg of chem- icals and saving 49 GWh energy compared to conventional technologies. 3. Our internal initiatives: We have imple- mented various sustainability measures and initiatives around ESG related themes in our own operations, for our employees and our partners. In our Sustainability Report, that forms part of this Annual Report, we further elaborate on these and other ESG related aspects. Strengthening organization In our journey of fast growth, strengthening and growing our organization is amongst our top priorities. During 2021, our employee base has grown from 34 FTE to 69 FTE, which in- cludes more than 10 nationalities. Key additions were made to our sales force, team of pilot and commissioning engineers, R&D employees and production personnel. The latter facilitated, amongst others, the transition to a full continu- ous working schedule for the production of our membranes in the course of the second half of 2021. In addition to its production, R&D, engi- neering and sales center in the Netherlands, NX Filtration employs dedicated sales sta in Bel- gium, Germany, Spain, India, Singapore, UAE, the United States and Canada, and works with commercial and technical partners in various other parts of the world. NX Filtration is placing strong emphasis on training and development. Not only to em- power NX Filtration’s employees, but also for customers, partners and graduates. We are facilitating internships, joint research programs and partnerships with universities and research institutes. We also successfully strengthened our manage- ment team. In September, we welcomed Ale- jandro Roman Fernandez as Chief Commercial Ocer to our team, bringing a wealth of expe- rience in commercial roles in the global water markets. At the start of 2022, Marc Luttikhuis joined us as our Chief Financial Ocer, bringing extensive international experience as a CFO in entrepreneurial and fast-growing settings. Together with them we are looking forward further expanding our team and professionalize our organisation. Strong progress against strategy NX Filtration’s key strategic themes center around the roll-out of pilot projects, the ex- pansion of its production capacity and further innovation. Pilot roll-out Pilots play an important role in NX Filtration’s commercial roll-out strategy. Pilots range from lab-scale Mexplorer pilots to full-scale (contain- erized) Mexpert pilots. In 2021, NX Filtration initiated 87 pilot projects compared to 27 in 2020. On 31 December 2021, NX Filtration had 85 pilots in its eet and, to facilitate a growing demand for its pilot systems, NX Filtration is further expanding its eet of pilot systems. We are also broadening our pilot eet with dedicat- ed systems for the North American and Asian markets, and are working to add larger-scale pilot/demo systems (based on 10 membrane modules) to our eet. Capacity expansion NX Filtration is making further progress on expanding its production capacity. With the addition of a separate facility (at the Josink Esweg in Enschede, the Netherlands) for the production of its membrane modules in the rst half-year of 2021, the original facility (at the In- stitutenweg in Enschede, the Netherlands) has been expanded to accommodate a second spin- ning line for the production of membranes. This second spinning line has been commissioned at bacteria, viruses and PFAS, resulting in potential health issues) and for the production of drinking water (for example increased requirements on the removal of micropollutants). NX Filtration’s direct nanoltration technolo- gy can play a pivotal role in addressing these issues. Our technology was designed to remove micropollutants (including pharmaceuticals, medicines, PFAS and insecticides), colour and selective salts from (treated) wastewater and surface water in one single step and also removes bacteria, viruses and nanoplastics. The direct nanoltration membrane technology also oers substantial sustainability benets compared to conventional water treatment methods, as it avoids the use of pretreatment chemicals in the water treatment process and substantially reduces energy consumption. Recent market developments appear favorable for the further adoption of our dNF technology. Based on research by Frost & Sullivan 2 , treated wastewater is increasingly being embraced as the sustainable alternative to the use of ground - water sources, therewith conserving such fresh- water resources and reducing the need for cost and energy-intensive desalination processes. Various countries have already implemented pol - icies that require a minimum amount of treated wastewater to be reused. This is expected to be adopted globally in the near future to mitigate the water stress caused by climate change, economic development and population growth. Another important trend relates to PFAS and other emerging pollutants (including antibiotics, hormones and persistent organic matter), that have become a key cause for concern, especially in North America and the EU. Most countries in these regions are exploring various methods to detect, monitor, and treat these harmful pollut - ants. And nally, circular economy themes are more and more being adopted by utilities and in - dustries across the globe. Therefore, technology solutions with circularity benets or those that enable a circular model are expected to witness signicant growth. Sustainability and ESG impact Sustainability and a clear Environmental, Social and Governance (ESG) agenda are at the heart of NX Filtration’s business. We passionately believe we have a responsibility to contribute positively to society and the environment. 2021 marked an important year for NX Filtration in terms of progress on this ESG agenda: we realized an externally certied green-labelled IPO, professionalized our CO 2 emission data collection in order to be able to report thereon, prepared for ISO14001 certication (which we obtained at the start of 2022), realized further alignment with the UN Sustainable Development Goals (SDGs) and can already report that all our dNF sales contribute to the EU Taxonomy, based on objective 1 on climate change mitigation 3 . We are also strongly committed to contribute to other objectives of the EU Taxonomy for which the delegated regulations including the technical screening are still under development. We have developed a targeted ESG framework in which we address and monitor our impact along three pillars: 1. Clean water for all: Our 2021 membrane sales can enable the production of 121 billion liters of clean water 4 , which is equiva- lent to the drinking water supply for 22 million persons during one year. In 2021, NX Filtration enabled access to clean water across 28 countries. 2. Avoiding emissions at our customers: With our membrane module sales in 2021, we 2 Frost & Sullivan Global Water and Wastewater Treatment, Outlook 2022 3 dNF sales represent 65% of total revenues from sale of goods. See Sustainability Report for details, assumptions and methodologies 4 Based on NX Filtration’s sales of approximately 1,200 membrane modules (dNF and UF only), multiplied by the expected capacity and lifetime of such modules. See Sustainability Report for details, assumptions and methodologies 13NX Filtration - Annual Report12 Business review predictions of design parameters and calcula- tions of energy consumption, process ows and cleaning intervals. We also worked on a new, more open dNF membrane that we anticipate to launch to the market in the course of 2022. This membrane is ideally suited for processes where the priority is to retain colour and pathogens. The new mem- brane will complement our current portfolio of dNF40 and dNF80 membranes. NX Filtration’s dNF40 and dNF80 membranes oer the high- est selectivity in the market and are therefore uniquely suited to remove small micropollutants such as PFAS in a sustainable process. The new membrane oers higher ow rates than the dNF40 and dNF80 membranes, with better selectivity than conventional technologies such as ultraltration. In line with NX Filtration’s existing products, the new membrane enables operational simplicity and sustainable process- es, reducing energy consumption and prevent- ing the use of pretreatment chemicals. Outlook Boosted by the additional equity capital that NX Filtration raised with its IPO in June 2021, we continue to invest in our strategic priorities in 2022. A further ramp-up of our commercial roll-out program will be enabled by a growing eet of pilot systems and an increase in the number of pilot engineers. With the addition of our second spinning line for the dedicated production of dNF membranes we will unlock further growth opportunities and enable production eciencies. In 2022, we will take important steps in the development of our new large-scale production plant, with con- struction expected to start in the second half of the year. Furthermore, we continue to expand NX Filtration’s organization, specically on international sales, pilot engineering, R&D and production personnel. ESG will remain at the heart of NX Filtration’s business on which we will not compromise while scaling up. NX Filtration considers high ESG standards of great importance for its long- term success, its customers, the environment and society as a whole. The strong growth that NX Filtration is currently experiencing provides many opportunities to organize ESG aspects with the highest standards and impact from the outset. Furthermore, we will follow the development regarding the EU Taxonomy Reg- ulation closely, in particular the details around objectives for which the delegated regulations including the technical screening are still under development. In 2022, we aim to continue the strong growth of our business and further accelerate the roll- out of our strategy. We remain committed to make an impact based on our mission ‘clean and aordable water for all’, whilst oering strong sustainability benets to our customers and providing an inspiring working environment for our employees. Management Board Michiel Staatsen, CEO and COO Erik Roesink, Founder and CTO the end of 2021, resulting in a combined total capacity of approximately 10,000 membrane modules per year 5 (compared to the capacity of approximately 2,500 membrane modules per year 6 in 2021). In parallel, further progress has been made with the development of a new large-scale manufac- turing facility, which is expected to be commis- sioned at the end of 2023. We secured a 24,000 square meters plot of land at the High Tech Systems Park in Hengelo, the Netherlands, ap- proximately 10 kilometres from the current fa- cilities. We also staed our project organization for the construction of our new manufacturing facility, responsible for construction, installa- tion and automation. Construction works are expected to start in the second half of 2022. Upon completion, this facility can be expanded to a targeted total capacity of approximately 80,000 membrane modules per year 7 . Innovation We are convinced that our breakthrough dNF membrane technology will play an important role in addressing global issues which center around water quality and water scarcity. It makes us proud that the breakthrough charac- ter of our membranes is also being recognized by various industry observers. In August 2021, NX Filtration received the 2021 Frost & Sullivan Global New Product Innovation Award in the water and wastewater treatment membrane industry. Their commentary on this prize includ- ed: “Climate change today leads to increasing water scarcity and water contamination. Frost & Sullivan recognizes NX Filtration’s direct nano- ltration membranes’ ability to address such challenges. The company displays highly eec- tive and resilient properties that allow users to achieve high selectivity at nanoscale. By utilizing NX Filtration’s membrane solutions, companies can achieve higher eciency in a sustainable process unmatched by the competition.” In June 2021, NX Filtration received a distinc- tion from the Global Water Intelligence in the category Breakthrough Technology Company of the Year. Their commentary on our company included: “NX Filtration’s membrane provides a step change in water treatment, disrupting traditional treatment trains such as UF-RO in surface water treatment and wastewater reuse applications.” and “By controlling membrane properties on a nanometre level via polyelectro- lyte layers, NX Filtration is uniquely positioned to meet the growing challenge of treating micropol- lutants in dierent feedwaters.” In 2021, we made great progress on our patent portfolio, through the grants of 10 patents in various countries and through adding two new patent applications to our portfolio. One such new patent application relates to further per- formance improvements on our dNF technology (‘dNF regeneration’) whilst the other relates to new membrane inserts (‘innovative membrane holder’). An important part of our innovation activity is related to the optimal deployment of our membrane modules at our customers. In the second half of the year we therefore released a new version of our projection tool, allowing our customers to optimally design their system parameters to operate our membrane modules. Key features of this new release include accu- rate estimations of micropollutants retention, 5 Estimation, based on 5-shift production and depending on product mix 6 Theoretical capacity (as the current spinning line is incurring downtime with changes in products being produced and because spinning line is also used for R&D activities), estimation based on 3-shift production and depending on product mix 7 Estimation, based on 5-shift production and depending on product mix 15NX Filtration - Annual Report14 Business review Sustainability report Introduction Sustainability and ESG are at the heart of NX Filtration’s business. Our vision is to be a leading global provider of breakthrough nanoltration technology that enables customers to, amongst others, produce pure and aordable water, treat wastewater, reduce their water footprint and achieve strong sustainability benets. Water scarcity and water quality are major global and structural issues and key drivers of the water market. For example, it is estimated that 1.1 billion people worldwide lack access to water, and a total of 2.7 billion people nd water scarce for at least one month of the year. By 2025, approximately two-thirds of the world’s population may face water shortages. In addition, the discharge of wastewater increasingly poses challenges for the environment (for example the presence of antibiotic resistant bacteria resulting in potential health issues) and for the production of drinking water (for example increased requirements on the removal of micropollutants). NX Filtration’s direct nanoltration technology can play a central role in addressing these issues. This technology was designed to remove micropollutants (including pharmaceuticals, medicines, PFAS and insecticides), colour and selective salts from water in one single step and also removes bacteria, viruses and nanoplastics. The direct nanoltration technology also oers substantial sustainability benets compared to conventional water treatment methods, as it avoids the use of pretreatment chemicals in the water treatment process and substantially reduces energy consumption. At NX Filtration, we believe we have a responsibility to contribute positively to society and the environment. 2021 marked an important year for NX Filtration in terms of progress on our ESG agenda: we realized an externally certied green-labelled IPO, professionalized our CO 2 emission data collection in order to be able to report thereon, prepared for ISO14001 certication (which we obtained at the start of 2022), realized further alignment with the UN Sustainable Development Goals (SDGs) and further progressed on our ESG agenda. As used throughout this Annual Report, “ESG” means Environmental, Social and Governance. Environmental factors for example include the contribution NX Filtration makes to climate change through (the reduction of) greenhouse gas emissions, along with waste management and energy eciency by the use of its products. Social factors for example include human rights, labour standards throughout the supply chain, and more routine issues such as adherence to workplace health and safety and gender equality. Governance refers to a set of rules or principles dening rights, responsibilities and expectations between dierent stakeholders in NX Filtration’s governance. Green labelled IPO In June 2021, NX Filtration became a publicly traded company when it listed its shares on Euronext Amsterdam, raising €165 million for the acceleration of its business plan, including investing in pilot systems, expanding its organization, expanding its production capacity, fast-tracking its innovation agenda and acquiring regional or industry specic distribution platforms to accelerate its growth plan. The IPO attracted a wide variety of shareholders that value companies with a strong sustainability angle. The IPO was externally certied by CICERO Green as a green labelled IPO. CICERO Green provided a Shades of Green assessment of NX Filtration’s revenue and investments. CICERO Green assigned its Dark Green shading to 95% of the Group’s annual revenue in 2020 and 98% of the Group’s investments in 2020, its Medium Green shading to 5% of the Group’s annual revenue in 2020, and its Light Green shading to 2% of the Group’s investments in 2020. Dark Green is allocated to projects and solutions that correspond to the long-term vision of a low carbon and climate resilient future. Medium Green is allocated to projects and solutions that represent steps towards this long-term vision but do not correspond to such vision yet. Light Green is allocated to transition activities that could have lower emissions, but do not by themselves represent or contribute to this long-term vision. Although CICERO based its conclusions on nancial information for 2020, NX Filtration is condent that the assessment of NX Filtration’s activities materially hold true for 2021 as well. According to CICERO Green, revenue associated with the Group’s dNF and MF membranes has been allocated the Dark Green shade due to its contributions to a climate resilient future by providing clean water solutions and at the same time reducing the need for energy and chemicals during operation of the membranes compared to conventional technologies. Revenue associated with UF membranes have been allocated the Medium Green shade. This shading is based on an increased need for clean water as the eects of climate change are increasing. However, UF is viewed as a bridging technology, presenting improved environmental performance, but not at the same scale as the Company’s dNF and MF technology. According to CICERO Green, all of the Group’s investments support NX Filtration’s core innovation, the dNF technology. Investments have been screened for fossil fuel usage and, except for those investments that can directly be linked to the use of fossil fuel, all investments have been allocated the Dark Green shading. CICERO Green has allocated a Light Green shading to the purchase of a transport vehicle supporting the Group. Recognizing this Light Green shading, NX Filtration purchased a more sustainable, electric transport vehicle demonstrating the commitment to improve its business operations. CICERO did not shade any of NX Filtration’s revenue or investments Yellow or Red, representing respectively projects and activities that do not contribute to transition (Yellow) and projects and activities that have no role to play in a low-carbon and climate resilient future (Red). 17NX Filtration - Annual Report16 Sustainability report In addition to shading from Dark Green to Red, CICERO Green also includes a governance score to show the robustness of the environmental governance structure (on a scale including the gradings Fair, Good and Excellent). When assessing the governance of the Group, CICERO Green looked at ve elements: (i) strategy, policies and governance structure; (ii) lifecycle considerations including supply chain policies and environmental considerations towards customers; (iii) the integration of climate considerations into their business and the handling of resilience issues; (iv) the awareness of social risks and the management of these; and (v) reporting. Based on these aspects, an overall grading of Good was given. CICERO Green has provided recommendations around strengthening or improving the Group’s environmental governance by actively identifying supply chain improvements, conducting climate risk assessments, nalising and implementing targets towards climate and environment and starting to report on greenhouse gas emissions. Part of these recommendations have been incorporated by NX Filtration in the second half of 2021 and are included in this sustainability report. It is beyond any doubt that NX Filtration acknowledges the importance of good corporate governance. NX Filtration fully complies with the Dutch Corporate Governance Code, except as set out in the Corporate Governance section of this Annual Report. Alignment with UN Sustainable Development Goals To obtain input on material topics on environmental, social and economic parameters, NX Filtration performed a broad stakeholder survey amongst employees, customers, suppliers, communities and partners. These material topics formed the basis for the development of a materiality matrix and the mapping to the UN SDGs. The SDGs are guiding NX Filtration’s ESG agenda, by way of which NX Filtration supports society. NX Filtration has selected ve SDGs that today form an integral part of NX Filtration’s strategic framework. The SDGs that NX Filtration seeks to contribute to are SDG 6 – Clean water and sanitation, SDG 8 – Decent work and economic growth, SDG 9 – Industry, innovation and infrastructure, SDG 12 – Responsible consumption and production and SDG 17 – Partnership for the goals. NX Filtration has set key performance indicators (KPIs) for each SDG and is currently starting to monitor these KPIs and initiating improvement actions. These KPIs are described in the paragraph NX Filtration’s integrated ESG framework. Vision To be a leading global provider of technology for producing pure and affordable water to improve our quality of life. Mission Inspired by our team's passion for membranes we develop and produce innovative products and solutions, enabling our partners to excel in membrane filtration applications. Company values 19NX Filtration - Annual Report18 Sustainability report Environmental material topics Social material topics Economical material topics Importance for NX Filtration Importance for stakeholders Moderate Carbon neutrality Community involvement Data security & privacy Sustainable and responsible supply chain Energy efficiency of operations Diversity & equal opportunities Risk management Hazardous substances Partnerships Resource scarcity Sustainability of end products Training & development Customer satisfaction Management of customer relationship Employee engagement Climate change and water challenges People & process safety Business ethics & integrity Sustainable innovation and technology Product circularity High Very high Moderate High Very high EU Taxonomy Objective 1 The European Commission has established technical screening criteria to determine if an economic activity makes a substantial contribution to objective 1 of the EU Taxonomy Regulation and causes no signicant harm to any of the other environmental objectives. In this respect, NX Filtration focuses on the technical screening criteria for activity 3.6 ‘Manufacture of other low carbon technologies’: the economic activity manufactures technologies that are aimed at and demonstrate substantial life-cycle GHG emission savings compared to the best performing alternative. Given the CO 2 savings of its dNF products, NX Filtration can already report that 65% of its revenues (dNF sales as percentage of total revenues from sale of goods) align with objective 1 ‘climate change mitigation’, as these revenues contribute to reducing energy consumption and avoiding chemicals. Approximately 85% of 2021 Capex was related to NX Filtration’s dNF products. This dNF related Capex primarily relates to the construction of a dedicated dNF membrane spinning line and investments in pilot systems for dNF products. NX Filtration’s 2021 operating expenses that are associated with its dNF products represent approximately 65% of its total operating expenses (assumed proportional to the share of dNF as part of total revenues). EU Taxonomy alignment Introduction Regulation (EU) 2020/852 (Taxonomy) on the establishment of a framework to facilitate sustainable investment (the EU Taxonomy Regulation) has introduced a classication system for environmentally sustainable economic activities that will create a common language that investors and businesses can use when investing in projects and economic activities that have a substantial positive impact on the climate and the environment. The EU Taxonomy Regulation sets out the four conditions that an economic activity must meet in order to qualify as environmentally sustainable. A qualifying activity must: (i) contribute substantially to one or more of the six environmental objectives as described in more detail below, (ii) not signicantly harm any of the other environmental objectives; (iii) be carried out in compliance with minimum (social) safeguards laid down in the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identied in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights, and (iv) comply with technical screening criteria established by the European Commission. The technical screening criteria specify the performance requirements for any economic activity that determine under what conditions that activity (i) makes a substantial contribution to a given environmental objective; and (ii) does not signicantly harm the other objectives. The EU Taxonomy Regulation sets, or will set, as the case may be, performance thresholds and screening criteria for economic activities that make a substantive contribution to six environmental objectives, being 1) climate change mitigation, 2) climate change adaptation, 3) the sustainable use and protection of water and marine resources, 4) the transition to a circular economy, 5) pollution prevention and control and 6) the protection and restoration of biodiversity and ecosystems. A complete set of rules and delegated regulations for each of the six objectives has not been developed yet, but NX Filtration closely monitors any developments in this respect. This includes new requirements that are part of the proposed Corporate Sustainability Reporting Directive (CSRD) in particular, which still needs to be approved by the European Parliament and Member States in the Council. NX Filtration will however likely benet from a proportionate reporting regime and will only have to start reporting three years after the entry into application of the CSRD. NX Filtration aims to contribute to the vast majority of the objectives of the EU Taxonomy Regulation, supporting its strong ESG prole. First and foremost due to the vision of NX Filtration to be a leading global provider of breakthrough nanoltration technology that enables customers to, amongst others, produce pure and aordable water, treat wastewater and reduce their water footprint, NX Filtration expects to substantially contribute to the third objective of the EU Taxonomy Regulation, being ‘the sustainable use and protection of water and marine resources’, which was conrmed by an external assessment by consultancy rm MJ Hudson. Whilst NX Filtration’s key contribution in terms of EU Taxonomy Regulation alignment is expected to center around objective 3, NX Filtration expects its activities also to contribute to, and is committed to achieve maximum possible alignment with, objectives 1 (climate change mitigation), 4 (the transition to a circular economy), 5 (pollution prevention and control) and 6 (the protection and restoration of biodiversity and ecosystems) as well, as set out in more detail below. At the date of this Annual Report, the technical screening criteria for objectives three up to and including six are still to be published. EU Taxonomy Objective 1 - climate change mitigation Taxonomy requirement: An economic activity shall qualify as contributing substantially to climate change mitigation where that activity contributes substantially to the stabilization of greenhouse gas concentra- tions in the atmosphere at a level consistent with the long-term temperature goal of the Paris Agreement through the avoidance or reduction of greenhouse gas emissions or the increase of greenhouse gas removals, including through process innovations or product innovations. Technical screening and DNSH (do no signicant harm) criteria available NX Filtration’s activities: The operation of water treatment systems based on NX Filtration’s dNF membranes require less energy and therefore realise a signicant CO 2 footprint reduction compared to water treatment systems based on conventional technologies such as ltration with reverse osmosis (RO), adsorp- tion (activated carbon) and oxidation. In research by the Energie en Grondstoenfabriek, energy consumption of various technologies for producing drinking water in the Netherlands have been compared. In this research, it can be seen that the gross energy requirements for a system based on direct nanoltration are approximately 0.5 kWh/m3 , as compared to approximately 1.7 kWh/ m3 for a combination of ultraltration and reverse osmosis. In addition, NX Filtration’s dNF solution avoids or signicantly reduces the use of chemicals in op- erations, as it prevents the use of occulants and coagulants in pre-treatment (which is required for traditional ltration processes) and requires a very low cleaning frequency. From external research by Stockholm university (Rahul Aggarwal, “Strategic Assesment of Drinking Water Production Systems Environmental impacts from a Life Cycle perspective”, KTH Royal Institute of Technology, school of architecture and the built environment, Stockholm, Sweden 2020), it can be derived that each dNF module can avoid approximately 4 tons of chemicals during a ve-year lifetime, that would be required for conventional technologies such as the combination of ultral- tration and reverse osmosis. 21NX Filtration - Annual Report20 Sustainability report In its Green IPO assessment, CICERO Green has identied NX Filtration’s ultraltration (UF) membranes as a bridging technology, contributing to clean water production and presenting improved environmental performance, but not at the same scale as the dNF technology. Therefore, we consider revenues associated with the sale of UF products not to be aligned with objective 1. NX Filtration’s microltration (MF) products also oer signicant contributions towards climate change mitigation in the food & beverage industry. Compared to traditional diatomaceous earth ltration that is commonly applied in beer breweries, MF membranes have demonstrated to reduce energy consumption by approximately 30%, reduce water consumption with approximately 35% and generate approximately 50% less solid waste. As these savings percentages are derived from practical examples, and not from publicly available research, NX Filtration has chosen not to include the revenues from its MF product in the alignment with objective 1. As part of its proactive approach to seek full alignment with the EU Taxonomy Regulation, NX Filtration has assessed whether it complies with the published DNSH-criteria for objective 1. NX Filtration already complies with almost all of the DNSH-criteria and, although it needs to seek some further alignment with a few of such criteria as set out in this paragraph, NX Filtration has no reason to believe it will not be able to meet those. As part of the assessment, NX Filtration can report that: (i) it has assessed that its eligible activities as such cannot be materially impacted by physical climate risks (ii) it is currently not obliged to identify and address environmental degradation risks in accordance with Directive 2000/60/EC (as implemented under Dutch law), (iii) its eligible activities do not lead to the manufacture, placing on the market or use of certain substances that would possibly harm the environment, whether on their own or in mixtures, and (iv) its sites/operations are not located in or near biodiversity-sensitive areas (including the Natura 2000 network of protected areas, UNESCO World Heritage sites and Key Biodiversity Areas, as well as other protected areas). Each of these conclusions should be monitored over time and in 2022, NX Filtration will particularly focus on alignment with the DNSH-criteria that requires it to seek reuse of its secondary raw materials and components in products manufactured and requires recycling over disposal and the DNSH- criterion to conduct an environmental impact assessment (EIA), to the extent required. EU Taxonomy Objective 3 NX Filtration’s potential contribution to objective 3 of the EU Taxonomy Regulation (the sustainable use and protection of water and marine resources) can be found in various (pilot) projects in which its dNF technology enables companies to treat and reuse their wastewater and, as such, reduce their water consumption, for example through extracting (and depleting) groundwater sources. An example of such application is the use of dNF technology at a pilot for Industriewater Eerbeek, a subsidiary of three Dutch paper mills focusing on wastewater treatment, for the reuse of wastewater, therewith reducing the extraction of groundwater and the overall water footprint of the paper mills. Another example is a project in Dumai, Indonesia, in which NX Filtration contributed to the goal of providing access to improved water sources. NX Filtration delivered its dNF membrane modules that turned the local Masjid river into a valuable source for the supply of drinking water to the city of Dumai. EU Taxonomy Objective 3 - the sustainable use and protection of water and marine resources Taxonomy requirement: An economic activity shall qualify as contributing substantially to the sustainable use and pro- tection of water and marine resources where that activity either contributes substantially to achieving the good status of bodies of water, including bodies of surface water and groundwater or to preventing the deterioration of bodies of water that already have good status, or contrib- utes substantially to achieving the good environmental status of marine waters or to preventing the deterioration of marine waters that are already in good environmental status, by, inter alia: (a) protecting the environment from the adverse eects of urban and industrial waste water dis- charges, including from contaminants of emerging concern such as pharmaceuticals and micro- plastics, for example by ensuring the adequate collection, treatment and discharge of urban and industrial waste waters; (b) protecting human health from the adverse impact of any contami- nation of water intended for human consumption by ensuring that it is free from any micro-or- ganisms, parasites and substances that constitute a potential danger to human health as well as increasing people’s access to clean drinking water; or (c) enabling any of these activities. Technical screening criteria expected to be published in 2022 NX Filtration’s activities: NX Filtration’s membrane technology enables its customers to produce drinking water from surface water by retaining, amongst others, bacteria, viruses, micropollutants (including phar- maceuticals, medicines, PFAS and insecticides), nanoplastics and selective salts. In addition, with NX Filtration’s products, customers can treat wastewater streams to prevent discharge of polluting substances in the environment, and to reuse wastewater for purposes that also include the production of drinking water. With Dutch drinking water utility Vitens, we have performed tests on both synthetic feed waters and on real waters containing a large range of PFAS compounds. Very high removal rates were obtained for both our dNF40 and dNF80 products. KWR, a water research institute (Ghent Uni- versity, 2019) also researched our dNF membranes and found comparable, high removal rates for e.g. PFOA, which is a peruorinated carboxylic acid produced and used worldwide as an indus- trial surfactant in chemical processes and as a material feedstock, and is a product of health concern and one of many PFAS compounds). 23Sustainability report EU Taxonomy Objective 4 An example of NX Filtration’s potential contribution to objective 4 of the EU Taxonomy Regulation (the transition to a circular economy) can be found in its contribution to the RecoLab project in the City of Helsingborg in Sweden, where NX Filtration’s dNF membranes are part of a system that recovers nutrients from an urban waste stream. Another example, from NX Filtration’s Sustainable Industrial Water business line, can be found in the use of its dNF membranes for a water recycling application at Kewal Kiran Clothing Limited (KKCL), a leading denim jeans company in India. Here, our dNF membranes remove colour completely and reduce large parts of COD (Chemical Oxygen Demand) and TDS (Total Dissolved Solids) partially from wastewater. EU Taxonomy Objective 5 An example of NX Filtration’s potential contribution to objective 5 of the EU Taxonomy Regulation (pollution prevention and control) can be found in its pilot project for Dutch water board Aa & Maas. This pilot project demonstrated the benets dNF membranes in combination with ultra violet (UV) and hydrogen peroxide post-treatment, to eciently remove organic micropollutants under optimal circumstances from a wastewater stream. Another example can be found in India, where NX Filtration’s dNF membranes ensure compliance with discharge regulations at the Jetpur common euent treatment plant. The membrane ltration system enables the recovery of caustic from wastewater streams for reuse in the textile industry. This not only saves spending on caustic for the textile industry, it also reduces treatment cost of caustic wastewater and ensures compliance with increasingly stringent discharge regulations. In research by the KWR water research institute (Ghent University, 2019), NX Filtration’s dNF40 membranes (with a MWCO - molecular weight cut-o - of 400 Dalton) have been compared to a traditional spiral wound nanoltration membrane on the rejection of a wide range of micropollutants and PFAS. The study found that dNF40 membranes displayed comparable rejections as the spiral wound nanoltration membranes on various micropollutants with a MWCO larger than 400 Dalton, and displayed signicantly higher rejections than the spiral wound nanoltration membranes on various micropollutants with a very small MWCO (between 88 and 130 Dalton). EU Taxonomy Objective 4 - the transition to a circular economy Taxonomy requirement: An economic activity shall qualify as contributing substantially to the transition to a circular economy if such activity increases waste prevention and the reuse and recycling of products. Technical screening criteria expected to be published in 2022 NX Filtration’s activities: In its Clean Municipal Water business line, NX Filtration’s membrane technology enables its customers to treat wastewater streams to prevent discharge of polluting substances in the environment. The application of dNF membranes for biologically treated municipal wastewater enables the reuse of water for various high quality applications, up to the reuse of wastewater as drinking water. In its Sustainable Industrial Water business line, NX Filtration’s membrane technology enables its customers to reuse wastewater for industrial processes and recover and recycle valuable raw materials from wastewater streams, such as indigo in the textile industry or cleaning chemicals in beer breweries. EU Taxonomy Objective 5 - pollution prevention and control Taxonomy requirement: An economic activity shall qualify as contributing substantially to pollution prevention and con- trol where that activity contributes substantially to environmental protection from pollution by inter alia: • preventing or, where that is not practicable, reducing pollutant emissions into air, water or land, other than greenhouse gasses; • improving levels of air, water or soil quality in the areas in which the economic activity takes place whilst minimising any adverse impact on, human health and the environment or the risk thereof; and • preventing or minimising any adverse impact on human health and the environment of the production, use or disposal of chemicals. Technical screening criteria expected to be published in 2022 NX Filtration’s activities: Pollution is a major concern in many emerging countries due to the lack of adequate wastewater treatment facilities where wastewater is discharged untreated, directly into the sea or rivers. NX Filtration’s products address these concerns as they are capable of removing micropollutants (including pharmaceuticals, medicines, PFAS and insecticides), colour and selective salts, but also bacteria, viruses and nanoplastics, from water in one ltration step whilst oering strong sustainability benets. Additionally, NX Filtration’s dNF solution avoids or signicantly reduces the use of chemicals in operations, as it avoids the use of occulants and coagulants in pre-treatment (which is required for traditional ltration processes) and requires a very low cleaning frequency. 25NX Filtration - Annual Report24 Sustainability report EU Taxonomy Objective 6 Examples of NX Filtration’s potential contribution to objective 6 of the EU Taxonomy Regulation (the protection and restoration of biodiversity and ecosystems) can be found in similar projects as described under objective 5. By removing micropollutants (including pharmaceuticals, medicines, PFAS and insecticides), bacteria, viruses and nanoplastics from wastewater streams, we can ensure that such contaminations do not enter ecosystems with potential subsequent eects. An example of such eects can be found in male sh that are turning into females due to chemical pollution, specically estrogenic endocrine disrupting chemicals. Conclusion Awaiting the delegated regulations including the technical screening and DNSH criteria under the EU Taxonomy Regulation on objectives 3 to 6 , NX Filtration can already report that 65% of NX Filtration’s revenues align with objective 1 ‘climate change mitigation’. NX Filtration complies with almost all of the published DNSH-criteria of objective 1 and will continue to take a protective approach in 2022 to seek full alignment. NX Filtration will closely monitor any upcoming legislation in this respect to continuously test its (voluntary) alignment with the EU Taxonomy Regulation. EU Taxonomy Objective 6 - the protection and restoration of biodiversity and ecosystems Taxonomy requirement: An economic activity shall qualify as contributing substantially to the protection and restoration of biodiversity and ecosystems where that activity contributes substantially to protecting, con- serving or restoring biodiversity or to achieving the good condition of ecosystems, or to protect- ing ecosystems that are already in good condition, through inter alia nature and biodiversity con- servation, including achieving favorable conservation status of natural and semi-natural habitats and species, or preventing their deterioration where they already have favorable conservation status, and protecting and restoring terrestrial, marine and other aquatic ecosystems in order to improve their condition and enhance their capacity to provide ecosystem services. Technical screening criteria expected to be published in 2022 NX Filtration’s activities: NX Filtration’s products contribute to the protection of natural resources and wildlife due to eliminating micropollutants (including pharmaceuticals, medicines, PFAS and insecticides), bac- teria, viruses and nanoplastics from aquatic ecosystems on the one hand, and preventing these contaminants from owing into nature on the other hand. 27NX Filtration - Annual Report26 Sustainability report NX Filtration’s integrated ESG framework NX Filtration has established an ESG framework to embed ESG in its way of working. This ESG framework consists of three layers. The rst layer constitutes the impact NX Filtration is aiming to make with its technology in addressing the global challenges around water scarcity and water quality, contributing to SDG 6 relating to clean water and sanitation. NX Filtration seeks to be a leading and global provider of breakthrough technology for producing pure and aordable water to improve quality of life. Key KPIs in this respect mainly relate to SDG 6 (clean water and sanitation) and include i) the amount of clean water production enabled by NX Filtration membrane module sales and ii) the number of countries in which NX Filtration supplied its membrane modules. The second layer constitutes the impact NX Filtration is aiming to make on its customers’ operations and on its partners. The energy ecient and chemicals free operation of NX Filtration’s membranes requires less energy compared to conventional technologies (environmental impact) and NX Filtration’s solution avoids the use of occulants and coagulants in pre-treatment (that is required for traditional ltration processes) and requires a low cleaning frequency (environmental and social impact). NX Filtration has a strong academic network; it partners and cooperates with multiple universities and research institutes around the world, including the University of Twente, Saxion University of Applied Sciences and the Universität Hamburg (governance impact). Key KPIs in this respect mainly relate to SDG 12 (responsible consumption and production) and include i) GHG emissions scope 1 and 2 and 3 (upstream) and ii) avoided GHG emissions during the use of NX Filtration’s membrane modules. The third layer constitutes NX Filtration’s own organisation, in which it has implemented various sustainability measures and is deploying various initiatives around ESG related themes. For example, NX Filtration’s coating process for its dNF membranes is based on water-based chemistry (green chemistry), in contrast to conventional solvent-based coating processes and NX Filtration has developed an energy ecient membrane spinning process based on a unique in-line polymer mixing concept. NX Filtration is valuing a diverse workforce. For example, its 69 FTEs at 31 December 2021 represented more than 10 nationalities. Key KPIs in this respect mainly relate to SDG 8 (decent work and economic growth) including i) growth in the number of employees and ii) lost time injury rate, SDG 9 (Industry, innovation and infrastructure) including i) the number of patents led and granted and ii) the number of scientic publications authored or supervised by NX employees and SGD 17 (partnerships for the goals) including i) progress on the implementation of the supplier code of conduct and ii) NX Filtration’s network of research partners. On the following pages, various examples and KPIs have been included on these three layers. Looking ahead Looking ahead, NX Filtration anticipates to further grow its business strongly. Environmental, Social and Governance will remain aspects on which it will not compromise while scaling up. NX Filtration considers high ESG standards of great importance for its long-term success, its customers, the environment and society as a whole. The strong growth that NX Filtration is currently experiencing provides many opportunities to organize ESG aspects with the highest standards from the outset. The development and construction of our new manufacturing plant, for which we have secured a plot of land at the High Tech Systems Park in Hengelo, the Netherlands, will also provide ample opportunities to implement measures for further progress on ESG themes. In 2022, NX Filtration aims to continue the growth of its business, therewith also growing the impact it can make with the sale of its membrane products. This will contribute to the global availability of clean and safe water and the reduction of energy and chemicals usage in water treatment processes. Furthermore, we will follow the development regarding the EU Taxonomy Regulation closely, in particular the details around objectives 3 (the sustainable use and protection of water and marine resources), 4 (the transition to a circular economy), 5 (pollution prevention and control) and 6 (the protection and restoration of biodiversity and ecosystems). With the further scale-up of our business, we aim to reduce our energy consumption relative to our revenues and deploy measures to limit our GHG emissions. Key contributing factors to this objective include the increase in eciency with our second production line, the transitioning to even more energy-ecient production methods and moving towards low-carbon distribution and logistics. In 2022, we also aim to establish an action plan that is compatible with the transition to a net-zero emissions economy, containing short, medium and long-term science-based CO 2 emission reduction targets. Environmental Social Governance Recurring replacements Repeat projects ReplacementsFull-scale US Sustainable Development Goal 6 - Pure and affordable water for all Energy efficient operation Green chemistry Production energy savings Safety Training and development Diversified employee base Sustainable supply chain Knowledge sharing Avoiding chemicals in pre-treatment Demo plantsPilots Clean water for all Avoiding emissions at our customers Our internal initiatives Gross income (€ ‘000) 704 2,789 1,301 784 2021 H2 192 1,280 2021 H1 771 317 536 2020 H2 242 237 57 533 2020 H1 156 249 128 Other income Sustainable Industrial Water Clean Municipal Water 29NX Filtration - Annual Report28 Sustainability report drinking water supply for persons 22 million Clean water for all Our impact in 2021 Based on WHO assumptions of a need for at least 15 liter water per person per day. Note that actual water consumption in developed countries is much higher. or 48,400 filled olympic size swimming pools x 100,000 2021 membrane sales could enable the production of: 121 billion liters of clean water Based on NX Filtration’s sales of approximately 1,200 membrane modules (dNF and UF), multiplied by the expected capacity and lifetime of such modules. …which is equivalent to: during 1 year In 2021 enabled clean water across 28 countries worldwide Revenue split Europe Rest of the World Europe North America Asia 42% 6% 34% 18% 31Sustainability report Avoiding emissions Our impact in 2021 NX Filtration’s GHG footprint in 2021 amounted to: 170 ton CO 2 e versus: 2,127 ton CO 2 e savings during the deployment of NX Filtration’s dNF membrane modules through: 3.9 million kg of chemicals avoided 49 GWh energy savings a broad set of alternative technologies based on sources including Aggarwal (Rahul Aggarwal, “Strategic Assesment of Drinking Water Production Systems Environmental impacts from a Life Cycle perspective”, KTH Royal Institute of Technology, school of architecture and the built environment, Stockholm, Sweden 2020) and The Water Factory (Energie en Grondstoenfabriek). CO 2 e savings of NX Filtration’s other products have not been taken into account in this analysis of downstream savings, despite the fact that the production and related activities (such as business travel) of such products have been included in the GHG footprint analysis of NX Filtration. CO 2 e emission and energy consumption reduction programs at NX Filtration Albeit emissions in upstream and business related activities represent a relatively small portion compared to downstream emissions, NX Filtration is implementing various programs to further reduce its energy consumption and CO 2 e emissions per membrane module. Programs focus on those areas where most improvement can be made, most notable in reducing waste in the production process. It is expected that, after the ramp-up of the second spinning line in the rst half of 2022, we will be able to realise signicant reductions of waste in production. Other ongoing programs to reduce our CO 2 footprint include the recovery of products used in the production process and further production eciencies. Additional programs, such as heat recovery, are being taken into account with the realization of the new factory that is planned for the coming years. Methodology: GHG Protocol The Greenhouse Gas Protocol (GHG Protocol) denes three emission scopes: • Scope 1 emissions refer to all direct greenhouse gas emissions from sources that are owned or controlled by the organisation itself. • Scope 2 emissions are all indirect greenhouse gas emissions stemming from the consumption of purchased electricity, steam, or other sources of energy generated upstream. • Scope 3 emissions are all other indirect greenhouse gas emissions resulting from an entity’s operations. This includes both upstream and downstream supply chains, such as the extraction and production of purchased materials and fuels, ight emissions, waste disposal, investments, etc. Organizational boundaries NX Filtration’s organisational boundary has been determined according to the principles laid down in the GHG protocol. NX Filtration reports the emissions from its operations over which it has nancial or operational control. Using this approach, this section includes emissions from the only subsidiary of NX Filtration, NX Filtration B.V., so the reported GHG-data is on a fully consolidated basis. Base year NX Filtration has set the base year at 2021 as this is the rst year that NX Filtration has veriable emission data available on essentially all scopes. Verication The information in this Annual Report on GHG- data has not been veried by any third party, but NX Filtration is exploring options to do so in the near term. GHG footprint of NX Filtration The reported GHG footprint of NX Filtration includes all emissions of Scope 1, Scope 2, and business travel of Scope 3, in line with the GHG protocol. NX Filtration’s total emissions in 2021 amounted to 170 ton CO 2 e (CO 2 equivalent). Scope 1 CO 2 e emissions amounted to 109 ton, of which 35% related to lease cars and 65% to refrigerants). Scope 2 CO 2 e emissions amounted to 0 ton, as 100% of the purchased electricity (926 MWh) was sourced from European wind projects and 100% of the natural gas usage (32,000 cubic Nm3) was CO 2 compensated through NX Filtration’s energy supplier by investments in Veried Emission Reduction units. Reported Scope 3 CO 2 e emissions related to business travel amounted to 61 ton CO 2 e in 2021. Downstream CO 2 e savings of NX Filtration’s products The downstream CO 2 e savings that NX Filtration enables through oering its dNF membrane modules as an alternative to conventional water treatment technologies, such as activated carbon or a combination of ultraltration and reverse osmosis, add up to approximately 2,127 ton CO 2 e saved over the typical lifetime of a module. In this analysis, the chemicals and energy footprint of NX Filtration’s technology has been compared with 33NX Filtration - Annual Report32 Sustainability report Our internal initiatives Employees growth in the number of employees Our employee base grew from 34 FTE at the end of 2020 to 69 FTE at the end of 2021, representing more than 10 nationalities. NX Filtration employs staff in the Netherlands, Belgium, Germany, Spain, India, Singapore, UAE, the United States and Canada, and works with commercial and technical partners in various other parts of the world. In response to COVID-19, NX Filtration implemented additional protective procedures, including equipping employees with sanitising equipment (e.g. disinfectants and hand sanitisers), implementing social distancing, adjusting employees working hours as required to comply with restrictions and increasing the frequency of cleaning in the facilities. NX Filtration is placing strong emphasis on training and development with a focus on innovation, not only for NX Filtration’s employees, but also for customers, partners and graduates. We are facilitating internships, joint research programs and partnerships with universities and research institutes. Our impact in 2021 100% Safety lost time injuries in 2021 NX Filtration harnesses a culture of safety, where health and safety risks are minimized with a methodology based on the safety awareness model. The management of NX Filtration is highly committed to improving health and safety conditions. This commitment is shown, amongst others, by a clear communi- cation to the production, quality control and R&D employees. Upon joining NX Filtration, each employee receives a safety training and each department meeting starts with a health and safety topic. During the year we invested, amongst others, in safe storage solutions in our laboratory, lifting aids in the production and improved air circula- tion in our offices. In November, we welcomed a QSHE manager to our team, who will further manage and improve our health and safety agenda. In the second half of 2021, NX Filtration has reached out to the vast majority of its suppliers to actively engage about its Supplier Code of Conduct. It also conducted various audits with existing and new suppliers. At NX Filtration, we are very much committed to strengthen the value chain by actively engaging with our suppliers, not only from a pure business perspective but also to pursue certain standards and values. We value a reliable and sustainable business relationship, a better environment, a safe workplace, high quality standards and the highest integrity. The principles we value most are regarded as a minimum standard for us to cooperate based upon, are laid down in our Supplier Code of Conduct, which we apply to all of our suppliers. The spirit thereof is professional, reliable, down-to-earth and accountable. Suppliers adherence to NX Filtration’s Supplier Code of Conduct 0 95% Our patent portfolio included 35 granted patents as per 31 December 2021. Additions in 2021 included patent grants in the US, Canada, Australia and China for our ‘Positively charged membranes’ patent, a patent grant in Brazil for our ‘Hollow-fibre membrane’ patent and patent grants in the US, China, Australia, Singapore and South Korea for our ‘PEM membranes’ patent. In addition, NX Filtration added two new patent family applications to its portfolio: ‘dNF regeneration’ in June 2021 related to further performance improvements on its dNF technology, and ‘Innovative membrane holder’ in December 2021 related to novel membrane inserts. In addition, we are working on various programs to further improve the sustainability of our production process, that is already working according to a ‘green chemistry’ process. Each of the initiatives on NX Filtration’s research & development roadmap is monitored against its contribution to our sustainability objectives. Academic network Research & development partnerships with universities and research institutes around the world patent grants added to our patent portfolio 10 Knowledge sharing scientific publications authored by NX Filtration employees In total, our people authored in approximately 30 peer reviewed scientific publications since 2016. In 2021, our people authored in 9 peer reviewed scientific publications, amongst others, in the Journal of Membrane Science, Membranes and ACS Applied Polymer Materials. In November 2021, NX Filtration published a joint research together with PepsiCo, LEITAT Technological Center and the MESA+ Institute for Nanotechnology on the advances and applications of hollow fiber nanofiltration membranes that was published in the peer reviewed journal Membranes (MDPI). Throughout 2021 a total of 16 students were part of the NX Filtration’s team as an intern for their BSc or MSc thesis. A total of 7 educational or scientific lectures were given by NX Filtration’s team, amongst which at the International Water Conference in Scottsdale, Arizona, USA and the IDA 2021 International Water Reuse and Recycling Conference in Rome, Italy. NX Filtration actively supports the projects of 13 PhD students spread across various universities, whose work was presented throughout 6 scientific lectures at the EuroMembrane 2021 Conference in Copenhagen, Denmark. 9 16 35NX Filtration - Annual Report34 Sustainability report January NX Filtration adds second production facility for its capacity expansion To enable the expansion of its production ca- pacity, NX Filtration added a second production facility in Enschede, the Netherlands, for the production of its membrane modules. This new location freed up space in its original produc- tion plant, where, at the end of 2021, a second membrane production line was added. February Royal Grolsch (Asahi) starts water treatment pilot with NX Filtration’s nanoltration membranes The Grolsch brewery in Enschede, the Nether- lands has a long history of further improving reliability and robustness of its processes and minimizing impact on the environment. Grolsch launched a full-scale water treatment pilot trajectory to compare NX Filtration’s direct nanoltration membranes with conventional water treatment solutions on factors such as the retention of micropollutants and hardness, energy usage and the need for cleaning agents. NX Filtration supplies its nanoltration membranes to Forsmark power plant in Sweden For the local production of drinking and process water for the Forsmark power plant in Sweden, ProMinent, a multinational water treatment systems supplier, installed an innovative water treatment system based on 74 direct nanoltration membrane modules of NX Filtration. The feed water is taken from a local, highly colored lake with temperatures close to zero degrees Celsius in the winter. March Our employees plant trees at Kennispark Twente Trees and water: don’t underestimate the con- nection. Trees retain water and contribute in combating draughts. Together with other local companies, NX Filtration’s employees planted trees at the ‘innovation lane’ at Kennispark Twente, the location of our membrane produc- tion plant. Global Water Intelligence: Breakthrough Technology Company of the Year award nomination GWI: “2020 saw NX Filtration’s ground-breaking one-step membrane process excel in a dizzying number of applications including dirty surface water treatment, wastewater reuse and the removal of micropollutants for both municipal and industrial customers. Major project wins in Indonesia and Sweden were complemented by a rapid global expansion of pilot trials, a huge ramp up in production capacity and the expan- sion of the sales force to bring a game-changing technology to the world.” April NX Filtration starts nanoltration pilot with drinking water company PWN PWN, responsible for the production and sup- ply of drinking water in the Dutch province of Noord-Holland, selected NX Filtration to start a pilot for the sustainable production of drink- ing water based on its direct nanoltration membranes. May Water Board Aa & Maas starts pilot with a combination of direct nanoltration and UV technology for the reuse of municipal wastewater To turn municipal wastewater into a valuable source for high quality process water, Water Board Aa & Maas, NX Filtration, Van Remmen UV Technology and Jotem Watertreatment started a pilot project with the objective to demonstrate the viability of clean water production from municipal euent from Aa & Maas’ wastewater treatment plant in Asten, The Netherlands. June Green-labelled IPO on Euronext Amsterdam Successful listing of NX Filtration on Euronext Amsterdam as the rst Green-labelled IPO, with over 95% of NX Filtration’s revenue and investments externally certied by CICERO Green as ‘Dark Green’, their highest green ranking corresponding to the long-term vision of a low carbon and cli- mate resilient future. 2021 month by month 2 3 4 6 1 5 37NX Filtration - Annual Report36 2021 month by month NX Filtration secures land for high-tech megafactory for nanoltration membrane production in Hengelo, the Netherlands NX Filtration signed a purchase option for a plot of land of approximately 24,000 square meters at the High Tech Systems Park in Hen- gelo, the Netherlands, on which NX Filtration plans to build a new plant for the production of its innovative nanoltration membranes in the next two to three years. The High Tech Systems Park is the innovation campus that is evolving around the Thales site in Hengelo, the Netherlands. Companies located at the High Tech Systems Park share the mission of innovating faster through cooper- ation. August NX Filtration receives order to supply direct nanoltration membranes for Jetpur wastewater treatment plant in India Aquarius H2O Dynamics, an Indian OEM fo- cusing on wastewater treatment, selected NX Filtration to supply its direct nanoltration membranes for wastewater treatment at the common euent treatment plant (CETP) in Jetpur in the Gujarat province of India. This was NX Filtration’s second project for Aquarius H2O Dynamics in 2021. The new membrane ltra- tion system enables CETP Jetpur to recover caustic from its wastewater streams for reuse in the textile industry, ensuring compliance with increasingly stringent discharge regulations. NX Filtration wins 2021 Frost & Sullivan Global New Product Innova- tion Award Paul Hudson, in- dustry analyst at Frost & Sullivan, comments: “Climate change today leads to increasing water scarcity and water contamination. Frost & Sullivan recognizes NX Filtra- tion’s direct nanoltration membranes’ abil- ity to address such challenges. The company displays highly eective and resilient properties that allow users to achieve high selectivity at nanoscale. By utilizing NX Filtration’s mem- brane solutions, companies can achieve higher eciency in a sustainable process unmatched by the competition.” NX Filtration extends executive team with a Chief Commercial Ocer NX Filtration announced the appointment of Alejandro Roman Fernandez as Chief Commer- cial Ocer of NX Filtration. In this newly creat- ed role, Alejandro is responsible for managing and expanding NX Filtration’s global sales force and network of distributors and Original Equip- ment Manufacturer (OEM) partners. Alejandro brings a wealth of experience in commercial roles in the global water markets at amongst others Organica Water, Pentair and Xylem. NX Filtration donates to the Water for Life Foundation at the occasion of its Euronext listing To mark the occasion of its Euronext listing, NX Filtration donated €15,000 to the Water for Life Foundation on behalf of Infestos Founda- tion. Water for Life, together with local water companies, sets up projects in poor neighbor- hoods in Africa and Asia to build drinking water and sanitation facilities. Worldwide there are still millions of people without access to water. NX Filtration provides direct nanoltration membranes for textile water recycling in India Aquarius H2O Dynamics, an Indian OEM fo- cusing on wastewater treatment, selected NX Filtration to supply its direct nanoltration membranes for a water recycling application at Kewal Kiran Clothing Limited (KKCL), a leading denim jeans company in India. This order fol- lowed after a pilot project that demonstrated the performance and benets of NX Filtration’s membranes. NX Filtration to deliver pilot system to produce clean drinking water from the Mekong river in Vietnam With an abundant average precipitation rate, Vietnam could be considered a water-rich coun- try. However, the non-uniform rainfall, coupled with strong demographic and industrial devel- opments, makes its water resources extremely vulnerable. In several areas groundwater is ex- ploited beyond the recharge capacity, resulting in falling water tables, causing land subsidence and salinity intrusion, especially in the Mekong river delta. Therefore, there is an increasing need for alternative solutions for water supply in the country, to which NX Filtration’s technol- ogy could contribute. July New initiative to brew beer from local canal water Brouwersnös, a local beer brewer in Groen- lo, the Netherlands, started the produc- tion of a new beer, Tweach, from local canal water based on NX ltration’s direct nanoltration membranes together with Jotem Waterbehan- deling. First live event in a year: Membrane Technology Conference & Exposition NX Filtration participated in the 2021 Mem- brane Technology Conference & Exposition presented by American Membrane Technology Association and American Water Works As- sociation, where it presented its direct nano- ltration membrane technology for clean and aordable water. NX Filtration supplies hollow ber nano- ltration membranes for potable water production at Indonesian hospital NX Filtration was selected by PT. Bayu, an Indonesian specialist in constructing water and wastewater treatment plants, to supply its hol- low ber nanoltration membranes for potable water production for Rumah Sakit Cipto Ma- ngunkusomo, Indonesia’s biggest state owned hospital in Jakarta. This was NX Filtration’s second project for PT. Bayu, to whom NX Filtra- tion supplied its membrane modules earlier this year for the production of drinking water for the city of Dumai based on local river water. 8 7 39NX Filtration - Annual Report38 2021 month by month NX Filtration extends executive team with Chief Financial Ocer NX Filtration proudly announces the appoint- ment of Marc Luttikhuis (46 years) as Chief Financial Ocer (CFO) of NX Filtration. Marc joined NX Filtration at the beginning of 2022 at NX Filtration’s headquarters in Enschede, the Netherlands. The Supervisory Board will nominate Marc for appointment as member of the Management Board at the regular general meeting of shareholders in 2022. November NX Filtration expands to the Middle East To further strengthen its position in the global water markets, NX Filtration expanded its sales team with Usama Patel. Usama supports NX Filtration in further rolling out its innovative and sustainable direct nanoltration technol- ogy for municipal and industrial applications in the Middle East and North Africa region. Practical Water Solutions starts various pilot projects with NX Filtration’s direct nanoltration technology in South Africa Practical Water Solutions, a water as a service company in South Africa, has started various pilot projects to test NX Filtration’s dNF mem- branes for the reuse of industrial waste- water at various industrial clients across South Africa. Envirogen orders NX Filtration’s Mexperience pilot at Aquatech Amsterdam Envirogen, a UK based special- ist in industrial water treatment and process ltration, ordered a Mexperience pilot system from NX Filtration. The order was placed during the Aquatech Amsterdam, the world’s leading trade exhibition for process, drinking and wastewater. Envirogen will be using the Mexperience pilot system for testing NX Filtration’s innovative and sustain- able direct hollow ber nanoltration tech- nology across various applications in the food and beverage, healthcare and industrial water treatment sectors. December Joint publication in the Membranes Journal with PepsiCo, MESA+ Institute for Nano- technology and Leitat Technological Center NX Filtration, together with PepsiCo, the MESA+ Institute for Nanotechnology of the University of Twente and the Leitat Technolog- ical Center in Barcelona, published an article providing a holistic overview of the applications of hollow ber nanoltration membranes. Applications include the removal of micropollut- ants and nanoplastics, wastewater reuse and various industrial applications for the recovery of raw materials. September Attending Aquatech Mexico NX Filtration attended Aquatech Mexico in Centro Citibanamex, Mexico City. NX Filtra- tion presented its breakthrough direct nano- ltration membrane technology for clean and aordable water. Launch of projection tool 3.0 NX Filtration launched the third generation of its projection tool for optimal performance of hollow ber nanoltration membrane systems. Key features include accurate estimations of micropollutants retention, predictions of design parameters and calculations of energy con- sumption, process ows and cleaning intervals. NX Filtration starts pilot with IWE for water reuse from paper mills NX Filtration started a pilot project with Industriewater Eerbeek (IWE), a subsidiary of three Dutch paper mills focusing on waste- water treatment. The objective of the pilot is to enable the reuse of wastewater, therewith reducing the extraction of groundwater and the overall water footprint of the paper mills. A worldwide unique system for source sep- arated wastewater inaugurated In the City of Helsingborg a recovery plant for wastewater, RecoLab, has been inaugurated. The facility includes a testbed for re- search and a showroom for visitors. RecoLab is a world unique system for source-separated waste- water that recycles resources from domestic wastewater and food waste. NX Fil- tration delivered its direct nanoltration technology as an important part of this innovative wastewater recovery concept. October Veolia expands pilot testing with NX Filtration’s hollow ber nanoltration technology Veolia, a global leader in optimized resource manage- ment, expanded its pilot testing pro- gram based on NX Filtration’s innovative hollow ber nanoltration membranes. In a series of two new pilot programs, NX Filtration’s nanoltration membranes will be tested for the reuse of euent from a municipal wastewater treatment plant as well as for the treatment of surface water. These pilots follow a series of lab-scale tests, that Veolia conducted at its Scientic & Technological Expertise De- partment, where Veolia works with innovative technologies to meet the global environmental challenges and help its customers move to- wards sustainable solutions. 11 9 12 10 41NX Filtration - Annual Report40 NX Filtration included in the AScX index at Euronext Amsterdam NX Filtration was included in the Amsterdam Small cap Index (AScX) on Euronext Am- sterdam as per 20 December 2021. This was announced by Euronext, following its quarterly review, based on free-oat adjusted market capitalisation and liquidity. The AScX is a free- oat market capitalisation weighted index composed of 25 Dutch funds that are listed on Euronext Amsterdam. NX Filtration starts pilot with drinking water utility WMD in the Netherlands WMD, the drinking water utility of the province of Dren- the in the Nether- lands, initiated a pilot project with NX Filtration to test dNF technology on the removal of various micropollutants from WMD’s groundwater sources. Initial lab-scale tests (based on NX Filtration’s ‘Mexplorer’ test unit) demonstrated high removal of Ni/Fe, EDTA and other micropollutants. Therefore, WMD decided to expand its pilot program to test dNF technology in a full-scale setting, based on NX Filtration’s large scale ‘Mexpert’ pilot system. 43NX Filtration - Annual Report42 2021 month by month Financial performance NX Filtration is a provider of direct nanoltration mem- brane technology for producing pure and aordable water to improve quality of life. Its direct nanoltration technology removes micropollutants (including phar- maceuticals, medicines, PFAS and insecticides), colour and selective salts, but also bacteria, viruses and nano- plastics, from water in one step whilst oering strong sustainability benets. NX Filtration sells its ltration membranes in the form of modules in its two business lines: Clean Municipal Water and Sustainable Industrial Water. As there is a strong interrelationship between NX Filtration’s dierent business activities, manage- ment reviews the protability of the Company on an aggregate level. All nancial information can be found in the consolidated nancial statements. Gross income Gross income increased by 281% from €1,069 thousand in 2020 to €4,069 thousand in 2021. Revenues from the sale of goods increased by 373% from €671 thousand in 2020 to €3,173 thousand in 2021. Especially the second half of 2021 saw a rapid acceleration of growth. Gross income in the second half of 2021 increased by 420% from €536 thousand in H2 2020 to €2,789 thousand in H2 2021. Revenues from the sale of goods in the second half of 2021 increased by 609% from €294 thousand in H2 2020 to €2,085 thousand in H2 2021. Key drivers for this growth were an increase in the number of pilot projects as well as full- scale projects that resulted from preceding pilot projects. In addition, we benetted from the start of our contract with Hydranautics to produce and supply HYDRAcap ultraltration (UF) modules (with a gradual ramp-up in volumes during 2021), the expansion of our sales force to new countries (USA, Canada, India, Singapore and UAE) and a growing number of (repeat projects from our) OEM relationships. Environmental Social Governance Recurring replacements Repeat projects ReplacementsFull-scale US Sustainable Development Goal 6 - Pure and affordable water for all Energy efficient operation Green chemistry Production energy savings Safety Training and development Diversified employee base Sustainable supply chain Knowledge sharing Avoiding chemicals in pre-treatment Demo plantsPilots Clean water for all Avoiding emissions at our customers Our internal initiatives Gross income (€ ‘000) 704 2,789 1,301 784 2021 H2 192 1,280 2021 H1 771 317 536 2020 H2 242 237 57 533 2020 H1 156 249 128 Other income Sustainable Industrial Water Clean Municipal Water 45NX Filtration - Annual Report44 Financial performance We experienced strongest growth in our Sustainable Industrial Water business line, with revenues from the sale of goods of €2,072 thousand in 2021 (€771 thousand in H1 2021 and €1,301 thousand in H2 2021), a growth of 468% compared to €365 thousand in 2020. NX Filtration benetted from the pilots it had initiated since mid-2020 and the relatively short pilot to full-scale conversion lead-time. We experienced strong traction with customers in, amongst others, the food & beverage, textile and paper industries looking to reduce their water footprint and optimise their water systems in a sustainable way. Key projects included a repeat project for Nijhuis Saur Industries for industrial water treatment in France, multiple projects for Aquarius H2O Dynamics for wastewater reuse in the textile industry in India and the supply of our dNF modules to Grundfos focusing on industrial water footprint reduction. In addition, NX Filtration worked with PepsiCo to investigate additional opportunities for deployment of dNF membranes within PepsiCo’s facilities, following previous use of dNF technology at two PepsiCo facilities in North America. In the Clean Municipal Water business line, revenues from the sale of goods in 2021 were €1,101 thousand (€317 thousand in H1 2021 and €784 thousand in H2 2021), a growth of 260% compared to €306 thousand in 2020. This growth was primarily driven by full-scale projects in Asia, whereas the focus in Europe and North America has been on realising pilots with leading players, with visibility on future large projects. We realised repeat projects with PT. Bayu for the production of drinking water in Indonesia, supplied our dNF modules to Aquarius H2O Dynamics for caustic clarication at an euent treatment plant in India, and received an order from EcoAzur for a new wastewater treatment project in Mexico. In the European and North American market, where the conversion time from pilot to demo or full-scale project typically takes longer, NX Filtration started various new pilot projects, amongst others with Veolia in France, Aigües de Barcelona in Spain, Service de l’Eau de Lausanne in Switzerland, Jacobs for the City of Melbourne in Florida, USA and various water utilities, amongst whom PWN, Aa & Maas and WMD, in the Netherlands. Gross margin, EBITDA and Net result Gross margin increased from 47.9% in H1 2021 to 58.7% in H2 2021. H1 2021 gross margin was negatively impacted by waste resulting from the HYDRAcap UF product introduction at the start of the year. Gross margin for the full year 2021 was 55.0%, slightly lower than in 2020 (56.9%) as a result of a changing product mix with a growing share of UF products and production ineciencies related to a relatively high number of product switches on a single membrane spinning line. EBITDA loss was €13,323 thousand in 2021 compared to a loss of €1,972 thousand in 2020. EBITDA loss excluding IPO transaction costs for 2021 was €3,738 thousand. In EUR ‘000 2021 2020 Operating loss (14,714) (2,775) Depreciation and amortization 1,391 803 EBITDA (13,323) (1,972) IPO transaction cost 9,585 - EBITDA excluding IPO transaction costs (3,738) (1,972) Net loss was €11,354 thousand compared to a net loss of €2,092 thousand in 2020. Net loss excluding IPO transaction cost for 2021 was € 4,103 thousand. In EUR ‘000 2021 2020 Net loss (11,354) (2,092) IPO transaction cost (net of tax) 7,251 - Net loss excluding IPO transaction costs (4,103) (2,092) Cash ows and investments The net cash position at 31 December 2021 amounted to €133.4 million, compared to a net cash position of €6,599 thousand at 31 December 2020. This increase is the result of the equity capital that NX Filtration raised through its IPO in June 2021. Operating cash ow is €13,215 thousand negative (excluding IPO transaction costs €3,630 thousand negative), compared to €2,620 thousand negative in 2020. Working capital 1 decreased to €1,062 thousand versus €1,300 thousand at 31 December 2020. Capital expenditures amounted to €8,616 thousand as compared to €1,454 thousand in 2020. Capex included investments in the ongoing capacity expansion (new production facility for module production and expansion of the production facility for membrane production) and the expansion of NX Filtration’s eet of pilot systems. Additionally, NX Filtration capitalised €741 thousand of development costs which demonstrates the company’s continued eorts to invest in innovations for the future. Total FTE increased from 34 at 31 December 2020 (43 at 30 June 2021) to 69 at 31 December 2021, with key additions in sales force, pilot engineers, R&D employees and production personnel. The Company does not pay any dividend for the year. 1 Working capital dened as inventories plus trade and other receivables minus trade and other payables NX Filtration - Annual Report 47NX Filtration - Annual Report46 Below is a summary of our risks, our risk appetite, likelihood and potential impact. For a detailed description of these risks and what we do to mitigate these risks we refer to page 52 to 74 of this Annual Report. Additional risks not known to us, or currently believed not to be material, could later turn out to have a material impact on our business, revenue, assets, liquidity, capital resources or net income. Risk category Risk description Risk appetite Likelihood Potential impact Strategic and Commercial We are dependent upon acceptance of our technology by customers and future partners. A lack thereof will likely impact our ability to achieve and maintain market acceptance. High Low High Unsuccessful pilot projects or inconsistent performance of our products could harm the customer support for our products. High Low High The demand for NX Filtration’s products depends on the continuation of market trends towards greater sustainability, including trends to lowering the corporate water footprint and decarbonisation. Such trends could change due to a number of factors outside our control, following which the demand for our products could be reduced. High Low Medium Increased competition in the water treatment solution market may materially adversely aect our ability to gain market share. High Medium Medium Our business and strategy depends, in part, on signicant customers and our relationship with OEMs. If such relationships fail to develop this could have a materially adverse eect on our business. High Low High We do business with municipal clients and, as a result, we face risks of delays related to the procurement process, budget decisions driven by statutory and regulatory determinations and compliance with government contracting requirements. High Medium Low The COVID-19 pandemic has had and may continue to have an adverse impact on our business, operations and the markets in which we, our partners and customers operate. Medium High Medium Risks and Uncertainties 49NX Filtration - Annual Report48 Risks and Uncertainties Risk category Risk description Risk appetite Likelihood Potential impact Operational If we experience signicant delays in the planned scale-up of our production and the build of our planned manufacturing facility, or if such facility were to become inoperable, we would be unable to produce sucient products and our business would be harmed. Low Low High We are dependent on third-party suppliers to deliver raw materials and components for our products. Supply interruptions could lead to interruptions of our own production, increased costs, order cancellations and loss of market share. Medium Medium High Signicant increases in the cost of raw materials, components and nished goods may materially adversely aect our business. Medium Medium Low We depend on the ability to hire and retain management, key employees and other qualied and skilled employees and we may not be able to attract and retain such personnel. Medium Medium Medium Disruptions of our information technology systems could have a material adverse eect on our business. Low Medium High Any diculties we encounter while we expand or transition our manufacturing operations in-house, now or in the future, could materially and adversely aect our ability to manufacture and deliver our products. Medium Low High Our current operations are international in scope, and we plan further geographic expansion, creating a variety of operational challenges. High Medium Low Risk category Risk description Risk appetite Likelihood Potential impact Technology Our failure to protect intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly, time consuming and distracting from daily operations. Low Low Medium We may be unsuccessful in adequately protecting our technological know- how that is not covered by intellectual property registration. Low Low Medium New products or technological improvements by competitors, including by larger players in the industry investing in research and development for product substitution of our dNF products, or improvements to our dNF technology could materially adversely aect our business and our ability to gain market share. Medium Low Medium Compliance We are exposed to risks associated with product liability, warranties, recall claims or other lawsuits or claims that may be brought against us. Low Low Medium We are subject to various laws and regulations in multiple jurisdictions in which we operate, and unfavorable changes or failure by us to comply with these regulations could have a material adverse eect on our business. Low Medium Medium We may be exposed to the risk of fraud and other dishonest activities, which could have a material adverse eect on our business, nancial condition or results of operations. Low Medium Medium 51NX Filtration - Annual Report50 Risks and Uncertainties For information about NX Filtration’s credit risk, liquidity and market risks as well as the capital management structure, please refer to the information outlined in Note 3 and 4 of the Consolidated Financial Statements. Furthermore, risks related to external reporting are considered limited due to the limited amount of estimates in the nancial statements, and because NX Filtration was not faced with any indication for impairment in nancial year 2021. For each risk factor, we set out how we believe we mitigate these risks. However, we may not be successful in deploying some or all of these mitigating actions eectively. If circumstances occur or are not suciently mitigated, our business, nancial condition, results of operations and prospects could be material adversely aected. In addition, risks and uncertainties could cause actual results to vary from those described, which may include forward-looking statements, or could impact our ability to meet our objectives or be detrimental to our nancial condition or reputation. Strategic and Commercial Risks and Uncertainties We are dependent upon acceptance of our new technology by customers and future partners. A lack thereof will likely impact our ability to achieve and maintain market acceptance. NX Filtration’s ability to succeed is mainly dependent upon achieving and maintaining the acceptance by customers and future partners of its innovative inside-out hollow ber dNF membranes that are based on patented production methods. Historically, governments, municipal and industrial companies have fully relied on water ltration activities using conventional water treatment technology. In order for NX Filtration to achieve its business objectives, it must convince these governments and companies that its technology and capabilities justify the switch to its products. If NX Filtration cannot convince governments and companies of the eectiveness of its dNF membranes or if NX Filtration is unable to obtain the necessary approvals, it is unlikely to keep existing customers or attract additional customers and future partners on acceptable terms or to develop a sustainable, protable business. The market for dNF is at a relatively early stage of operation and customers may not recognise the need for, or the benets of, the dNF products. Therefore, the extent to which the dNF products will be able to meet its customers’ requirements and achieve signicant market acceptance is uncertain. By contrast, the markets for UF, traditional nanoltration and reverse osmosis treatment technologies are large and well established, which may make the commercialisation of new water treatment technologies longer than foreseen and ultimately unsuccessful, including dNF membrane technology or other future technology developments. The use of a new type of water ltration depends on compatibility with existing infrastructures, installations and equipment, as well as the manner in which such technique may be used by a manufacturer. Manufacturers may elect not to use, distribute or install NX Filtration’s products due to regulatory and political considerations, including but not limited to tax exemptions, subsidies, trade barriers, handling and safety requirements, and for a variety of other reasons, including (i) product and process safety considerations; (ii) advantages of alternative water ltration methods; (iii) lack of cost-eectiveness; (iv) timing of market introduction of competitive products; (v) process economics in realising economies of scale; (vi) incompatibility with required product specications; (vii) lack of t with existing infrastructure; and (viii) the fact that NX Filtration is in an early stage of operation and potential uncertainty around its future development and ability to deliver its products in the future. If NX Filtration fails to achieve market acceptance for its products to replace or compete with current UF, traditional nanoltration and reverse osmosis treatment technologies or if NX Filtration is not able to successfully commercialise the membrane technology that it develops, NX Filtration may not be able to generate signicant revenue, which could have a material adverse eect on its business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration is actively developing, piloting and investing in its technology. NX Filtration benets from a unique team of leading membrane technology experts with technical, operational and commercial experience with an extensive background in membrane technology and the water sector. Based on the concept of its pilot- based roll-out model, NX Filtration invests in signicantly expanding the number and size of its pilot systems to accelerate acceptance of its technology. Over the past year this has led to an increase in conversions of pilot systems to full-scale installations. Furthermore, it is expected that this risk is reducing over time, as the market for dNF is expected to gradually mature and NX Filtration’s customers are gaining more experience with dNF products, including business case development, internal approval procedures and project management. Unsuccessful pilot projects or inconsistent performance of our products could harm the customer support for our products. Currently, in relation to its new dNF technology, the vast majority of NX Filtration’s projects are at a pilot system phase during which customers test the dNF technology before making a decision whether to proceed with a demo or full-scale installation investment. Some or all of such pilot systems may not ultimately lead to full-scale installations, including for reasons beyond NX Filtration’s control, such as where third parties would not adequately integrate the products into a pilot, demo or full-scale system. Its products may not be functional, may be faulty or may not meet customers’ expectations. This may lead to requirements for NX Filtration to repair or improve its products after sale and/or installation, which may diminish operating margins or lead to actual losses. In respect of water ltration systems that are built together with OEMs, NX Filtration may be made responsible if such systems are faulty or not functional. Furthermore, there could be unwillingness by OEMs to roll-out NX Filtration’s technology across their customer base if its products do not display the promised performance. Any of the above events could materially adversely aect NX Filtration’s business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration generally oers on-site commissioning, technical support and training by its engineers. NX Filtration generally seeks to maintain a constructive dialogue with the customer that is testing NX Filtration’s technology through a pilot system. NX Filtration believes the vast majority of ongoing pilots have a clear visibility towards follow-on demo or full-scale projects and, the amount of customers that have not been retained after using NX Filtration’s technology by way of a pilot system is considered to be limited. The demand for NX Filtration’s products depends on the continuation of market trends towards greater sustainability, including trends to lowering the corporate water footprint and decarbonisation. Such trends could change due to a number of factors outside our control, following which 53NX Filtration - Annual Report52 Risks and Uncertainties the demand for our products could be reduced. The present and projected demand for NX Filtration’s products is driven by the need to address global and structural water scarcity and water quality issues. Such issues include, but are not limited to, people not having daily access to clean, drinkable water, the fact that 80% of global wastewater ows back in nature without being treated, the fact that 95% of medicine waste reaches nature through sewerage systems, limited reuse of treated wastewater globally, and micro-plastics ending up in any water environment and eventually the food- and waterchain. Additionally, pollution is a major concern in many emerging countries due to the lack of adequate wastewater treatment facilities where wastewater is discharged untreated, directly into the sea or rivers. The key drivers of demand for NX Filtration’s products include climate change/ droughts, regulations, universal access to clean water, corporate responsibility, discharge surcharges, and health awareness. Furthermore, water plays an integral part in the production process of companies in a wide variety of sectors, such as within the agricultural, food and beverage, textile, power generation, mining, high tech, datacenter, semi- conductor, and pulp and paper sectors. Such sectors heavily depend on water that is used as an ingredient or for operational purposes such as for cleaning, heating, cooling and transport. Many companies are reliant on water supply and exposed to the risk of water scarcity through their supply chains, since they rely on (hydropower) energy and input from water- dependent agricultural and industrial sectors. Companies are becoming increasingly aware of the severity of water scarcity issues and its eventual impact on their businesses and seek to strategically address these by setting goals to reduce their corporate water footprint (i.e. the total volume of water that is used directly or indirectly to run and support a business). Increasingly, customers are demanding the use of products and technologies that contribute to decarbonisation and governments globally and locally are enacting pro-climate environmental standards and regulations. These current and expected trends could change due to a number of factors which are outside of NX Filtration’s control, including the modication or elimination of economic incentives encouraging decarbonisation, the use of alternative forms of water treatment and the public perception moving away from the idea that CO 2 emissions negatively impact the environment. If any of these or other changes were to occur, demand for NX Filtration’s products could be reduced signicantly, which could, in turn, have a material adverse eect on its business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration continuously monitors trends and initiates R&D eorts accordingly. To verify its R&D and product development projects, NX Filtration actively engages with its customers, academic partners and stakeholders that are active in the global water market to anticipate trends and market developments and to provide it with a deep understanding of the (future) needs of NX Filtration’s customers. Increased competition in the water treatment solution market may materially adversely aect our ability to gain market share. The water treatment solution market is highly competitive, and NX Filtration faces signicant competition from large international competitors as well as smaller regional competitors in certain markets. NX Filtration faces competition in countries across the globe and the products of NX Filtration’s competitors are typically sold globally. NX Filtration primarily competes with organisations that oer conventional water treatment solutions (such as reverse osmosis, adsorption and oxidation processes), organisations that develop products similar to those oered by NX Filtration and organisations that oer alternative technologies. NX Filtration’s competitors generally have global distribution networks, a global sales force and have therefore already achieved economies of scale, as opposed to NX Filtration. In addition, industry players that do not currently compete with NX Filtration but may have greater nancial resources, may enter the market and disrupt the competitive environment, which may inuence NX Filtration’s ability to grow its market share. Such existing or new industry players may have longer operating histories, customer incumbency advantages, stronger relationships with industrial companies, more access to and inuence on municipal governments and more capital resources than NX Filtration does. NX Filtration competes primarily on the basis of, among other things, price, product technology and performance, delivery times, ease of operation, sustainability benets, exibility, design and innovation, reputation, brand recognition and customer access as well as the scope and quality of the products and the suitability of the products as components in systems built by original equipment manufacturers (OEMs). NX Filtration’s ability to compete may be adversely aected by a number of factors, such as the following (i) new products or product improvements by competitors, including product substitution of NX Filtration’s products for new or alternative technologies; (ii) greater nancial and technical resources available to other competitors specialising in water treatment; (iii) larger players in the industry investing in research and development relating to hollow ber direct nanoltration (dNF), ultraltration (UF) or microltration (MF) technology; (iv) competitors having lower production costs (due to geographic location, currency uctuations or other advantages), larger production and assembly capacity or larger spending budgets, more buying power with respect to raw materials, which may enable competitors to compete more aggressively in oering discounts and lowering prices; (v) consolidation among competitors in the water treatment industry; (vi) raw material suppliers seeking opportunities to forward integrate membrane spinning capabilities; and (vii) competitors temporarily oering their products and services at signicant discounts in order to enter the market or to increase their market share, thereby impacting protability throughout the sector. If NX Filtration is unable to compete successfully for any of the above reasons, its business, nancial condition, results of operations and prospects could be materially adversely aected. To mitigate this risk, NX Filtration is fully committed to leverage on the competitive edge of its dNF products versus conventional water treatment solutions. Key characteristics of the dNF product are lower energy usage, avoidance of pre-treatment chemicals, simpler system set-up with a smaller physical footprint and reduced cleaning and maintenance cost. As a consequence of expected future cost savings, the price NX Filtration can charge for its membrane modules is signicantly higher than the price of alternative membrane modules. Furthermore, NX Filtration believes it will experience limited price pressure as its pricing strategy is based on TCO comparisons with alternative technologies that are well-advanced on their cost curve (i.e. these technologies have been existing for several decades and are being produced and delivered by large global players). Furthermore, NX Filtration continuously invests in innovation, operations and its organisation amongst other to further improve performance of its products and to further reduce its costs. In addition, NX Filtration believes its IPO has increased brand awareness and global reputation to drive future sales. Finally, 55NX Filtration - Annual Report54 Risks and Uncertainties NX Filtration is building its global sales and distribution network along its geographical markets. This network allows NX Filtration to quickly roll-out its innovative product on a global scale. Our business and strategy depends, in part, on signicant customers and our relationship with OEMs. If such relationships fail to develop this could have a materially adverse eect on our business. NX Filtration’s business and strategy depends, in part, on signicant customers and its relationship with OEMs, which have the potential to roll-out the NX Filtration’s technology across their customer base. Generally, NX Filtration would have to cooperate with a third party to integrate its products in a system or installation. If the OEMs are unable to adequately integrate NX Filtration’s product into their system design such roll-out may materially adversely aect NX Filtration’s commercialisation eorts. Although NX Filtration seeks to penetrate a market in which a wide and diversied number of companies could become customers, in any particular period and most notably within the current early-stage of NX Filtration, a substantial amount of NX Filtration’s revenue from sale of goods currently comes from and in the coming years could come from a relatively small number of customers and the impact of such customer concentration is unpredictable. While NX Filtration’s initial commercial model is based on pilot systems, which allow prospective customers to test NX Filtration’s technology for their application, NX Filtration has successfully converted and aims to convert these pilot systems into full-scale installations. NX Filtration may not be successful in converting all pilot systems into full-scale installations or, once installed, win repeat projects from such end-customers or may only be able to do so on less favourable terms. If NX Filtration is unable to win, renew or extend such contracts on favourable terms, it could have a negative impact on NX Filtration’s revenue and prots or NX Filtration’s ability to realise its business objectives. More generally, NX Filtration’s inability to maintain relationships with key customers or OEMs could have a negative impact on NX Filtration’ sales and prots. Failure by NX Filtration to win, renew or extend larger customer contracts could have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration seeks to build strong relationships with OEMs while applying certain standards, policies and practices under which its engineers are expected to operate. Together with the OEMs, NX Filtration is continuously reviewing potential areas of improvement, and ensuring thorough evaluations of all incidents and sharing resulting improvements and best 57NX Filtration - Annual Report56 Risks and Uncertainties practices. NX Filtration seeks to grow its relationships with OEM customers, mainly by the eorts of its commercial sta that targets and trains OEM customers to use dNF technology in their projects. Once these OEM customers have been trained and have worked with NX Filtration’s products, they can become an important element in the further commercial roll-out of NX Filtration’s products. A key strategic advantage of NX Filtration is that it does not provide ltration systems and installations itself and, as such, is regarded as an independent supplier of membrane modules that can work with multiple OEM companies without creating channel conicts. NX Filtration develops joint business plans with key OEMs that include customer service objectives and NX Filtration regularly monitors progress to improve customer performance and enhance our customer relationships. We do business with municipal clients and, as a result, we face risks of delays related to the procurement process, budget decisions driven by statutory and regulatory determinations and compliance with government contracting requirements. Doing business with public sector customers presents a variety of risks. The procurement process for municipal governments and their agencies can be highly competitive, expensive and time-consuming, often requiring signicant upfront time and expense without any assurance that these eorts will generate a sale. In addition, demand for NX Filtration’s products may be adversely impacted by public sector budgetary cycles and funding availability that, in any given scal cycle, may be reduced or delayed or not provided at all. Public sector customers may also have contractual, statutory, or regulatory rights to terminate existing contracts with NX Filtration for convenience or due to a default, and any such termination may adversely aect NX Filtration’s future results of operations. If a contract is terminated due to a default, NX Filtration may be liable for excess costs incurred by the customer for procuring alternative products or services or be precluded from doing further business with government entities. Further, entities providing services to governments are required to comply with a variety of complex laws, regulations, and contractual provisions relating to the formation, administration or performance of government contracts that give public sector customers substantial rights and remedies, many of which are not typically found in commercial contracts. These may include rights with respect to price protection, the accuracy of information provided to the government, contractor compliance with supplier diversity policies and other terms that are particular to government contracts, such as termination rights. NX Filtration’s non-compliance with such terms could result in repercussions with respect to contractual and customer satisfaction issues. To mitigate this risk, management and relevant internal stakeholders including the departments for sales, sales engineering and operations make a thorough assessment of the likelihood that eorts for municipal clients will result in a sale. The general rule is that a procurement process for municipal clients is only commenced after a satisfactory outcome of such an assessment. Furthermore, NX Filtration is continuously diversifying its customer base and the sectors it currently operates in. The COVID-19 pandemic has had and may continue to have an adverse impact on our business, operations and the markets in which we, our partners and customers operate. The COVID-19 pandemic has resulted, and other adverse global health events could result, in widespread health crises that could adversely aect the economies and nancial markets worldwide. The COVID-19 pandemic has resulted in governments in the Netherlands and other countries in which NX Filtration operates, implementing numerous measures to try to contain the virus, such as travel bans and restrictions, lockdowns, curfews, quarantines and shutdowns of business and workplaces. The outbreak of COVID-19 has impacted and may impact NX Filtration mainly due to (i) limitations in sales and marketing activities as there are generally less trade fairs, which are important to further commercialise the NX Filtration’s products, (ii) the inability to be present at the start-up of pilot systems and full-scale projects (where required), and (iii) customers facing cost savings and budget constraints, especially with regard to new technology, and as a consequence may choose to postpone a year or more. Additionally, any interruptions at NX Filtration’s manufacturing facilities as a result of COVID-19 in the future could result in interruptions to NX Filtration’s supply chains, its ability to conduct production activities and ultimately reduce the amount of products available for NX Filtration to oer to its customers. The COVID-19 pandemic is ongoing and there is a risk of recurring outbreaks in aected countries, including the Netherlands and other countries in which NX Filtration operates, and further mutations in the virus, which may prove dicult to contain. The long-term eects of the COVID-19 pandemic on the global economy are still unclear. The degree to which COVID-19 continues to impact NX Filtration, its partners and customers will depend on future developments, including, but not limited to, further actions taken to contain the virus or treat its impact, the eectiveness and rate of deployment of vaccines, the extent and eectiveness of economic stimulus and the speed at which and to what extent normal economic and business activity can resume globally. If NX Filtration’s existing or potential customers experience slowdowns in their businesses or if governments and municipality companies face stringent budget constraints due to the consequences of COVID-19, or if they are otherwise negatively impacted by the COVID-19 pandemic or any resulting economic downturn, they may have reduced capital expenditure available, which may lead them to delay their projects to employ NX Filtration’s products. As a result, NX Filtration may experience a lengthening of pilot system cycles or the loss of existing or potential customers. NX Filtration may also experience disruptions to its growth objectives, including with respect to international expansion, or disruptions to its supply chain as a result of the ongoing COVID-19 pandemic. Any of the foregoing factors, individually or in aggregate, could have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration is continuously diversifying its customer base. Not only in the markets NX Filtration currently operates in, but also by further internationalising globally. To safeguard the health and safety of its employees, NX Filtration complies to all relevant national and international guidelines, standards and policies for health and safety. Also, NX Filtration can implement additional safety measures, if and when required, to continue safe and responsible operations during a pandemic, as evidenced during the COVID-19 crisis. 59NX Filtration - Annual Report58 Risks and Uncertainties Operational Risks and Uncertainties If we experience signicant delays in the planned scale-up of our production and the build of our planned manufacturing facility, or if such facility were to become inoperable, we would be unable to produce sucient products and our business would be harmed. An important part of NX Filtration’s scale-up is the intended addition of a new manufacturing facility in the Netherlands in the next two years that will primarily focus on the increased production of NX Filtration’s products. It may take considerable time to scale-up production and commence operations at NX Filtration’s manufacturing facility before NX Filtration is able to meet any increase in the commercial demand for its products. The new manufacturing facility could expose NX Filtration to product comparability issues meaning that the products could not immediately have similar quality attributes before and after the manufacturing process changes. That may further delay the introduction of additional capacity to manufacture its products, as the facility and the equipment that will be used to manufacture its products will be costly to install and could require substantial lead time to install and qualify for use. Any substantial delay in bringing the new manufacturing facility up to full production may hinder NX Filtration’s ability to produce all of the products needed to meet orders, which, in turn, could materially damage NX Filtration’s business, nancial condition and operating results. Any delay in the scale-up of its production could also materially adversely aect NX Filtration’s growth prospects as NX Filtration may fail to grow its market share. NX Filtration may also face unexpected delays in obtaining the required permits and approvals in connection with its planned manufacturing facility, which could require signicant time and nancial resources and delay NX Filtration’s ability to operate the facility. This is particularly relevant to NX Filtration as it will heavily rely on this new manufacturing facility to achieve its growth strategy. Opening the new manufacturing facility will require the eorts and attention of NX Filtration’s management and other personnel, which will divert resources from the existing business or operations and, in the longer term, additional capital expenditures will be required as NX Filtration will likely seek further expansion. In addition, NX Filtration will need to hire and retain more skilled employees to develop and operate the expanded facility. Even if NX Filtration’s new manufacturing facility is brought up to full production, it may not provide NX Filtration with all of the operational and nancial benets it expects to receive. 61NX Filtration - Annual Report60 Risks and Uncertainties Furthermore, the costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration has an extensive expansion roadmap in place for further increasing production capacity going forward. The construction plans are based on a highly modular concept that foresee a gradual scale-up of production capacity based on existing blueprints of key process steps, including NX Filtration’s spinning line for the production of its membranes. On a dedicated plot of land that has been secured already, NX Filtration aims to develop a new production facility over the next two to three years, giving it considerable time to limit the risks and uncertainties set out above. We are dependent on third-party suppliers to deliver raw materials and components for our products. Supply interruptions could lead to interruptions of our own production, increased costs, order cancellations and loss of market share. NX Filtration’s production process depends on the availability, quality and timely supply of raw materials, components and nished goods from third-party suppliers. NX Filtration obtains a signicant portion of its processed raw materials from a few key suppliers. With respect to a few raw materials and/or the processing thereof, NX Filtration has sourced and may in the future source from one of these suppliers or other single suppliers from time to time due to specic quality or other requirements or because the small volumes required may not justify the cost of sourcing from multiple suppliers or other suppliers may not be available to provide necessary quantities. If any of NX Filtration’s suppliers is unable to meet its obligations under purchase orders or supply agreements, including due to their own production capacity limitations or otherwise limited supply of materials as a result of their obligations to other customers, or does not deliver the quality that is necessary to meet the raw material standards applied by NX Filtration, NX Filtration may be forced to pay higher prices to obtain the necessary raw materials from other suppliers, may be faced with increased lead times, may need to change suppliers, or may not be able to locate suitable alternatives at all. Changing suppliers can be time-consuming and costly, as resources are required to qualify new suppliers and ensure the quality, approval and consistency of the raw materials. Supply interruption could lead to interruption of NX Filtration’s own production at one or more production facilities. Furthermore, if NX Filtration experiences signicant increased demand for its products, there can be no assurance that additional supplies of raw materials, components and nished goods will be available when required on terms that are acceptable to NX Filtration, or at all, or that any supplier would allocate sucient supplies to NX Filtration in order to meet its requirements or ll its orders in a timely manner. NX Filtration may experience supply problems in the future or be unable to extend current or enter into new supply agreements, especially agreements for raw materials with relatively low volume requirements, where NX Filtration’s negotiating power is limited. If NX Filtration fails to maintain its relationships with current suppliers, if suppliers oer pricing and other terms that are not satisfactory, or if a supplier fails to supply raw materials that meet NX Filtration’s quality, quantity and cost requirements, NX Filtration may be unable to ll customers’ orders on a timely and cost- eective basis or in the required quantities, which could result in production disruptions, damage claims, order cancellations, decreased sales or loss of market share and damage to NX Filtration’s reputation. These factors could, in turn, have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration always seeks to have multiple interchangeable suppliers for its key purchases. For its standardised commodity raw materials and parts suppliers, NX Filtration has a multiple supplier strategy in place in order to ensure continuous operations. NX Filtration is in continuous dialogue with its key suppliers to discuss potential supply chain challenges and, in case of any disruptions, seeks to jointly address these and return to normal course of business as quickly as possible. Any potential disruptions can further be mitigated by, temporarily, increasing stock levels and adjusting working procedures. Signicant increases in the cost of raw materials, components and nished goods may materially adversely aect our business. NX Filtration uses various raw materials, components and nished goods in its operations, including polymers such as polyethersulfone, polyvinyl chloride (PVC) and epoxy. The prices for these raw materials, components and nished goods uctuate depending on market conditions and global demand for these materials and could adversely aect NX Filtration’s business and operating results. In recent years, PVC in particular experienced a signicant price increase, largely attributable to persistent supply- side issues globally. NX Filtration’s ability to achieve protability is, and will continue to be, dependent in part upon its ability to reduce production costs and costs of materials required to make these products (including raw materials). In particular, NX Filtration’s business plan is dependent upon the successful reduction of raw material prices, for example due to volume-discounts. The cost of processed raw materials, components and nished goods historically has represented a signicant portion of NX Filtration’s cost of raw materials and consumables used. As a consequence, sudden and signicant increases in the prices of raw materials or similar volatility with respect to the currency exchange rates between the euro and the currency of such goods may lead to corresponding price increases in components and nished goods used in the assembly of NX Filtration’s products. NX Filtration is also indirectly exposed to uctuations of labour costs, commodity prices and energy costs as the prices of raw materials and components it orders from third-party suppliers and manufacturers will likely increase if the costs of NX Filtration’s suppliers increase. NX Filtration does not hedge the price exposure for its raw materials. Increases in the costs of raw materials and components and as a result in nished goods may therefore have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects, particularly because it is generally not able to pass on such price increases or reduce other costs to oset the higher commodity prices. Furthermore, the price of commodities could become so high that there is a decline in the demand of the products provided by NX Filtration. To mitigate this risk, NX Filtration always seeks to have multiple interchangeable suppliers for its key purchases, also from a cost perspective. For its standardised commodity raw materials and parts suppliers, NX Filtration has a multiple supplier strategy in place in order to ensure continuous operations. Furthermore, NX Filtration’s pricing strategy is based on TCO comparisons with alternative technologies that are likely impacted by similar raw material price increases as NX Filtration may be exposed to, and developments in raw material prices are monitored and where possible addressed through a pro-active pricing strategy. 63NX Filtration - Annual Report62 Risks and Uncertainties We depend on the ability to hire and retain management, key employees and other qualied and skilled employees and we may not be able to attract and retain such personnel. NX Filtration’s future performance and its ability to reach its strategic objectives depends in signicant part on the continued service of the senior management of the Company and other key personnel, including employees involved in research and development, operations, marketing and sales personnel and employees with critical know-how and expertise. Other than customary notice periods, none of NX Filtration’s key employees is required to stay for any specic term. In addition, NX Filtration does not have “key person” life insurance policies covering any of its ocers or other key employees. The loss of the services of one or more members of senior management or other key personnel, or the inability to hire (additional) members of the senior management, could disrupt its operations, delay the development and introduction of NX Filtration’s products and anticipated expansion projects, which could, in turn, have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. NX Filtration’s success also depends on its continuing ability to attract, retain and develop qualied and skilled personnel, including nancial personnel, sales personnel, scientists, designers, technical employees and engineers with the requisite technical background. Competition for such personnel is intense, in particular for technical and industrial employees, and there is signicant competition for talented individuals with the specialised knowledge of water ltration and membrane technology. This is particularly relevant in the Netherlands, as the country where NX Filtration has its headquarters, signicant business operations and research and development activities. NX Filtration’s eorts to retain and motivate management and key employees or attract and retain other highly qualied personnel in the future may not be successful. A failure to attract and retain key personnel may have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration seeks to leverage on its public prole that has increased after the IPO and the widespread interest in the growing water technology market, with in particular the sustainable character of NX Filtration’s technology, in order to attract talent. Hiring, retention and development are key focus areas of the HR department and management. NX Filtration continuously assesses capability gaps for its key positions and has initiatives in place to close any employee capability gaps and maintains a remuneration structure aimed at attracting and retaining talent. Disruptions of our information technology systems could have a material adverse eect on our business. NX Filtration depends on its information technology (IT) systems to, among other things, conduct operations, to interface with customers, to maintain nancial records and accuracy. All of NX Filtration’s internal data is stored at Microsoft cloud services. NX Filtration’s production process specically depends on the use of custom-made processing software based upon standardised internationally accepted software platforms such as Siemens S7 and others. IT systems or such custom-made processing software failures, including risks associated with upgrading systems, network disruptions and breaches of security could disrupt operations by impeding NX Filtration’s cyber security, its protection of customer or group information and its nancial reporting, leading to increased costs. In addition, NX Filtration’s computer systems, including its back-up systems, could be damaged or interrupted by power outages, computer and telecommunications failures, viruses, ransom software, internal or external security breaches, events such as res, earthquakes, oods and/or errors by NX Filtration’s employees. Disruptions, security breaches or failures of NX Filtration’s IT systems could impair its ability to eectively and timely produce and provide products, which could damage NX Filtration’s reputation and could have a material adverse eect on its business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration uses cloud based solutions for its own IT systems from suppliers that oer proven and tested security which they continuously update to protect it from the latest threads. Furthermore, to mitigate the risks related to privacy related information as well as data protection in general several actions have been taken and NX Filtration maintains a cyber-security insurance policy. Additionally, NX Filtration has implemented an information security policy to safeguard and secure remote communication and operation of its products & services. The mitigation of these risks starts with an IT security policy that is in place and sucient resources to manage the IT related risks. As such, NX Filtration seeks to strengthen its IT focus in 2022. To further mitigate the risks related to privacy related information as well as data protection in general several actions have been taken. For 2022, a cybersecurity consultant has been contracted to execute several tests upon our systems thus auditing the implementation of above described policies, services and systems. Any diculties we encounter while we expand or transition our manufacturing operations in-house, now or in the future, could materially and adversely aect our ability to manufacture and deliver our products. Because of the signicant variation in the manufacturing stages of its products, NX Filtration has separated its production into two manufacturing sites. NX Filtration has one primary facility that manufactures the membranes and one primary facility that manufactures the modules. Therefore, a disruption in service at such facilities would likely have a signicant impact on the sale of its products almost immediately. If either of NX Filtration’s manufacturing facilities is unable to operate, or if any project is delayed or cancelled, for an extended period of time, NX Filtration’s sales may decline due to the disruption and it may not be able to meet customers’ needs, which could cause them to seek other suppliers. As NX Filtration’s membrane production capacity at the Institutenweg has been expanded with an additional spinning line and the implementation of various process improvements and expansions, it may experience unexpected delays or diculties in executing this expansion. Any diculties NX Filtration encounters while it expands or transitions its manufacturing operations in-house, now or in the future, could materially and adversely aect NX Filtration’s ability to manufacture and deliver its products to customers. If any of the risks described above arise, this could have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration is continuously improving its quality assurance processes and controls to ensure consistent production continuity and quality. In addition to pro-actively managing the production process, we have further enhanced our production development processes based on clear objective setting, risk identication and debottlenecking reviews. We are also centralizing our quality organization to report directly to the CEO to bolster cross functional focus. 65NX Filtration - Annual Report64 Risks and Uncertainties Our current operations are international in scope, and we plan further geographic expansion, creating a variety of operational challenges. A component of NX Filtration’s growth strategy involves the further expansion of its operations and customer base internationally. NX Filtration is continuing to adapt to and develop strategies to address international markets, but there can be no guarantee that such eorts will have the desired eect. For example, NX Filtration anticipates that it will need to expand its international sales force and establish relationships with new partners in order to expand into the countries where NX Filtration wants to conduct its business, and if NX Filtration fails to identify, establish and maintain such relationships, it may be unable to execute its expansion plans. NX Filtration expects that its international activities will continue to grow in the next few years as it continues to pursue opportunities in existing and new international markets, which will require signicant dedication of management attention and nancial resources. NX Filtration’s current and future international business and operations involve a variety of risks, some of which are outside of NX Filtration’s control, including (i) slower than anticipated dNF membrane technology adoption by international businesses and municipalities; (ii) diculty controlling the application of NX Filtration’s solutions and the installation of pilot systems in distant or remote jurisdictions; (iii) changes in a specic country’s or region’s political, economic, or legal and regulatory environment, including pandemics, taris, trade wars or long-term environmental risks; (iv) the need to adapt and localise NX Filtration’s products and service oerings for specic countries; (v) greater diculty collecting accounts receivable and longer payment cycles; (vi) challenges relating to underdeveloped infrastructure or lack of qualied management or adequately trained customers and personnel in certain jurisdictions; (vi) challenges inherent in eciently managing, and the increased costs associated with, an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benets, and compliance programs that are specic to each jurisdiction; and (vii) currency exchange rate uctuations and the resulting eect on NX Filtration’s revenue and expenses, and the cost and risk of entering into hedging transactions if NX Filtration choses to do so in the future. If NX Filtration invests substantial time and resources to further expand its international operations and is unable to do so successfully and in a timely manner, it could have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. 67NX Filtration - Annual Report66 Risks and Uncertainties To mitigate this risk, NX Filtration’s processes are set up to quickly understand, adapt to, and eectively apply international cultural and legal norms for doing business. We have actual presence of dedicated sta in some regions we operate in. We continuously monitor economic, political and general societal changes and, where deemed necessary, develop response strategies to such events, including pandemics (e.g. COVID-19). Technology Risks and Uncertainties Our failure to protect intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly, time consuming and distracting from daily operations. Intellectual property rights are vital to NX Filtration’s business. Although NX Filtration has taken many protective measures to protect its technologies and know-how, including patents, trade secrets, employee and third- party nondisclosure agreements, trademarks, copyright, limited access, segregation of knowledge (including on the particular set-up of the supply-chain and production process), password protections and other measures, policing the unauthorised use of proprietary technology can be dicult, time-consuming and expensive. Also, litigation may be necessary to enforce NX Filtration’s intellectual property rights, protect its trade secrets or determine the validity and scope of the proprietary rights of others. Such litigation may result in NX Filtration’s intellectual property rights being challenged, limited in scope or declared invalid or unenforceable. NX Filtration cannot be certain that the outcome of any litigation will be in its favor, and an adverse determination in any such litigation could impair its intellectual property rights and may harm NX Filtration’s business, prospects and reputation. NX Filtration inter alia relies on (i) multiple patents relating to NX Filtration’s dNF technology, (ii) trade secrets and trademark rights, and (iii) non-disclosure, condentiality and other types of contractual restrictions to establish, maintain and enforce its intellectual property and proprietary rights. However, the rights of NX Filtration under these laws and agreements may not fully protect NX Filtration, and the actions NX Filtration takes to establish, maintain and enforce its intellectual property rights may not be adequate. For example, NX Filtration’s trade secrets and other condential information could be disclosed in an unauthorised manner to third parties, NX Filtration’s owned or licensed intellectual property rights could be challenged, invalidated, circumvented, infringed or misappropriated or the intellectual property rights of NX Filtration may not be sucient to provide it with a competitive advantage. Any successful challenge to any of NX Filtration’s intellectual property rights could deprive NX Filtration of rights necessary for the successful commercialisation of its products or any technology relating thereto (including the dNF technology). Patent prosecution process is expensive and time consuming, and NX Filtration may not le and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner or in all jurisdictions where protection may be commercially advantageous. It is also possible that NX Filtration fails to identify patentable aspects of its research and development output before it is too late to obtain patent protection. In addition, the laws of some countries do not protect proprietary rights as fully as Dutch law does. As a result, NX Filtration may not be able to protect its proprietary rights adequately abroad. Furthermore, intellectual property rights can be limited in time. Each of NX Filtration’s current patents provide protection against infringement of the technology patented by such patent for 20 years after the ling date of the respective patent application with the relevant patent oce. Any of the above, individually or in aggregate, could have a material adverse eect on NX Filtration’s business, nancial condition, results of operation or prospects. To mitigate this risk, NX Filtration regularly monitors the market and takes steps, when appropriate, to ensure compliance with its intellectual property rights which may include various intellectual property related audits. In addition, control and governance frameworks are in place to establish, maintain and protect NX Filtration’s intellectual property rights and minimize the risk of data leakage as far as possible. Furthermore, NX Filtration has developed all its critical production processes in-house based on the extensive industry experience of its team of experts. NX Filtration benets from a strong team of leading membrane technology experts with technical, operational and commercial experience with an extensive background in membrane development, production and commercialisation. This team has been instrumental in developing the dNF technology, bringing this from lab-scale to industrial-scale, developing the required innovative and patented production methods and processes and reliably producing the dNF membranes and modules. We may be unsuccessful in adequately protecting our technological know-how that is not covered by intellectual property registration. NX Filtration relies on technology, know-how, and business and trade secrets, some of which NX Filtration believes cannot be adequately protected through registered intellectual property rights. Consequently, there is a risk that third parties, in particular competitors, may copy such technology and know-how or develop it independently and later challenge NX Filtration’s use of it, especially considering that technology is constantly evolving and that NX Filtration’s competitors are engaged in signicant research and development work on products that are aimed at competing with NX Filtration’s products. In addition, employees who, in the course of their employment with NX Filtration, have access to important proprietary information which may or may not be protected by intellectual property rights may leave to go work for a competitor. To mitigate this risk, NX Filtration relies on condentiality agreements with suppliers and customers, noncompete clauses in contracts with employees and technical precautions to protect its technology, know-how and other proprietary information. Furthermore, dierent suppliers are used for dierent parts of its production equipment to make sure that no individual supplier has a full picture of the total manufacturing process. However, there is no guarantee that these agreements and precautions or NX Filtration’s ability to enforce its contractual rights, will provide sucient protection in the case of any unauthorised access or use, misappropriation or disclosure of such information. Defending against any unauthorised access or use, misappropriation or disclosure of NX Filtration’s technology, know-how, and other proprietary information may result in lengthy and costly litigation or administrative proceedings and may cause signicant disruption to the business and operations of NX Filtration. If NX Filtration is unable to protect or eectively enforce its proprietary technology and information, this could have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. New products or technological improvements by competitors, including by larger players in the industry investing in research and development for product substitution of our dNF products, or improvements to our dNF technology could materially adversely aect our business and our ability to gain market share. 69NX Filtration - Annual Report68 Risks and Uncertainties Disruptive changes in technology and product standards could render NX Filtration’s products less competitive, or even obsolete. Other companies that seek to enhance traditional technologies have recently introduced or are currently developing products based on emerging and potential technologies. These competitors are engaged in signicant research and development work on products that may be similar to NX Filtration’s products. New products could be introduced that are in direct competition with, or superior to, NX Filtration’s products. Competing technologies that outperform NX Filtration’s technology could be developed and successfully introduced and, as a result, NX Filtration’s existing or future products may not be able to compete eectively in its current or future target markets. If NX Filtration’s technology is not adopted by its customers, or if its technology does not meet industry requirements, NX Filtration’s existing or future products may not gain or maintain market acceptance. If NX Filtration cannot adapt to changing market conditions should customer behaviour change, or if NX Filtration fails to develop, manufacture and market products that improve upon existing technologies, its business, nancial condition, results of operations and prospects could be materially adversely aected. To mitigate this risk, NX Filtration continues to signicantly invest in R&D to remain competitive. NX Filtration monitors and analyses competitors through various sources such as trade associations, universities, banks, employees and their intellectual property lings, and it actively maintains, protects and expands its own intellectual property portfolio. As a result of the limited innovation that has taken place by competitors, conventional technologies are not always equipped to cope with the challenges and demands of today’s environment. NX Filtration believes its dNF product provides a number of advantages over these technologies, including but not limited to (i) superior ltration characteristics and performance; (ii) sustainability benets throughout the lifetime of the product, as it typically reduces energy consumption and avoids the use of pre-treatment chemicals; and (iii) reduced physical footprint, as it typically reduces the number of treatment steps. Furthermore, NX Filtration’s products are developed and produced in-house, which makes NX Filtration less vulnerable to new market developments, resulting in short innovation cycles, cross leverage of concepts, modularity of modules and short time to market. Compliance Risks and Uncertainties We are exposed to risks associated with product liability, warranties, recall claims or other lawsuits or claims that may be brought against us. NX Filtration is exposed to product liability and warranty claims, as well as reputational damage, in the normal course of business in the event that (i) its products fail or allegedly fail to perform as expected or otherwise do not conform to the product’s specications or the expectations of its customers or (ii) the use of NX Filtration’s products results, or is alleged to result, in property damage. Furthermore, NX Filtration may become subject to other proceedings alleging violations of due care, safety provisions and claims arising from breaches of contract (such as delivery delays) or nes imposed by government or regulatory authorities in relation to its products and its operations. Any such lawsuits, proceedings and other claims could result in signicant increased costs, including costs to defend against these claims and/or make payments to compensate for damages. In addition, under certain circumstances, any such issues could give rise to an investigation by regulatory authorities, which could result in the need for remedial action such as a recall requiring the repair or replacement of NX Filtration’s products or even a prohibition of future sales. Furthermore, any product liability or warranty issues may damage NX Filtration’s reputation as a provider of high quality, technologically advanced and safe products and place a signicant strain on management and divert management’s attention from other business concerns. Any litigation or complaints and any adverse publicity surrounding such allegations or actions could have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. To mitigate this risk, NX Filtration has insurance coverage for claims arising from warranty and product liability lawsuits, proceedings and other claims, but the insurance coverage could prove insucient in individual cases. NX Filtration aims to have back-to-back agreements in place with its suppliers, where possible. Furthermore, throughout the design and production phases, there is a continuous focus on quality with quality assurance being an integral part of NX Filtration’s working processes. Moreover, NX Filtration will seek to continuously improve its products through valuable performance information obtained from its team of leading membrane experts and engineers through amongst others the increasing scale-up of pilots. We are subject to various laws and regulations in multiple jurisdictions in which we operate, and unfavorable changes or failure by us to comply with these regulations could have a material adverse eect on our business. NX Filtration and its products and business operations are subject to a broad range of local, national and multi-national laws and regulations in the Netherlands and other jurisdictions in which it operates and markets its products. For instance, extensive environmental and product stewardship legislation applies to NX Filtration’s products and the components and parts used in manufacturing these products. Such legislation includes, inter alia, safety requirements, information requirements and requirements relating to the hazardous properties of substances used. NX Filtration is particularly subject to Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), a regulation of the European Union adopted to improve the protection of human health and the environment from the risks that can be posed by chemicals. Under REACH, NX Filtration has to demonstrate to the European Chemicals Agency how the substances used by NX Filtration can be safely used. Furthermore, NX Filtration’s production facilities each qualify as a facility (inrichting) under the Dutch Environmental Management Act (Wet milieubeheer) and need to comply with strict environmental rules in the Activities Decree (Activiteitenbesluit). NX Filtration’s business operations must therefore comply with laws and regulations relating to, inter alia, the protection of natural resources, the management of hazardous substances and wastes, air emissions, water discharges, the use, management, storage, treatment, transportation and disposal of waste and by-products, the protection and restoration of plants, wildlife and natural resources, the investigation and remediation of contaminated property, public and workplace health and safety (such as rules regarding the handling of carcinogenic substances or rules governing the use of protection equipment) and data protection. Many new laws and amendments, as well as amendments to existing ones, have become more stringent, particularly in the European Union. NX Filtration may incur additional costs to ensure that it operates its business and supplies products that comply with applicable laws and regulations, and any failure to comply with such laws and regulations may 71NX Filtration - Annual Report70 Risks and Uncertainties lead to nes, penalties or claims, injunctions which may lead to disruptions of NX Filtration’s business, or harm its reputation, which may have a material adverse eect on NX Filtration’s business, nancial condition, results of operations and prospects. To mitigate this risk, the quality of NX Filtration’s products and compliance to the relevant safety and quality certicates is strictly monitored by the QHSE-department. Additionally, NX Filtration’s legal team monitors or requests specialist assistance from external counsel about laws and regulations across multiple jurisdictions. Finally, in order to increase the safety awareness and accreditations of its personnel NX Filtration uses tailormade education to train its people. Furthermore, NX Filtration prepares, rolls out and makes available relevant policies and procedures which are regularly reviewed and audited. NX Filtration implements observations made during inspections by line management, sta and relevant regulatory parties. NX Filtration has furthermore obtained a management system complying with ISO 14001. This has resulted in improved process technologies and people skills, as well as formalised procedures, checklists, training and instructions. We may be exposed to the risk of fraud and other dishonest activities, which could have a material adverse eect on our business, nancial condition or results of operations. We have implemented a set of internal control measures and compliance policies, including amongst others, an authorization policy, sucient level of segregation of duties, approval of bank payments, reporting and monitoring framework, which we believe is appropriate for NX Filtration. Considering the size and concentrated locations of NX Filtration, the existing internal control and reporting framework, we believe all material events are timely known to the Management Board and enable us to take appropriate actions. However, the risk of fraudulent or other dishonest activities occurring and aecting NX Filtration cannot be excluded. Further, as NX Filtration grows or expands in international markets, its internal controls may need to be adapted in order to eectively prevent and detect fraud and other dishonest activities. However, there can be no assurance that NX Filtration will be able to adapt such internal controls in a timely manner or at all or that they will be eective. Any fraud incident or dishonest activity aecting NX Filtration, whether as a result of the activities of employees, partners, suppliers or other third parties, may result in nancial losses, a loss of customer trust and condence, as well as litigation or nancial or other regulatory penalties being imposed, any of which could have a material adverse eect on NX Filtration’s business, nancial condition or results of operations. Risk management and control systems The Management Board is responsible for the control environment, including risk management and internal control systems in order to properly manage the strategic, operational and other risks and uncertainties that could have a material adverse eect on NX Filtration’s business and day-to-day operations. The applicable risks and uncertainties for NX Filtration are evaluated on a periodic basis by the Management Board and discussed with the Supervisory Board. The Management Board recognizes the importance of a formalized approach towards risk management for a rapidly growing organisation like NX Filtration, especially because it has transformed from a private company to a public company with much more scrutiny. In practice this means that it is important to maintain the right balance between formalized systems and procedures and the informal hands-on approach that is necessary to further boost the growth of the company. NX Filtration’s corporate culture is also an important ‘soft-control’ to mitigate risks, fraud and non-compliance with laws and regulations. During the nancial year 2021, NX Filtration continued to support its corporate culture and other foundations of its risk management and control systems with its Code of Conduct, Whistle-blower Policy, Insider Trading Policy, safety and quality certications, periodic reports and meetings. In addition, further consolidation and professionalization has been achieved in the nancial year 2021. In the years to come, NX Filtration will continue to professionalize and strengthen its organisation and control environment. NX Filtration has implemented a further segregation of duties, such as hiring a CFO, Tactical Buyer and a QHSE-manager, not only to properly divide responsibility and accountability, improve the quality of the sta, but also to create a system of checks and balances. To support this further, NX Filtration introduced and implemented a data warehouse and reporting system in which our business processes as well as our day-to-day working procedures are formally documented in one central system. The Management Board, to the best of its knowledge, is not aware of any signicant deciencies in its control environment, including risk management and internal control systems. Code of Conduct NX Filtration has a Code of Conduct that applies to all employees. The principles and best practices established in the Code of Conduct reect the corporate culture that the Management Board wants to embed in the day-to-day routines of all employees. The core values included in the Code of Conduct are related to professional conduct, exibility, reliability, integrity and safety. The Code of Conduct includes topics including acting with integrity, gifts, anti-bribery, corporate social responsibility and health and safety. The Code of Conduct can be found on NX Filtration’s website. NX Filtration also has a Supplier Code of Conduct in order to ensure our supply chain abides by our culture and values. No violations of either Code of Conduct were reported in the nancial year 2021. Human Rights NX Filtration is committed to shape its activities and operations within a framework of proper standards and values, while fully complying with all applicable laws and regulations. It also means upholding human rights within NX Filtration and throughout its supply chain. NX Filtration’s commitment is embedded in NX Filtration’s Code of Conduct and Supplier Code of Conduct, which it applies vis-à-vis its stakeholders and business partners. NX Filtration’s approach towards human rights is based on the Universal Declaration of Human Rights, the core conventions of the International Labour Organization (in particular ILO Conventions 138 and 182) and the UN Guiding Principles on Business and Human Rights (UNGPs). NX Filtration carries out human rights due diligence processes and has not come across any issues in this respect in 2021. Because NX Filtration’s growth strategy involves the further expansion of its operations and customer base internationally, human rights due diligence will require increased attention. NX Filtration is on a journey to further implement robust procedures to identify, manage, and prevent adverse human rights impacts that are material for its business and to provide meaningful disclosures on these practices and to account for the eectiveness of the human rights management and mitigation strategy. 73NX Filtration - Annual Report72 Risks and Uncertainties Whistle-blower Policy NX Filtration employees are oered the opportunity to report irregularities or suspicions with regards to violations of the Code of Conduct, the law, safety policies, the environment or any other forms of misbehaviour without bringing their (legal) position in jeopardy. Reporting of such instances by NX Filtration employees can be either by designated ‘persons of trust’ or in complete anonymity through a prescribed website. No violations or irregularities were reported under the Whistle-blower Policy in nancial year 2021. Insider trading policy NX Filtration continues to adhere to its implemented regulations covering securities transactions by the members of the Management Board and Supervisory Board and other designated employees that have or may have access to inside information. The Insider trading policy is published on NX Filtration’s website. The Insider Trading Policy aims to promote compliance with the relevant obligations and restrictions under applicable securities law, including Regulation (EU) 596/2014 and intends to limit the risk of NX Filtration’s good reputation and business integrity being harmed as a result of prohibited or undesirable dealing in NX Filtration securities. No violations or irregularities were reported in nancial year 2021. Safety and quality certications NX Filtration has been awarded with several ISO certications and possesses other relevant safety and quality certicates. The quality of NX Filtration’s products and compliance to the relevant safety and quality certicates is strictly monitored by the QHSE- department. 75NX Filtration - Annual Report74 Risks and Uncertainties Corporate Governance General NX Filtration N.V. is a public limited liability company (naamloze vennootschap) incorporated under the laws of the Netherlands, with its registered seat in Amsterdam and its registered oce at Josink Esweg 44, 7545 PN Enschede, the Netherlands (NX Filtration or the Company). The Company is registered with the trade register of the Netherlands Chamber of Commerce (Kamer van Koophandel) under number 64951030 and its Legal Entity Identier (LEI) is 254900YF0PQV9APMA050. For details regarding NX Filtration’s share capital, reference is made to Capital Structure. Corporate governance within NX Filtration is based on statutory requirements applicable to public limited liability companies in the Netherlands as well as NX Filtration’s articles of association, which are publicly available on the Investor Relations section of its website www. nxltration.com (the Articles of Association). This section gives an overview of the information concerning the Management Board, the Supervisory Board and the General Meeting of Shareholders. NX Filtration has a two-tier board structure consisting of the Management Board and the Supervisory Board. The Management Board together with two senior managers of the Company forms the senior management of the Company (Senior Management) which is responsible for the day-to-day management of the Company. The Management Board and the Supervisory Board are jointly responsible for the governance structure of NX Filtration. Management Board Powers, responsibilities and functioning The Management Board is the executive body and is entrusted with the management of the Company and responsible for the continuity of the Company, under the supervision of the Supervisory Board. The Management Board’s responsibilities include, among other things, setting the Company’s management agenda, developing a view on long-term value creation by the Company, enhancing the performance of the Company, developing a strategy, identifying, analysing and managing the risks associated with the Company’s strategy and activities and establishing and implementing internal procedures, which safeguard that all relevant information is known to the Management Board and the Supervisory Board in a timely manner. The Management Board may perform all acts necessary or useful for achieving the Company’s corporate purposes, except for those expressly attributed to the General Meeting or the Supervisory Board as a matter of Dutch law or pursuant to the Articles of Association. The Management Board has informed the Supervisory Board of the main outlines of the Company’s strategic policy, the general and nancial risks, and the risk management and control systems. Two Managing Directors are jointly authorised to represent the Company. Pursuant to the Articles of Association, the Management Board may grant one or more persons, whether or not employed by the Company, a power of attorney or other form of continuing authority to represent the Company or to grant one or more persons such titles as it sees t. No long term powers of attorney have been granted. The General Meeting appoints the Managing Directors. The Supervisory Board will nominate one or more candidates for each vacant seat. A resolution of the General Meeting to appoint a Managing Director other than in accordance with a nomination by the Supervisory Board can be adopted by a majority of the votes cast representing at least one third of the Company’s issued capital. If such quorum is not met, the Company is entitled to convene a second meeting where no quorum shall apply. The Articles of Association provide that a Managing Director may be suspended or dismissed by the General Meeting at any time. A resolution of the General Meeting to suspend or dismiss a Managing Director other than pursuant to a proposal by the Supervisory Board can be adopted by a majority of the votes cast, representing at least one third of the Company’s issued capital. If such quorum is not met, the Company is entitled to convene a second meeting where no quorum shall apply. The Articles of Association provide that the number of Managing Directors is determined by the Supervisory Board after consultation with the Management Board, but there will be at least two Managing Directors. The Supervisory Board has appointed one of the Managing Directors as CEO. Members of the Management Board The Management Board is composed of the following members: Name Age Position Member End of since current term Mr M.A. 50 CEO 2019 AGM of (Michiel) and COO 2025 Staatsen Mr H.D.W. 69 CTO 2016 AGM of (Erik) Roesink 2025 Mr M.A. (Michiel) Staatsen (born 1971, Dutch) is NX Filtration’s CEO and COO since May 2019. Prior to joining NX Filtration, he held various positions related to the food and water markets, including those of strategy consultant and investment manager. He held the position of chief operating ocer at Pré Pain, a leading manufacturer of frozen bake o bread in North-West Europe. He holds a master’s degree in civil engineering from Delft University of Technology in Delft, the Netherlands. Mr H.D.W. (Erik) Roesink (born 1952, Dutch) founded NX Filtration in 2016 and held the position of CEO between 2016 and 2019. Since 2019 he focuses on business and technology development and currently holds the role of CTO. He is also a part-time professor advanced membranes for aqueous applications in the research cluster membrane science & technology at the University of Twente in Enschede, the Netherlands since 2013. Prior to joining NX Filtration, Erik Roesink worked 77NX Filtration - Annual Report76 Corporate Governance in various director roles in research and development, strategic innovation and business development at Pentair and Norit X-Flow. It is expected that Mr M. (Marc) Luttikhuis (born 1975, Dutch) will be added to the Management Board. Marc has joined NX Filtration as Chief Financial Ocer (CFO) as of 1 January 2022. The Supervisory Board will nominate Marc for appointment as member of the Management Board at the regular general meeting of shareholders in 2022. Marc Luttikhuis previously held CFO positions at Brink Group (leading global manufacturer of towing systems in the automotive industry) and Heuver (leading European tyre wholesaler), with responsibility for nance, IT, HR and procurement functions. He has a broad nancial background with a strong track record of performance improvements and will play a key role in achieving NX Filtration’s ambitions. Marc is a Dutch national and holds a degree in Business Economics, Management & Organization from the University of Groningen (the Netherlands). Senior Management The members of the Management Board comprise the Senior Management of the Company together with the following non- statutory members: Name Age Position Member since Mr J.J.G. 37 Finance 2016 (Joris) Kooiker Manager Mr A.M. 45 Chief 2021 (Alejandro) Commercial Roman Fernandez Ocer Mr J.J.G. (Joris) Kooiker (born 1985, Dutch) is NX Filtration’s nancial manager since 2016. Prior to joining NX Filtration, he held the position of controller at Webprint (2011-2016), an online photo service. Before Joris Kooiker joined Webprint, he worked at Van der Arend Markslag & Partners (2009-2011), a provider of nancial, transactional and administrative services. He holds a master’s degree in business administration from University of Groningen in Groningen, the Netherlands. Mr A.M. (Alejandro) Roman Fernandez (born 1977, Spain) is NX Filtration’s Chief Commercial Ocer. Prior to joining NX Filtration, Alejandro was a Vice President and Global Commercial Head at Organica Water where he was responsible for all sales activities globally, managing the regional sales teams and expanding the global partner network. Prior to that, Alejandro held various roles at Pentair (Netherlands), Xylem (Spain and United Kingdom) and Thames Water (United Kingdom). Alejandro holds a degree in Chemical Engineering from the University of Cadiz (Spain) and a degree in Environmental Science from Kingston University in London (United Kingdom). The business address of the Senior Management of the Company is Josink Esweg 44, 7545 PN Enschede, the Netherlands. Supervisory Board Powers, responsibilities and functioning The Supervisory Board supervises the Management Board and the general course of aairs of the Company, its subsidiaries and the business aliated therewith. The Supervisory Board is accountable for these matters to the General Meeting. The Supervisory Board also provides advice to the Management Board. In performing its duties, the Supervisory Board focuses on the eectiveness of the NX Filtration’s internal risk management and control systems and the integrity and quality of the nancial reporting. The Supervisory Board assists the Management Board with advice on general policies related to the activities of NX Filtration. In the fullment of its duty, the Supervisory Board focuses on the interests of the Company and its related business. Members of the Supervisory Board The Supervisory Board is composed of the following members: Name Age Position End of current term Ms C. 51 Member AGM of 2025 (Carolina) Wielinga (chair) Mr B.A.M. 57 Member AGM of 2025 (Benno) van Dongen Mr J.T.P. 48 Member AGM of 2025 (John) Glorie The business address of the Supervisory Board of the Company is Josink Esweg 44, 7545 PN Enschede, the Netherlands. Reference is made to p. 92 and p. 93 of this Annual Report for their professional bio’s. Remuneration The remuneration policy applicable to the Management Board was determined by the General Meeting on 8 June 2021. Any subsequent amendments to this remuneration policy are subject to adoption by the General Meeting, which resolution can only be adopted by a majority of the votes cast. The Supervisory Board shall make a proposal to this eect. The remuneration of, and other agreements with, the Managing Directors are required to be determined by the Supervisory Board, with due observance of the remuneration policy. The Company’s remuneration policy aims to attract, motivate and retain qualied individuals and reward them with a market competitive remuneration package that focuses on achieving sustainable nancial results aligned with the long-term strategy of the Company and fosters alignment of interests of Managing Directors with shareholders. Based on the remuneration policy, the remuneration of the Managing Directors consists of the following components: • annual base pay; and • pension and other benets. A summary of the remuneration of the Management Board is set out in the Remuneration Report of the Supervisory Board below. Short-term incentive The remuneration policy enables the Supervisory Board to determine at its sole discretion that new Managing Directors become entitled to a short-term incentive, which consists of cash only. In setting the performance targets of the future short-term incentives (if any), the Supervisory Board will take into account the Company’s strategy and medium- and long-term objectives, amongst which revenue growth, scale-up of production, market penetration and increasing protability, and ESG-criteria. Long-Term Incentive Plan The Company intends to implement a participation plan in order to attract and retain the best available personnel to serve as Managing Director and to align the economic interests of the Managing Directors directly with those of the Company’s shareholders. It is anticipated that new Managing Directors will be invited to receive a conditional award of Ordinary Shares under the plan, at the sole discretion of the Supervisory Board. The vesting of an award is subject to the achievement of predetermined nancial and non-nancial (including ESG) performance conditions set by the Supervisory Board on a yearly basis. Following the vesting of an award the Ordinary Shares subject to the award are subject to a holding period of two years as of the date of vesting (or any dierent holding period as the 79NX Filtration - Annual Report78 Corporate Governance Supervisory Board may determine at the time of grant) subject to continued engagement to the Company. Related Party Transactions All legal entities that can be controlled, jointly controlled or signicantly inuenced are considered to be a related party. Also, entities which can control, jointly control or signicantly inuence the Company are considered a related party. In addition, statutory and supervisory directors and close relatives are regarded as related parties. The following transactions were carried out with related parties: • Key management compensation • Management fee to Infestos Holding E B.V., based on the consultancy agreement between Infestos Holding E B.V. and NX Filtration as entered into on the date of IPO. • Management fee to Infestos Management B.V. in the period pre-IPO. • Repayment of preference shares held by Infestos Holding E B.V. All these transactions are made on terms equivalent to those that prevail in arm’s length transactions. General Meeting According to the Articles of Association, General Meetings can be held in Amsterdam, in the Netherlands, or any other place in the Netherlands, at the choice of those who call the meeting. The annual General Meeting must be held at least once a year, within six months after the close of each nancial year. An extraordinary General Meeting may be convened, whenever the Company’s interests so require, by the Supervisory Board or the Management Board. In addition, shareholders or others with meeting rights under Dutch law representing jointly at least one-tenth of the issued and outstanding share capital may, pursuant to the Dutch Civil Code, request that a General Meeting be convened. If no General Meeting has been held within eight weeks of the shareholders making such request, the shareholders making such request may, upon their request, be authorised by the competent Dutch court in preliminary relief proceedings to convene a General Meeting. The convocation of the General Meeting must be published through an announcement by electronic means. Notice of a General Meeting must be given by at least such number of days prior to the day of the meeting as required by Dutch law, which, at the date of this Annual Report, is 42 calendar days. The notice convening any General Meeting must include, among other items, the agenda stating the items to be discussed, the venue and time of the General Meeting, the requirements for admittance to the General Meeting, the address of the Company’s website, and such other information as may be required by Dutch law. The agenda for the annual General Meeting must contain specic subjects, including, among other things, the adoption of the annual accounts, the discussion of any substantial change in the corporate governance structure of the Company and the allocation of the prots, insofar as these are at the disposal of the General Meeting. In addition, the agenda must include such items as have been included in it by the Management Board, the Supervisory Board or the shareholders and others with meeting rights under Dutch law (with due observance of Dutch law as described below). If the agenda of the General Meeting contains the item of granting discharge to the Managing Directors and the Supervisory Directors concerning the performance of their duties in the nancial year in question, the discharge must be mentioned on the agenda as separate items for the Management Board and the Supervisory Board, respectively. Shareholders and others with meeting rights under Dutch law representing jointly at least 3% of the Company’s issued and outstanding share capital may request, by a motivated request, that an item is added to the agenda. Such requests must be made in writing, must either be substantiated or include a proposal for a resolution, and must be received by the Company at least 60 days before the day of the General Meeting. No resolutions may be adopted on items other than those that have been included in the agenda (unless the resolution would be adopted unanimously during a meeting where the entire issued capital of the Company is present or represented). Shareholders who, individually or with other shareholders, hold Ordinary Shares that represent at least 1% of the issued and outstanding share capital or a market value of at least €250,000 may request the Company to disseminate information that is prepared by them in connection with an agenda item for a General Meeting, provided that the Company has done a so-called “identication round” in accordance with the provisions of the Dutch Securities Transactions Act. The Company can only refuse disseminating such information, if received less than seven business days prior to the day of the General Meeting, if the information gives or could give an incorrect or misleading signal or if, in light of the nature of the information, the Company cannot reasonably be required to disseminate it. More information about the authority of the General Meeting and the Articles of Association can be found on NX Filtration’s website. Special provisions relating to shares Unless indicated otherwise, there are no restrictions on the transfer of shares, the exercise of voting rights or the term for exercising those rights, and there are no special controlling rights attached to shares. Pursuant to a resolution adopted by the General Meeting, the Management Board has been authorised, for a period of three years following 15 June 2021, subject to the approval of the Supervisory Board, to resolve to issue Ordinary Shares (either in the form of stock dividend or otherwise) and/or grant rights to acquire Ordinary Shares up to a maximum of 20% of the number of Ordinary Shares issued immediately following 15 June 2021, and to exclude pre- emptive rights in relation thereto. In addition, the Management Board has been, pursuant to a resolution of the General Meeting, authorised for a period of 18 months following 15 June 2021, subject to the approval of the Supervisory Board, to acquire its own Ordinary Shares (including Ordinary Shares issued as stock dividend), up to a maximum of 10% of the issued capital at the date of acquisition, provided that Company will hold no more Ordinary Shares in stock than a maximum of 50% of the issued capital, either through purchase on a stock exchange or otherwise, at a price, excluding expenses, not lower than the nominal value of the Ordinary Shares and not higher than the opening price on Euronext Amsterdam on the day of the repurchase plus 10%. Diversity Policy The diversity policy of NX Filtration has been in eect since its adoption by the Supervisory Board on 11 June 2021 and is in accordance with best practice provision 2.1.5 of the Dutch Corporate Governance Code (the Policy). 81NX Filtration - Annual Report80 Corporate Governance The Supervisory Board values and promotes diversity in the Management Board and the Supervisory Board, and also in the Company as a whole. The Supervisory Board recognises that dierences in skills, experience, background, nationality, age, race, gender, sexual orientation, religious beliefs, physical ability and other characteristics of people are important and enable both the Management Board and the Supervisory Board as well as the Company as a whole to look at issues and to solve problems in a dierent way, to respond dierently to challenges and to take more robust decisions. All these dierent skills and backgrounds reect the diverse nature of the environment in which the Company and its stakeholders operate, and improve the eectiveness through diversity of approach and thought. Diversity furthermore drives innovation, and accelerates growth. It enables the Company to attract and retain the best talented people. The Management Board and the Supervisory Board collectively are considered diverse and balanced from an educational background and work experience. The Management Board and the Supervisory Board consist of people with a good mix of sector knowledge, nancial expertise and management capabilities. Annually, the Supervisory Board assesses the composition of the Supervisory Board and of the Management Board, and agrees to measurable objectives for achieving diversity on the Boards. At the date of this Annual Report, the Supervisory Board meets the quota as prescribed by law. In a broader sense, NX Filtration has a very diverse group of employees with men and women from dierent backgrounds, cultures and religions. Dutch Corporate Governance Code The Dutch Corporate Governance Code, as amended, entered into force on, and applies to any nancial year starting on or after, 1 January 2017, and nds its statutory basis in Book 2 of the Dutch Civil Code (the Dutch Corporate Governance Code). The Dutch Corporate Governance Code applies to the Company as the Company has its statutory seat in the Netherlands and its Ordinary Shares are admitted to listing and trading on Euronext Amsterdam. The Dutch Corporate Governance Code is based on a ‘comply or explain’ principle. Accordingly, companies are required to disclose in their management report whether or not they are complying with the various best practice principles of the Dutch Corporate Governance Code that are addressed to the management board or, if applicable, the supervisory board of the company. If a company deviates from a best practice principle in the Dutch Corporate Governance Code, the reason for such deviation must be properly explained in its management report. Deviations from the Best Practice Principles of the Dutch Corporate Governance Code The Company acknowledges the importance of good corporate governance. The Company agrees with the general approach and is committed to adhering to the best practices of the Dutch Corporate Governance Code as much as possible. The Company fully complies with the Dutch Corporate Governance Code, except for best practice provision 3.3.3: Shares held by a Supervisory Director in the company on whose supervisory board they serve should be long-term investments. The securities of the Company indirectly held by Supervisory Director Mr John Glorie are not necessarily held on behalf of him as long-term investments as his investment horizon shall be determined following expiration of applicable lock-ups. Takeover Directive (Article 10) In the context of the EU Takeover Directive (Article 10) Decree, the following notications must be given insofar as they are not included in this Annual Report. Capital Structure On 26 May 2021 and pursuant to a notarial deed of amendment of the Articles of Association, the Ordinary Shares with a value of €1.00 have been split into an aggregate amount of 35,000,000 Ordinary Shares, each with a nominal value €0.01, as a result of which the Company’s issued capital amounted to €350,000 divided into 35,000,000 Ordinary Shares, each with a nominal value of €0.01. The dierence between the aggregate nominal value of the Ordinary Shares before and after this stock split was added to the share premium reserve of the Company. In its IPO, the Company issued 15,000,000 Ordinary Shares, each with a nominal value of €0.01. As of 15 June 2021 and at 31 December 2021, the issued share capital of the Company amounts to €500,000 divided into 50,000,000 Ordinary Shares, each with a nominal value of €0.01. Each Ordinary Share confers the right to cast one vote. Limitations on the transfer of shares NX Filtration has not imposed any limitations on the transfer of its shares and therefore there are no outstanding or potential protection measures against a takeover of control of the Company. Substantial holdings As of 15 June 2021, there are 50,000,000 Ordinary Shares outstanding in the market. Pursuant to the Dutch Financial Supervision Act (Wet op het nancieel toezicht), interests in the issued capital of NX Filtration of 3% or more are required to be disclosed to the Netherlands Authority for the Financial Markets (AFM). At year-end 2021, the following shareholders were known to hold interests of at least 3% directly in the Company (as per AFM disclosure on 31 December 2021): Shareholder Number of Percentage of the Ordinary issued share capital Shares of the Company B.H.F. 31.968.448 63.94% ten Doeschot (1) Teslin 2.932.954 5.87% Participaties Coöperatief U.A. B.V. 2.725.000 5.45% Beleggingsfonds Hoogh Blarick M&G Plc 2.473.317 4.95% Notes: (1) Through Infestos Holding E B.V. and Stichting Administratiekantoor NX Filtration Holding. Infestos Holding E B.V. is ultimately controlled by Mr B.H.F. ten Doeschot. Material Subsidiaries NX Filtration B.V., incorporated in the Netherlands, is the only (material) subsidiary of the Company. The Company holds 100% of the ownership interest therein. Special controlling rights No special controlling rights are attached to the shares in the Company. Employee equity plans See above under Long-Term Incentive Plan and Short-term incentive. Limitations on voting rights Each share confers the right to cast one vote. The voting rights attached to the shares in the 83NX Filtration - Annual Report82 Corporate Governance Company are not restricted, and neither are the terms in which voting rights may be exercised restricted. Agreements on limitations on the transfer of shares The Senior Management and certain other key employees of the Company hold depository receipts in Stichting Administratiekantoor NX Filtration Holding (DRs) as they have been given the opportunity to indirectly participate in the capital of the Company. These DRs will be subject to lock-up restrictions. The DRs will be released from the lock-up restrictions as follows: one-third of the DRs held by such member at that time (the Shareholding Reference Date) will be unconditionally released from the lock-up restrictions on 11 June 2022, one-third of the DRs held by such member on the Shareholding Reference Date will be unconditionally released from the lock-up restrictions on 11 June 2023, and the remaining one-third of the DRs held by such member on the Shareholding Reference Date will be unconditionally released from the lock-up restrictions on 11 June 2024, in each case on the condition that the relevant member of the Senior Management or relevant key manager of the Company continues to be employed by the Company on these dates. Appointment and dismissal of Management Board members and Supervisory Directors and amendment of the Articles of Association The General Meeting appoints the Managing Directors. The Supervisory Board will nominate one or more candidates for each vacant seat. A resolution of the General Meeting to appoint a Managing Director other than in accordance with a nomination by the Supervisory Board can be adopted by a majority of the votes cast representing at least one third of the Company’s issued capital. If such quorum is not met, the Company is entitled to convene a second meeting where no quorum shall apply. The Articles of Association provide that a Managing Director may be suspended or dismissed by the General Meeting at any time. A resolution of the General Meeting to suspend or dismiss a Managing Director other than pursuant to a proposal by the Supervisory Board can be adopted by a majority of the votes cast, representing at least one third of the Company’s issued capital. If such quorum is not met, the Company is entitled to convene a second meeting where no quorum shall apply. The Articles of Association provide that the number of Managing Directors is determined by the Supervisory Board after consultation with the Management Board, but there will be at least two Managing Directors. The Supervisory Board appoints one of the Managing Directors as CEO. In addition, the Supervisory Board may appoint one of the Managing Directors as CFO (chief nancial ocer) to specically oversee the Company’s nancial aairs. The Supervisory Board Rules provide that the Supervisory Board must consist of a minimum of three members. The exact number of Supervisory Directors shall be determined by the Supervisory Board. The Supervisory Board consists of three members today. Only natural persons may be appointed as Supervisory Directors. In accordance with the Articles of Association, the Supervisory Board has prepared a prole (proelschets) for its size and composition, taking account of the nature and activities of the business, the desired expertise and background of the Supervisory Directors, the desired mixed composition and the size of the Supervisory Board and the independence of the Supervisory Directors. The Company’s diversity policy is also taken into account. The General Meeting appoints the Supervisory Directors. The Supervisory Board will nominate one or more candidates for each vacant seat. A resolution of the General Meeting to appoint a Supervisory Director other than in accordance with a nomination by the Supervisory Board can be adopted by a majority of the votes cast representing at least one third of the Company’s issued capital. If such quorum is not met, the Company is entitled to convene a second meeting where no quorum shall apply. The Articles of Association provide that a Supervisory Director may be suspended or dismissed by the General Meeting at any time. A resolution of the General Meeting to suspend or dismiss a Supervisory Director other than pursuant to a proposal by the Supervisory Board can be adopted by a majority of the votes cast, representing at least one third of the Company’s issued capital. If such quorum is not met, the Company is entitled to convene a second meeting where no quorum shall apply. The General Meeting may pass a resolution to amend the Articles of Association with an absolute majority of the votes validly cast in the General Meeting, but only (i) on a proposal of the Management Board that has been approved by the Supervisory Board or (ii) in the absence of such a proposal, with the explicit approval of the Management Board and the Supervisory Board or (iii) on the proposal of a Shareholder, or shareholders acting jointly provided that they belong to the same group, for as long as they solely or jointly represent at least 30% of the issued capital of the Company. Any such proposal must be stated in the notice of the General Meeting. In the event of a proposal to the General Meeting to amend the Articles of Association, a copy of such proposal containing the verbatim text of the proposed amendment will be deposited at the Company’s oce, for inspection by shareholders and other persons holding meeting rights, until the end of the meeting. Furthermore, a copy of the proposal will be made available free of charge to shareholders and other persons holding meeting rights from the day it was deposited until the day of the meeting. A resolution by the General Meeting to amend the Articles of Association requires an absolute majority of the votes cast. A resolution of the General Meeting to amend the Articles of Association that has the eect of reducing the rights attributable to holders of shares of a particular class, is subject to approval of the meeting of holders of shares of that class. The Management Board’s powers especially to issue shares Pursuant to a resolution adopted by the General Meeting, the Management Board has been authorised, for a period of three years following 15 June 2021, subject to the approval of the Supervisory Board, to resolve to issue Ordinary Shares (either in the form of stock dividend or otherwise) and/or grant rights to acquire Ordinary Shares up to a maximum of 20% of the number of Ordinary Shares issued immediately following 15 June 2021, and to exclude pre-emptive rights in relation thereto. Signicant agreements and changes in the control of the company NX Filtration does not have any such agreements. Redundancy agreements in the event of a public takeover bid NX Filtration has not concluded any agreements with a Management Board member or employee that provides for any severance pay in the case of a termination of employment in connection with a public bid within the meaning of Article 5:70 of the Dutch Financial Supervision Act. Shareholders See Substantial Holdings. Dividend Policy The dividend policy is to reserve all prots (if 85NX Filtration - Annual Report84 Corporate Governance any) until the policy is revised. NX Filtration does not pay dividends to its shareholders at this moment in time. Financial calendar Date Event 11 February 2022 Publication full year results 2021 5 April 2022 Annual General Meeting 30 August 2022 Publication half-year results 2022 NX Filtration applied the following closed periods for transactions directly or indirectly, relating, to shares and other nancial instruments in NX Filtration: • 1 July 2021 until 31 August 2021 • 1 November 2021 until 11 February 2022 In accordance with best practice provision 1.4.3. of the Dutch Corporate Governance Code, the Management Board states to the best of its knowledge that: • the report of the Management Board provides sucient insight into any shortcomings in the eectiveness of the internal risk management and control systems; • those systems provide reasonable assurance that the nancial report does not contain any material misstatements; • in the current situation, it is appropriate for the nancial report to be prepared on a going concern basis; and • the report states those material risks and uncertainties that are relevant to the expectation of the Company’s continuity for the period of twelve months after the preparation of the report. As required by the relevant statutory provisions, the Management Board hereby declares that to the best of its knowledge: • the report of the Management Board provides a true and fair view of the position of NX Filtration and its subsidiaries included in the consolidation on the reporting date and of the course of their aairs during the nancial year. The report of the Management Board provides information on any material risks to which NX Filtration is exposed; • The Consolidated Financial Statements as at and for the year ended 31 December 2021, give a true and fair view of the assets, liabilities, nancial position and result of the nancial year of NX Filtration and its subsidiaries included in the consolidation as a whole. Enschede, 10 February 2022 Management Board Michiel Staatsen Erik Roesink CEO and COO CTO 87NX Filtration - Annual Report86 Corporate Governance Report of the Supervisory Board 89NX Filtration - Annual Report88 Report of the Supervisory Board John GlorieBenno van DongenCarolina Wielinga Chair Report of the Supervisory Board The Supervisory Board’s main responsibility is to supervise and advise the Management Board, in particular regarding the strategy for realising long-term value and the manner in which the strategy is implemented. The Supervisory Board also focuses on the eectiveness of the Company’s internal risk management and control systems and the integrity and quality of the nancial reporting. For NX Filtration, 2021 was a very exciting year with a number of special events. Particularly the IPO in June 2021 and the consequential change from a privately owned to a publicly traded company required signicant attention from the Management Board as well as the Supervisory Board. Overall NX Filtration made signicant steps in line with its strategy, amongst which further broadening its international customer base, the further roll-out of its pilot program, growing and strengthening its organization, making signicant steps in the ramp-up of its production capacity and progressing on various innovations. With its IPO, NX Filtration also further diversied its shareholder base. Activities and priorities 2021 The Supervisory Board was installed on 11 June 2021 concurrently with the listing of NX Filtration on Euronext Amsterdam. One of the most important roles was to guide NX Filtration and its management through the corporate governance requirements of a publicly listed company. A top priority was the monitoring of the strong growth plan both commercially and operationally. Key attention points were the recruitment of personnel and strengthening the organisation in skills and management to facilitate the growth. The Supervisory Board closely advised the Management Board in hiring a CFO. Part of the monitoring and sounding board role was the dialogue with key management in various Supervisory Board meetings. 91NX Filtration - Annual Report90 Report of the Supervisory Board Composition and diversity Ms C. (Carolina) Wielinga (born 1970, Dutch) is the chief nancial ocer of BDR Thermea Group, a global manufacturing company in smart thermal heating solutions. She is supervisory board member and chair of the audit committee at Gasunie and has been a supervisory board member of Darlin N.V. (part of Teslin) (2010-2017). Ms Carolina Wielinga is an all-round nance business executive with over 25 years of experience. Prior to joining the BDR Thermea Group, Ms Carolina Wielinga had several functions at Rabobank and its subsidiaries, as head of nancial restructuring and recovery at Rabobank Group (2016-2018), chief nancial risk ocer/chief operating ocer at FGH Bank (2015-2016) and chief nancial risk ocer at Rabo Real Estate Group (2013-2015). In the period 2011-2013, she was senior director nance at Vion Food Group, an international supplier of meat, meat products and plant-based alternatives. Ms Carolina Wielinga started her career at Arthur Andersen (1993-2002), followed by roles as director business advisory services at KPMG (2002-2005) and country market leader and managing director of Protivi in the Netherlands (2005-2010). Ms Carolina Wielinga holds a master’s degree in business administration from University of Groningen in Groningen, the Netherlands and is also a chartered accountant. Mr B.A.M. (Benno) van Dongen (born 1964, Dutch) is a senior partner at Roland Berger, for which he co founded the Amsterdam oce in 2002. At Roland Berger, Mr Benno van Dongen is focusing on technology intensive industries and life sciences, public private partnerships and academia. He supports these groups in innovation management, growth strategy, business model development and creating business plans. Prior to joining Roland Berger, Mr Benno van Dongen was an associate director at Arthur D. Little, where he focused on, amongst others, advising companies in the water markets as head of the engineering, manufacturing and resources practice. Mr Benno van Dongen studied chemical engineering and materials science at Delft University of Technology in Delft, the Netherlands and has an MBA degree from INSEAD in Fontainebleau, France. He is a member of the advisory board of Kalmeijer, a manufacturer of bakery machinery, a selected member of advisory platform AcTI (Netherlands Academy for Technology and Innovation) and a director of academic society Royal Holland Society of Sciences and Humanities (Koninklijke Hollandsche Maatschappij der Wetenschappen). Mr J.T.P. (John) Glorie (born 1973, Dutch) works at Infestos Nederland B.V. since 2016, where he currently holds the role of investment manager. Mr John Glorie’s expertise is in supporting companies on areas including production management, logistics, operational processes and ICT. Mr John Glorie started his career in the water markets as quality manager at Norit Process Technology (1996-1999), followed by a role as logistics manager at Sollas Holland, an international company for packaging machinery (1999-2004). In the period 2004-2010, he was managing director of BOA Recycling Equipment, after which he became chief executive ocer of Webprint (2010-2015), an online photo service that was part of Infestos Nederland’s portfolio and which was sold to Smartphoto Group, a Belgian listed company. Mr John Glorie holds a master’s degree in industrial engineering & management from University of Twente of Technology in Enschede, the Netherlands, with a specialisation in process technology. The business address of the Supervisory Board is Josink Esweg 44, 7545 PN Enschede, the Netherlands. The Supervisory Board operates independently of the Management Board, any other participating interests and each other. Each of the Supervisory Board members has the necessary expertise, experience and background to perform his or her tasks and responsibilities. Two of the three members of the Supervisory Board are independent within the meaning of the Dutch Corporate Governance Code as, in the opinion of the Supervisory Board, the requirements referred to in best practice provisions 2.1.7 to 2.1.9 inclusive of the Dutch Corporate Governance Code have been fullled. One of the Supervisory Board members is not independent within the meaning of the Dutch Corporate Governance Code. Pursuant to the relationship agreement between Infestos Holding E B.V., Stichting Administratiekantoor NX Filtration Holding and NX Filtration dated 8 June 2021, Infestos Holding E B.V. has the right to designate for nomination, and propose replacements for, two Supervisory Directors on the Supervisory Board. One out of three Supervisory Directors is a representative of Infestos: Mr John Glorie. The Management Board and the Supervisory Board collectively are considered diverse and balanced from an educational background and work experience. The Management Board and the Supervisory Board consist of people with a good mix of sector knowledge, nancial expertise and management capabilities. Annually, the Supervisory Board assesses the composition of the Supervisory Board and of the Management Board, and agrees to measurable objectives for achieving diversity on the Boards. At the date of this Annual Report, the Supervisory Board meets the diversity quota as prescribed by law. Where searches for appointment to any of the Boards or to senior management are conducted by NX Filtration or by search rms, they will identify and present a long list of candidates who are considered to meet the essential criteria for the relevant vacancy, including qualied females and people of colour. The Boards will consider suitably qualied candidates for positions from as wide a pool as appropriate, including candidates with little or no previous listed company board experience but whose skills and experience will add value to the relevant Board. Meetings and attendance The Supervisory Board held ve meetings in 2021, which were all regular scheduled meetings, except for the meeting specically held to discuss the potential appointment of a CFO. Four of such meetings were attended by the members of the Management Board. The meeting where the Supervisory Board discussed its own functioning was held without the members of the Management Board. All members of the Supervisory Board attended all the meetings, as such the absenteeism rate is zero. The Supervisory Board consists of the following three members: Name Age Position Initial appointment End of current term Ms C. (Carolina) Wielinga 51 Member and Chair 11 June 2021 AGM 2025 Mr B.A.M. (Benno) van Dongen 57 Member 11 June 2021 AGM 2025 Mr J.T.P. (John) Glorie 48 Member 11 June 2021 AGM 2025 93 NX Filtration - Annual Report92 Report of the Supervisory Board Other than the Audit Committee, the Supervisory Board has not installed any standing committees as this is not required under Dutch law or the Dutch Corporate Governance Code based on the current composition of the Supervisory Board. If the Supervisory Board would in the future consist of more than four members, it should, in addition to the existing Audit Committee, appoint from among its members a remuneration committee and a selection and appointment committee to remain in compliance with the Dutch Corporate Governance Code. The Chair speaks with the CEO on a monthly basis. Next to the key priorities mentioned earlier the Supervisory Board agenda contained the nancials, risk management, audit plan of the external auditor, nancing structure, Long Term Incentive Plan for key management, HR overviews, development and diversity, and budget 2022. Audit Committee NX Filtration has an Audit Committee, consisting of Mr Benno van Dongen and Ms Carolina Wielinga, the independent members of the Supervisory Board. The duties of the Audit Committee include: • informing the Supervisory Board of the results of the statutory audit and explaining how the statutory audit has contributed to the integrity of the nancial reporting and how the Audit Committee has fullled this process; • monitoring the nancial reporting process and making proposals to safeguard the integrity of the process; • monitoring the eectiveness of the internal control systems, the internal audit system and the risk management system with respect to nancial reporting; • monitoring the statutory audit of the annual accounts, and in particular the process of such audit • monitoring the independence of the external auditor; and • adopting procedures with respect to the selection of the external auditor. Remuneration report The remuneration policy of NX Filtration (the Remuneration Policy) applicable to the Management Board was determined by the General Meeting in June 2021 at the time of the IPO and has been taking into account when the members of the Management Board signed a new service agreement prior to the IPO. Any subsequent amendments to the Remuneration Policy are subject to adoption by the General Meeting. The remuneration of, and other agreements with, the Managing Directors are required to be determined by the Supervisory Board in any given year, with due observance of the Remuneration Policy. The Remuneration Policy is designed taking into account the Company’s vision (“pure and aordable water across the globe’’), mission (“to be a leading global provider of breakthrough nano-ltration technology that enables customers to, amongst others, produce pure and aordable water, treat wastewater and reduce their water footprint, and achieve strong sustainability benets’’) and values (“Sustainable, Adaptive, Reliable, Knowledgeable”) through performance targets related to for example growth, innovation and sustainability. The Remuneration Policy contributes to long-term value creation because variable remuneration (for future members of the Management Board) is higher when targets are exceeded and no variable remuneration is payable if threshold targets are not met. This helps to ensure the alignment of the new Managing Directors’ interests with that of the Company’s stakeholders and create a true pay- for-performance culture. The Remuneration Policy fosters alignment of interests of the Managing Directors with its shareholders and other stakeholders. Furthermore, the Remuneration Policy is designed in a way that Managing Directors and Supervisory Directors are not encouraged to take or stimulate inappropriate risks. The Remuneration Policy aims to attract, motivate and retain qualied individuals and reward them with a market competitive remuneration package that focuses on achieving sustainable nancial results aligned with the long-term strategy of NX Filtration and fosters alignment of interests of Managing Directors with shareholders. Based on the Remuneration Policy, the remuneration of the Managing Directors consists of the following components: annual base pay and pension and other benets. Annual base pay This represents a xed cash remuneration consisting of the base salary including holiday allowance that is set based on the level of responsibility of the Managing Directors. Pension and other benets Managing Directors are generally eligible to participate in a pension plan at the level of NX Filtration B.V., a wholly-owned subsidiary of NX Filtration, but they may waive their pension rights. The Managing Directors contribute to the pension plan (eigen bijdrage) if they participate in the pension plan. Managing Directors are generally eligible for a range of other emoluments, such as the use of a company car (except for the current Managing Directors), an expense allowance reective of the position of the Managing Director and a collective health insurance. NX Filtration has arranged and paid for a directors and ocers liability insurance for the members of the Management Board. Notice period The management agreements for the Managing Directors are entered into for an indenite term. The notice period for the Managing Directors is three months and for NX Filtration six months. Severance The service agreement of Mr Michiel Staatsen contains severance provisions which provide for compensation for the loss of income resulting from a termination of employment at the initiative of the Company, of six months’ base compensation, subject to certain conditions such as that the termination is not based on seriously culpable acts or negligence of the Managing Director. The contractual severance amount will replace or be subtracted from any statutory or other severance payments. The service agreement of Mr Erik Roesink does not contain any provisions providing for benets upon termination of employment. None of the Supervisory Directors does enjoy contractual severance provisions. Variable remuneration None of the Managing Directors was entitled to variable remuneration in 2021. Management Board remuneration over 2020 The total amount of remuneration of the Managing Directors for the nancial year 2020 comprised €215,397. For the nancial year 2020, the gross annual base salary of Mr Michiel Staatsen comprised €116,562 (including holiday allowance and social charges) and the total gross annual base salary of Mr Erik Roesink comprised €98,835 (including holiday allowance and social charges). NX Filtration paid €5,000 as pension contribution for Mr Michiel Staatsen. In addition, Infestos Nederland (which is an aliate of Infestos) paid a bonus of €60,000 (gross) to Mr Michiel Staatsen in the nancial year 2020. 95NX Filtration - Annual Report94 Report of the Supervisory Board Management Board remuneration over 2021 The total amount of remuneration of the Managing Directors for the nancial year 2021 comprised €302,971. For the nancial year 2021, the gross annual base salary of Mr Michiel Staatsen comprised €153,023 (including holiday allowance and social charges) and the total gross annual base salary of Mr Erik Roesink comprised €143,253 (including holiday allowance and social charges). In the nancial year 2021, the Company paid €6,695 as pension contribution for Mr Michiel Staatsen. Shareholdings of the Managing Directors The Managing Directors indirectly participate in the share capital of the Company. These indirect investments are held through the STAK, which has issued depositary receipts of shares (certicaten van aandelen) in the capital of the Company for Ordinary Shares (the DRs) to the Managing Directors. In this manner, Erik Roesink indirectly holds 1,750,000 Ordinary Shares (3.5%) and Michiel Staatsen indirectly holds 1,050,000 Ordinary Shares (2.1%) in the capital of the Company. The DRs are subject to lock-up restrictions. The DRs will be released from the lock-up restrictions as follows: one- third of the DRs held by such member at that time (the Shareholding Reference Date) will be unconditionally released from the lock- up restrictions on the day that is one year after 11 June 2021 (the First Trading Date), one-third of the DRs held by such member on the Shareholding Reference Date will be unconditionally released from the lock-up restrictions on the day that is two years after the First Trading Date, and the remaining one-third of the DRs held by such member on the Shareholding Reference Date will be unconditionally released from the lock-up restrictions on the day that is three years after the First Trading Date, in each case on the condition that the Managing Director continues to be employed by the Company on these dates. Remuneration information for the Supervisory Board The General Meeting determines the remuneration of the Supervisory Directors. The Supervisory Board submits from time to time proposals to the General Meeting in respect of the remuneration of the Supervisory Directors. The remuneration of the Supervisory Board may not be made dependent on the Company’s results. Supervisory Directors will not receive Ordinary Shares and/or rights to Ordinary Shares as remuneration. The compensation for the chair of the Supervisory Board has been set at €50,000 per year and the compensation for Mr Benno van Dongen has been set at €30,000 per year. Mr John Glorie is employed by Infestos Nederland and does not receive compensation for his Supervisory Board activities. NX Filtration has arranged and paid for a directors and ocers liability insurance for the members of the Supervisory Board. The Supervisory Board will reconsider the remuneration of the individual members of the Management Board and the Remuneration Policy during the nancial year 2022, whilst – to the extent possible and reasonable – adhering to the principle of maintaining the overall value of the remuneration packages of the members of the Management Board. At this time a peer group will be established for the Management Board. Internal pay ratio In EUR ‘000 2021 Management Board compensation Salaries and wages 282,342 Short-term incentive plan - Social security distributions 13,933 Pension contributions (DC) 6,695 Share-based payments - Total 302,971 Average number of FTEs 2 Average compensation 151,485 Employee compensation Salaries and wages 2,235,729 Short-term incentive plan 168,410 Social security distributions 341,650 Pension contributions (DC) 97,100 Share-based payments - Total 2,842,890 Average number of FTEs 47 Average compensation 60,487 Internal Pay Ratio 2.50 The Remuneration Policy takes into account the pay ratio within the organisation. The NX Filtration internal pay ratio is calculated by dividing the average total Management Board compensation by the average employee compensation. The average employee compensation is based on the total personnel cost (dened as salaries and wages, social security contributions, pension contributions and share-based payment costs) and the average number of FTEs excluding the Management Board (see also Note 9, Note 12 and Note 16 of the Consolidated Financial Statements). This is the rst time NX Filtration reports on the internal pay ratio. 5-year comparison As NX Filtration was listed on Euronext Amsterdam on 11 June 2021 the 5-year comparison of average compensation and business performance starts as of 2021. Internal audit function NX Filtration does not have an internal audit function. The need for an internal audit function is assessed on a yearly basis by the Supervisory Board. The Supervisory Board concluded that the size of the Company and the combination of a nance and control department with accounting and audit knowledge, are presently covering the requirements suciently. External auditor The Management Board and the Supervisory Board have evaluated the activities performed for the Company by PricewaterhouseCoopers Accountants N.V. It is apparent that PricewaterhouseCoopers Accountants N.V. is capable of forming an independent judgment concerning all matters that fall within the scope of its auditing task; there is a good balance between the eectiveness and eciency of their actions, for example in relation to auditing costs, risk management and reliability. Functioning of the Supervisory Board and the Management Board (evaluation accountability) The Supervisory Board discussed, in the absence of the Management Board, its own functioning. The evaluation was performed by the Chair of the Supervisory Board, by means of a structured questionnaire, which was subsequently discussed with the rest of the Supervisory Board. The Supervisory Board also lled in a questionnaire and addressed items such as: team eectiveness, interaction, transparency, composition and prole, competences, eectiveness of individual members, quality of information and the relationship with the Management Board and others, which is meant to also include the relationship with key managers. The outcome 97NX Filtration - Annual Report96 Report of the Supervisory Board of the evaluation is positive. Despite its relatively new composition, it was found that the Supervisory Board has rapidly organized itself in an eective and ecient manner and considers the contributions of each Supervisory Board member to be complementary in nature. There is a good level of transparency amongst both the Management Board and Supervisory Board. The Supervisory Board evaluation delivered areas for improvement and key topics for 2022: (i) the Supervisory Board intends to spend more time on discussing the longer term strategy of the Company, (ii) the Supervisory Board intends to hold challenge sessions with the Management Board on commercial tactics and, if possible, visit customers in various regions, (iii) the Supervisory Board intends to seek some possibilities to strengthen the interpersonal relationship amongst its members. The Supervisory Board has conducted an annual review to identify any aspects with regard to which the Supervisory Board members require further training or education during their term of oce. For all members in the Supervisory Board this centers around business dynamics, competitive arena, and innovations in the water ltration industry. We shared our reections with the Management Board members and had an individual discussion with each to discuss last year’s performance, area of improvement and/ or development and key priorities for 2022. Financial statements and auditor’s opinion The nancial statements 2021 included in this Annual Report have been audited and PWC has issued an unqualied opinion on them. The nancial statements were extensively discussed with the Supervisory Board, in the presence of the external auditor, and the Management Board. The Supervisory Board is of the opinion that the nancial statements meet all requirements for transparency and correctness. Therefore, the Supervisory Board recommends that the General Meeting of Shareholders to be held on 5 April 2022 adopts the nancial statements and the appropriation of the result. Result appropriation NX Filtration realised a loss of €11.4 million. The proposal to the General Meeting is to recognise this loss in retained earnings. The members of the Supervisory Board have signed the nancial statements to comply with their statutory obligation pursuant to article 2:101, paragraph 2, of the Dutch Civil Code. In summary & looking ahead First and foremost, we want to thank NX Filtration’s partners and customers for their condence and loyalty, NX Filtration’s shareholders for their trust and our employees for their involvement and dedication in this stage of rapid growth. 2021 was a very exciting year for NX Filtration, especially because it listed on Euronext Amsterdam by means of its IPO and experienced a growth of 281% in gross income. Amongst the many important hires during 2021, key milestones included the appointment of Alejandro Roman Fernandez as CCO, who joined NX Filtration in September 2021, and the appointment of Marc Luttikhuis as CFO, who joined NX Filtration in January 2022. We are convinced that each of them will be of valuable contribution to the future success of NX Filtration. The proceeds that were raised in the IPO will be used to advance the Company’s commercial roll-out, capacity expansion, fast-track innovation and M&A in the next years. Enschede, 10 February 2022 The Supervisory Board Carolina Wielinga (Chair), Benno van Dongen John Glorie 99NX Filtration - Annual Report98 Report of the Supervisory Board Financial statements 101NX Filtration - Annual Report100 Financial statements Consolidated nancial statements for the year ended 31 December 2021 Consolidated statement of comprehensive income In EUR ‘000 Notes 31 December 2021 31 December 2020 Revenue from sale of goods 7 3,173 671 Other income 8 896 398 Gross income 4,069 1,069 Operating expenses Costs of raw materials and consumables (1,428) (289) Changes in inventories of nished goods and work in progress 218 357 Personnel expenses 9 (3,833) (1,781) Amortization on intangible assets 17 (315) (211) Depreciation on property, plant and equipment 18,19 (1,076) (592) Operating costs 10 (12,102) (967) External research & development costs 11 (247) (361) Operating expenses (18,783) (3,844) Operating loss (14,714) (2,775) Finance expenses 13 (427) (208) Loss before income tax (15,141) (2,983) Income tax benet 14 3,787 891 Net loss for the period (11,354) (2,092) Other comprehensive result for the period - - Total comprehensive loss for the period (11,354) (2,092) Total comprehensive loss for the period (attributable to the owners of the Company) (11,354) (2,092) Earnings per share Basic earnings per share (EUR) 15 (0,26) (0,26) Diluted earnings per share (EUR) 15 (0,26) (0,26) 103NX Filtration - Annual Report102 Consolidated nancial statements Consolidated statement of nancial position Consolidated statements of changes in equity In EUR ‘000 Notes 31 December 2021 31 December 2020 Assets Non-current assets Intangible assets 17 1,829 1,300 Property, plant and equipment 18 9,150 2,246 Right-of-use assets 19 1,356 1,164 Deferred tax assets 20 5,708 1,921 Total non-current assets 18,043 6,631 Current assets Inventories 21 3,212 2,077 Trade and other receivables 22 2,804 626 Cash and cash equivalents 23 133,433 6,599 Total current assets 139,449 9,302 Total assets 157,492 15,933 Group equity Share capital 24 500 5,997 Share premium 24 170,450 13,378 Retained earnings 24 (19,806) (6,031) Total equity 151,144 13,344 Liabilities Non-current liabilities Lease liabilities 25 1,076 979 Total non-current liabilities 1,076 979 Current liabilities Trade and other payables 26 4,954 1,403 Lease liabilities 25 318 207 Current tax payables - - Total current liabilities 5,272 1,610 Total liabilities 6,348 2,589 Total equity and liabilities 157,492 15,933 In EUR ‘000 Notes Attributable to equity owners of NX Filtration N.V. Share Share Retained Total capital premium earnings equity Balance - 1 January 2020 997 7,478 (3,939) 4,536 Loss for the period - - (2,092) (2,092) Other comprehensive result - - - - Total comprehensive loss for the period - - (2,092) (2,092) Transactions with owners in their capacity as owners Issuance of ordinary shares 24 5,000 - - 5,000 Share premium contribution on preference shares 24 - 6,000 - 6,000 Share premium repayment 24 - (100) - (100) Share-based payment transactions - - - - Dividend - - - - Balance - 31 December 2020 5,997 13,378 (6,031) 13,344 Loss for the period - - (11,354) (11,354) Other comprehensive income (loss) - - - - Total comprehensive loss for the period - - (11,354) (11,354) Transactions with owners in their capacity as owners Stock split transaction 24 (5,600) 5,600 - - Repayment and cancellation of preference share capital 24 (47) (13,378) (2,421) (15,846) Issuance of ordinary shares 24 150 164,850 - 165,000 Share-based payment transactions - - - - Dividend - - - - Balance - 31 December 2021 500 170,450 (19,806) 151,144 105 NX Filtration - Annual Report104 Consolidated nancial statements Consolidated statement of cash ows General information NX Filtration N.V. (NX Filtration or the Company) is a public company with limited liability (naamloze vennootschap), incorporated under Dutch law, and the leading provider of nanoltration membrane technology for producing pure and aordable water to improve quality of life. NX Filtration obtained its listing on Euronext Amsterdam in June 2021 through an IPO raising €165 million to enable the Company’s accelerated commercial roll-out, capacity expansion program and innovation agenda. At the date of the IPO the Company’s name was changed from NX Filtration Holding B.V. to NX Filtration N.V. NX Filtration is the holding company of the Group, which consists of NX Filtration and one wholly owned subsidiary, NX Filtration B.V., with its registered oce in Enschede, the Netherlands, which has been fully consolidated for purposes of these consolidated nancial statements. NX Filtration is registered with the Chamber of Commerce under number 64951030 and has its registered oce at Josink Esweg 44, 7545 PN, Enschede, the Netherlands. The Company’s nancial year covers the rst day of January and ends on the last day of December of each year. On 10 February 2022, the management board authorized the nancial statements for issue. The nancial statements as presented in this report are subject to adoption by the Annual General Meeting of shareholders on 5 April 2022. Summary of signicant accounting policies The principal accounting policies applied in the preparation of these consolidated nancial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of preparation These consolidated nancial statements have been prepared in accordance, and comply with International Financial Reporting Standards (IFRS) and interpretations adopted by the European Union, where eective, for nancial years beginning 1 January 2021 and also comply with the nancial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code. The preparation of these consolidated nancial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signicant to the nancial statements are disclosed in note 6 ‘Critical accounting estimates and judgements’. These consolidated nancial statements have been prepared on a going concern basis. Basis of measurement These consolidated nancial statements have been prepared on a historical cost convention, In EUR ‘000 Notes 2021 2020 Cash ows from operating activities Operating loss (14,714) (2,775) Adjustments to reconcile prot before taxation to net cash ows: Depreciation, amortisation and impairment expenses 17,18,19 1,391 803 Non cash items in operating loss 30 - Increase/(decrease) provisions - - Income taxes (paid)/received - - Share-based payment expenses - - Increase in working capital: - Increase inventories (1,135) (1,019) - Increase trade and other receivables (2,178) (279) - Increase trade and other payables 3,391 650 Net cash outow from operating activities (13,215) (2,620) Cash ows from investing activities Payment for property, plant and equipment 18 (7,772) (930) Payment for intangible assets 17 (844) (524) Net cash outow from investing activities (8,616) (1,454) Cash ows from nancing activities Proceeds from share premium contribution and issuance of shares 24 165,000 11,000 Repayment and cancellation of preference shares 24 (15,846) (100) Principal elements of lease payments (268) (123) Interest paid (221) (181) Net cash inow from nancing activities 148,665 10,595 Net increase in cash and cash equivalents 126,834 6,521 Cash and cash equivalents at the beginning of the nancial year 6,599 78 Eects of exchange rate changes on cash and cash equivalents - - Cash and cash equivalents at the end of the nancial year 133,433 6,599 Notes 1 107NX Filtration - Annual Report106 Consolidated nancial statements unless stated otherwise. These consolidated nancial statements are presented in euro, which is the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated. New and amended standards not adopted by the Group Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions: • Onerous contracts – Cost of Fullling a Contract (Amendments to IAS 37) • Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12) • COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) • Annual Improvements to IFRS Standards 2018–2020 • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) • Reference to Conceptual Framework (Amendments to IFRS 3) • Classication of Liabilities as Current or Non-current (Amendments to IAS 1) • IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts • Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) • Denition of Accounting Estimates (Amendments to IAS 8) Critical accounting policies Consolidation Subsidiaries are all entities over which the Company has control. The Company controls an entity where the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to aect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. Subsidiaries are deconsolidated from the date that control ceases. Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Foreign currency transactions and translations Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates, are generally recognized in prot or loss. Revenue The Company manufactures and sells a range of water ltration solutions to companies serving the industrial and municipal sectors. Sales are recognized when control of the products has transferred, being when the products are delivered or risks are transferred to the customers, the customer has full discretion over the use of the products, and there is no unfullled obligation that could aect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specic location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satised. Revenue is measured based on the consideration specied in a contract with a customer. The Company has no specic obligations for returns, refund clauses nor any other similar obligations specied in the contract with customers. However, standard product compliance warranty is provided to customers, which is not considered a separate performance obligation. Government grants Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received, and the Company will comply with all attached conditions. Government grants relating to costs are deferred and recognized in the statement of comprehensive income over the period necessary to match them with the costs they are intended to compensate. Employee benets Short-term obligations Liabilities for wages and salaries, including non-monetary benets, annual leave and accumulating sick leave that are expected to be settled fully within 12 months after the end of the period in which the employees render the related service are recognized in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benet obligations in the balance sheet. Salaries, wages and social security contributions are charged to the consolidated statement of comprehensive income based on the terms of employment, when they are due to employees and the tax authorities respectively. Pension obligations For dened contribution plans, the Company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benet expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. Termination benets are expensed at the earlier of when the Company can no longer withdraw the oer of those benets and when the Company recognizes costs for a restructuring. Shared-based payments Eligible and selected employees and directors have been invited to invest indirectly in the share capital of the Company. These investments are accounted for as equity- settled share-based payment transactions since the Company has no obligation to repurchase the equity instruments or to make any cash payments to the participants. For accounting purposes, the fair value of an award is equal to the fair value of the underlying ordinary shares less the acquisition price paid by a participant. The impact of any market conditions or non-vesting conditions are incorporated in the fair value of the share- based payment awards. The grant date fair value, if any, is recognized as an expense over the 6 year vesting period with a corresponding increase of equity. The amount recognized as an expense during the vesting period reects the number of awards for which the related service conditions are expected to be met. 2 109NX Filtration - Annual Report108 Consolidated nancial statements Expenses Expenses arising from the Company’s business operations are accounted for in the year incurred. Finance expenses Finance expenses include interest incurred on nancial instruments measured at amortized cost using the eective interest method (if any) and interest expenses on the Company’s cash and cash equivalent balances. Corporate income tax The income tax expense or credit for the period is the tax payable on the current period’s taxable income, based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary dierences and to unused tax losses. The current income tax charge (if applicable) is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the group companies operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty. Deferred income tax is provided in full, using the liability method, on temporary dierences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated nancial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized, or the deferred income tax liability is settled. Deferred tax assets are recognized only if it is probable that future taxable amounts will be available to utilize those temporary dierences and losses. Current and deferred tax is recognized in prot or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. Intangible assets Research and development Development costs that are directly attributable to the design and testing of identiable and unique products controlled by the Company are recognized as intangible assets where the following criteria are met: • it is technically feasible to complete the product or system so that it will be available for use; • management intends to complete the product or system and use or sell it; • there is an ability to use or sell the product or system; • it can be demonstrated how the product or system will generate probable future economic benets; • adequate technical, nancial and other resources to complete the development and to use or sell the product or system are available; and • the expenditure attributable to the product or system during its development can be reliably measured. Directly attributable costs that are capitalized as part of the product include amongst others payroll costs and other costs related to creating or improving the existing product portfolio in the development phase. Capitalized development costs are recorded as intangible assets and amortized in 5 years from the point at which the asset is ready for use. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Expenditure on research activities is recognized as expense in the period in which it is incurred. Concessions, licenses and rights to intellectual property Concessions, licenses and rights to intellectual property are shown at historical cost. They have a nite useful life and are subsequently carried at cost less accumulated amortization and impairment losses. These assets are amortized over a period of 10 years. Property, plant and equipment All property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benets associated with the item will ow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to prot or loss during the reporting period in which they are incurred. Depreciation on assets is calculated by recognizing the dierence between historical cost and the estimated residual values using the straight-line method over their estimated useful life in prot or loss. The estimated useful lives of property, plant and equipment for current and comparable periods are as follows: Land and buildings 10 - 30 years Machinery and equipment 5 - 10 years Right of use assets 1 - 9 years Pilot equipment 5 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The costs of future replacement are capitalized based on the component approach. Under this approach the total costs are allocated to the ‘component assets’. Government grants on investments, if applicable, are deducted from the purchase price or manufacturing price of the assets to which the government grants relate. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are recognized within the consolidated statement of comprehensive income. Leases As a lessee At the inception of an agreement, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identied asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identied asset, the Company uses the denition of a lease in IFRS 16. The Company, as a lessee, recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments at the lease commencement date. 111NX Filtration - Annual Report110 Consolidated nancial statements The Company elected to apply the recognition exemption for both short-term and low value leases – e.g. oce equipment. As such, the Company recognizes lease payments associated with these leases as an expense on a straight-line basis over the lease term. 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 incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or 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 end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reects that the Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property, plant and equipment. In addition, 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 not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Subsequently, the lease liability is increased by the interest costs on the lease liability and decreased by lease payments made. Lease payments included in the measurement of the lease liability comprise the following: • xed payments, including in-substance xed payments; • variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; • amounts expected to be payable under a residual value guarantee; and • the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early. The lease liability is measured at amortized cost using the eective interest method. The lease liability is remeasured when there is a change in future lease payments arising from a change in index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment whether a purchase or renewal option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. When the lease liability is remeasured as abovementioned, a corresponding adjustment is made to the carrying amount of the right-of- use asset or is recorded in prot or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Company’s right-of-use assets and lease liabilities are presented under Property, plant and equipment and Lease liabilities, respectively. As a lessor Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classied as operating leases. The Company has rental income from the lease of pilot equipment. This rental income is accounted for on a straight- line basis over the lease terms and is included in gross income in the statement of comprehensive income. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as gross income in the period in which they are earned. Impairment of non-nancial assets Non-nancial assets with a denite useful life are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiable cash inows which are largely independent of the cash inows from other assets or groups of assets (cash- generating units). Non-nancial assets that suered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. Inventories Inventories mainly relate to raw materials and nished goods and are valued at the lower of cost and net realizable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and xed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts. Costs are determined using the rst in rst out method. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Financial instruments Financial assets – Classication and measurement The Company classies its nancial assets in the following measurement categories: • those to be measured subsequently at fair value (either through other comprehensive income (OCI) or through prot or loss), and • those to be measured at amortized cost. The classication depends on the entity’s business model for managing the nancial assets and the contractual terms of the cash ows. Financial assets - Recognition and derecognition Regular purchases and sales of nancial assets are recognized on the trade-date, the date on which the Company commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash ows from the nancial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership. Financial assets – Initial recognition At initial recognition the Company measures a nancial asset at its fair value. Except for cash and cash equivalents, the initial measurement of a nancial asset is adjusted for directly attributable transaction cost. Transaction costs of nancial assets carried at fair value through prot or loss (cash and cash equivalents) are expensed in prot or loss. Financial assets – Subsequent Measurements Subsequent measurement depends on the Company’s business model for managing the asset and the cash ow characteristics of the asset. There are three measurement categories into which the Company classies its debt instruments: (i) Amortized cost, (ii) Fair value through prot or loss; and (iii) Fair value through other comprehensive income. 113NX Filtration - Annual Report112 Consolidated nancial statements The Company makes no use of derivative nancial instruments. Besides cash and cash equivalents that are measured at fair value through prot and loss, the Company’s receivables are measured at amortized costs. Interest income (if any) from these nancial assets is included in nance income using the eective interest rate method. Any gain or loss arising on derecognition is recognised directly in prot or loss. Financial assets – Impairment The Company assesses on a forward-looking basis the expected credit losses associated with its nancial instruments carried at amortized cost. The impairment methodology applied depends on whether there has been a signicant increase in credit risk. The Company has no trade receivables nor amounts due from customers for contract work including a signicant nance component and is therefore allowed to apply the simplied approach under IFRS 9, in which the credit losses are measured using a lifetime expected loss allowance for all trade receivables. Financial liabilities - Recognition and measurement Financial liabilities are recognized when the Company becomes a party to the contractual provisions of the nancial instrument. The Company only has nancial liabilities at amortized cost and makes no use of derivative nancial instruments. Financial liabilities at amortized costs Financial liabilities at amortized cost include trade and other payables. Trade and other payables are initially recognized at fair value equaling the amount required to be paid, less, when material, a discount to reduce the payables to fair value. Subsequently, trade and other payables are measured at amortized cost using the eective interest method. Trade and other payables are classied as current liabilities due to their short-term nature, except for maturities greater than 12 months after the end of the reporting period. These are classied as non-current liabilities. Financial liabilities – Derecognition The Company derecognizes a nancial liability when its contractual obligations are discharged or cancelled or expired. On derecognition of a nancial liability, the dierence between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in the consolidated statement of comprehensive income. The Company also derecognizes a nancial liability when its terms are modied and the cash ows of the modied liability are substantially dierent, in which case a new nancial liability based on the modied terms is recognized at fair value. However, when the cash ows of the modied liability are not substantially dierent, the Company (i) recalculates the amortized cost of the modied nancial liability by discounting the modied contractual cash ows using the original eective interest rate and (ii) recognizes any adjustment in the consolidated statement of comprehensive income. Osetting nancial instruments Financial assets and liabilities are oset and the net amount is reported in the balance sheet when there is a legally enforceable right to oset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The Company does not have any legally enforceable right to oset the recognized amounts in the balance sheet. Trade and other receivables Trade and other receivables are amounts due from customers for products delivered and services performed in the ordinary course of business. If collection is expected in one year or less, they are classied as current assets. If not, they are presented as non-current assets. Trade receivables are generally due for settlement immediately and therefore all classied as current assets. Trade receivables are recognized initially at their transaction price, the amount of consideration that is unconditional, unless they contain signicant nancing components when they are recognized at fair value. They are subsequently measured at amortized cost using the eective interest method, less loss allowance. Cash and cash equivalents For the purpose of presentation in the statement of cash ows, cash and cash equivalents includes cash on hand, deposits held at call with nancial institutions, other short- term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignicant risk of changes in value. Cash and cash equivalents are measured at fair value. Share capital – Ordinary shares An ordinary share entitles its owner to a voting right and, only to extent so ultimately decided by the general meeting of the Company (the General Meeting), to dividends. Trade and other payables These amounts represent liabilities provided to the Company prior to the end of the nancial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value. And subsequent measurement at amortized cost using the eective interest method. Cash ow statement The cash ow statement has been prepared using the indirect method, whereby prot or loss is adjusted for the eects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or nancing cash ows. Segment reporting The Company is engaged in the business of developing, producing and selling hollow ber membrane modules. There is a strong interrelationship between the Company’s dierent activities, hence Management reviews the overall business based on the Group’s protability. Financial instruments and risk management Financial instrument classication As result of regular business practices, the Company holds positions in a variety of nancial instruments. The nancial instruments are presented in the balance sheet and consists of cash and cash equivalents, trade receivables and other receivables, trade payables and other payables. The Company does not use foreign exchange contracts and/or foreign exchange options and does not deal with such nancial derivatives. On each balance date, nancial instruments are reviewed to see whether or not an objective indication exists for the impairment of a nancial asset or a group of nancial assets. If an objective indication for impairment exists, the Company determines the amount of impairment losses and charges this amount to the consolidated statement of comprehensive income. As a result of the use of nancial instruments, the Company incurs credit risks, liquidity risks and market risks. 3 115NX Filtration - Annual Report114 Consolidated nancial statements Risk management The Company’s management board has the overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reect changes in market conditions. Credit risk Credit risk is the risk of a nancial loss in case a customer does not comply with the contractual obligations. Credit risks are mainly incurred from receivables to customers. The Company executes a strict policy to minimize credit risks. To control these risks, the Company makes use of information from licensed credit agencies. If necessary, credit risks will be mitigated by the use of credit insurances, bank guarantees, prepayments and other insurances. Cash and cash equivalents are placed by a number of banks. The Company determines the credit risk of cash and cash equivalents that are placed with these banks, by solely doing business with highly respectable banks. The Company evaluates the concentration risk with respect to trade receivables as medium. For the nancial year 2021, one customer accounted for approximately 19% (2020: 29%) of the revenue of the sale of goods. Expected credit losses The Company has the following types of nancial assets that are subject to the expected credit loss model: • Trade and other receivables The Company applies the IFRS 9 simplied approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade and other receivables. To measure the expected credit losses, trade and other receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates used at 31 December 2021 and 31 December 2020 are based on the payment proles of sales over a period of 12 months of the preceding nancial year and the corresponding historical credit losses experienced related to these sales. The historical loss rates are adjusted to reect current and forward-looking information based on macro-economic factors aecting the ability of the customers to settle the receivables. The Company retrieves the latter from externally available information from credit rating agencies. Credit insured amounts are excluded from the determination of the loss allowance. On that basis, the loss allowance as of 31 December 2021 and 31 December 2020 was determined as follows for both trade and other receivables: Trade and other receivables are written o when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Company and a failure to make contractual payments. Impairment losses on trade and other receivables are recognized in the consolidated statement of comprehensive income as a separate line item. Subsequent recoveries of amounts previously written o are credited against the same line item. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its nancial obligations. The Company’s approach to managing liquidity is to ensure that, as far as possible, it will always have sucient liquidity to meet its obligations when they become due, avoiding unacceptable losses or damages to the Company’s reputation. The Company monitors its liquidity risk on an ongoing basis. In June 2021, NX Filtration became a publicly traded company when it listed its ordinary shares on Euronext Amsterdam, raising €165 million for inter alia the acceleration of its business plan. This provided the necessary funds for amongst others investing in pilot systems, expanding the organization, expanding the production capacity and fast- tracking its innovation agenda. As per 31 December 2021, the Company has €133.4 million cash available. In EUR ‘000 31 December 2021 Current Overdue Overdue Overdue Overdue > amount < 30 days 31 - 60 days 61 - 90 days 90 days Expected loss rate 0% 0% 0% 0% 0% Gross carrying amount - trade receivables and other receivables 2,279 366 38 67 54 Loss allowance - - - - - 31 December 2020 Current Overdue Overdue Overdue Overdue > amount < 30 days 31 - 60 days 61 - 90 days 90 days Expected loss rate 0% 0% 0% 0% 0% Gross carrying amount - trade receivables and other receivables 618 7 1 Loss allowance - - - - - 117 NX Filtration - Annual Report116 Consolidated nancial statements The tables below analyses the Company’s nancial liabilities on their contractual maturities for all non-derivative nancial liabilities for which the contractual maturities are essential for an understanding of the timing of the cash ows. Note that the interest component of the lease liabilities in the table below reects the undiscounted value of the future lease payments. Market risk Foreign exchange risk The Company does predominately business in the euro currency. Therefore, the currency risk is limited and largely concerns positions and (future) transactions in euros. Management has determined, based on a risk assessment, that these currency risks do not need to be hedged. The Company’s exposure to other foreign exchange movements is not signicant and therefore no sensitivity analysis is included. The concentration risk is therefore considered low. Price risk The Company incurs price risks on the purchase of (raw) materials for the dierence between the market price at the time of the purchase and during the actual performance. Price risk is currently managed by agreeing on (long term) framework agreements with its suppliers. With the expected growing volume of purchase, the Company expects to be able to negotiate lower prices for raw materials. In case the costs of raw materials and consumables increase with 2%, the impact on prot before tax is €29 thousand. Interest risk The Company is exposed to interest rate risk and cash ow risk on its current accounts. If negative interest rates on its cash and cash equivalent balances would increase by 0.5%, the impact on prot before tax is €667 thousand. Capital management The Company’s objectives when managing capital is to safeguard the Company’s ability to continue as a going concern and maintain an optimal capital structure to reduce the cost of capital. The table below provides an analysis of net debt and the movements in net debt for each of the periods presented. Other changes comprise a non-cash movement and relates to eective interest Accretion on lease liabilities. Fair value estimation At 31 December 2021 and 31 December 2020, the Company’s cash and cash equivalents are measured at fair value. The carrying amounts of trade and other receivables and trade and other payables approximated their fair values due to the short-term maturities of these assets and liabilities. Fair value is dened as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. IFRS establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Critical accounting estimates and judgements The preparation of the nancial statements requires management to make judgements, estimates and assumptions that aect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reported periods. The estimates and associated assumptions are based on historical experiences and various other factors that are believed to be reasonable under the circumstances. Actual results may dier from these estimates. In EUR ‘000 31 December 2021 Less than 3 months Between 1 Over 3 months to 1 year and 5 years 5 years Total Trade and other payables 4,748 206 - - 4,954 Lease liabilities 78 240 994 82 1,394 Lease liabilities - Interest component 13 35 77 2 127 Total non-derivatives 4,839 481 1,071 84 6,475 In EUR ‘000 31 December 2020 Less than 3 months Between 1 Over 3 months to 1 year and 5 years 5 years Total Trade and other payables 1,369 34 - - 1,403 Lease liabilities 50 157 818 161 1,186 Lease liabilities - Interest component 12 33 97 7 149 Total non-derivatives 1,431 224 915 168 2,738 In EUR ‘000 Cash and bank overdrafts Lease liabilities Net debt At 1 January 2020: 78 (588) (510) Cash ows 6,521 - 6,521 New leases - (680) (680) Other changes - 82 82 Net debt - 31 December 2020 6,599 (1,186) 5,413 Cash ows 126,834 - 126,834 New leases - (430) (430) Other changes - 222 222 Net debt - 31 December 2021 133,433 (1,394) 132,039 5 6 4 119NX Filtration - Annual Report118 Consolidated nancial statements Development costs The capitalized development costs are based on management judgements taken into account: • the technical feasibility to complete the product or system so that it will be available for use; • management intends to complete the product or system and use or sell it; • the ability to use or sell the product or system; • the availability of adequate technical, nancial and other resources to complete the development. In determining the development costs to be capitalized, the Company estimates the expected future economic benets of the respective product or system that is the result of a development project. Furthermore, management estimates the useful life of such product or system. Deferred tax assets Deferred tax assets are recognised for the future tax consequences attributable to temporary dierences between the nancial statement carrying amounts of existing assets and liabilities and their respective tax bases, unused tax losses and unused tax credits. The Group’s deferred tax assets mainly relate to net operating losses (tax losses) in the Netherlands. Deferred tax assets are recognised only to the extent that it is probable that sucient taxable prot will be available against which those unused tax losses, unused tax credits or deductible temporary dierences can be utilised. This assessment requires signicant management judgements and assumptions and are inherently uncertain. The Management Board considered both negative and positive evidence in its evaluation of the probability that sucient taxable prots will be available in the medium-term. Under IAS 12 – Income taxes, the existence of unused tax losses is strong evidence that future taxable prot may not be available. In addition to that the Management Board also considered the fact that the Group does not expect to be protable for the next few years. However, the Management Board considers the negative evidence for these purposes to be outweighed by positive evidence evaluated. The Group expects to utilise its unused tax losses in the medium-term. The Group has no unrecognised deferred tax assets. Revenue from sale of goods The Company’s revenue originates from sale of products. The Company recognizes all its revenue at a point in time, when control over the asset is transferred to the customer. Set out below is the disaggregation of the Company’s revenue with customers: In EUR ‘000 2021 2020 Type of markets Sustainable Industrial Water 2,072 365 Clean Municipal Water 1,101 306 Total revenues from sale of goods 3,173 671 Revenue from sale of goods by region based on the destination of products and location of projects: In EUR ‘000 2021 2020 Geographical split Netherlands 189 118 Europe (excluding Netherlands) 893 393 North America 575 89 Asia 1,325 52 Rest of World 191 19 Total revenues from sale of goods 3,173 671 Other income Set out below is the disaggregation of the Company’s other income: In EUR ‘000 2021 2020 Government grants 616 332 Pilot income 192 66 Other 88 - Total other income 896 398 Government grants comprises of the several government grants received for the Company’s research & development activities in the eld of water ltration. NX Filtration has fullled all conditions relating to government grants at time of recognition. Pilot income relates to rental income from pilot equipment. Personnel expenses In EUR ‘000 2021 2020 Salaries and wages 3,023 1,874 Social security contributions 116 58 Pension contributions 104 51 External personnel cost 821 188 Capitalised personnel expenses (231) (390) Total personnel expenses 3,833 1,781 The number of FTEs per year-end are: 2021 2020 Direct employees 31 15 Indirect employees 38 19 Total FTE 69 34 Pensions The Company has a dened contribution scheme for certain key employees, in which the pension contribution is predetermined and based on the gross salary and the age of the individual employee. Furthermore, the Company has a dened contribution scheme for the other employees, in which the pension contribution is predetermined and based on the gross salary only. Both schemes limit the Group’s legal obligation to the amount it agrees to contribute during the period of employment. The assets of the plans are held separately from those of the Company in funds under the control of pension insurance companies. The average annual net premium contribution for 2021 is 4.3% (2020: 10.2%). The pension contributions are paid on a monthly basis to the pension fund. The net contribution for 2021 amounts to €97 thousand (€61 thousand in 2020). The premium payable during the nancial year is charged to the consolidated statement of comprehensive income and is classied as costs of personnel. Aside from premium payables, the Company does not have any additional obligations in respect to the pension schemes. Operating costs The operating costs can be divided into the following cost categories: In EUR ‘000 2021 2020 Housing expenses 500 313 Other personnel expenses 347 59 Administrative expenses 10,177 291 Selling expenses 747 130 Operating expenses 331 174 Total operating costs 12,102 967 Administrative expenses include €9,558 thousand IPO related transaction costs. 8 10 9 7 121NX Filtration - Annual Report120 Consolidated nancial statements External research & development costs In EUR ‘000 2021 2020 Gross external R&D costs 740 443 Capitalized external R&D costs (493) (82) Total external research & development costs (net) 247 361 To maintain its technological leadership position, NX Filtration continuously invests in its research and development activities for further improvement of existing products and development of new products. Gross research and development costs, including R&D salaries in 2021 amounted to €1.7 million (2020: €1.3 million). Development costs that are directly attributable to the design and testing of identiable and unique products and systems controlled by the Company are recognised as intangible assets and are capitalised as part of the product. Other research and development expenditures are recognised as an expense as incurred. NX Filtration currently relies on its commercially ready and available product ranges with proven applications. Going forward, the Company’s strategy is to build further on this technology and make the technology available towards dierent applications and markets, which may require additional product development costs in future periods. Share based payments Since the incorporation of the Company in 2016, eligible and selected employees and directors have been provided with the opportunity to invest in ordinary shares in the capital of the Company by acquiring Depositary Receipts (“DRs”) issued by a foundation that is controlled by the majority shareholder. The DRs are not freely transferable and, under certain circumstances, the majority shareholder may require a participant to sell DRs to a party designated by the majority shareholder. If a participant voluntarily leaves the Company prior to the end of the vesting period, he/she is not entitled to the full fair market value. As a result, the IFRS 2 fair value will have to be allocated to the vesting tranches. The share participation arrangement is accounted for as an equity-settled share- based arrangement since the Company and its subsidiaries do not have an obligation to settle or to repurchase any DRs from the participants. Each DR issued by the foundation represents one ordinary share in the capital of the Company. The number of outstanding DRs held by employees of the Group are as follows: 2021 2020 Outstanding at 1 January 644,656 272,155 Granted (purchased) during the year - 382,001 Ordinary share split per 26 May 2021 3,147,438 - Forfeited (repurchased) during the year - (9,500) Outstanding shares at 31 December 3,792,094 644,656 See note 24 for further details in respect of the ordinary share split at 26 May 2021. As the Company’s ordinary shares were not listed at the grant date, the fair value of the ordinary shares has been estimated by the Company as of each date a participant indirectly acquired shares in the Company. For accounting purposes, the fair value of an award is equal to the fair market value of the underlying ordinary shares at the grant date less the acquisition price paid by a participant for the DRs. Given that the participants have paid the estimated fair market value of the underlying shares as of each grant date, the fair value of the share- based payment awards is nil. For participants being classied as key management personnel based on the denition in IAS 24, Related-party transactions, any expense recognized related to the share investments will have to be disclosed as “share- based payment expense” in the disclosure of key management personnel compensation. Finance expenses In EUR ‘000 2021 2020 Interest expenses related to lease liabilities 46 26 Other interest expenses 381 182 Finance expenses 427 208 Interest expense related to lease liabilities is the result of application of IFRS 16. Income tax benet This note provides an analysis of the Company’s income tax expense, showing how the tax expense is aected by non-deductible items. In EUR ‘000 2021 2020 Current tax Current tax on prots for the year - - Adjustments for previous years - - Total current tax (expense) benet - - Deferred income tax Income tax on operations 3,708 891 Change in tax rates 79 - Total deferred tax (expense) benet 3,787 891 Total income tax (expense) benet 3,787 891 The tax on the Company’s loss before tax diers from the statutory amount that would arise using the tax rate applicable to losses of the entity. The reconciliation of the eective tax rate is as follows: In EUR ‘000 2021 2020 Result from operations (11,354) (2,092) Total income tax 3,787 891 Loss before income tax (15,141) (2,983) Tax calculated based on Dutch tax rate 25.0% 25.0% Tax eect of: Adjustments for previous years -0.1% 0.0% Eect of tax rates in other countries 0.0% 0.0% Non-taxable expenses -0.4% 0.0% Change in tax rates 0.5% 4.9% Other dierences 0.0% 0.0% Eective tax rate 25.0% 29.9% The change in tax rates is driven by change in the enacted Dutch tax rates for the scal years 2022 and further. 11 12 13 14 123NX Filtration - Annual Report122 Consolidated nancial statements Earnings per share Note that the 2021 opening balance and prior year number of outstanding shares have been adjusted to reect the impact of the ordinary share split as per 26 May 2021 as disclosed in note 24. Remuneration of the Management Board and the Supervisory Board The total amount of remuneration of the Managing Directors for the nancial year 2021 comprised €302,971 (2020: €215,397). For the nancial year 2021, the gross annual base salary of Mr Michiel Staatsen comprised €153,023 (2020: €116,562) including holiday allowance and social charges. For the nancial year 2021, the total gross annual base salary of Mr Erik Roesink comprised €143,253 (2020: €98,835) including holiday allowance and social charges. In 2021, the Company paid €6,695 (2020: €5,000) as pension contribution for Mr Michiel Staatsen. In addition, Infestos Nederland (which is an aliate of Infestos) paid a bonus of €60,000 (gross) to Mr Michiel Staatsen in the nancial year 2020. The Management Board collectively hold 2,800,000 DRs (see note 12) in the share capital of the Company, of which Mr Michiel Staatsen holds 1,050,000 DRs and Mr Erik Roesink 1,750,000 DRs. These DRs are subject to lock-up restrictions. The DRs will be released from the lock-up restrictions as follows: one-third of the DRs will be unconditionally released from the lock-up restrictions on the day that is one year after the IPO date which is 11 June 2021, one- third of the DRs on the day that is two years after the IPO date, and the remaining one-third of the DRs on the day that is three years after the IPO date, in each case on the condition that the relevant board member continues to be employed by the Company. The compensation for Ms Carolina Wielinga, chair of the Supervisory Board, has been set at €50,000 per year and the compensation for Mr Benno van Dongen has been set at €30,000 per year. Mr John Glorie is employed by Infestos Nederland and does not receive compensation for his Supervisory Board activities. Intangible assets The movement in intangible assets during the years was as follows: Development costs Additions to intangible xed assets relate to internal development projects for new products or systems or development projects for new features to existing products and systems. Concessions and rights of intellectual property Additions for concessions and rights of intellectual property relate to payments made to the patent oce for the ling process of the Company’s patents and intellectual property rights. 2021 2020 Net loss attributable to equity holders (in EUR ‘000) (11,354) (2,092) Outstanding number of shares for the basic earnings per share as at 1 January 35,000,000 5,588,235 Eect of issued ordineray shares in 2021 8,095,890 2,450,980 Weighted-average number of shares outstanding for the purpose of basic earnings per share 43,095,890 8,039,216 Incremental shares for assumed conversion - - Weighted-average number of shares outstanding for the purpose of diluted earnings per share 43,095,890 8,039,216 Concessions and rights In EUR ‘000 Development costs of intellectual property Software Total At 1 January 2020 Cost 926 209 - 1,135 Accumulated impairments and amortisation (106) (42) - (148) Net book value 820 167 - 987 Year ended 31 December 2020 Opening net book value 820 167 - 987 Additions 500 24 - 524 Amortisation for the year (189) (22) - (211) Closing net book value 1,131 169 - 1,300 At 1 January 2021 Cost 1,426 233 - 1,659 Accumulated impairments and depreciation (295) (64) - (359) Net book value 1,131 169 - 1,300 Year ended 31 December 2021 Opening net book value 1,131 169 - 1,300 Additions 741 31 72 844 Amortisation for the year (290) (25) - (315) Closing net book value 1,582 175 72 1,829 At 31 December 2021 Cost 2,167 264 72 2,503 Accumulated impairments and depreciation (585) (89) - (674) Net book value 1,582 175 72 1,829 15 17 16 125NX Filtration - Annual Report124 Consolidated nancial statements Property, plant and equipment The movement in property, plant and equipment during the years was as follows: The Company’s additions to machinery and equipment mainly relate to expansion of the Company’s production capacity. The depreciation accounting policies for property, plant and equipment are included in the section accounting policies of the Company. Right-of-use assets The movement in the right-of-use assets during the years was as follows: In EUR ‘000 2021 2020 At 1 January Cost 1,352 657 Accumulated depreciation (188) (81) Net book value 1,164 576 Additions 430 695 Depreciation for the year (238) (107) Net book value at 31 December 1,356 1,164 Total gross right-of-use assets: 31 December 31 December In EUR ‘000 2021 2020 Buildings 1,320 1,161 Vehicles 448 179 Fork-lift truck 14 13 Total gross right-of-use assets 1,782 1,353 Total depreciation charge right-of-use-assets: 31 December 31 December In EUR ‘000 2021 2020 Buildings 176 69 Vehicles 57 33 Fork-lift truck 4 5 Total depreciation charge 238 107 Interest expense (included in nance cost) 46 26 The total cash outow for leases in 2021 was €268 thousand (2020: €123 thousand). Deferred tax assets 31 December 31 December In EUR ‘000 2021 2020 Deferred tax assets Timing dierences 9 18 Carry forward losses 5,699 1,903 Total 5,708 1,921 Of which: Current (<1 year) - 18 Non-current (>1 year) 5,708 1,903 As of December 31, 2021, the amount of tax losses that can be oset in the future amounts to €22.8 million. There are no tax losses for which no deferred tax asset has been recognized. A deferred tax asset has been recognized for these tax losses that have been valued at the nominal tax rate of 25% (being the estimated blended rate as from 2022). Inventories 31 December 31 December In EUR ‘000 2021 2020 Raw materials 1,503 857 Semi nished goods 738 538 Finished goods 898 623 Work in progress 73 59 Total 3,212 2,077 During 2021 no inventories were written down to net realizable value (31 December 2020: € nil). Machinery and Pilot Assets under In EUR ‘000 Land & buildings equipment equipment construction Total At 1 January 2020 Cost - 2,624 - - 2,624 Accumulated impairments and depreciation - (823) - - (823) Net book value - 1,801 - - 1,801 Year ended 31 December 2020 Opening net book value - 1,801 - - 1,801 Additions - 687 243 - 930 Disposal - (39) - - (39) Depreciation for the year - (426) (43) - (469) Depreciation of disposal - 22 - - 22 Closing net book value - 2,046 200 - 2,246 At 1 January 2021 Cost - 3,272 243 - 3,515 Accumulated impairments and depreciation - (1,226) (43) - (1,269) Net book value - 2,046 200 - 2,246 Year ended 31 December 2021 Opening net book value - 2,046 200 - 2,246 Additions 223 2,136 2,428 2,985 7,772 Disposal - (36) (31) - (67) Depreciation for the year - (658) (179) - (837) Depreciation of disposal - 31 5 - 36 Closing net book value 223 3,519 2,423 2,985 9,150 201918 21 127NX Filtration - Annual Report126 Consolidated nancial statements Trade and other receivables 31 December 31 December In EUR ‘000 2021 2020 Trade receivables 833 63 Less: loss allowance - - Trade receivables - net 833 63 Prepaid expenses 318 236 Other taxes 1,080 214 Other receivables 573 112 2,804 625 Less non-current portion - - Current portion 2,804 625 The fair value of the receivables approximates the carrying amounts. No breakdown of the fair values of trade and other receivables and the non-current portion of the receivables has been included as the dierences between the carrying amounts and the fair values are insignicant. As at 31 December 2021 and 31 December 2020 all receivables are denominated in euro currency. Information about the Company’s exposure to credit and market risks, and impairment losses for trade and other receivables is included in note 3 ‘Financial instruments and risk management’. Cash and cash equivalents 31 December 31 December In EUR ‘000 2021 2020 Cash and cash equivalents 133,433 6,599 Total 133,433 6,599 The cash and cash equivalents are freely disposable to the Company. Equity Ordinary shares The movement of the ordinary shares in 2021 and 2020 is outlined in the tables below. On 26 May 2021 and pursuant to a notarial deed of amendment of the Articles of Association, the ordinary shares with a value of €1.00 have been split into an aggregate amount of 35,000,000 ordinary shares, each with a nominal value €0.01, as a result of which the Company’s issued capital amounted to €350,000 divided into 35,000,000 ordinary shares, at such time. The dierence between the aggregate nominal value of the ordinary shares before and after this stock split was added to the share premium reserve of the Company. These outstanding ordinary shares are fully paid-up. Pursuant to a deed of amendment and conversion executed on 11 June 2021, the authorized capital (maatschappelijk kapitaal) of NX Filtration N.V. amounts to €1,750,000 divided into 175,000,000 ordinary shares. On 15 June 2021, the Company issued 15,000,000 ordinary shares against an issue price of €11.00, each with a nominal value of €0.01, as a result of which the Company’s current issued capital amounts to €500,000 divided into 50,000,000 ordinary shares. The share premium reserve relates to contribution on issued shares in excess of the nominal value of the shares (above par value). Preference shares The movement of the preference shares in 2021 and 2020 is outlined in the tables below. 2322 Number of Par value Share premium Total ordinary shares EUR ‘000 EUR ‘000 EUR ‘000 Opening balance 1 January 2020 950,000 950 - 950 Share issuance 5,000,000 5,000 - 5,000 Balance 31 December 2020 5,950,000 5,950 - 5,950 Share split 29,050,000 (5,600) 5,600 - Share issuance 15,000,000 150 164,850 165,000 Balance 31 December 2021 50,000,000 500 170,450 170,950 Number of Par value Share premium Total preference shares EUR ‘000 EUR ‘000 EUR ‘000 Opening balance 1 January 2020 47,468 47 7,478 7,525 Share premium contribution - - 6,000 6,000 Shares buy back (566) - (100) (100) Balance 31 December 2020 46,902 47 13,378 13,425 Shares cancellation (46,902) (47) (13,378) (13,425) Balance 31 December 2021 - - - - 24 129NX Filtration - Annual Report128 Consolidated nancial statements On 15 June 2021, the Company repaid and cancelled all of the outstanding preference shares including payment of the cumulative interest accrued thereon. The total repaid amounts to €15.8 million, including €2.4 million of accrued interest. Preference shares were shares with voting rights that entitled their owners to a xed 7% dividend per annum for Preference Shares A and a xed 9% per annum for the other Preference Share classes. Preference shares are considered as a part of equity, since holders of ordinary shares decide at the General Meeting whether dividends will be paid out to preference shareholders or not. Only in case of a dividend distribution, preference shareholders rst receive a return on their investment. Subsequently the ordinary shareholders receive a return, therefore the dividend on preference shares are discretionary and non-contractual in nature. Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. Retained earnings The retained earnings are restricted due to a legal reserve for capitalized development costs of €1.6 million (31 December 2020: €1.1 million) which is not available for distribution. Loss for the period The proposal to the General Meeting is that the 2021 loss for the period will be recognized in retained earnings. Lease liabilities The Company leases several assets, which can be combined into the asset classes: (i) Buildings and (ii) Vehicles. These contracts are typically entered into for a period between 3 to 5 years, but some leases may include renewal and/or termination options. 31 December 31 December In EUR ‘000 2021 2020 Buildings 1,042 1,043 Vehicles 352 143 Total 1,394 1,186 The maturity of the lease liabilities can be specied as follows: Right-of-use assets Right-of-use assets related to leases that do not meet the denition of investment property are presented as property, plant and equipment. The Company has no right-of-use assets that meet the denition of investment property. Amounts recognized in the statement of comprehensive income and cash ows Besides the interest expenses related to lease liabilities and depreciation charges on right-of- use assets as disclosed in Note 13 and Note 19, respectively, the Company recognized in 2021 within the statement of comprehensive income €11 thousand (2020: €7 thousand) relating to low value leases. Extension and termination options The Company has contracts within the building asset class that include renewal and termination options or a combination of both. At 31 December 2021 and 31 December 2020 the renewal options are included in the measurement of the lease liabilities, no termination options are included. Repayment Remaining term Remaining obligation in >1 year term In EUR ‘000 31 December 2021 2022 and <5 year >5 years Buildings 1,042 219 740 83 Vehicles 352 98 254 - Total 1,394 317 994 83 25 131NX Filtration - Annual Report130 Consolidated nancial statements Trade and other payables 31 December 31 December In EUR ‘000 2021 2020 Trade payables 3,677 603 Tax payables 125 63 Employee benets 203 150 Payments received in advance 162 425 Other liabilities 787 162 Total 4,954 1,403 All current liabilities fall due in less than one year. The fair value of the current liabilities approximates the carrying amount due to its short-term character. The entire amount of payments received in advance has been recognized as income in the subsequent period. As at 31 December 2021 and 31 December 2020 all payables are denominated in euro currency. Contingencies and commitments Option agreement to purchase a plot of land for a new production and oce facility NX Filtration entered into an option agreement to purchase a 24,000 square meters plot of land at the High-Tech Systems Park in Hengelo, the Netherlands, for the amount of €3.8 million (excluding taxes). Capital Expenditure Commitments NX Filtration B.V. has signed a number of purchase contracts related to machinery and equipment capital expenditures, amounting to €1.7 million (2020: €1 million). Related party transactions All legal entities that can be controlled, jointly controlled or signicantly inuenced are considered to be a related party. Also, entities which can control, jointly control or signicantly inuence the Company are considered a related party. In addition, statutory and supervisory directors and close relatives are regarded as related parties. The following transactions were carried out with related parties: • Key management compensation, as further disclosed in note 16 above; • Management fee to Infestos Holding E B.V, based on the consultancy agreement between Infestos Holding E B.V. and NX Filtration as entered into on the date of IPO in the amount of €84 thousand; • Management fee to Infestos Management B.V. in the period pre-IPO, in the amount of €2 thousand; • Repayment of preference shares held by Infestos Holding E B.V., as further disclosed in note 24 above. All these transactions are made on terms equivalent to those that prevail in arm’s length transactions. Events after the end of the reporting period No such events to report. 26 27 28 29 133NX Filtration - Annual Report132 Consolidated nancial statements Company nancial statements Company balance sheet as at 31 December 2021 Before prot allocation In EUR ‘000 Notes 31 December 2021 31 December 2020 Assets Non-current assets Intangible assets 3 1,757 1,300 Financial xed assets 4 516 3,956 Deferred tax assets 5 5,699 1,903 Total non-current assets 7,972 7,159 Current assets Receivable from group companies 32,065 - Receivables 35 7 Cash and Cash Equivalents 6 111,617 6,329 Total current assets 143,717 6,336 Total assets 151,689 13,495 Equity and liabilities Shareholders’ equity Issued share capital 500 5,997 Share premium 170,450 13,378 Legal and statutory reserves 7 1,582 1,132 Other reserves 7 (10,034) (1,132) Result for the period (11,354) (6,031) Total equity 151,144 13,344 Current liabilities Trade and other payables 320 12 Debt to group companies - 101 Other payables 225 38 Total current liabilities 545 151 Total equity and liabilities 151,689 13,495 135NX Filtration - Annual Report134 Company nancial statements Company income statement 2021 General information The company nancial statements are part of the consolidated nancial statements of NX Filtration N.V. (the Company) Basis of preparation The Company nancial statements of NX Filtration N.V. have been prepared in accordance with Part 9, Book 2 of the Dutch Civil Code. In accordance with sub 8 of article 362, Book 2 of the Dutch Civil Code, the Company nancial statements are prepared based on the accounting principles of recognition, measurement and determination of prot, as applied in the consolidated nancial statements. These principles also include the classication and presentation of nancial instruments, being equity instruments or nancial liabilities. In case no other policies are mentioned, refer to the accounting policies as described in the accounting policies in the consolidated nancial statements of this Annual report. For an appropriate interpretation, the company nancial statements of NX Filtration N.V. should be read in conjunction with the consolidated nancial statements. All amounts are presented in euro and have been rounded to the nearest thousand, unless stated otherwise. The balance sheet and income statement include references. These refer to the notes. The current nancial year covers the period 1 January 2021 until 31 December 2021. The previous nancial year covers the period 1 January 2020 until 31 December 2020. Critical accounting policies Investments in subsidiaries Subsidiaries are all entities (including intermediate subsidiaries) over which the Company has control. The Company controls an entity when it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to aect those returns through its power over the subsidiary. Subsidiaries are recognized from the date on which control is transferred to the Company or its intermediate holding entities. They are derecognized from the date that control ceases. Investments in subsidiaries are measured at net asset value. Net asset value is based on the measurement of assets, provisions and liabilities and determination of prot based on the principles applied in the consolidated nancial statements. In case of a negative net equity value of a subsidiary, the negative value is initially deducted from loans due from the respective subsidiary, if any, and subsequently accounted for as a provision for loss making subsidiaries. In EUR ‘000 Notes 2021 2020 Revenue 8 53 33 Amortization of intangible assets 3 (315) (211) Personnel expenses (236) - General expenses 10 (9,841) (140) Operating loss (10,339) (318) Finance income 11 124 136 Finance expenses 12 (352) (181) Finance expenses (net) (228) (45) Loss before income tax (10,567) (363) Income tax benet 5 2.653 263 Share of net loss of investments in subsidiaries 4 (3,440) (1,992) Loss for the period after income tax (11,354) (2,092) Notes 2 1 137NX Filtration - Annual Report136 Company nancial statements Intangible assets The movement in intangible assets during the year was as follows: Amortization rates: % Development costs 20% Concessions and rights of intellectual property 10% Financial xed assets The movement in the nancial xed assets during the years was as follows: The Company is wholly and severally liable for the loans of NX Filtration B.V. Consequently, a provision for loss making subsidiaries is recognised related to the negative equity value of NX Filtration B.V. The loan receivable relates to a loan issued to NX Filtration B.V. The loan is redeemable per 31 December 2022. Earlier repayment is allowed under the loan agreement. The loan receivable accrues interest which is calculated based the interest percentage payable on a 10 year maturity Dutch government bond plus 1.75%. The interest is payable at the end of each year. The fair value of the loan receivable approximates the book value of the loan receivable. Concessions and rights of In EUR ‘000 Development costs intellectual property Total At 1 January 2020: Cost 926 209 1,135 Accumulated impairments and amortisation (105) (43) (148) Net book value 821 166 987 Movements in 2020: Opening net book value 821 166 987 Additions 500 24 524 Amortisation for the year (189) (22) (211) Closing net book value 1,132 168 1,300 At 1 January 2021: Cost 1,426 233 1,659 Accumulated impairment and amortisation (295) (65) (359) Net book value 1,132 168 1,300 Movements in 2021 Opening net book value 1,132 168 1,300 Additions 741 32 772 Amortisation for the year (290) (25) (315) Closing net book value 1,582 175 1,757 At 31 December 2021 Cost 2,167 264 2,431 Accumulated impairments and depreciation (585) (90) (674) Net book value 1,582 175 1,757 In EUR ‘000 Investment in subsidiaries Loans receivable Total At 1 January 2020 (3,802) 6,300 2,498 Investment/ changes - 3,450 3,450 Share of net loss (1,992) - (1,992) (5,794) 9,750 3,956 Provision 5,794 (5,794) - At 31 December 2020 - 3,956 3,956 At 1 January 2021 (5,794) 9,750 3,956 Investment/ changes - - - Share of net loss (3,440) - (3,440) Other movements - - - (9,234) 9,750 516 Provision 9,234 (9,234) - At 31 December 2021 - 516 516 Share in issued share capital at Share in issued share capital at 31 December 2021 31 December 2020 NX Filtration B.V. 100% 100% 3 4 139NX Filtration - Annual Report138 Company nancial statements Deferred tax assets In EUR ‘000 2021 2020 At 1 January 1,903 1,088 Tax benet subsidiaries through scal unit 1,143 552 Tax benet NX Filtration N.V. 2,653 263 At 31 December 5,699 1,903 The deferred tax assets can be specied as follows: 31 December 31 December In EUR ‘000 2021 2020 Deferred tax assets Timing dierences - - Carry forward losses 5,699 1,903 Total 5,699 1,903 Of which: Current (<1 year) - - Non-current (>1 year) 5,699 1,903 As of December 31, 2020, the total amount of recognized tax losses amounts to €22.8 million. A deferred tax asset has been recognized at the nominal tax rate of 25% (being the estimated blended rate as from 2022). Cash and cash equivalents 31 December 31 December In EUR ‘000 2021 2020 ABN AMRO bank 45,992 0 Van Lanschot bank 25,000 0 Rabobank 40,625 6,329 Total 111,617 6,329 The cash and cash equivalents are freely disposable to the Company. Shareholders’ equity Reference is made to note 24 of the consolidated nancial statements for an explanation of the equity composition of the Company. Legal and statutory reserves The legal reserve relates to a reserve for capitalized development costs of the subsidiaries In EUR ‘000 2021 2020 At 1 January 1,132 821 Movement in legal reserve 451 311 At 31 December 1,582 1,132 Other reserves The other reserves can be specied as follows: In EUR ‘000 2021 2020 At 1 January (5,071) (3,171) Allocation of previous year loss (2,092) (1,589) Interest on repayment and cancellation of preference share capital (2,421) - Movement in legal reserve (450) (311) At 31 December (10,034) (5,071) Revenue In EUR ‘000 2021 2020 Charged patent rights 48 28 Management fee 5 5 Total 53 33 Average numbers of employees In 2021, the Company had 2 employees (2020: no employees). None of these employees works abroad. General expenses In EUR ‘000 2021 2020 Audit fees 150 85 Legal fees 35 17 Consultancy fee Infestos Holding E B.V. 84 - Patent renewal fees 47 28 Management fee lnfestos Holding E B.V. - 5 Management fee lnfestos Management B.V. 2 5 Listing costs 9,465 - Other general costs 58 - Total 9,841 140 The following audit fees were expensed in the income statement in the reporting period. The fees listed above relate to the services provided to the Company by accounting rms and external independent auditors as referred to in Section 1(a) of the Dutch Accounting Firms Oversight Act (Wta). 5 8 6 In EUR ‘000 PwC Accountants N.V. Other network Total network 2021 2020 2021 2020 2021 2020 Audit of the nancial statements 150 85 - - 150 85 Other audit procedures 213 - - - 213 - Tax services - - - - - - Other non-audit services - - - - - - Total 363 85 - - 363 85 7 9 10 141NX Filtration - Annual Report140 Company nancial statements Finance income In EUR ‘000 2021 2020 Interest on receivables from group companies 124 136 Total 124 136 Finance expense In EUR ‘000 2021 2020 Interest on shareholder loan and current account - (181) Interest on cash balances (negative interest) (352) - Total (352) (181) Contingencies and commitments Fiscal unity The Company is the head of the scal unity for the Corporate Income Tax and Value Added Tax of the Group. As such the Company is fully liable for any tax liability resulting from this. Events after the reporting period Nothing to report. Authorisation of the nancial statements Enschede, 10 February 2022 Board of Directors Michiel Staatsen Erik Roesink CEO and COO CTO 11 12 13 14 143NX Filtration - Annual Report142 Company nancial statements Other information Provision in the Articles of Association relating to prot appropriation Article 31. Prots and Distributions. 31.1 The Management Board, with the approval of the Supervisory Board, may decide that the prots realised during a nancial year fully or partially be appropriated to increase and/or form reserves. 31.2 The prots remaining after application of Article 31.1 shall be put at the disposal of the General Meeting. The Management Board, with the approval of the Supervisory Board, shall make a proposal for that purpose. A proposal to pay a dividend shall be dealt with as a separate agenda item at the General Meeting of Shareholders. 31.3 Distributions from the Company’s distributable reserves are made pursuant to a resolution of the Management Board, with the approval of the Supervisory Board. 31.4 Provided it appears from an interim statement of assets signed by the Management Board that the requirement mentioned in Article 31.7 concerning the position of the Company’s assets has been fullled, the Management Board may, with the approval of the Supervisory Board, make one or more interim distributions to the holders of Shares. 31.5 The Management Board may, with the approval of the Supervisory Board, decide that a distribution on Shares shall not take place as a cash payment but as a payment in Shares, or decide that holders of Shares shall have the option to receive a distribution as a cash payment and/or as a payment in Shares, out of the prot and/or at the expense of reserves, provided that the Management Board is designated by the General Meeting pursuant to Articles 6.2. With the approval of the Supervisory Board, the Management Board shall determine the conditions applicable to the aforementioned choices. 31.6 The Company’s policy on reserves and dividends shall be determined and can be amended by the Management Board, subject to the approval of the Supervisory Board. The adoption and thereafter each amendment of the policy on reserves and dividends shall be discussed and accounted for at the General Meeting of Shareholders under a separate agenda item. 31.7 Distributions may be made only insofar as the Company’s equity exceeds the amount of the paid in and called up part of the issued capital, increased by the reserves which must be kept by virtue of the law or these Articles of Association. Article 32. Payment of and Entitlement to Distributions. 32.1 Dividends and other distributions will be made payable pursuant to a resolution of the Management Board within four weeks after adoption, unless the Management Board sets another date for payment. 32.2 A claim of a Shareholder for payment of a distribution shall be barred after ve years have elapsed after the day of payment. 32.3 For all dividends and other distributions in respect of Shares included in the Statutory Giro System the Company will be discharged from all obligations towards the relevant Shareholders by placing those dividends or other distributions at the disposal of, or in accordance with the regulations of, Euroclear Netherlands. 145NX Filtration - Annual Report144 Other information Independent auditor’s report Report on the nancial statements 2021 To: the general meeting and the supervisory board of NX Filtration N.V. Our opinion In our opinion: • the consolidated nancial statements of NX Filtration N.V. together with its subsidiaries (‘the Group’) give a true and fair view of the nancial position of the Group as at 31 December 2021 and of its result and cash ows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (‘EU-IFRS’) and with Part 9 of Book 2 of the Dutch Civil Code; • the company nancial statements of NX Filtration N.V. (‘the Company’) give a true and fair view of the nancial position of the Company as at 31 December 2021 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code. What we have audited We have audited the accompanying nancial statements 2021 of NX Filtration N.V., Amsterdam. The nancial statements include the consolidated nancial statements of the Group and the company nancial statements. The consolidated nancial statements comprise: • the consolidated statement of nancial position as at 31 December 2021; • the following statements for 2021: the consolidated statements of comprehensive income, changes in equity and cash ows; and • the notes, comprising signicant accounting policies and other explanatory information. The company nancial statements comprise: • the company balance sheet as at 31 December 2021; • the company income statement for the year then ended; • the notes, comprising the accounting policies applied and other explanatory information. The nancial reporting framework applied in the preparation of the nancial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated nancial statements and Part 9 of Book 2 of the Dutch Civil Code for the company nancial statements. The basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further described our responsibilities under those standards in the section ‘Our responsibilities for the audit of the nancial statements’ of our report. We believe that the audit evidence we have obtained is sucient and appropriate to provide a basis for our opinion. Independence We are independent of NX Filtration N.V. in accordance with the European Union Regulation on specic requirements regarding statutory audit of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit rms supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants 147NX Filtration - Annual Report146 Independent auditor’s report bij assuranceopdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics). Our audit approach We designed our audit procedures with respect to the key audit matters, fraud and going concern, and the matters resulting from that, in the context of our audit of the nancial statements as a whole and in forming our opinion thereon. The information in support of our opinion, like our ndings and observations related to individual key audit matters, the audit approach fraud risk and the audit approach going concern was addressed in this context, and we do not provide a separate opinion or conclusion on these matters. Overview and context NX Filtration N.V. is a public limited liability company (N.V.) which is specialized in the production of advanced hollow ber membrane modules for nanoltration, ultraltration and microltration applications. NX Filtration N.V. forms a group together with NX Filtration B.V., where NX Filtration N.V. is the holding company and NX Filtration B.V. the operating company. The initial public oering (herafter: “IPO”) on 11 June 2021 characterised the nancial year 2021. This aected the determination of materiality and our audit procedures as described in the sections ‘Materiality’ and ‘Key audit matters’. As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the nancial statements. In particular, we considered where the management board made important judgements, for example, in respect of signicant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. In note 6 of the consolidated nancial statements, the Company describes the areas of judgement in applying accounting policies and the key sources of estimation uncertainty. Given the judgement involved in determining whether development costs can be capitalised, we considered this matter as key audit matter as set out in the section ‘Key audit matters’ of this report. Furthermore, we identied the accuracy of the outgoing payments as key audit matter given the large amounts received from the IPO and the limitations we noted in the segregations of duties in the payment process. Finally, we identied the tax deductibility of the listing costs as key audit matter because of the signicance of these incidental costs. Given the early stage growth phase of the Company, the control environment can be described as informal and therefore we performed a primarily substantive audit. NX ltration assessed the possible eects of climate change and its plan to meet the net zero commitments on their nancial position, refer to the section “sustainability report” of the report of the management board. We discussed NX Filtration’s assessment and governance thereof with the management board and evaluated the potential impact on the nancial position including underlying assumptions and estimates. The eect of climate change is not considered to impact the key audit matters. We ensured that the audit team included the appropriate skills and competences which are needed for the audit of NX Filtration N.V. We therefore included auditor’s experts in the area of taxes in our team. The outline of our audit approach was as follows: Materiality The scope of our audit was inuenced by the application of materiality, which is further explained in the section ‘Our responsibilities for the audit of the nancial statements’. Based on our professional judgement we determined certain quantitative thresholds for materiality, including the overall materiality for the nancial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual nancial statement line items and disclosures and to evaluate the eect of identied misstatements, both individually and in aggregate, on the nancial statements as a whole and on our opinion. Materiality Audit scope Key audit matters Overall group materiality €241,000 Basis for determining materiality We used our professional judgement to determine overall materiality. As a basis for our judgement we used 1% of benchmark ‘Total assets – Cash’. Rationale for benchmark applied We used Total assets – Cash’ as the primary benchmark, based on our analysis of the common information needs of users of the nancial statements. On this basis, we believe that ‘Total assets – Cash’ is an important metric for the nancial performance of the Company, as this shows the total asset base that can be used to generate future revenues. Materiality • Overall materiality: €241,000 Audit scope • We performed a full scope audit on both NX Filtration N.V. and NX Filtration B.V. Key audit matters • Capitalisation of development costs • Accuracy of outgoing payments • Tax deductibility of the listing costs 149NX Filtration - Annual Report148 Independent auditor’s report We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons. We agreed with the supervisory board that we would report to them misstatements identied during our audit above €24,100 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. Audit approach fraud risks We identied and assessed the risks of material misstatements of the nancial statements due to fraud. During our audit we obtained an understanding of the entity and its environment and the components of the system of internal control, including the risk assessment process and management’s process for responding to the risks of fraud and monitoring the system of internal controls and how the supervisory board exercises oversight, as well as the outcomes. We refer to section “risk and uncertainties” of the report of the management board for management’s board fraud risk assessment. We note that, although management made a (fraud) risk assessment, no formalised monitoring procedures are in place. We evaluated the design and relevant aspects of the system of internal controls and in particular the fraud risk assessment, as well as among others the code of conduct and whistle blower procedures. We evaluated the design and the implementation of internal controls designed to mitigate fraud risks and reported our observations to the management board and those charged with governance. As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to nancial reporting fraud, misappropriation of assets and bribery and corruption. We evaluated whether these factors indicate that a risk of material misstatement due to fraud is present. We identied the following fraud risks and performed the following specic procedures: Identied fraud risk Audit procedures and observations The risk of management override of controls As in all of our audits, we addressed the risk of management override of controls, including evaluating whether there was evidence of bias by management that may represent a risk of mate- rial misstatement due to fraud. In this context, we paid particular attention to the judgement applied in the capitalization of development costs. Where relevant to our audit, we evaluated the design of the internal control measures that are intended to mitigate the risk of management override of controls and assessed the eectiveness of those measures in the processes of generating and processing journal entries and making estimates. We also paid specic attention to the access safeguards in the IT system and the possibility of functional segregation as a result and reported our observations to the management board and those charged with governance. We performed data analysis of high-risk journal entries. Where we identied instances of unexpected journal entries or other risks through our data analytics, we performed additional audit procedures to address each identied risk. We evaluated key judgements for bias by NX Filtration N.V. in the capitalization of development costs. For further details on the procedures performed we refer to our “key audit matter capitalisation of development costs”. Our procedures did not reveal any material misstatement of the information provided by management in the nancial statements and the management report compared with the nancial statements. Our work did not reveal any specic indications of fraud or suspicion of fraud in respect of management override of controls. Risk of fraudulent reporting due to overstating the revenues NX Filtration N.V. aims for growth through the commercialization of its hollow ber nano ltra- tion membrane technology and to realise increase in turnover and protability in the future in order to increase shareholder value. In general, this may cause pressure on management to show growth in both sales and protability. Where relevant to our audit, we evaluated the design and eectiveness of the internal control measures related to revenue recognition and reported our observations to the management board and those charged with governance. We selected journal entries based on risk criteria and performed specic audit activities for these entries, as part of which we also paid attention to signicant transactions outside the normal course of busines. No such transactions were identied. We selected a sample of revenues and reconciled the transactions to the contracts or orders, the sales invoice, the shipping documents and the payments. 151NX Filtration - Annual Report150 Independent auditor’s report We incorporated elements of unpredictability in our audit. We also considered the outcome of our other audit procedures and evaluated whether any ndings were indicative of fraud or noncompliance. We considered available information and made enquiries of the management board and the supervisory board. This did not lead to indications for fraud potentially resulting in material misstatements. Audit approach going concern As disclosed in section “summary of signicant accounting policies” of the nancial statements, the management board prepared the nancial statements on the assumption that the entity is a going concern and that it will continue its operations for the foreseeable future. Our procedures to evaluate management’s board going concern assessment include, amongst others: • Considering whether management’s board going concern assessment includes all relevant information like the nancial position per balance sheet date and the developments in the membrane industry of which we are aware as a result of our audit, inquiring with the management board regarding their most important assumptions underlying their going concern assessment and considering whether management board identied events or conditions that may cast signicant doubt on the entity’s ability to continue as a going (hereafter: going concern risks); • Analysing the nancial position per balance sheet date to assess whether events or circumstances exist that may lead to a going concern risk, including considering the cash balance per 31 December 2021 of € 133.4 million as a result of the proceeds obtained from the IPO and evaluating the Company’s existing on-balance and o- balance obligations; • Evaluating the Company’s existing on- balance and o-balance obligations; • Evaluating the management board’s budget for 2022 and 2023, taking into account current developments in the membrane industry and all relevant information of which we are aware as a result of our audit; and • Performing inquiries with the management board as to their knowledge of going concern risks beyond the period of the management board’s assessment. Our procedures did not result in outcomes contrary to the management board’s assumptions and judgements used in the application of the going concern assumption. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most signicance in the audit of the nancial statements. We have communicated the key audit matters to the supervisory board. The key audit matters are not a comprehensive reection of all matters identied by our audit and that we discussed. In this section, we described the key audit matters and included a summary of the audit procedures we performed on those matters. We addressed the key audit matters in the context of our audit of the nancial statements as a whole, and in forming our opinion thereon. We do not provide separate opinions on these matters or on specic elements of the nancial statements. Any comment or observation we made on the results of our procedures should be read in this context. Identied fraud risk Audit procedures and observations In addition, we tested whether NX ltration met the requirements as included in the grant decisions and conditions. Subsequently we tested a sample of the hours of employees and expenses accounted for on these subsidy projects. Our procedures did not identify any material misstatement in the information provided by the management board in the nancial statements and the report of the management board compared with the nancial statements. Our procedures did not lead to specic indications of fraud or suspicions of fraud with respect to the existence of the revenue or the accuracy of the subsidies accounted for. Accuracy of outgoing payments In our audit we identied the risk for unautho- rised payments made from the Company’s cash balances, given the large amount of cash received from the IPO and limitations in the segregation of duties in the payment process. For our audit procedures, performed with respect to the accuracy of the outgoing payments, we refer to our key audit matters. Our procedures did not lead to specic indications of fraud or suspicions of fraud with respect to the accuracy of outgoing payments. Key audit matter Our audit procedures and observations Capitalisation of development costs Refer to note 17 to the consolidated nancial statements The intangible assets of NX Filtration N.V. amount to € 1.8 million of which € 1.6 million re- lates to capitalised development costs mainly re- lating to projects in which the Company’s hollow bre nanoltration technology has been devel- oped. During 2021, NX Filtration N.V. capitalised € 0.7 million of development cost for new and fur- ther developments in the Company’s hollow bre nanoltration and microltration technologies and related projects. The management board applies signicant judge- ment regarding the determination on whether to capitalise development costs. This determination is highly dependent on: • whether it is technically feasible to complete the product or system so that it will be avail- able for use; • the management board’s intention to com- plete the product or system and use or sell it; • the ability to use or sell the product or sys- tem; We gained an understanding of and evaluated NX Filtration N.V.’s process with regards to the capitalisation of development costs and reported our observations to the management board and those charged with governance. We primarily relied on substantive testing procedures, based on eciency considerations. As part of our risk assessment procedures, we performed look-back procedures. We veried that the projects capitalised in prior years, resulted in revenues in 2021. We obtained a listing of all projects for which development costs were capitalised during the period. We selected several projects based on the amount of capitalised development costs and obtained explanations and documentation from the management board and the R&D director on how these projects met the criteria for capitalisation of development costs. 153NX Filtration - Annual Report152 Independent auditor’s report Key audit matter Our audit procedures and observations • the probability that the product or system will generate probable future economic bene- ts; • the availability of adequate technical, - nancial and other resources to complete the development; and • the reliability of the measurement of expen- ditures attributable to the product or system during its development. Given the level of judgement required from the management board to determine whether or not the capitalization criteria are met, we considered this area to be a key audit matter. We obtained the technical business plans for the projects and discussed and evaluated them with the R&D director. The technical business plans indicate that the projects are technically feasible to be completed and the products and systems will be available for use in the near future. We evaluated reasonableness of future economic benets and the management board’s intention to sell the products by obtaining evidence such as new contracts with customers. The future economic benets and the management boards intention were supported with available evidence. We discussed the ability of the Company to sell the products and systems with the R&D director and determined that the new products are strongly related to the products and systems currently produced by the Company. We performed procedures to conrm that the R&D department employees are engaged in the projects. We performed procedures to conrm that the Company has sucient funds, resulting in sucient nancial and technical resources to complete the development. We tested the accuracy of directly attributable costs that are capitalised by tracing a sample of external costs back to the invoices received. In addition, we assessed the hourly rate used for the calculation of costs of development employees and traced the capitalised hours back to the time registration. No dierences were noted in these procedures. Based on the procedures performed we found the capitalised development costs to be supported with available evidence. Our procedures did not lead to specic indications of fraud or suspicions of fraud with respect to the capitalisation of development costs. Accuracy of outgoing payments Refer to the consolidated statement of cash ows of the nancial statements During 2021, NX Filtration realised a net cash outow from operations of €13.2 million, a net cash outow from investing activities of 8.6 million and a net cash inow from nancing activ- ities of € 148.7 million. We gained an understanding of and evaluated NX Filtration N.V.’s process with regards to the authorisation of outgoing payments and reported our observations to the management board and those charged with governance. Key audit matter Our audit procedures and observations Given the large amount of cash received from the IPO and the lack of segregation of duties identi- ed in the payment process, we considered this area to be a key audit matter. We obtained an overview of all outgoing payments and tested a selection by performing the following procedures: - verifying that the payments reconciled to the invoices and the invoices were addressed to NX Filtration N.V.; - reconciling the bank account number to which the amount was transferred to the bank account number included on the invoice; - verifying that the expenses made were in line with the business activities and rationale of the entity and that the outgoing payments were approved by two authorised employees. Based on the procedures as set out above, we did not note any material exceptions. Our procedures did not lead to specic indications of fraud or suspicions of fraud with respect to the outgoing payments. Tax deductibility of the listing costs Refer to note 17 to the consolidated nancial statements The loss before tax for NX ltration N.V. amounts € 15,1 million. Included in the loss before tax are the IPO transaction costs of €9.6 million. Only 0.4% of the expenses included in the result are classied as non-taxable, implying that the majority of the IPO transaction costs were in- cluded in the calculation of the corporate income tax benet. Management applied judgement in determining whether the costs should be classied as costs for the Company, resulting in tax deductibility, or cost for the shareholders, resulting in no tax deductibility. Management engaged a manage- ment expert to assess the possibilities relating to the tax deductibility based on Dutch Corporate Income Tax Law and concluded that € 9.3 million of the IPO transaction costs would be tax de- ductible. Given the judgement applied in determining whether the IPO transaction costs are tax de- ductible and given the incidental nature of these costs, we considered this are to be a key audit matter. We gained an understanding of and evaluated NX Filtration N.V.’s process with regards to the corporate income tax declarations and reported our observations to the management board and those charged with governance. We primarily relied on substantive testing procedures, based on eciency considerations. We obtained the report of the management’s expert and performed the following procedures: - evaluated the competency, capabilities and objectivity of the management’s expert; - together with an auditor’s expert, assessed the reasonability of the conclusions reached by the management’s expert; - traced the amounts included in the report of the management’s expert to the nal corporate income tax declaration; and - veried the income tax declaration for mathematical accuracy. Based on the procedures as set out above, we did not note any material exceptions. 155NX Filtration - Annual Report154 Independent auditor’s report In addition to the nancial statements and our auditor’s report thereon, the annual report contains other information that consists of: • 2021 at a glance; • About NX Filtration; • Report of the management board; • Business review; • Sustainability report; • 2021 month-by-month; • Financial performance; • Risks and uncertainties; • Corporate governance; • Report of the supervisory board; and • the other information pursuant to Part 9 of Book 2 of the Dutch Civil Code; Based on the procedures performed as set out below, we conclude that the other information: • is consistent with the nancial statements and does not contain material misstatements; • contains all the information regarding the directors’ report and the other information that is required by Part 9 of Book 2 and regarding the remuneration report required by the sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code. We have read the other information. Based on our knowledge and the understanding obtained in our audit of the nancial statements or otherwise, we have considered whether the other information contains material misstatements. By performing our procedures, we comply with the requirements of Part 9 of Book 2 and section 2:135b subsection 7 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures was substantially less than the scope of those procedures performed in our audit of the nancial statements. The management board is responsible for the preparation of the other information, including the directors’ report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil Code. The management board and the supervisory board are responsible for ensuring that the remuneration report is drawn up and published in accordance with sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code. Our appointment We were appointed as auditors of NX Filtration N.V. on 22 April 2021 by the management board. Our appointment has been renewed annually by the management board and now represents a total period of uninterrupted engagement of 2 years. European Single Electronic Format (ESEF) NX Filtration N.V. has prepared the annual report, including the nancial statements, in ESEF. The requirements for this format are set out in the Commission Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specication of a single electronic reporting format (these requirements are hereinafter referred to as: the RTS on ESEF). In our opinion, the annual report prepared in XHTML format, including the partially tagged consolidated nancial statements as included in the reporting package by NX Filtration N.V., has been prepared in all material respects in accordance with the RTS on ESEF. The management board is responsible for preparing the annual report, including the nancial statements, in accordance with the RTS on ESEF, whereby the management board combines the various components into a single reporting package. Our responsibility is to obtain reasonable assurance for our opinion whether the annual report in this reporting package, is in accordance with the RTS on ESEF. Our procedures, taking into account Alert 43 of the NBA (Royal Netherlands Institute of Chartered Accountants), included amongst others: • Obtaining an understanding of the entity’s nancial reporting process, including the preparation of the reporting package. • Obtaining the reporting package and performing validations to determine whether the reporting package, containing the Inline XBRL instance document and the XBRL extension taxonomy les, has been prepared, in all material respects, in accordance with the technical specications as included in the RTS on ESEF. • Examining the information related to the consolidated nancial statements in the reporting package to determine whether all required taggings have been applied and whether these are in accordance with the RTS on ESEF. No prohibited non-audit services To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in article 5(1) of the European Regulation on specic requirements regarding statutory audit of public-interest entities. Services rendered The services, in addition to the audit, that we have provided to the Company or its controlled entities, for the period to which our statutory audit relates, are disclosed in note 10 to the company nancial statements. Report on the other information included in the annual report Report on other legal and regulatory requirements and ESEF 157NX Filtration - Annual Report156 Independent auditor’s report Responsibilities of the management board and the supervisory board for the nancial statements The management board is responsible for: • the preparation and fair presentation of the nancial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code; and for • such internal control as the management board determines is necessary to enable the preparation of the nancial statements that are free from material misstatement, whether due to fraud or error. As part of the preparation of the nancial statements, the management board is responsible for assessing the Company’s ability to continue as a going-concern. Based on the nancial reporting frameworks mentioned, the management board should prepare the nancial statements using the going-concern basis of accounting unless the management board either intends to liquidate the Company or to cease operations or has no realistic alternative but to do so. The management board should disclose in the nancial statements any event and circumstances that may cast signicant doubt on the Company’s ability to continue as a going concern. The supervisory board is responsible for overseeing the Company’s nancial reporting process. Our responsibilities for the audit of the nancial statements Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sucient and appropriate audit evidence to provide a basis for our opinion. Our objectives are to obtain reasonable assurance about whether the nancial statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high but not absolute level of assurance, which makes it possible that we may not detect all material misstatements. Misstatements may arise due to fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to inuence the economic decisions of users taken on the basis of the nancial statements. Materiality aects the nature, timing and extent of our audit procedures and the evaluation of the eect of identied misstatements on our opinion. A more detailed description of our responsibilities is set out in the appendix to our report. Zwolle, 10 February 2022 PricewaterhouseCoopers Accountants N.V. F.S. van der Ploeg RA In addition to what is included in our auditor’s report, we have further set out in this appendix our responsibilities for the audit of the nancial statements and explained what an audit involves. The auditor’s responsibilities for the audit of the nancial statements We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit consisted, among other things of the following: • Identifying and assessing the risks of material misstatement of the nancial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sucient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control. • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eectiveness of the Company’s internal control. • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management board. • Concluding on the appropriateness of the management board’s use of the going-concern basis of accounting, and based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast signicant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the nancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opinion on the nancial statements as a whole. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluating the overall presentation, structure and content of the nancial statements, including the disclosures, and evaluating whether the nancial statements represent the underlying transactions and events in a manner that achieves fair presentation. Responsibilities for the nancial statements and the audit Appendix to our auditor’s report on the nancial statements 2021 of NX Filtration N.V. 159NX Filtration - Annual Report158 Independent auditor’s report Considering our ultimate responsibility for the opinion on the consolidated nancial statements, we are responsible for the direction, supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the Group to ensure that we performed enough work to be able to give an opinion on the nancial statements as a whole. Determining factors are the geographic structure of the Group, the signicance and/or risk prole of group entities or activities, the accounting processes and controls, and the industry in which the Group operates. On this basis, we selected group entities for which an audit or review of nancial information or specic balances was considered necessary. We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and signicant audit ndings, including any signicant deciencies in internal control that we identify during our audit. In this respect, we also issue an additional report to the audit committee in accordance with article 11 of the EU Regulation on specic requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report. We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related actions taken to eliminate threats or safeguards applied. From the matters communicated with the supervisory board, we determine those matters that were of most signicance in the audit of the nancial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest. 161NX Filtration - Annual Report160 Independent auditor’s report 254900YF0PQV9APMA0502021-01-012021-12-31254900YF0PQV9APMA0502020-01-012020-12-31254900YF0PQV9APMA0502021-12-31254900YF0PQV9APMA0502020-12-31254900YF0PQV9APMA0502019-12-31ifrs-full:IssuedCapitalMember254900YF0PQV9APMA0502020-01-012020-12-31ifrs-full:IssuedCapitalMember254900YF0PQV9APMA0502020-12-31ifrs-full:IssuedCapitalMember254900YF0PQV9APMA0502019-12-31ifrs-full:SharePremiumMember254900YF0PQV9APMA0502020-01-012020-12-31ifrs-full:SharePremiumMember254900YF0PQV9APMA0502020-12-31ifrs-full:SharePremiumMember254900YF0PQV9APMA0502019-12-31ifrs-full:RetainedEarningsMember254900YF0PQV9APMA0502020-01-012020-12-31ifrs-full:RetainedEarningsMember254900YF0PQV9APMA0502020-12-31ifrs-full:RetainedEarningsMember254900YF0PQV9APMA0502019-12-31254900YF0PQV9APMA0502021-01-012021-12-31ifrs-full:IssuedCapitalMember254900YF0PQV9APMA0502021-12-31ifrs-full:IssuedCapitalMember254900YF0PQV9APMA0502021-01-012021-12-31ifrs-full:SharePremiumMember254900YF0PQV9APMA0502021-12-31ifrs-full:SharePremiumMember254900YF0PQV9APMA0502021-01-012021-12-31ifrs-full:RetainedEarningsMember254900YF0PQV9APMA0502021-12-31ifrs-full:RetainedEarningsMemberiso4217:EURiso4217:EURxbrli:sharesNetherlandsEnschede
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