FS Financial Statements - 12/31/ ADVANCED DIGITAL HEALTH MEDICINA PREVENTIVA S.A. Version : 1. Composition of Capital 1.

Transcription

1 FS Financial Statements - 12/31/ Version : 1 Index Company Data Composition of Capital 1 Individual Financial Statements Balance Sheet - Asset Balance Sheet 2 Balance Sheet Liabilities and Shareholders Equity 3 Income Statement 4 Comprehensive Income Statement 6 Cash Flow Statement 7 Statement of Changes in Equity Changes in Equity - 01/01/2017 to 12/31/ Changes in Equity - 01/01/2016 to 12/31/ Changes in Equity - 01/01/2015 to 12/31/ Valued Added Statement 12 Consolidated Financial Statement Balance Sheet - Asset 13 Balance Sheet - Liabilities and Shareholders Equity 14 Income Statement 15 Comprehensive Income Statement 16 Cash Flow Statement 17 Statement of Changes in Equity Changes in Equity - 01/01/2017 to 12/31/ Changes in Equity - 01/01/2016 to 12/31/ Changes in Equity - 01/01/2015 to 12/31/ Valued Added Statement 22 Management Report 23 Explanatory 27 Opinion and Statements Audit Report Qualified 61 Statement of Directors on the Financial Statements 65 Statement of Directors on the Report of the Independent Auditor 66

2 FS Financial Statements - 12/31/ Version : 1 Company Data / Composition of Capital Paid in capital total number of stocks 12/31/2017 Ordinary 7,562,598 Preferred shares 0 Total 7,562,598 Treasury Ordinary 0 Preferred 0 Total 0 PAGE: 1 of 65

3 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Balance Sheet - Asset (Reais thousand) Code Account Total Assets 2,409 2,751 6, Current Assets Cash and Equivalents Accounts Receivable Deferred Tax Assets Deferred Tax Assets Anticipated Expenses Other Current Assets Other Current Assets Non-Current Assets 2,052 1,794 6, Non-Current Assets 1,722 1,388 6, Related-Party Transactions 0 0 4, Related-Party Transactions 0 0 4, Other Non-Current Assets 1,722 1,388 1, Legal Block 1,722 1,388 1, Fixed Assets Fixed Assets Intangible PAGE: 2 of 65

4 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Balance Sheet Liabilities and Shareholders Equity (Reais thousand) Code Account Total Liabilities and Shareholder's Equity 2,409 2,751 6, Current Liabilities 7,931 3,279 34, Payroll Social Taxes Suppliers 1, Suppliers 1, Taxes 1, Taxes 1, Other 4,578 1,452 28, Related-Party Liabilities 4,578 1,452 28, Debts with controlling shareholder 4,578 1,452 28, Provisions , Other Provisions , Other Provisions Provisions 0 0 4, Non-Current Liabilities 3,806 3,704 7, Deferred Tax Liabilities 0 0 3, Taxes 0 0 3, Provisions 3,806 3,704 3, Fiscal, Tax and Civil Provisions 0 0 3, Legal Provisions 0 0 3, Shareholder's Equity -9,328-4,232-35, Paid in Capital 33,860 33, Capital Subscribed 33,860 33, Reserves 4,648 4,332 4, Options Advance for future Capital Increase Shares Granted Exercised 3,859 3,859 3, Profit/Loss Accumulated -47,836-42,424-40,608 PAGE: 3 of 65

5 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Income Statement (Reais thousand) Code Account Revenue Gross Profit Expenses -4,805-7,532-3, General and Administrative Expenses -4,805-7,532-2, Payroll Administrative Expenses -1,207-1, Social Expenses Third-Party Services -2,346-2,008-1, Other administrative Expenses Other Taxes Depreciation and Amortization Other Losses 0-1, Losses Other Losses Earnings Before Interest and Tax -4,787-7,532-3, Financial Result ,082-9, Interest Revenue 341 4, Exchange Rate Variations Interest Expense ,607-10, Exchange Variations , Earnings Before taxes -5,411-5,450-12, Taxes 0 3,633-2, Deferred 0 3,633-2, Profit/Loss -5,411-1,817-14, Profit/Loss -5,411-1,817-14, Earnings per Share - (Reais / Stock) Earnings per Share ON PAGE: 4 of 65

6 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Income Statement (Reais thousand) Code Account ON PAGE: 5 of 65

7 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Comprehensive Income Statement (Reais thousand) Code Account Net Profit -5,411-1,817-14, Comprehensive income for the period -5,411-1,817-14,799 PAGE: 6 of 65

8 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Cash Flow Statement (Reais thousand) Code Account Cash Flow from operating activities , Cash Generated from operations -4, , Net Profit/Loss -5,411-1,817-14, Depreciation and Amortization Interest Expense , Net Exchange Variations 220-2,371 7, Interest income Impairment Loss 0 1, Deferred Tax and Social Contribution 0-3,633 2, Other reconciliation adjustments 0 6,588-12, Financial Revenue Changes in Assets and Liabilities 4,379-33,333 14, Advance to employee Prepaid Expenses Taxes to recover Other Assets Suppliers Taxes, Fees and Contributions Provision for Vacation and Charges Other Liabilities Legal block Accounts receivable 0 0-4, Other accounts receivable Provision for overdraft liabilities of investees 0 0 4, Accounts payable - related parties 2,317-29,591 11, Other contingencies Deferred taxes 0-3,633 2, Labor Obligations Fixed assets PAGE: 7 of 65

9 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Cash Flow Statement (Reais thousand) Code Account Net Cash Investing Activities Change in fixed and intangible assets Net Cash Financing Activities , Advance for future capital increase Increase (Reduction) in Cash and Equivalents Initial Cash Balance Ending Cash Balance PAGE: 8 of 65

10 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Statement of Changes in Equity / Changes in Equity - 01/01/2017 to 12/31/2017 (Reais thousand) Code Account Paid in capital Capital Reserves, Options and Treasury Stock Retained Earnings Accumulated Profit or Loss Other Comprehensive Results Shareholders Equity 5.01 Initial Balance 33, ,859-42, , Adjusted Initial Balance 33, ,859-42, , Total Comprehensive result , , Net Profit , , Other comprehensive results Advance for future capital increase Ending balance 33, ,175-47, ,328 PAGE: 9 of 65

11 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Statement of Changes in Equity / Changes in Equity - 01/01/2016 to 12/31/2016 (Reais thousand) Code Account Paid in Capital Capital Reserves, Options and Treasury Stock Retained Earnings Accumulated Profit or loss Other Comprehensive Results Shareholders' Equity 5.01 Initial Balance ,859-40, , Adjusted Initial Balance ,859-40, , Capital Transactions with Shareholders 33, , Capital increase 33, , Comprehensive result , , Net Profit , , Ending Balance 33, ,859-42, ,232 PÁGINA: 10 de 65

12 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Statement of Changes in Equity / Changes in Equity - 01/01/2015 to 12/31/2015 (Reais thousand) Code Account Paid in Capital Capital Reserves, Options and Treasury Stock Retained Earnings Accumulated Profit or Loss Other Comprehensive Results Shareholders' Equity 5.01 Initial Balance 689 1,493 3,859-26, , Adjusted Initial Balance 689 1,493 3,859-26, , Capital Transactions with Shareholders 0-1, , Expenses with options granted 0-1, , Comprehensive result , , Net Profit , , Ending Balance ,859-40, ,587 PAGE: 11 of 65

13 FS Financial Statements - 12/31/ Version : 1 Individual Financial Statements / Statement of Changes in Equity / Value Added Statement (Reais thousand) Code Account Revenue Sale of Product and Services Cost of Goods and Services -2,673-3,731-1, Energy, third party services and other -2,267-2,008-1, Other , Gross Value Added -2,655-3,731-1, Value Retained , Depreciation, Depletion and Amortization Other 0 0-2, Net Value Added Produced -2,731-3,769-3, Value Added received on transfer , Financial revenue , Value Added to Distribute -3,062-1,665-3, Distributed Value Added -3,062-1,665-3, Personal 1,521 2, Payroll 1,360 2, Benefits F.G.T.S Taxes, Fees and Contributions 455-2, Federal 455-2, State Interest on third party capital , Interest , Rental Interest on Equity -5,411-1,817-14, Retained profit / loss -5,411-1,817-14,799 PAGE: 12 of 65

14 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Balance Sheet - Asset (Reais thousand) Code Account Total Assets 2,409 2,751 6, Current Assets Cash and Equivalents Cash and Bank account Accounts receivable Taxes to recover Current taxes to recover Anticipated expenses Other current assets Other current assets Non-current assets 2,052 1,794 6, Realizable assets in the long term 1,722 1,388 6, Related Party Credits 0 0 4, Credits with affiliates 0 0 4, Other non-current assets 1,722 1,388 1, Legal Block 1,722 1,388 1, Fixed assets Fixed assets in operation Intangible PAGE: 13 of 65

15 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Balance Sheet Liabilities and Shareholders Equity (Reais thousand) Code Account Equity and Liabilities 2,409 2,751 6, Current Liabilities 7,931 3,279 34, Social and Labor Obligation Social Obligation Labor Obligation Suppliers 1, National Suppliers 1, Tax obligation 1, Federal tax obligation 1, Other obligation 4,578 1,452 33, Related Party Liabilities 4,578 1,452 33, Debts with controlling shareholder 4,578 1,452 33, Provisions Other provisions Other provisions Non-current liabilities 3,806 3,704 7, Deferred taxes 0 0 3, Deferred income taxes and social contributions 0 0 3, Provisions 3,806 3,704 3, Fiscal, Labor and Civil provisions 0 0 3, Civil Provisions 0 0 3, Shareholders' Equity -9,328-4,232-35, Paid in capital 33,860 33, Capital reserves 4,648 4,332 4, Options Advance for future capital increase Shares granted realized 3,859 3,859 3, Accumulated Profit / Loss -47,836-42,424-40,608 PAGE: 14 of 65

16 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Income Statement (Reais thousand) Code Account Revenue Gross Profit Operating Revenue/Expenses -4,805-7,532-3, General and Administrative Expenses -4,805-7,532-3, Payroll - directors Salaries -1,207-1, Social Expenses Third party services -2,346-2,008-1, Other administrative expenses Other taxes and fees Depreciation and amortization Other losses 0-1, Earnings Before interest and tax -4,787-7,532-3, Financial result ,082-9, Financial revenue 341 4, Interest receives Financial expenses ,607-10, Other financial expenses , Earnings before taxes -5,411-5,450-12, Taxes 0 3,633-2, Deferred 0 3,633-2, Net Result -5,411-1,817-14, Consolidated Profit/Loss -5,411-1,817-14, Assigned to parent company -5,411-1,817-14, Earnings per share - (Reais / Stock) Basic earnings per share ON Diluted earnings per share ON PAGE: 15 of 65

17 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Comprehensive Income Statement (Reais thousand) Code Account Net Profit -5,411-1,817-14, Comprehensive consolidated income for the period -5,411-1,817-14, Assigned to parent company -5,411-1,817-14,799 PAGE: 16 of 65

18 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Cash Flow Statement (Reais thousand) Code Account Net cash from operating activities , Cash Generated from operations -4, , Net Profit/Loss -5,411-1,817-14, Depreciation and Amortization Interest Expense , Net Exchange Variations 220-2,371 7, Interest income Impairment Loss 0 1, Deferred Tax and Social Contribution 0-3,633 2, Other reconciliation adjustment 0 6,588-12, Financial Revenue Changes in Assets and Liabilities 4,379-33,333 14, Advance to employee Prepaid Expenses Taxes to recover Other Assets Suppliers Taxes, Fees and Contributions Provision for Vacation and Charges Other Liabilities Legal block Provision for overdraft liabilities of investees 0 0 4, Fixed assets Accounts receivable from related party 0 0-4, Accounts payable - related parties 2,317-29,591 11, Provisions for contingencies Deferred taxes 0-3,633 2, Labor obligations Other accounts receivable PAGE: 17 of 65

19 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Cash Flow Statement (Reais thousand) Code Account Net Cash Investing Activities Change in fixed and intangible assets Net Cash Financing Activities , Advance for future capital increase Increase (Reduction) in Cash and Equivalents Initial Cash Balance Ending Cash Balance PAGE: 18 of 65

20 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Statement of Changes in Equity / Changes in Equity 01/01/2017 to 12/31/2017 (Reais thousand) Code Account Paid in capital Capital Reserves, Options and Treasury Stock Retained Earnings Accumulated Profit or Loss Other Comprehensive Results Shareholders' Equity Non-Controlling Shareholders Stake Shareholders Equity Consolidated 5.01 Initial Balance 33, ,859-42, , , Adjusted Initial Balance 33, ,859-42, , , Total Comprehensive result , , , Net Profit , , , Other comprehensive results Advance for future capital increase Ending balance 33, ,175-47, , ,328 PAGE: 19 of 65

21 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Statement of Changes in Equity / Changes in Equity 01/01/2016 to 12/31/2016 (Reais thousand) Code Account Paid in Capital Capital Reserves, Options and Treasury Stock Retained Earnings Accumulated Profit or Loss Other Comprehensive Results Shareholders' Equity Non-controlling Shareholders stake Shareholders Equity Consolidated 5.01 Initial Balance ,859-40, , , Adjusted Initial Balance ,859-40, , , Capital Transactions with Shareholders 33, , , Capital increase 33, , , Comprehensive result , , , Net Profit , , , Ending Balance 33, ,859-42, , ,232 PAGE: 20 of 65

22 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Statement of Changes in Equity / Changes in Equity 01/01/2015 to 12/31/2015 (Reais thousand) Code Account Paid in Capital Capital Reserves, Options and Treasury Stock Retained Earnings Accumulated Profit or Loss Other Comprehensive Results Shareholders' Equity Non-controlling Shareholders stake Shareholders' Equity Consolidated 5.01 Initial Balance ,859-26, , , Adjusted Initial Balance ,859-26, , , Capital Transactions with Shareholders 0-1, , Expenses with options granted 0-1, , Comprehensive result , , , Net Profit , , , Ending Balance ,859-40, , ,587 PAGE: 21 of 65

23 FS Financial Statements - 12/31/ Version : 1 Consolidated Financial Statement / Value Added Statement (Reais thousand) Code Account Revenue Sale of Product and Services Cost of Goods and Services -2,673-3,731-1, Cost of Goods and Services 0 0-1, Energy, third party services and other -2,267-2, Other , Gross Value Added -2,655-3,731-1, Value Retained , Depreciation, Depletion and Amortization Other 0 0-2, Net Value Added Produced -2,731-3,769-3, Value Added received on transfer , Financial revenue , Value Added to Distribute -3,062-1,665-3, Distributed Value Added -3,062-1,665-3, Personal 1,521 2, Payroll 1,360 2, Benefits F.G.T.S Taxes, Fees and Contributions 455-2, Federal 455-2, State Interest on third party capital , Interest , Rental Interest on Equity -5,411-1,817-14, Retained profit / loss -5,411-1,817-14,799 PAGE: 22 of 65

24 FS Financial Statements - 12/31/ Version : 1 Management Report MANAGEMENT REPORT In compliance with legal provisions and in accordance with current corporate law, Advanced Digital Health Medicina Preventiva S.A. (Advanced Digital Health Preventive Medicine S.A., "Company", ADH) presents the Management Report with the financial and operating results for the year ended December 31, Advanced Digital Health Preventive Medicine S.A. is a company that develops systems and processes aimed at the well-being of people through methodologies of habit change uniting cutting edge technology, genetic of each individual, their lifestyle and ancestry, allowing accurate diagnosis on the health and the body of each one, supported by the most respected scientific studies. The Company operates in this niche market and has decided to adopt a new strategy to create value for the Company and its shareholders. The focus has become an in-house platform that will bring together all support and customer support activities throughout the 21 weeks of wellness activity. Considering that the Company was in a pre-operational mode until November 2017, the costs of developing and maintaining administrative and outsourced services during the year ended December 31, 2017 were made through inputs from the controlling shareholder. The Company recorded a loss of R $ 5.4 million in the period. The net cash provided by intercompany loans with the controller was enough to support the Company's operations throughout 2017, reaching the end of 2017 R $ 157 thousand in cash. In the year ended December 31, 2017, the Company's financial commitments were limited to loans entered into with its parent company. PAGE: 23 of 65

25 FS Financial Statements - 12/31/ Version : 1 Management Report Operational Performance (with revenues generated starting mid-december 2017): Consolidated Information (R $ thousand) Income Statement R$ thousand DIGITAL HEALTH MEDICINA PREVENTIVA S.A vs 2016 Revenue 18 - n.a. Gross Profit 18 0 n.a. Payroll directors (210) (946) -78% Salaries (1,207) (1,862) -35% Social Expenses (559) (727) -23% Third party services (2,346) (2,008) 17% Other administrative expenses (359) (675) -47% Other taxes and fees (48) (70) -31% Depreciation and amortization (76) (38) 100% Other losses - (1,206) -100% General and Administrative Expenses (4,805) (7,532) -36% Earnings Before interest and tax (4,787) (7,532) -36% Financial revenue 341 4,689-93% Financial expenses (965) (2,607) -63% Financial result (624) 2, % Earnings before taxes (5,411) (5,450) -1% Taxes - current Taxes - Deferred - 3, % Net Loss (5,411) (1,817) 198% On December 31, 2017, (i) the Company's shareholders' equity was negative in R $ 9.3 million, (ii) debt (intercompany loans) with the controller, representing the Company's total indebtedness in the pre-operational phase was R $ 4.6 million, remunerated at an interest rate of 4% per annum and (iii) cash and cash equivalents registered was R $ 157 thousand. In 2017, an important part of the Company's resources was contributed through mutual funds with the parent company in the amount of R $ 2,617 thousand, guaranteeing its capitalization. The Company has only loan agreements with its parent company, Metropolis Capital Markets GmbH. There is no financing from financial institutions. PAGE: 24 of 65

26 FS Financial Statements - 12/31/ Version : 1 Management Report List of intercompany loan contracts: Funds entry date Total contract value in (US$) Value of transfers (US$) Contract value in (R$) Net Value received Cost (%) Type 10/14/16 Intercompany 90, , , ,070 11% p.a. 11/09/16 Intercompany 90, , , ,514 11% p.a. 11/29/16 Intercompany 60, , ,517 11% p.a. 12/06/16 Intercompany 30, ,180 99,015 11% p.a. 12/09/16 Intercompany 100, , ,970 32,805 11% p.a. 11/10/16 Intercompany 50, , ,468 11% p.a. 11/29/16 Intercompany 60, , ,530 32,367 11% p.a. 12/12/16 Intercompany 50, , ,538 11% p.a. 12/26/16 Intercompany 35, , ,358 11% p.a. 12/29/16 Intercompany 100, , ,710 46,554 11% p.a. 01/20/17 Intercompany 100, , , ,842 11% p.a. 01/26/17 Intercompany 100, , , ,043 11% p.a. 04/17/17 Intercompany 100, , , ,350 11% p.a. 07/18/17 Intercompany 100, , , ,047 4% p.a. 09/12/17 Intercompany 100, , , ,250 4% p.a. 11/06/17 Intercompany 100, , , ,287 4% p.a. 11/06/17 Intercompany 250, , , ,600 4% p.a. 11/10/17 Intercompany 50, , ,594 4% p.a. 11/16/17 Intercompany 100, , ,550 4% p.a. Total 1,290, ,290, ,010,842 4,000,613 Personnel expenses: In 2017, there was a decrease in personnel expenses. Specialized team was hired, with a strong track record in health startups, which adapted the structure of the company to the current moment, focusing efforts on product development. This impact is observed by the reduction of 49.5% in the Personnel Expenses and Administration Fees, which went down from R $ 2.8 million in 2016 to R $ 1.4 million in Third-party services: In 2017, there was an increase in the line of services with third parties by hiring technology service providers, developers and consultants. Other administrative expenses: In 2017, administrative expenses with rent decreased with the change in the São Paulo team. Expenses with stock options granted: There were no expenses with the Stock Option Program or Purchase of Common Shares. In 2017, stock purchase plans for the Company's executives were granted with the first maturity from the beginning of Independent Auditors: During the 2017 financial year, the external auditing work PAGE: 25 of 65

27 FS Financial Statements - 12/31/ Version : 1 Management Report of financial statements prepared in accordance with accounting practices adopted in Brazil and the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) applicable to real estate development entities in Brazil and approved by the Accounting Pronouncements Committee (CPC), by the Commission Securities (CVM) and the Federal Accounting Council (CFC) were carried out by BDO Auditores Independentes, for the amount of R $ 120 thousand. Pursuant to CVM Instruction 381 of January 14, 2003, confirmed by Circular Letter CVM / SNC / SEP / January 1, 2007, the Company informs that its independent auditors have not rendered services not related to independent auditing in Human Resources: The management of personnel at Advanced Digital Health Preventive Medicine S.A. involves employees specialized in specific activities and hired by the Company to carry out the activities defined by the project planning. Advanced DH always seeks to promote the use of available technologies to minimize the environmental impact of its projects and operations, to encourage healthy habits among its teams, and to comply with current legislation - laws, standards and resolutions - to consume less natural resources and produce as little waste as possible. Management PAGE: 26 of 65

28 Management for intermediary, individual and consolidated accounting 1. Operational context ADH ("ADH" or "Company"), a publicly-held corporation with common shares traded on B3 (formerly BMF & BOVESPA), headquartered at Av. Nações Unidas, º andar São Paulo, SP, has as its corporate purpose: (i) provision of preventive medicine services; (ii) trade, including in the segment of e-commerce, distribution, import and export of laboratory test kits; (iii) business intermediation; (iv) trademark and franchise licensing; and (v) participation as partner or shareholder in other companies of any kind, whether Brazilian or foreign. Its parent company is Metropolis Capital Markets GmbH, a company headquartered in Frankfurt, Germany. On November 13, 2017, the Company announced that it has launched its InYou platform. The InYou platform brought in its launch the "InYou 21 Weeks Program", which aims to change people's lifestyles, so that they live with more health, disposition and beauty. It begins with the definition of the profile of the individual made through the collection of four groups of : genetic sequencing, family history, medical history and daily habits. From this profile, the health professional associated with the platform will set up a program based on Nutrition and Fitness, which, among other characteristics, will point out possible diseases that could be avoided due to the engagement, such as the appearance of Type Diabetes II. During 21 Weeks, the user will have periodic goals to be achieved, will be encouraged through different technological resources and in the end you can see one before and after the program. The next step is to build the distribution network so that it grows, generates revenue, and becomes formally operational. InYou is a product with growth potential aligned to the society's demand for solutions that make the health sector more sustainable. The development of InYou counted on the technical and scientific support of physicians, geneticists, physical educators and nutritionists from both Brazil and the United States. 2. a) Continuity of operations The Company maintains a mutual agreement with Metropolis Capital Markets (Controller), since its pre-operational phase is financed by its Controller (intercompany loans), and henceforth, until the Company's operations are self-sufficient in order to guarantee financial equilibrium, it will also depend substantially on financial contributions (intercompany loans / capital increase) coming from its Controller. The loan agreements have the following characteristics: 1 PÁGINA: 27 de 65

29 Management for intermediary, individual and consolidated accounting Resources received on Ammount (US$) Amount (US$) Amount (R$) Net Amount (R$) 10/14/16 Intercompany 90, , , ,070 11% p.a. 11/09/16 Intercompany 90, , , ,514 11% p.a. 11/29/16 Intercompany 60, , ,517 11% p.a. 12/06/16 Intercompany 30, ,180 99,015 11% p.a. 12/09/16 Intercompany 100, , ,970 32,805 11% p.a. 11/10/16 Intercompany 50, , ,468 11% p.a. 11/29/16 Intercompany 60, , ,530 32,367 11% p.a. 12/12/16 Intercompany 50, , ,538 11% p.a. 12/26/16 Intercompany 35, , ,358 11% p.a. 12/29/16 Intercompany 100, , ,710 46,554 11% p.a. 01/20/17 Intercompany 100, , , ,842 11% p.a. 01/26/17 Intercompany 100, , , ,043 11% p.a. 04/17/17 Intercompany 100, , , ,350 11% p.a. 07/18/17 Intercompany 100, , , ,047 4% p.a. 09/12/17 Intercompany 100, , , ,250 4% p.a. 11/06/17 Intercompany 100, , , ,287 4% p.a. 11/06/17 Intercompany 250, , , ,600 4% p.a. 11/10/17 Intercompany 50, , ,594 4% p.a. 11/16/17 Intercompany 100, , ,550 n/a. Total 1,290, ,290, ,010,842 4,000,613 2 PÁGINA: 27 de 65

30 Management for intermediary, individual and consolidated accounting a. Subsidiaries The Company has interests in the following companies: Company Stake (%) Zanka 06 Participações Empresariais Spe Ltda. 100 MCM Gold Ltda. 100 These companies were incorporated with focus on strategic plans of the previous management (mining and cosmetics), and are no longer in operation. However, the process of closure of such companies before the competent authorities is still in progress. 2. Summary of significant accounting practices The main accounting policies adopted in the preparation of these financial statements are described below. These policies were consistently applied in all years presented Basis of preparation and preparation Declaration of conformity (in relation to IFRS and CPC standards) 2.1. Basis of preparation and preparation Declaration of conformity (in relation to IFRS and CPC standards) 2 PAGE: 28 to 65

31 Management for intermediary, individual and consolidated accounting The individual and consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and also in accordance with accounting practices adopted in Brazil issued by the Federal Accounting Council (CFC) with based on pronouncements issued by the Accounting Pronouncements Committee (CPC) and regulations of the Brazilian Securities and Exchange Commission (CVM). The presentation of the Statement of Added Value (DVA) is required by Brazilian corporate law and by the accounting practices adopted in Brazil applicable to publiclyheld companies. IFRS does not require the presentation of this statement. As a consequence, under IFRS, this statement is presented as supplementary, with no prejudice to all financial statements. The financial statements are presented in reais, which is also the Company's functional currency. All balances were rounded to the nearest thousand, unless otherwise noted. These financial statements were approved by the Board of Directors and the Board of Executive Officers on March 29, Basis of measurement The financial statements have been prepared based on historical cost, except for the following material items recognized in the balance sheets: Non-derivative financial instruments designated at fair value through profit or loss are measured at fair value; Available-for-sale financial assets are measured at fair value; Liabilities for cash-settled share-based payment transactions are measured at fair value; Net defined benefit asset or liability is recognized as the fair value of the plan assets, less the present value of the defined benefit obligation; Revenue recognition; Contingent liabilities; Investments. 3 PAGE: 29 to 65

32 Management for intermediary, individual and consolidated accounting 2.3. Changes in accounting policies and disclosures The IFRS emissions / changes made by the IASB that are effective for the year beginning in 2017 had no impact on the Company's financial statements. In addition, the IASB issued / revised some IFRS standards, which are adopted for the years beginning on January 1, 2018 and subsequent years. The Company is evaluating the impacts on its financial statements of the adoption of the following standards: IFRS 9 - Financial instruments: replaces IAS 39 and refers some questions on the application of the standard and introduces the concept of "fair value against comprehensive income" for the measurement of some types of debt instruments, in addition to recognition of losses due to the non-recoverability of assets related to the recording of expected losses with credits on financial assets and commitments of renegotiation of these credits and hedge accounting. This standard is effective for fiscal years beginning on or after January 1, 2018; IFRS 15 - Customer Contracts Revenue: establishes principles of revenue recognition and disclosure of about the nature, amount, timing and uncertainties of revenues and cash flows arising from contracts with clients of an entity, as well as in the document issued later clarifies important aspects of the standard. This standard is effective for fiscal years beginning on or after January 1, 2018; I FRS 16 - Lease: establishes aspects of recognition, measurement and disclosure of leases. This standard is effective for fiscal years beginning on or after January 1, Consolidated Financial Statements: The following accounting policies are applied in the preparation of the financial statements Participation of non-controlling shareholders: The Company elected to measure any non-controlling interest in the acquiree by the proportional participation in the identifiable net assets at the acquisition date. 4 PAGE: 30 to 65

33 Management for intermediary, individual and consolidated accounting Subsidiaries The Company controls an entity when it is exposed to, or is entitled to, the variable returns arising from its involvement with the entity and has the ability to affect those returns by exercising its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which the Company obtains control until the date on which the control ceases to exist. In the individual financial statements of the parent company, the financial statements of subsidiaries are recognized using the equity method Loss of control When the entity loses control over a subsidiary, the Company derecognizes the assets and liabilities and any non-controlling interests and other components recorded in shareholders' equity relating to this subsidiary. Any gain or loss arising from loss of control is recognized in profit or loss. If the Company retains any interest in the former subsidiary, such participation is measured at its fair value on the date of loss of control Functional currency The items included in the financial statements of the Company and each of the companies included in the consolidated financial statements are measured using the currency of the main economic environment in which the companies operate (functional currency) Cash and cash equivalents Cash equivalents are held for the purpose of meeting short-term cash commitments, not for investment or other purposes. They include cash, cash deposits and financial investments that are realizable within 90 days of the original date of the security or are considered to be of immediate liquidity or convertible into a known amount of cash and which are subject to an insignificant risk of change of value, which are recorded at cost amounts, plus income earned through the balance sheet dates, which do not exceed their market or realizable value. 5 PAGE: 31 to 65

34 Management for intermediary, individual and consolidated accounting 2.7 Financial instruments Categories The category depends on the purpose for which the financial assets and liabilities were acquired or contracted and is determined on initial recognition of the financial instruments. Financial assets measured at fair value through profit or loss These are financial assets held for trading, when they are acquired for this purpose, mainly in the short term and are measured at fair value on the date of the financial statements, and the changes are recognized in the income statement. Derivative financial instruments are also classified in this category. Assets in this category are classified in current assets. Held-to-maturity financial assets They comprise investments in certain financial assets classified at the time of initial contracting to be held to maturity, which are measured at amortized cost using the effective interest rate method, less impairment losses. The Company has no held-tomaturity investments during the years ended December 31, 2017 and Available-for-sale financial assets When applicable, this classification includes non-derivative financial assets that are designated as available-for-sale or are not classified as: (a) loans and receivables; (b) investments held to maturity; or (c) financial assets at fair value through profit or loss. 6 PAGE: 32 to 65

35 Management for intermediary, individual and consolidated accounting Loans and receivables Included in this classification are non-derivative financial assets with fixed or determinable receipts that are not quoted in an active market. They are recorded in current assets, except where applicable, those with a maturity of more than 12 months after the balance sheet date, which are classified as non-current assets. After initial measurement, these financial assets are accounted for at amortized cost, using the effective interest method (effective interest rate), less impairment loss. The amortized cost is calculated taking into account any discount or "premium" on the acquisition and fees or costs incurred The financial liabilities held by the Company are classified under the following categories: Financial liabilities measured at fair value through profit or loss They are classified at fair value through profit or loss when they are held for trading or designated at fair value through profit or loss. Other financial liabilities They are measured at amortized cost using the effective interest method. As of December 31, 2017 and 2016, in the case of the Company, comprise loans with related parties and balances payable to domestic and foreign suppliers Measurement Regular purchases and sales of financial assets are recognized on the trade date, that is, on the date that the Company undertakes to buy or sell the asset. Loans and receivables and financial assets held to maturity are measured at the cost of amortization. 7 PAGE: 33 to 65

36 Management for intermediary, individual and consolidated accounting Financial assets at fair value through profit or loss are initially recognized at fair value and transaction costs are recorded in the statement of income. Gains or losses arising from changes in the fair value of financial assets measured at fair value through profit or loss are recorded in the statement of income under "Financial income" or "Financial expenses", respectively, in the period in which they occur. For financial assets classified as Available-for-sale, when applicable, these changes are recorded under "Other comprehensive income" in the comprehensive income and shareholders' equity, until the financial asset is settled, when reclassified to income for the year Compensation of financial instruments Financial assets and liabilities are cleared and the net amount is presented in the balance sheet when there is a legally enforceable right to offset the amounts recognized and there is the intention to liquidate them on a net basis or to realize the asset and settle the liability simultaneously De-recognition (low) of financial instruments A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is written off when the rights to receive cash flows from the asset have expired, and / or, when transferring their rights or risks of receiving the cash flows of the asset or assumed an obligation to pay in full the cash flows received Effective interest method It is used to calculate the amortized cost of a debt instrument and allocate its interest income over the corresponding period. The effective interest rate accurately discounts estimated future cash receipts (including all fees and points paid or received that are an integral part of the effective interest rate, transaction costs, and other premiums or deductions) over the estimated life of the instrument. debt or, where appropriate, for a shorter period, to the net carrying amount on the date of initial recognition. 8 PAGE: 34 to 65

37 Management for intermediary, individual and consolidated accounting Revenue is recognized based on effective interest for debt instruments not characterized as financial assets at fair value through profit or loss Immobilized Measured at acquisition cost and / or construction, plus interest capitalized during the construction period, when applicable to qualifying assets, and reduced by accumulated depreciation and impairment losses, when applicable. Rights related to tangible assets intended for the maintenance of the Company's and its subsidiaries' activities, arising from financial leasing operations, are recorded as if they were a financed purchase, recognizing at the beginning of each transaction a fixed asset and a liabilities and the assets are also subject to depreciation calculated according to the estimated useful lives of the respective assets or the duration of the contract, in cases in which there is no option to purchase. The residual values and the useful life of the assets are reviewed and adjusted, if appropriate, at the end of each year. Gains and losses on disposals are determined by comparing the sale price with the book value and are recognized in the statement of income Intangible assets Software Computer software licenses and business management systems acquired are capitalized and amortized at the rates described in Note 9 and maintenance expenses are recognized as expenses when incurred. Expenses with the acquisition and implementation of business management systems are capitalized as an intangible asset when there is evidence of future economic benefits, considering its economic and technological viability. Software development expenses recognized as assets are amortized using the straight-line method over their estimated useful lives. Expenses related to software maintenance are recognized in the statement of income when incurred. 9 PAGE: 35 to 65

38 Management for intermediary, individual and consolidated accounting 2.10 Valuation of the recoverable value of the assets The net book value of assets other than those measured at fair value are evaluated annually to identify evidence of non-recoverable losses or whenever events or significant changes in circumstances indicate that the carrying amount may not be recoverable. When applicable, if there is a loss arising from situations in which the book value of the asset exceeds its recoverable value, the loss is recognized. For impairment purposes, assets are grouped at the lowest levels for which there are separately identifiable Cash Flow Units (CGUs). The recoverable amount of an asset or a certain cash-generating unit is defined as the higher of the value in use and the net sale value. In estimating the value in use of the asset, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the weighted average cost of capital for the industry in which the cash-generating unit operates. The net sale value is determined, whenever possible, based on a firm sale agreement in a transaction between commutative, knowledgeable and interested parties, adjusted for expenses attributable to the sale of the asset, or, when there is no firm sales contract, based on the market price of an active market, or the price of the most recent transaction with similar assets Suppliers and accounts payable Suppliers and accounts payable are obligations payable for goods or services that were acquired from suppliers in the ordinary course of business and are classified as current liabilities if payment is due within a period of up to one year. Otherwise, the accounts payable are presented as non-current liabilities. Initial recognition is at fair value and subsequently measured at amortized cost using the effective interest rate method. In practice, they are usually recognized at the corresponding invoice amount Loans and financing with related parties 10 PAGE: 36 to 65

39 Management for intermediary, individual and consolidated accounting Loans and financing with related parties are initially recognized at fair value, net of costs incurred in the transaction and are subsequently stated at amortized cost. Any difference between the amounts received (net of transaction costs) and the settlement value is recognized in the income statement during the period in which the loans are outstanding using the effective interest rate method. Loans and financing with related parties are classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date Provisions for procedural risks Recognized when the Company and its subsidiaries have a present or non-formalized obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be estimated safely. The provisions are quantified at the present value of the expected disbursement to settle the obligation, and the appropriate discount rate is used according to the risks related to the liability. They are updated through the balance sheet dates by the estimated amount of probable losses, based on their nature and supported by the opinion of the Company's legal advisors. The grounds and nature of the provisions for tax, civil and labor risks are described in Note Current and deferred income tax and social contribution Income tax and social contribution expenses for the period comprise current and deferred taxes. Income taxes are recognized in the statement of income, except in so far as they relate to items recognized directly in shareholders' equity. In this case, the tax is also recognized in shareholders' equity. The current income tax and social contribution charge is calculated based on the tax laws enacted or substantially enacted on the balance sheet date in the country in which the Company operates and generates "taxable profit". 11 PAGE: 37 to 65

40 Management for intermediary, individual and consolidated accounting Management periodically evaluates the positions assumed by the Company in income tax returns in relation to situations in which the applicable tax regulations give rise to interpretations. It establishes provisions, where appropriate, based on the estimated amounts of payment to the tax authorities. Deferred Income Tax and Social Contribution are recognized using the liability method on temporary differences arising from differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred income tax and social contribution are not accounted for if it results from the initial recognition of an asset or liability in a transaction other than a business combination, which, at the time of the transaction, does not affect the accounting result, nor does it the "taxable profit" / tax loss. Deferred income tax and social contribution are determined using tax rates (and tax laws) promulgated or substantially enacted at the balance sheet date and that must be applied when the respective deferred tax asset is realized or when the deferred tax liability is settled. Deferred income tax and social contribution assets are recognized only in proportion to the probability that future "taxable profit" is available and against which temporary differences can be used. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when deferred income tax assets and liabilities are related to income taxes levied by the same tax authority on the taxable entity or different taxable entities where it is intended to settle the balances on a net basis Capital Stock Ordinary shares are classified in shareholders 'equity, and incremental costs directly attributable to the issuance of new shares or options are stated in shareholders' equity as a deduction from the amount collected, net of taxes. 13 PAGE: 39 to 65