Exhibit 99.1

Positivo Soluções Didáticas

Unaudited interim condensed combined carve-out financial statements as of October 31, 2019

Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

Contents

Unaudited interim condensed combined carve-out balance sheets	3
Unaudited interim condensed combined carve-out statements of comprehensive income	4
Unaudited interim condensed combined carve-out statements of changes in parent´s net investments	5
Condensed combined carve-out statements of cash flows - indirect method	6
Notes to the unaudited interim condensed combined carve-out financial statements	7

2

Positivo Soluções Didáticas 

Unaudited interim condensed combined carve-out balance sheets 

(In thousands of Reais – R$ thousand)

Assets	Note	10/31/2019		12/31/2018		Liabilities	Note	10/31/2019		12/31/2018
Current assets						Current liabilities
Cash and cash equivalents	5		37,609		20,328	Suppliers			6,381		14,039
Trade accounts receivable	6		65,142		99,766	Salaries, provisions and social contributions			21,513		19,964
Inventories	7		6,622		5,909	Taxes payable			1,391		1,942
Recoverable taxes			138		195	Income tax and social contribution payable			17,927		11,858
Recoverable income tax (IRPJ) and social contribution (CSLL)			5		126	Advances from clients			183		183
Advances to suppliers - related parties	11		8,834		-	Lease payable	10		2,358		-
Other receivables			1,462		1,457	Other liabilities			6,729		7,943
			119,812		127,781				56,482		55,929
Non-current assets						Non-current liabilities
Judicial deposits			19		48	Advances from clients			426		578
Deferred income tax and social contribution			8,104		15,934	Taxes payable			438		518
Property, plant and equipment	8		10,015		4,095	Provision for tax, civil and labor risks			4,649		5,359
Intangible assets	9		35,020		32,156	Lease payable	10		3,016		-
			53,158		52,233				8,529		6,455
						Parent´s net investments			107,959		117,630
			172,970		180,014				172,970		180,014

See the accompanying notes to the unaudited interim condensed combined carve-out financial statements.

3

Positivo Soluções Didáticas

Unaudited interim condensed combined carve-out statements of comprehensive income

For the ten-month ended October 31

(In thousands of Reais – R$ thousand)

	Note	10/31/2019			10/31/2018
Net revenue from sales	12		321,559			324,179
Cost of sales	13		(87,750	)		(77,263	)
Gross profit			233,809			246,916
Operating expense
General and administrative expenses	13		(53,245	)		(53,211	)
Selling and distribution expenses	13		(60,279	)		(49,385	)
Other operating income, net			45			736
Impairment loss on accounts receivable	13		(789	)		(3,132	)
Income before financial income and taxes			119,541			141,924
Financial income
Financial revenues	14		3,973			3,480
Financial expenses	14		(1,078	)		(1,374	)
Income before income tax and social contribution			122,436			144,030
Income tax and social contribution
Current			(33,399	)		(50,933	)
Deferred			(7,830	)		1,968
Net income for the year			81,207			95,065

See the accompanying notes to the unaudited interim condensed combined carve-out financial statements.      

4

Positivo Soluções Didáticas

Unaudited interim condensed combined carve-out statements of changes in parent´s net investments

For the ten-month ended October 31

(In thousands of Reais – R$ thousand)

	Note		Parent´s net investments
Balances at December 31, 2017				54,537
Net income for the period				95,065
Net investments				(89,873	)
Balances at October 31, 2018 (unaudited)				59,729
Balances at December 31, 2018				117,630
Net income for the period				81,207
Profit distribution		11		(82,000	)
Net investments				(8,878	)
Balances at October 31, 2019 (unaudited)				107,959

See the accompanying notes to the unaudited interim condensed combined carve-out financial statements.

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Positivo Soluções Didáticas

Condensed combined carve-out statements of cash flows - indirect method

For the ten-month ended October 31

(In thousands of Reais – R$ thousand)

	Note		10/31/2019			10/31/2018
Cash flows from operating activities
Net income for the year				81,207			95,065
Adjustments to reconcile the net income for the period with cash generated by operating activities:
Depreciation and amortization		13		10,469			8,359
Impairment loss on accounts receivable		13		789			3,132
Provision (reversal) for obsolete inventories		13		(89	)		479
Provision for tax, civil and labor risks		13		(1,032	)		1,510
Provision for interest on loans				-			715
Provision for interest on leases		14		351			-
Deferred income tax and social contribution				7,830			(1,968	)
(Increase) decrease in operating assets:
Trade accounts receivable				33,835			50,526
Inventories				(624	)		3,589
Recoverable taxes				57			(6	)
Recoverable income tax (IRPJ) and social contribution (CSLL)				121			-
Advances to suppliers - related parties				(8,834	)		-
Miscellaneous credits				(5	)		988
Judicial deposits				29			(19	)
Increase (decrease) in operating liabilities:
Suppliers				(7,658	)		(14,326	)
Salaries, provisions and social contributions				1,549			3,885
Taxes payable				(631	)		(165	)
Income tax and social contribution payable				6,069			185
Advances from clients				(152	)		791
Other liabilities				(1,214	)		(2,349	)
				122,067			150,391
Interest paid		10		(334	)		-
Lawsuits and proceedings paid				322			82
Net cash generated in operating activities				122,055			150,473
Cash flows from investment activities
Acquisition of property, plant and equipment		8		(1,473	)		(1,442	)
Additions to intangible assets		9		(9,943	)		(9,003	)
Net cash used in investment activities				(11,416	)		(10,445	)
Cash flows from financing activities
Loans				-			6,873
Payment of principal on loans				-			(56,965	)
Payment of leases - principal		10		(2,480	)		-
Dividends paid		11		(82,000	)		-
Parent´s net investment				(8,878	)		(89,873	)
Net cash invested in financing activities				(93,358	)		(139,965	)
Net increase in cash and cash equivalents				17,281			63
Cash and cash equivalents at the beginning of the year		5		20,328			351
Cash and cash equivalents at the end of the year		5		37,609			414
Net increase in cash and cash equivalents				17,281			63

See the accompanying notes to the unaudited interim condensed combined carve-out financial statements.

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

Notes to the unaudited interim condensed combined financial statements

(Amounts expressed in thousands of Reais, unless otherwise indicated)

1 General information

Positivo Soluções Didáticas (hereinafter referred to as the "Business" and “Positivo Soluções Didáticas”) represents the combination of the historical financial statements of Positivo Soluções Didáticas Ltda. and Editora Piá Ltda., and the carve-out of the financial position and results operations of the private sector (“K-12”) and those in the scope of National Program for Didactic Books (“PNLD”) carried out by Editora Positivo Ltda (hereinafter referred as “Parent Company”)

The Business’ activities include conception, production and commercial distribution of the Learning System comprised of integrated solutions of printed (integrated educational books, literature and pedagogical support) and digital (digital books and teaching-learning platform denominated: Positivo On) contents, training of teachers for each area of knowledge.

Accordingly, businesses conducted by Positivo Soluções Didáticas include:

· Sistema Positivo de Ensino (“SPE”) and Conquista: comprised of Teaching Systems in Portuguese provided to private schools throughout Brazil;

· Positivo English Solution (“PES”): comprised of Teaching Systems in English provided to private schools throughout Brazil; and

· Literature Books: editing and commercialization of didactic and literature books in the general market (distributors and resellers), and in the scope of the PNLD.

Under its articles of association, the three companies with operations that are included in these unaudited interim condensed combined carve-out financial statements are allowed to engaged in: (i) edition and trading of school material, especially books, handouts and maps, (ii) commercial distribution of authors’ property rights, (iii) phonographic production, recording and trading of musical compact disc (CD), (iv) provision of graphic creation and editing services, and (v) provision of courses, lectures, trainings, seminars and continued education for personal and professional development, sundry advisory, as well as conduction of operation denominated "factoring".

Up to November 1, 2018, the activities related to private sector operations (“K-12”) and those in the scope of PNLD described in these financial statements were included in Editora Positivo Ltda. On November 1, 2018, a corporate restructuring was completed to spin-off of SPE, Conquista, PES and Literature Books operations to Positivo Soluções Didáticas Ltda. As the entities involved were under common control, this reorganization was accounted for using the historical basis of the assets and liabilities. Additionally, this reorganization did not result in a change in the shareholding structure of the entities.

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

On May 7, 2019, Arco Platform Limited (“Arco”), a U.S foreign private issuer entity, entered into a definitive agreement to acquire aforementioned operations included in these unaudited interim condensed combined carve-out financial statements. On November 1, 2019, Arco concluded the transaction and accordingly, on that date, Arco acquired control of Positivo Soluções Didáticas.

2 Preparation basis and presentation of the unaudited interim condensed combined carve-out financial statements

These unaudited interim condensed combined carve-out financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting, and should be read in conjunction with the Business’ last annual combined carve-out financial statements as at and for the year ended 31 December 2018 (‘last annual combined carve-out financial statements’). However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Business’ financial position and performance since the last annual financial statements.

The unaudited interim condensed combined carve-out financial statements are presented in thousands of Brazilian Real (“BRL”), which is the Business functional currency. All financial information presented in BRL has been rounded to the nearest thousand value, except otherwise indicated.

This is the first set of the Business’ financial statements in which IFRS 16 has been applied. Changes to significant accounting policies are described in Note 3.

These unaudited interim condensed combined carve-out financial statements were authorized for issue by Management on March 20, 2020.

3 Changes in significant accounting policies

Except as described below, the accounting policies applied in these unaudited interim condensed combined carve-out financial statements are the same as those applied in the last annual financial statements. The Business has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The Business applies, as from January 1, 2019, IFRS 16 - Leases. As required by IAS 34, the nature and effect of these changes are disclosed below.

Other amendments and interpretations of IFRS became applicable as from January 1, 2019; however, these changes did not have an impact on the unaudited interim condensed combined carve-out financial statements of the Business.

IFRS 16 - Leases

IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model.

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

The Business has lease contracts for properties and vehicles. Before the adoption of IFRS 16, the Business did not have finance lease prior to December 31, 2018. The leased property was not capitalized and the lease payments were recognized as rent expense in the unaudited interim condensed combined carve-out statement of comprehensive income on a straight-line basis over the lease term. Upon adoption of IFRS 16, the Business applied a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets.

In the adoption of IFRS 16, the leases will impact the financial information due to:

(a) Recognition of right-of-use assets and lease liabilities in the unaudited interim condensed combined carve-out balance sheet initially measured at present value of the future minimum lease payments;

(b) Recognition of depreciation expenses of right-of-use assets and interest expense on lease liabilities in the unaudited interim condensed combined carve-out statement of comprehensive income; and

(c) Separation of the total amount of cash paid on these transactions between principal (presented within financing activities) and interest (presented in operating activities) in the unaudited interim condensed combined carve-out statement of cash flow.

a. The effect of adoption IFRS 16

The Business applied the forward-looking transition approach and did not restate comparative amounts for the year prior to first adoption. Right-of-use assets for property leases were measured on transition as if the new rules had always been applied. All other right-of-use assets were measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses).

In the transition process, the Business chose to use the practical expedient that allows not to reevaluate whether a contract is or contains a lease. The main impacts are related to the leasing operations of third-party real estate and leased vehicles.

As permitted, short-term leases (lease term of 12 months or less) and leases of low value assets (such as personal computers and office furniture) will maintain recognition of their lease expenses on a straight-line basis in the income statement.

The Business also applied the available practical expedients wherein it:

· Use of a single discount rate for each rental portfolio with reasonably similar characteristics. In this sense, the incremental funding rate, measured on January 1, 2019, applicable to each of the leased asset portfolios, was obtained. Through this methodology, the Business obtained a weighted average rate of 6.5%;

· Applied the short-term leases exemptions to leases with lease term that ends within 12 months at the date of initial application;

· Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application;

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

· Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease;

· The Business did not separate non-lease components from contracts that also have lease components;

As a result of the above facts, the Business recognized the following amounts in the opening balances of its balance sheet:

	December 31, 2018		Opening adjustments		January 1, 2019
Non-current assets
Fixed assets		4,095		7,678		11,773
Deferred taxes		16,581		-		16,581
Total assets		20,676		7,678		28,354
Current liabilities
Leases payable		-		2,952		2,952
Non-current assets
Leases payable		-		4,726		4,726
Total liabilities		-		7,678		7,678

Additionally, the table below summarizes the accounting impacts of the adoption of this new accounting pronouncement on the interim condensed combined carve-out statement of comprehensive income for the period of ten months ended on October 31, 2019:

	October 31, 2019
Statement of comprehensive income
Depreciation		(2,597	)
Financial expenses		(351	)
Deferred income tax and social contribution		108
		(2,840	)

b. Summary of new accounting policies

Set out below are the new accounting policies of the Business upon adoption of IFRS 16, which have been applied from the date of initial application:

(i) Right-of-use assets

The Business recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

(ii) Lease liabilities

At the commencement date of the lease, the Business recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Business and payments of penalties for terminating a lease, if the lease term reflects the Business exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Business uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. The accounting amount of the lease liabilities is remeasured if there is a change in the term of the lease, a change in fixed lease payments or a change in valuation to purchase the right-of-use asset.

(iii) Short-term leases and leases of low-value assets

The Business applies the short-term lease recognition exemption to its short-term leases of properties (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease.

(iv) Significant judgement in determining the lease term of contracts with renewal options

The Business determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if reasonably certain to be exercised.

The Business has the option, under some of its leases to lease the assets for additional terms. The Business applies judgment in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Business reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).

4 Significant accounting judgments, estimates and assumptions

The preparation of the Business’ interim condensed combined carve-out financial statements requires Management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of the reporting period; however, uncertainties about these assumptions and estimates may result in outcomes that require adjustments to the carrying amount of the affected asset or liability in future periods. The significant assumptions and estimates used in the preparation of the interim condensed combined carve-out financial statements for the ten-month period ended October 31, 2019 were the same as those adopted in the combined carve-out financial statements for the year ended December 31, 2018, except for the adoption of IFRS 16-Leases described in Note 3.

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

5 Cash and cash equivalents

Balances of cash and cash equivalents are broken down as follows:

	October 31, 2019		December 31, 2018
Cash		-		4
Banks		662		1,071
Fixed income investments (a)		36,947		19,253
		37,609		20,328

(a) These mainly represent investments in Bank Deposit Certificates (CDBs) that earn interest of approximately 100% of CDI change (interest rates of Interbank Deposit Certificates), with immediate liquidity and subject to an insignificant risk of change in value.

6 Trade accounts receivable

The balance of account is comprised by the following amounts:

	October 31, 2019			December 31, 2018
Learning systems		88,330			111,023
Literature books		14,713			25,855
(-) Impairment loss on accounts receivable		(37,901	)		(37,112	)
		65,142			99,766

The breakdown of accounts receivable by maturity age is as follows:

	October 31, 2019			December 31, 2018
Falling due		51,748			93,443
Overdue (days):
up to 30		4,280			2,302
31-60		2,168			3,792
61-90		1,507			2,734
91-180		4,486			3,474
181-360		5,703			5,434
>361		33,151			25,699
(-) Impairment loss on accounts receivable		(37,901	)		(37,112	)
		65,142			99,766

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

Changes in impairment losses on accounts receivable are broken down as follows:

Balance at December 31, 2017	33,875
(+) Additions	3,132
Balance at October 31, 2018	37,007
(-) Receipt / reversal	(4,430	)
(+) Additions	4,535
Balance at December 31, 2018	37,112
(-) Receipt / reversal	(2,184	)
(+) Additions	2,973
Balance at October 31, 2019	37,901

The impairment losses are formed based on criteria established by the Management and in an amount considered sufficient to cover estimated losses in the realization of these credits. The criterion for the allowance for doubtful accounts is based on a three-year average of the default history of the client portfolio in relation to annual revenues.

7 Inventories

The balance of this account is comprised by the following amounts:

	October 31, 2019			December 31, 2018
Goods for resale held by third-parties		3,125			1,211
Good for resale		3,186			2,223
Inventories in transit		1,236			3,489
(-) Provision for obsolete inventories		(925	)		(1,014	)
		6,622			5,909

The provision for obsolete inventory is recognized based on the analysis of the history of turnover of inventory items, which classification as obsolete additionally comprised of inventory age, considering that Management also performs individual analysis of expected realization of inventory items, considering the product’s sales potential (based on sales history), the analysis of the book content, and the possibility of visual update.

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

Changes in provision for obsolete inventories is broken down as follows:

Balance at December 31, 2017	324
(+) Additions	479
Balance at October 31, 2018	803
(+) Additions	211
Balance at December 31, 2018	1,014
(-) Reversal	(1,079	)
(+) Additions	990
Balance at October 31, 2019	925

8 Property, plant and equipment

The balance of this account is comprised by the following amounts:

		October 31, 2019							December 31, 2018
	Depreciation weighted average rate	Cost		Accumulated depreciation			Net book value		Cost		Accumulated depreciation			Net book value
Leases	40%		7,837		(2,597	)		5,240		-		-			-
Furniture, fixtures and facilities	15%		1,877		(1,386	)		491		1,875		(1,264	)		611
Machinery and equipment	10%		277		(135	)		142		277		(120	)		157
IT equipment	20%		10,921		(8,406	)		2,515		9,450		(7,839	)		1,611
Leasehold improvements	4%		2,647		(1,020	)		1,627		2,647		(931	)		1,716
			23,559		(13,544	)		10,015		14,249		(10,154	)		4,095

The main increase in the Business’ property, plant and equipment was related to the adoption of IFRS 16 Leases. Please refer to note 3.

Changes in fixed assets are as follows:

	Leases			Leasehold improvements			Machinery and equipment			Furniture, fixtures and facilities			IT equipment			Total
Balance at December 31, 2017		-			1,554			91			660			1,489			3,794
Additions		-			260			81			93			1,008			1,442
Depreciation		-			(81	)		(12	)		(118	)		(755	)		(966	)
Balance at October 31, 2018		-			1,733			160			635			1,742			4,270
Balance at December 31, 2018		-			1,716			157			611			1,611			4,095
Initial adoption of IFRS 16		7,678			-			-			-			-			7,678
Additions		159			-			-			2			1,471			1,632
Depreciation		(2,597	)		(89	)		(15	)		(122	)		(567	)		(3,390	)
Balance at October 31, 2019		5,240			1,627			142			491			2,515			10,015

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

a. Evaluation for impairment of assets

The Business assesses, at each reporting date, whether there is an indication that a property and equipment asset may be impaired. If any indication exists, the Business estimates the asset’s recoverable amount. There were no indications of impairment of property and equipment for the ten-month periods ended October 31, 2019 and 2018.

b. Useful life

The Business reviewed the estimate of useful life annually in the preparation of the condensed combined carve-out financial statements. As of October 31, 2019, the Business did not identify any significant change in relation to the previously adopted useful life.

9 Intangible assets

The balance of this account is comprised by the following amounts:

		October 31, 2019							December 31, 2018
	Weighted average rate of amortization	Cost		Accumulated amortization			Net book value		Cost		Accumulated amortization			Net book value
Literature books
Learning Systems	25%		38,240		(34,443	)		3,797		38,240		(31,352	)		6,888
Educational books	25%		28,189		(26,788	)		1,401		28,189		(24,940	)		3,249
Dictionaries	10%		4,883		(4,878	)		5		4,883		(4,873	)		10
Literature books in progress	0%		21,683		-			21,683		12,392		-			12,392
Software	20%		15,821		(7,687	)		8,134		15,169		(5,552	)		9,617
			108,816		(73,796	)		35,020		98,873		(66,717	)		32,156

The changes in intangible assets in the year is comprised as follows:

	Literature books			Literature books in progress			Software			Total
Balance at December 31, 2017		11,750			17,229			1,101			30,080
Additions		-			8,380			623			9,003
Transfers		5,632			(14,536	)		8,904			-
Amortization		(5,868	)		-			(1,525	)		(7,393	)
Balance at October 31, 2018		11,514			11,073			9,103			31,690
Balance at December 31, 2018		10,147			12,392			9,617			32,156
Additions		-			9,291			652			9,943
Amortization		(4,944	)		-			(2,135	)		(7,079	)
Balance at October 31, 2019		5,203			21,683			8,134			35,020

Evaluation for asset impairment

The Business assesses, at each reporting date, whether there is an indication that an intangible may be impaired. If any indication exists, the Business estimates the asset’s recoverable amount. There were no indications of impairment of intangibles for the ten-month periods ended October 31, 2019 and 2018.

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Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

Useful life

As of October 31, 2019, there was no write-offs related to discontinued projects.

10 Lease payable

Changes in leases for the year are composed as follows:

	Current			Non-current			Total
Balance at January 1, 2019		-			-			-
Initial adoption of IFRS 16		2,952			4,726			7,678
Additions		48			111			159
Transfers		1,950			(1,950	)		-
Interest		222			129			351
Interest paid		(334	)		-			(334	)
Payment of leases - principal		(2,480	)		-			(2,480	)
Balance at October 31, 2019		2,358			3,016			5,374

11 Related parties

The Positivo Group (hereinafter referred as “Group”) is composed by all entities owned by the quotaholders of the Parent Company and individual entities included in this unaudited interim condensed combined carve-out financial statements. Balances and transactions between the entities and operations included in the Business, have been eliminated in the unaudited interim condensed combined carve-out financial statements. Some of the Group’s transactions and arrangements are with related parties and the effect of these transactions using the basis determined between the parties is reflected in this unaudited interim condensed combined carve-out financial statements.

Transactions with these related parties are priced on an arm’s length basis and are to be settled in cash. None of the related party balances are secured. No expense has been recognized in the current year or prior year for losses in respect of amounts owed by related parties. Additionally, no guarantees have been given or received related to these balances.

On October 31, 2019 and December 31, 2018, the Business carried out transaction with related parties, as stated below:

	Accounts receivable from commercial transactions				Accounts payable from commercial transactions				Advances for commercial transactions
	October 31, 2019		December 31, 2018		October 31, 2019		December 31, 2018		October 31, 2019		December 31, 2018
Positivo Educacional Ltda. (a)		838		1,479		-		-		-		-
Gráfica e Editora Posigraf Ltda. (b)		35		358		2,911		4,957		8,834		-
Centro de Estudos Superiores Positivo Ltda. (c)		9		566		2		13		-		-
Consórcio Positivo J Malucelli		-		3		-		-		-		-
Editora Positivo Ltda. (e)		-		-		458		578		-		-
Centro Educacional Opção Única Ltda. (a)		20		45		-		-		-		-
Sociedade Educacional Posiville Ltda. (a)		61		614		-		-		-		-
Positivo Tecnologia S.A. (d)		2		142		-		30		-		-
		965		3,207		3,371		5,578		8,834		-

16

Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

During the periods presented below, the Business entered into the following transactions with related parties:

	Sales				Purchases and services
	October 31, 2019		October 31, 2018		October 31, 2019		October 31, 2018
Positivo Educacional Ltda. (a)		6,672		464		-		-
Gráfica e Editora Posigraf Ltda. (b)		233		2,737		61,503		59,461
Centro de Estudos Superiores Positivo Ltda. (c)		112		3		103		56
Editora Positivo Ltda. (e)		2,679		-		3,931		4,175
Positivo Tecnologia S.A. (d)		23		18		1,788		1,010
Centro Educacional Opção Única Ltda. (a)		318		46		-		-
Sociedade Educacional Posiville Ltda. (a)		412		280		-		-
Positivo Soluções Didáticas Ltda.		3,485		-		-		-
		13,934		3,548		67,325		64,702

(a) Substantially refers to the amounts arising from the direct sales of learning system made by the Business to the students of Positivo Educacional Ltda., considering that the Positivo Educacional Ltda intermediates the financial receipt of such sales, and, later on, makes the financial transfer to Positivo Soluções Didáticas.

(b) These are transactions of purchase of printed books and other products (inventories). These goods are acquired for resale by the Business to its customers.

(c) Comprises transactions of space rentals, especially the Positivo Theater and Event Center, as well as service provision.

(d) Purchases and services comprise the acquisition of computers and other IT equipment. Additionally, up to 2016, the Business made copyright payments related to the access to internet sites, called “Portal Positivo”, as well as the supply of CD-ROMs with educational contents to institutions that are members of the SPE System. There was also the engagement of Positivo Tecnologia for the production of Positivo ON, the software which substituted the former.

(e) Sales comprise the Business transactions of catalog book sales. Purchase refers to the apportionment of expenses and shared service center, which are incurred by Editora Positivo Ltda. and later on apportioned with the other related parties benefitted by the provision of such services following the terms established between the parties. Such reimbursements are represented by the shared use of purchasing (especially indirect materials), human resources, marketing, legal, accounting, finance and IT departments. The apportionment amount is calculated at the effective cost, apportioned according to the use of available resources.

Profit distribution

During the ten-month period ended on October 31, 2019, Positivo Soluções Didáticas Ltda. distributed and paid dividends to its quotaholders in a total amount of R$ 82,000.

12 Net revenue from sales

The breakdown of net sales of the Business as of October 31, 2019 and October 31, 2018 is as follows:

	October 31, 2019			October 31, 2018
Learning system		335,813			339,149
(-) Commissions		(8,765	)		(6,863	)
(-) Sales taxes		(256	)		(51	)
(-) Sales return		(5,233	)		(8,056	)
Net revenue		321,559			324,179

17

Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

The Business’s revenues from contracts with customers are all in Brazil. The Group recognized impairment losses on trade receivables arising from contracts with customers, included under selling expenses in the unaudited interim condensed combined carve-out statement of comprehensive income of R$ 789 and R$ 3,132 as of October 31, 2019 and 2018, respectively.

Seasonality

It’s important to highlight the revenue recognition and seasonality of our Business. The Business typically deliver the learning system SPE four times each year, in March, June, August and December. The learning system Conquista and PES are delivered twice, in June and December, usually two to three months prior to the start of each school quarter. The books are typically delivered by the end of the fourth quarter and during the first quarter. The amount of revenue recognized is proportional to the amount of content made available, which is not linearly distributed among the quarters. This causes revenue seasonality in our business, in which the third quarter revenue is the lowest point of the year.

Revenues tax benefits

The Business is not subjected to the payment of the social integration program tax (Programa de Integração Social, or PIS) and the social contribution on revenues tax (Contribuição para o Financiamento da Seguridade Social, or COFINS) on the sale of books. The sale of printed and digital books is also exempt from the Brazilian municipal taxes and from the Brazilian value added tax (Imposto sobre Operações relativas à Circulação de Mercadorias e sobre Prestações de Serviços de Transporte Interestadual e Intermunicipal e de Comunicação, or ICMS).

13 Information on nature of expenses recognized in the statement of comprehensive income

The Business presents the statement of comprehensive income using a classification of operating expenses based on their function. The information on the nature of these expenses recognized is as follows:

	October 31, 2019			October 31, 2018
Resale goods and consumption material used		67,790			56,319
Personnel and commissions		64,937			63,016
Advertising and publicity		18,658			11,822
Depreciation and amortization		10,469			8,359
Freight		8,131			6,739
Traveling		8,108			6,448
Promotion expenses		3,519			3,425
Third party services		4,245			4,132
Credit card expenses (commission)		2,168			1,131
Rentals		946			3,068
Provision (reversal) for obsolete inventories		(89	)		479
Impairment loss on accounts receivable (a)		789			3,132
Provision (reversal) for tax, civil and labor risks		(1,032	)		1,510
Other		13,424			13,411
		202,063			182,991

(a) At the beginning of 2019, the entire customer portfolio that gave rise to the impairment loss was sold to a third party, with no chance of recourse, and therefore the impairment loss was reversed.

18

Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

The cost of sales mainly consists of the expenses related to the resale goods and consumption material used, which mainly comprises printing costs and amortization of intellectual property in the long term. Operating expenses are comprised of sales expenses, general and administrative expenses and other expenses. The largest expense component comprises employees and labor, which includes salaries and bonuses, employee benefit expenses and contracted labor costs.

The breakdown of these accounts for reconciling with the unaudited interim condensed combined carve-out statement of comprehensive income is as follows:

	October 31, 2019			October 31, 2018
Cost of sales		(87,750	)		(77,263	)
General and administrative expenses		(53,245	)		(53,211	)
Selling and distribution expenses		(60,279	)		(49,385	)
Impairment loss on accounts receivable		(789	)		(3,132	)
		(202,963	)		(182,991	)

14 Financial income

	October 31, 2019			October 31, 2018
Financial revenues
Discounts obtained and other		82			196
Interest charged on accounts receivable and other		2,374			3,251
Yield from investments		1,517			33
		3,973			3,480
Financial expenses
Discounts granted		(449	)		(476	)
Interest on loans and other		-			(715	)
Interest on leases		(351	)		-
Bank expenses		(270	)		(129	)
Other		(8	)		(54	)
		(1,078	)		(1,374	)
		2,895			2,106

19

Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

15 Financial instruments

Accounting classification and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their fair values hierarchy. The amortized cost is reasonable approximated to the fair value due to the nature and liquidity level of the financial assets and liabilities held by the Business, are as follows:

October 31, 2019	Hierarchy	Amortized cost		Fair value
Financial assets
Cash and cash equivalents	Level 2		37,609		37,609
Trade accounts receivable	Level 2		65,142		65,142
Other receivables	Level 2		1,462		1,462
			104,213		104,213
Financial liabilities
Suppliers	Level 2		6,381		6,381
Other liabilities	Level 2		6,729		6,729
			13,110		13,110
December 31, 2018
Financial assets
Cash and cash equivalents	Level 2		20,328		20,328
Trade accounts receivable	Level 2		99,766		99,766
Other receivables	Level 2		1,457		1,457
			121,551		121,551
Financial liabilities
Suppliers	Level 2		14,039		14,039
Other liabilities	Level 2		7,943		7,943
			21,982		21,982

Financial risk management

Risk management structure

The main risk factors to which the Business is exposed reflect strategic operational and economic and financial aspects. Strategic operating risks (such as, demand behavior, competition and material changes in the structure of the industry) are addressed by the Business' management model.

The economic and financial risks mainly reflect the behavior of macroeconomic variables such as exchange and interest rates as well as the characteristics of the financial instruments that the Business uses. These risks are managed through control and monitoring policies, specific strategies and limits.

20

Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

The Business has a policy for managing funds, instruments and financial risks monitored by top management and this practice of managing its existing risks in a manner, aiming mainly to preserve the value and liquidity of financial assets and to guarantee financial resources for the smooth running of business, including its expansions.

The Business is exposed to the following risks resulting from financial instruments:

· Credit risk;

· Liquidity risk;

· Market risk.

This note presents information on the Business' exposure to each of the risks above, the objectives of the Business, measurement policies, and the Business's risk and capital management proceedings as of October 31, 2019 are the same as those disclosed in the last annual financial statements.

Concentration of credit risk

Credit risk is the risk of the Business incurring losses due to a customer or financial instrument counterparty, resulting from failure in complying with contract obligations. Risk is mainly due to financial investments and trade accounts receivable.

Accounts receivable and other credits

The Business' exposure to credit risks is influenced mainly by the individual characteristics of each client. However, Management considers the geographical distribution of customers in its evaluation, including the risk of default of industry and in the country where it operates, as these factors may impact credit risk.

The quality of the credit of accounts receivable from other receivables is assessed with a basis on the credit policy established by the Business.

Cash and cash equivalents

The Business held cash and cash equivalents totaling R$ 37,609 as of October 31, 2019, which represent the maximum credit exposure on those assets. Cash and cash equivalents are maintained with major Brazilian banks and financial institutions.

Liquidity risk

Liquidity risk is the risk of the Business encountering difficulties in performing the obligations associated with its financial liabilities that are settled with cash payments or with another financial asset. The Business' approach in liquidity management is to maintain, as much as possible, sufficient liquidity to perform its obligations upon maturity, under normal conditions or not, without causing unacceptable losses or risk to the Business’ reputation.

The Business’ Management is ultimately responsible for the liquidity risk management, which manages the needs of funding and liquidity management in short, medium and long terms. The Business manages liquidity risk by maintaining sufficient cash reserves and the ability to raise loans as it considers adequate, through continuous monitoring of foreseen and actual cash flows and through combination of financial assets and liabilities’ maturity profiles.

21

Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

Tables below show the remaining contractual maturities in details of Business’s non-derivative financial assets and liabilities and the amortization contractual terms:

Financial assets

	Weighted average interest rate per annum	<1 month		1-3 months		3-12 months		1-5 years		Total
October 31, 2019
Cash and banks			662		-		-		-		662
Interest earning bank deposits	6,40%		36,947		-		-		-		36,947
Trade accounts receivable			13,951		19,894		16,639		14,658		65,142
			51,560		19,894		16,639		14,658		102,751
December 31, 2018
Cash and banks			1,075		-		-		-		1,075
Interest earning bank deposits	6,40%		19,253		-		-		-		19,253
Trade accounts receivable			12,175		56,129		22,068		9,934		99,766
			32,403		56,129		22,068		9,934		120,094

Financial liabilities

	Weighted average interest rate per annum	<1 month		1-3 months		3-12 months		1-5 years		Total
October 31, 2019
Suppliers			6,274		80		26		-		6,381
			6,274		80		26		-		6,381
December 31, 2018
Suppliers			13,205		8		826		-		14,039
			13,205		8		826		-		14,039

Market risk

Market risk is the risk that alterations in market prices, such as exchange rates and interest rates, have in the Business’ earnings, or in the value of its holdings of financial instruments. The objective of market risk management is to manage and control exposures to market risks according to acceptable parameters and optimize the return at the same.

22

Positivo Soluções Didáticas

Unaudited interim condensed

combined carve-out financial

statements as of October 31, 2019

16 Non-cash transactions

The Business carried out the non-cash activities in the ten-month period ended October 31, 2019, which are not reflected in the unaudited interim condensed combined carve-out statement of cash flows, mainly related to the recognition of right-of-use assets and lease liabilities as a result of the adoption of IFRS 16, please refer to note 3, 8 and 10.

* * *

23