Padtec S A : 2020 2019 2018 Combined Annual Results

(Free translation from the original issued in Portuguese. In the event of any discrepancies, the Portuguese language version shall prevail.)

Consolidated and combined financial statements and independent auditor's report

December 31, 2020, 2019 and 2018

	Page
Independent auditor's report on the consolidated and consolidated financial statements	3
Consolidated and combined financial statements	8
Notes to the consolidated and combined financial statements for the years
ended December 31, 2020, 2019, 2018	15

(Free translation from the original issued in Portuguese. In the event of any discrepancies, the Portuguese language version shall prevail. See Note 27 to the financial statements.)

Grant Thornton Auditores

Independentes

Av. José de Souza Campos, 507 5oandar Cambuí, Campinas (SP)

T [phone]

To the Shareholders and Management

Padtec Group

Campinas - SP

Opinion

We have audited the consolidated and combined financial statements of Padtec Group (comprised of the companies listed in Note 1), which comprise the balance sheets, consolidated as of December 31, 2020 and combined as of December 31, 2019 and 2018 (referred to as consolidated and combined), and the statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including significant accounting policies and other explanatory information.

In our opinion, the aforementioned consolidated and combined financial statements present fairly, in all material respects, the consolidated and combined financial and equity position of Padtec Group as of December 31, 2020, 2019 and 2018, respectively, and the combined performance of its operations and respective combined cash flows for the years then ended, in accordance with the accounting practices adopted in Brazil and international financial reporting standards (IFRS) issued by the International Accounting Standards Board (IASB), and technical pronouncement NBC TG 44 - Combined Statements.

Basis for opinion

We conducted our audit in accordance with Brazilian and international auditing standards.

Our responsibilities under those standards are further described in the section "auditor's responsibilities for the audit of the consolidated and combined financial statements". We are independent of Padtec Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in Brazil, and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Emphasis of matter

Presentation of the consolidated and combined financial statements

As described in Note no. 1.2, on June 01, 2020 Padtec Holding S.A. (formerly Ideiasnet S.A.) absorbed the shares of Padtec S.A., in accordance with corporate legislation and as approved at the Extraordinary General Meeting held April 27, 2020, with Padtec S.A. consequently being converted into its wholly- owned subsidiary, making Padtec Holding S.A. the sole shareholder of Padtec S.A. Management elected to present these consolidated and combined financial statements of Padtec Group assuming Padtec S.A. has been a subsidiary of Padtec Holding S.A. since January 01, 2018. As mentioned in Note 1.2, the consolidated and combined financial statements are only being presented to provide additional analyses to third parties, and do not represent the individual or consolidated financial statements of the company and its subsidiaries. These statements should not therefore be relied on for the purpose of calculating dividends and taxes or for any other corporate purpose. Our opinion does not make a qualification regarding this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the current year. These matters were addressed in the context of our audit of the consolidated and combined financial statements as a whole, and in forming our opinion thereon, and we are not therefore expressing a separate opinion on these matters.

Revenue recognition

Why the matter was determined to be a KAM

As mentioned in notes 3.15. and 26, due to the materiality and risks involved in the revenue recognition process, in the current year we considered this to be a key audit matter. Padtec Group recognizes revenue based on Pronouncement NBC TG 47 - Revenue from contracts with customers. Revenue from sales of hardware and installation services have separate performance obligations, impacting the moment revenue is recognized as/when Padtec Group satisfies its performance obligations. We understand that the risk of early recognition, or recognition before Padtec Group has satisfied all contractual performance obligations, could be present, as a number of Padtec Group's activities related to revenue recognition are controlled manually, thereby increasing the risk of involuntary mistakes occurring in this process. It was therefore necessary to conduct additional specific audit procedures and tests to address the revenue recognition risks we deem material.

How the matter was addressed in our audit

Our audit procedures in this area included, among others:

• We assessed the internal controls introduced by management for the flow of sales and provision of services;
• We conducted substantive analytical procedures and detailed tests, including confirmation with third parties, to certify that the sales existed and had been recorded in the correct period;
• We tested the effective delivery of the products and services with control over the risks and rewards being transferred to the clients;
• We checked the consistency of the revenue recognition accounting policy applied by testing sales transactions conducted during and at the end of the year;
• We analyzed the disclosures required in the consolidated and combined financial statements and whether they were consistent with management information and representations.

Based on the procedures conducted, we consider the assumptions and methodologies used by Padtec Group to recognize revenue to be reasonable and that the information presented in the consolidated and combined financial statements is consistent with the information analyzed in our audit procedures in the context of said consolidated and combined financial statements taken as a whole.

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Intangible assets - Initial recognition of cost and recoverability of the balance

Why the matter was determined to be a KAM

As described in Notes 3.7. and 13, Padtec Group's consolidated and combined financial statements present significant balances in the item intangible assets of R$ 29,217 thousand, R$ 21,849 thousand and R$ 48,073 thousand as of December 31, 2020, 2019 and 2018 respectively. Padtec Group recognizes intangible assets for development projects, which are initially recorded at acquisition cost and are definite- lived. Because of the materiality of the balances involved, subject to estimates and assumptions made by Padtec Group Management in relation to projects under development, which can be de-recognized or be classified as assets, subject to impairment if there are no prospects of economic recovery, or variance in the cost of the projects that might not be recovered or make the projects unfeasible for Padtec Group, we considered this to be a key audit matter.

How the matter was addressed in our audit

Our audit procedures in this area included, among others:

• We assessed the internal control framework implemented by management for the initial recognition of amounts recorded in the item;
• We conducted sample-based substantive procedures to certify that the capitalized amounts were eligible and conducive with the nature of operations in relation to intangible asset definition;
• We challenged the criteria and assumptions used by management to determine the useful life and consequently the amortization terms of these assets, checking whether they were adequately supported by documents;
• We tested these assets for impairment, based on studies presented by management;
• We tested the calculations and assumptions used by management to support the conclusion that these assets were not impaired.

Based on the procedures conducted, we consider that the assumptions and methodologies used by Padtec Group to measure definite-lived intangible assets and to test them for impairment are reasonable, and that the information presented in the consolidated and combined financial statements is consistent with the information analyzed in our audit procedures in the context of said consolidated and combined financial statements taken as a whole.

Other matters

Combined statements of value added

The combined statements of value added (DVA) for the years ended December 31, 2020, 2019 and 2018, which are the responsibility of Padtec Group management and are presented as supplementary information under IFRS, were subject to audit procedures conducted in conjunction with the audit of Padtec Group's combined financial statements. To form our opinion we assessed whether these statements have been reconciled against the combined financial statements and accounting records, as applicable, and whether their form and content comply with the criteria set out in NBC TG 09 - Statements of Value Added.

In our opinion, these combined statements of value added have been adequately prepared, in all material respects, in accordance with this Standard and are consistent with the combined financial statements taken as a whole.

Audit of the prior year's figures

Neither we nor any other independent auditors have audited the figures in the combined balance sheet for the year ended December 31, 2017 (opening balances at January 01, 2018), presented to facilitate a comparative analysis.

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