6-K - AFYA - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OFFOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August, 2020

Commission File Number: 001-38992

Afya Limited

(Exact name of registrant as specified inits charter)

Alameda Oscar Niemeyer, No. 119, Salas502, 504, 1,501 and 1,503

Vila da Serra, Nova Lima, Minas Gerais

Brazil

+55 (31) 3515 7550

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F	X	Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes	No	X

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes	No	X

TABLE OF CONTENTS

EXHIBIT
99.1	Unaudited interim condensed<br>consolidated financial statements<br>June 30, 2020
99.2	Afya Limited Announces Second Quarter and First Half 2020 Financial Results

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Afya Limited
By:	/s/ Virgilio Deloy Capobianco Gibbon
	Name:	Virgilio Deloy Capobianco Gibbon
	Title:	Chief Executive Officer

Date: August 27, 2020

Afya Limited

Unaudited interim condensed

consolidated financial statements

June 30, 2020

Afya Limited

Unaudited interim condensed consolidated statements of financial position

As of June 30, 2020 and December 31, 2019

(In thousands of Brazilian reais)

	Notes	June 30, 2020	December 31, 2019
Assets		(unaudited)
Current assets
Cash and cash equivalents	5	1,041,462	943,209
Restricted cash	6	10,902	14,788
Trade receivables	7	238,874	125,439
Inventories		5,375	3,932
Recoverable taxes		18,774	6,485
Derivatives	12.2.1	8,720	-
Other assets		14,108	17,912
Total current assets		1,338,215	1,111,765
Non-current assets
Restricted cash	6	2,053	2,053
Trade receivables	7	13,611	9,801
Other assets		41,240	17,267
Investment in associate	9	50,539	45,634
Property and equipment	10	192,686	139,320
Right-of-use assets	12.2.2	376,023	274,275
Intangible assets	11	1,835,823	1,312,338
Total non-current assets		2,511,975	1,800,688
Total assets		3,850,190	2,912,453
Liabilities
Current liabilities
Trade payables		23,234	17,628
Loans and financing	12.2.1	42,094	53,607
Derivatives	12.2.1	-	757
Lease liabilities	12.2.2	46,920	22,693
Accounts payable to selling shareholders	12.2.3	149,879	131,883
Notes payable	12.2.4	9,322	-
Advances from customers		40,621	36,860
Labor and social obligations		98,916	46,770
Taxes payable		32,483	19,442
Income taxes payable		4,395	3,213
Other liabilities		14,662	376
Total current liabilities		462,526	333,229
Non-current liabilities
Loans and financing	12.2.1	19,308	6,750
Lease liabilities	12.2.2	347,320	261,822
Accounts payable to selling shareholders	12.2.3	245,567	168,354
Notes payable	12.2.4	69,115	-
Taxes payable		23,924	21,304
Provision for legal proceedings	22	19,807	5,269
Other liabilities		3,048	1,999
Total non-current liabilities		728,089	465,498
Total liabilities		1,190,615	798,727
Equity
Share capital	16	17	17
Additional paid-in capital		2,300,513	1,931,047
Share-based compensation reserve		32,711	18,114
Retained earnings		276,411	115,916
Equity attributable to equity holders of the parent		2,609,652	2,065,094
Non-controlling interests		49,923	48,632
Total equity		2,659,575	2,113,726
Total liabilities and equity		3,850,190	2,912,453

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

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Afya Limited

Unaudited interim condensed consolidated statements of income and comprehensive income

For the three and six-month periods ended June 30, 2020 and 2019

(In thousands of Brazilian reais,except earnings per share)

		Three-month period ended		Six-month period ended
	Notes	June 30, 2020	June 30, 2019	June 30, 2020	June 30, 2019
		(unaudited)	(unaudited)	(unaudited)	(unaudited)
Net revenue	18	274,211	178,493	546,515	323,071
Cost of services	19	(106,683)	(82,283)	(195,934)	(136,647)
Gross profit		167,528	96,210	350,581	186,424
General and administrative expenses	19	(90,039)	(59,584)	(176,762)	(90,818)
Other (expenses) income, net		(689)	576	(748)	370
Operating income		76,800	37,202	173,071	95,976
Finance income	20	13,954	4,650	42,780	9,817
Finance expenses	20	(23,130)	(19,721)	(40,802)	(31,957)
Finance result		(9,176)	(15,071)	1,978	(22,140)
Share of income of associate	9	2,603	920	4,905	920
Income before income taxes		70,227	23,051	179,954	74,756
Income taxes expense	21	(6,341)	(1,725)	(12,398)	(3,954)
Net income		63,886	21,326	167,556	70,802
Other comprehensive income		-	-	-	-
Total comprehensive income		63,886	21,326	167,556	70,802
Income attributable to
Equity holders of the parent		60,679	16,317	160,495	57,852
Non-controlling interests		3,207	5,009	7,061	12,950
		63,886	21,326	167,556	70,802
Basic earnings per share
Per common share	17	0.65	0.23	1.74	0.91
Diluted earnings per share<br><br> <br>Per common share	17	0.65	0.23	1.73	0.89

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

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Afya Limited

Unaudited interim condensed consolidated statements of changes in equity

For the six-month periods ended June 30, 2020 and 2019

(In thousands of Brazilian reais)

	Equity attributable to equity holders of the parent
				Earnings reserves
	**<br><br> <br>Share capital**	Additional paid-in capital	Share-based compensation reserve	Legal reserve	Retained earnings reserve	Retained earnings	Total	Non-controlling interests	Total equity
Balances at December 31, 2018	315,000	125,014	2,161	7,223	52,584	-	501,982	88,372	590,354
Net income	-	-	-	-	-	57,852	57,852	12,950	70,802
Total comprehensive income	-	-	-	-	-	57,852	57,852	12,950	70,802
Capital increase with cash	150,000	-	-	-	-	-	150,000	-	150,000
Capital increase from corporate reorganization	122,062	137,051	-	-	-	-	259,113	-	259,113
Capital increase from shares contribution of shareholders	48,768	36,358	-	-	-	-	85,126	(44,774)	40,352
Share-based compensation	-	-	1,909	-	-	-	1,909	-	1,909
Dividends cancelled	-	-	-	-	-	4,107	4,107	-	4,107
Dividends declared to shareholders	-	-	-	-	-	(38,000)	(38,000)	(8,952)	(46,952)
Allocation to additional paid-in capital	-	33,001	-	-	(33,001)	-	-	-	-
Balances at June 30, 2019 (unaudited)	635,830	331,424	4,070	7,223	19,583	23,959	1,022,089	47,596	1,069,685
Balances at December 31, 2019	17	1,931,047	18,114	-	-	115,916	2,065,094	48,632	2,113,726
Net income	-	-	-	-	-	160,495	160,495	7,061	167,556
Total comprehensive income	-	-	-	-	-	160,495	160,495	7,061	167,556
Issuance of common shares	-	389,170	-	-	-	-	389,170	-	389,170
Shares issuance cost	-	(19,704)	-	-	-	-	(19,704)	-	(19,704)
Share-based compensation	-	-	14,597	-	-	-	14,597	-	14,597
Dividends declared to non-controlling interests	-	-	-	-	-	-	-	(5,770)	(5,770)
Balances at June 30, 2020 (unaudited)	17	2,300,513	32,711	-	-	276,411	2,609,652	49,923	2,659,575

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

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Afya Limited

Unaudited interim condensed consolidated statements of cash flows

For the six-month periods ended June 30, 2019 and 2018

(In thousands of Brazilian reais)

				June 30, 2020	June 30, 2019
				(unaudited)	(unaudited)
Operating activities
	Income before income taxes			179,954	74,756
		Adjustments to reconcile income before income taxes
			Depreciation and amortization	51,330	28,441
			Allowance for doubtful accounts	13,953	8,606
			Share-based compensation expense	14,597	1,909
			Net foreign exchange differences	(14)	(1,858)
			Net (gain) loss on derivatives	(19,430)	2,809
			Accrued interest	11,017	9,873
			Accrued lease interest	20,428	14,540
			Share of income of associate	(4,905)	(920)
			Provision for legal proceedings	1,183	(347)
Changes in assets and liabilities
	Trade receivables			(104,831)	(28,624)
	Inventories			(976)	884
	Recoverable taxes			(11,464)	(2,827)
	Other assets			2,940	(15,758)
	Trade payables			996	5,257
	Taxes payables			10,214	1,139
	Advances from customers			(13,317)	1,428
	Labor and social obligations			39,605	13,352
	Other liabilities			10,534	(1,458)
				201,814	111,202
	Income taxes paid			(12,397)	(2,392)
	Net cash flows from operating activities			189,417	108,810
Investing activities
	Acquisition of property and equipment			(37,583)	(20,674)
	Acquisition of intangibles assets			(7,766)	(718)
	Restricted cash			3,870	(1,153)
	Payments of accounts payable to selling shareholders			(67,304)	(30,674)
	Payments of notes payable			(1,611)	-
	Acquisition of subsidiaries, net of cash acquired			(240,631)	(148,880)
	Loans to related parties			-	(1,695)
	Net cash flows used in investing activities			(351,025)	(203,794)
Financing activities
	Payments of loans and financing			(99,096)	(23,868)
	Issuance of loans and financing			911	-
	Payments of lease liabilities			(25,538)	(17,316)
	Capital increase			-	150,000
	Proceeds from issuance of common shares			389,170	-
	Shares issuance cost			(19,704)	-
	Dividends paid to non-controlling interests			(5,770)	(7,621)
	Net cash flows from financing activities			239,973	101,195
	Net foreign exchange differences			19,888	-
	Net increase in cash and cash equivalents			78,365	6,211
	Cash and cash equivalents at the beginning of the period			943,209	62,260
	Cash and cash equivalents at the end of the period			1,041,462	68,471

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

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| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 1 | Corporate information | | --- | --- |

Afya Limited (“Afya”), collectively with its subsidiaries referred to as the “Company”, is a holding company incorporated under the laws of the Cayman Islands on March 22, 2019. Afya Limited became the holding company of Afya Participações S.A. (hereafter referred to as “Afya Brazil”), formerly denominated NRE Participações S.A., through the completion of the corporate reorganization described below.

Until the contribution of Afya Brazil shares to Afya Limited, in July 2019, Afya Limited did not have commenced operations and had only nominal assets and liabilities and no material contingent liabilities or commitments. Accordingly, Afya Limited’s consolidated financial information substantially reflect the operations of Afya Brazil after the corporate reorganization.

The Company is formed by a network of higher education institutions located in 14 Brazilian states forming the largest educational group with focus in medicine in the country and comprises the development and sale of electronically distributed educational courses on medicine science and related printed and technological educational content.

Corporate reorganization

On March 29, 2019, Afya Brazil merged (i) BR Health Participações S.A. (“BR Health”), a wholly-owned subsidiary of Bozano Educacional II Fundo de Investimento em Participações Multiestratégia (“Crescera”) that controlled Guardaya Empreendimentos and Participações S.A. (“Guardaya”) and was one of Afya Brazil’s shareholders; and (ii) Guardaya which owned 100% of Medcel Editora e Eventos S.A. (“Medcel Editora”) and CBB Web Serviços e Transmissões On Line S.A. (“CBB Web”), focused on medical residency preparation courses located in the state of São Paulo, resulting in the transfer to Afya Brazil of 100% of Medcel Editora and CBB Web and 15% of União Educacional do Planalto Central S.A. (“UEPC”), a medical school located in the Federal District. On June 18, 2019, Afya Brazil acquired an additional 15% interest in UEPC resulting in an interest of 30%.

On July 7, 2019, each of Afya Brazil´s shareholders had agreed to contribute their respective shares on Afya Brazil to Afya Limited, exchanging one common share into 28 Class A or Class B common shares of Afya Limited. The holders of the Class A common shares and Class B common shares have identical rights, except that (i) the holder of Class B common shares is entitled to 10 votes per share, whereas holders of Class A common shares are entitled to one vote per share, (ii) Class B common shares have certain conversion rights and (iii) the holders of Class B common shares are entitled to maintain their proportional ownership interest in the event that common shares and/or preferred shares are proposed to be issued. The holders of Class A common shares and Class B common shares vote together as a single class on all matters (including the election of directors) submitted to a vote of shareholders, unless otherwise required by law and subject to certain exceptions.

| F-6 |

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| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

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Initial public offering

On July 18, 2019, Afya Limited priced its initial public offering (“IPO”) of 13,744,210 Class A common shares, which began trading on the Nasdaq Global Select Market (“NASDAQ”) on July 19, 2019 under the symbol “AFYA”. On July 23, 2019, the underwriters exercised the option to buy an additional 2,061,631 Class A common shares to cover over-allotments, totaling 15,805,841 Class A common shares, which 13,888,887 Class A common shares were offered by Afya Limited and 1,916,954 Class A common shares were offered by the selling shareholders at the initial public offering price. The initial offering price was US$ 19.00 per Class A common share.

On July 23, 2019, the share capital of Afya Limited was increased by 13,888,887 Class A shares through the proceeds received as a result of the IPO of US$ 263,888 thousand (or R$ 992,778). The net proceeds from the IPO were US$ 242,711 thousand (or R$ 913,108), after deducting US$ 15,833 thousand (or R$ 59,566) in underwriting discounts and commissions and other offering expenses totaled US$ 5,344 thousand (or R$ 20,104). The share issuance costs totaled R$ 79,670.

Issuance of additional common shares

On February 6, 2020, Afya completed its follow-on public offering of 3,019,928 Class A common shares offered by the Company and 9,406,812 Class A common shares offered by the selling shareholders.

The offering price was US$ 27.50 per Class A common shares and gross proceeds of R$ 358,286 (US$ 83,048 thousand). The Company received net proceeds of R$ 339,648 (US$ 78,846 thousand), after deducting R$ 18,638 (US$ 4,202 thousand) in underwriting discounts, commissions and other offering expenses.

On March 10, 2020, the underwriters exercised their option to acquire additional 240,552 Class A common shares at the offering price, resulting in gross proceeds of R$ 30,884 (US$ 6,615 thousand). The net proceeds from the additional shares were R$ 29,819 (US$ 6,387 thousand), after deducting R$ 1,066 (U$ 228 thousand) in underwriting discounts and commissions.

Afya transferred R$ 294,312 (US$ 68,060 thousand) of the net proceeds to bank accounts in Brazil with an increase in the capital of Afya Brazil. These deposits were invested in first-line financial institutions in Brazil and are denominated in Brazilian reais.

Acquisitions in 2020

On January 31, 2020, Afya Brazil acquired control of Sociedade Universitária Redentor S.A. ("UniRedentor"), through the acquisition of 100% of its shares. UniRedentor is a post-secondary education institution with governmental authorization to offer on-campus, undergraduate degrees and graduate programs in medicine and health, as well as other courses, in the State of Rio de Janeiro. UniRedentor is in line with the Company’s strategy to focus on medical education. See Note 4.

On May 5, 2020, Afya Brazil acquired control of Centro Universitário São Lucas Ltda. (“UniSL”), through the acquisition of 100% of its shares. UniSL is a post-secondary education institution with governmental authorization to offer on-campus, undergraduate courses in medicine in the State of Rondônia. UniSL is in line with the Company’s strategy to focus on medical education. See Note 4.

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| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

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On July 20, 2020, Afya Brazil acquired 100% share of PEBMED Instituiçãode Pesquisa Médica e Serviços Tecnológicos da Área da Saúde S.A. (“PEBMED”). PEBMED offers digital content to better support clinical decision aiming a better performance of the healthcare professional. See Note 24.

COVID-19

In December 2019, a novel strain of coronavirus (COVID-19) was reported to have emerged in Wuhan, China. COVID-19 has since spread to most of the countries around the globe, including every state in Brazil. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and on March 20, 2020 the Brazilian federal government declared a national emergency with respect to COVID-19.

Since March 17, 2020, there has been an interruption of our on-campus activities due to Brazilian government authorities mandatory lockdowns. We managed to rapidly adapt our business to these unusual times, and although there has been an interruption of our on-campus activities, we are offering our educational activities to our students through our online platform (rather than on-site). Regarding the offering of practical classes, we quickly resumed our in-hospital and health care residency programs for fifth and sixth year students, which represents the largest portion of our practical curriculum. Some of our practical educational activities (particularly for students in the first to fourth years) that we were planning to provide in our on-campus labs and clinics remain suspended as of June 30, 2020 as a result of the COVID-19 pandemic.

Accordingly, we assessed whether we had satisfied all of our contracts with customers performance obligations, in accordance with IFRS 15, and concluded that was necessary to defer a portion of the net revenue in the second quarter of 2020. We recorded deferred revenues of R$14,465 by June 30, 2020, which were recorded in advances from customers in the statement of financial position as of June 30, 2020, as disclosed in Note 18.

By June 30, 2020, the States of Rio de Janeiro and Pará had issued state decrees granting discounts to our students, and we consequently have granted mandatory discounts to our students totaling R$345 in the State of Rio de Janeiro and R$263 in the State of Pará. As of the date of these interim financial statements, these mandatory discounts have been suspended as their constitutionality has been challenged in the superior courts. The State of Bahia also issued local regulation on August 13, 2020 granting discounts to our students. We are still evaluating the legal responses and measuring the possible impacts in our future financial statements.

As we continue to offer non-practical educational activities to our students through our platform and practical activities for fifth and sixth year students, through the same professors, staff and suppliers, we continue to charge our standard monthly tuitions fees. We are committed to delivering the best quality service, minimize the impacts of the COVID-19 pandemic on our students, employees and our local communities. In addition, as of the date of these interim financial statements, the COVID-19 pandemic has had no significant impact on the payment default rates of our students. We continue to support our students by providing special payment arrangements for families impacted by the COVID-19 pandemic. Furthermore, there have been no significant impacts on our financial performance and position of assets and there have been no significant changes in our financial condition triggering impairment indicators in these interim financial statements.

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| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

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The COVID-19 pandemic is still evolving, and Brazilian authorities may maintain a lockdown of our on-campus activities for a longer or undefined extended of period of time or impose a more severe lockdown, among other measures, all of which are outside of our control and may materially adversely affect our business and results of operations including the resumption of on-campus practical classes in 2020. We may also suffer labor shortages, particularly of our teaching faculty, which is mostly comprised of doctors that continue to have work shifts at hospitals and are consequently more exposed to COVID-19 than non-medical administrative staff. Furthermore, the COVID-19 pandemic is expect to cause a material and adverse effect on the general economic, financial, political, demographic and business conditions in Brazil, which may reduce the disposable income of our students and their families, and consequently (i) result in an adverse impact on the ability of our students (current and/or prospective) to pay our tuition fees and/or (ii) trigger an increase in our attrition rates.

While we are aware of the uncertainties created by the COVID-19 pandemic, we remain confident in our strategy, in the financial robustness of our business and in our contribution of high quality medical professionals who we believe will help our society overcome the COVID-19 pandemic and other future challenges.

2	Significant accounting policies
2.1	Basis for preparation of the unaudited interim condensed consolidated financial statements
---	---

The unaudited interim condensed consolidated financial statements as of June 30, 2020 and for the three-month and six-month periods ended June 30, 2020 and 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The unaudited interim condensed consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments that have been measured at fair value.

The corporate reorganization described in Note 1, occurred on July 7, 2019, was accounted for as a reorganization of entities under common control whereby Afya Limited was created as a holding company of Afya Brazil. As a result, the assets and liabilities of Afya Brazil was carried at historical cost and there was no step-up in basis or goodwill, or other intangible assets recorded as a result of the corporate reorganization.

As a result, the unaudited interim condensed consolidated financial statements prepared by the Company subsequent to the completion of the reorganization are presented “as if” Afya Brazil is the predecessor of the Company. Accordingly, these unaudited interim condensed consolidated financial statements reflect: (i) the historical operating results of Afya Brazil prior to the reorganization; (ii) the consolidated results of the Company and Afya Brazil following the reorganization; (iii) the assets and liabilities of Afya Brazil at their historical cost; and (iv) the Company’s equity and earnings per share for all periods presented.

| F-9 |

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| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

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The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company’s annual consolidated financial statements as of December 31, 2019.

Afya Limited is a holding company, as such the primary source of revenue derives from its interest on the operational companies in Brazil. As result, the Brazilian Real has been assessed as the Company`s functional currency.

The unaudited interim condensed consolidated financial statements are presented in Brazilian reais (“BRL” or “R$”), which is the Company’s functional and presentation currency. All amounts are rounded to the nearest thousand, except when otherwise indicated.

These unaudited interim condensed consolidated financial statements for the six-month period ended June 30, 2020 were authorized for issue by the Board of Directors on August 27, 2020.

2.2	Changes in accounting policies and disclosures

New standards, interpretationsand amendments adopted by the Company

The accounting policies adopted in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended December 31, 2019. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

Several amendments and interpretations apply for the first time in 2020, which include Amendments to IFRS 3: Definition of a Business; Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark Reform; and Amendments to IAS 1 and IAS 8: Definitionof Material; and Conceptual Framework for Financial Reporting issued on March 29, 2018, but did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.

2.3	Basis consolidation

The table below is a list of the Company’s subsidiaries and associate:

				Direct and indirect interest
Name	Principal activities	Location	Investment type	June 30, 2020	December 31, 2019
Afya Participações S.A. (Afya Brazil)	Holding	Nova Lima - MG	Subsidiary	100%	100%
Instituto Tocantinense Presidente Antônio Carlos Porto S.A. – (“ITPAC Porto”)	Undergraduate and graduate degree programs	Porto Nacional - TO	Subsidiary	100%	100%
Instituto Tocantinense Presidente Antônio Carlos S.A. – (“ITPAC Araguaina”)	Undergraduate and graduate degree programs	Araguaína - TO	Subsidiary	100%	100%
União Educacional do Vale do Aço S.A. – (“UNIVAÇO”)	Medicine undergraduate degree program	Ipatinga - MG	Subsidiary	100%	100%
IPTAN - Instituto de Ensino Superior Presidente Trancredo de Almeida Neves S.A. (“IPTAN”)	Undergraduate and graduate degree programs	São João Del Rei - MG	Subsidiary	100%	100%
Instituto de Educação Superior do Vale do Parnaíba S.A. (“IESVAP”)	Undergraduate and graduate degree programs	Parnaíba - PI	Subsidiary	80%	80%
Centro de Ciências em Saúde de Itajubá S.A. (“CCSI”)	Medicine undergraduate degree program	Itajubá - MG	Subsidiary	60%	60%
Instituto de Ensino Superior do Piauí S.A. (”IESP”)	Undergraduate and graduate degree programs	Teresina - PI	Subsidiary	100%	100%
RD Administração e Participações Ltda. (“RD”)	Holding	Pato Branco - PR	Subsidiary	100%	100%
FADEP - Faculdade Educacional de Pato Branco Ltda. (“FADEP”)	Undergraduate and graduate degree programs	Pato Branco - PR	Subsidiary	100%	100%
CBB Web Serviços e Transmissões Online S.A. (“CBBW”)***	Medical education courses and online platform	São Paulo - SP	Subsidiary	-	100%
Medcel Editora e Eventos S.A. (“Medcel”)	Medical education content	São Paulo - SP	Subsidiary	100%	100%
Instituto Educacional Santo Agostinho S.A. (“FASA”)	Undergraduate and graduate degree programs	Montes Claros - MG	Subsidiary	100%	100%

| F-10 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | ESMC Educação Superior Ltda.* | Undergraduate and graduate degree programs | Montes Claros - MG | Subsidiary | 100% | - | | --- | --- | --- | --- | --- | --- | | Instituto de Pesquisa e Ensino Médico do Estado de Minas Gerais Ltda. (“IPEMED”) | Post-graduate | Belo Horizonte - MG | Subsidiary | 100% | 100% | | União Educacional do Planalto Central S.A. (“UEPC”) | Undergraduate and graduate degree programs | Brasília - DF | Associate | 30% | 30% | | Instituto Paraense de Educação e Cultura Ltda (“IPEC”) | Undergraduate and graduate degree programs | Marabá - PA | Subsidiary | 100% | 100% | | Sociedade Universitária Redentor S.A. (“UniRedentor”) ** | Undergraduate and graduate degree programs | Itaperuna - RJ | Subsidiary | 100% | - | | Centro Universitário São Lucas Ltda. (“UniSL”) ** | Undergraduate and graduate degree programs | Porto Velho - RO | Subsidiary | 100% | - |

* On January 1, 2020, Afya Brazil incorporated ESMC Educação Superior Ltda. (“ESMC”) and transferred the two FASA campuses located in the State of Minas Gerais, which do not offer medicine courses, to ESMC. This spin-off did not have an impact on the consolidated financial statements.

** See Note 4 for further details on the business combinations during 2020.

*** CBBW was merged by Medcel on May 1, 2020.

The financial information of the acquired subsidiaries is included in the Company’s consolidated financial statements beginning on the respective acquisition dates.

The Company consolidates the financial information for all entities it controls. Control is achieved when the Company is exposed to, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and it ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.

When necessary, adjustments are made to the financial statements of subsidiaries in order to bring their accounting policies in line with the Company’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Company loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resulting gain or loss is recognized in the statement of income.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statements of financial position, consolidated statements of income and comprehensive income and consolidated statements of changes in equity. ****

3	Segment information

As a result of the corporate reorganization described in Note 1 which occurred on March 29, 2019, the Company has two reportable segments, as follows:

• Education Services Segment (Business Unit 1), which provides educational services through undergraduate courses related to medicine, other health sciences and other undergraduate programs; and

• Residency Preparatory and Specialization Programs Segment (Business Unit 2), which provides residency preparatory courses, graduate courses and medical post-graduate specialization programs, through printed and digital content, an online medical education platform and practical medical training.

| F-11 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

No operating segments have been aggregated to form the above reportable operating segments. There is only one geographic region and the results are monitored and evaluated as a single business.

Segment information is presented consistently with the internal reports provided to the Company’s Chief Executive Officer (CEO), which is the Chief Operating Decision Maker (CODM) and is responsible for allocating resources, assessing the performance of the Company’s operating segments, and making the Company’s strategic decisions.

The following table presents assets and liabilities information for the Company’s operating segments as of June 30, 2020 and December 31, 2019, respectively:

	June 30, 2020 (unaudited)
	Business unit 1	Business unit 2	Total	Adjustments and eliminations	Consolidated
Assets	3,658,276	192,235	3,850,511	(321)	3,850,190
Current assets	1,233,392	105,144	1,338,536	(321)	1,338,215
Non-current assets	2,424,884	87,091	2,511,975	-	2,511,975
Liabilities and equity	3,658,276	192,235	3,850,511	(321)	3,850,190
Current liabilities	429,912	32,935	462,847	(321)	462,526
Non-current liabilities	653,836	74,253	728,089	-	728,089
Equity	2,574,528	85,047	2,659,575	-	2,659,575
Other disclosures	88,091	7,797	95,888	-	95,888
Investment in associate	50,539	-	50,539	-	50,539
Capital expenditures (*)	37,552	7,797	45,349	-	45,349
	December 31, 2019
---	---	---	---	---	---
	Business Unit 1	Business Unit 2	Total	Adjustments and eliminations	Consolidated
Assets	2,714,161	199,285	2,913,446	(993)	2,912,453
Current assets	1,026,857	85,901	1,112,758	(993)	1,111,765
Non-current assets	1,687,304	113,384	1,800,688	-	1,800,688
Liabilities and equity	2,714,161	199,285	2,913,446	(993)	2,912,453
Current liabilities	312,303	21,919	334,222	(993)	333,229
Non-current liabilities	360,005	105,493	465,498	-	465,498
Equity	2,041,853	71,873	2,113,726	-	2,113,726
Other disclosures
Investment in associate	45,634	-	45,634	-	45,634
Capital expenditures (*)	167,427	8,282	175,709	-	175,709

(*) Capital expenditures consider the acquisitions of property and equipment and intangible assets.

| F-12 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

The following table presents statements of income for the Company’s operating segments for the six-month periods ended June 30, 2020 and 2019:

	June 30, 2020 (unaudited)
	Business unit 1	Business unit 2	Total	Elimination (inter-segment transactions)	Consolidated
External customer	446,147	100,368	546,515	-	546,515
Inter-segment	-	977	977	(977)	-
Net revenue	446,147	101,345	547,492	(977)	546,515
Costs of services	(172,431)	(24,480)	(196,911)	977	(195,934)
Gross profit	273,716	76,865	350,581	-	350,581
General and administrative expenses					(176,762)
Other expenses, net					(748)
Operating profit					173,071
Finance income					42,780
Finance expenses					(40,802)
Share of income of associate					4,905
Income before income taxes					179,954
Income taxes expense					(12,398)
Net income for the period					167,556
	June 30, 2019 (unaudited)
---	---	---	---	---	---
	Business<br><br> <br>Unit 1	Business<br><br> <br>Unit 2	Total	Elimination (inter-segment transactions)	Consolidated
Net revenue
External customer	301,518	21,553	323,071	-	323,071
Inter-segment	-	1,818	1,818	(1,818)	-
Net revenue	301,518	23,371	324,889	(1,818)	323,071
Costs of services	(130,383)	(8,082)	(138,465)	1,818	(136,647)
Gross profit	171,135	15,289	186,424	-	186,424
General and administrative expenses					(90,818)
Other income, net					370
Operating profit					95,976
Finance income					9,817
Finance expenses					(31,957)
Share of income of associate					920
Income before income taxes					74,756
Income taxes expense					(3,954)
Net income for the period					70,802

Seasonality of operations

Business Unit 1´s tuition revenues do not have significant fluctuations during the year.

Business Unit 2’s sales are concentrated in the first and last quarter of the year, as a result of enrollments at the beginning of the year. The majority of Business Unit 2’s revenues is derived from printed books and e-books, which are recognized at the point in time when control is transferred to the customer. Consequently, Business Unit 2 generally has higher revenues and results of operations in the first and last quarter of the year compared to the second and third quarters of the year.

| F-13 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 4 | Business combinations | | --- | --- |

The preliminary fair values of the identifiable assets acquired and liabilities assumed as of each acquisition date were:

	UniRedentor*	UniSL
Assets
Cash and cash and equivalents	11,796	3,245
Trade receivables	4,800	21,567
Inventories	-	467
Recoverable taxes	3	822
Other assets	2,486	7,251
Indemnification assets	710	12,645
Right-of-use assets	10,265	42,062
Property and equipment	4,207	19,149
Intangible assets	134,281	273,136
	168,548	380,344
Liabilities
Trade payables	(746)	(3,554)
Loans and financing	(16,187)	(58,541)
Lease liabilities	(10,265)	(42,062)
Labor and social obligations	(4,471)	(8,070)
Taxes payable	(850)	(5,779)
Provision for legal proceedings	(710)	(12,645)
Advances from customers	(10,994)	(6,084)
Notes payable	-	(80,526)
Other liabilities	-	(14,754)
	(44,223)	(232,015)
Total identifiable net assets at fair value	124,325	148,329
Preliminary goodwill arising on acquisition	85,780	53,192
Purchase consideration transferred	210,105	201,521
Cash paid	114,607	141,065
Payable in installments	95,498	60,456
Analysis of cash flows on acquisition:
Transaction costs (included in cash flows from operating activities)	(1,380)	(1,666)
Cash paid, net of cash acquired with the subsidiary (included in cash flows from investing activities)	(102,811)	(137,820)
Net of cash flow on acquisition	(104,191)	(139,486)

*During the measurement period, the preliminary goodwill for the acquisition of UniRedentor was adjusted to R$85,780 (R$90,282 previously disclosed) as a result of a purchase consideration adjustment of R$4,502.

(a) Acquisition of UniRedentor

On January 31, 2020, Afya Brazil acquired 100% of the share capital of UniRedentor. The original purchase price of R$ 214,607, was adjusted by R$4,502 and was comprised by: i) R$114,607 paid in cash on the acquisition date; and ii) R$ 100,000 is payable in five equal installments from January 2021 to July 2024, adjusted by the CDI rate. The purchase consideration adjustement of R$4,502 will be deducted from the first installment due in January 2021.

UniRedentor is a post-secondary education institution with governmental authorization to offer on-campus, undergraduate degrees and graduate programs in medicine and health, as well as other courses, in the State of Rio de Janeiro. The acquisition will contribute with 112 medical school seats, with a potential 44 additional medical school seats subject to the approval by MEC and is in line with the Company’s strategy to focus on medical education, including medical school.

| F-14 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

The acquisition of UniRedentor was accounted for under IFRS 3 – Business Combinations.

Transaction costs to date amount to R$ 1,380 and were expensed and are included in general and administrative expenses in the consolidated statement of income.

At the acquisition date, the fair value of the trade receivables acquired equals its carrying amount. Afya Brazil measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The right-of-use assets were measured at an amount equal to the lease liabilities and adjusted to reflect the unfavorable terms of the lease relative to market terms.

The preliminary goodwill recognized includes the value of expected synergies arising from the acquisition, which is not separately recognized. Goodwill is allocated entirely to Business Unit 1 segment. The preliminary goodwill recognized is not expected to be deductible for income taxes purposes.

The Company has not yet finalized the valuation of all identifiable assets acquired and liabilities assumed in the business combination of UniRedentor and therefore some of these amounts are preliminary. These amounts may be adjusted when the valuations are finalized.

The valuation techniques used for measuring the fair value of separately identified intangible assets acquired were as follows:

Intangible assets acquired	Valuation technique
Licenses	With-and-without method<br><br> <br>The with-and-without<br> method consists of estimating the fair value of an asset by the difference between the value of this asset in two scenarios: a<br> scenario considering the existence of the asset in question and another considering its non-existence.
Customer relationships	Multi-period excess earnings method<br><br> <br>The method considers<br> the present value of net cash flows expected to be generated by customer relationships, by excluding any cash flows related to<br> contributory assets.

From the date of acquisition, this business combination has contributed R$ 40,244 of net revenue and R$ 9,465 of income before income taxes to the Company. Should the acquisition had taken place at the beginning of the period, net revenue for the six-month period ended June 30, 2020 would have been increased by R$ 5,931 and income before income taxes for the six-month period ended June 30, 2020 would have been decreased by R$ 321.

(b) Acquisition of UniSL

On May 5, 2020, Afya Brazil acquired 100% of the total share capital of UniSL. UniSL is a post-secondary education institution with governmental authorization to offer on-campus, undergraduate courses in medicine in the State of Rondônia. UniSL also offers other health related undergraduate degrees. The purchase consideration is R$201,521, of which: (i) 70% is payable in cash on the transaction closing date, and (ii) 30% is payable in cash in three equal installments through 2023, adjusted by the CDI rate. The acquisition will contribute with 182 medical school seats. There are 100 additional seats still pending approval which, if approved by MEC, will result in a potential additional payment of up to R$80,000, adjusted by the CDI rate. Such potential additional payment has not been recognized as the approval of additional seats have not yet occurred and is contingent.

| F-15 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

The acquisition of UniSL was accounted for under IFRS 3 – Business Combinations.

Transaction costs to date amount to R$ 1,666 and were expensed and are included in general and administrative expenses in the consolidated statement of income.

The Company has not yet finalized the valuation of all identifiable assets acquired and liabilities assumed in the business combination of UniSL and therefore some of these amounts are preliminary. These amounts may be adjusted when the valuations are finalized.

The valuation techniques used for measuring the fair value of separately identified intangible assets acquired were as follows:

Intangible assets acquired	Valuation technique
Licenses	With-and-without method<br><br> <br>The with-and-without<br> method consists of estimating the fair value of an asset by the difference between the value of this asset in two scenarios: a<br> scenario considering the existence of the asset in question and another considering its non-existence.
Customer relationships	Multi-period excess earnings method<br><br> <br>The method considers<br> the present value of net cash flows expected to be generated by customer relationships, by excluding any cash flows related to<br> contributory assets.

From the date of acquisition, UniSL has contributed R$ 30,460 of net revenue and R$ 6,627 to the income before income taxes to the Company. If the acquisition had taken place at the beginning of the period, net revenue for the six-month period ended June 30, 2020 would have been increased by R$ 57,477 and income before income taxes for the six-month period ended June 30, 2020 would have been increased by R$ 9,455.

| F-16 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 5 | Cash and cash equivalents | | --- | --- | | | June 30, 2020 | December 31, 2019 | | --- | --- | --- | | | (unaudited) | | | Cash and bank deposits | 25,433 | 13,092 | | Cash equivalents | 1,016,029 | 930,117 | | | 1,041,462 | 943,209 |

Cash equivalents correspond to financial investments in Bank Certificates of Deposit (“CDB”) with highly rated financial institutions. As of June 30, 2020, the average interest on these CDB are equivalent to 98.0% of the Interbank Certificates of Deposit (“CDI”) (December 31, 2019: 99.2%). These funds are available for immediate use and have insignificant risk of changes in value. Cash equivalents denominated in U.S. dollars totaled R$76,406 as of June 30, 2020 (December 31, 2019: R$2,529).

6	Restricted cash

As of June 30, 2020, the restricted cash of R$12,955 (December 31, 2019: R$16,841) corresponds to financial investments in investment funds managed by highly rated financial institutions that serve as collateral for loans agreements. In accordance with the contractual terms, the Company is not allowed to withdraw any amounts until an integral payment of the loan.

As of June 30, 2020, the average interest on these funds are equivalent to 76.1% (December 31, 2019: 96.9%) of the CDI.

	June 30, 2020	December 31, 2019
	(unaudited)
Collateral for loan in Euros with Banco Itaú	10,902	14,788
Other	2,053	2,053
Total	12,955	16,841
Current	10,902	14,788
Non-current	2,053	2,053
7	Trade receivables
---	---
	June 30, 2020	December 31, 2019
---	---	---
	(unaudited)
Tuition fees	152,462	86,798
Educational content (a)	51,571	37,154
FIES	43,544	17,789
Others	23,620	6,378
Proeducar	1,884	1,884
	273,081	150,003
(-) Allowance for doubtful accounts	(20,596)	(14,763)
Total	252,485	135,240
Current	238,874	125,439
Non-current	13,611	9,801
(a)	Related to trade receivables from sales of printed<br>books, e-books and medical courses through digital platform from Medcel.
---	---

| F-17 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

As of June 30, 2020 and December 31, 2019, the aging of trade receivables was as follows:

	June 30, 2020	December 31, 2019
	(unaudited)
Neither past due nor impaired	114,840	71,095
Past due
1 to 30 days	39,276	15,042
31 to 90 days	59,948	27,221
91 to 180 days	37,617	20,543
More than 180 days	21,400	16,102
	273,081	150,003

The changes in the allowance for doubtful accounts for the six-month periods ended June 30, 2020 and 2019, was as follows:

	June 30, 2020	June 30, 2019
	(unaudited)	(unaudited)
Balances at the beginning of the period	(14,763)	(7,537)
Additions	(13,953)	(8,606)
Write-offs	8,120	2,498
Balances at the end of the period	(20,596)	(13,645 )

| F-18 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 8 | Related parties | | --- | --- |

The table below summarizes the balances and transactions with related parties:

	June 30, 2020	December 31, 2019
	(unaudited)
Assets
Trade receivables (a)	455	577
	455	577
	June 30, 2020	June 30, 2019
	(unaudited)	(unaudited)
Other income
Sales to UEPC (a)	104	683
	104	683
Lease payments
RVL Esteves Gestão Imobiliária S.A.	5,478	5,888
UNIVAÇO Patrimonial Ltda.	1,452	1,364
IESVAP Patrimonial Ltda.	1,628	1,191
	8,558	8,443

(a) Refers to sales of educational content from Medcel to UEPC.

Lease agreements with RVL Esteves GestãoImobiliária S.A.

Afya Brazil has entered into lease agreements with RVL Esteves Gestão Imobiliária S.A. (“RVL”), an entity controlled by the shareholder Nicolau Carvalho Esteves and of which Mr. Renato Esteves is an executive officer, as described below:

On June 21, 2016, RVL entered into lease agreements (as amended on April 26, 2018) with ITPAC – Instituto Tocantinense Presidente Antônio Carlos S.A., or ITPAC, and Itpac Porto Nacional – Instituto Tocantinense Presidente Antonio Carlos Porto S.A., or ITPAC Porto Nacional, pursuant to which RVL Esteves Gestão Imobiliária S.A. agreed to lease campuses to ITPAC and ITPAC Porto Nacional in the cities of Araguaína and Porto Nacional, both located in the State of Tocantins. The lease agreements are adjustable in accordance with the provisions of each lease agreement. The lease agreements are for an initial term of 20 years and are renewable for an additional 20 years subject to the provisions of each lease agreement.

On November 1, 2016, RVL entered into a lease agreement with Afya Brazil, pursuant to which RVL agreed to lease to Afya Brazil certain offices located in the city of Nova Lima, State of Minas Gerais, where Afya Brazil’s principal executive offices are located. On February 9, 2019 the agreement was amended to extend lease terms and adjust the lease amounts, subject to certain discount conditions set forth in the lease agreement and adjustable in accordance with the provisions of the lease agreement. The lease agreement is for an initial term of 5 years and may be renewable for an additional 5 years subject to the provisions of the lease agreement.

On September 6, 2018, RVL entered into a lease agreement with ITPAC, a subsidiary of Afya Brazil, pursuant to which RVL agreed to lease to ITPAC the new ITPAC campus currently under construction by RVL in the city of Palmas, State of Tocantins. The lease agreement is for an amount equal to 7.5% of the monthly net revenue of ITPAC during the prior semester, which will start to become due once the new ITPAC campus becomes operational, subject to the provisions of the lease agreement. The lease agreement is for an initial term of 20 years, starting on the date the new ITPAC campus becomes operational, and is renewable for an additional 20 years subject to the provisions of the lease agreement.

| F-19 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

On October 30, 2019, RVL entered into a lease agreement with IPTAN, pursuant to which RVL agreed to lease to IPTAN the new IPTAN medical campus, currently under construction by RVL in the city of Santa Inês, State of Maranhão. The lease agreement is for a monthly amount equal to (i) up to June 2020, R$12 and (ii) after June 2020 and until March 2024, 6.5% of the monthly net revenue of IPTAN assessed during the prior semester, in each case adjustable in accordance with the provisions of the lease agreement. The lease agreement is for an initial term of 20 years counted from the conclusion of the construction works and may be renewable for an additional 20 years subject to the provisions of the lease agreement.

The lease payments in connection with the lease agreements with RVL totaled R$5,478 and R$5,888 in the six-month periods ended June 30, 2020 and 2019, respectively.

Lease agreement withUNIVAÇO Patrimonial Ltda.

On July 14, 2016, UNIVAÇO Patrimonial Ltda., an entity controlled by the shareholder Nicolau Carvalho Esteves and of which Ms. Rosângela Esteves is the chief executive officer, entered into a lease agreement with UNIVAÇO, a subsidiary of Afya Brazil, pursuant to which UNIVAÇO Patrimonial Ltda. agreed to lease the UNIVAÇO campus to UNIVAÇO, located in the city of Ipatinga, State of Minas Gerais. The lease agreement is adjustable in accordance with the provisions of the lease agreement. The lease agreement is for an initial term of 20 years and is renewable for an additional 20 years subject to the provisions of the lease agreement. The lease payments in connection with this lease agreement totaled R$1,452 and R$1,364 in the six-month periods ended June 30, 2020 and 2019, respectively.

Lease agreement withIESVAP Patrimonial Ltda.

On April 25, 2018, IESVAP Patrimonial Ltda., an entity controlled by the shareholder Nicolau Carvalho Esteves and of which Mr. Renato Esteves is an executive officer, entered into a lease agreement with IESVAP, a subsidiary of Afya Brazil, pursuant to which IESVAP Patrimonial Ltda. agreed to lease the IESVAP campus to IESVAP located in the city of Parnaíba, State of Piauí. The lease agreement is for an amount equal to 7.5% of the monthly net revenue of IESVAP during the prior fiscal year. The lease agreement is for an initial term of 20 years and is renewable for an additional 20 years subject to the provisions of the lease agreement. The lease payments in connection with this lease agreement totaled R$1,628 and R$1,191 in the six-month periods ended June 30, 2020 and 2019, respectively.

| F-20 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

Key management personnelcompensation

Key management personnel compensation comprised the following:

	June 30, 2020	June 30, 2019
	(unaudited)	(unaudited)
Short-term employee benefits	5,679	1,289
Share-based compensation plan	9,380	1,372
	15,059	2,661

Compensation of the Company’s key management includes short-term employee benefits comprised by salaries, labor and social charges, and other ordinary short-term employee benefits. The amounts disclosed in the table are the amounts recognized as an expense in general and administrative expenses during the reporting period related to key management personnel. The executive officers participate in the share-based compensation plans described in Note 15(b).

9	Investment in associate

In connection with the corporate reorganization, described in Note 1 regarding the merger of BR Health, the Company acquired a 30% interest in UEPC, a medical school located in the Federal District, that offers higher education and post-graduate courses, both in person and long-distance learning. The Company’s interest in UEPC is accounted for using the equity method. The following table illustrates the summarized financial information of the Company’s investment in UEPC:

	June<br> 30, 2020	December 31, 2019
	(unaudited)
Current assets	29,405	26,762
Non-current assets	80,499	77,031
Current liabilities	(20,703)	(29,328)
Non-current liabilities	(64,677)	(66,294)
Equity	24,524	8,171
Company’s share in equity – 30%	7,356	2,451
Goodwill	43,183	43,183
Carrying<br> amount of the investment	50,539	45,634
	June 30, 2020	June 30, 2019
---	---	---
	(unaudited)	(unaudited)
Net revenue	61,193	28,924
Cost of services	(24,116)	(14,337)
General and administrative expenses	(18,100)	(8,713)
Finance result	(2,416)	182
Income before income taxes	16,561	6,056
Income taxes expenses	(210)	(390)
Net income for the period	16,351	5,666
Company’s share of income for the period	4,905	920
	June 30, 2020	June 30, 2019
---	---	---
	(unaudited)	(unaudited)
Opening balance	45,634	-
Acquisition of interest	-	48,915
Share of income	4,905	920
Closing balance	50,539	49,835

| F-21 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 10 | Property and equipment | | --- | --- | | Cost | Machinery and equipment | Land | Vehicles | Furniture and fixtures | IT equipment | Library books | Laboratories and clinics | Leasehold improvements | Construction in progress | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | As of December 31, 2018 | 30,503 | 2,770 | 182 | 11,897 | 10,243 | 12,838 | 597 | 11,882 | 10,736 | 91,648 | | Additions | 3,448 | 515 | - | 2,573 | 849 | 369 | 15 | 1,362 | 11,543 | 20,674 | | Business combinations | 3,988 | - | 103 | 2,565 | 2,035 | 4,096 | 418 | 14,541 | 470 | 28,216 | | As of June 30, 2019 (unaudited) | 37,939 | 3,285 | 285 | 17,035 | 13,127 | 17,303 | 1,030 | 27,785 | 22,749 | 140,538 | | As of December 31, 2019 | 44,329 | 7,005 | 707 | 21,438 | 15,994 | 18,139 | 1,049 | 30,911 | 36,731 | 176,303 | | Additions | 6,460 | 673 | - | 2,446 | 3,833 | 680 | - | 4,638 | 18,853 | 37,583 | | Business combinations | 4,114 | - | 266 | 2,346 | 1,811 | 703 | - | 9,441 | 4,675 | 23,356 | | As of June 30, 2020 (unaudited) | 54,903 | 7,678 | 973 | 26,230 | 21,638 | 19,522 | 1,049 | 44,990 | 60,259 | 237,242 | | Depreciation | | | | | | | | | | | | As of December 31, 2018 | (9,696) | - | (59) | (4,261) | (4,489) | (7,015) | (27) | (338) | - | (25,885) | | Depreciation | (1,466) | - | - | (802) | (960) | (751) | (93) | (516) | - | (4,588) | | As of June 30, 2019 (unaudited) | (11,162) | - | (59) | (5,063) | (5,449) | (7,766) | (120) | (854) | - | (30,473) | | As of December 31, 2019 | (13,793) | - | (59) | (5,890) | (6,537) | (8,663) | (386) | (1,655) | - | (36,983) | | Depreciation | (2,974) | - | (48) | (845) | (1,811) | (1,022) | (78) | (795) | - | (7,573) | | As of June 30, 2020 (unaudited) | (16,767) | - | (107) | (6,735) | (8,348) | (9,685) | (464) | (2,450) | - | (44,556) | | Net book value | | | | | | | | | | | | As of December 31, 2019 | 30,536 | 7,005 | 648 | 15,548 | 9,457 | 9,476 | 663 | 29,256 | 36,731 | 139,320 | | As of June 30, 2020 (unaudited) | 38,136 | 7,678 | 866 | 19,495 | 13,290 | 9,837 | 585 | 42,540 | 60,259 | 192,686 |

There were no indications of impairment of property and equipment as of and for the six-month period ended June 30, 2020.

| F-22 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 11 | Intangible assets and goodwill | | --- | --- | | | Goodwill | Licenses with indefinite useful life | Trademark | Customer relationships | Software | Education content | Educational platform and software in progress | Total | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Cost | | | | | | | | | | As of December 31, 2018 | 169,535 | 445,616 | - | 63,303 | 8,288 | - | 1,752 | 688,494 | | Additions (i) | 4,030 | - | - | - | 170 | - | 548 | 4,748 | | Business combinations | 290,186 | 150,156 | 32,111 | 62,110 | - | 17,305 | 2,845 | 554,713 | | As of June 30, 2019 (unaudited) | 463,751 | 595,772 | 32,111 | 125,413 | 8,458 | 17,305 | 5,145 | 1,247,955 | | As of December 31, 2019 | 459,409 | 703,772 | 32,111 | 125,413 | 9,389 | 17,305 | 14,241 | 1,361,640 | | Additions | - | - | - | - | 699 | - | 7,067 | 7,766 | | Business combinations | 138,972 | 328,459 | 55 | 76,084 | 2,819 | - | - | 546,389 | | As of June 30, 2020 (unaudited) | 598,381 | 1,032,231 | 32,166 | 201,497 | 12,907 | 17,305 | 21,308 | 1,915,795 | | Amortization | | | | | | | | | | As of December 31, 2018 | - | - | - | (2,945) | (3,080) | - | - | (6,025) | | Amortization | - | - | (209) | (11,987) | (702) | (2,165) | (772) | (15,835) | | As of June 30, 2019 (unaudited) | - | - | (209) | (14,932) | (3,782) | (2,165) | (772) | (21,860) | | As of December 31, 2019 | - | - | (1,150) | (37,872) | (4,536) | (4,876) | (868) | (49,302) | | Amortization | - | - | (810) | (23,606) | (1,131) | (3,806) | (1,317) | (30,670) | | As of June 30, 2020 (unaudited) | - | - | (1,960) | (61,478) | (5,667) | (8,682) | (2,185) | (79,972) | | Net book value | | | | | | | | | | As of December 31, 2019 | 459,409 | 703,772 | 30,961 | 87,541 | 4,853 | 12,429 | 13,373 | 1,312,338 | | As of June 30, 2020 | 598,381 | 1,032,231 | 30,206 | 140,019 | 7,240 | 8,623 | 19,123 | 1,835,823 |

(i) The amount of R$4,030 added to goodwil in June 2019 relates to ajustments during the measurement period of the business combination of IESP in respect to amounts to be included as part of the purchase price allocation at acquisition date mainly related to impairment of receivables.

| F-23 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

Impairment testing of goodwill and intangible assets with indefinite lives

The Company performed its annual impairment test in December and when circumstances indicated that the carrying value may be impaired. The Company’s impairment test for goodwill and intangible assets with indefinite lives is based on value-in-use calculations. The key assumptions used to determine the recoverable amount for the different cash generating units were disclosed in the annual consolidated financial statements for the year ended December 31, 2019.

There were no indications of impairment of goodwill and intangible assets with indefinite lives for the six-month period ended June 30, 2020.

Other intangible assets

For the six-month period ended June 30, 2020, there were no indicatives that the Company’s intangible assets with finite useful lives might be impaired.

12	Financial assets and financial liabilities
12.1	Financial assets
---	---
Financial assets	June 30, 2020	December 31, 2019
---	---	---
	(unaudited)
At amortized cost
Cash and cash equivalents	1,041,462	943,209
Restricted cash	12,955	16,841
Trade receivables	252,485	135,240
Total	1,306,902	1,095,290
Current	1,291,238	1,083,436
Non-current	15,664	11,854
Derivatives not designated as hedging instruments
Cross-currency interest rate swaps	8,720	-
Total	8,720	-
Current	8,720	-
Non-current	-	-
12.2	Financial liabilities
---	---
Financial liabilities	June 30,2020	December 31, 2019
---	---	---
	(unaudited)
At amortized cost
Trade payables	23,234	17,628
Loans and financing	61,402	60,357
Lease liabilities	394,240	284,515
Accounts payable to selling shareholders	395,446	300,237
Notes payable	78,437	-
Advances from customers	40,621	36,860
Total	993,380	699,597
Current	312,070	262,671
Non-current	681,310	436,926
Derivatives not designated as hedging instruments
Cross-currency interest rate swaps	-	757
Total	-	757
Current	-	757
Non-current	-	-

| F-24 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 12.2.1 | Loans and financing | | --- | --- | | Financial institution | Currency | Interest rate | Maturity | June 30, 2020 | December 31, 2019 | | --- | --- | --- | --- | --- | --- | | Itaú Unibanco S.A. ^(c)^ | Euro | 1.01% p.y. | 2020 | 35,968 | 52,959 | | Itaú Unibanco S.A. | Brazilian real | 15.66% p.y up to 16.21% p.y. | 2020 | 910 | 648 | | FINEP ^(a)^ | Brazilian real | TJLP p.y. | 2027 | 6,748 | 6,750 | | Banco da Amazônia S.A. ^(b)^ | Brazilian real | 3.56% p.y up to 5.05% p.y. | 2028 | 10,267 | - | | BNDES ^(b)^ | Brazilian real | 10.03% p.y. | 2024 | 509 | - | | CEF ^(b)^ | Brazilian real | 10.03% p.y. | 2024 | 7,000 | - | | | | | | 61,402 | 60,357 | | Current | | | | 42,094 | 53,607 | | Non-current | | | | 19,308 | 6,750 | | (a) | On July 23, 2019, Medcel entered into a loan of R$ 16,153 with Financiadora de Estudos e Projetos (“FINEP”), a governmental agency focused on financing investments on R&D, which has an interest rate based on TJLP (Long term interest rate), 2019 and maturity in 2027. The first tranche of R$ 6,734 was drawdown in October 2019 in order to develop the Medical web series. There is no financial covenant related to this agreement. The loan is guaranteed by bank warranty in the amount of R$ 6,734. | | --- | --- | | (b) | On May 5, 2020, as a result of the acquisition of UniSL, the Company assumed loans agreements with Banco da Amazônia S.A. which has an interest rate of 3.56% to 5.05% per year and maturity for July 2028, BNDES wich has an interest rate of 10.03% per year and maturity in 2024 and Caixa Econômica Federal (CEF) wich has an interest rate of 10.03% per year and maturity in January 2024. | | --- | --- | | (c) | On November 16, 2018, Afya Brazil entered into a euro-denominated loan agreement with Itaú Unibanco S.A. in the amount of R$ 74,980 (equivalent to €17,500). The loan accrues interest at 1.01% per annum and is repayable in three equal installments on November 18, 2019, May 18, 2020 and November 12, 2020. The loan agreement contains a financial covenant requiring Afya Brazil to maintain a Net Debt to EBITDA ratio less or equal to: 2.2x at end of 2018 and 2019 and 1.8x at the end of 2020. The Company is in compliance with the financial ratio at June 30, 2020. The loan is guaranteed by financial investments, classified as restricted cash, in the amount of R$ 10,902 as of June 30, 2020 (R$14,788 as of December 31, 2019), as disclosed in Note 6. | | --- | --- |

On November 21, 2018, Afya Brazil entered into cross-currency interest rate swaps in order to mitigate the foreign exchange exposure related to a loan denominated in Euros. The swap agreements are comprised of derivative assets to swap the foreign exchange exposure (Euros to Brazilian real) and derivative liabilities for the interest rate swap (1.01% p.y. to 128% of CDI). The swap agreements have three maturities on November 18, 2019, May 18, 2020 and November 12, 2020.

The table below summarizes the notional and fair value amounts of the swap agreements as of June 30, 2020 and December 31, 2019.

		Fair value
Cross-currency interest rate swap agreements	Principal amount (notional)*	June 30, 2020	December 31, 2019
		(unaudited)
Asset position: Euros + 1.01% p.y.	24,378	35,863	53,045
Liability position: 128% of CDI	(24,378)	(27,143)	53,802
Net position		8,720	(757)
Current assets (liabilities)		8,720	(757)
Non-current assets (liabilities)		-	-
*	The outstanding notional amount in Euros was 5,689<br>thousand.
---	---

| F-25 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 12.2.2 | Leases | | --- | --- |

The Company adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of January 1, 2019. The Company has lease contracts for properties. The maturity of the lease contracts generally has lease terms between 5 and 30 years. There are no sublease and variable payments in-substance lease agreements in the period. The incremental borrowing rate as at June 30, 2020 was from 9.3% up to 11.8%.

Set out below are the carrying amounts of right-of-use assets and lease liabilities and the movements in the six-month periods ended June 30, 2020 and 2019:

	Right-of-use assets	Lease liabilities
As at January 1, 2019	212,360	212,360
Additions	2,634	2,634
Business combinations	61,145	61,365
Depreciation expense	(8,018)	-
Interest expense	-	14,540
Payments of lease liabilities	-	(17,316)
As at June 30, 2019 (unaudited)	268,121	273,583
As at December 31, 2019	274,275	284,515
Additions	43,147	43,147
Remeasurement	19,361	19,361
Business combinations	52,327	52,327
Depreciation expense	(13,087)	-
Interest expense	-	20,428
Payments of lease liabilities	-	(25,538)
As at June 30, 2020 (unaudited)	376,023	394,240
As at December 31, 2019
Current	-	22,693
Non-current	274,275	261,822
As at June 30, 2020
Current	-	46,920
Non-current	376,023	347,320

The Company recognized lease expense from short-term leases and low-value assets of R$ 1,407 for the six-month period ended June 30, 2020 (R$ 733 for the six-month period ended June 30, 2019).

| F-26 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 12.2.3 | Accounts payable to selling shareholders | | --- | --- | | | June 30, 2020 | December 31, 2019 | | --- | --- | --- | | | (unaudited) | | | Acquisition of IESP (a) | 76,782 | 75,450 | | Acquisition of FADEP (b) | - | 18,745 | | Acquisition of FASA (c) | 66,766 | 105,306 | | Acquisition of IPEMED (d) | 38,245 | 45,646 | | Acquisition of IPEC (e) | 56,060 | 55,090 | | Acquisition of UniRedentor (f) | 96,879 | - | | Acquisition of UniSL (g) | 60,714 | - | | | 395,446 | 300,237 | | Current | 149,879 | 131,883 | | Non-current | 245,567 | 168,354 | | | June 30, 2020 | June 30, 2019 | | --- | --- | --- | | | (unaudited) | (unaudited) | | Opening balance | 300,237 | 177,730 | | Payments | (67,304) | (30,674) | | Interest | 6,559 | 8,081 | | Business combination | 155,954 | 147,560 | | Closing balance | 395,446 | 302,697 | | (a) | On November 27, 2018, Afya Brazil acquired 80% of IESP and the amounts of (i) R$8,906 was paid in February 2019, and (ii) R$106,200 is payable in three equal installments of R$35,400, each adjusted by the CDI rate through the payment date. The first installment was paid in November 2019 and the remaining two installments are due by the end of the second and third year from the transaction closing date. | | --- | --- | | (b) | On December 5, 2018, Afya Brazil acquired 100% of FADEP and the amount of R$52,846 is payable in three equal installments of R$17,615, each adjusted by the SELIC rate through the payment date and due semiannually from the transaction closing date. The first installment was paid in June 2019, the second installment was paid in December 2019, and the last installment was paid in June 2020. | | --- | --- | | (c) | On April 3, 2019, Afya Brazil acquired 90% of FASA and R$ 39,695 was paid in April 2020, R$ 29,770 is payable in April 2021, and R$ 29,770 is payable in April 2022; each adjusted by the IPCA rate + 4.1% per year. | | --- | --- | | (d) | On May 9, 2019, Afya Brazil acquired 100% of IPEMED and R$ 45,303 is payable in five equal installments of R$ 9,061, adjusted by the CDI rate, and due annually in February 2020, 2021, 2022, 2023 and 2024. | | --- | --- | | (e) | On August 13, 2019, Afya Brazil acquired 100% of IPEC and R$54,000 was paid in cash on the transaction closing date, and (ii) R$54,000 is payable in two equal installments, adjusted by the CDI rate, and due annually at the end of the first and the second year from the transaction closing date. | | --- | --- | | (f) | On January 31, 2020, Afya Brazil acquired 100% of UniRedentor and R$ 114,607 was paid in cash on the transaction closing date, and the original amount of R$100,000 is payable in five equal installments from January 2021 through July 2024, adjusted by the CDI rate. The purchase consideration adjustement of R$4,502 will be deducted from the first installment due in January 2021. | | --- | --- |

| F-27 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | (g) | On May 5, 2020, Afya Brazil acquired 100% of UniSL. The purchase consideration is R$201,521, of which: R$ 141,065 was paid in cash on the transaction closing date, and R$ 60,456 is payable in three equal installments through 2023, adjusted by the CDI rate. | | --- | --- | | 12.2.4 | Notes payable | | --- | --- |

With the acquisition of UniSL, Afya Brazil assumed notes payable regarding the previous acquisition of a portion of the operations of Universidade Luterana do Brasil (ULBRA) by UniSL in auction by the end of 2018. Two of the UniSL campuses, located in the cities of Ji-Paraná and Porto Velho in the State of Rondônia, were acquired in such transaction. As at June 30, 2020, notes payable of R$78,437, has a final maturity in 2023 and is adjusted by 100% of IPCA-E.

Set out below are the carrying amount of notes payable and the movements during the period:

	Notes payable
As at January 1, 2020	-
Business combination	80,526
Payments	(1,611)
Monetary indexation*	(478)
As at June 30, 2020 (unaudited)	78,437
Current liabilities	9,322
Non-current liabilities	69,115

*For the period ended June 30, 2020, there was a negative IPCA-E inflation.

12.3	Fair values

The table below is a comparison of the carrying amounts and fair values of the Company’s financial instruments, other than those carrying amounts that are reasonable approximation of fair values:

	June 30, 2020		December 31, 2019
	Carrying amount	Fair value	Carrying amount	Fair value
Financial assets	(unaudited)
Restricted cash	12,955	12,955	16,841	16,841
Trade receivables (non-current)	13,611	13,611	9,801	9,801
Derivatives	8,720	8,720	-	-
Total	35,286	35,286	26,642	26,642
Financial liabilities
Loans and financing	61,402	61,501	60,357	60,443
Lease liabilities	394,240	394,240	284,515	284,515
Accounts payable to selling shareholders	395,446	395,446	300,237	300,237
Notes payable	78,437	78,437	-	-
Derivatives	-	-	757	757
Total	929,525	929,624	645,866	645,952

| F-28 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

The Company assessed that the fair values of cash and cash equivalents, current trade receivables and other current assets, trade payables, advances from customers and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

Derivatives not designated as hedging instruments are recorded at fair value.

The fair value of interest-bearing borrowings and loans are determined by using the DCF method using discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk at June 30, 2020 was assessed to be insignificant.

12.4	Financial instruments risk management objectives and policies

The Company’s principal financial liabilities, other than derivatives, comprise loans and financing, accounts payable to selling shareholders, notes payable, trade payables and advances from customers. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include trade receivables, cash and cash equivalents and financial investments classified as restricted cash that derive directly from its operations. The Company has also entered into derivative transactions to protect its exposure to foreign currency risk.

The Company is exposed to market risk, credit risk and liquidity risk. The Company monitors market, credit and operational risks in line with the objectives in capital management and counts with the support, monitoring and oversight of the Board of Directors in decisions related to capital management and its alignment with the objectives and risks. The Company’s policy is that no trading of derivatives for speculative purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarized below.

12.4.1	Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company’s exposure to market risk is related to interest rate risk and foreign currency risk.

The sensitivity analysis in the following sections relate to the position as at June 30, 2020.

(i)	Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s cash equivalents and financial investments classified as restricted cash with floating interest rates and accounts payable to selling shareholders.

| F-29 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

Sensitivity analysis

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on cash equivalents, restricted cash, derivatives, loans and financing and accounts payable to selling shareholders and notes payable. With all variables held constant, the Company’s income before income taxes is affected through the impact on floating interest rates, as follows:

				Increase / decrease in basis points
	June 30, 2020(unaudited)
		Index – % per year	Base rate
				+75	-75	+150	-150
Cash equivalents	939,623	98.00% CDI	19,798	7,047	(7,047)	14,094	(14,094)
Restricted cash	12,955	76.10% CDI	212	97	(97)	194	(194)
Swap – liability position	(27,143)	128% CDI	(747)	(204)	204	(407)	407
Loans and financing	(6,748)	TJLP	(388)	(51)	51	(101)	101
Accounts payable to selling shareholders	(76,782)	CDI	(1,651)	(576)	576	(1,152)	1,152
Accounts payable to selling shareholders	(38,245)	CDI	(822)	(287)	287	(574)	574
Accounts payable to selling shareholders	(66,766)	IPCA + 4.1%	(4,854)	(501)	501	(1,001)	1,001
Accounts payable to selling shareholders	(56,060)	CDI	(1,205)	(420)	420	(841)	841
Accounts payable to selling shareholders	(96,879)	CDI	(2,083)	(727)	727	(1,453)	1,453
Accounts payable to selling shareholders	(60,714)	CDI	(1,305)	(455)	455	(911)	911
Notes payable	(78,437)	100% IPCA-E	(2,486)	(588)	588	(1,177)	1,177

*(ii)*Foreigncurrency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates to the loan denominated in Euros in the amount of R$35,968 as of June 30, 2020 (December 31, 2019: R$52,959) and cash equivalents denominated in U.S. dollars in the amount of R$76,406 as of June 30, 2020 (December 31, 2019: R$2,529).

The Company manages its foreign currency risk by entering in cross-currency interest rate swap agreement to mitigate its exposure to the loan denominated in Euros with the same notional amount and loan’s maturities.

Foreign currency sensitivity

The following table demonstrates the sensitivity in the Company’s income before income taxes of a 10% change in the Euro exchange rate of R$ 6.1539 to Euro 1.00 and U.S. dollar exchange rate of R$ 5.4760 to US$ 1.00 as of June 30, 2020, with all other variables held constant.

	Exposure	+10%	-10%
As of June 30, 2020
Cash equivalents	76,406	7,641	(7,641)
Loans and financing	(35,968)	(3,597)	3,597
	40,438	4,044	(4,044)

| F-30 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 12.4.2 | Credit risk | | --- | --- |

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including cash and cash equivalents and restricted cash.

Customer credit risk is managed by the Company based on the established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored. See Note 7 for additional information on the Company’s trade receivables.

Credit risk from balances with banks and financial institutions is management by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within limits assigned to each counterparty.

The Company’s maximum exposure to credit risk for the components of the statement of financial position at June 30, 2020 and December 31, 2019 is the carrying amounts of its financial assets.

12.4.3	Liquidity risk

The Company’s Management has responsibility for monitor liquidity risk. In order to achieve the Company’s objective, Management regularly reviews the risk and maintains appropriate reserves, including bank credit facilities with first tier financial institutions. Management also continuously monitors projected and actual cash flows and the combination of the maturity profiles of the financial assets and liabilities.

The main requirements for financial resources used by the Company arise from the need to make payments for suppliers, operating expenses, labor and social obligations, loans and financing, accounts payable to selling shareholders and notes payable.

The tables below summarize the maturity profile of the Company’s financial liabilities based on contractual undiscounted amounts:

As of June 30, 2020 (unaudited)	Less than 1 year	1 to 3 years	3 to 5 years	More than 5 years	Total
Trade payables	23,234	-	-	-	23,234
Loans and financing	52,821	30,438	7,928	11,706	102,893
Lease liabilities	52,542	99,115	93,746	623,806	869,209
Accounts payable to selling shareholders	157,566	228,261	62,753	-	448,580
Notes payable	9,020	27,369	50,757	-	87,146
Advances from customers	40,621	-	-	-	40,621
	335,804	385,183	215,184	635,512	1,571,683
As of December 31, 2019	Less than 1 year	1 to 3 years	3 to 5 years	More than 5 years	Total
---	---	---	---	---	---
Trade payables	17,628	-	-	-	17,628
Loans and financing	54,507	3,537	2,517	1,926	62,487
Lease liabilities	44,139	81,326	76,013	502,831	704,309
Accounts payable to selling shareholders	137,608	182,535	12,072	-	332,215
Advances from customers	36,860	-	-	-	36,860
Derivatives	757	-	-	-	757
	291,499	267,398	90,602	504,757	1,154,256

| F-31 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 12.5 | Changes in liabilities arising from financing activities | | --- | --- | | | January 1, 2020 | Payments | Additions | | Interest* | Foreign exchange movement | Business combinations | Other | June30, 2020 (unaudited) | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Loans and financing | 60,357 | (99,096) | 911 | | 4,938 | 19,564 | 74,728 | - | 61,402 | | Lease liabilities | 284,515 | (25,538) | 43,147 | | 20,428 | - | 52,327 | 19,361 | 394,240 | | Total | 344,872 | (124,634) | | 44,058 | 25,366 | 19,564 | 127,055 | 19,361 | 455,642 | |   | January 1, 2019 | Payments | Additions | | Interest | Foreign exchange movement | Business combinations | Other | June30, 2019 (unaudited) | | Loans and financing | 77,829 | (23,868) | - | | 1,792 | (1,858) | 43,087 | - | 96,982 | | Lease liabilities | 212,360 | (17,316) | 2,634 | | 14,540 | - | 61,365 | - | 273,583 | | Dividends payable | 4,107 | (7,621) | 46,952 | | - | - | - | (4,107) | 39,331 | | Total | 294,296 | (48,805) | 49,586 | | 16,332 | (1,858) | 104,452 | (4,107) | 409,896 |

| F-32 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 13 | Fair value measurement | | --- | --- |

The following table provides the fair value measurement hierarchy of the Company’s assets and liabilities as of June 30, 2020 and December 31, 2019.

	Fair value measurement
	Total	Quoted prices in active markets (Level 1)	Significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)
June 30, 2020 (unaudited)
Assets measured at fair value:
Derivative financial assets
Cross-currency interest rate swaps	8,720	-	8,720	-
Assets for which fair values are disclosed
Restricted cash	12,955	-	12,955	-
Trade receivables (non-current)	13,611	-	13,611	-
Liabilities for which fair values are disclosed
Loans and financing	(61,501)	-	(61,501)	-
Lease liabilities	(394,240)	-	(394,240)	-
Accounts payable to selling shareholders	(395,446)	-	(395,446)	-
Notes payable	(78,437)	-	(78,437)	-
	Fair value measurement
	Total	Quoted prices in active markets (Level 1)	Significant observable inputs (Level 2)	Significant unobservable inputs (Level 3)
December 31, 2019
Liabilities measured at fair value:
Derivative financial liabilities
Cross-currency interest rate swaps	(757)	-	(757)	-
Assets for which fair values are disclosed
Restricted cash	16,841	-	16,841	-
Trade receivables (non-current)	9,801	-	9,801	-
Liabilities for which fair values are disclosed
Loans and financing	(60,443)	-	(60,443)	-
Lease liabilities	(284,515)		(284,515)
Accounts payable to selling shareholders	(300,237)	-	(300,237)	-
14	Capital management
---	---

For the purposes of the Company’s capital management, capital considers total equity. The primary objective of the Company’s capital management is to maximize the shareholder value.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and to maintain and adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using net debt and total equity. The Company includes within net debt, loans and financing, lease liabilities, accounts pyable to selling shareholders and notes payable less cash and cash equivalents and restricted cash.

| F-33 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | | June 30, 2020 | December 31, 2019 | | --- | --- | --- | | | (unaudited) | | | Loans and financing | 61,402 | 60,357 | | Lease liabilities | 394,240 | 284,515 | | Accounts payable to selling shareholders | 395,446 | 300,237 | | Notes payable | 78,437 | - | | Less: cash and cash equivalents | (1,041,462) | (943,209) | | Less: restricted cash | (12,955) | (16,841) | | Net debt | (124,892) | (314,941) | | Total equity | 2,659,575 | 2,113,726 | | Total equity and net debt | 2,534,683 | 1,798,785 |

No changes were made in the objectives, policies or processes for managing capital during the six-month period ended June 30, 2020.

15	Labor and social obligations
a)	Variable compensation (bonuses)
---	---

The Company recorded bonuses related to variable compensation of employees and management in cost of services and general and administrative expenses in the amount of R$ 6,731 and R$1,741 in the six-month periods ended June 30, 2020 and 2019, respectively.

b.1) Share-based compensationplans exercised in 2019

The fair value of the stock options was estimated at the grant date using the Monte Carlo pricing model for Afya Brazil and Black & Scholes pricing model for the Guardaya’s plan, taking into account the terms and conditions on which the stock options were granted. The exercise price of the stock options granted was monetarily adjusted by the CDI rate. The Company accounted for the stock options plan as an equity-settled plan.

The stock options granted in June 2018 had the following vesting periods after the grant date: 10% after 90 days, 15% after 12 months, 25% after 24 months, 25% after 36 months and 25% after 48 months.

The stock options granted in February 2019 had the following vesting periods after the grant date: 10% after 90 days, 15% after 15 months, 25% after 27 months, 25% after 39 months and 25% after 51 months.

The Guardaya’s stock options had the following vesting periods: 10% after 1 year, 15% after 2 years, 25% after 3 years and 50% after 4 years.

The stock options vest immediately at the following liquidity events: (i) an IPO, (ii) changes in the Company’s control group; and (iii) sale of Crescera’s interest on Afya Brazil. On July 18, 2019, Afya Limited completed its IPO and the stock options became vested and was fully exercised on July 31,2019 at Afya Limited.

| F-34 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

The following table list the inputs to the model used to determine the fair value of the stock options:

	05/15/2018	02/07/2019	03/29/2019*
Weighted average fair value at the measurement date	R$ 366.16	R$529.12	R$684.22
Dividend yield (%)	0.0%	0.0%	0.0%
Expected volatility (%)	49.5%	45.5%	43.7%
Risk-free interest rate (%)	7.7%	7.6%	7.2%
Expected life of stock options (years)	4.0	4.0	4.0
Weighted average share price	R$254.13	R$ 368.41	R$ 213.35
Model used	Monte Carlo	Monte Carlo	Black & Scholes

*After the corporate reorganization described in Note 1, the options originally granted under the Guardaya’s plan granted on August 10, 2018 were remeasured at fair value and included in Afya Brazil’s plan with no changes to the previous terms and conditions other than the shares subject to such options granted and, consequently, the number of stock and exercise price of the shares as per the share exchange ratio applied on the corporate reorganization.

In September 2019, as a result of the IPO and the options became vested, the Company had a capital increase through the issuance of 1,842,428 Class A common shares in the amount of R$ 17,627 related to the exercise of the stock options.

The share-based compensation expense recognized in general and administrative expenses in the statement of income in the six-month period ended June 30, 2019 was R$ 1,909.

The following table illustrates the number and movements in stock options during the year ended December 31, 2019:

	Number of<br><br> <br>stock options
Outstanding at January 1, 2019	1,291,248
Granted	293,860
Forfeited	-
Addition of Guardaya’s plan	257,320
Exercised	(1,842,428)
Expired	-
Outstanding at December 31, 2019	-

The number of common shares outstanding from Afya Brazil was retrospectively adjusted in the proportion of 1:28 due to the contribution of the shareholders of Afya Brazil into Afya in a one-to-28 exchange for the shares of Afya Brazil contributed to Afya, which did not result in changes on the arrangements of the plans.

| F-35 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

b.2) Afya Limitedshare-based compensation plan

The stock options approved on August 30, 2019 as a result of the IPO will govern the issuance of equity incentive awards with respect to Company’s Class A common shares. On September 2, 2019 and September 25, 2019, the Company granted 2,306,214 and 58,000 stock options, respectively. The fair value of the stock options was estimated at the grant date using the Binomial pricing model, taking into account the terms and conditions on which the stock options were granted. The exercise price of the stock options granted is monetarily adjusted by the CDI rate. The Company accounts for the stock options plan as an equity-settled plan.

The stock options will vest in five installments of 20% per year, starting on May 1 of the year following the date of execution of the option agreement with each beneficiary.

On March 19, 2020, 230,000 additional stock options were granted, with an exercise price of US$19.00 each. These stock options will vest in four annual installments, representing each, respectively, 25% of the total stock options granted to such option holder. The final expiration for the exercise of the stock options granted to date is May 2024.

The share-based compensation expense recognized in general and administrative expenses in the statement of income for the six-month period ended June 30, 2020 was R$14,597.

The following table illustrates the number and movements in stock options during the period:

	Number of<br><br> <br>stock options
Outstanding at January 1, 2020	2,364,213
Granted	230,000
Forfeited	(164,531)
Exercised	-
Expired	-
Outstanding at June 30, 2020 (unaudited)	2,429,682

The following table list the inputs to the model used to determine the fair value of the stock options:

	March 2020	September 2019
Strike price at the measurement date	US$ 19.00	US$ 19.00
Dividend yield (%)	0.0%	0.0%
Expected volatility (%)	39.7%	38.9%
Risk-free interest rate (%)	0.8%	1.4%
Expected life of stock options (years)	4.0	5.0
Share price at the measurement date	US$ 16.30	US$ 21.90
Model used	Binomial	Binomial
Weighted average fair value at the measurement date	US$ 3.94	US$ 6.55

| F-36 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

16	Equity
a.	Share capital
---	---

As of June 30, 2020, the Company’s share capital was R$ 17 (R$ 17 as of December 31, 2019) represented by 93,004,755 shares comprised by 44,970,440 class A common shares and 48,034,315 class B common shares (89,744,275 shares comprised by 31,814,690 class A common shares and 57,929,585 class B common shares as of December 31, 2019).

In 2020, the Company issued 3,260,480 of the Class A common shares through the public equity offering, as described in Note 1.

b.	Afya Brazil

Prior to the completion of Afya’s IPO in July 2019, Afya Brazil was the predecessor of Afya. As such, the consolidated financial statements reflect the operating results of Afya Brazil prior to the reorganization, including the following equity transactions:

On March 8, 2019, the shareholders of Afya Brazil approved a renounce of dividends for the year ended December 31, 2016 of R$4,107; and an increase of capital through the issuance of 37,200 common shares, in the amount of R$ 0.01, subscribed entirely by the shareholders BR Health and certain members of the Esteves Family.

On March 12, 2019, the shareholders of Afya Brazil approved amongst other matters: (i) the change in its legal name to Afya Participações S.A.; (ii) a capital increase through the issuance of 156,337 common shares, in the amount of R$ 150,000, subscribed entirely by BR Health; and (iii) the propose to repurchase 160,000 common shares issued by the Company, at the acquisition price of R$ 206.25 per share, in the total amount of R$33,001, all held by the shareholder Nicolau Carvalho Esteves. The Company's common shares object of the repurchase approved were immediately canceled by the Company, without reduction of its share capital.

On March 29, 2019, Afya Brazil issued 378,696 common shares to the shareholders of BR Health and Guardaya, and had a capital increase of R$ 122,062 and an additional paid-in capital of R$ 137,051.

In June 2019, Afya Brazil’s shareholders approved an increase of capital through the issuance of 157,202 common shares in exchange of the acquisitions of FASA, IESP and Univaço minority interests, in the total amount of R$ 24,310.

On June 18, 2019, the shareholders of Afya Brazil approved an increase of capital through the issuance of 27,211 common shares in exchange of the acquisition of an addition 15% interest at UEPC, in the total amount of R$ 24,458, subscribed entirely by the shareholder Bozano Educacional II Fundo de Investimento em Participações Multiestratégia.

| F-37 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

In addition to the capital increase related to the acquisition of the non-controlling interests of FASA, IESP and Univaço and the interest in UEPC, the Company had an additional paid-in capital of R$ 36,358.

c.	Dividends

On March 8, 2019, the shareholders of Afya Brazil approved the cancellation of dividends for the year ended December 31, 2016 of R$4,107.

On June 13, 2019, Afya Brazil approved the payment of interim dividends totaling R$ 38,000 to Afya Brazil shareholders of record on June 13, 2019. The dividend amount was determined based on the Afya Brazil’s net income for the five months ended May 31, 2019 and was paid on September 26, 2019. Afya and its public shareholders were not entitled to receive such dividends.

In 2020, CCSI and IESVAP approved the payment of interim dividends totaling R$ 5,770 of which R$ 2,098 and R$ 3,672 was distributed to IESVAP and CCSI’s non-controlling shareholders, respectively. The dividends were already paid.

17	Earnings per share (EPS)

Basic EPS is calculated by dividing net income attributable to the equity holders of the Company by the weighted average number of common shares outstanding during the period.

Diluted EPS is calculated by dividing net income attributable to the equity holders of the parent by the weighted average number of common shares outstanding during the period plus the weighted average number of shares that would be issued on conversion of all potential shares with dilutive effects.

Diluted earnings per share are computed including stock options granted to key management using the treasury shares method when the effect is dilutive. The Company has the stock option plan in the category of potentially dilutive shares

The following table reflects the net income and share data used in the basic and diluted EPS calculations:

	Three-month period ended
	June 30, 2020	June 30, 2019	June 30, 2020	June 30, 2019
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Numerator
Net income attributable to equity holders of the parent	60,679	16,317	160,495	57,852
Denominator*
Weighted average number of outstanding shares	93,004,755	69,628,580	92,215,329	63,740,516
Effects of dilution from stock options	186,936	1,295,112	393,695	1,295,112
Weighted average number of outstanding shares adjusted for the effect of dilution	93,191,691	70,923,692	92,609,024	65,035,628
Basic earnings per share - R$	0.65	0.23	1.74	0.91
Diluted earnings per share - R$	0.65	0.23	1.73	0.89

*****Considers the effects from the contribution of the shareholders of Afya Brazil into Afya in a one-to-28 exchange for the shares of Afya Brazil contributed to Afya.

| F-38 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 18 | Revenue | | --- | --- | | | Three-month period ended | | Six-month period ended | | | --- | --- | --- | --- | --- | | | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | | | (unaudited) | (unaudited) | (unaudited) | (unaudited) | | Tuition fees (*) | 328,639 | 208,183 | 617,421 | 376,574 | | Other | 12,109 | 10,782 | 46,793 | 11,778 | | Deductions | | | | | | Granted discounts | (19,603) | (15,353) | (30,748) | (21,459) | | Early payment discounts | (7,273) | (1,056) | (13,131) | (1,721) | | Returns | (1,275) | (2,129) | (5,189) | (3,250) | | Taxes | (12,191) | (6,349) | (22,862) | (11,242) | | PROUNI | (26,195) | (15,585) | (45,769) | (27,609) | | Net revenue from contracts with customers | 274,211 | 178,493 | 546,515 | 323,071 | | Timing of revenue recognition of net revenue from contracts with customers | | | | | | Tuition fees - Transferred over time | 262,222 | 169,545 | 501,964 | 313,273 | | Other revenue - Transferred at a point in time | 11,989 | 8,948 | 44,551 | 9,798 |

(*) As mentioned in Note 1, the Company assessed, in connection with the social distancing requirements, whether it has satisfied all performance obligations of its contracts with customers, accorging to IFRS15, and concluded it was necessary to defer a portion of it’s net revenues in the second quarter of 2020. As result, R$14,465 of net revenue were deferred to the second semester of 2020 and recorded in advances from customers.

The Company`s revenue from contracts with customers are all in Brazil. The Company is not subject 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 under graduation degrees under the PROUNI program.

The following table presents revenue by segment for the six-month periods ended June 30, 2020 and 2019:

Revenue by segment	Business<br><br> <br>Unit 1	Business<br><br> <br>Unit 2	Elimination (inter-segment transactions)	June 30, 2020
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Types of services or goods	451,886	95,606	(977)	546,515
Tuition fees	449,035	52,325	-	501,360
Other	2,851	43,281	(977)	45,155
Timing of revenue recognition	451,886	95,606	(977)	546,515
Transferred over time	449,035	52,929	-	501,964
Transferred at a point in time	2,851	42,677	(977)	44,551

| F-39 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | |   Revenue by segment | Business Unit 1 | Business Unit 2 | Elimination (inter-segment transactions) | June 30, 2019 | | --- | --- | --- | --- | --- | | | (unaudited) | (unaudited) | (unaudited) | (unaudited) | | Types of services or goods | 301,518 | 23,371 | (1,818) | 323,071 | | Tuition fees | 300,890 | 12,383 | - | 313,273 | | Other | 628 | 10,988 | (1,818) | 9,798 | | Timing of revenue recognition | 301,518 | 23,371 | (1,818) | 323,071 | | Transferred over time | 300,890 | 12,383 | - | 313,273 | | Transferred at a point in time | 628 | 10,988 | (1,818) | 9,798 | | 19 | Expenses and cost by nature | | --- | --- | | | Three-month period ended | | Six-month period ended | | | --- | --- | --- | --- | --- | | | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | | | (unaudited) | (unaudited) | (unaudited) | (unaudited) | | Cost of services | 106,683 | 82,283 | 195,934 | 136,647 | | General and administrative expenses | 90,039 | 59,584 | 176,762 | 90,818 | | Total | 196,722 | 141,867 | 372,696 | 227,465 | | Payroll | 112,254 | 85,561 | 204,899 | 141,633 | | Depreciation and amortization | 26,383 | 19,387 | 51,330 | 28,441 | | Hospital and medical agreements | 9,800 | 3,329 | 18,503 | 6,016 | | Share-based compensation | 6,157 | 868 | 14,597 | 1,909 | | Allowance for doubtful accounts | 7,621 | 4,803 | 13,953 | 8,606 | | Consulting fees | 5,711 | 2,213 | 10,368 | 2,486 | | Maintenance | 5,777 | 2,552 | 9,026 | 4,048 | | Sales and marketing | 3,551 | 3,984 | 6,904 | 4,985 | | Pedagogical services | 2,650 | 1,268 | 4,637 | 2,077 | | Utilities | 1,417 | 1,873 | 2,832 | 2,961 | | Tax expenses | 1,240 | 817 | 2,070 | 1,431 | | Travel expenses | 911 | 1,890 | 2,824 | 2,620 | | Rent | 914 | 959 | 1,407 | 1,047 | | Commercial expenses | 848 | 609 | 1,309 | 628 | | Other | 11,488 | 11,754 | 28,037 | 18,577 | | Total | 196,722 | 141,867 | 372,696 | 227,465 |

| F-40 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- | | 20 | Finance result | | --- | --- | | | Three-month period ended | | Six-month period ended | | | --- | --- | --- | --- | --- | | | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | | | (unaudited) | (unaudited) | (unaudited) | (unaudited) | | Income from financial investments | 5,875 | 1,783 | 16,086 | 3,283 | | Change in fair value of derivative instruments | 5,374 | - | 19,430 | - | | Interest received | 1,810 | 1,410 | 5,327 | 3,915 | | Foreign exchange gain, net | - | 743 | 14 | 1,858 | | Other | 895 | 714 | 1,923 | 761 | | Finance income | 13,954 | 4,650 | 42,780 | 9,817 | | Change in fair value of derivative instruments | - | (842) | - | (2,809) | | Interest expense | (5,236) | (7,599) | (11,017) | (9,873) | | Interest expense on lease liabilities | (10,528) | (8,122) | (20,428) | (14,540) | | Financial discounts granted | (958) | (1,053) | (1,764) | (1,265) | | Bank fees | (2,130) | (636) | (3,106) | (1,029) | | Foreign exchange loss, net | (1,187) | - | - | - | | IOF taxes (taxes on financial transactions) | (181) | - | (1,476) | | | Other | (2,910) | (1,469) | (3,011) | (2,441) | | Finance expenses | (23,130) | (19,721) | (40,802) | (31,957) | | Finance result | (9,176) | (15,071) | 1,978 | (22,140) | | 21 | Income taxes | | --- | --- |

Reconciliation of income taxes expense

	Three-month period ended		Six-month period ended
	June 30, 2020	June 30, 2019	June 30, 2020	June 30, 2019
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Income before income taxes	70,227	23,051	179,954	74,756
Combined statutory income taxes rate - %	34%	34%	34%	34%
Income taxes at statutory rates	(23,877)	(7,837)	(61,184)	(25,416)
Reconciliation adjustments:
Tax effect on income from entities not subject to taxation	(896)	-	897	-
PROUNI - Fiscal incentive (a)	31,324	7,919	63,127	27,866
Unrecognized deferred tax assets	(8,470)	-	(15,766)	-
Presumed profit income tax regime effect (b)	(2,457)	-	2,160	-
Other	(1,965)	(1,807)	(1,632)	(6,404)
Income taxes expense – current	(6,341)	(1,725)	(12,398)	(3,954)
Effective rate	(9.0)%	(7.5)%	(6.9)%	(5.3)%

(a) Some of the Company’s educaton instiutions adhered to PROUNI, established by Law 11,096 / 2005, which is a Brazilian federal program that exempt companies of paying income taxes and social contribution.

(b) Brazilian tax law establishes that companies that generate gross revenues of up to R$ 78,000 in the prior fiscal year may calculate income taxes as a percentage of gross revenue, using the presumed profit income tax regime. Some of the Company’s non-education subsidiaries (Business Unit 2) adopted this tax regime and the effect of the presumed profit of subsidiaries represents the difference between the taxation based on this method and the amount that would be due based on the statutory rate applied to the taxable profit of the subsidiaries.

| F-41 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

Deferred income taxes

As of June 30, 2020, the Company had unrecognized deferred income tax assets on temporary differences in the amount of R$ 167,364 (tax basis) (R$ 96,627 (tax basis) as of December 31, 2019) which does not have any tax planning opportunities available that could support the recognition of these temporary differences as deferred tax assets. Accordingly, the Company did not recognize deferred tax assets.

22	Insurance contracts and contingencies

a) Insurancecontracts

The Company and its subsidiaries have a risk management program with the purpose of delimiting the risks, seeking in the market coverage compatible with its size and operations.

b)Legal proceedings and contingencies

The provisions related to labor, civil and taxes proceedings whose likelihood of loss is assessed as probable are as follows:

	Labor	Civil	Total
Balances as of December 31, 2018	2,233	1,232	3,465
Business combinations	2,699	993	3,692
Additions	837	427	1,264
Reversals	(1,039)	(572)	(1,611)
Balances as of June 30, 2019 (unaudited)	4,730	2,080	6,810
	Labor	Civil	Taxes	Total
---	---	---	---	---
Balances as of December 31, 2019	2,501	2,768	-	5,269
Business combinations	2,536	2,029	8,790	13,355
Additions	1,763	329	-	2,092
Reversals	(40)	(869)	-	(909)
Balances as of June 30, 2020 (unaudited)	6,760	4,257	8,790	19,807

There are other civil, labor, taxes and social security proceedings assessed by Management and its legal counsels as possible risk of loss, for which no provisions are recognized, as follows:

	June 30, 2020	December 31,<br><br> <br>2019
	(unaudited)
Labor	5,529	3,570
Civil	43,349	39,135
Taxes and social security	17,209	7,583
Total	66,087	50,288

The Company has judicial deposits recorded in other assets (non-current) in the amount of R$ 1,156 as of June 30, 2020 (December 31, 2019: R$ 804).

| F-42 |

| --- |

| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

| --- |

Under the terms of the Share Purchase and Sale Agreements ("Agreements") between the Company and the selling shareholders of the subsidiaries acquired, the Company assesses that the selling shareholders are exclusively responsible for any provisions (including labor, tax and civil), which are or will be the subject of a claim by any third party, arising from the act or fact occurred, by action or omission, prior to or on the closing dates of the acquisitions.

Accordingly, and considering that the provisions for legal proceedings recorded by the Company that result from causes arising from events occurring prior to the closing dates of the acquisitions, any liability for the amounts to be disbursed, in case of their effective materialization in loss, belongs exclusively to the selling shareholders. In this context, the Agreements state that the Company and its subsidiaries are indemnified and therefore exempt from any liability related to said contingent liabilities and, therefore, the provision amounts related to such contingencies are presented in the non-current liabilities and the correspondent amount of R$ 19,710 (December 31, 2019: R$ 6,690) is presented in non-current other assets.

23	Non-cash transactions

During the six-month period ended June 30, 2020 and 2019, the Company carried out non-cash transactions which are not reflected in the statements of cash flows. The main non-cash transactions were the business combination of Guardaya in March 2019; and additions of right-of-use assets and lease liabilities.

24	Subsequent events

a) Loan agreement

On July 3, 2020, Afya Brazil entered into a loan agreement with Banco Votorantim S.A. in the amount of R$ 100,000 adjusted by the CDI rate plus a interest rate of 1.65% per year and is repayable at maturity on July 5, 2021.

b) Acquisitionof PEBMED

On July 20, 2020, Afya Brazil acquired control of PEBMED through the acquisition of 100% of its share capital. PEBMED offers content and clinical tools for healthcare professionals, including mobile and web apps. With this acquisition, Afya will strengthen its position in the medical career and expand its digital platform.

The aggregate purchase price is R$132,900, of which: (i) 86.8% was paid in cash, and (ii) 13.2% was paid with Afya's shares.

The acquisition date fair value of each major class of consideration, including the allocation of the purchase price has not been completed by the Company as of the date of these interim financial statements. The impact on revenue and profit or loss of the combined entity for the current reporting period as if the acquisition date had been as of the beginning of the annual reporting period is not available as the Company recently concluded this acquisition. Therefore, these interim financial statements do not include this information. The transaction costs to date amounted to R$ 435. Any goodwill generated in the transaction is not expected to be deductible for tax purposes.

c) Share-basedcompensation plan strike price change

| F-43 |

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| **Afya Limited**<br><br>Notes to the unaudited interim condensed consolidated financial statements<br><br>June 30, 2020 and 2019<br><br>Expressed in thousands of Brazilian reais, unless otherwise stated |

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On July 29, 2020, the board of directors of the Company approved a change in the strike price of the current share-based compensation plan. The strike price is now measured in Brazilian Reais (where the Company’s operations are located and valuated) instead of U.S. dollar, considering the exchange rate at the date of the IPO, which was R$4.1385 Real for each U.S. dollar. This change was assessed as a modification by the Company and will be accounted for in accordance with IFRS 2.

d) Acquisitionof FCMPB

On August 20, 2020, Afya Brazil entered into an agreement for the acquisition of 100% of the total share capital of Faculdade deCiências Médicas da Paraíba (“FCMPB”). FCMPB is a post-secondary education institution with government authorization to offer on-campus, undergraduate courses in medicine in the State of Paraíba and medical course represents 99% of its net revenue in 2019.

The purchase price is R$380,000, of which: (i) 50% is payable in cash on the transaction closing date, and (ii) 50% is payable in cash in four equal installments through 2024, adjusted by the CDI rate.

The acquisition will contribute 157 medical school seats to Afya, increasing Afya’s total medical school seats to 2,023.

The acquisition date fair value of each major class of consideration, including the allocation of the purchase price has not been completed by the Company as of the date of these interim financial statements. The impact on revenue and profit or loss of the combined entity for the current reporting period as if the acquisition date had been as of the beginning of the annual reporting period is not available as the Company as the Company did not conclude this acquisition. Therefore, the interim financial statements do not include this information. Any goodwill generated in the transaction is not expected to be deductible for tax purposes.

e) Acquisitionof FESAR

On August 27, 2020, Afya Brazil entered into an agreement, through its for the acquisition of 100% of the total share capital of Faculdade de Ensino Superiorda Amazônia (“FESAR”). FESAR is a post-secondary education institution with government authorization to offer on-campus, undergraduate courses in medicine in the State of Pará.

The purchase price is R$260,000 payable in cash in the transaction closing date. The purchase price also includes real state, which is valued at R$21,000.

The acquisition will contribute 120 medical school seats to Afya, increasing Afya’s total medical school seats to 2,143.

The acquisition date fair value of each major class of consideration, including the allocation of the purchase price has not been completed by the Company as of the date of these interim financial statements. The impact on revenue and profit or loss of the combined entity for the current reporting period as if the acquisition date had been as of the beginning of the annual reporting period is not available as the Company did not conclude this acquisition. Therefore, the interim financial statements do not include this information. Any goodwill generated in the transaction is not expected to be deductible for tax purposes.

***

F-44

****

Afya Limited Announces SecondQuarter and First Half 2020 Financial Results

Surpassed 1H20 Guidance; Synergies and MaturationDriving Margin Expansion

Nova Lima, Brazil, August 27,2020 – Afya Limited (Nasdaq: AFYA) (“Afya” or the “Company”), the leading medical education group in Brazil, today reported financial and operating results for the three and six-month periods ended June 30, 2020 (second quarter 2020, 2Q20 and first half 2020, respectively). Financial results are expressed in Brazilian Reais and are presented in accordance with International Financial Reporting Standards (IFRS).

SecondQuarter 2020

§	Net Revenue in 2Q20 increased 53.6% year over year (YoY) to R$274.2 million, this value does not include R$14.4 million of Net Revenue, that<br>was deferred due to the interruption of practical activities on campus. Net Revenue excluding UniRedentor and UniSL grew 22.6%, reaching<br>R$218.8 million.
§	Adjusted EBITDA in 2Q20 increased 76.6% YoY reaching R$118.2 million, with Adjusted EBITDA margin of 43.1%, expanding 560 basis points (bps). This<br>value does not include R$14.4 million of Net Revenue, that was deferred due to the interruption of practical activities on campus. Adjusted<br>EBITDA excluding UniRedentor and UniSL grew 46.6%.
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§	Adjusted Net Income<br>in 2Q20 of R$82.6 million was 163.1% higher than 2Q19.
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FirstHalf 2020 Highlights

§	First Half 2020 Net<br>Revenue of R$546.5 million, up 69.2% YoY. Net Revenue excluding UniRedentor and UniSL increased 47.3% YoY reaching R$475.8 million.
§	Adjusted EBITDA for<br>first half 2020 (1H20) increased 82.7% YoY reaching R$258.8 million, with Adjusted EBITDA margin of 47.4%, expanding 360 bps. Adjusted<br>EBITDA excluding UniRedentor and UniSL increased 66.5% YoY, reaching R$235.9 million, with Adjusted EBITDA margin of 49.6%.
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§	Adjusted Net Income<br>in 1H20 of R$206.6 million was 143.3% higher than 1H19.
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§	Cash conversion of 82.6%<br>with a solid cash position of R$1.1 billion at quarter-end.
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§	Subsequent events:
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—	Entrance into the digital health services<br>segment with the acquisition of PEBMED, strengthening BU-2. PEBMED helps physicians in the decision making process through Whitebook<br>with more than 165,000 active users per month, of which 91,000 are paying subscribers. It also provides Nursebook app and PEBMED<br>portal;
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—	Entrance into a purchase agreement for<br>the acquisition of Faculdade Ciências Médicas da Paraíba, or FCMPB and Faculdade de Ensino Superior da Amazônia<br>Reunida, or FESAR, adding a combined total of 277 medical seats. The transactions are subject to customary closing conditions and<br>antitrust regulatory approvals. It is Afya’s first medical school in Paraíba state and FESAR, the second one, in the<br>state of Pará.
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Table 1: Financial Highlights
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					For the six months period ended June 30,
(in thousand of R)	2020 Ex Uniredentor and UniSL	2019	% Chg	% Chg Ex Uniredentor and UniSL	2020	2020 Ex Uniredentor and UniSL	2019	% Chg	% Chg Ex Uniredentor and UniSL
(a) Net Revenue¹	218,813	178,493	53.6%	22.6%	546,515	475,811	323,071	69.2%	47.3%
(b) Pro forma Net Revenue¹ ²	218,813	184,229	48.8%	18.8%	546,515	475,811	402,172	35.9%	18.3%
(c) Adjusted EBITDA³	98,072	66,909	76.6%	46.6%	258,796	235,867	141,639	82.7%	66.5%
(d) = (c )/(a) Adjusted EBITDA Margin²	44.8%	37.5%	560 bps	730 bps	47.4%	49.6%	43.8%	360 bps	580 bps
(g) Pro forma Adjusted EBITDA¹ ²	98,072	68,127	73.4%	44.0%	258,796	235,867	152,509	69.7%	54.7%
(h) = (e)/(b) Pro forma Adjusted EBITDA¹ ² Margin	44.8%	37.0%	610 bps	780 bps	47.4%	49.6%	37.9%	950 bps	1170 bps
(i) Adjusted Net Income³	68,689	31,376	163.1%	118.9%	206,569	190,654	84,907	143.3%	124.5%
1. Due to the interruption of pratical classes during the pandemic R 14.4 million of 1H2020 Net Revenue will be recognized in the 2H2020.
2. Includes the pro-forma results of Medcel, IPEMED and FASA, as if the acquisition had been consummated on January 1, 2019.
3. See more information on "Non-GAAP Financial Measures" (Item 8).

All values are in US Dollars.

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Messagefrom Management

Virgilio Gibbon, Afya’s CEO*,stated:*

Our organization has responded and adapted to the challenges of the COVID-19 in an incredible and agile manner. I am extremely proud of the way Afya has adapted and executed to meet the significant changes and delivered an outstanding performance during the second quarter, which was ahead of our expectations.

The story of the second quarter was dictated by the COVID-19 pandemic. Our priorities remain unchanged as we continue to navigate these challenging times. We are focused on taking care of our employees and students and operating in a safe environment that protects both our team members and students. To that end, in mid-March, we shifted all our classes online and moved to a remote work situation for all corporate employees. Our ability to adapt to these changes allowed us to deliver a strong performance in the second quarter and surpass our first half guidance. Importantly, we closed the quarter having exceeded all the key financial targets we laid out for first half 2020.

We began the year with a very strong intake process, had completed the enrollment process and delivered 100% occupancy for the first half. We also saw strong demand for medical seats for the upcoming semester, thus, we are once again assured of 100% occupancy for the remainder of the year.

The COVID-19 pandemic intensified and accelerated some behavior shifts that were already underway, and caused us to rethink where best to invest our resources. In addition, as evidenced by the pandemic, the medical community and patients alike have embraced a digital component to healthcare. We discussed in the past that digital assets were appealing to us so that we can add more services to medical students and professionals, thus maximizing our product offering. Subsequent to quarter end, we furthered our Afya Digital with the acquisition of PEBMED, our first and significant acquisition in the health tech segment. This acquisition enables us to deepen our relationships with our students as well as getting our brand in front of many new doctors, nurses and other medical personnel and students, enhancing our competitive position and our capabilities.

Additionally, and also subsequent to quarter end, we announced two medical school acquisitions adding a further 277 seats – marking our entry in the state of Paraíba and strengthening our presence in the state of Pará. We are successfully executing on our strategy as we have completed 15 acquisitions over the past 2 years - 6 since we became public one year ago - and have added close to 700 medical seats in less than one year, or approximately 70% of our three-year target of 1,000 seats shared during our IPO. Importantly, we have a solid track record of integrating acquired companies and delivering cost efficiencies and synergies that can be seen in the margin expansion we are delivering. These acquisitions set us up to deliver continued strong results in the months and years to come.

We continue to have a peer-leading capital structure, providing agility to adapt to the dynamic environment we are operating in. Given our strong free cash flow and liquidity, we remain committed to our long-term capital priorities, with a balanced approach to invest in the business and return strong cash to our stockholders, all while keeping our students, faculty members and employees safe and managing through this volatile environment.

We are celebrating our one year anniversary of being a public company. Since then, we have all experienced significant change and new challenges over these past several months. Things we never predicted are now realities that we are all adapting to. Things we thought would evolve over the course of several years have changed in weeks. We are very pleased with our first half performance and are encouraged with how the back half is shaping up which is reflected in the guidance that we are introducing today.

To close, I could not be prouder of the Afya organization for how they have responded, the way we kept our focus on our people, students and physicians and delivered superior execution, leading to an outstanding first half in 2020.

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**1.**First Half 2020 Guidance

	Guidance for 1H20	Actual 1H20
Net Revenue^(1)(2)^	R$475 mn ≤ ∆ ≤ R$510 mn	R$516.1 mn
Adjusted EBITDA Margin^(3)^	45% ≤ ∆ ≤ 46.5%	48.1%
(1)	IncludesUniredentor starting February 1^st^, 2020, and excludes any acquisition that was concluded after the issuance of the guidance;for instance, it does not include UniSL that was concluded on May 5, 2020, subsequent to the original issuance of guidance.
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(2)	Includesthe postponement in the recognition of Net Revenue in the amount of R$14.4 million, due to the interruption of practical classesduring the pandemic.
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(3)	Includesthe impact of the adoption of IFRS16.
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**2.**Second Half 2020 Guidance

The Company is introducing guidance for 2H20 which takes into account the successfully concluded acceptances of new medicine students for the second half of 2020 and assuming a certain degree of potential impacts of COVID-19 into the business during 2H20. We assume that the practical educational on-campus activities resume in second half but some portion might be provided only in 2021.

The global Coronavirus outbreak is an unprecedented and still evolving situation. When considering Afya’s guidance for 2H20, it is paramount that shareholders and the market in general be advised that the COVID-19 pandemic is still evolving in Brazil, some state authorities may maintain quarentines or “shelter in place” status for a still undefined period of time and/or take other actions not contemplated into the guidance, all of which are outside of the Company’s control.

Considering the above factors, the guidance for 2H20 is defined in the following table.

Guidance for 2H20

Important considerations

Net Revenue is expected to be between R$600 million – R$640 million

§ Includes PEBMED starting on July 20, 2020. § Includes R$14.4 million of Net Revenue related to the 1H20 that was not recognized due to the postponement of practical classes during the pandemic. § Excludes any acquisition that may be concluded after the issuance of the guidance. For instance does not include FCMPB and FESAR.

Adjusted EBITDA margin is expected to be between 45.5-47.0%

**3.**Overview of 2Q20

OperationalReview

Afya is the only company offering technological solutions to support students across every stage of the medical career, from undergraduate students in its medical school years through medical residency preparatory courses, medical specialization programs and continuing medical education.

The Company operates two distinct business units. The first (Business Unit 1 or BU1), is comprised of Undergraduate – medical schools, other healthcare programs and ex-health degrees. Revenue is generated from the monthly tuition fees the Company charges students enrolled in the undergraduate programs. The Company also offers Residency Preparatory and Specialization Programs, as well as Digital Health Services (Business Unit 2 or BU2). Revenue is comprised of fees from these programs.

| 3 |

| --- | | Table 2: Key Revenue Drivers | | | | --- | --- | --- | | | 2019 | % Chg | | Business Unit 1: Educational Services Segment ¹ | | | | MEDICAL SCHOOL | | | | Approved Seats² | 1,352 | 38.0% | | Operating Seats | 1,102 | 37.6% | | Total Students | 5,550 | 63.9% | | Total Students (ex-UniSL and ex- Uniredentor) | 5,550 | 31.9% | | Tuition Fees (ex- UniSL and ex- Uniredentor - RMM) | 239,280 | 49.7% | | Tuition Fees (Total - RMM) | 239,280 | 69.9% | | Medical School Avg, Ticket (ex- UniSL and ex- Uniredentor - R/month) | 7,186 | 13.5% | | UNDERGRADUATE HEALTH SCIENCE | | | | Total Students | 6,939 | 99.6% | | Total Students (ex-UniSL and ex- Uniredentor) | 6,939 | 1.3% | | Tuition Fees (ex- UniSL and ex- Uniredentor - RMM) | 49,570 | 5.4% | | Tuition Fees (Total - RMM) | 49,570 | 38.6% | | OTHER UNDERGRADUATE | | | | Total Students | 12,711 | 26.1% | | Total Students (ex-UniSL and ex- Uniredentor) | 12,711 | -31.4% | | Tuition Fees (ex- UniSL and ex- Uniredentor - RMM) | 60,504 | -2.8% | | Tuition Fees (Total - RMM) | 60,504 | 33.4% | | Business Unit 2: Prep Courses & CME and Medical Specialization | | | | Active Paying Students | | | | Prep Courses & CME - B2C | 8,415 | 25.9% | | Prep Courses & CME - B2B | 732 | 21.6% | | Medical Specialization & Others | 1,728 | 161.2% | | Medical Specialization & Others (ex-Uniredentor) | 1,728 | 26.6% | | Revenue from courses (ex- Uniredentor - RMM) ³ | 23,371 | 270.7% | | 1. Uniredentor average tuition fee for medical school in 1H2020 was R9,431 and for UniSl was R7,691. | | | | 2. This number does not includes FCMPB and FESAR that were acquired in August, 2020 and contribute 277 seats to Afya. | | | | 3. As Medcel and Ipemed were acquired on March 31, 2019 and on May 9, 2019 respectively, revenue from courses for BU2 were not accounted for in 1Q19. The number of students is disclosed to contribute with investors analysis. | | |

All values are in US Dollars.

Along with the active paying students, 11,619 medical students from 46 public and private medical schools are still accessing the Company’s Digital platform with a temporary free access during the pandemic crisis.

Total monthly active users (MaU) increased 27.6% quarter over quarter, reaching 20,420 users at the end of June. MaU represents the number of unique individuals that consumed Afya’s digital content in the last 30 days. Afya’s offers to its MaU a significant amount of learning assets, comprised of e-books, videos, podcasts and question/answer documents.

Table 3: Key Operational Drivers for BU2	2020
	2Q20	1Q20	% Chg
Total Monthly Active Users (MaU)	20,420	16,008	27.6%

*Does not include PEBMED’s numbers

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Seasonality

Afya’s two businesses are impacted by seasonality but at different time periods. The first is associated with the concentration of prep course revenues in the first and fourth quarters of each year, when new content (books and e-books) is delivered and most part of the revenues are recognized. The second is associated with the maturation of several medical schools, which leads to a higher enrollment base in the second half of each year. As a result, in a typical year, the first quarter is normally the strongest. The fourth quarter is normally the second strongest, followed by the third and second quarters, respectively. Finally, the second half of the year is normally stronger than the first half.

Revenue

Total Net Revenue for second quarter 2020 was R$274.2 million, an increase of 53.6% over the same period of prior year. Pro forma Net Revenue, which considers results of Medcel, IPEMED and FASA as if they were acquired on January 1^st^ 2019, was R$274.2 million in 2Q20, up 48.8% over the same period of the prior year. Excluding UniSL and UniRedentor, Pro Forma Net Revenue in 2Q20 increased 18.8% YoY, reaching R$218.8 million. This increase was primarily driven by organic revenue growth, mainly due to the maturation of medical school seats and increase in average ticket.

For the six-months ended June 30, 2020 Total Net Revenue was R$546.5 million, an increase of 69.2% over the same period of last year. For the six-months ended June 30, 2020, Pro forma Net Revenue increased 35.9% over the same period of last year, to R$546.5 million. Excluding UniSL and UniRedentor, Pro Forma Net Revenue in six-months ended June 30 increased 18.3% YoY, reaching R$475.8 million.

Taking into account the interruption of on-campus activities and that some non-practical educational activities had to be rearranged to 2H20, according to IFRS15, the Company concluded it was necessary to defer R$14.4 million of its 2Q20 Net Revenue, with no postponement of costs or expenses in the same period. The Company expects these activities to gradually resume during 2H20 and the associated deferred revenues to be recognized at that time.

Table 4: Revenue & Revenue Mix
(in thousand of R$)	For the three months period ended June 30,					For the six months period ended June 30,
	2020	2020 Ex Uniredentor and UniSL	2019	% Chg	% Chg Ex Uniredentor and UniSL	2020	2020 Ex Uniredentor and UniSL	2019	% Chg	% Chg Ex Uniredentor and UniSL
Net Revenue Mix
Business Unit-1	240,102	190,064	156,940	53.0%	21.1%	451,886	389,168	301,518	49.9%	29.1%
Business Unit-2	34,109	28,749	23,371	45.9%	23.0%	95,606	86,643	23,371	309.1%	270.7%
Inter-segment transactions	-	-	(1,818)	-	-	(977)	-	(1,818)	-46.3%	-
Total Reported Net Revenue	274,211	218,813	178,493	53.6%	22.6%	546,515	475,811	323,071	69.2%	47.3%
Total Pro Forma Net Revenue¹	274,211	218,813	184,229	48.8%	18.8%	546,515	475,811	402,172	35.9%	18.3%
1. Includes the pro-forma results of Medcel, IPEMED and FASA, as if the acquisition had been consummated on January 1, 2019.

AdjustedEBITDA

Adjusted EBITDA in the three-months ended June 30, 2020 increased 76.6% to R$118.2 million, from R$66.9 million in the same period of the prior year. Adjusted EBITDA margin of 43.1% was up from 37.5% reported in the three-months ended June 30, 2019. For the six-months ended June 30, 2020, Adjusted EBITDA increased 82.7% to R$258.8 million, from R$141.6 million in the six-months ended June 30, 2019. Adjusted EBITDA margin of 47.4% was 360 basis points higher than the 43.8% reported in the six-months ended June 30, 2019.

Excluding the consolidation of UniRedentor and UniSL, Pro forma Adjusted EBITDA in the three-months ended June 30, 2020 increased 44.0% YoY to R$98.1 million from R$68.1 million while Pro forma Adjusted EBITDA margin increased 780 basis points, to 44.8% from 37.0%. For the six-months ended June 30, 2020, Pro forma Adjusted EBITDA excluding Uniredentor and UniSL increased 54.7% YoY to R$235.9 million up from R$152.5 million and Pro forma Adjusted EBITDA margin increased 1170 basis points, to 49.6% from 37.9%. Both improvements reflect mainly operational leverage, synergies obtained from recent acquisitions and other improvements.

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| --- | | Table 5: Adjusted EBITDA | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | (in thousand of R$) | For the three months period ended June 30, | | | | | For the six months period ended June 30, | | | | | | | 2020 | 2020 Ex Uniredentor and UniSL | 2019 | % Chg | % Chg Ex Uniredentor and UniSL | 2020 | 2020 Ex Uniredentor and UniSL | 2019 | % Chg | % Chg Ex Uniredentor and UniSL | | Adjusted EBITDA | 118,152 | 98,072 | 66,909 | 76.6% | 46.6% | 258,796 | 235,867 | 141,639 | 82.7% | 66.5% | | % Margin | 43.1% | 44.8% | 37.5% | 560 bps | 730 bps | 47.4% | 49.6% | 43.8% | 360 bps | 580 bps | | Proforma Adjusted EBITDA¹ | 118,152 | 98,072 | 68,127 | 73.4% | 44.0% | 258,796 | 235,867 | 152,509 | 69.7% | 54.7% | | % Margin | 43.1% | 44.8% | 37.0% | 610 bps | 780 bps | 47.4% | 49.6% | 37.9% | 950 bps | 1170 bps | | 1. Includes the pro-forma results of Medcel, IPEMED and FASA, as if the acquisition had been consummated on January 1, 2019. | | | | | | | | | | |

NetIncome

Adjusted Net Income for the second quarter 2020 was R$82.6 million, increasing 163.1% over the same period of the prior year. For the six-months ended June 30, 2020, the Company reported Adjusted Net Income of R$206.6 million, compared to an Adjusted Net Income of R$84.9 million in the six-months ended June 30, 2019, an increase of 143.3%. Both increases reflect mainly the revenue contribution, synergies captured and margin expansion from the consolidation of acquisitions as well as organic growth.

(in thousand of R)
			For the six months period ended June 30,
	2019	% Chg	2020	2019	% Chg
Net income	21,326	199.6%	167,556	70,802	136.7%
Amortization of customer relationships and trademark (1)	9,182	36.3%	24,416	12,196	100.2%
Share-based compensation	868	609.3%	14,597	1,909	664.6%
Adjusted Net Income	31,376	163.1%	206,569	84,907	143.3%
(1) Consists of amortization of customer relationships and trademark recorded under business combinations.

All values are in US Dollars.

BalanceSheet and Cash Flow

Cash and cash equivalents, including restricted cash, at June 30, 2020 were R$1.1 billion, compared to R$1.3 billion at March 31, 2020, a decrease of 19.0% due to the acquisitions concluded during the 1H20.

For the six-month period ended June 30, 2020, Afya reported an Adjusted Cash Flow from Operations of R$201.8 million up from R$111.2 million in same period of previous year, an 81.5% year-over-year increase.

Operating Cash Conversion Ratio for the six-month period ended June 30, 2020 was 82.6% compared with 85.4% in same period of the previous year. This decrease was mainly due to the consolidation of Medcel results in 1H20 figures and our students renegotiation of overdue monthly installments due to Covid-19 crisis. Prep course’s revenues are recognized mainly in the first and fourth quarters of each year, but the receivables are mostly stable during the year, Medcel’s results negatively affects cash conversion in the first and fourth quarters.

| 6 |

| --- | | Table 6: Operating Cash Conversion Ratio Reconciliation | For the six months period ended June 30, | | | | --- | --- | --- | --- | | (in thousand of R$) | Considering the adoption of IFRS 16 | | | | | 2020 | 2019 | % Chg | | (a) Cash flow from operations | 189,417 | 108,810 | 74.1% | | (b) Income taxes paid | 12,397 | 2,392 | 418.3% | | (c) = (a) + (b) Adjusted cash flow from operations | 201,814 | 111,202 | 81.5% | | (d) Adjusted EBITDA | 258,796 | 141,639 | 82.7% | | (e) Non-recurring expenses: | | | | | - Integration of new companies (1) | 4,982 | 3,607 | 38.1% | | - M&A advisory and due diligence (2) | 5,636 | 1,099 | 412.8% | | - Expansion projects (3) | 2,091 | 943 | 121.7% | | - Restructuring Expenses (4) | 1,762 | 5,749 | -69.4% | | (f) = (d) - (e) Adjusted EBITDA ex- non-recurring expenses | 244,325 | 130,241 | 87.6% | | (g) = (a) / (f) Operating cash conversion ratio | 82.6% | 85.4% | -280 bps | | (1) Consists of expenses related to the integration of newly acquired companies. | | | | | (2) Consists of expenses related to professional and consultant fees in connection with due diligence services for M&A transactions. | | | | | (3) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses. | | | | | (4) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of acquired companies. | | | |

**4.**Subsequent Events

Acquisition of PEBMED

On July 20, 2020, the Company announced the acquisition of 100% of the total share capital of PEBMED, through its wholly-owned subsidiary Afya Participações S.A. PEBMED offers content and clinical decision applications with the aim of assisting healthcare professionals make quicker and/or better decisions by providing up to date information at their fingertips, through its products WhiteBook, Nursebook and Portal PEBMED. The business model consists of both paid subscriptions and free content. The net purchase price was R$132.9 million, with the assumption of estimated net debt of R$7.1 million, of which: (i) 86.8% was paid in cash, and (ii) 13.2% was paid in Afya’s stock. The price multiple is equivalent to 4x PEBMED’s annual recurring revenue.

Acquisition of Faculdade Ciências Médicas da Paraíba(FCMPB)

On August 20, 2020, the Company announced it entered into a purchase agreement for the acquisition, through its wholly-owned subsidiary Afya Participações S.A., of 100% of the total share capital of Faculdade Ciências Médicas da Paraíba. FCMPB is a post-secondary education institution with government authorization to offer on-campus, undergraduate courses in medicine in the State of Paraíba. The projected Net Revenue for FCMPB in 2024 is R$107.0 million with an EV/EBITDA post synergies and maturation of 6.3x, all derived from its medical school. The aggregate purchase price is R$380.0 million, of which: (i) 50% is payable in cash on the transaction closing date, and (ii) 50% is payable in cash in four equal installments through 2024, adjusted by the CDI rate. The acquisition will contribute 157 medical school seats to Afya, increasing Afya’s total medical school seats to 2,023.

Acquisition of Faculdade de Ensino Superior da AmazôniaReunida (FESAR)

On August 26, 2020, the Company announced it entered into a purchase agreement for the acquisition, through its wholly-owned subsidiary Afya Participações S.A., of 100% of the total share capital of Faculdade de Ensino Superior da Amazônia Reunida. FESAR is a post-secondary education institution with government authorization to offer on-campus, undergraduate courses in medicine in the State of Pará. The projected Net Revenue for FESAR in 2024 is R$88.6 million with an EV/EBITDA post synergies and maturation of 4.7x adjusted by the real estate. The aggregate purchase price is R$260 million, of which 100% is payable in cash on the transaction closing date. The enterprise value also includes real estate which is valued at R$21.0 million. The acquisition will contribute 120 medical school seats to Afya, increasing Afya’s total medical school seats to 2,143.

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**5.**Conference Call and Webcast Information

When: August 28, 2020 at 11:00 a.m. ET.

Who:	Mr. Virgilio Gibbon, Chief Executive Officer<br><br> <br>Mr. Luis André Blanco, Chief Financial Officer<br><br> <br>Ms. Renata Costa Couto, Head of Investor Relations

Dial-in: +55-11-3181-8565 or +1-844- 204-8586 or +1-412-717-9627 (International), conference ID: Afya

Webcast: ir.afya.com.br

Replay: available between August 28, 2020 until September 9, 2020, by dialing +1-412-317-0088 conference ID: 10147648.

**6.**About Afya Limited (Nasdaq: AFYA)

Afya is the leading medical education group in Brazil based on number of medical school seats, delivering an end-to-end physician-centric ecosystem that serves and empowers students to be lifelong medical learners from the moment they enroll as medical students through their medical residency preparation, graduation program, and continuing medical education activities. Afya also offers content and clinical decision applications for healthcare professionals, through its products WhiteBook, Nursebook and Portal PEBMED. For more information, please visit www.afya.com.br.

**7.**Forward – Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements other than statements of historical fact, could be deemed forward looking, including risks and uncertainties related to statements about our competition; our ability to attract, upsell and retain students; our ability to increase tuition prices and prep course fees; our ability to anticipate and meet the evolving needs of student and teachers; our ability to source and successfully integrate acquisitions; general market, political, economic, and business conditions; and our financial targets such as revenue, share count and IFRS and non-IFRS financial measures including gross margin, operating margin, net income (loss) per diluted share, and free cash flow. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential impacts of the COVID-19 pandemic on our business operations, financial results and financial position and on the Brazilian economy.

The Company undertakes no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. Readers should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent management’s beliefs and assumptions only as of the date such statements are made. Further information on these and other factors that could affect the Company’s financial results is included in filings made with the United States Securities and Exchange Commission (SEC) from time to time, including the section titled “Risk Factors” in the most recent Rule 434(b) prospectus. These documents are available on the SEC Filings section of the investor relations section of our website at: https://ir.afya.com.br/.

**8.**Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements, which are prepared and presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board—IASB, Afya uses Proforma Revenue, Adjusted EBITDA, Pro Forma Adjusted EBITDA, Pro Forma Adjusted Net Income and Operating Cash Conversion Ratio information for the convenience of investors, which are non-GAAP financial measures. A non-GAAP financial measure is generally defined as one that purports to measure financial performance but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure.

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Afya calculates Adjusted EBITDA as net income plus/minus net financial result plus income taxes expense plus depreciation and amortization plus interest received on late payments of monthly tuition fees, plus share-based compensation plus/minus income share associate plus/minus non-recurring expenses. Pro Forma Adjusted EBITDA is calculated as pro forma net income plus/minus pro forma net financial result plus pro forma income taxes expense plus pro forma depreciation and amortization plus pro forma interest received on late payments of monthly tuition fees, plus pro forma share-based compensation plus/minus pro forma income share associate plus/minus pro forma non-recurring expenses. The calculation for Adjusted Net Income is net income plus amortization of customer relationships and trademark, plus shared based compensation. We calculate Operating Cash Conversion Ratio as the cash flows from operations, adjusted with income taxes paid divided by Adjusted EBITDA plus/minus non-recurring expenses.

Management presents Adjusted EBITDA, Pro Forma Adjusted EBITDA and Pro Forma Adjusted Net Income because it believes these measures provide investors with a supplemental measure of the financial performance of the core operations that facilitates period-to-period comparisons on a consistent basis. Afya also presents Operating Cash Conversion Ratio because it believes this measure provides investors with a measure of how efficiently the Company converts EBITDA into cash. The non-GAAP financial measures described in this prospectus are not a substitute for the IFRS measures of earnings. Additionally, calculations of Adjusted EBITDA, Pro Forma Adjusted EBITDA, Pro Forma Adjusted Net Income and Operating Cash Conversion Ratio may be different from the calculations used by other companies, including competitors in the education services industry, and therefore, Afya’s measures may not be comparable to those of other companies.

**9.**Unaudited Pro Forma Condensed Consolidated FinancialInformation

The unaudited interim pro forma condensed consolidated statement of income for the three and six months ended June 30, 2019 is based on the historical unaudited interim consolidated financial statements of each company, and gives effect of the acquisition of Medcel, IPEMED and FASA by Afya Brazil as if it had been consummated on January 1, 2019. Pro forma adjustments were made to reflect the acquisition of Medcel, IPEMED and FASA by Afya Brazil.

**10.**Investor Relations Contact

Renata Couto, Head of Investor Relations

Phone: +55 31 3515.7564 | +55 31 98463.3341

E-mail: renata.couto@afya.com.br

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**11.**Financial Tables

Interim condensedconsolidated statements of income and comprehensive income

For the threeand six-months periods ended June 30, 2020 and 2019

(In thousandsof Brazilian Reais, except earnings per share)

	Three-month period ended		Six-month period ended
	June 30, 2020	June 30, 2019	June 30, 2020	June 30, 2019
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Net revenue	274,211	178,493	546,515	323,071
Cost of services	(106,683)	(82,283)	(195,934)	(136,647)
Gross profit	167,528	96,210	350,581	186,424
General and administrative expenses	(90,039)	(59,584)	(176,762)	(90,818)
Other (expenses) income, net	(689)	576	(748)	370
Operating income	76,800	37,202	173,071	95,976
Finance income	13,954	4,650	42,780	9,817
Finance expenses	(23,130)	(19,721)	(40,802)	(31,957)
Finance result	(9,176)	(15,071)	1,978	(22,140)
Share of income of associate	2,603	920	4,905	920
Income before income taxes	70,227	23,051	179,954	74,756
Income taxes expense	(6,341)	(1,725)	(12,398)	(3,954)
Net income	63,886	21,326	167,556	70,802
Other comprehensive income	-	-	-	-
Total comprehensive income	63,886	21,326	167,556	70,802
Income attributable to
Equity holders of the parent	60,679	16,317	160,495	57,852
Non-controlling interests	3,207	5,009	7,061	12,950
	63,886	21,326	167,556	70,802
Basic earnings per share
Per common share	0.65	0.23	1.74	0.91
Diluted earnings per share<br><br> <br>Per common share	0.65	0.23	1.73	0.89

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Interimcondensed consolidated statements of financial position

Asof June 30, 2020 and December 31, 2019

(Inthousands of Brazilian Reais)

	June 30, 2020	December 31, 2019
Assets	(unaudited)
Current assets
Cash and cash equivalents	1,041,462	943,209
Restricted cash	10,902	14,788
Trade receivables	238,874	125,439
Inventories	5,375	3,932
Recoverable taxes	18,774	6,485
Derivatives	8,720	-
Other assets	14,108	17,912
Total current assets	1,338,215	1,111,765
Non-current assets
Restricted cash	2,053	2,053
Trade receivables	13,611	9,801
Other assets	41,240	17,267
Investment in associate	50,539	45,634
Property and equipment	192,686	139,320
Right-of-use assets	376,023	274,275
Intangible assets	1,835,823	1,312,338
Total non-current assets	2,511,975	1,800,688
Total assets	3,850,190	2,912,453
Liabilities
Current liabilities
Trade payables	23,234	17,628
Loans and financing	42,094	53,607
Derivatives	-	757
Lease liabilities	46,920	22,693
Accounts payable to selling shareholders	149,879	131,883
Notes payable	9,322	-
Advances from customers	40,621	36,860
Labor and social obligations	98,916	46,770
Taxes payable	32,483	19,442
Income taxes payable	4,395	3,213
Other liabilities	14,662	376
Total current liabilities	462,526	333,229
Non-current liabilities
Loans and financing	19,308	6,750
Lease liabilities	347,320	261,822
Accounts payable to selling shareholders	245,567	168,354
Notes payable	69,115	-
Taxes payable	23,924	21,304
Provision for legal proceedings	19,807	5,269
Other liabilities	3,048	1,999
Total non-current liabilities	728,089	465,498
Total liabilities	1,190,615	798,727
Equity
Share capital	17	17
Additional paid-in capital	2,300,513	1,931,047
Share-based compensation reserve	32,711	18,114
Retained earnings	276,411	115,916
Equity attributable to equity holders of the parent	2,609,652	2,065,094
Non-controlling interests	49,923	48,632
Total equity	2,659,575	2,113,726
Total liabilities and equity	3,850,190	2,912,453

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Interimcondensed consolidated statements of cash flows

Forthe six-months periods ended June 30, 2020 and 2019

(Inthousands of Brazilian Reais)

				June 30, 2020	June 30, 2019
				(unaudited)	(unaudited)
Operating activities
	Income before income taxes			179,954	74,756
		Adjustments to reconcile income before income taxes
			Depreciation and amortization	51,330	28,441
			Allowance for doubtful accounts	13,953	8,606
			Share-based compensation expense	14,597	1,909
			Net foreign exchange differences	(14)	(1,858)
			Net (gain) loss on derivatives	(19,430)	2,809
			Accrued interest	11,017	9,873
			Accrued lease interest	20,428	14,540
			Share of income of associate	(4,905)	(920)
			Provision for legal proceedings	1,183	(347)
Changes in assets and liabilities
	Trade receivables			(104,831)	(28,624)
	Inventories			(976)	884
	Recoverable taxes			(11,464)	(2,827)
	Other assets			2,940	(15,758)
	Trade payables			996	5,257
	Taxes payables			10,214	1,139
	Advances from customers			(13,317)	1,428
	Labor and social obligations			39,605	13,352
	Other liabilities			10,534	(1,458)
				201,814	111,202
	Income taxes paid			(12,397)	(2,392)
	Net cash flows from operating activities			189,417	108,810
Investing activities
	Acquisition of property and equipment			(37,583)	(20,674)
	Acquisition of intangibles assets			(7,766)	(718)
	Restricted cash			3,870	(1,153)
	Payments of accounts payable to selling shareholders			(67,304)	(30,674)
	Payments of notes payable			(1,611)	-
	Acquisition of subsidiaries, net of cash acquired			(240,631)	(148,880)
	Loans to related parties			-	(1,695)
	Net cash flows used in investing activities			(351,025)	(203,794)
Financing activities
	Payments of loans and financing			(99,096)	(23,868)
	Issuance of loans and financing			911	-
	Payments of lease liabilities			(25,538)	(17,316)
	Capital increase			-	150,000
	Proceeds from issuance of common shares			389,170	-
	Shares issuance cost			(19,704)	-
	Dividends paid to non-controlling interests			(5,770)	(7,621)
	Net cash flows from financing activities			239,973	101,195
	Net foreign exchange differences			19,888	-
	Net increase in cash and cash equivalents			78,365	6,211
	Cash and cash equivalents at the beginning of the period			943,209	62,260
	Cash and cash equivalents at the end of the period			1,041,462	68,471

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Reconciliationbetween Net Income and Adjusted EBITDA, Pro Forma Adjusted EBITDA

(in thousand of R)
			For the six months period ended June 30,
	2019	% Chg	2020	2019	% Chg
Net income	21,326	199.6%	167,556	70,802	136.7%
Net financial result	15,071	-39.1%	(1,978)	22,140	n.a.
Income taxes expense	1,725	267.6%	12,398	3,954	213.6%
Depreciation and amortization	19,387	36.1%	51,330	28,441	80.5%
Interest received (1)	1,410	28.4%	5,327	3,915	36.1%
Income share associate	(920)	182.9%	(4,905)	(920)	433.2%
Share-based compensation	868	609.3%	14,597	1,909	664.6%
Non-recurring expenses:	8,042	-12.9%	7,002	8,042	-12.9%
- Integration of new companies (2)	2,607	-28.6%	4,982	3,607	38.1%
- M&A advisory and due diligence (3)	959	200.9%	5,636	1,099	412.8%
- Expansion projects (4)	638	105.0%	2,091	943	121.7%
- Restructuring expenses (5)	3,838	-75.4%	1,762	5,749	-69.4%
Adjusted EBITDA	66,909	76.6%	258,796	141,639	82.7%
Adjusted EBITDA Margin	37.5%	560 bps	47.4%	43.8%	360 bps
Adjusted EBITDA comparable to guidance	66,909	60.5%	248,007	141,639	75.1%
Adjusted EBITDA Margin comparable to guidance	37.5%	650 bps	48.1%	43.8%	430 bps
Pro Forma Adjusted EBITDA	68,127	73.4%	258,796	152,509	69.7%
Pro Forma Adjusted EBITDA Margin	37.0%	610 bps	47.4%	37.9%	950 bps
(1) Represents the interest received on late payments of monthly tuition fees.
(2) Consists of expenses related to the integration of newly acquired companies.
(3) Consists of expenses related to professional and consultant fees in connection with due diligence services for our M&A transactions.
(4) Consists of expenses related to professional and consultant fees in connection with the opening of new campuses.
(5) Consists of expenses related to the employee redundancies in connection with the organizational restructuring of our acquired companies.

All values are in US Dollars.