Netshoes (Cayman) (NETS) 6-K Current report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of August, 2017

Commission File Number 001-38055

NETSHOES (CAYMAN) LIMITED

(Exact name of registrant as specified in its charter)

The Cayman Islands	98-1007784
(State of incorporation or organization)	(I.R.S. Employer Identification No.)

Rua Vergueiro 961, Liberdade

01504-001 São Paulo, São Paulo, Brazil

+55 11 3028-3528

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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  ☒            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  ☒

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  ☒

NETSHOES (CAYMAN) LIMITED

Unaudited condensed consolidated financial statements

as of and for the six months ended June 30, 2016 and 2017

Report of Independent Registered Public Accounting Firm

1

NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Financial Position

December 31, 2016 and June 30, 2017

(Reais and Dollars in thousands)

				December 31,			June 30,
Assets	Note			2016			2017			2017
Current assets:					BRL			BRL			USD
Cash and cash equivalents		9	R$		111,304	R$		419,949	US$		126,942
Restricted cash					21,946			18,857			5,700
Trade accounts receivables, net		10			213,994			122,783			37,115
Inventories, net		11			352,011			393,711			119,011
Recoverable taxes		12			66,329			72,497			21,914
Other current assets					59,127			65,688			19,856
Total current assets					824,711			1,093,485			330,538
Non-current assets:
Restricted cash					21,254			20,623			6,234
Judicial deposits		23			71,817			95,432			28,847
Recoverable taxes		12			33,178			62,331			18,841
Other assets					950			950			288
Due from related parties		22			17			17			5
Property and equipment, net		13			74,202			74,471			22,511
Intangible assets, net		14			87,593			99,262			30,005
Totalnon-current assets					289,011			353,086			106,731
Total assets			R$		1,113,722	R$		1,446,571	US$		437,269

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

2

NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Financial Position

December 31, 2016 and June 30, 2017

(Reais and Dollars in thousands)

				December 31,				June 30,
Liabilities and Shareholders’ Equity	Note			2016				2017				2017
Current liabilities:					BRL				BRL				USD
Trade accounts payable		15	R$		335,430		R$		283,941		US$		85,829
Reverse factoring					27,867				29,356				8,874
Current portion of long-term debt		17			75,956				114,992				34,760
Derivative financial liabilities		18			186				—				—
Taxes and contributions payable					15,249				15,396				4,654
Deferred revenue		7			6,628				6,628				2,004
Accrued expenses		16			122,048				90,560				27,374
Other current liabilities					33,331				36,362				10,992
Total current liabilities					616,695				577,235				174,487
Non-current liabilities:
Long-term debt, net of current portion		17			311,426				250,103				75,601
Provision for labor, civil and tax risks		23			5,177				8,666				2,620
Share-based payment		20			30,139				—				—
Deferred revenue		7			26,247				24,798				7,496
Othernon-current liabilities					13				21				6
Totalnon-current liabilities					373,002				283,588				85,723
Total liabilities					989,697				860,823				260,210
Shareholders’ equity:
Share capital					141				244				74
Additional-paid in capital					821,988				1,348,349				407,577
Treasury shares					(1,533	)			(1,533	)			(463	)
Accumulated other comprehensive loss					(19,577	)			(11,476	)			(3,469	)
Accumulated losses					(677,379	)			(749,878	)			(226,673	)
Equity attributable to owners of the parent					123,640				585,706				177,046
Equity attributable tonon-controlling interests					385				42				13
Total shareholders’ equity					124,025				585,748				177,059
Total liabilities and shareholders’ equity			R$		1,113,722		R$		1,446,571		US$		437,269

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

3

NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Profit or Loss

For the six months ended in June 30, 2016 and 2017

(Reais and Dollars in thousands, except loss per share)

				For the six months ended in June 30,												For the three months ended in June 30,
	Note			2016				2017				2017				2016				2017				2017
				BRL				BRL				USD				BRL				BRL				USD
Net Sales		6	R$		749,507		R$		857,559		US$		259,222		R$		401,644		R$		461,331		US$		139,451
Cost of sales		8a			(502,387	)			(574,954	)			(173,797	)			(259,567	)			(308,492	)			(93,251	)
Gross Profit					247,120				282,605				85,425				142,077				152,839				46,200
Operating expenses:
Selling and marketing expenses		8b			(209,826	)			(222,526	)			(67,265	)			(105,886	)			(121,000	)			(36,576	)
General and administrative expenses		8c			(92,151	)			(74,647	)			(22,564	)			(45,815	)			(43,020	)			(13,004	)
Other operating expenses, net					(3,387	)			(2,116	)			(640	)			(1,724	)			(1,024	)			(310	)
Total operating expenses					(305,364	)			(299,289	)			(90,469	)			(153,425	)			(165,044	)			(49,890	)
Operating loss					(58,244	)			(16,684	)			(5,044	)			(11,348	)			(12,205	)			(3,690	)
Financial income		8d			12,491				15,195				4,593				4,737				10,166				3,073
Financial expenses		8d			(49,520	)			(71,383	)			(21,578	)			(27,026	)			(33,116	)			(10,010	)
Loss before income tax					(95,273	)			(72,872	)			(22,029	)			(33,637	)			(35,155	)			(10,627	)
Income tax expense					—				(2	)			(1	)			—				(2	)			(1	)
Net Loss			R$		(95,273	)	R$		(72,874	)	US$		(22,030	)	R$		(33,637	)	R$		(35,157	)	US$		(10,628	)
Net loss attributable to:
Owners of the Parent			R$		(94,865	)	R$		(72,499	)	US$		(21,915	)	R$		(33,671	)	R$		(34,991	)	US$		(10,577	)
Non-controlling interests					(408	)			(375	)			(115	)			34				(166	)			(51	)
Loss per share attributable to owners of the Parent
Basic and diluted		5	R$		(4.54	)	R$		(3.09	)	US$		(0.94	)	R$		(1.61	)	R$		(1.49	)	US$		(0.45	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4

NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

For the six months ended in June 30, 2016 and 2017

(Reais and Dollars in thousands)

		For the six months ended in June 30,												For the three months ended in June 30,
		2016				2017				2017				2016				2017				2017
		BRL				BRL				USD				BRL				BRL				USD
										Note 2.2												Note 2.2
Net Loss	R$		(95,273	)	R$		(72,874	)	US$		(22,030	)	R$		(33,637	)	R$		(35,157	)	US$		(10,628	)
Items that will subsequently be recorded to profit or loss
Foreign currency translation			(15,158	)			7,588				2,294				(7,814	)			9,276				2,804
Cash flow hedges – effective portion of changes in fair value			(5,242	)			348				105				(1,402	)			775				234
Cash flow hedges – reclassified to initial cost of inventories			1,759				—				—				2,026				(214	)			(65	)
Cash flow hedges – reclassified to profit or loss			1,471				197				60				3,061				(114	)			(34	)
Other comprehensive income (loss)			(17,170	)			8,133				2,459				(4,129	)			9,723				2,939
Total comprehensive income (loss)			(112,443	)			(64,741	)			(19,571	)			(37,766	)			(25,434	)			(7,689	)
Total comprehensive income (loss) attributable to:
Owners of the Parent	R$		(112,035	)	R$		(64,398	)	US$		(19,466	)	R$		(37,943	)	R$		(25,346	)	US$		(7,662	)
Non-controlling interests			(408	)			(343	)			(103	)			177				(88	)			(28	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5

NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2016 and 2017

(Reais and Dollars in thousands)

		For the six months ended in June 30,
		2016				2017				2017
		BRL				BRL				USD
										Note 2.2
Cash flows from operating activities:
Net loss	R$		(95,273	)	R$		(72,874	)	US$		(22,030	)
Adjustments to reconcile net loss to net cash used in operating activities:
Allowance for doubtful accounts			(280	)			6,262				1,893
Depreciation and amortization			14,270				15,663				4,735
Loss on disposal of property and equipment, and intangible assets			494				170				51
Share-based payment			3,532				(13,469	)			(4,071	)
Deferred taxes			—				2				1
Provision for contingent liabilities			—				4,595				1,389
Interest expense, net			42,457				61,892				18,709
Provision for inventory losses			—				464				140
Other			1,738				179				54
Changes in operating assets and liabilities:
(Increase) decrease in:
Restricted cash			7,924				3,089				934
Trade accounts receivable			152,818				84,879				25,657
Inventories			(85,709	)			(40,822	)			(12,340	)
Recoverable taxes			(31,133	)			(34,696	)			(10,488	)
Judicial deposits			(18,206	)			(23,615	)			(7,138	)
Other assets			(4,762	)			(11,832	)			(3,577	)
Increase (decrease) in:
Derivative financial instruments			1,047				(186	)			(56	)
Trade accounts payable			680				(52,674	)			(15,922	)
Reverse factoring			1,427				1,489				450
Taxes and contributions payable			—				212				64
Deferred revenue			—				(1,449	)			(438	)
Accrued expenses			(24,543	)			(31,354	)			(9,476	)
Share-based payment			—				(2,141	)			(647	)
Other liabilities			(1,652	)			(568	)			(172	)
Net cash provided by (used in) operating activities			(35,171	)			(106,784	)			(32,278	)
Cash flows from investing activities:
Purchase of property and equipment			(17,858	)			(4,487	)			(1,356	)
Purchase of intangible assets			(17,269	)			(22,770	)			(6,883	)
Interest received on installment sales			663				197				60
Restricted cash			(8,359	)			631				191
Net cash provided by (used in) investing activities			(42,823	)			(26,429	)			(7,988	)
Cash flows from financing activities:
Proceeds from debt			—				123,936				37,463
Payments of debt			(55,144	)			(52,973	)			(16,013	)
Payments of interest			(48,782	)			(60,960	)			(18,427	)
Proceeds from issuance of common shares			—				424,533				128,327
Net cash provided by (used in) financing activities			(103,926	)			434,536				131,350
Effect of exchange rate changes on cash and cash equivalents			(5,539	)			7,322				2,213
Change in cash and cash equivalents			(187,459	)			308,645				93,297
Cash and cash equivalents, beginning of period			249,064				111,304				33,645
Cash and cash equivalents, end of period			61,605				419,949				126,942
	R$	(187,459)			R$	308,645			US$	93,297
Supplemental disclosure
Non-cash investing and financing activities:
Acquisition of property and equipment and intagible assets (Note 16)	R$		8,914		R$		1,241		US$		375
Deferred offering costs reclassified to equity (Note 1.2)	R$		—		R$		6,808		US$		2,058
Convertible notes converted to common shares (Note 1.3)	R$		—		R$		94,151		US$		28,460
Reclassification of share-based payment from Cash-settled arrangement to
Equity-settled arrangement (Note 20)	R$		—		R$		13,706		US$		4,143

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

6

NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity

For the six months ended in June 30, 2016 and 2017

(Reais and Dollars in thousand)

		Equity Attributtable to owners of the Parent
		Share Capital			Additional Paid-in Capital			Tresuary Shares				Accumulated Losses				Foreign Currency Translation				Gain (Loss) on Hedge Accounting				Total				Non-controlling Interest				Total Equity
		BRL			BRL			BRL				BRL				BRL				BRL				BRL				BRL				BRL
Balance, January 1, 2016	R$		141	R$		821,988	R$		(925	)	R$		(526,305	)	R$		(7,735	)	R$		913		R$		288,077		R$		925		R$		289,002
Comprehensive Income (Loss)
Net loss			—			—			—				(94,865	)			—				—				(94,865	)			(408	)			(95,273	)
Other comprehensive income (loss)			—			—			—				—				(15,158	)			(2,012	)			(17,170	)			—				(17,170	)
Total comprehensive income (loss)			—			—			—				(94,865	)			(15,158	)			(2,012	)			(112,035	)			(408	)			(112,443	)
Transactions with Owners and Other
Issuance of common shares			—			—			—				—				—				—				—				—				—
Purchase of treasury shares			—			—			(326	)			—				—				—				(326	)			—				(326	)
Total transactions with owners and other			—			—			(326	)			—				—				—				(326	)			—				(326	)
Balance, June 30, 2016	R$		141	R$		821,988	R$		(1,251	)	R$		(621,170	)	R$		(22,893	)	R$		(1,099	)	R$		175,717		R$		517		R$		176,233
Balance, January 1, 2017	R$		141	R$		821,988	R$		(1,533	)	R$		(677,379	)	R$		(19,032	)	R$		(545	)	R$		123,640		R$		385		R$		124,025
Comprehensive Income (Loss)
Net loss			—			—			—				(72,499	)			—				—				(72,499	)			(375	)			(72,874	)
Other comprehensive income (loss)			—			—			—				—				7,556				545				8,101				32				8,133
Total comprehensive income (loss)			—			—			—				(72,499	)			7,556				545				(64,398	)			(343	)			(64,741	)
Issuance of common shares in initial public offering, net of offering costs			84			417,140			—				—				—				—				417,224				—				417,224
Conversion of convertible notes to common shares			19			94,132			—				—				—				—				94,151				—				94,151
Share-based payments			—			15,089			—				—				—				—				15,089				—				15,089
Transactions with Owners and Other
Purchase of treasury shares			—			—			—				—				—				—				—				—				—
Total transactions with owners and other			—			—			—				—				—				—				—				—				—
Balance, June 30, 2017	R$		244	R$		1,348,349	R$		(1,533	)	R$		(749,878	)	R$		(11,476	)	R$		—		R$		585,706		R$		42		R$		585,748

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

7

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

1. Organization and background

1.1 Nature of Operations

Netshoes (Cayman) Limited (“NSC” or the “Parent”) was incorporated in the Cayman Islands on April 12, 2011. NSC is a holding company and conducts its business primarily through its subsidiaries (together with NSC, the “Company”, “we” or “us”). The Company’s registered office is at Willow House, Cricket Square, George Town, KY1-1104, Cayman Islands. Major shareholders of the Company include Tiger Global Private Investment Partners V, L.P. (“Tiger Global V”), Tiger Global Private Investment Partners VI, L.P. (“Tiger Global VI”), Archy LLC (“Archy”), CDK Net Fund IC and HCFT Holdings.

The Company is a leading sports and lifestyle ecommerce destination in Latin America with operations in Brazil, Mexico and Argentina. The Company’s core business is to offer to its customers a reliable and convenient online shopping experience with a wide selection of products including athletic shoes, jerseys, apparel, accessories and sporting equipment from leading international, local and private brands as well as fashion. The Company conducts its business mainly through its ecommerce websites (www.netshoes.com andwww.zattini.com).

1.2 Initial Public Offering

On April 18, 2017, the Company completed its Initial Public Offering (IPO). The Company sold 8,250,000 of its common shares at a public offering price of $18.00 per common share, for gross proceeds of $148.5 million (or R$459.7 million, using the exchange rate on the date of completion of the IPO). The Company received net proceeds of $134.7 million (or R$417.2 million, using the exchange rate on the date of completion of the IPO), after deducting $9.7 million (or R$29.9 million, using the exchange rate on the date of completion of the IPO) in underwriting discounts and commissions and $4.1 million (or R$12.6 million, using the exchange rate on the date of completion of the IPO) for offering expenses.

The shares offered and sold in the initial public offering were registered under the Securities Act of 1933, as amended, pursuant to the Company’s Registration Statement on FormF-1 (RegistrationNo.333-216727), which was declared effective by the Securities and Exchange Commission on April 12, 2017. The common stock began trading on the New York Stock Exchange on April 12, 2017 under the symbol “NETS.”

1.3 Convertible Notes

On February 22, 2017, the Company entered into a note purchase agreement pursuant to which it issued and sold unsecured promissory notes convertible into its common shares, in the aggregate principal amount of US$30.0 million, to certain of its shareholders.

The Company determined that the convertible notes constituted a hybrid instrument with characteristics of a debt containing embedded derivative features requiring separate accounting as a derivative instrument. The liability related to the convertible notes was initially recorded at fair value and, subsequently, at amortized cost. The embedded derivative associated with the convertible notes was recorded at fair value with its changes being recorded in the statement of profit or loss.

Immediately prior to the completion of the IPO, the convertible notes (principal amount and any unpaid accrued interest) and its embedded derivative was converted into our common shares with a 10% price discount relative to the initial public offering price of the Company’s outstanding common shares. The value of the Company’s outstanding convertible notes (principal amount and unpaid accrued interest) and its embedded derivative was US$ 30,413 (or R$94,151, using the exchange rate on the date of completion of the IPO) that was converted in 1,870,709 common shares.

8

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

1.4 Split of Shares

The Board of Directors approved a 1.0 for 3.0 share split of the Company’s outstanding common shares. The share split became effective on April 18, 2017. The Company has retrospectively adjusted loss per share data considering the split of shares (See note 5).

2. Summary of Significant Accounting Policies

2.1. Statement of Compliance

These interim financial statements have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” and should be read in conjunction with the Company’s last annual consolidated financial statements as at and for the year ended December 31, 2016 (“last annual financial statements”). These interim financial statements, which are unaudited, do not include all of the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company’s financial position and performance since the last annual financial statements.

These condensed consolidated financial statements for thesix-month period ended June 30, 2017 were authorized for issuance by the Board of Directors on August 11, 2017.

2.2. Basis of Presentation

The functional currency of the Company is US$ and the reporting currency is Brazilian Real (“R$”) as this currency better reflects the underlying operations of the consolidated entities. The Company’s subsidiaries with operations in Brazil, Argentina and Mexico use their respective currencies as their functional currencies.

Translations of balances in the condensed consolidated statement of financial positions, condensed consolidated statement of profit or loss, condensed consolidated statement of comprehensive income (loss) and condensed consolidated statement of cash flows from R$ into US$ are solely for the convenience of the readers and have been calculated at the rate of US$1.00 = R$ 3.3082, representing the exchange rate set forth by the Banco Central do Brasil (Central Bank of Brazil) on June 30, 2017. No representation is made that the R$ amounts could have been, or could be, converted, realized or settled into US$ at that rate on June 30, 2017, or at any other rate. All values have been rounded to the nearest thousands of R$ and US$, except where noted.

This interim information was prepared pursuant to the accounting principles, practices and criteria consistent with those adopted in financial statements for the year ended December 31, 2016 and must be analyzed jointly with the referred to financial statements.

The policy for recognizing and measuring income taxes in the interim period is described in Note 21.

2.3. Use of Judgments, Estimates and Assumptions

In preparing these condensed consolidated financial statements in conformity with IFRS, management has made judgments, estimates and assumptions that affect the application of the Company’s accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from those estimates.

9

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended December 31, 2016.

2.4. Fair Value Measurements

Several accounting policies and disclosures require fair value measurement, for both financial andnon-financial assets and liabilities.

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1 — unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2 — inputs other than quoted prices included in Level 1 that are observable for the assets or liability, either directly or indirectly

• Level 3 — inputs for the assets or liability that are not based on observable market data.

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Note 19 includes accounting classification and fair value measurement of financial instruments.

2.5. New Accounting Pronouncements

The following pronouncements issued by the IASB and interpretations published by IFRIC will become effective for annual periods beginning on or after January 1, 2018. The Company has not early adopted the following new or amendment standards in preparing these consolidated financial statements.

Effective for periods beginning on or after January 1, 2018

IFRS 15 Revenue from Contracts with Customers was issued by the IASB in May 2014. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. Earlier application is permitted. IFRS 15 supersedes the following standards: IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers, andSIC-31 Revenue-Barter Transactions Involving Advertising Services.

10

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

IFRS 9 Financial Instruments was issued by the IASB in July 2014 and will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. A new hedge accounting model is introduced and represents a substantial overhaul of hedge accounting which will allow entities to better reflect their risk management activities in the financial statements. The most significant improvements apply to those that hedgenon-financial risk, and so these improvements are expected to be of particular interest tonon-financial institutions. Earlier application is permitted.

The Company is currently evaluating the effect of adopting the above standards and the impact it may have on its consolidated financial statements.

Effective for periods beginning on or after January 1, 2019

IFRS 16, Leases replaces IAS 17, Leases and related interpretations. The core principle is that a lessee recognizes assets and liabilities for all leases with a lease term of more than 12 months. A lessee is required to recognize aright-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includesnon-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. The new standard is intended to provide a faithful representation of leasing transactions, in particular those that do not currently require the lessees to recognize an asset and liability arising from an operating lease. IFRS 16 is effective for annual periods beginning on January 1, 2019, with early adoption permitted for entities that would also apply IFRS 15, Revenue from Contracts with Customers.

The Company is currently evaluating the effect of adopting the above standard and the impact it may have on its consolidated financial statements.

3. Seasonality

Like most retail businesses, the Company experiences seasonal fluctuations in its net sales and operating results. Historically, the Company has generated higher net sales in the fourth quarter, which includes Black November period (commercial holiday introduced in 2010 by Braziliane-commerce websites which is a month-long equivalent to the Black Friday in the United States) and the Christmas season in Brazil, Argentina and Mexico while the first quarter of the year is our slowest period, as the months of January and February correspond to vacation time in Brazil and Argentina.

The amount of cash flows and working capital we require to support our operations fluctuate throughout the year, primarily driven by the seasonality of our business. Typically, we have higher generation of cash flows during the fourth quarter, given the increase in the volume of sales we generally experience in this period, which includes the Black November period and the holiday season. Conversely, our cash flow requirements increase during the first quarter of the year, as a result of (1) the maturity of the payment terms with our suppliers for inventory acquired in advance of our peak selling season and (2) a decrease in sales volumes that typically follows such season.

11

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

4. Segment Information

The Company uses the “management approach” to determine its reportable segments. The management approach identifies operating segments based on how the entity is organized and based on how financial information is presented to the chief operating decision maker (“CODM”). The Company concluded that the CODM is the Chief Executive Officer.

The Company is organized around geographical divisions and discloses the following reportable segments: Brazil and International.

• Brazil: consists of retail sales of consumer products from all of our verticals (which includes sales of sporting goods and related garments as well as fashion and more recently, beauty goods) carried out through our sites Netshoes.com.br and Zattini.com.br and third-party sites that we manage as well as our business to business offline operation.

• International: consists of retail sales of consumer products (mainly sporting goods and related garments) from our sites Netshoes.com.ar and Netshoes.com.mx in Argentina and Mexico.

The items not allocated directly to the reportable segments are disclosed as corporate and others. Corporate and others comprises operating expenses, financial income and financial expenses recorded in Netshoes (Cayman) Limited and Netshoes Holding, LLC.

The CODM receives individual financial information based on the nature of revenues and expenses incurred. There is no regular reporting of individual financial information for products, services, or major customers, and therefore the Company concluded that Brazil and International were each independent reportable segments.

The company has aggregated Mexico and Argentina geographic divisions into one reportable segment, International. Mexico and Argentina share similar characteristics as an operating segment, including, but not limited to the same degree of risk, same opportunities for growth and similar products and service offerings to local customers.

No information on segment assets or liabilities is relevant for decision-making. There are no inter segment transactions in the internal reporting structure.

The Company evaluates the performance of its reportable segments using “segment net income (loss)”. A reconciliation of reportable segments is as follows:

12

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

		Brazil												International												Corporate and others												Total
		Six months ended in June 30,												Six months ended in June 30,												Six months ended in June 30,												Six months ended in June 30,
		2016				2017				2017				2016				2017				2017				2016				2017				2017				2016				2017				2017
		BRL				BRL				USD				BRL				BRL				USD				BRL				BRL				USD				BRL				BRL				USD
Net Sales	R$		657,883		R$		763,034		US$		230,649		R$		91,624		R$		94,525		US$		28,573		R$		—		R$		—		US$		—		R$		749,507		R$		857,559		US$		259,222
Cost of sales			(430,465	)			(498,445	)			(150,670	)			(71,922	)			(76,509	)			(23,127	)			—				—				—				(502,387	)			(574,954	)			(173,797	)
Segment gross profit			227,418				264,589				79,979				19,702				18,016				5,446				—				—				—				247,120				282,605				85,425
Salaries and employees’ benefits			(100,143	)			(75,047	)			(22,685	)			(13,558	)			(13,635	)			(4,122	)			(115	)			(685	)			(207	)			(113,816	)			(89,367	)			(27,014	)
Marketing expenses			(68,520	)			(76,523	)			(23,131	)			(13,093	)			(14,006	)			(4,234	)			(59	)			(157	)			(47	)			(81,672	)			(90,686	)			(27,412	)
Operating lease			(12,932	)			(12,434	)			(3,759	)			(2,241	)			(1,961	)			(593	)			—				—				—				(15,173	)			(14,395	)			(4,352	)
Credit card fees			(11,902	)			(13,745	)			(4,155	)			(3,212	)			(3,028	)			(915	)			—				—				—				(15,114	)			(16,773	)			(5,070	)
Information technology services			(12,800	)			(16,581	)			(5,011	)			(823	)			(558	)			(169	)			(3,827	)			(2,520	)			(762	)			(17,450	)			(19,659	)			(5,942	)
Amortization and depreciation			(13,358	)			(13,692	)			(4,139	)			(673	)			(510	)			(154	)			(1,007	)			(1,461	)			(442	)			(15,038	)			(15,663	)			(4,735	)
Consulting			(4,045	)			(4,855	)			(1,468	)			(771	)			(675	)			(204	)			(330	)			(1,294	)			(391	)			(5,146	)			(6,824	)			(2,063	)
Allowance for doubtful accounts			(2,934	)			(6,262	)			(1,893	)			—				—				—				—				—				—				(2,934	)			(6,262	)			(1,893	)
Sales commissions and royalties			(5,442	)			(5,783	)			(1,748	)			(536	)			(417	)			(126	)			—				—				—				(5,978	)			(6,200	)			(1,874	)
Facilities expenses			(7,290	)			(7,275	)			(2,199	)			(721	)			(698	)			(211	)			—				(277	)			(84	)			(8,011	)			(8,250	)			(2,494	)
Other selling, general and administrative expenses			(16,838	)			(20,181	)			(6,100	)			(4,807	)			(2,912	)			(879	)			—				(1	)			(1	)			(21,645	)			(23,094	)			(6,980	)
Other operating (expense) income, net			(3,321	)			(2,058	)			(623	)			(65	)			(8	)			(2	)			(1	)			(50	)			(15	)			(3,387	)			(2,116	)			(640	)
Total operating expenses			(259,525	)			(254,436	)			(76,911	)			(40,500	)			(38,408	)			(11,609	)			(5,339	)			(6,445	)			(1,949	)			(305,364	)			(299,289	)			(90,469	)
Financial income			11,142				13,768				4,162				1,349				639				193				—				788				238				12,491				15,195				4,593
Financial expenses			(41,671	)			(63,499	)			(19,194	)			(7,849	)			(5,814	)			(1,759	)			—				(2,070	)			(625	)			(49,520	)			(71,383	)			(21,578	)
Loss before income tax			(62,636	)			(39,578	)			(11,964	)			(27,298	)			(25,567	)			(7,729	)			(5,339	)			(7,727	)			(2,336	)			(95,273	)			(72,872	)			(22,029	)
Income tax expense			—				—				—				—				(2	)			(1	)			—				—				—				—				(2	)			(1	)
Net loss	R$		(62,636	)	R$		(39,578	)	US$		(11,964	)	R$		(27,298	)	R$		(25,569	)	US$		(7,730	)	R$		(5,339	)	R$		(7,727	)	US$		(2,336	)	R$		(95,273	)	R$		(72,874	)	US$		(22,030	)

13

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

		Brazil												International												Corporate and others												Total
		Three months ended in June 30,												Three months ended in June 30,												Three months ended in June 30,												Three months ended in June 30,
		2016				2017				2017				2016				2017				2017				2016				2017				2017				2016				2017				2017
		BRL				BRL				USD				BRL				BRL				USD				BRL				BRL				USD				BRL				BRL				USD
Net Sales	R$		354,546		R$		407,522		US$		123,186		R$		47,098		R$		53,809		US$		16,265		R$		—		R$		—		US$		—		R$		401,644		R$		461,331		US$		139,451
Cost of sales			(222,826	)			(264,687	)			(80,010	)			(36,741	)			(43,805	)			(13,241	)			—				—				—				(259,567	)			(308,492	)			(93,251	)
Segment gross profit			131,720				142,835				43,176				10,357				10,004				3,024				—				—				—				142,077				152,839				46,200
Salaries and employees’ benefits			(49,508	)			(39,964	)			(12,080	)			(6,892	)			(7,570	)			(2,288	)			256				(406	)			(123	)			(56,144	)			(47,940	)			(14,491	)
Marketing expenses			(37,009	)			(47,307	)			(14,300	)			(6,295	)			(8,014	)			(2,422	)			(30	)			(78	)			(24	)			(43,334	)			(55,399	)			(16,746	)
Operating lease			(6,172	)			(6,340	)			(1,917	)			(1,101	)			(1,062	)			(321	)			—				—				—				(7,273	)			(7,402	)			(2,238	)
Credit card fees			(6,457	)			(7,395	)			(2,235	)			(1,743	)			(1,679	)			(508	)			—				—				—				(8,200	)			(9,074	)			(2,743	)
Information technology services			(5,336	)			(8,017	)			(2,424	)			(302	)			(275	)			(83	)			(1,435	)			(1,297	)			(392	)			(7,073	)			(9,589	)			(2,899	)
Amortization and depreciation			(7,046	)			(6,448	)			(1,949	)			(326	)			(258	)			(78	)			(740	)			(866	)			(262	)			(8,112	)			(7,572	)			(2,289	)
Consulting			(1,990	)			(2,588	)			(781	)			(334	)			(357	)			(109	)			(171	)			(1,103	)			(333	)			(2,495	)			(4,048	)			(1,223	)
Allowance for doubtful accounts			(1,455	)			(1,701	)			(514	)			—				—				—				—				—				—				(1,455	)			(1,701	)			(514	)
Sales commissions and royalties			(2,966	)			(3,243	)			(980	)			(227	)			(251	)			(76	)			—				—				—				(3,193	)			(3,494	)			(1,056	)
Facilities expenses			(2,710	)			(4,047	)			(1,223	)			(379	)			(347	)			(105	)			—				(277	)			(84	)			(3,089	)			(4,671	)			(1,412	)
Other selling, general and administrative expenses			(8,787	)			(11,411	)			(3,450	)			(2,469	)			(1,718	)			(519	)			(77	)			(1	)			—				(11,333	)			(13,130	)			(3,969	)
Other operating (expense) income, net			(1,700	)			(1,014	)			(307	)			(23	)			(4	)			(1	)			(1	)			(6	)			(2	)			(1,724	)			(1,024	)			(310	)
Total operating expenses			(131,136	)			(139,475	)			(42,160	)			(20,091	)			(21,535	)			(6,510	)			(2,198	)			(4,034	)			(1,220	)			(153,425	)			(165,044	)			(49,890	)
Financial income			3,567				9,811				2,965				1,180				297				90				(10	)			58				18				4,737				10,166				3,073
Financial expenses			(21,848	)			(29,279	)			(8,850	)			(4,801	)			(3,318	)			(1,003	)			(377	)			(519	)			(157	)			(27,026	)			(33,116	)			(10,010	)
Loss before income tax			(17,697	)			(16,108	)			(4,869	)			(13,355	)			(14,552	)			(4,399	)			(2,585	)			(4,495	)			(1,359	)			(33,637	)			(35,155	)			(10,627	)
Income tax expense			—				—				—				—				(2	)			(1	)			—				—				—				—				(2	)			(1	)
Net loss	R$		(17,697	)	R$		(16,108	)	US$		(4,869	)	R$		(13,355	)	R$		(14,554	)	US$		(4,400	)	R$		(2,585	)	R$		(4,495	)	US$		(1,359	)	R$		(33,637	)	R$		(35,157	)	US$		(10,628	)

14

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

The Company has aggregated its products and services into groups of similar products and provided the supplemental disclosure of net sales below. The Company evaluates whether additional disclosure is appropriate when a product or service category begins to approach a significant level of net sales.

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016			2017			2017
		BRL			BRL			USD			BRL			BRL			USD
Sports(1)	R$		686,002	R$		735,260	US$		222,253	R$		358,816	R$		384,488	US$		116,223
Fashion(1)			62,782			110,030			33,260			42,164			69,170			20,909
Market Place			723			12,269			3,709			664			7,673			2,319
Total net sales	R$		749,507	R$		857,559	US$		259,222	R$		401,644	R$		461,331	US$		139,451

⁽¹⁾  Freight services were allocated to the product revenues that they are related to.

Net sales generated from our international segment are denominated in local functional currencies. Revenues are translated at average rates prevailing throughout the period.

Net sales attributable to geographical areas are as follows:

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016			2017			2017
		BRL			BRL			USD			BRL			BRL			USD
Brazil	R$		657,883	R$		763,034	US$		230,649	R$		354,546	R$		407,522	US$		123,186
Argentina			63,112			68,442			20,689			33,389			38,407			11,609
Mexico			28,512			26,083			7,884			13,709			15,402			4,656
Total net sales	R$		749,507	R$		857,559	US$		259,222	R$		401,644	R$		461,331	US$		139,451

Property and equipment and intangible assets by geography are as follows:

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
Property and equipment, net
Brazil	R$		69,901	R$		70,270	US$		21,241
Argentina			3,071			2,818			852
Mexico			1,230			1,383			418
Total property and equipment, net	R$		74,202	R$		74,471	US$		22,511
Intangible assets, net
Brazil	R$		74,515	R$		81,493	US$		24,634
Argentina			32			21			6
Mexico			35			34			10
Cayman			13,011			17,714			5,355
Total intangible assets, net	R$		87,593	R$		99,262	US$		30,005
Total			161,795			173,733			52,516

5. Earnings (Loss) Per Share (“EPS”)

The Company computes basic loss per share by dividing net loss attributable to the owners of the Parent by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution of share options that could be exercised or converted into common shares, and is computed by dividing net loss attributable to the owner of the Parent by the weighted average number of common shares outstanding plus the potentially dilutive effect of share options.

15

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

Earnings per share data for both periods presented has been calculated giving effect to the stock split of 1.0 for 3.0 which occurred immediately prior to the completion of the Initial Public Offering on April 18, 2017 (see note 1.4).

The following table sets forth the computation of the Company’s basic and diluted loss per share attributable to the owners of the Parent for the three and six months ended June 30, 2016 and 2017:

		Six months ended in June 30,												Three months ended in June 30,
		2016				2017				2017				2016				2017				2017
		BRL				BRL				USD				BRL				BRL				USD
Numerator
Net loss for the period attributable to the owners of the Parent	R$		(94,865	)	R$		(72,499	)	US$		(21,915	)	R$		(33,671	)	R$		(34,991	)	US$		(10,577	)
Denominator
Weighted average number of outstanding shares of common stock			20,912,187				23,435,524				23,435,524				20,912,187				23,435,524				23,435,524
Loss per share attributable to the owners of the Parent(1)
Basic and diluted	R$		(4.54	)	R$		(3.09	)	US$		(0.94	)	R$		(1.61	)	R$		(1.49	)	US$		(0.45	)

⁽¹⁾ When the Company reports net loss attributable to the owners of the Parent, the diluted loss per common share is equal to the basic losses per common share due to the anti-dilutive effect of the outstanding share options and convertible notes.

6. Net Sales

Details of net sales for the three and six months ended June 30, 2016 and 2017 were as follows:

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016			2017			2017
		BRL			BRL			USD			BRL			BRL			USD
Product sales	R$		736,341	R$		833,988	US$		252,097	R$		395,046	R$		446,974	US$		135,111
Other revenues			13,166			23,571			7,125			6,598			14,357			4,340
Total net sales	R$		749,507	R$		857,559	US$		259,222	R$		401,644	R$		461,331	US$		139,451

The Company has established distribution centers in the States of Pernambuco and Minas Gerais, where it has been granted tax incentives by local government which reduce the amount of sales taxes paid, effectively increasing the amount of revenue recognized.

As a result of such tax incentives, sales to purchasers outside of the State of Pernambuco originated from our distribution center located in the city of Recife (State of Pernambuco, Brazil), enjoyed Pernambuco State ICMS tax rates of a range from 0.5% to 1.0% during the first semester of 2016 and during the first semester of 2017, depending on the type of product offered. Also, sales to purchasers outside of the State of Minas Gerais originated from our distribution center located in the city of Extrema (State of Minas Gerais, Brazil) enjoyed a Minas Gerais State ICMS tax rate of 1.0% during the first semester of 2016 and during the first semester of 2017.

The incentive also determines that the Company is not allowed to take any credit for taxes paid on the purchase of products subsequently sold outside of those states such that these amounts becomenon-recoverable taxes and increase the Cost of Sales. Note 8 (a) of these financial statements presents the impact on cost of sales.

16

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

For the three and six months ended June 30, 2016 and 2017, the total amounts of tax incentives recorded in net sales are as follows:

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016			2017			2017
		BRL			BRL			USD			BRL			BRL			USD
State of Pernambuco	R$		43,796	R$		32,259	US$		9,751	R$		22,065	R$		15,058	US$		4,552
State of Minas Gerais			45,551			64,058			19,363			27,417			35,310			10,673
Total tax incentives—Net sales	R$		89,347	R$		96,317	US$		29,114	R$		49,482	R$		50,368	US$		15,225

7. Deferred Revenue

On October 30, 2015, the Company entered into a partnership agreement with a financial institution to create a co-branded credit card (“NCard”). Deferred revenue recorded represents the amount paid in advance by the financial institution for the exclusive use of the Company’s customer database and credit card activation.

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
Deferred revenue from exclusive use of customer database	R$		13,250	R$		12,500	US$		3,779
Deferred revenue from credit card activation			19,625			18,926			5,721
Total	R$		32,875	R$		31,426	US$		9,500
Current			6,628			6,628			2,004
Non-current			26,247			24,798			7,496

Deferred revenue from exclusive use of the Company’s customer database is recognized as other operating (expense) income, net in the consolidated statements of profit or loss using the straight line method, over the period of the contract (10 years). In thesix-month periods ended June 30, 2016 and 2017, the amount of R$750 (US$227) was recorded in other operating income related to customer database.

Deferred revenue from credit card activation is recognized as other revenues within net sales, in the consolidated statements of profit or loss, when the credit cards are activated with the bank by the Company’s customers. In thesix-month periods ended June 30, 2016 and 2017 the amount of R$57 and R$699 (US$211), respectively, was recorded in other revenues related to credit card activations.

In the event the bank decides to terminate the contract early, the Company will be entitled to the remaining amount of deferred revenue related to the customer database proportionally to the remaining period of the contract while credit cards activation deferred revenue balances will be reimbursed to the bank proportionally to credit cards not activated, with interest.

17

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

In the event the Company decides to terminate the contract early, the amounts related to the customer database will be reimbursed to the bank proportionally to the remaining period of the contract and the amounts related to credit card activation will be reimbursed to the bank proportionally to credit cards not activated, both including interest. In addition, a penalty will be paid to the bank as follows:

	Penalty
Termination year	BRL		USD
2017		7,650		2,312
2018		7,200		2,176
2019		6,300		1,904
2020		5,400		1,632
2021		4,500		1,360
2022		3,600		1,088
2023		2,700		816
2024		1,800		544
2025		900		272

Additionally, the bank and the Company will share the profit and loss of this partnership, equally. In case of losses in the partnership, the amount attributable to the Company will be compensated with future profits. Losses in the partnership will only be absorbed by the Company in case of early termination of the contract, therefore the revenue will be recorded when the right to receive payment is established by the amount net of losses.

8. Expenses

(a) Costs of Sales

The following is the breakdown of cost of sales for the three and six months ended June 30, 2016 and 2017, respectively:

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016			2017			2017
		BRL			BRL			USD			BRL			BRL			USD
Cost of product sales	R$		435,398	R$		504,983	US$		152,645	R$		224,483	R$		271,768	US$		82,150
Shipping costs			65,351			67,830			20,504			34,320			36,294			10,970
Others			1,638			2,141			648			764			430			131
Total cost of sales	R$		502,387	R$		574,954	US$		173,797	R$		259,567	R$		308,492	US$		93,251

Cost of product sales include thenon-recoverable ICMS taxes resulting from the tax incentives disclosed in note 6 granted by the States of Minas Gerais and Pernambuco. For the three and six months ended June 30, 2016 and 2017, the total amounts ofnon-recoverable ICMS are as follows:

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016			2017			2017
		BRL			BRL			USD			BRL			BRL			USD
State of Pernambuco	R$		14,235	R$		10,626	US$		3,212	R$		6,246	R$		5,900	US$		1,783
State of Minas Gerais			16,547			32,555			9,841			10,742			16,736			5,059
Non-recoverable ICMS	R$		30,782	R$		43,181	US$		13,053	R$		16,988	R$		22,636	US$		6,842

The impact of tax incentives net ofnon-recoverable ICMS for the six months ended June 30, 2016 and 2017 is R$58,565 and R$53,136 (US$16,062), respectively.

As a result of ICMS tax reviews performed during the first semester of 2016 and 2017, the Company identified ICMS tax credits on past transactions not previously taken. These tax credits amounted to R$5,500 and R$10,118 (US$3,058), respectively, and were recorded as a reduction of the cost of product sales in the six months ended June 30, 2016 and 2017.

18

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

(b) Selling and Marketing Expenses

The following is the breakdown of selling and marketing expenses for the three and six months ended June 30, 2016 and 2017, respectively:

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016				2017			2017
		BRL			BRL			USD			BRL				BRL			USD
Salaries and employees’ benefits	R$		65,695	R$		66,609	US$		20,135	R$		32,183		R$		32,470	US$		9,815
Marketing expenses			81,672			90,686			27,412			43,334				55,399			16,746
Operating lease			10,827			10,102			3,054			4,759				5,196			1,571
Credit card fees			15,114			16,773			5,070			8,200				9,074			2,743
Information technology services			1,036			716			216			231				356			108
Amortization and depreciation			3,635			1,987			601			1,988				1,162			351
Consulting			—			608			184			(295	)			263			79
Allowance for doubtful accounts			2,934			6,262			1,893			1,455				1,701			514
Sales commissions and royalties			5,978			6,200			1,874			3,193				3,494			1,056
Facilities expenses			6,181			6,475			1,957			2,473				3,625			1,096
Others			16,754			16,108			4,869			8,365				8,260			2,497
Total selling and marketing expenses	R$		209,826	R$		222,526	US$		67,265	R$		105,886		R$		121,000	US$		36,576

(c) General and Administrative Expenses

The following is the breakdown of general and administrative expenses for the three and six months ended June 30, 2016 and 2017, respectively:

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016			2017			2017
		BRL			BRL			USD			BRL			BRL			USD
Salaries and employees’ benefits	R$		48,121	R$		22,758	US$		6,879	R$		23,961	R$		15,470	US$		4,676
Operating lease			4,346			4,293			1,298			2,514			2,206			667
Information technology services			16,414			18,943			5,726			6,842			9,233			2,791
Amortization and depreciation			11,403			13,676			4,134			6,124			6,410			1,938
Consulting			5,146			6,216			1,879			2,790			3,785			1,144
Facilities expenses			1,830			1,775			537			616			1,046			316
Others			4,891			6,986			2,111			2,968			4,870			1,472
Total general and administrative expenses	R$		92,151	R$		74,647	US$		22,564	R$		45,815	R$		43,020	US$		13,004

(d) Financial Income (Expenses)

The following is the breakdown of financial income and expenses of the Company for three and the six months ended June 30, 2016 and 2017, respectively:

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016			2017			2017
		BRL			BRL			USD			BRL			BRL			USD
Interest income	R$		10,788	R$		13,285	US$		4,016	R$		4,170	R$		9,482	US$		2,866
Foreign exchange gain			—			727			220			—			290			88
Imputed interest on installment sales			1,278			380			115			142			334			101
Derivative financial instruments gain			—			764			231			—			33			10
Other			425			39			11			425			27			8
Total financial income	R$		12,491	R$		15,195	US$		4,593	R$		4,737	R$		10,166	US$		3,073

19

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			2017			2016			2017			2017
		BRL			BRL			USD			BRL			BRL			USD
Interest expense	R$		29,887	R$		37,958	US$		11,474	R$		16,610	R$		18,224	US$		5,509
Imputed interest on credit purchases			13,840			25,639			7,750			7,398			9,576			2,895
Bank charges			3,626			4,034			1,219			1,817			2,463			745
Foreign exchange loss			509			1,839			556			426			1,839			556
Debt issuance costs			164			1,462			442			82			698			211
Other			1,494			451			137			693			316			94
Total financial expense	R$		49,520	R$		71,383	US$		21,578	R$		27,026	R$		33,116	US$		10,010

9. Cash and Cash Equivalents

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
Cash and bank balances	R$		6,769	R$		15,052	US$		4,550
Cash equivalents			104,535			404,897			122,392
Total cash and cash equivalents	R$		111,304	R$		419,949	US$		126,942

Cash equivalents are investments in Bank Deposit Certificates (“CDB”) and investment funds, issued by Brazilian financial institutions, with original maturities of 90 days or less that accrue at an average interest rate of 95.62% of CDI (Interbank Deposit Certificate rate).

10. Trade Accounts Receivable, Net

		December 31, 2016				June 30, 2017
		BRL				BRL				USD
Trade accounts receivables	R$		215,716		R$		130,760		US$		39,526
Allowance for doubtful accounts			(1,722	)			(7,977	)			(2,411	)
Total trade accounts receivables, net	R$		213,994		R$		122,783		US$		37,115

The changes in the allowance for doubtful trade accounts receivable for the six months period ended June 30, 2017 and 2016 are as follows:

		June, 30
		2016				2017				2017
		BRL				BRL				USD
Balance at January 1	R$		(555	)	R$		(1,722	)	US$		(521	)
Additions			(2,921	)			(6,262	)			(1,893	)
Write-offs			3,200				7				3
Balance at June 30	R$		(276	)	R$		(7,977	)	US$		(2,411	)

Information about the Company’s exposure to credit and other market risks is included in Note 19.

20

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

11. Inventories, Net

		December 31, 2016				June 30, 2017
		BRL				BRL				USD
Finished goods for resale	R$		356,529		R$		398,724		US$		120,526
Allowance for slow moving and others			(4,518	)			(5,013	)			(1,515	)
Total inventories, net	R$		352,011		R$		393,711		US$		119,011

Due to obsolescence, damaged and slow moving items, the Company recognized losses on the related inventories to their net realizable value, which resulted in a loss of R$222 for the six months ended June 30, 2016 and R$495 (US$150) for the six months ended June 30, 2017.

12. Recoverable Taxes

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
VAT Taxes Brazil (ICMS)	R$		63,574	R$		95,329	US$		28,816
VAT Taxes International			17,222			17,496			5,289
Taxes other than income tax (PIS and COFINS)			12,148			12,099			3,657
Withholding income taxes			2,739			4,065			1,229
Others			3,824			5,839			1,764
Total recoverable taxes	R$		99,507	R$		134,828	US$		40,755
Current			66,329			72,497			21,914
Non-Current			33,178			62,331			18,841

13. Property and Equipment, Net

During the six months ended June 30, 2016 and 2017, the Company acquired property and equipment with a cost of R$17,858 and R$4,487 (US$1,356), respectively.

During the six months ended June 30, 2016 and 2017, the Company disposed of property and equipment with a carrying amount of R$609 and R$209 (US$66), respectively, resulting in a loss on disposal of R$310 and R$170 (US$51), respectively, which was included in “other operating expense” in the condensed consolidated statements of profit or loss.

14. Intangible assets, Net

The gross amount of intangible assets was R$136,584 at December 31, 2016 and increased to R$159,853 (US$ 48,320) at June 30, 2017. The increase is mainly related to software in development related to marketplace project, website platform, Shoestock store and software acquired (app and website).

21

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

15. Trade Accounts Payable

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
Trade accounts payable—Denominated in local currency	R$		315,072	R$		250,957	US$		75,859
Trade accounts payable—Denominated in other currencies			20,358			32,984			9,970
Total trade accounts payable	R$		335,430	R$		283,941	US$		85,829

Information about the Company’s exposure to currency and liquidity risks is included in Note 19.

16. Accrued Expenses

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
Selling and marketing services	R$		67,090	R$		56,520	US$		17,085
Freight			24,774			11,764			3,556
Gift card			5,225			5,118			1,547
Information technology			7,301			4,992			1,509
Acquisition of fixed assets and intangible			4,677			1,241			375
Rentals			3,031			2,056			621
Services			4,277			1,911			578
Employees benefits			834			634			192
Other			4,839			6,324			1,911
Total accrued expenses	R$		122,048	R$		90,560	US$		27,374

17. Debt

During the six months ended June 30, 2016 and 2017, the Company repaid R$55,144 and R$52,973 (US$16,013) of secured borrowings, nonconvertible loans and bank loans, respectively. The weighted average interest rate for debt was 17.22% and 14.27% for the six months ended June 30, 2016 and 2017, respectively.

The secured borrowings and debentures contain certain affirmative financial covenants for which the Company was in compliance as of June 30, 2017.

The carrying value of the Company’s outstanding debt consists of the following:

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
Secured borrowings	R$		255,471	R$		255,770	US$		77,314
Nonconvertible notes—Debentures			122,284			103,173			31,187
Bank loans			5,161			6,152			1,860
Transfer of financial assets with recourse			4,466			—			—
Total long-term debt			387,382			365,095			110,361
Current portion of long-term debt			75,956			114,992			34,760
Long-term debt, net of current portion	R$		311,426	R$		250,103	US$		75,601

22

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

18. Derivative Financial Instruments

a) Derivatives not designated as hedge accounting

The Company recognized a derivative gain of R$ 1,227 and R$ 764 (US$ 231) as financial income, in the condensed consolidated statements of profit or loss as of June 30, 2016 and 2017, respectively. The objective of these derivatives was to manage foreign exchange risks.

b) Derivatives designated as hedge accounting

The Company utilizednon-deliverables forwards as the hedging instruments for cash flow hedges which had a fair value of R$186 and R$0 (US$0) on December 31, 2016 and June 30, 2017, respectively, recorded as liabilities. Since March 2016, the Company does not enter into new forward foreign exchange contracts in order to hedge their exposure to purchase commitments denominated in those currencies.

19. Financial Instruments—Fair Value and Risk Management

(a) Accounting classifications and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities if the carrying amount is a reasonable approximation of fair value.

				As at December 31, 2016
				Carrying amount									Fair value
Financial assets or liabilities, measured at fair value	Note			Fair value	Loans and receivables		Other financial liabilities		Total				Level 2
				BRL	BRL		BRL		BRL				BRL
Forward exchange contracts used for hedging		18	R$	(186)		—		—		(186	)	R$		(186	)
Total			R$	(186)		—		—		(186	)	R$		(186	)

				As at December 31, 2016
				Carrying amount
Financial assets or liabilities, not measured at fair value	Note			Fair value		Loans and receivables		Other financial liabilities			Total
				BRL		BRL		BRL			BRL
Cash and cash equivalents		9			—		111,304		—			111,304
Restricted cash, current andnon-current portion					—		43,200		—			43,200
Trade accounts receivables		10			—		213,994		—			213,994
Due from related parties		22			—		17		—			17
Judicial deposits		23			—		71,817		—			71,817
Other assets, current andnon-current portion							22,126		—			22,126
Trade accounts payable		15			—		—		(335,430	)		(335,430	)
Reverse factoring					—		—		(27,867	)		(27,867	)
Long-term debt		17			—		—		(387,382	)		(387,382	)
Accrued expenses		16			—		—		(122,048	)		(122,048	)
Other current liabilities					—		—		(33,331	)		(33,331	)
Total			R$		—		462,458		(906,058	)		(443,600	)

23

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

As at June 30, 2017

Carrying amount

Fair value

Fair value

Financial assets or liabilities, measured at fair value

Note

Fair value

Loans and receivables

Other financial liabilities

Total

Level 2

Level 2

BRL

BRL

BRL

BRL

BRL

USD

Forward exchange contracts used for hedging

18

R$

—

—

—

—

R$

—

US$

—

Total

R$

—

—

—

—

R$

—

US$

—

				As at June 30, 2017
				Carrying amount
Financial assets or liabilities, not measured at fair value	Note			Fair value		Loans and receivables		Other financial liabilities			Total				Total
				BRL		BRL		BRL			BRL				USD
Cash and cash equivalents		9	R$		—		419,949		—			419,949		US$		126,942
Restricted cash, current andnon-current portion					—		39,480		—			39,480				11,934
Trade accounts receivables		10			—		122,783		—			122,783				37,115
Due from related parties		22			—		17		—			17				5
Judicial deposits		23			—		95,432		—			95,432				28,847
Other assets, current andnon-current portion							38,668					38,668				11,689
Trade accounts payable		15			—		—		(283,941	)		(283,941	)			(85,829	)
Reverse factoring					—		—		(29,356	)		(29,356	)			(8,874	)
Long-term debt		17			—		—		(365,095	)		(365,095	)			(110,361	)
Accrued expenses		16			—		—		(90,560	)		(90,560	)			(27,374	)
Other current liabilities					—		—		(36,362	)		(36,362	)			(10,991	)
Total			R$		—		716,329		(805,314	)		(88,985	)	US$		(26,897	)

(b) Measurement of fair values

Derivative financial instruments mainly consist of foreign currency forward exchange contracts and foreign currency swaps. The fair value of these derivative financial instruments are measured by using market observable inputs such as the foreign exchange spot and forward rates and discount rates. As of December 31, 2016 and June 30, 2017, the changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value.

The Company’s financial instruments, including cash and cash equivalents, trade accounts receivable, trade accounts payable and other payables, are carried at cost, which approximates fair value due to the short-term maturity of these instruments. The estimated fair value of debentures is based on the current rates offered to the Company for debentures of the same remaining maturities, which is categorized as a Level 2 measurement in the fair value hierarchy. As a substantial portion of the debentures has been contracted at floating rates of interest, which are reset at short intervals, the carrying value of the debentures at December 31, 2016 and June 30, 2017 closely approximated the fair value at December 31, 2016 and June 30, 2017, respectively.

During the six months ended June 30, 2016 and 2017, there were no transfers between Level 1 and Level 2 fair value measurements or transfer to or from Level 3.

(c) Financial risk management

In the regular course of its business, the Company is exposed to market risks mainly related to the fluctuation of interest rates, exchange rate variation, credit risk on credit sales and liquidity risk.

The Company adopts certain instruments to minimize its exposure to such risks, based on monitoring, under the supervision of the Company´s executive officers, which in turn is under the oversight of the Company´s board of directors.

24

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

The Company has exposure to the following risks arising from financial instruments:

• credit risk (see (i));

• liquidity risk (see (ii)); and

• market risk (see (iii)).

i. Credit risk

Credit risk is the Company´s risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. This risk principally comes from the outstanding receivables due by customers, derivatives and cash and cash equivalents.

Trade Accounts Receivable

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.

The Company regularly monitors trade accounts receivable and considers the risk of not collecting from customers as limited because of the intrinsic nature of the payments of credit card operations methods.

ForBusiness-to-business customers, the credit risk exposure and the carrying values reflect management’s assessment of the associated maximum exposure to such credit risk. The maximum exposure to credit risk is equal to the carrying value of the financial assets. The objective of managing counterparty credit risk is to prevent losses in financial assets. The Company assesses the credit quality of the counterparties, taking into account their financial position, past experience and other factors.

No customer had balances representing more than 10% of the Company´s consolidated trade accounts receivable as of December 31, 2016 and June 30, 2017, respectively.

At December 31, 2016 and June 30, 2017, respectively, the maximum exposure to credit risk for trade accounts receivable by type of counterparty was as follows:

		December 31, 2016				June 30, 2017
		BRL				BRL				USD
Credit card operations	R$		162,915		R$		76,218		US$		23,039
Business-to-business customers			52,801				54,542				16,487
Total trade accounts receivable	R$		215,716		R$		130,760		US$		39,526
Allowance for doubtful accounts			(1,722	)			(7,977	)			(2,411	)
Trade accounts receivable, net	R$		213,994		R$		122,783		US$		37,115

At December 31, 2016 and June 30, 2017, respectively, the aging of trade accounts receivable was as follows:

25

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
Neither past due nor impaired	R$		197,631	R$		96,959	US$		29,308
Past due1-30 days			9,497			7,988			2,415
Past due31-90 days			3,455			18,069			5,462
Past due91-120 days			1,314			641			194
Past due120-180 days			2,097			983			297
Past due over 180 days			1,722			6,120			1,850
Total trade accounts receivable			215,716			130,760			39,526
Allowance for doubtful accounts			(1,722)			(7,977)			(2,411)
Trade accounts receivable, net	R$		213,994	R$		122,783	US$		37,115

Management believes that unimpaired amounts are collectible, based on historical payment behavior and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available.

Cash and cash equivalents

The Company held cash and cash equivalents of R$111,304 and R$419,949 (US$126,942) at December 31, 2016 and June 30, 2017, respectively. Cash and cash equivalents are held with bank and financial institution counterparties, which are rated A toAA-, based on Standard & Poor’s credit rating for local currency credit issuers.

ii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The following are the remaining contractual maturities of financial liabilities as of June 30, 2017. The amounts are gross and undiscounted and include contractual interest payments. Estimated interest payments were calculated based on the interest rate indexes of the Company’s floating interest rate indebtedness, in effect as of June 30, 2017.

		As at June 30, 2017
		Carrying amount			Carrying amount			Contractuall cash flows
								Within 1 year			1 - 3 years			3 - 5 years			More than 5 years
		BRL			USD			BRL			BRL			BRL			BRL
Financial liabilities:
Long-term debt	R$		365,095	US$		110,361	R$		152,760	R$		284,676	R$		—	R$		—
Derivative financial instruments			—			—			—			—			—			—
Trade accounts payable			283,941			85,829			293,294			—			—			—
Reverse factoring			29,356			8,874			30,488			—			—			—
Taxes and contributions payable			15,396			4,654			15,396			—			—			—
Accrued expenses			90,560			27,374			90,560			—			—			—
Other current liabilities			36,362			10,991			36,362			—			—			—
Provision for labor, civil and tax risks			8,666			2,620			—			—			—			8,666
Othernon-current liabilities			21			6			—			—			—			21
	R$		829,397	US$		250,709	R$		618,860	R$		284,676	R$		—	R$		8,687

26

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

		As at June 30, 2017
		Carrying amount			Carrying amount			Contractuall cash flows
								Within 1 year			1 - 3 years			3 - 5 years			More than 5 years
		BRL			USD			BRL			BRL			BRL			BRL
Financial liabilities:
Long-term debt	R$		365,095	US$		110,361	R$		152,760	R$		284,676	R$		—	R$		—
Derivative financial instruments			—			—			—			—			—			—
Trade accounts payable			283,941			85,829			293,294			—			—			—
Reverse factoring			29,356			8,874			30,485			—			—			—
Taxes and contributions payable			15,396			4,654			15,396			—			—			—
Accrued expenses			90,560			27,374			90,560			—			—			—
Other current liabilities			36,362			10,991			36,362			—			—			—
Provision for labor, civil and tax risks			8,666			2,620			—			—			—			8,666
Othernon-current liabilities			21			6			—			—			—			21
	R$		829,397	US$		250,709	R$		618,857	R$		284,676	R$		—	R$		8,687

The following are the Company’s unrestricted cash and cash equivalents and unused portion of the credit facility at December 31, 2016 and June 30, 2017:

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
Unrestricted cash and cash equivalents	R$		111,304	R$		419,949	US$		126,942
Undrawn credit facility			290			49			15
Available liquidity	R$		111,594	R$		419,998	US$		126,957

In recent years, the Company has financed its operations in large part with cash flows from operating activities, bank financing and cash proceeds from issuances of common shares. The Company has taken a number of measures designed to improve liquidity, including: (i) reducing the number of monthly credit card installments from customers, (ii) renegotiating payment terms with suppliers, (iii) entering into sales of receivables with financial institutions, whereby the Company transfers its rights to receive cash flows from a portion of trade accounts receivable, limited to the amount given as securities for borrowing and debentures, (iv) entering into reverse factoring of trade accounts payable with financial institutions, whereby they commit to pay suppliers at an accelerated rate in exchange for a trade discount, (v) raise capital from financial investors by issuing notes convertible into our common shares with total proceeds amounting to US$30.0 million. These measures are enabling the Company to secure liquidity to maintain its operations.

The Company has also raised capital from financial investors through Initial Public Offering, as described in note 1.2.

iii. Market risk

(a) Foreign Currency Exchange Risk

The Company’s net sales are denominated in the functional currencies of the countries in which our operational subsidiaries are located. Accordingly, its receivables are generally not subject to foreign currency exchange risks.

In the ordinary course of business, the Company’s subsidiaries purchase goods from vendors in both local functional currency and foreign currencies (mainly U.S. dollars).

27

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

Since March 2016, the Company does not enter into new forward foreign exchange contracts in order to hedge their exposure to purchase commitments denominated in those currencies.

The summary of quantitative data about the Company’s exposure to currency risk as reported to management of the Company is as follows:

	June 30, 2017
	USD
Trade accounts payable		9,970
Accrued expenses		909
Net statement of financial position exposure		10,879

The following table indicates the instantaneous change in the Company’s income or (loss) before tax that would arise if foreign exchange rates to which the Company has exposure at the reporting date had changed by 10% at that date, assuming all other risk variables remained constant.

	Profit or loss
As at June 30, 2017	Strenghthening		Weakening
	BRL		BRL
Net exposure in USD	$	3,599		(3,599	)

This sensitivity analysis assumes that the change in foreign exchange rates had been applied tore-measure those financial instruments held by the Company which expose it to foreign currency exchange risk at the reporting date. This analysis excludes differences that would result from the translation of the consolidated financial statements of foreign operations into the Company’s reporting currency, which is Brazilian Real. The sensitivity analysis above is conducted for monetary assets and liabilities denominated in foreign currencies other than functional currency as of June 30, 2017.

(b) Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond the Company’s control. Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. The Company’s debt has floating interest rates. As a result, the Company is exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates for its floating rate debt. The Company’s floating rate debt requires payments based on variable interest rate indexes such as CDI. Therefore, increases in interest rates may increase the Company’s loss before taxes by increasing its financial expense. If interest rates were to increase or decrease by 50 basis points, the Company´s financial expense on borrowings subject to variable interest rates would increase or decrease by R$1,091 (US$330) for the six months ended June 30, 2017. This analysis assumes that all other variables, in particular foreign currency exchange rate, remain constant.

28

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

To reduce the exposure of variable interest rate (CDI), the Company invests its excess cash and cash equivalents in short-term investments. If interest rates were to increase or decrease by 50 basis points, the Company’s financial income on short-term investments subject to variable interest rates would increase or decrease by R$407 (US$123) for the six months years ended June 30, 2017.

(c) Inflation Risk

Brazil and countries in Latin America, in general, have historically experienced high rates of inflation. Inflationary pressures persist, and actions taken in an effort to curb inflation, coupled with public speculation about possible future governmental actions, have in the past contributed to economic uncertainty in Brazil and other Latin American countries and heightened volatility in the Latin American securities market.

The Company does not believe that inflation has had a material effect in its business, financial condition or results of operations. The Company continues to monitor the impact of inflation in order to minimize its effects through pricing strategies and productivity improvements.

20. Share-based Payments

The number of share options has been disclosed giving effect to the stock split of 1.0 for 3.0 occurred immediately prior to the completion of Initial Public Offering on April 18, 2017 (see note 1.4).

Under the Share Plan (the “Plan”) established by the Company, its Board of Directors (the “Board”) may grant up to 631,470 share options to key employees, directors and independent contractors. The options under the Plan were granted at the discretion of the Board; as such, the Board has full authority to establish terms and conditions of any award consistent with the provisions of the Plan and to waive any such terms and conditions at any time. The Plan was set up for the following purposes: (i) attracting, retaining and motivating its beneficiaries; (ii) adding value to quote-holders; and (iii) encouraging the view of entrepreneurs of the business.

(a) Arrangements previously classified as cash-settled

Each share option granted under the Plan contains a vesting period, during which the participant cannot exercise the option, and are generally subject to the following vesting schedule: over a four-year period, 25% of the total common shares subject to the award will vest at the first anniversary of the vesting commencement date and the remaining common shares subject to the award will vest in equal monthly installments over the 36 months of continuous service thereafter.

The Company held a right of first refusal to repurchase the shares exercised according to the Plan. The Company only had this right of first refusal until it has became public and, after that date, holders of the common shares has traded them in the market.

In addition, the Company had anon-contractual practice of (i) providing its employees whose employment relationship was terminated (whether voluntarily or involuntarily) with a repurchase proposal to buy back its common shares held by such persons at a discount of their fair value and (ii) to provide holders of vested awards that terminate their relationship with the Company (whether voluntarily or involuntarily) with a bonus equivalent to the exercise price of their exercisable option.

Due to the characteristics of the transaction, these awards had been regarded as a cash-settled plan and the liability was remeasured at each reporting date. The liability recognized in these consolidated financial statements takes into account the fair value of Company´s shares, expected forfeitures and the discount the Company has obtained when repurchasing such shares.

29

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

Following the completion of Initial Public Offering, the condition of the right of first refusal by the Company of repurchasing the shares exercised is no longer applicable, as prescribed in the Plan.

Therefore, upon completion of Initial Public Offering, the Company reclassified the share-based plan from cash-settled to equity-settled, and the impact was a reduction inNon-current liabilities and an increase in Equity (Capital Reserves) of R$13,706 (US$4,143).

For purposes of the statement of cash flows, share based payment transactions are fully reported under operating activities.

The Company did not repurchase shares during the six months period ended June 30, 2016 and 2017.

As the Company will provide holders of vested awards with a bonus equivalent to the exercise price of the options if they decide to exercise the options, the fair value of the awards was estimated based on the fair value of the Company´s shares.

A summary of option activities under the Plan and changes during the period ended June 30, 2016 and 2017 is set forth in the following table:

30

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

Cash-settled arrangements	Number of Units				Weighted Average Exercise Price Per Unit			Weighted Average Remaining Contractual Term (in years)
					USD
Oustanding at December 31, 2015		273,147		US$		19.28			1.1 year
Granted		—				—
Exercised		—				—
Forfeited/Cancelled		—				—
Expired		—				—
Oustanding at March 31, 2016		273,147				19.28			1.1 year
Granted		—				—
Exercised		—				—
Forfeited/Cancelled		(5,643	)			—
Expired		—				—
Oustanding at June 30, 2016		267,504				19.69			1.1 year
Cash-settled arrangements
Oustanding at December 31, 2016		346,767				16.76			1.3 year
Granted		—				—
Exercised		—				—
Forfeited/Cancelled		(73,710	)			43.31
Expired		—				—
Oustanding at March 31, 2017		273,057		US$		9.59			0.9 year
Cash-settled arrangements
Oustanding at March 31,		273,057		US$		9.59			0.9 year
Granted		—				—
Exercised		—				—
Forfeited/Cancelled		—				—
Expired		—				—
Transfer to equity-settled arrangements on April 12nd		(273,057	)			(9.59	)
Oustanding at June 30, 2017		—		US$		—			0 year
Vested at December 31, 2016		228,501
Vested at June 30, 2017		—

As mentioned before, the Company reclassified the share-based plan from cash-settled to equity-settled after conclusion of IPO.

31

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

(b) Equity-settled arrangements

On November 14, 2016 and on March 29, 2017, the Company granted 7,750 and 42,500 share options respectively, under the Plan with anon-market performance condition (Initial Public Offering—IPO) combined with a requirement that the holder of the award is employed until six months after the IPO.

The Company fully satisfied thisnon-market performance on April 18, 2017, therefore the share option expense has been recognized since the grant date, and will be fully recognized by October 2017. The Company only has a right of first refusal under the Plan until April 18, 2017 (IPO date), after that date, holders of the common shares can trade them in the market. Therefore, this arrangement has been regarded as equity-settled.

As the Company will provide holders of vested awards with a bonus equivalent to the exercise price of the options if they decide to exercise the options, the fair value of the awards was estimated based on the fair value of the Company´s shares.

A summary of option activities under the Plan and changes during the period ended June 30, 2017 and December 31, 2016 is set forth in the following table:

	Number of Units				Weighted Average Exercise Price Per Unit		Weighted Average Remaining Contractual Term (in years)
Equity-settled arrangements					USD
Oustanding at December 31, 2016		23,250				8.10		0.8 year
Granted		127,500				8.10
Exercised		—				—
Forfeited/Cancelled		—				—
Expired		—				—
Oustanding at March 31, 2017		150,750		US$		8.10		0.6 year
Granted		—				—
Exercised		—				—
Forfeited/Cancelled		(22,302	)			8.10
Expired		—				—
Transfer from cash-settled arrangements on April 12nd		273,057				9.59
Oustanding at June 30, 2017		401,505		US$		9.11		0.9 year
Vested at December 31, 2016		228,501
Vested at June 30, 2017		164,733

As of June 30, 2017, the Company had remaining unrecognized compensation cost of R$13,274 (US$4,012), which is expected to be recognized over a weighted average period of 0.9 year.

The Company recognized compensation expense (income) for both cash and equity-settled arrangements of R$ 3,532 and (R$ 13,469) (US$ 4,071) for the six months ended June 30, 2016 and 2017, respectively.

The fair value of the shares was estimated, for both cash and equity-settled arrangements, at US$42.61 and US$18.00 per share at June 30, 2016 and 2017, respectively. The June 30, 2016 price per share was based on guideline public comparable company method, or GPCM prepared by the Company, and the June 30, 2017 price per share was based on the guideline public comparable company method, or GPCM, which was used for the pricing of the initial public offering (see note 1.2).

32

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

21. Income Taxes

Income tax expenses for the periods presented are based on the best estimate of the weighted average annual income tax rate expected for the full years.

The Company’s effective tax rate for the six months ended June 30, 2017 was 0% (six months ended June 30, 2016: 0%).

22. Related party transactions

The consolidated subsidiaries of the Company as of December 31, 2016 and June 30, 2017 are listed below:

		Percentage Ownership and Voting Interest
Company	Country of Incorporation	December 31, 2016		June 30, 2017
Netshoes Holding, LLC	United States of America		100.00%		100.00%
NS2 Com Internet Ltda	Brazil		100.00%		100.00%
NS3 Internet S.A.	Argentina		98.17%		98.32%
NS4 Com Internet S.A.	Mexico		100.00%		100.00%
NS4 Servicios de México S.A. C.V.	Mexico		100.00%		100.00%
NS5 Participações Ltda.	Brazil		99.99%		99.99%
NS6 Serviços Esportivos Ltda.	Brazil		100.00%		100.00%

The Company has the following related party transactions:

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
Balances fromnon-controlling owners
Receivables	R$		17	R$		17	US$		5

		Six months ended in June 30,									Three months ended in June 30,
		2016			2017			USD Total			2016			2017				USD Total
		BRL			BRL			USD			BRL			BRL				USD
Personnel expenses
Compensation and short-term benefits	R$		5,949			8,251	US$		2,494	R$		1,663	R$		6,290		US$		1,901
Share-based payments			1,653			393			119			748			(55	)			(17	)
Convertible notes interest			—			2,069			625			—			503				152
	R$		7,602	R$		10,713	US$		3,238	R$		2,411	R$		6,738		US$		2,036

33

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

23. Commitments and Contingencies

(a) Litigation

The Company is a party to legal proceedings and claims which arise during the ordinary course of business. It reviews its legal proceedings and claims, conducts regulatory reviews and inspections, and reviews other legal matters on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes provisions for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and the Company discloses the amount provided for and the amount of a reasonably possible loss in excess of the amount provided for, if such disclosure is necessary for its financial statements not to be misleading. The Company does not record a provision when the likelihood of loss being incurred is probable, but the amount cannot be reasonably estimated, or when the loss is believed to be only reasonably possible or remote. The Company´s assessment of whether a loss is reasonably possible or probable is based on its assessment and consultation with legal counsel regarding the ultimate outcome of the matter following all appeals. After taking into consideration legal counsel’s evaluation of such actions, management is of the opinion that their outcome will not have a significant effect on the Company’s consolidated financial statements, other than the amount already provided for.

Breakdown of and changes in provisions whose unfavorable outcome is probable are as follows:

		Labor				Civil				Tax			Total				Total
		BRL				BRL				BRL			BRL				USD
As of December 31, 2015	R$		1,378		R$		1,313		R$		1,238	R$		3,929		U$		1,188
Additions			330				2,620				1,333			4,283				1,295
Payments			(887	)			(1,892	)			—			(2,779	)			(840	)
As of June 30, 2016	R$		821		R$		2,041		R$		2,571	R$		5,433		U$		1,642

		Labor				Civil				Tax			Total				Total
		BRL				BRL				BRL			BRL				USD
As of December 31, 2016	R$		492		R$		1,230		R$		3,455	R$		5,177		U$		1,565
Additions			310				1,315				3,217			4,842				1,464
Payments			(107	)			(1,246	)			—			(1,353	)			(409	)
As of June 30, 2017	R$		695		R$		1,299		R$		6,672	R$		8,666		U$		2,620

Labor claims presented above are related to different matters, such as overtime and salary equalization. Labor lawsuits are not individually significant.

Civil claims are related to the Company´s ordinary course of operations, and generally relate to consumer claims. None of these lawsuits have significant amounts under dispute.

The Company has a tax claim related to challenging Brazilian tax authorities’ interpretation that retailers of imported goods are subject to paying additional sales taxes on manufactured products (“IPI”) and PIS and COFINS on financial income.

(b) Judicial deposits

In some situations, in connection with a legal requirement or presentation of guarantees, judicial deposits are made to secure the continuance of the claims under discussion. These judicial deposits may be required for claims whose likelihood of loss was analyzed by the Company, grounded on the opinion of its legal advisors as a probable, possible or remote loss.

Until the case is settled, the judicial deposits amounts accrues interest at Brazil’s official short-term interest rate (SELIC).

34

NETSHOES (CAYMAN) LIMITED

Notes to the unaudited condensed consolidated financial statements

For the six months ended June 30, 2017

(In thousands of reais and dollars, unless otherwise stated)

		December 31, 2016			June 30, 2017
		BRL			BRL			USD
VAT taxes Brazil (PIS and COFINS)1	R$		67,548	R$		88,008	US$		26,603
PIS and COFINS on financial income			1,139			1,794			542
Tax on manufactured products (IPI)2			2,192			4,214			1,274
Other			938			1,416			428
Total judicial deposits			71,817			95,432			28,847

(1) Contribution tax on gross revenue for social integration program (PIS) and social security financing (COFINS)

The Company is involved in disputes related to:

i) Exclusion of VAT tax (ICMS) from PIS and COFINS calculation basis, which started in November 2014. On March 15, 2017, the Brazilian Federal Supreme decided for the unconstitutionality of considering the inclusion of the VAT tax (ICMS) from PIS and COFINS calculations basis. Based on the new position of Brazilian Federal Supreme, the Company’s lawyers changed the estimate of chance of losing of this legal dispute from possible at December 31, 2016 to remote at June 30, 2017. The Company has not recorded a provision for this proceeding since its lawyers estimate the chance of losing this legal dispute as remote.

The Company is currently waiting to be defined by the court, the procedures to realize this judicial deposit.

ii) A constitutional challenge on the imposition of PIS and COFINS on financial income.

(2) Tax on manufactured products (IPI)

The Company is involved in disputes related to the levy of taxes on manufactured products (IPI) over products it sells and obtained a preliminary injunction allowing it not to pay IPI on imports and sales of goods since it is a trading company.

24. Subsequent events

On July 03, 2017, the Company entered into a financing agreement with Financiadora de Estudos e Projetos – FINEP (public institution linked to the Ministry of Science and Technology), in the amount of R$79,667. The funds from this financing will be part of a financing package aimed at supporting the strategic plan of innovation. The financing has a grace period of 24 months, which covers the period from the agreement signature date and to the date of maturity of the amortization installment, payable in 85 installments, with the first one falling due on July 15, 2019 and the last on July 15, 2026.

***********

35

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized.

Netshoes (Cayman) Limited
By:	/s/ Leonardo Tavares Dib
Name:	Leonardo Tavares Dib
Title:	Chief Financial Officer

Date: August 14, 2017