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Quarterly Company Progress Report December 2016

Welcome to the December Quarterly Company Progress Report. This report covers details already reported to shareholders on the progress that companies have made since our last update. At the end of the report there’s also an update covering the latest happenings at Snowball Effect.

If you missed out on last quarter’s report, you can check it out here.

The information below is provided by the companies themselves, and participation in the report is at each company's discretion. Many companies have chosen to moderate the level of financial / commercial information included below due to sensitivity, with shareholders typically receiving more fulsome detail on company progress. There are a small number of companies not covered in the current report due to timing issues with their own shareholder reports. Updates from these companies will be added as their reports are made available to shareholders.

Invivo

Invivo is one of New Zealand’s fastest-growing wine brands. It produces, markets, and sells a range of wines and spritzers in New Zealand and 17 offshore markets. Invivo raised $2m through Snowball Effect in April 2015 - the first company in New Zealand to raise the full $2m that can be raised by each company from retail investors through the equity crowdfunding regulations.

  • Six monthly wine sales were $4.457m vs. forecasted budgeted sales of $3.574m, an increase of 24.7% vs. budget. We have nearly achieved last years full 12 month sales in just 6 months. Net profit for the period was $217k vs budgeted $198k, an increase of 9.6%. Full year sales are forecasted at over $9m.
  • The first orders of Graham Norton’s Shiraz have been sent to Ireland and Australia for launch this month in both countries. In Ireland, the Shiraz will be sold in Musgrave stores, Ireland’s largest supermarket chain. Woolworths in Australia are launching the Shiraz through their 1100 BWS stores. Our distributor, Lion, will be launching the Shiraz across NZ early next year.
  • Graham Norton’s Own Rosé is now across both NZ and Australia. Last month we entered both Graham Norton’s Own Shiraz and Rosé into the Sydney International Wine Competition (Australia’s largest wine competition). Both wines received gold medals. Over the last few months our 2016 Sauvignon Blanc and Pinot Gris have also received a number of prestigious awards.
  • Invivo partnered the Jono and Ben show this season as the official wine supplier, see Invivo logo in the credits!
  • This month we also released Paul Henry’s Own Pinot Noir. Click here to watch Paul’s blending video. The wine sold out in 3hours! Glengarry wine store  commented it was the most successful wine launch they've ever had.
  • Our first annual meeting held at our Te Kauwhata winery in August received positive feedback from both our shareholders and media. In attendance were 110 shareholders and 145 watching live online.

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Red Witch

Red Witch is a boutique manufacture of world-leading premium analog guitar and bass effects pedals. Red Witch raised $406k through Snowball Effect in June 2015.

  • In October we ran an anniversary sale through our new website. We sold $80,000 of pedals in the 48 hours it was open. This exceeded the amount of total sales through Red Witch’s distribution network in the previous 5 months. This reinforced Red Witch’s desirability as a product, that our sales model needs to be focussed on online sales, and that the product is price sensitive even to our own database.
  • Over the last quarter the board has prepared the company for the possible execution of a direct online sales strategy by commissioning the online shop and increasing online social media activity to build our database.
  • We have spent considerable time and expense to develop the Personal Development Course (PDC) for retailers. Its initial delivery to industry insiders was met by universal approval by course participants. By moving to sell direct, we understand the need to build ‘community’ and engage with our database. The PDC is an ideal vehicle to achieve this. Automation of the PDC is almost complete and we anticipate the final version to be available to dealers late Nov/ Dec. Once this is completed, we will be generating and branding a consumer version.
  • We have put any further capital raising plans on hold until we are in a position to use any additional capital to drive growth and have proven the new business model.

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Renaissance

Renaissance is an award winning New Zealand craft beer producer situated in the heart of Marlborough wine country. Renaissance raised $700k through Snowball Effect in Snowball Effect in August 2014 - the first company in New Zealand to raise capital through equity crowdfunding.

  • It’s that time of year and the brewery is a pretty busy spot, as we would expect. Alex Scott, our new Head Brewer, has settled into his brewing role alongside Andy and the brewery crew are producing some really fantastic beers.
  • Our new national distributors, EuroVintage, have been working with our Brewers and Sales to give our nation-wide launch real impetus. Trade events have been held throughout New Zealand and bottled beer sales are picking up as a result of this and the season (to be merry). Keg sales have proven a little slower to pick up but nevertheless, month on month they continue to track in the right direction.
  • In order to get our sales offering matched with our distributors and to maximise our marketing opportunities we’ve recently launched a few new offerings: Mixed 330ml six packs as samplers, gifts and ease of listing, Empathy four packs (our Gold-medal winning low alcohol beer), and our Fellowship Aotearoa Pale Ale that celebrates the malts and hops of New Zealand.
  • We are now the proud owners of a Gai bottled beer filler. This is an upgrade on our previous filler and has greatly increased our packaging rate. More beer in less time and a very happy bottling crew.
  • Operations remain tight at Renaissance and the change to Eurovintage for NZ distribution caused a lull in June/July this year. We are now seeing the benefits of this relationship but without doubt, it will require constant oversight from Renaissance to ensure targets are met. Also, significant expenditure was undertaken on replacing the bottling line and we are now seeing the benefits in both quality and quantity of the finished product as a direct result.

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WOOP — World On Our Plate

WOOP makes cooking dinner easy and is a world leader in the pre-prepared food-kit delivery space. Founded by Thomas Dietz in 2015 WOOP is answering to the demands of busy professionals in Auckland who are time poor but still looking to cook delicious healthy dinners. WOOP raised $800k through the Snowball Effect in September 2015.

  • We increased our recurring revenue by more than 50% in the last quarter. We have reached an annualised revenue run rate of $1.9 million and continue to deliver a gross margin over 40%.
  • Following on from the first year focusing on our Foodie range, suiting adults, we felt the need to increase our offer to meals suited to families with children aged from 5 to 15 years with a lower price point just under $10/meal. We launched WOOP Classic in early August. This product is proving popular over the short time it has been available.
  • We have continued to drive growth of our offer for single WOOPers. The offer solves the dilemma of singles bouncing between takeaways, eating out or taking a long time to cook for one person. We have a very good retention rate with these customers.
  • We celebrated our 1st year birthday at the Auckland Foodshow. It was a real success, selling 3 times more than last year, demonstrating the increase in brand awareness amongst Aucklanders.
  • We have started a partnership with the Healthy Food Guide (NZ’s biggest food publication with over 400,000 readers in New Zealand). We used 8 of their recipes in our meals and promoted the WOOP Classic to their Auckland readers, continuing to position WOOP as a healthy and delicious option.
  • We are pleased to welcome James Hurman to the WOOP advisory board. James is one of NZ’s most talented advertisers and branding specialists.
  • To accelerate our growth we are launching a capital raise open to wholesale investors. We currently have expressions of interest from a number of investors for this round.

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SOS

SOS is a medically formulated hydration drink mix that’s as effective as an IV drip. SOS raised over $250k through Snowball Effect in January 2016.

  • We had out highest sales month so far in August - 180,000 drinks sold. This was SOS first profitable month as a company. We have already surpassed our total 2015 sales, and are on track to hit beyond this year’s forecasts.
  • Amazon has selected SOS to be one of its 150 exclusive partners of its Dash Button for Amazon Prime members in the USA. The Amazon Dash Button is a Wi-Fi connected device that reorders your favourite product at the press of a button. Amazon has become SOS USA and UK’s prime online retail outlet and we only expect revenue to grow from here.
  • USA sales across Meijer, Kroger, CVS and 7 Eleven continue to grow. We launched 7 Eleven with 2 SKUs in June and sold through all product in 62 stores in the first 6 weeks. We are now using this sales data to push further growth in other US states and other counties with 7 Eleven.
  • National roll out in NZ New World Supermarkets has been approved.
  • Our largest SOS production run is underway for 1,250,000 sticks across all flavours.
  • We are currently in market and in numerous discussions for a $3-5m Series A raise at $12m USD pre-money.

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Squirrel

Squirrel Group is made up of Squirrel Mortgages, Squirrel Money (P2P Lending), and TenanSee (SaaS platform for property investors). Squirrel raised over $3.4m through Snowball Effect in April 2015 - the largest raise through an equity crowdfunding marketplace in New Zealand to date.

  • Following on from our strong loan settlements in the first quarter of the financial year, the second quarter saw a further $290m of loan settlements recorded. This places us over 16% ahead of projections for the year to date, even in what has become a tougher market. With the strong first half we are well on track to arrange in excess of the $1 billion of home loans projected for FY17.
  • Squirrel Mortgage’s success comes from its authentic client-centric culture, which ultimately translates to client referrals. We started measuring client satisfaction last quarter, receiving a 4.6 out of 5 rating for that quarter, with the life to date rating improving to 4.7 out of 5 as at early November.
  • We recently finalised the audit of the Squirrel Group financial statements for the year ended 31 March 2016. Reported revenues for the 2016 financial year were 88% up on the previous year mainly attributable to a 81% increase in loans settled and partially due to a change in the accounting treatment of trail commissions.
  • With Squirrel Money we added a further 100 new loans to the platform in the second quarter.
  • We continue to focus on building trust with the market and proving the technology and we need to do that cost effectively and efficiently. As a result, we expect to undershoot our volume forecast for Squirrel Money for 2017 financial year.
  • With the ‘auto-invest’ functionality, Android and IOS investor mobile apps and the Secondary Market all launched for Squirrel Money in the second quarter of the financial year, we’ve largely delivered the proposition on the investor side of the platform. The focus now is on making our borrower process frictionless and on improving our credit decision engine and credit risk management before we start to scale.
  • Notably we have not lost one cent of investor interest or principle since our launch in November 2015. Every investor repayment has been on time with the average annual investor return still tracking at around 8.6%.

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Veriphi

Veriphi is a New Zealand company that has worked to develop a highly innovative laser-based analyser to verify intravenous drugs and alert clinicians before administration to prevent medication error in hospitals. Veriphi raised over $700k through Snowball Effect in May 2016.

  • Following extensive testing and commissioning we are about to commence an intensive period of drug testing, to build training data in preparation for blind drug tests at Auckland City Hospital. As we collect the training data, work will start on a building a second analyser, exactly the same as the first, to increase our testing capacity. Over the summer we will have three people committed full time to just testing and analysis.
  • Work on the consumable also progresses well. Testing on lower cost window material, the major consumable cost component looks very promising. Data from the new consumable design conforms more closely to the mathematical models developed by Dr Ray Simpkin, which will enhance discrimination capability.
  • The US FDA have formally requested a teleconference with Veriphi on December 14 to discuss our submission. We are excited about the opportunity to engage with the FDA as the issue of medication safety is a highly sensitive one for the regulatory body.
  • We have been informed by the USPTO office, that our fourth US patent application has been allowed. This is an exciting development as this US patent and the one previously approved, cover fundamental aspects of our system. We will continue to follow an aggressive IP strategy to maximise our protection as we move closer to commercialisation.
  • Following expressions of interest from existing shareholders, we raised a further $240k through Snowball Effect in November.

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Punakaiki Fund

Punakaiki Fund is one of the most active venture capital investors in New Zealand, with investments in 14 high-growth companies across New Zealand. Punakaiki Fund raised $2m through Snowball Effect in July 2015, and over $400k further from Snowball Effect wholesale investors in January 2016.

  • It was a busy quarter, with the Annual Report published, the AGM in Auckland and investor meetings throughout the country. It was good to meet so many of our shareholders, and great to see the resounding vote of confidence in our newest director – Mandy Simpson, who is already proving her worth on the Board.
  • We have made four five investments in the first second half of our financial the year – Agtract, Linewize, Populate, New Zealand Artesian Water (covered in the last Company Update) and a small placement with Weirdly. We also received a dividend of $64,063 from Onceit – our third so far and very pleasing.
  • Punakaiki Fund Limited’s Product Disclosure Statement has been issued, and investment is currently open to the public through Snowball Effect offer page.
  • The September-end Investor Net Asset Value (“iNAV”) per share was $18.30, up from $17.28 per share at the end of June. The primary reasons for the uplift were investment valuation increases after our comprehensive valuation exercise for the PDS, including marking company values in-line with a rebounding market.

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Andrea Moore

Andrea Moore is an innovative and profitable fashion business with a unique sense of style and colour that clients love. Andrea Moore raised $750k through Snowball Effect in August 2016.

  • A new AM store has been secured on Huntsmere Road, Takapuna, which will open December 1. The location is strategically located near similar high-end brands, in a neighbourhood that is growing in popularity for our target demographic.
  • We are on track to achieve our annual profit target through careful cost management. Our EBITDA is positive at $67,661 and currently ahead of budget ($21,338).
  • Our footwear and eyewear categories continue to develop and grow quickly. We’re showing our collections to major Australian department stores this month with the goal of securing wholesale accounts.
  • Our new I AM: Spring/Summer currently stocked in 30 Farmers stores. There has been a good initial consumer response to this range, with royalties on budget.
  • We received a fantastic critical response following Fashion Week. Our I AM video posted on youtube viewed 26,500 times.
  • A new web site has been designed which will suit mobile and tablet devices which are not currently supported by our existing web site.
  • We’ve hired new store managers for our Takapuna and Ponsonby stores. We’re currently in the process of hiring a new National Retail Manager, and expect to make an announcement early in the new year.

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Breathe Easy

Breathe Easy is developing Citramel™, an inhaled medicine for the treatment of cystic fibrosis (CF) a chronic genetic illness affecting the lungs and digestive systems of approximately 75,000 children and adults worldwide. Breathe Easy raised over $600k through Snowball Effect in May 2015.

  • Breathe Easy is currently undertaking a capital raise to complete the Phase IIa trial across the two main centre sites in Christchurch and Auckland as well as including two smaller sites in Hamilton and Dunedin. Having four clinical trial sites across the country widens the recruiting pool of CF subjects and provides greater independence of the trial results.
  • The company is wanting to offer an opt-in extension to those CF subjects who wish to continue Citramel dosing for a period of up to six months after the trial end. The extension of the trial will provide longitudinal data to inform future trial programmes.
  • Extra laboratory testing and small variable dose tolerability studies are currently being planned. To do this, regulatory approval will soon be sought and extra batch runs of Citramel will be undertaken.

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Snowball Effect

Snowball Effect is an online investment marketplace. Our mission is to simplify investment into high growth Kiwi companies. We’ve been funded by existing shareholders and cash flow to date to support the continued growth and development of the equity capital market for early-mid stage New Zealand growth businesses.

  • Over $21m has been raised through the Snowball Effect platform to date - a mix of retail, wholesale, public, and private offers.
  • After a lean second quarter, a wider range of services have helped improve revenue over the last few months.
  • Tauranga-based Balex Marine, creators of the world-first Automatic Boat Loader, raised over $300k in October to push expansion into offshore markets.
  • In November, medtech company Veriphi completed a top-up round following investor demand. Veriphi raised over $200k through both existing shareholders and new investors.
  • There’s been a significant increase in private wholesale investor offers facilitated by Snowball Effect, with opportunities ranging from tech hardware to primary resources. We are currently have 7 mandates.
  • We’re about to launch an "Investor Profile" feature for Snowball members, which helps to provide companies with useful information on their new shareholders, and also provides the team at Snowball with useful information on the type of opportunities investors would like to see
  • We’ve spent the last few months working closely with a number of companies on shareholder engagement in an effort to improve the quality of shareholder reporting. These services are provided for a fee and have received good feedback to date.
  • Our nominee services for companies raising capital through Snowball Effect has been launched. For various reasons there are companies looking to simplify their shareholding structure when raising capital, and this new service provides an additional option for companies looking for a professionally managed nominee structure. Balex Marine was the first company to utilise this service, with Roholm being the second.
  • This month our new senior developer, Michelle Raymundo, will be joining the Snowball Effect team. Michelle is a full-stack developer with experience working for Yahoo and a range of other agency and client-side roles.
  • We are trialling including a 'talent' section in our emails. This provides our readers the opportunity to find out about new, senior roles in young New Zealand growth companies.
  • There are no firm capital raising plans at this stage.

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