Quarterly Company Progress Report March 2016

Welcome to the Quarterly Company Progress Report. This report covers details already reported to shareholders on the progress that companies have made since our last update. There’s also an update on how everything is tracking at Snowball Effect. It’s been an eventful few months for everyone involved in the report.

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. However encouraging excellent shareholder communication remains a work in progress for the team at Snowball Effect. We aim to work more closely with companies over time to the improve the quality of reporting.

You’ll notice some companies are not included in this report. This is largely due to timing issues with their end of year reports (e.g., some are still undergoing audit). We’ll include updates for these companies after their reports have been made available to their shareholders.


Invivo is one of New Zealand’s fastest-growing wine brands. It produces, markets, and sells a range of wines and spritzers, mostly into 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.

  • Full 12 month wine sales have increased by 58% over the prior year, with export sales increasing 98%. Gross margin increased 199% in dollar value over the prior year, while operating expenses fell 11% from the prior year (excluding FX gains and losses).
  • March 2016 was a record month for Invivo sales, coming in at over $1million. The start to the 2016 financial year has been positive with April sales 122% ahead of the prior year, and May showing an increase of over 300% on 2015!
  • Things have changed rapidly at our winery in Te Kauwhata since we moved in a couple of months ago. For starters, we leapt right into the 2016 harvest and vintage and the place is now brimming with wine. Bottling and freighting costs have reduced significantly following the move. Plans for further expansion are also underway.
  • Graham Norton's Sauvignon Blanc produced by Invivo has hit the shores of Australia, available nationwide at over 1,100 BWS stores (so tell your Aussie mates!). We have kicked off a nationwide 15 second TV ad campaign in Australia. Watch the video
  • We’ve made a number of new appointments, including a new Winemaker and Production Manager, Financial Controller and Production Planning and Global Logistics Manager.
  • This month, Invivo have just signed a nationwide distribution partnership with Lion in New Zealand. Lion NZ Managing Director Rory Glass says, “Invivo is a great Kiwi success story, showing impressive growth since its launch in 2008 through a combination of innovative marketing, some high profile brand ambassadors, and most importantly: great wine. We’re excited to partner with Invivo to distribute its award-winning wines throughout New Zealand.”

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Mahana is a 2016 New Zealand drama film from the creators of Once Were Warriors and based on Witi Ihimaera's Bulibasha. Mahana raised over $450k through Snowball Effect in October 2014.

  • Following on from the World and NZ premieres in February, Mahana has had positive critical responses both locally and abroad. The film screened at a great prime time slot at the Berlinale Film Festival, and the audience gave the film a standing ovation.
  • Mahana achieved over $1.3m at the NZ box office, which is slightly below the New Zealand distributor’s original forecasts of $1.5m. Our focus is now on international sales - the success of these will determine returns to investors.
  • Mahana has been selected for prime slots at the Sydney Film Festival (8th-19th June) to gauge the local audience reaction to plan an Australian theatrical release.
  • As of March, international sales have been made to Denmark, Central America and Portugal.

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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.

  • Renaissance’s audited accounts have taken some time to produce, so shareholders have been provided an interim update in the last quarter ahead of our annual report. Snowball Effect will refresh this update once shareholders have received their full report.
  • Renaissance has appointed Eurovintage as national distributor in New Zealand from 1st July. Eurovintage are a tremendously respected distributor of premium wines, liquors, spirits and beers. They have extensive coverage nationwide and a portfolio second to none.
  • Sam Hobson has joined the team as CEO, while Brian Thiel (previous CEO) has moved into a more hands on role at the brewery. Sam comes from outside the brewing industry and brings strong general management, planning and people management skills to the position.
  • We have a new Head Brewer by the name of Alex Scott. Andy Deuchars, as Director of Brewing, has been bringing Alex up to speed with the nuances of the styles we make.
  • Gareth Lyne has reluctantly, for personal reasons, relinquished his role as both Chairman and Director of the company after several years of tremendous contribution. David Pearce has stepped in as Chairman and will retain this position until after the AGM. We’re now looking for a replacement Director to come from the Snowball Effect Investors.

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Heyrex is a pioneering New Zealand data and technology company that has commercialised a wearable technology for the global veterinary industry capable of managing diet, exercise, monitoring treatment and identifying the potential early signs of illness. Heyrex raised over $800k through Snowball Effect in March 2016.

  • HeyrexVet has been adopted by new veterinarians and researchers in the USA including leading Stem Cell professionals and university vet schools. This will result in new white papers and case studies that will further enhance the credibility of the HeyrexVet service. Massey University has also commenced permanent monitoring of its canine colony using HeyrexVet.
  • The business strategy for the expansion of the HeyrexVet services to large animals is well underway. The strategy intends that product development will commence in Q3 of 2016 with equine and bovine data services that will focus on productivity and performance.
  • HeyrexVet continues to grow its reputation as a reliable, high quality data analysis tool for vets and researchers.
  • The Torus range of watering solutions is now being distributed in 14 countries, the latest partnership having been established in Hong Kong and China. In addition, Torus has also been selected to be sold on QVC, the largest shopping channel in the USA before potentially being expanded to QVC UK and Japan. This would result in exposure to up to 350 million target customers.
  • We are now seeking pre-orders of the Torus animal health supplements that will be dispensed via the Torus watering solution and add a new annuity revenue stream to the Heyrex business.
  • The Torus range is collecting global innovation awards in the pet sector almost monthly and sales are a reflection of its growing reputation.

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CarbonScape is an award winning cleantech company with technology that converts waste biomass into valuable Carbon products. CarbonScape raised over $750k through Snowball Effect in December 2014.

  • China’s economic slowdown and surplus steel making capacity has led to a decline in prices for coke and char products and challenging market conditions for steel-makers. CarbonScape has therefore refocused its pilot plant development to the production of higher value products: both renewable Activated Carbon and Graphite.
  • We have achieved production of  renewable Graphite  and Graphene at lab scale, and have enhanced our first stage hydrothermal and second stage carbon activation process through trialing.
  • We are pleased to report that  Callaghan Innovation has approved a $970,000 project for  CarbonScape to optimise Activated Carbon for WaterCare Services Ltd to condition Auckland’s water.
  • The core patent on the method and apparatus for processing biomass lodged globally has now been granted in New Zealand, Australia and South Africa, with numerous other jurisdictions giving it active consideration. We are also pleased to report the completion and filing of a new renewable Graphite patent.
  • We have finalised the design of the 450 ton/year continuous production pilot plant and secured its space adjacent to the CarbonScape offices. Commissioning is anticipated in Q4 2016.
  • We’ve also hired key staff: A Business Development and Commercial Manager, Specialist Microwave Engineer, Automation and Control Engineer and  Mechanical Engineer.
  • Dr Suki Harding of Auckland has joined the Board of CarbonScape Ltd as an Independent Director.
  • With Snowball Effect's assistance CarbonScape recently completed a new funding round raising in excess of $1m from 60 new and existing shareholders.

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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.

  • Raised $2.24 million in our December 2015 / January 2016 placement to wholesale investors, making a total of $12.83 raised to date, including the $2 million from the June 2015 Snowball offer.
  • Placed a new investment with HR hiring SaaS start-up Populate, with three other investments in contract phase.
  • Revalued our assets to $18.2 million through a comprehensive financial year-end valuation process which was assessed, amended and signed-off by our Board and is now with our auditors, Ernst & Young.
  • If we raised capital based on this 31 March 2016 valuation, the price would be $17.62 per share, which is 22% above the $14.50/share in the June 2015 Snowball offer.
  • Seen an equity weighted average revenue growth rate from portfolio companies of 60% over the last year, providing more overall confidence that the underlying portfolio is growing in value.
  • Planning underway for our next capital raising, scheduled for the September quarter.
  • Attended the Hi-Tech awards with two tables of founders, including finalists and former winners Vend and Timely.

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Aeronavics designs and manufactures high quality industrial aerial robots (drones), and has been an industry innovator since 2010 with clients such as NASA, Dreamworks, and Disney. Aeronavics raised $1.5m through Snowball Effect in February 2014.

  • Aeronavics is at a difficult point in its growth plan. The development of our new product range and subsequently increased sales / cash flow has been slower than expected, and as a result the company has had to reduce staff costs which will impact growth. We continue our efforts in raising new growth capital.
  • Financial year 2016 ended with sales at $1.55M. While this is nearly double our FY15 revenue, it remains below forecasts. Due to delayed release of our new product range, our channel development has been slower than anticipated in our chosen markets. However, the forward sales pipeline remains strong and channel expansion preparation has been progressed, ready to be executed as soon as all collateral of our new products is completed and demonstration units are available.
  • The Chairman Martin Riegel has resigned from the board. Rob and Linda (founding directors) remain as directors.
  • Our new ICON craft is shaping up to be a major asset with its heavy lift and long flight time capability. The product and technological roadmap has seen a state-of-the-art ground station, NAVI and ICON become commercially viable, with the new SkyJib craft due to be ready soon.
  • The first quarter of FY17 commenced with Aeronavics exhibiting at multiple tradeshows across the USA predominantly. The lead database has a large volume of potential sales and channel partners loaded. The sales team are working hard to ensure their enquiry response and conversion ratio improve significantly to achieve the levels of sales required to support the ambitions of the team and shareholders.

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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.

  • SOS is now an approved product by the NHS available for both outpatient and inpatient prescription across all hospitals and medical centres in the UK. This process has taken eighteen months to complete and underlines the medical and clinical efficacy of the product.
  • SOS has now been approved as a Holland and Barrett product. Holland Barrett has 1000 stores across the UK and a small footprint in Europe. We will start with Holland Barrett online and grow to store presence in the coming months on a success basis.
  • We have been approved as a 7/11 convenience product in the US. The product has now begun to sell quickly through Hawaii 7/11 stores.
  • We have three new thirst Managers across the retail States in the USA to support growth of the new stores.
  • Our new Coconut flavour is hitting the shelves around the world in the coming month.

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Mad Group

Mad Group is one of New Zealand’s fastest growing companies, with two extremely passionate brands under one shelter: Mad Mex and Habitual Fix. Mad Group raised $500k through a Snowball Effect Private offer in June 2015.

  • It has been a mixed few months at Habitual Fix. On one hand, we’ve had several poor performing stores close with another couple coming to the end of their lease, while on the other hand, we’ve secured 2 additional new stores (Greenlane and Hamilton CBD) that will begin construction in the coming weeks. We expect both of these new sites to perform well.
  • Our latest Mad Mex store at Sylvia Park food court (Auckland) opened late May and has achieved a pleasing first couple of weeks.  This takes our Mad Mex store number to 10 – in just over 3 years since launching in New Zealand. We are cautiously optimistic that this location will be one of our best performing stores due to the location and the strength of this mall.
  • Additional time and energy will be spent over the coming year on international opportunities. We are in the process of appointing an international franchise broker from July to market Habitual Fix internationally and represent us at various major franchise expos around the world.
  • We have contracted a market research company to undertake a major research project for both brands to help us understand our customers and market position better. This will enable us to identify opportunities for operational and menu improvements and will form the basis of our new marketing strategy which we expect to implement from August.
  • At Mad Group we are continuing to investigate a number of new opportunities and remain committed to our vision of 100 stores across 5 brands in 5 years. While the past year has presented a number of challenges, we remain confident in the long-term outlook for the business and we are making progress towards our strategic goals.

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Urban Sherpa

UrbanSherpa is an innovative technology that allows Auckland customers to get practically anything picked up, dropped off or purchased within an hour. Urban Sherpa raised over $300k through Snowball Effect in November 2015.

  • The UrbanSherpa user community has continued to increase rapidly over the last quarter and we have now hit the 8,000 registered user mark (a month ahead of target). Trip volume is also showing significant growth, with weekly trip volume expected to exceed 1,000 by the end of July.
  • Revenue growth for the 2015/16 financial year was slower than projected, in part reflecting the decision to delay service extension into Wellington in favour of a lower-risk approach with a key distribution partner, planned for later this year. The EBITDA loss for the year was lower than projected due to a tight focus on cost control.
  • Merchant partnerships continue to be a focus for the business, and we have seen a significant number of retailers sign up over the past few months. We now service over 60 restaurants in the Auckland CBD alone, and are on-boarding new retailers at a rate of 10+ per week.
  • Our partnership with Menulog (part of the global JUSTEAT Group) has been very successful, and we anticipate continuing to extend the partnership into new territories beyond Auckland later in the year.
  • The new UrbanSherpa mobile app is expected to hit app stores in June. This will help us service users better and provide another channel for customer engagement.
  • We have recruited further operations resource and our on-demand Sherpa fleet now stands at 20.
  • Following on from our successful Snowball Effect raise last year, we are now planning a new investment round to raise capital to support our growth.

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Snowball Effect

Snowball Effect is an online marketplace for financial products. 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 business.

  • Over $19m has been raised through the Snowball Effect platform to date - a mix of retail, wholesale, public, and private offers.
  • Preparation of year end accounts and financial audit is currently being undertaken by Deloitte and KPMG. This report will be updated with the results once this process is complete.
  • Revenue for FY16 was an improvement to our forecast, while EBITDA was ahead of budget - the result being a small cash loss for the business in FY16.
  • F17 budget has been approved by the board, with targets of revenue growth of ~65%, and a small cash profit for the year.
  • We're focussed on developing our offering so that Snowball Effect can serve a broader range of companies seeking growth capital.
  • We're also focussed on building a deep, loyal audience of investors. We now have over 10,000 investors that we communicate with via email (including over 700 wholesale investors). ~1900 of this group have made at least 1 investment to date.
  • Squirrel, a high growth financial services business operating mortgage broking and a P2P lending service, raised over $3.4m in April, marking the largest raise in New Zealand to date through an online capital raising marketplace.
  • In May, medtech company Veriphi raised over $700k for commercial trials of its intravenous drug verification system. Along with cystic fibrosis drug development company Breathe Easy and its offer last year, Veriphi’s offer demonstrates that our marketplace is proving itself as an effective capital raising channel for medical technology companies - an industry that has traditionally struggled to raise capital in New Zealand.
  • The Snowball Private marketplace has been busy over the last two months, with raises ranging between $85k (facilitating a small rights issue) and $830k. There has been increased interest from companies seeking to utilise private offers to discreetly raise from their own network or Snowball Effect wholesale investors.
  • Snowball Effect has partnered with Lightning Lab to provide a live stream of its Demo Day events in both Wellington and Auckland. Snowball Effect has developed a web app which allows investors to submit online expressions of interest while watching the live stream. The aim is to provide a simple online channel to capture, nurture, and convert investor interest that is generated at this type of event.
  • A "Lead Investor Group" has been developed over the past 2 months. This group is a collection of wholesale investors that are interested in getting an early look at investment opportunities and potentially leading public offers made through Snowball Effect.
  • Ben Tan, Snowball Effect’s lead developer, left the team at the end of May to pursue a new role for the Vodafone Xone Accelerator in Christchurch. Snowball Effect is currently hiring a new lead developer.
  • There are no firm capital raising plans at this point.

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