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Quarterly Company Progress Report September 2016

Welcome to the September Quarterly Company Progress Report. This report covers details already reported to shareholders on the progress that companies have made since our last update. As always, there’s also an update covering what we’ve been up to 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, 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.

  • Sales continue to be strong and are ahead of budget, with 65% projected revenue growth this financial year to $9.2m ($5.5m last year) and a projected EBITDA this financial year to $1.1m ($357k last year). Much of the sales growth is attributable to success in Australia, new distribution in NZ, along with UK and Ireland, particularly the Graham Norton brand Invivo produces (Graham Norton is also a shareholder).
  • Secured nationwide distribution with Woolworths (BWS 1268 stores) in Australia. Invivo has also partnered with Lion in New Zealand for distribution of all its brands. Awarded contract to supply Qantas.
  • Secured our new home at the historic Te Kauwhata winery including our own bottling line, we are saving money, with projected over savings in 16/17FY of over $400k.
  • In August we launched our 2016 Graham Norton campaign. You can watch the video of our wine blending with Graham in Cork, Ireland, here: Watch the video
  • The campaign has been covered in media in UK, Ireland, Australia and New Zealand. Marie Claire Magazine recently called our partnership with Graham “One of the most successful celebrity collaborations ever”.
  • This month we launched our new Gisborne Chardonnay and will be launching Graham Norton’s Own Rosé for Summer.

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Heyrex

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.

  • The sales pipeline for both HeyrexVet and the Torus range continues to grow. This includes new sales to universities for research, veterinary specialists and pet trainers. Significant sales of the Torus watering solution range are also being achieved.
  • Massey University has chosen HeyrexVet service to commence the ongoing monitoring of its fowls. Massey’s ongoing use of HeyrexVet for multiple species along with the use of HeyrexVet in universities in the USA and Australia (including for monitoring tigers at zoos), provides significant endorsement of the quality of our services.
  • In the 6-months to March 2017, our key objectives are to register a minimum of 20 new veterinary hospitals to the HeyrexVet service, continue to provide commercial services to researchers and universities for R&D projects, and sell a minimum of 50,000 Torus bowls for the financial year to March 2017.
  • Heyrex earned a nomination in the Rising Star category for the 2016 Deloitte Fast 50 business awards.
  • Heyrex products are now sold in 14 countries. Heyrex is continuing to raise capital to enable it to supply and support the growing opportunity pipeline in the global market.

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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.

  • Funding from May’s capital raise has so far gone into expanding our in-house technical team from one fulltime employee to five (two full time, three part time) and providing them with the resources to accelerate the development project, moving away from our historical reliance on outside contractors.
  • Following a successful meeting with senior hospital staff on September 1 2016, an agreement was reached allowing Veriphi to conduct trials at Auckland City Hospital (ACH) and a memorandum of understanding (MOU) is being put in place to this effect. The MOU will cover the research plan but also create the opportunity for a commercial relationship beyond a successful trial. ACH are very supportive of Veriphi and are enthusiastic about the upcoming trials.
  • Veriphi’s first submission to the US FDA, a Qsub, formal request for guidance on a 510k FDA application, was sent off to the FDA earlier this month.
  • Initial tests on a new prototype consumable and test cell show good repeatability. Further, initial test results on recently collected data using our new concentration algorithm software have been very encouraging. Reduction in testing time is also on track.

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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.

  • It has been an extremely busy year, especially on the recruitment front. We have a new marketing manager, a front-end developer, a web designer, a new CFO, a new Client Services team and have increased our mortgage advisor numbers.
  • Despite Auckland house sales lowering in volume, our mortgage volumes have steadily increased. We're on track to settle well over the $1 billion which we forecasted in Snowball Effect IM for FY17.
  • Clients have been rating Squirrel Mortgages on Shopper Approved since we introduced a survey into our process and we currently rate at 4.6 out of 5.
  • Squirrel Money has been developing nicely and has released three New Zealand firsts within our platform which our investors are excited about: the Secondary Market, Auto-invest and an IOS and Android mobile app.

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Aeronavics

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.

  • After reaching a difficult point in our growth plan last quarter, we were forced to reduce cost and restructure our company. The saying goes “what doesn’t kill you, makes you stronger” – and we believe now this is true for us also. We reduced our overheads and now have complete focus on finalising our new product range, which is on track for completion early November. We have learned a lot throughout this last period and intend to apply these lessons moving forward.
  • We contacted Soda Inc., a business incubator and business growth advisor in Hamilton. We met Soda in 2013 when we were offered their LIFT program as part of winning the Fieldays Innovation Den that year. We have always appreciated their support and expertise and asked them if they could offer us guidance in helping us back on our feet and preparing ourselves for further growth. With their support we are composing an advisory team with experts in relevant areas to our company, as well as redefining our strategy. We are grateful for their help.
  • We came to an agreement with some of our current shareholders for providing additional bridging and growth capital. Our focus in the next 6 months, besides completing our new product line and progressing marketing & sales, is on securing development support from industry collaborations, and seeking further investment and/or acquisition partners overseas.

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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.

  • Annualised sales have reached $1m USD. Sales have doubled since last year from the same stores, repeat orders are high and constantly selling through, and issues now come from selling out and maintaining forward order stock.
  • Meijer now have all four flavour products on the shelf, with 220 Stores across Michigan and central USA.
  • We are expanding to a further 100 Kroger stores through Texas with all flavours. SOS currently leading against key brands Berocca and EmerGenC in Texas.
  • Selling as one of the top 10% of all brands on shelf in CVS stores throughout Hawaii.
  • SOS was represented in many sports at the Rio Olympics: 23 Track & Field athletes, 15 Sailors, Triathlon, Swimming and Rugby teams to name but a few. Notable wins from SOS ambassadors Peter Burling and Blair Tuke.
  • SOS have built a great foundation and awareness within athletics. Partnerships with US Nike and US New Balance are fuelling success.
  • Independent research published by Coventry University, UK in May proved the effectiveness of SOS in returning the body to a rehydrated state post-use compared to electrolyte tablets in a double cross over blind study (vs market leader vs placebo). SOS will continue to push research.

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Carbonscape

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.

  • Oliver Foster has been appointed as CarbonScape’s CEO. Oliver brings 17 years of experience in the petroleum, resources and corporate finance industries. He has significant experience in analyzing, marketing and raising equity for various ASX energy companies.
  • Peter Colenbrander has also been appointed as Operations Controller, with particular responsibility for the new continuous production pilot plant.
  • CarbonScape is currently setting up a 1 million-dollar pilot “lab” plant to produce 450 tonnes a year of activated carbon. The R&D related to this project is partially funded by Callaghan Innovation with a $390,000 grant. The pilot plant design and layout is now complete, procurement and fabrication is well underway and plant construction will begin shortly. The plant will be commissioned by Q1 2017.
  • The lab plant currently being commissioned by CarbonScape is capable of producing 150 tonnes a year of graphite. Lab-scale experiments have proven that CarbonScape graphite has high electrical conductivity, high product purity, replicable and reliable production, and other qualities that make it superior to synthetic graphite produced by the petroleum industry.
  • CarbonScape’s core “Method & Apparatus” application has been allowed by the USPTO. The USA patent is an extremely valuable reference point for other countries as they in turn consider the granting of our CarbonScape patent applications.

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Motim

Motim Technologies is a creative software company that develops and delivers innovative mobile marketing technology products and services for leading global brands. Motim raised over $550k through Snowball Effect in November 2015.

  • Motim's recent client work has included the Hollywood red-carpet premiere experience of “Ghostbusters” for Sony, and a new virtual reality solution for use in trade - shows in Europe.
  • The company continues to enhance its technology portfolio and has already submitted four provisional patents in 2016 ( related primarily to key enabling technologies for its new SaaS platform ).
  • With its engagements focused at the C-Suite level, discussions in North America have progressed with a number of key FMCG and Restaurant brands, both in terms of ongoing marketing innovation partnerships and the utilisation of Motim’s SaaS platform. As well as the new work currently in production for US customers, Motim is also seeing ongoing growth in the EMEA region, with a mix of repeat and new client business.
  • Motim anticipates confirming a number of key US and NZ partnerships in the coming months and is on track with its stated plan to raise capital in the US once key milestones have been achieved.

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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.

  • A new Mad Mex distributor has been appointed, along with changes to several of our suppliers. These changes have resulted in significant savings.
  • New Habitual Fix stores have been opened in Greenlane, Auckland and Hamilton. Another new franchise is expected to be executed within the next week in Palmerston North.
  • An international franchise brokerage firm engaged on retainer to represent Mad Group exclusively in South East Asia and non-exclusively world wide.
  • A Middle East broker has been appointed to represent Mad Group non-exclusively in the Middle East who has recently met with ~10 prospective parties across the region.
  • We met with a prospective JV partner in New York City last month for Habitual Fix for the US market.

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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 had a very full on 1st quarter (April to June), consolidating our business foundations, reaching an annualised revenue run rate of $1.3 million and maintaining a gross margin over 40%.
  • We have successfully launched a new offer for singles (“Table for One”), solving the dilemma of cooking for one. The first two meals are an individual serve and the third meal of the week is a double serve, allowing for a delicious lunch box at the office or to invite a friend over for a WOOP date.
  • Following the analysis of customer demographics and needs we have developed a box suited to families with children aged from 5 to 15 years with a lower price point (cost per meal under $10). It features healthy and delicious family meals that are ready in less than 25 minutes. Following customer interviews, focus groups and several iterations we have arrived to a good mix of recipes and a price point that is accessible to a wider demographic.
  • We are pleased to announce that Franck Ridon (WOOP shareholder) has joined the WOOP board. He has a strong set of skills, a real passion for recurring revenue business models and the right business experience to support this early stage fast growth.

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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.

  • Following the success of Phase I, the Phase IIa trial testing Citramel on up to 24 CF subjects in Auckland and Christchurch is now underway.
  • To help progress this initiative, Breathe Easy is currently raising $1m in funding from wholesale investors.
  • Funds raised will be used to ensure sufficient capital to complete the trial across the two sites as well as offering an opt-in extension to those CF subjects who may wish to continue after the trial end.  Extra laboratory testing is also planned. Having two trial sites widens the recruiting pool of CF subjects and provides greater independence of the trial results. It also brings another group of specialised medical professionals into the trial programme. These additions however, increase the overall cost of the trial.
  • In July we were honoured to host the Governor-General, Sir Jerry Mateparae, at the Breathe Easy laboratory.

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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.

  • The fund has now invested $11.9m into 18 companies, in 30 tranches. Since March 2016, $1.15m has been invested into 4 new companies.
  • Four of the portfolio companies were showing annualised revenues for the fourth quarter of FY16 of over $10 million, and over half the companies were at an annualised rate of over $1 million.
  • Placed a new investment in June with Linewize, which provides a SaaS product that enables teachers and schools to gain visibility and control over Internet use in the classroom.
  • Also in June investment was placed with New Zealand Artesian Water, a company that bottles and exports water under both its own E’stel brand (bottled) and third party brands (boxed).
  • In July, a new investment was placed in Agtract. Agtract provides a SaaS product for agricultural contractors that assists with tracking jobs and invoicing.
  • The next capital raise will commence shortly, with the offer being available to New Zealand retail and wholesale investors, and Australian wholesale investors.

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Mahana

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.

  • The last couple of months have seen a successful festival circuit for Mahana, having its Australian Premiere at the Sydney Film Festival, and then continuing on to the Melbourne International Film Festival (MIFF). Hundreds of films are included in the MIFF Programme, and Mahana was well received by Australian audiences, being voted one of the MIFF 2016 Top 10 Feature Films as voted by the audience!
  • In early September, Mahana had its North American Premiere at the Toronto International Film Festival. Lee Tamahori was in attendance, along with the New Zealand Film Commission, and the film was well received by a sell-out audience.
  • Mahana’s composers Mahuia Bridgman-Cooper and Tama Waipara have been nominated for APRA Silver Scrolls Best Original Music in a Feature Film! This is an exciting announcement and we are proud to celebrate this nomination with them. Congratulations to fellow nominees from Hunt for the Wilderpeople and The Art of Recovery.

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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 $20m has been raised through the Snowball Effect platform to date - a mix of retail, wholesale, public, and private offers.
  • F17 has seen a steady improvement in revenue, with a small cash surplus. This is partially due to this year's focus on diversification of revenue streams, including capital raising advice and private deals for strategic and wholesale investors.
  • Andrea Moore, an innovative and profitable NZ fashion business, raised its maximum target of $750k in August. This was the first fashion business in NZ to successfully raise capital through an equity crowdfunding marketplace.
  • August marked two years since Snowball Effect launch. During this time we've seen some interesting trends emerging, including the increase in average investment from ~$4,200 to ~$13,800, and reinvestment rate increase from 20% to over 27%. These statistics are ones we monitor closely as we continue to build a database of educated, high quality investors. You can read more about this here.
  • In September, NXT-listed G3 Group launched an offer to the public through Snowball Effect. G3 is the first publicly listed company to raise capital through an equity crowdfunding marketplace in NZ. A number of listed companies have also expressed interest in using Snowball Effect as an efficient method for conducting rights issues.
  • Peter Thomson joined the Snowball Effect Advisory Group. Peter is the Director of Strategy at design and innovation firm Richards Partners, and has over a decade of experience in branding, marketing and product development. He was formerly the head of digital marketing at equity crowdfunding platform SeedInvest in New York and the Chief Marketing Officer at equity crowdfunding platform Seedrs in London.
  • During the last quarter, Snowball Effect has begun to offer an advisory service for companies, which involves development of a long term fundraising strategy and preparation of a high quality information memorandum. The first company to complete the program is currently raising capital from a mix of strategic and private investors.
  • We have seen increased inquiry from companies wanting to raise capital through a nominee company. Snowball Effect is able to provide a cost effective nominee service for companies that raise capital in this way. The first clients utilising this service will be launching offers over the coming month.
  • Cowan Finch joined the team in September as Head of Private Capital. Cowan has recently returned to New Zealand from time at a boutique capital raising firm in Australia and, prior to that, establishing an Indonesian-based business focused on funding energy efficiency projects in the region. There has been increased demand for private deals in our marketplace over the last 12 months. Cowan will be leading this development, as well as supporting companies who want to prepare themselves for capital raising, either through Snowball Effect, or from within the wider ecosystem. Feel free to give Cowan a call on 027 489 8947 or email him at [email protected]
  • This month Snowball Effect was announced as a finalist for the NZ Innovation Awards under the Financial and Professional Services and Emerging New Zealand Innovator categories.

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