Disclosure statement

This disclosure statement is made as at 14 December 2016 by The Snowball Effect Limited (company number 3564791) Snowball Effect, C/- Wynn Williams, Level 11, 41 Shortland Street, Auckland 1010, New Zealand (Snowball Effect or we) licensed and regulated by the Financial Markets Authority (the FMA) to any person (Investor or you) who wishes to consider subscribing for shares in a company (the Company) in response to an offer (Retail Offer) made by a Company in reliance on our market services licence via the website located at snowballeffect.co.nz (Website).

Equity crowdfunding is risky

Companies using this facility include new or rapidly growing ventures. Investment in these types of businesses is very speculative and carries high risks. You may lose your entire investment, and must be in a position to bear this risk without undue hardship. The law normally requires people who offer financial products to give information to investors before they invest. This requires those offering financial products to have disclosed information that is important for investors to make an informed decision. The usual rules do not apply to offers by issuers using this facility. As a result, You may not receive a complete and balanced set of information. You will also have fewer other legal protections for this investment. Ask questions, read all information given carefully, and seek independent financial advice before committing yourself.

Snowball Effect's service

Snowball Effect provides services relating to the arranging of the investment by the Investor in shares in the Company (Investment) as described in more detail in the Investor Agreement.

Any capitalised but undefined terms in this Disclosure Statement are as defined in the Investor Agreement.

Snowball Effect is licensed by the FMA as a "licensed intermediary" holding a market services license pursuant to the Financial Markets Conduct Act 2013, enabling it to provide the primary service of an equity crowdfunding provider. In order to be granted such licence by the FMA, Snowball Effect is subject to a number of operational, financial, governance and capability minimum standards, on an ongoing basis. Snowball Effect's directors and senior managers have been subject to character assessments, as will any new directors and senior managers of Snowball Effect. The key details of the license requirements for Snowball Effect can be found at https://fma.govt.nz/assets/Compliance-section/Crowd-Funding-Standard-Conditions-updated-160601.pdf

Investors can access Snowball Effect through the Website. An Investor must register and be accepted by Snowball Effect as a member before it can utilise the services of Snowball Effect relating to Retail Offers, and before it can invest in any Company under a Retail Offer. The process for registration can be found at auth.snowballeffect.co.nz/register. Snowball Effect has the right to refuse any Investor or Company from utilising its services as described in more detail in the Investor Agreement (described below).

As part of the Investor registration process, the Investor may be required to provide identification and other anti-money laundering requirements that Snowball Effect may from time to time require. In particular, Snowball Effect may require identification of Investors and information about the sources of funds being provided by the Investor for investment in Companies.

An Investor who accesses a Retail Offer from outside New Zealand, or who is not a New Zealand citizen, or who by virtue of their non-New Zealand citizenship has laws of a country outside New Zealand applying to them (International Investor) is solely responsible for ensuring their compliance with all laws of any country outside New Zealand relevant to them accessing such Retail Offer and subsequently subscribing for any shares pursuant to that Retail Offer. Any International Investor should consult their professional advisers as to whether any governmental or other consents are required, or other formalities need to be observed, to enable them to access a Retail Offer or to subscribe for shares pursuant to a Retail Offer.

The Investor will also be required to enter into an engagement agreement (Investor Agreement) with Snowball Effect before it can utilise the services of Snowball Effect. A copy of the Investor Agreement can be found at snowballeffect.co.nz/legal/investor-agreement.

Fees

Snowball Effect does not currently charge you any upfront fees for the services we provide you in accordance with our Investor Agreement which can be found at snowballeffect.co.nz/legal/investor-agreement. Snowball Effect’s fees may be changed at any time. Snowball Effect will notify you in advance if it proposes to charge you fees for its services.

Interest accrued (if any) on the Subscription Price whilst held in Snowball Effect's trust account will be retained by Us as an administration fee to partially compensate the time and our costs involved with collection and managing payments.

For Retail Offers, Snowball Effect has three different fee structures for Companies. Snowball Effect typically charges Companies an upfront fee of $5,000, and a success fee on any funds successfully raised through the Website (the total funds successfully raised through the Website being the Capital Amount) of:

  1. 7.5% of the Capital Amount, subject to a $25,000 minimum fee; or
  2. 4% of the Capital Amount, then an additional 2% of the Capital Amount payable on each of the following three anniversaries of the Retail Offer close; or
  3. 3.5% of the Capital Amount, then:
    1. an additional 1.5% of the Capital Amount payable on each of the following three anniversaries of the Retail Offer close; and
    2. 2.5% of the Capital Amount in warrants (issued at the Retail Offer close) at the then current valuation of the Company, which will expire on the third anniversary of the Retail Offer close.

Snowball Effect's fees to Companies may change, or may be amended in discussions with a Company prior to a Retail Offer being made available. If a Company requests Snowball Effect to provide additional services beyond the basic fund raising services it provides to all companies, for example if Snowball Effect has required an independent report on a Company, Snowball Effect may charge that Company reasonable time based charges for such work, and for the recovery of external costs. The Company will be told the scope of any such charges prior to them being incurred, and shall have the opportunity to withdraw prior to any costs or expenses being charged.

Investment process and how an investor's money is held

The process for investing in a Company, including how any Investor's money is held, is described in the Investor Agreement.

Mandatory checks

We undertake limited background checks on each Company that makes a Retail Offer. These checks consist of a number of preliminary checks of the Company making the Retail Offer, its directors and senior managers (being managers of the Company that are identified to us as material to the Company's business) (Mandatory Checks). Details of the nature of these Mandatory Checks are:

Individuals

  • Checks of the insolvency, SIO (a Summary Instalment Order is a formal arrangement with creditors to repay debt over time), and disqualified directors register at the Companies Office.
  • General internet searches for evidence of bankruptcy or involvement with insolvent companies, and involvement in litigation or disputes (where public information is available).
  • Police criminal records check if permitted by authorities, and noting that the Criminal Records (Clean Slate) Act 2004 authorises people to conceal many convictions.

Companies

  • Snowball Effect’s records to ascertain whether the Company has previously raised funds through Snowball Effect, and if so, the timing and amount raised (cross-checked against our bank records to verify the timing and amount).
  • The identity and character of the Company's directors and senior managers (from readily available public information).
  • Companies register searches (however we do not expect to learn more than that the Company is registered and who were the directors and shareholders at the date of last filing).
  • General internet searches to identify involvement in litigation or disputes (where public information is available and readily accessible).
  • Search of the Insolvency Register.

Snowball Effect will, acting in its sole discretion, consider any areas of concern about the Company or the individuals apparent from the Mandatory Checks. If the Mandatory Checks outlined above disclose facts impugning the honesty of the Company or the individuals involved, then the Company’s application to raise funds through Snowball Effect will be put on hold. We will give the Company or individuals concerned the opportunity to respond to the areas of concern, and the board of directors of Snowball Effect will consider whether the supplementary information disposes of the concerns. Snowball Effect will not allow any Company to raise funds through Snowball Effect if it has material unresolved concerns about honesty arising from the Mandatory Checks.

When undertaking the Mandatory Checks, Snowball Effect will exercise the care, diligence, and skill that a prudent licensee (that's an equity crowdfunding provider) undertaking those Mandatory Checks would exercise in the same circumstances. However the Mandatory Checks will not provide guidance regarding the commercial success of any Company, and You should not rely on the Mandatory Checks as any assurance of the results of your investment.

We do not actively monitor Companies and individuals after these Mandatory Checks have been completed. However, if we become aware of information that is materially contradictory to the results of the Mandatory Checks previously undertaken, we will reconsider whether to decline to allow the Company to use Snowball Effect’s services.

We may form an adverse view at any time of the Company's prospects of raising funds through Snowball Effect and decline to proceed without an adverse judgement of the prospects of the Company's business or its people. It may be a question of timing, or reflect our view of the particular interests and appetite of our investors, or take account of relative attractiveness in relation to other offers or potential offers to our investors around that time.

At any stage, we may notify a Company that it is not suitable for raising money through the Website and that it is no longer eligible to use our services.

Snowball Effect does not verify the content of the offer materials, and makes no representation in relation to the completeness or accuracy of any information contained in the offer materials.

Each Investor shall be entirely responsible for any decision he or she makes to invest, or not to invest, in any Company. Snowball Effect shall have no liability to any Investor under or in connection with their decision (whether in contract, tort including, without limitation, negligence, or under any other theory of law or cause of action howsoever arising) unless such liability arises out of the fraudulent actions of Snowball Effect or a breach by Snowball Effect of its obligations expressly provided for in the Investor Agreement.

We rely on each Company to inform Us if any material information relating to it has changed from what it has disclosed in its Retail Offer. Companies will usually be required to update their Retail Offer with any such information during the Retail Offer period. However We may not be well enough informed, or have rights and procedures to ensure this will happen.

The services provided to You by Snowball Effect will not include any financial or taxation advice of any nature whatsoever.

Snowball Effect and its related parties

People associated with Snowball Effect (such as its directors, employees and people which Snowball Effect has a business relationship with) may subscribe for shares in a Retail Offer. Any such investments will generally not be disclosed by Snowball Effect or the Company to You or any other investor. If You otherwise become aware that a person associated with Snowball Effect has invested in a Company, it is not an endorsement and You may not rely on this fact when making a decision whether or not to invest.

Snowball Effect may raise funds for itself through equity crowdfunding on the Website.

Requesting copies of documents

An Investor may request from Snowball Effect (for no charge) a copy of a relevant document by emailing it at [email protected]. Examples of relevant documents include the Investor Agreement, Disclosure Agreement, terms of use, privacy policy, and warning statement. Snowball Effect will provide an electronic copy to the Investor (to its Snowball member registered email address) of such information within 10 business days.

Each Investor will be able to access a summary of its investment transaction history through the Website on its membership page.

Complaints

If an Investor has any complaints or queries about the services provided by Snowball Effect, he/she should contact Snowball Effect on [email protected] or by writing to Snowball Effect at Snowball Effect, C/- Wynn Williams, Level 11, 41 Shortland Street, Auckland 1010.

If an Investor it not satisfied with Snowball Effect's response to the complaint, he/she may be able to refer the complaint to Financial Services Complaints Limited, an approved dispute resolution scheme under the Financial Service Providers (Registration and Dispute Resolution) Act 2008. They can be contacted at: PO Box 5967, Wellington 6145 or [email protected] or 0800 347 257.

Communications with, to or from Snowball Effect shall be in the English language.