Supporting documents

Offer details

Offer

Rubber Monkey is offering investors the opportunity to invest in a rapidly growing e-commerce platform. We are seeking to raise up to $2.5 million of capital to support our growth strategy which is focused on increasing our product range and Australian presence.

Valuation

The board and existing shareholders of Rubber Monkey have set the pre-money valuation of the business at $20 million. The $20 million valuation equates to a multiple of 0.98x FY22 revenue and has been determined having regard for:

• our proven history of profitable growth;
• the strength of our proprietary website and related technology, logistics and supplier relationships;
• the significant growth opportunity in Australia from a proven base;
• the strength of our team and e-commerce experience; and
• the importance to the board for investors to enjoy a positive and profitable experience as shareholders.

Use of Funds

The funds from this capital raise will be used to support the growth strategy, which is focused on growing its Australian presence and product range. The key uses of cash include:

• investment in additional inventory for the Australian and NZ markets;
• further investment in fitting out the warehouse and distribution centre in Australia; and
• working capital to support execution of the growth strategy.

If less than $2 million is raised, the company will reduce investment in inventory as required and/or raise additional debt.

Disclosures

Type of Shares on offer

Rubber Monkey is offering ordinary voting shares (Shares) in its holding company, Rubber Monkey Holdings Limited. The Shares are to be issued to Snowball Nominees Limited (“Nominee”), who will hold legal title to those Shares on trust for the beneficial owner of those Shares (i.e. the investor).

Corporate Structure

Rubber Monkey Sales Limited is the operating company in the group and a wholly owned subsidiary of Rubber Monkey Holdings Limited, the issuer in this capital raise.

Rubber Monkey Holdings Limited has two other wholly owned subsidiaries, Aurora Pacific Limited and Rubber Monkey Australia Pty Limited. Aurora Pacific Limited acts as a distributor for products that are sold to other New Zealand resellers. Although there is minimal activity in this company, this is expected to increase in the future. Rubber Monkey Australia Pty Limited has been formed to operate the Australian business.

Nigel Stanford is a shareholder of Rubber Monkey Software Limited, which, although shares the same name, is an independent and unrelated software business.

Constitution

The shareholder rights which attach to the Shares are set out in the Constitution. A copy of the Constitution is available for review and you should read it carefully, along with the Subscription Agreement setting out the terms of your investment, before applying for shares in this Offer.

The Shares rank equally with all other shares on issue. Holders of the Shares will have:

• the right to receive notice of, and attend, every meeting of the shareholders;
• the right to vote at a meeting of the shareholders on any resolution;
• the right to an equal share in dividends authorised by the board;
• certain shareholder information rights; and
• pre-emptive, or anti-dilution, rights on certain share issues, subject to certain exceptions set out below.

The Constitution includes certain exceptions to the pre-emptive rights for the issue of shares, including:

• an issue of shares up to 10% of the share capital of the company at any time as part of a bona fide future capital raising; and
• an issue of shares up to 2% of the share capital of the company at any time under an employee share scheme.

The Shares are also subject to tag and drag along rights, providing the holder of the Shares with the right to tag onto a sale of 50% or more of the total shares in the company, and obliging the holder of the Shares to sell where there is an offer to purchase 75% or more of the shares in the company.

Nominee Structure

Rubber Monkey is making use of a nominee shareholding structure to simplify the share register and prevent it from becoming a “Code Company” for the purposes of the Takeovers Code in the future. In broad terms, a company becomes a Code Company when it has 50 or more voting shareholders and share parcels and it (including subsidiaries) had total assets of at least $30 million or total revenue of at least $15 million at the end of its last financial year.

Shareholders of Code Companies can be restricted in how and when they are able to transfer their shares. Given its forecast growth, the Board does not believe it is in the best interests of the company, its existing shareholders, or investors for Rubber Monkey to become a Code Company and bear increased compliance costs.

The Shares to be issued by Rubber Monkey are to be issued to the Nominee, who will hold legal title to those Shares on trust for the relevant beneficial owner of those shares (i.e. the investor). The full terms on which the nominee will hold the shares are set out in the Nominee Deed Poll (which forms part of the Offer Documents). In broad terms, the nominee must:

• act in accordance with the relevant beneficial owner’s instructions (e.g. in exercising the voting rights attached to the relevant shares);
• account to the relevant beneficial owner for all proceeds from the relevant shares (e.g. dividends received); and
• deliver notices, letters, reports, demands, offers, agreements and other documents and communications received by the Nominee to the relevant beneficial owner.

Under the Nominee Deed Poll, each beneficial owner indemnifies the Nominee against any losses, damages, costs, actions, proceedings, claims and demands that may be made against or incurred by the Nominee as a result of it holding the Shares under the Nominee Deed Poll (unless the Nominee has been fraudulent or grossly negligent).

The nominee structure used by Snowball Effect is commonly used and consistent with best practice around the world for early-stage investing and online private equity investments including the SeedInvest Special Purpose Vehicle arrangements in the USA and the Seedrs Nominee structure in the UK. Snowball Effect has found that both companies and investors value the nominee service, as it helps smooth and facilitate easy investment and ongoing investor communications.

Shareholding Structure

The following table sets out the current shareholding compared with the projected ownership structure for both the target capital raise of $1.5 million and maximum capital raise of $2.5 million. The final shareholder structure may vary from this due to the actual amount raised and rounding of individual allotments.

The existing shareholders are not participating in this round, and there are no other securities or options authorised or issued by Rubber Monkey at this time. The table does not reflect the impact from shares that may be issued under an employee share scheme in the future.

Employee Share Scheme

There is currently no employee share scheme in place. However, the board reserves the right to implement an employee share scheme in the future and, as noted above, provision has been made in the Constitution to enable the board to issue up to 2% of the share capital of the company at any time under an employee share scheme.

Dividend Policy

There are no immediate plans to pay dividends to shareholders, with profits to be reinvested in further growth and expansion in order to achieve faster growth in the short term. As Rubber Monkey grows in scale and profitability, the board will look to adopt a dividend policy that maximises dividend payments to its shareholders, provided that such payments are consistent with good business practice and the requirements of the Companies Act 1993, as well as comply with any banking covenants and the responsibilities and duties of the directors.

The board will also consider all avenues for generating returns for shareholders, including creating opportunities for liquidity most likely through a trade sale or Initial Public Offering (IPO).

Remuneration

Executives and other employees are remunerated through fair and reasonable salaries. All remuneration of key executives is reviewed regularly by the board to ensure remuneration is market driven and reflects individual performance and achievement of role objectives. All compensation costs have been accounted for in the financial forecasts.

There are no director fees payable at this time. However, the board reserves the right to appoint other directors from time to time, and remunerate all directors in line with industry standards, including, where appropriate, participation in an employee share option scheme.

Governance

Rubber Monkey currently has three directors:

• Laurie Alexander, Co-founder and Chief Executive Officer
• Nigel Stanford, Co-founder
• Philip Cox, Chief Technology Officer

Biographies for the directors can be found in the Team Section above. Rubber Monkey plans to appoint an additional director that has the relevant experience and skill set to help drive the growth strategy, as well as strengthen board governance.

The Board currently meets monthly, with other senior staff in attendance, to discuss performance against KPIs and strategic initiatives, and quarterly for a full business review to set strategic actions.

Future Funding

While there is no existing plan, or identified requirement, to raise additional funds after this funding round, the board may elect to raise additional capital in the future to accelerate growth plans or take advantage of other opportunities that will increase shareholder value, as they arise.

Share Registry Management

We plan to use Orchestra equity management platform to manage our share registry.

Shareholder Communication

We intend to keep our investors updated through:

• quarterly business summary updates (more frequently if required);
• annual updates on the outlook for Rubber Monkey, including financial statements and commentary approved by the board; and
• participation in Annual General Meetings of Shareholders.

Related Party Transactions

There are no material related party transactions known to the directors or management.

Litigation and Disputes

There are no past litigations or disputes known to the directors or management.

Snowball Effect Fees

No fees are payable by investors to Snowball Effect. Snowball Effect charges the company a fee of up to 7.5% of the funds raised.

International investors

The distribution of this offer outside of New Zealand may be restricted by law. This is not intended to, and does not, constitute an offer of securities in any place which, or to any person to whom, the making of such offer would not be lawful under the laws of any jurisdiction outside New Zealand. This includes, but is not in any way limited to, Australia and the United States. It is the responsibility of any Snowball Investor to ensure compliance with all laws of any country outside New Zealand relevant to their subscription, and any such Snowball 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 apply for securities pursuant to each offer. The failure to comply with any applicable restrictions may constitute a violation of securities law in those jurisdictions. The securities in each offer have not been and will not be registered under the US Securities Act or the securities laws of any state of the United States.