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Snowball Effect records first profit, thanks to tax benefit, revenue jumps 46%

Thursday 3rd August 2017

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Snowball Effect recorded a full-year profit driven by a modest tax benefit, while revenue rose faster than expenses, narrowing the equity crowdfunding platform's pre-tax loss.

The Auckland-based company posted a net profit of $12,404 in the 12 months ended March 31, from a loss of $76,428 a year earlier. Sales rose to $607,519 from $415,253, while expenses climbed to $673,853 from $521,791. The company recognised a $51,110 deferred tax gain.

Some $25.3 million has been raised on the Snowball Effect platform through 33 offers, according to its website. They include $1.7 million for Designer Wardrobe, which allows members to trade their fashion-label clothes, $1.2 million for Zeffer Cider, $3.4 million across three offers for investment group Punakaiki Fund, $3.4 million for mortgage broker and peer to peer lender Squirrel Group, $1.8 million for university research incubator Powerhouse Ventures and $2 million for winemaker Invivio.

Snowball was an early entrant when equity crowdfunding launched in 2014 under the updated Financial Markets Conduct Act, which provides a regime where projects can raise a maximum of $2 million offering equity through crowdfunding platforms. 

The company's accounts show wages are its biggest expense at $399,433, up from $249,804 a year earlier. Marketing expenses were just $34,878, up from $24,858 a year earlier. Its biggest asset is its website, with a carrying value of $158,609, followed by cash at $129,438.

The accounts list chief executive and co-founder Simeon Burnett's gross pay at $120,016. Burnett is also one of the two biggest shareholders with a stake of 31.6 percent, the same sized stake as is held by co-founder and director Richard Allen. Another co-founder and director Francis Reid owns 18.6 percent. Alastair Lawrence, who is on Snowball's screening committee, owns 12.2 percent with Joanne Lawrence through Antipodes Ventures and business incubator The Icehouse owns 4.9 percent.

The company's auditors, Staples Rodway, added an "emphasis of matter" saying that Snowball's going concern assumption was dependent on its ability to reach profit and cash-flow forecasts and access alternative sources of funding from key crowdfunding investors or existing shareholders.


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