Quarterly Report – Q2 2018

We continue to make progress on a number of fronts including; deal flow; investments; partnerships and strategic alliances and many more. We also have further clarity on general guidance that govern Section 12 J Venture Capital Companies (VCC’s).

Section 12 J 

SARS recently released a draft guide, which is based on the legislation at the time of issue, which further clarifies the rules and regulations regarding Section 12J VCC’s. The guide reinforces that as a Section 12J company the sole intention should be to invest in qualifying companies. This clarification was not our and the broader Section 12J communities initial understanding which was, that 20% of the capital raised could be invested in non-qualifying companies, e.g. a company domiciled outside of South Africa.
Due to this clarification, we had no choice but to withdraw any further investment into The Sun Exchange (TSE), being domiciled in Delaware, USA.

Deal Flow

We continue to receive and analyse a number of exciting deal opportunities on a weekly basis. Our pipeline continues to expand to include impactful companies across multiple industries and technologies. We are seeing the majority of our deal flow emanating from the Western Cape followed by Gauteng.

We are currently in the later stages of issuing term sheets to a number of companies, including a technology company with applications for global patents in Application Delivery Controller, Web Security and Load Balancing technologies, Snapt. We will also shortly be finalising a term sheet for a company, who have developed an Artificial Intelligence BOT for the Financial Services industry, FinChatBot. The company utilise chatbots to help financial service providers acquire & retain customers through AI-powered conversations. This term sheet is in conjunction with an investor based in Mauritius who have extensive networks in the global Insurance industry.

Investments 

Our current portfolio continues to show tremendous growth as reflected below:

SnapnSave

Cashback coupons company SnapnSave has shown consistent growth since Kalon and The Smollan Group co-invested in July 2017. The following statistics are testament of this growth over the last year by comparing end June 2018 to end June 2017. Net revenue grew 84%, SnapnSave users have grown to 210K which is growth of 61%, till slips submitted have grown 89%; number of coupons redeems have increased 128%. The company had also signed up a number of new blue-chip clients during the last quarter and have recently released a wholesale solution which is gaining good traction.

SnapnSave successfully concluded a pilot program with Momentum to promote coupons to an initial 10 000 Multiply loyalty clients. Based on the success of the partnership, the next phase is being discussed with Momentum to roll the platform out to their circa 1 million Multiply clients.

SnapnSave is also in discussions with a number of other corporates to leverage their technology for their loyalty members.

i-Pay

i-Pay over the last 12 Months has shown exceptional growth and are well on-course to continue this trend through 2018 and into 2019. The instant EFT payment solution has seen an increase of 208% in gross revenue, their number of transactions have risen 142% to 2 768 858, the gross merchant value of payments processed through the platform grew 210% to circa R2 billion and a 69% increase in number of merchants on the platform bringing the total to over 800.
i-Pay is currently in discussions to expand further into Africa as well as into Europe. To finance their global expansion, i-Pay are raising capital and currently evaluating a number of international and local Term Sheets to find an appropriate “smart” capital provider. To see i-Pay’s expansion plans, please click here.

Partnerships and Strategic Alliances 

We continue to make progress with the forming of Strategic Alliances with many constituents in the ecosystem. Our focus during the last few months has been to develop relationships with other venture capital companies for co-investment opportunities. To-date we have concluded agreements with a number of these companies, both in the Western Cape and Gauteng. These relationships benefit our investors and entrepreneurs by broadening our collective networks resulting in high quality and increased deal flow. We are excited about these relationships as they will help scale our investee companies both locally and globally with access to additional capital, clients, channels and distribution.

Capital Raising 

Just a reminder of the provisional tax dates of end of August and September. Kalon will not be issuing a Private Placement Memorandum (PPM) which would have allowed investors to invest a minimum of R110 K during this period. A PPM is not required for investors who wish to invest a minimum of R1 million and hence if you have Capital Gains or any other taxable income in excess of R1-million, please consider Kalon as an alternative to paying your provisional taxes. The price is fixed at our February 2018 subscription price of R1100 per share.

In Conclusion 

We look forward to providing more ongoing positive updates regarding the topics above. Should you have any queries on the contents of this communication, please do not hesitate to contact the Kalon team.