QUESTION
I was perusing over forms filed by WNBD and I looked at a D/A form which said a minimum investment from an outside investor must be over $5,000. I am curious what happens if we make this investment to you? Do we receive preferred stock? Or is it a debt deal? If it is PS is it protected from a R/S? And is it at the same price as the PPS is at the moment? Thank you for your time.
ANSWER
A correct answer cannot be given in a couple of sentences, so bear with me. There are specific procedural points to understand.
We have made no formal offering to the shareholder group. Our securities attorneys, and experts in the field, are consulting currently as to the full range of options. I have explained to them all that I would like to ensure that existing shareholders have access to any attractive options that are open to them under the applicable regulations. To ensure that there is no solicitation, we are confining ourselves to responding to questions, such as yours, originating from interested shareholders. Interested shareholders are then noted and will be provided with details as soon as they are available.
Philosophically, the ideal form of financing is from sales revenue and profit, of course. However, when sales are not yet sufficient to provide working capital for growth, companies raise funds externally. My preference is that existing shareholders be considered in the overall development of financing options, rather than excluding existing shareholders on the false assumption that they have “already made” their investment. In reality, existing shareholders account for a significant proportion of open market share purchases of any normal public company. Regulations draw a distinction between direct subscriptions that an “accredited” investor is able to participate in, as opposed to an “unaccredited” person. The primary difference between the two is their financial net worth and the deemed ability to make their own choices at a higher level of risk. This distinction arises from a desire by regulators to protect persons who may not be capable of carrying the risk or making appropriate investment determinations.
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Winning Brands receives much encouragement from its existing shareholders in the form of communication to the firm. A recurring question amongst a certain percentage of such communications is a self-generated enquiry about available opportunities to participate in direct subscriptions or convertible note financing. This is prompted in part by the perception that accredited investors appear to enjoy attractive options. There is an accumulated mass of interest along these lines amongst existing shareholders which prompts the current consultations. The company will preserve the current high level of trust amongst its shareholders by ensuring that the company’s financing actions are in the interests of shareholders as a whole, because they are owners of the company. Once persons do become shareholders on the open market, there may be a blend between what they may wish to do further in the open market and on a direct basis, to the extent that this is provided for under existing regulations, such as Regulation D, Rule 506, as only one example. Furthermore, relevant options are being considered for investors outside of the United States, under Regulation S.
Regardless of such options, the company is cognizant of the need to eventually reduce the outstanding share count, rather than increase it, by means other than a reverse split. This is why such careful long term planning is required. Regardless of the means available to accept subscriptions, or convertible note financing, they are not in themselves the goal of financing. Attaining self-sufficiency and profitability through operations is the goal of financing. All financing should be a means to that end. The extraordinary efforts that Winning Brands makes to communicate its operational activities, including both accomplishments and challenges, provides ample evidence that the company’s financing supports a coherent business plan.
As the company advances toward its goal of eventually being fully registered, additional financing options will become available. Registration is not a simple matter, however. Although Form 10 is described as a “form”, it is not as simple as completing a courier waybill. “Form” may be a misnomer – as it is actually an application that is extensive, expensive and time consuming to undertake. As in all things, preparation pays. We are readying ourselves so that the application is suitable and meets qualifications from the outset.
In the meantime, we continue to be alert to opportunities that are good for the company, and thereby good for the shareholders, in general.
