Thank you to WNBD shareholders for your interest in our next steps and for your related questions. To provide further context for Winning Brands’ proposed strategy, the following overview is provided in Q & A format for convenience:
What does Winning Brands do now and what will be different going forward?
Winning Brands owns proprietary environmental cleaning product formulations and brand trademarks. In the early days, the company was planning for the sale of these consumer products to be the basis of its growth and the company had its own factory for production. It was not possible to gain sufficient sales growth, fast enough, for the company to be self-sufficient without public market financing. Like many OTC companies, we had operating losses that needed to be financed. Winning Brands has been reducing its losses every year since it began public filings and eventually reached break-even on a cash basis. However the break-even point was achieved more by cost cutting than sales growth. An example of the cost cutting was to shift from operating our own factory to contract packaging. Winning Brands’ sales of its cleaning solutions has amounted to several million dollars in aggregate over time, but was not sufficient per year to be profitable in this one category.
The company has therefore decided to leverage its consumer product and retail experiences to work with additional product lines whose owners can benefit from a partnership of effort for mutual gain. These will be “joint ventures” and will give WNBD shareholders more ways to benefit from their public company in the future.
If Winning Brands did not succeed before, why should its “experience” have value to someone else now?
Winning Brands did succeed in some important ways, but not in others. What we did accomplish was to bring early formulations into contemporary regulatory compliance, gain retailer listings, develop widespread goodwill amongst tens of thousands of consumers (to this day) and to remain in business despite the challenges. Survival skills have value too.
What Winning Brands did not succeed at is to achieve profitability soon enough to become self-sustaining. The company became overly reliant on the Regulation D, Rule 504 stock issuance fundraising mechanism, at a vulnerable time in its growth. When the Regulation D, Rule 504 mechanism fell out of favour with regulators, and many companies were put into a partial deposit restriction for their DWAC eligibility, convertible promissory note financing was relied upon as an alternative. However, this was unhelpful in the long run, because they were to be settled with share issuance at a floating exercise price that accelerated the pace of stock issuance. The conversion feature of those notes had the OTC marketplace standard provision of being convertible at a price-per-share that was related to prevailing market price, rather than to a fixed price. If a stock price is declining, this feature accelerates a downward spiral. This is why that type of convertible debt is sometimes described as “toxic”. If a share price is rising, this same provision can be beneficial to the company. Whether the convertibility feature is “toxic” or not to the company depends on the trend-line of that company’s stock price at the time of conversion.
Settlement of Winning Brands’ convertible notes caused the outstanding sharecount to increase too rapidly. This hampered our ability to raise replacement capital. Rather having a second reverse split, the company instead chose to contract to a minimum crew operation, with outsourcing, and retain its core brands and several good retailer listings. We lost some retailers, but kept others. To this day, Winning Brands’ lead product, 1000+ Stain Remover can be found online at Home Depot USA with good consumer ratings, in Do it Best hardware stores, Home Hardware, Lowe’s Home Improvement in Canada and other settings.
Therefore, Winning Brands does have considerable retailer and distribution experience, and good commercial relationships that it can deploy under the right conditions – meaning new non-toxic financing and an interesting expanded product mix via joint venture(s).
Winning Brands has spoken of joint ventures before. This has not yet made the necessary positive contribution. Why is that?
Joint venture partners are in a new relationship. Like all relationships, it passes through phases. If the parties sense in the very early stage (trial phase) that it’s not a good fit, then it is better to not proceed further, and find a better fit instead.
In the case of an air cleaning consumer product that Winning Brands was considering, Winning Brands determined early into the relationship that the inventor of that product was not comfortable making technical changes that Winning Brands considered necessary to achieve consumer appeal and to gain insurance underwriting. The insurance factor was important because the product was plugged into the electrical wall outlet and required the use of water. We wanted a re-design whereby the unit would operate from rechargeable batteries instead, or with a cord that removed it far enough from the outlet to ensure safety. A test marketing campaign for the inventor’s original prototype did not yield sufficient sales results to warrant going into the next phase. This confirmed Winning Brands’ concern.
In the case of of the tablet cleaning product, Winning Brands has not yet been able to raise the funds that it needs to contribute in order for the JV to fully vest. This can still be cured and that relationship can be modified to suit future conditions. This relationship is pending more financial heft by Winning Brands, and other moving parts in the equation.
Two additional additional JVs had been discussed publicly, one in the bakery field and the other in fintech. In the absence of JV financing, Winning Brands encouraged both those parties to connect with interested public companies that were in a position to acquire their operations. It is not Winning Brands’ desire to hold back prospective businesses until Winning Brands finds a non-dilutive refinancing method. Thus, those enterprises have carried on in their own destiny prior to the commencement of a joint venture and good relationships have been retained with Winning Brands.
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There are further JV possibilities – these seem more likely to materialize under our present conditions.
Project 1 of this group is an additional food sector opportunity, Project 2 is a consumer product line with a twist that has real appeal for the OTC markets in a cool sector and Project 3 is a video gaming industry tie-in that includes a relationship with well-known and respected clients/associates.
The negotiations with these joint venture candidates do not require cash investment by Winning Brands. In the case of these three, Winning Brands is contributing its insights, connections and shared work to own a piece of the commercialization, without having to buy those companies’ stock. Those JVs will each be independently financed with the assistance of Winning Brands, but not through Winning Brands. Therefore, the dilution caused by that financing will occur in those enterprises, not in Winning Brands.
What Winning Brands must do to qualify to activate those joint ventures is to bring its reporting status up-to-date with OTC Markets and to perform certain internal arrangements to be able to deal professionally with those new partners and markets. This is why a relatively small sum can deliver out-sized impact for Winning Brands shareholders in these projects. There are additional candidates, however we need to focus on implementing properly before proceeding with too much too soon.
Are you doing a reverse split, and if not, why not?
The only time that a reverse split can be beneficial for shareholders is when the circumstances of the company are so much better that the new higher share price (that occurs as a result of the reverse split) can be maintained afterward. This is not usually the case in OTC Market reverse splits because the companies performing them typically still have heavy dilution activity pending after the reverse split to satisfy more convertible promissory notes or to raise money to cover operating overheads. In my opinion, the company needs to be in a self-sustaining (consistently profitable position) AND have access to other more conventional financing for a reverse split to be successful, from a shareholder perspective. Therefore, Winning Brands has no present plans for a reverse split and is not even in any exploratory talks for this.
Winning Brands presently has a 2-step plan to acquire conventional non-dilutive financing. Step 1: With a $50K non-dilutional, non-convertible loan, with a term of 6 months, Winning Brands can perform the administrative requirements to be fully current in the Pink Current Information tier again and qualify to complete the negotiations for the three joint ventures described above.
The first of these joint ventures is of a nature that would deliver immediate cash flow to Winning Brands because Winning Brands will be utilizing its own $250,000 accounts receivable financing facility with a prestigious financial institution (when we are Pink Current Information Tier again).. This A/R facility is one of the contributions that Winning Brands is bringing to the joint venture. In other words, Winning Brands has both the retailer experience and A/R financing facility to allow that JV partner to increase sales fast. Our JV partner is the sales expert, not me (our shareholders will be glad to know). Trial shipments have already been made to test that partner’s ability to satisfy the initial target grocery store group with delivery and quality performance. These trials were successful. When Winning Brands’ A/R facility will be deployed, then Winning Brands will become the vendor of record and will quickly develop an attractive deposit history with our bank arising from a substantial flow of new business. When this is proven to the bank and to other parties watching, and they persist for 6 months, then Winning Brands will qualify for many conventional merchant advance capital offerings in a much larger amount than the $50K kicker, This will be the mechanism to payout the $50K, i.e. by means of the larger take-out conventional merchant advance mechanism. That is Step 2. This generates no Winning Brands shareholder dilution, and will make more capital available to Winning Brands for enhanced professionalism and further opportunities.
The second and third joint venture referred to above can also deliver cash flow without direct Winning Brands capital investment, but the cash flow from those is not as immediate, because the financing of those projects through third parties will require approximately 2 months to complete, and then activation will require at least another 2 months. In terms of scalability and reach, Project 2 and 3 may make a larger contribution than Project 1 – they will just take longer.
Any luck in obtaining the $50k loan? Any leads? Good luck!
Thank you. Yes, we have a new lead. I have always said that OTC market penny stock investors are bright and enterprising. This environment provides good opportunities for people who have self-confidence and ambition on both the investor side and the emergent company side. However, this lead may not come through, so I must emphasize that it is only a possibility, and cannot be counted upon. Whoever does come through should be considered a natural leader because that person will have created authentically positive conditions for everyone, not merely for themselves.
Thank you again, Winning Brands shareholders, for your interest in the company and for your own “partnership of effort” in our success. That is our goal.
