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:
QUESTION
Hello Eric, …Hope all is well. Just wanted to check in on how the loan hunt is going. Excited to hear about some potential JV’s. Long hold for me! Best Regards…
ANSWER
The honest answer is that we are looking at a “chicken or the egg” situation, as to which comes first. The company is being told by some parties that they would be pleased to provide all the required non-dilutional working capital loan funding if I could first “make the share price go up” (so that they will first make money on their holdings). I have replied that Winning Brands will not engage in staged rallies. Fortunately, a first participant (natural leader) has started the ball rolling with non-dilutional working capital funding with their initial minimum installment, for the benefit of all. Perhaps more will be forthcoming. In this method, any increase in stock price is authentic. We are not paying for promotion, we are not diluting and are not interfering with the natural market.
In the meantime, because of that positive move by the first participant, the company was able to address a certain need, and strengthened its discussions with a key JV partner. Therefore, it was very helpful to the company in a way that will become clearer when those negotiations advance in coming weeks.
Our joint venture strategy is interesting. In view of the key role of the joint venture concept in Winning Brands’ growth plans, the current JV strategy deserves more explanation and clarity. Bear in mind that it is impossible to provide names yet because the negotiations are ongoing. It would be foolish and a violation of confidentiality, both, to provide names prematurely. However, understanding the thinking behind the JV structure by shareholders will illustrate how much up-side we really do have. The insights that are to be found by understanding the issue will clarify why the joint ventures are so helpful to Winning Brands’ future.
The JV’s are not a substitution of our existing cleaning products business – the JV’s are an addition to it. Rather than issuing fake news releases which are hype-oriented (standard operating procedure in the pennies and sub-penny world), I’d rather respect the intelligence of our shareholder group (and the public at large) and work at creating understanding of how this would really work, so that people can judge for themselves whether we can anticipate an increase of our market cap to much higher levels. I think it is obvious that we will achieve this with the right conditions. There are plenty of sharp minds amongst our shareholders, and in the OTC markets generally. If the logic is there, it will be seen.
One more point before I go further – I know that this is a long answer to your question, but I am willing to invest the time and effort in thoroughness for the sake of our shareholders who are served with such thoroughness. The stakes are high and the effort is worthwhile, for their sake as investors, and for the company’s optimal performance.
Joint Venture vs Acquisition
There are many OTC companies speaking of “acquisitions” as a path to growth. This usually involves share issuance because cash deals (for anything worthwhile) are rarely possible. These acquisitions often introduce complexity where it is not warranted. Managing subsidiaries (some of which have their own secondary subsidiaries) is only worthwhile when there is a good legal reason or there is plenty of money flowing. Without those conditions, it adds to the cost and complexity of financial reporting, governance matters, tax filings, etc. Therefore, Winning Brands’ joint venture strategy is based on earning an ownership stake in unusual business opportunities, rather than “buying” companies, with all that this entails.
The purpose of owning a company or a piece of it is to gain the benefit of what it is doing. Joint ventures can be designed which still allow us to share in the benefits of an intriguing opportunity without the attendant cost, complexity and liability of buying companies, per se. This strategy is also less dilutional, because without deep pockets, acquisition of a company will involve stock issuance.
Winning Brands’ current joint venture strategy is not based on stock issuance. Instead, it is based on designing partnerships of effort wherein Winning Brands provides an ingredient to success that combines with contributions by others that makes something become better than it would otherwise have been. Winning Brands has a broad base of publico experience and business connections to be harnessed with new initiatives.
What Sort of Opportunities?
Some JV candidates are in the realm of cleaning of course, as a natural outgrowth of our existing relationships. However, to be completely honest with ourselves, the category of cleaning does not have the excitement factor that some other categories do.
Therefore, our joint venture strategy is to strike a balance between classic “sensible” sectors that are steady as a foundation, but also to include initiatives that bring more “excitement” than the basics. Being rooted purely in the basic trade categories is really only viable if the cash flow proves that the product range is a strong financial performer and/or the customer base is large. On the other hand, being involved in an “excitement” category is only viable if there is reality to the plan too. How will things be monetized? Will it all just be chasing fantasy, or will something actually come from it. There is a certain finesse required for us to get it right.
My point is that Winning Brands will be moving into territory that has more appeal, without wasting or ignoring our foundation. You can think of it as expanded consciousness and expanded reach.
Examples
Photo Caption Credit: Los Angeles Times. Photo used as generic representation of competitive video gaming.
E-Sports: One example is that Winning Brands is the deal architect of a proposed joint venture with another OTC publico to launch e-Sports satellite centers in partnership with a respected casino operator who has multiple locations, on a revenue sharing basis, rather than a tenancy basis.
Winning Brands, by working through another OTC entity, can avoid the dilutive effect of the funds that need to be raised to launch that project. Between us, the associate organization and Winning Brands have the personal and professional contacts to make this viable, and have already been told that the first such location could be started as soon as we are ready. However, we are holding out in negotiations to be able to open several locations on a guaranteed roll-out so that we can achieve higher critical mass of cash flow to make the shared royalty streams attractive on a net basis.
It is irrelevant that this joint venture is light-years away from our original origins in cleaning products because in this case Winning Brands brings practical experience on the publico side – which is a key element to the venture. We have already formed a JV Project Team with extensive e-Sports experience, proprietary video-gaming assets and existing ties to casino / resort / college contacts. We will eventually raise the funds for this project through persons who already know how steep the growth curve in e-Sports is becoming and recognizes our group’s combined intellectual property and quality of operational planning. What this will mean to Winning Brands shareholders, if we pull this across the finishing line, is a portion of the cash flow from the venture in the form of a perpetual royalty, without Winning Brands needing to have provided the seed capital. There are also ancillary joint marketing spin-off co-marketing elements for Winning Brands.
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Photo Caption: The old rules are gone about how we are supposed to feel in middle age, or any age.
Nutraceuticals: Today’s attitude to aging and potency is not our grandparents’. As millions of boomers turn 65 years old every year now, there is unsurpassed interest in the healthiest way to achieve prolonged vigor to get the most out of life. An area of great interest is the impact on male potency of human growth hormone precursors – factors that stimulate natural testosterone and human growth hormone production, rather than artificial supplements which have the unintended consequence of lowering natural production.
Winning Brands is negotiating with the creators of a clinically proven and government approved product line in this sector that also has a proven sales track record during an earlier test-marketing phase. Those creators are merging with a cannabis vend-in to their company and are in a unique position to allow Winning Brands to license the marketing rights for the product line against a profit sharing royalty back to the intellectual property holders.
The benefit to the licensor (owner of the intellectual property) of Winning Brands taking it over is to avoid confusion that the product line is somehow related to cannabis (which it is not). The benefit to Winning Brands is to add a brand property that is in a cool sector with lots of growth potential as a desire purchase. It is not only an aging population that desires maximum pleasure and capacity from living – this is our orientation to life today generally. Being the best you can be (rather than staying in a blah mode) is the way consumers are increasingly oriented.
Nutraceuticals are substances which achieve their effects from nutritive compounds rather than drugs. As such they are regulated in a manner that provides more scope to aspiring smaller companies in research, development and marketing than for pharmaceutical products (conventional drugs, the pervue of big pharma).
There is a primal energy to this potential joint venture that is driving a lot of enthusiasm behind the scenes for getting this negotiation concluded successfully. If we succeed in this negotiation, Winning Brands plans to leverage the encouraging results of that earlier test-marketing phase in order to gain certain listings and distribution that would not have be open to us if the product were not already so advanced in its development cycle. These strategic lift and quick-start factors are worth a lot of money. Due to the circumstances in this transaction and the design of the proposed relationship, Winning Brands shareholders do not have to bear the cost, but still gain the benefit.
Photo Caption: World food specialties as a passion, and a service.
Food Specialties for a Changing Society: A third joint venture example under development with Winning Brands is in the field of multi-ethnic food distribution contracts with key grocery retailers. Winning Brands has for two years been thinking about how to tap into the fact that we all eat, several times per day, whether we want to or not – but we usually want to. The pleasure principle is a strong driving force, especially when combined with the survival instinct!
So, that is why the food industry is one of the world’s largest and one of the most competitive, both. Winning Brands has no intention to purchase another entity to enter this area, but rather to combine complimentary skills with some private companies who constitute a supply chain team as their vendor of record to large supermarkets who want to boost their offerings in the growing multi-ethnic sector.
In this example, Winning Brands is combining the talents of small importation and distribution partners who individually do not have the clout that they would as a group with the mission statement of world food specialties as a passion and a service.
Winning Brands has a large accounts receivable credit facility that can be deployed for the benefit of our emerging team if the supermarket group with whom tests are being conducted approve of the team’s performance during the test-marketing and test-delivery cycles AND if Winning Brands’ A/R facility granter approves the expansion of Winning Brands from the packaged consumer goods into the food category. These are all moving parts.
The result of implementation would be that Winning Brands would experience an immediate increase in its cash flow and deposit history with its bank and eventually become a candidate for a range of larger conventional merchant advance facilities on an interest rate basis, rather than requiring stock issuance or convertible promissory notes.
The Paradox – Small Current Size, Substantial Plans
The apparent contradiction of a company that is so constrained in its resources pursuing substantial plans is not as contradictory as it seems. Winning Brands is demonstrating ambition but is being realistic in structuring growth plans that leverage its creativity, experience, good relationships and astute opportunity recruitment. The examples of possible joint ventures described above are only 3 of a larger number of candidates. We are being conservative in presenting a limited number in order to keep it real. We will overcome obstacles as they arise and make adjustments as necessary to ensure that 2019 and beyond is not a mirror image repeat of our earlier years. In the context of the OTC Markets environment, WNBD has exceptional determination to persist and advance. Our current market cap measured in the hundreds of thousands can easily be catapulted to several million dollars even with the start of any of the JVs above, or others, and then tens of millions if any of those JVs actually deliver monetized results.
In the meantime, we need to pay attention to the basics and keep things solid at the foundation of our existing business. The working capital funding that investment lenders will provide is put to good use to strengthen the company, and if sufficient in size, to restore our Current Information Tier reporting and other tasks. There have been many times that we could ship larger quantities of our product to retailers in single deliveries, if our production financing were greater.
I am looking forward to the balance of 2019 and beyond more than any year before. We have a lot going for us.
Photo Caption: It’s easy to “talk” about doing business, but a large proportion of OTC Market stocks are “pre-revenue” and never get any sales. All they do is talk. Winning Brands is small – that is true, but we have physical products, high-quality retailer relationships and have survived the ups and downs of business cycles. The pallet shown above, our 1000+ Stain Remover, is enroute to Lowe’s Home Improvement center in Canada. The same product is available in the USA at Home Depot online:
www.homedepot.com/p/1000-Stain-Remover-30-7-oz-Stain-Remover-181774/205795839
Respectfully,
Eric Lehner, CEO
Winning Brands
