For those who are following this matter:
In January 2017 a convertible promissory note holder, an investment firm, who had been satisfied with previous transactions with Winning Brands, provided $28K. The note would mature in January 2018.
In 2018, the holder did not require the funds and agreed with me that it would be better for the company to not issue more shares and to stay the course so that the company could grow stronger. We therefore agreed to let Winning Brands eventually settle the promissory note with money rather than shares, at some reasonable point in the future from earnings, at 5% APR.
Starting February 22, 2019, there was sudden and dramatic growth in WNBD share trading volume. This created (false) rumors on the discussion boards and elsewhere that there had been dilution. This makes note holders nervous, because from their point of view, it may suggest that another party is receiving special treatment.
Therefore, without informing the company, the note holder issued a request for conversion with the transfer agent. The holder assumed, correctly, that the transfer agent would notify the company to approve or not approve. Some promissory notes have transfer agent instruction letters that permit/require the transfer agent to proceed with the issuance if the company does not reply within 48 hrs.
The transfer agent sent notice by email to our official address, with attachments, to Winning Brands. However, that e-mail notice bounced back as “file size too large”. The transfer agent then forwarded that notice instead to a different address which it believed in good faith was a valid alternative address. (It is not a Winning Brands address but was used 2 years ago as a stop-gap method to deal with a large file size before). Therefore, the written notification was not actually received by Winning Brands in reality. However, the issuance is not technically invalid because it is pursuant to legitimate documentation. The note forbearance was voluntary, not obligatory.
Yesterday, OTC Markets provided an update to the share count. Winning Brands subscribed to such automatic updates when the service became available, as we have nothing to hide. This update triggered an enquiry yesterday to Winning Brands by a person who follows the company. I do not know if that individual is a shareholder or not, but the question was legitimate: Did I issue shares at the same time as the company was claiming that it has no undisclosed share issuances?
I expressed my surprise, contacted the transfer agent, reviewed the issuance journal and enquired whether it was too late to cancel the issuance.
Today I spoke with the organization that had been holding the note. Ironically, the apparent positive business developments that are occurring at Winning Brands in 2019 were an additional motivation by the note holder to become a shareholder at this time instead of a creditor. I was informed that none of these shares had been sold, or even put on the ask. The organization apparently feels that good things may be ahead for Winning Brands. They did not sell the shares, or even offer them for sale, because they feel that Winning Brands stock price is likely to rise beyond current levels. Also ironically, the organization expressed interest in additional investment with Winning Brands.
Summary
- The issuance was not prompted by the company.
- The transfer agent acted in good faith, notwithstanding the unfortunate miscommunication.
- The issuance is not technically improper as the forbearance was voluntary, not mandatory.
- The issuance has had no bearing whatsoever on WNBD trading volume, nor the bid and ask, since February 22nd
- The organization in question perceives Winning Brands as being on a positive course and is open to discussing future requirements.
- Unfortunately, this puts no funding into our hands at the present moment, and thus is not a solution for the immediate objectives.
- Despite the foregoing, our JV negotiations are still positive, on all three fronts. A separate update on that subject will be posted later tonight.
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