Winning Brands Corporation (WNBD)

[going]

From: Eric Lehner ([e-mail])
Sent: October-23-12 11:33:2


Memo to iHub Moderator –





Answers as requested, for the benefit of shareholders:







Relevant WNBD CEO questions that have NEVER been answered>>>

1. Where is the blogged about friendly financing that you said at the start of the year you'd be presenting a formal proposal in 90 days time to financiers you said you had already identified? If you had in fact already identified those friendly financiers and presented a formal proposal in 90 days time why have you not explained what became of them and the proposal you presented them?





Answer: A major financing is not yet in place. Regardless, best efforts continue to find the right combination of people and arrangements. Having prospects and concluding mutually arrangements are two different things. The process began within the 90 day time frame specified, and will continue until accomplished.





2. How much more time do you have with what little cash you have remaining without making an alternative decision to the friendly financing that hasn't come? Please provide a detailed list of exactly what financing instruments you are calling "friendly financing"?





Answer: Friendly financing is investment that cares about the company’s potential, including its current stakeholders. Unfriendly financing is purely transactional, with no regard for the interests of earlier (or future) investors. The company is resourceful and will continue to “make do” as best it can in order to keep progressing.



3. You keep denying a reverse split as a viable alternative to regaining financing..if this friendly financing or any other financing alternatives don't show up to keep this company running will you be able to sustain the business?





Answer: I do not deny that a reverse split is a viable alternative, technically. However the current conditions are not favourable to the interests of the common shareholders for a reverse split. R/S is more suitable if associated with sufficiently major positive circumstances such that the new higher consolidated share price can be maintained and grown thereafter, such as an elevation in the company’s public market tier where minimum share price requirements exist, as only one example. Post R/S split downward price pressure under current conditions would be made worse by the inevitable aggressive short selling that will be perpetrated by some.

4. With your 2nd Q being down -40%...how does this impact the speed of cash required to survive? How does this impact the necessary timing of needed cash? How do WNBD's financials reflect on your ability to attract this mysterious friendly financing?





Answer: Friendly financing as defined above is not mysterious, just hard to come by. The 2nd quarter deliveries being down did not help. However, 3rd quarter deliveries were up. Fluctuations of this nature in a single quarter in isolation are not indicative of a trend.



5. According to the CEO blog of August 20th wherein you stated that "accredited WNBD shareholders could contact you if they wished to participate in a final funding package", have any accredited shareholders in fact reached out to you to offer financing? If so how has that progressed so far? http://winningbrandscorporation.com/blog/2012/08/20/shareholder-question-financing-4/





Answer: Simple lenders do not need to be accredited investors, particularly if the number is low. We have been able to make do so far with modest arrangements and great team work all around. We have not entered into new share issuance subscription agreements during this period.



6. With no discount share financing in play since the middle of June 2012...how does this affect your negotiating power while trying to gain large chain accounts if you can't show the purchasing managers at the new accounts that you already have the necessary branding/marketing cash in play to assist in product sales?





Answer: It is always preferable to have abundant resources. However, one should not underestimate the value of good products, good teamwork and sincere passion as the basis of advancing with a variety of partners for mutual gain.



7. From the end of Q2 2011 through all of Q2 2012 you blogged about gaining entry into all of Walmart Canada's over 333 stores, over 650 DIB stores, 200 Duane Reade NYC locations, being available for over 1500 Mitre locations to order and several other accounts/territories entered for the 1st time! So please explain the cause of the discrepancy in the Q2 2012 -40% drastic drop off in across the board sales since according to all the blogs WNBD was available in well over +1000 new point of sale locations throughout the entire course of Q2 2012 that sales revenues weren't being realized in during the entire course of Q2 2011? Logic would suggest with all the new accounts blogged about the Q2 sales in 2012 should have greatly exceeded Q2 2011 not had a drastic -40% drop off???



Answer: The 40% drop in deliveries reflects less efficient (slower) conversion of orders to finished goods and subsequently into deliveries than under normal circumstances. Accounting convention calls for customer orders to only be recorded as sales only if deliveries have been made or arranged. When more funding is available again, then the velocity of order conversion will increase again. At any point in time, we may have between $20,000 and $75,000 in backorders. The larger point of your question, however, relates to why there would not be substantial growth regardless, even taking this factor into account. The wording of the question is important to consider. Although it is true that we informed our stakeholders in the first half of 2011 that Walmart was returning (and increasing) their involvement with 1000+, we do not control the speed of the implementation of such a re-launch. When dealing with the world’s largest retailer, these things can take longer than one would like. In the case of DIB, the stores began taking individual deliveries in Q4 2011 (as opposed to their distribution centers). Initial orders from stores who are trying the product on for size were modest because the Do it Best logistics operation permits the stores to take delivery of less-than-case lots. As DIB stores are becoming more familiar with 1000+, the orders are growing in average size, and replenishment is occurring more often. In Australia, a change of distributorship occurred. This caused some delays in implementing earlier plans, however, these are on track again for next year. In New York, we have marketing plans ready to deploy as resources come on stream. As a general comment, the fact remains that over the past three years sales have grown year-over-year despite a substantial reduction in advertising activity. This could only be possible if product demand was strengthening, organically.

8. Reflecting still on the last qrtly financials. You reported a -40% in comparison to the previous qtr. Can you please elaborate on how bad that previous qtr was as it relates to a breakeven qtr for you? and how do you recover from that previous qtr + the current -40% qtr? It appears that 2 qtrs like the last 2 and all previous qtrs that survival looks to be very very bleak at best given the cash burn.





Answer: Our prospects for survival are not bleak; our circumstances are challenging. There is a big difference. Consumer product brands that come from obscure independent companies do not usually succeed because the operators of that brand could not get past the challenges. Many people in life give up too easily. This is true for small companies too. There is usually more that can be done to survive challenges than meets the eye. It takes a certain combination of characteristics to be able to persevere. I think Winning Brands has what it takes. But the point is not merely to survive of course – the goal is to thrive. Winning Brands’ business model has the virtue of being simple and realistic. The company can have millions of dollars of profitable sales by attaining a relatively small percentage penetration of its market. The sooner that this can be accomplished, the better - naturally. However, if/when this occurs, then abundant cashflow from sound, systematic and precise operations will permit a great deal of healing for all interests to be satisfied and duly rewarded. Whether we can accomplish this is a risk – but then again, most businesses are risky. The terrible economic period that we have gone through has taken its toll on even the most supposedly secure corporations, with bankruptcy and layoffs bringing distress to many. Regardless, we will survive and eventually thrive, in my opinion, for reasons specific to our business. The financial statements filed annually by Winning Brands provide an outline of the company’s operations, challenges, opportunities to address your financial questions, such as break even analysis, in greater detail.





9. Given you've worked with your business plan for 7 years, your body of work the results from that plan that has led the company to a desperate need for cash , PPS bouncing between .0001 and .0002 and no dollars to do anything with. What changes are you going to have to initiate to divert from this current terrible path you are on from an investing financial perspective? Will you still be the CEO given your track record to investors? How will you measure your successes going forward? Will try and use a strict budget for expenditures in developing branding necessities? Unlike the 90 day window of new friendly financing you stated that never evolved ... What will be your new planned target dates and numbers for accomplishments that create shareholder value?





Answer: The question of who should be CEO going forward will be addressed in concert with financing, no doubt. I am prepared to cooperate with arrangements that are in the interests of common shareholders. A plan that envisions taking the company private or other techniques to disassociate the current common shareholders from their equity position are obviously not in their interest, regardless of who would be CEO. Having said that, I am proud of what has been accomplished operationally and the foundation that exists for accelerated growth. I have invested several hundred thousand dollars of my own in the earliest stages of the enterprise, prior to it becoming a public enterprise and have a vested interest in its success. I have also ensured that the convertibility of the preferred shares to common is only on a one for one basis. This is favourable to the current common shareholders because the economic interests are oriented to the common shareholders. On the subject of budgets, the company has always operated with financial discipline. There is nothing new in the idea of a budget. However, it is in the nature of test marketing and R&D to try things. Some of these suggestions come from the investors themselves, either as recommendations or as conditions. Some things work better than others. When the history of this brand is written, the cumulative investment that was required for 1000+ to become a household name will be found to be entirely reasonable, or even frugal, by comparison to norms for national brands, historically. I am confident of my role in bringing about this outcome.





10. Given your desperation for cash and the needing of some sort of financing...will you detail with full disclosure the type of financing you get and the conditions to the financing IF its secured? How is your supply chain handling your account as you reach critical mass in survival? Are they understandably guarded and asking for cash in advance on the product and services you require? Is this impacting current delivery schedules? and have you made any adjustments to your rate of pay to parallel the bad financials?





Answer: The company already provides disclosure regarding its sources and uses of capital that meets the standards of www.OTCMarkets.com for the Current Information tier. It will continue to do so. Our supply chain, our staff group and our customers constitute a terrific team. There are no particular problems – just reasonable accommodation to cooperate for mutual benefit, taking into account the needs that are specific to each. Naturally, this slows down the process of converting orders to delivered product because it is not possible to operate with full efficiency.

11. In an earlier CEO statement you specifically claimed that scup and dirtydave have in fact been reimbursed in advance for "any legitimate expenses" associated with their WNBD consultancy work of putting on demos...at any point in the past did your advance reimbursement of their "legitimate expenses" include monies specifically for their time and effort for putting on any of their WNBD demos?



Answer: It was originally envisioned that they would be paid on a time and effort basis, as well as expenses, however it was their choice to implement an expense reimbursement model instead. Even in this, it was their further choice to forego or defer complete reimbursement. The company has responded to their self-motivated (and self-financed) videos and local initiatives with appreciation and respect, but not with consulting fees. The company had to draw a line in their generosity by insisting on at least providing transportation to a trade show, meals, accommodation and supplies. By no generally accepted standard would “consultancy” describe their relationship to the company.



12. In an earlier CEO statement you specifically claimed that no shares were handed out for the purchase of url's by WNBD but you didn't provide a statement on whether or not any cash was paid out by WNBD to a WNBD shareholder for any url's so please provide a statement on whether or not cash was in fact paid to a WNBD shareholder for any url's and if so how much?





Answer: Three payments of $500 were made for URLs to a party whom the company believes was a shareholder. These URLs were evaluated for their usefulness to the company. Winning Brands determined this value of the URL’s and paid accordingly. No demand was placed before the company for a fixed amount. The company had experience in the evaluation of such assets because it had done business with conventional domain vendors and understood the process. It is not possible, or necessary, for the company to know whether every party with whom it does business on an arms-length basis holds shares so long as no favourable treatment is provided that would compromise the company’s ethical obligations and any transaction is in the normal course of business. Apple, Ford, and thousands of other public companies have purchased goods from entities whose employees/owners may hold shares in them as an investment. There is no difference in principle in our case other than the fact that we are much smaller.





13. To the best of your knowledge how many WNBD message board posters have in fact bought discount shares from WNBD...and did you in fact verify in advance that all the persons who bought discount shares from WNBD over the years were in fact accredited investors...or did you just have them check a box that claimed they were in fact accredited investors? Also were you aware that all persons who have in fact purchased discount stock from WNBD were legally required to disclose those purchases if/when they posted about WNBD publicly?



Answer: We have not accepted share subscriptions from any party whom we believed to be a “poster” on a message board. However, we have no independent access to the identities of posters of most message boards. Determination of the accreditation status of a subscriber in our case involves legal counsel, who satisfy themselves in each case through a combination of warranty by the subscriber or review of the standards with the subscriber to confirm that the subscriber qualifies, prior to providing the attorney opinion letter required by the stock transfer agent. A legitimate process is more involved than “checking a box”, although I cannot comment as to the practices of other companies, which will no doubt vary considerably. In my personal experience, our subscribers have had no interest in posting on message boards.

14. Mr.Lehner,have you ever been approached by a stock promoter,who posts on the message board IHub, to do investor awareness (i.e. stock promotion campaign)....



Answer: On May 11, 2009, an iHub poster who had visited our office on a well-publicized tour, solicited our business, in writing, for his professional services. We did not consider the solicitation inappropriate because we are routinely approached by stock awareness organizations. We enquired further with him as to what he had in mind, but were not able to proceed further for a combination of reasons. These include (A) The fact that Winning Brands at the time was not yet Current Information tier. It is a violation of regulations to carry out the promotion of stock for which there is not “adequate public information” available, particularly if during the same period exempt share subscription(s) are under way. (B) The share price at the time, approximately .0049 was in the opinion of the company going to increase naturally by itself on the basis of growing interest in the firm. The creation of additional demand through promotional activity would in my view have created a non-sustainable spike. (C) Stock promotion, even when it is legal, is extremely expensive. The firm did not have the requisite budget, even if the right circumstances had been present. After careful consideration, the company therefore respectfully declined the interest that had been expressed in providing such services to us. In retrospect, it was the correct decision, because the share price did continue to advance naturally from .0045 in mid-May 2009 through higher lows until June 7, 2010, with active trading. In the summer of 2010, the prospect of losing the Walmart account alarmed many watching WNBD, including the formal Market Makers. This was a primary catalyst for the sudden decline in the share price at the time. The current market capitalization (“value”) of the company is too low, in my opinion, relative to its merits and progress and will increase again, despite the current O/S. For the record, Walmart ordering resumed and things are fine with this account.





15. How many ihubbers have gotten WNBD product placements at retailers, hotels or any other location in the past while at the same time posting on the WNBD investors hub message board?





Answer: Although shareholders often suggest that we approach certain retailers, the Winning Brands Sales Department is always of necessity the presenting party. Accordingly, we are not aware of “ihubber posters” getting WNBD product placements.





16. Why do you constantly blog about WNBD critics and fuel speculation that they are somehow to blame for your track record/performance of actually delivering on your own earlier stated/projected expectations? Do you grasp the concept of taking accountability for your own previous statements made or do you genuinely believe WNBD critics have anything to do with how well you stain remover?



Answer: A review of the CEO Weblog reveals a distinction made between persons whose opinions may be critical of particular actions of the company (which is fine), and persons who habitually and exclusively dwell on the negative – particularly persons who by their own admission are not shareholders and pursuing some other agenda. My service to the company is oriented to identified shareholders, for whose interest we are building a company, albeit during a challenging period of its life. In that service, there is often spirited discussion about the relative merits of certain actions. Shareholders of the company have seen that the management of Winning Brands is far more accessible, willing to discuss its actions and pleased to respond to authentic shareholder exchange of views on the business than most companies