Winning Brands Corporation (WNBD)

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investors worry about the company issuing shares as a “printing press” for the enrichment of the controlling owners/managers without any reasonable prospect of a translation of the financing activity into a growth of the value of the company for the benefit of shareholders in general, particularly “retail investors”; ie. those who purchase shares in the open market through self directed accounts or their brokers.

A companion worry on the part of such shareholders is that the consolidation of the outstanding shares through a reverse split will perpetuate a cycle of increasing dilution followed by reverse split, repeatedly – all with the feared net result of declining net value in the holdings of the retail investor, rather than a significant speculative growth in value that holders of junior public companies seek as compensation for the risk that they take. This is because there is a risk that the new higher share price that follows a reverse split may fall instead of rise, leaving the shareholders with lower net value for their investment following the reverse split.

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Simply put, the firm would only undertake a reverse split if in the opinion of qualified advisors who have a demonstrated track record of professional competence in this arena feel that on balance such a measure would be beneficial to the shareholders in general. This may include, but not be limited to, the ability of the firm to expand the scope of its financing activities in European capital markets (where Winning Brands shares already trade albeit with still underdeveloped support), achieving a minimum price per share to qualify for a stock exchange, being able to achieve reportable events over a reasonable “per share” basis, reducing the number of “notional” shareholders – those holding a single share or sub-board lot quantity – by substituting a cash amount for fractional shares, or many other technical considerations.

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The share price should therefore be considered in the context of a process that is only underway rather than finished. By this standard, a market valuation of the firm below 1 cent is considered by management to significantly undervalue the company’s current and future possible “worth”. This is mentioned in order to caution shareholders that pre-mature sale of the shares at historic lows also carries the risk of unnecessary loss in the present should future internally generated cashflow permit the company to buy-back its shares on the open market, or as part of a formal offering, as an alternative to dividends for the benefit of common shareholders.

The advantage to common shareholders of a share buy-back is that the funds invested by the firm in this manner have lingering benefit for the remaining shareholders, rather than the “one time” benefit of a dividend. No promise is being made that the firm will be in a position to do this. It is an illustration that if/when the company is successful to its plan, there is a mechanism favoured by management to diminish the outstanding share count in future to offset the earlier growth in the number of outstanding shares during the early stages of the company’s capitalization.

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Decline of a share price after consolidation is exactly the situation which Winning Brands Corporation would like to avoid. Winning Brands management has been conservative in all matters pertaining to capitalization. We therefore invite interested parties to carefully peruse that FAQ and in particular the comments regarding dilution and reverse splits. This will help the reader understand our policies in respect of these issues.

Ultimately, it is the goal of the management of Winning Brands Corporation to earn the confidence of the investment community through decisions which are responsible, even if they cannot be entirely without risk. The effect upon retail investors currently holding shares of Winning Brands Corporation is an important criterion by which management evaluates the benefit of financing strategies. It is one of several criteria, but a very important one. The long term goal of all Winning Brands financing is to obtain capital for the advancement of the total worth of the organization. This may involve the utilization of new capital sources for the realization of opportunities – some of which may involve risk. However the operating parameters of the company are better disclosed than for many junior public companies, and in particular better than the majority of Non-Reporting Issuers. This means that a reverse split is possible at a suitable time, but will be handled responsibly, with an eye on preserving shareholder value.