TheDirectory.com, Inc. (SEEK)

[Carini]

SEEK CEO: DILUTION WILL CONTINUE UNABATED…

Spin it however you want, that’s basically what he said. Very clearly. In fact, it’s SEEK’s top priority this year. To reduce its current debt by 85%. You know how SG reduces debt? He issues shares. Lots of them. Like, 2.7 billion shares in the last 15 months. Then he tells his donors, I mean “investors,” that this is a good thing, and that he doesn’t really care about the share price because, you know, shareholder equity!

But my favorite part of the call had to be when SG described his debt reduction process as "an across the board positive for all of us." LOL tell that to anyone who bought above the trips!!!

He also said he would do "whatever it takes" to meet his goal. What do you think it will take after another billion or so shares hit the ask in the next few months, issued at under .0001, and nobody is willing to buy them anymore ever at .0001? It will take a reverse split. Writing is on the wall people.

Anyway, I couldn’t sleep last night so I wasted some time partially transcribing the first part of the conference call below, with some annotations, just to point out a few things. But first, some thoughts.

So, what is SEEK’s current debt? Not sure, but as of August 30 it was $2,558,839 according to the last 10-Q. Now just to be nice, let’s subtract the $678k in accounts payable and accrued expenses, but we also better add in the $250k loan from Fife and the additional $400k in capital mentioned on the previous conference call that would not have been counted in the 10-Q. Add it all up and you get $2,530,811 in debt as of August 30.

Now SG has issued a LOT of shares since August. About 855 million of them in fact. The bulk of the volume since then has been in the low trips, but a decent amount was traded around .0010 too. But let’s be really nice again and say that the average conversion price (which is generally 50% of the lowest recent share price) was around .0005. Multiply that by 855 million and you get about $427,000. And that’s being generous. Heck, let’s call it half a million bucks in debt reduction, and assume that SG hasn’t taken out any additional debt since the Fife loan, and just round it off and guess there’s around $2 million in current debt.

85% of 2 million dollars is $1.7 million. That’s SG’s goal for 2015 (using my approximate numbers obviously) -- to reduce SEEK’s debt by $1.7 million.

Note that, at the likely current conversion rates, 500 million shares is worth just $50,000. So how many shares are required to pay off $1.7 million? SEVENTEEN BILLION SHARES. (Now you see why SG was required to up the A/S to 30 billion shares eh? Because 25 billion shares converted at .0001 comes out to… $2.5 million, or just about SEEK’s last reported debt. IMO anyway.)

Yeah, yeah, I know, SG says he is going to make all kinds of new revenue to pay off debt. He said that last year too, of course, but whatever. Let’s say he manages to pay off HALF of that $1.7 million with actual revenues rather than by issuing shares. That still would mean issuing 8.5 BILLION shares. And let’s even say the PPS increases, in spite of the ongoing dumping, such that ALL of the conversions happen at .0004 (i.e., a PPS bottom around .0008 for all of 2015). That still requires 4.25 BILLION shares. Add that to the current O/S, and you have about 10 BILLION shares outstanding by the end of year, and that is WITH all these best-case scenario (IMO) assumptions.

So, does anyone really think there won’t be a R/S this year???

Actually, I will say that IF Scott manages to fulfill his goals and gets some decent revenue coming in that is growing, and eliminates most of SEEK’s current debt without taking on more and more, and something close to what he claims he has planned for his whole enterprise starts to pan out, then SEEK might be an attractive investment AFTER the R/S takes place and the SS gets cleaned up. Before then, however, you’re just giving your money away to SG to pay off his debts, IMO.

Anyway, on to the conference call (my comments are in blue). IMO Scott sounded noticeably less confident and more nervous in the past, especially at the beginning when he was trying to “clarify” the A/S increase to 30B shares, and he sure got off the phone quick when he was done…

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Good afternoon everyone, uh this is Scott Gallagher, and the, uh, CEO, and, um… and, uh, we’re gonna start our call now, it’s uh 5 minutes after the hour [and five minutes early, according to the PR], uh, before we begin today’s call I’d like to read our SEC disclaimer [this is always my favorite part]:

Certain matters being discussed by Thedirectory.com’s management on today’s conference call include forward-looking statements, which are made pursuant to the safe harbor provisions of the SEA of 1934. Investors are cautioned that statements which are not strictly historical statements, including statements concerning future expected financial performance, management objectives, and plans for future operations, the release of new products or services, and market acceptance of those products or services, constitute forward-looking statements.

Forward-looking statements include, but are not limited to, any statements containing the words: Expect, Anticipate, Estimate, Believe, Should, Could, May, Possibly, and similar expressions. [LOL]

Those forward-looking statements involve a number of risks and uncertainties, that could cause actual results to differ materially from the forward-looking statements. Those risks and uncertainties are detailed in the company’s filings with the Securities and Exchange Commission that can be found at SEC.gov. I encourage every shareholder to review those filings, especially our SEC form 10-k filing, which includes our audited annual results.

So again thank everybody for uh, thank everyone for taking some time today… I would encourage everyone to go and take a look at our SEC filings, uh, 2014 is when we became a fully-reporting company, we’ve got three years of audited financials on the books, and our fourth year coming, uh, here shortly, in the next, uh, month and a half.

So today’s call is really designed, um, to provide some clarity to the ongoing issues that we’ve had at the end of, uh, of the year of 2014, and then also to kind of detail our plans for what we’re looking to achieve at TheDirectory.com, for the coming year and beyond.

So before I jump into the operating plans for the year, um, I’d like to provide everyone with an update as to the biggest event, really, was at the end of 2014, when we increased our authorized shares. The reason we increased our authorized share count was, as part of our, um, debt financing, uh, relating to the acquisition of the, uh, the $2.1MM acquisition of the hello network sites, we were required to keep a certain number of shares held in reserve, um in case of a price decline. Obviously at the end of last year the price declined [oh gee, did it?], um, it declined [all on its own right? It just… declined?]to a point where we didn’t have enough shares, um, under the authorized amount, to meet those obligations [read: I diluted the crap out of this thing for a year until I was having to issue so many shares at .0001 to cover such small amounts of debt that I realized that I was going to need WAY more than the 6B I had authorized to keep this thing running]. Which are typically, they range from anywhere from 3 to 5 times, um, so sometimes, there’s quite a bit of shares that are held in reserve, not that they’ll ever be issued [please just believe me and try to ignore the fact that I have issued 2.7 billion shares in the past 15 months, much of that several multiples above the current conversion prices requiring a billion shares just to pay off $100k in debt, and just issued another 280 million shares this week], but they need to be held there and we are contractually obligated to that.

So obviously rather than risk a default, uh, which would be catastrophic to the shareholders and the company [more catastrophic for shareholders than seeing the value of, say, a $10k investment at the modest price of .0030 drop to be worth $600 with no hope in sight?], we made the obvious decision [LOL] to increase the authorized share count, to put us back in compliance with the loans [I took out], to remove that default risk [that I created] and move on [to selling more shares].

So hopefully that provides investors with some clarity as to what the reason was behind that move. [[color=blue]Yes, it is clear now: you took on a bunch of debt, missed most of your goals and deadlines, found yourself unable to service those debts because revenues were declining, issued 2 billion shares in a year to keep the debt holders at bay, all while continuing to make empty promises, miss deadlines, not communicate with shareholders, and pretend nothing was wrong as the PPS steadily declined to where it is today. As a result, you lost all investor confidence and nobody will even buy SEEK at .0003 anymore. Hence, you will need up to 30 billion shares to issue at .0001 and lower in order to keep paying the bills, which you likely won’t get even a third of the way through before nobody will even buy SEEK at .0001 and your debt holders force you to do a R/S so you can repeat the process for the foreseeable future]. It was specifically, um, based on the share price decline [that just happened, somehow, weird right?[/color]], to make sure that we could be in compliance with our loan covenants.

So since we’re on the loans, um, and debt, uh, lets kind of just move forward and start the discussion right there. Because as we’re moving into 2015, internally we think this is really uh the most important subject to discuss [ya think???]. We’re looking at 2015 is really gonna be all about two specific issues for us: reducing our debt, and growing our top line. Um. First and foremost, our debt is what got us here [no sh*t Sherlock, that and issuing 2.7 billion shares in 15 months]. Because our lenders extended us that access to capital, today we’re a multimillion dollar company, expecting revenue of $3-to-4 million dollars, um, I’ll discuss that a little more later, from a $500k company in 2012.

[Hey remember this?

“For the full year the Company is projecting revenue of between $4.5 and $6 Million with net income in the $1.1 to $1.6 Million range.” – Scott Gallagher, January 24, 2014.

[color=blue]Huh? How is your highest “expected” revenue for 2015 still $500k lower than your LOWEST projection for 2014? I thought you built value this year? And how did those 2014 projections turn out, anyway? Let’s see…

Actual 2014 revenue: Q1 - $801k; Q2 - $477k; Q3 - $390k; Total = $1.67M.
Actual 2014 net profit: Q1 - $213k; Q2 – 180k; Q3 - $3,509; Total = $396k.

So, for SEEK to meet the bare minimum of SG’s “expected” 2014 goals, it will have to show Q4 revenues of $2.83MM, and Q4 profit of $700k. Given the Q3 profit was less than $4,000, I have a feeling the real question is whether SEEK will even make it to a third of what SG projected last January. Kind of puts his most recent projections in perspective, eh? Moving on…[/color]]

Although we were growing we were doing it slow [noooooo, really?]. So we decided that this was a much, um, better way to accelerate our growth [and decimate the PPS and our shareholder’s investments along with it], increase the value of the company [for who?], which we have, create stockholders equity [there’s that term! LOL], which we have, um, and so, while debt at this point in the cycle is something that we’re focusing on eliminating [by selling billions of shares], its obviously part of the growth mix [“growth mix” LOL].

Um, 2015 is the year that we’ve really made the internal decision, based on now having integrated the acquisition for just over a year, um, to do whatever is necessary to rid ourselves of all, or no less that 85% of our debt. [Did you hear that, folks? “Whatever is necessary.” What do you think will be necessary after another half-billion or billion shares are issued and stacked on the ask at .0003, then .0002, then .0001, and finally nobody will buy them and help SEEK “reduce debt”? I’ll tell you what will be “necessary for the good of the company and the long-term benefit of shareholders”… a reverse split.] So we’re putting a metric out there that we can be measured by, and that is, that by the end of this fiscal year, our plan is to reduce our debt levels on our coming audit, um, for whatever that number is, minus 85% by the end of this year. Our goal is really to eliminate all of them, but that’s the metric where we, uh, it’s no less than that. That’s our fail safe. [Get it folks? Stop trying to measure SEEK by the PPS, or revenues, or growth. Just focus on its debt and do your part to help reduce it, okay?]

Reducing our debt obviously reduces our operating costs [Really? How much does it cost you to print shares?], um, which increases our profits, um, and thereby increases equity. [This is tenuous logic at best.] So, the whole combination of that process, um, is just, uh, an across the board positive, um, for all of us [the “debt reduction” that SG has been doing the past year is an “across the board positive for all of us”???!?! Did he really just say that?] , and really, I mean again, our debtors and lendors have been very, very good to us [yeah I bet they have].

When we did the initial deal for $2.1MM that was worth more than our market cap. It’s very difficult for an investor to come in and loan someone money, loan a company money, um, to buy something that’s worth more than that entire enterprise [not if they are guaranteed to be paid back in shares at a 50% discount to market price, and it’s a bit of a stretch to call a known toxic financer an “investor” as if they even needed any qualifications beyond an A/S big enough to give them enough shares]. So, um, that has been, they were a very important part of our enterprise, and will continue to be an important part of our enterprise if opportunities materialize going forward. But at this point, this year, it’s time for us now, we bought the assets that we wanted, it’s time for us to monetize them, to roll them all out, and realize the profits and the opportunities that were the genesis behind the deal [oh THIS year is the year, I see.]

Hey, remember this? It was a long time ago so maybe not. October 22, 2013 to be exact…

TheDirectory.com Founder and Chief Executive Officer Scott Gallagher commented, "I'm very excited to notify our stockholders that our plan to 'Build' www.TheDirectory.com into a national brand will effectively begin during the first quarter of 2014. Our plan is to launch a multi-channel branding campaign that begins in Q1 and runs consistently throughout the year over various media channels including cable and satellite television, radio and of course major digital channels such as Google, Yahoo, Facebook and others. The timing of the campaign could not be better for us as we position the Company for additional revenue and channel partner growth heading into the ad tech conference in November." Gallagher continued, "We already connect local businesses with over 200,000 online and mobile users daily, some 75 million annually. As we begin the branding of www.TheDirectory.com and the revamp of the city guide network we fully expect that number as well as our revenue and profit levels to grow exponentially."

“Exponential” LOL…]

Um, so our plan for this year. We’re confident now saying that after we have integrated the acquisition, um, for over a year, we will grow sequentially every quarter this year [grow what? grow how? revenues? employees? shares issued?]. Last year I know we had a good first quarter after we first kind of integrated the acquisition, and it was choppy the rest of the year [that’s one way to put it]. As we rolled out the call centers [a year late], as we integrated the, um, other assets that we acquired [???], as we later in the year finally rolled out the city guide network [“With regards to our newly acquired city guide network, we're already in talks with an award winning UI designer to assist us with a front end redesign that should improve both user engagement and monetization. We expect the new UI changes to go live during Q1” – SG, Oct. 22, 2013], um, we’re to a point now that it’s becoming a little more predictable [yes, yes it is], and we see what are the, um, what are the opportunities we have [to sell more shares], and how we can structure this so that it’s a more predictable revenue stream kinda going forward. So, um, again, on the debt side, an 85% reduction based on our coming audit is our goal and we will grow sequentially the entire year. [What does it even mean to “grow sequentially”?]

We talk about the debt. The best way to reduce the debt is to accelerate sales [of shares]. Obviously the faster we grow [our O/S], the more capabilities we have to use that cash [“cash”] to pay down the debt. That takes the pressure off the stock, there’s no conversions, um, so that is the obvious path for us to accelerate [if only we could actually do it], um, in addition to that, we need to focus 100% on controlling our expenses, we need to execute and reach our target of 3 to 4 million [like last year?]. Um, if we do that, and we achieve that target of minimal of $3 million in sales in 2015, we will exit 2015 essentially debt free, or under our goal of 85% debt reduction. [we’re screwed, people.]

We’ve got aggressive monetization plans for the city guide network [like last year?], and you’ve gotta remember we acquired the… that was the primary asset we acquired in 2013 [and said would be re-launched and producing revenue in Q1 2014]. We paid $2.1MM for it [well, our shareholders did, by buying the shares we paid that debt back with], and that city guide network is why we did that deal. That network we essentially spent the next year redesigning, thinking about and figuring out what we wanted to do with it, and we just relaunched it just a little over two months ago at the adtech show in November. So 2014 revenue was essentially absent of any material revenue from the city guide network [even though we told you repeatedly it would not be]. I believe, of course my opinion is totally biased, but I believe we have a very good chance of exceeding our targets for the full year if we are successful in executing our monetization programs that we have planned for the city guide network [why am I not convinced?]. Um, in 2015, as part of that acquisition, we envisioned, um, peeling off, um, some of those domains that were in the city guide network and creating a travel network as I’ve discussed in the past. The travel network is also planned for launch in the first half of this year. When that launches, revenue will be coming in essentially within the first month of launch… [Sure it will, Scott, sure it will…]