Until two weeks ago, when other priorities cropped up, I was a frequent and vocal basher on that board. Here is what i remember about all the hocus pocus, now you see 'em, now you don't crap going on.
First: The Series A preferred shares: The number of preferred shares held by Gallagher is mentioned, as I remember, in three different places in the financials. First the number is given as 270,000 shares and twice it is given as 270 shares. However, in the narrative it becomes crystal clear that 270,000 is the correct number and common shareholders are warned that, when Gallagher converts, this will result in substantial dilution. Thats 2,700,000,000 common shares! And Gallagher will convert ... he will get his. Of that one can be certain.
Second: When EYSM purchased Directory.com, the price was $1,000,000.00; payable either by shares, or cash, or a combination at EYSM's option. Obviously, there is no cash to work with right now so it'll almost certainly be in shares. OUCH!! that's a lot of shares.
Third: There are many other debt holders which have the right to convert to shares, also (I don't recall the exact amount of these debts. In fact, a precise amount may not have been given in the financials) At any rate, it all adds up to more dilution
Fourth: in the body of the report, EYSM is very upfront in telling shareholders (None of whom will even bother to read the report) that the company fully intends to raise $750,000.00 - $800,000.00 this year via share sales.
Fifth: Adding up all the potential dilution from the above sources shows that the OS could be diluted by as much 4,000,000,000+ more shares this year.
But Gallagher made a pretty smart move! After I had brought up all these points for many weeks, Gallagher issued a series of PRs addressing almost all of them.
A) No reverse split .... this year
B) Debt holders have agreed not to convert until at least April, at which time they will renegotiate
C) No further dilution of any kind until at least April (I'm betting that proves to be untrue as as the volume has been as high as 1/2 Billion shares in a day ... but who is to know with a gagged TA)
D) As a final touch, Gallagher also has consistently issued PRs touting the positive results of their new sales campaign.
Summation: I think Gallagher has hit upon a business plan that could work. But, it will never accrue to the benefit of share holders because of dilution, a mountain of past debt and the Series A preferred shares.
Plus, how much longer can this little run last when the company has as good as told shareholders that it all goes to heck again after April.
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