Internet streaming company converts debt to equity


Publicly traded IO World Media, best known for streaming the uncensored show of Bubba the Love Sponge, has wiped out its debt by converting nearly all to preferred stock. That debt had all been owed to officers, directors and affiliates, who now need to push the company’s stock price up to get a return on their investment.

The debt for equity exchanges in April converted $5,773,778 worth of debt to three million preferred shares. According to an SEC filing, the preferred stock is convertible to common stock on a one-to-one basis, but may be redeemed by the company for $1 per preferred share under certain circumstances. The common stock has recently been trading around 18-20 cents per share.

Filings with the SEC in recent days have brought IO World up to date on its financial filings, which had lapsed for several years. The company has filed a single 10-K, plus an amendment, to cover the time from October 1, 2005 through December 31, 2010. What had been a public shell company acquired the intellectual property of Search Play LLC and LLC in November 2005 to create the online streaming company subsequently known as IO World Media.

The company reported $841K of revenues in 2010 and a net loss of $921K. That was before the launch of Bubba’s subscription service in February 2011, with an initial sign-up offer that the company said generated nearly $1 million in revenue.

In addition to the conversions of debt to preferred stock, IO World has also been issuing restricted stock to its top officers and converting some other debt to stock. The board of directors in April authorized the issuance of three million shares of restricted common stock to the company’s three directors, Thomas Bean, John Stanton and Alex Edwards, in lieu of any other compensation for their five years of service through the end of 2010. An additional 2.42 million restricted shares were issued to nine other individuals for their services over the past year. Also, an unsecured promissory note owed to Zanett Opportunity Fund Ltd, a related party shareholder of the company, was converted to 1,942,905 shares of common stock.

Since then, Stanton has stepped down from the board to focus on his other ventures. Filling his seat on the board of directors is none other than Bubba himself, whose legal name appearing in SEC filings henceforth is Bubba the Love Sponge Clem.

Prior to the actions in April, Bean, Stanton and Edwards had owned over 72 million shares of IO World Media’s stock, which was 66% of the shares outstanding at the end of 2010. The SEC filing showed $6.8 million of total liabilities as of December 31, 2010. The debt conversions last month have reduced that debt load to less than $500K.

“The Company’s officers, directors and affiliates continue to have an extremely long-term vision for the tremendous value that we believe IO World Media will achieve. By converting the debt into preferred stock, it is our opinion that this should position the Company for success in the future and help increase shareholder value,” said Thomas Bean, who is CEO of IO World Media.

RBR-TVBR observation: Some comments posted on an Internet discussion board don’t like the dilution of the insiders converting their loans to stock, but a startup that’s working to get to break-even needs to conserve cash every way that it can. This penny stock may look cheap at current prices if it succeeds, but would be just another start-up that failed if it doesn’t grow its business.

RBR-TVBR Publisher Jim Carnegie’s interview with Bubba the Love Sponge about the Internet radio business opportunity can be seen by clicking here. That video first appeared in the initial issued of Manager’s Business Report. The second issue of MBR is just hitting the street, so click here to opt-in if you aren’t yet receiving MBR.