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EX-31.2 - SILVERTON - 10-Q - 3-31-11 - 302 CFO CERT - Silverton Adventures, Inc.silverton_10q033111-cfo302.htm
EX-31.1 - SILVERTON - 10-Q - 3-31-11 - 302 CEO CERT - Silverton Adventures, Inc.silverton_10q033111-ceo302.htm
EX-32.2 - SILVERTON - 10-Q - 3-31-11 - 906 CFO CERT - Silverton Adventures, Inc.silverton_10q033111-cfo906.htm
EX-32.1 - SILVERTON - 10-Q - 3-31-11 - 906 CEO CERT - Silverton Adventures, Inc.silverton_10q033111-ceo906.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the quarterly period ended March 31, 2011
   
     
[  ]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
   
For the transition period from _________________ to _________________
   
     
Commission file number 333-153626
   
     
Silverton Adventures, Inc.
   
(Exact name of small business issuer as specified in its charter)
   
       
   
Nevada
80-5072317
   
(State or jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
             
           
5070 Arville Street, Suite 7
           
Las Vegas, Nevada 89118
       
(Address of principal executive offices)
   
             
       
(702) 876-1539
   
       
(Issuer's telephone number)
   
               
         
(Former name, former address and former fiscal year, if changed since last report)
   

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [  ] No
 
 

 
 
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accredited filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “Smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer [  ]                                                                           Accelerated filer [  ]
Non-accelerated filer [  ]                                                                Smaller reporting company [X]
 

 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. [  ] Yes [X] No
 

 
1

 

TABLE OF CONTENTS
 
PAGE
 
PART I — FINANCIAL INFORMATION                                                                          3
 
ITEM 1. FINANCIAL STATEMENTS                                                                         3
 
ITEM 2. MANAGEMENT’S DISCUSSON AND ANALYSIS OF FINANCIALS CONDITION AND RESULTS OF OPERATIONS                                  10
 
PART II — OTHER INFORMATION                                                                            18
 
ITEM 1. LEGAL PROCEEDINGS                                                                            18
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                    18
 
ITEMS 3. DEFAULTS UPON SENIOR SECURITIES                                                                     18
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                   18
 
ITEM 5. OTHER INFORMATION                                                                            18
 
None                                                                                        18
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                                   18
 
SIGNATURES                                                                                     19







 
2

 

PART I — FINANCIAL INFORMATION
 
 
ITEM 1. FINANCIAL STATEMENTS


 
3

 


SILVERTON ADVENTURES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
               
               
ASSETS
               
     
March 31,
 
June 30,
     
2011
 
2010
     
(Unaudited)
 
 
CURRENT ASSETS
         
               
 
Cash
$
         1,875
 
$
            775
 
Accounts receivable, net
 
        88,387
   
                -
 
Related party receivables
 
    3,404
   
                -
               
   
Total Current Assets
 
          93,666
   
            775
               
PROPERTY AND EQUIPMENT, net
 
          63,521
   
         5,879
               
   
TOTAL ASSETS
$
        157,187
 
$
         6,654
               
               
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
CURRENT LIABILITIES
         
               
 
Accounts payable and accrued liabilities
$
      121,334
 
$
        57,045
 
Related party payables
 
        23,287
   
        28,590
               
   
Total Current Liabilities
 
      144,621
   
        85,635
               
STOCKHOLDERS' EQUITY (DEFICIT)
         
               
 
Preferred stock, 10,000,000 shares authorized
         
 
   at par value of $0.001, no shares
         
 
   issued and outstanding
 
                -
   
                -
 
Common stock, 75,000,000 shares authorized at par
         
 
value of $0.001; 17,800,000 and 11,250,000 shares
         
 
issued and outstanding, respectively
 
        17,800
   
        11,250
 
Additional paid-in capital
 
        65,639
   
        24,750
 
Accumulated deficit
 
       (70,873)
   
     (114,981)
               
   
Total Stockholders' Equity (Deficit)
 
        12,566
   
       (78,981)
               
   
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$
      157,187
 
$
         6,654
 
 
The accompanying notes are an integral part of these financial statements.

 
4

 


SILVERTON ADVENTURES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
   
 
                     
                       
     
For the Three Months Ended
 
For the Nine Months Ended
     
March 31,
 
March 31,
     
2011
   
2010
 
2011
   
2010
                           
REVENUES
$
       204,982
 
$
        19,196
 
$
        247,792
 
$
        48,692
COST OF SALES
 
         30,136
   
          4,168
   
          43,307
   
          8,176
                           
GROSS MARGIN
 
       174,846
   
        15,028
   
        204,485
   
        40,516
                           
OPERATING EXPENSES
                     
                           
 
Depreciation expense
 
         20,529
   
   377
   
 27,465
   
     1,131
 
General and administrative
 
         73,743
   
        11,535
   
          86,546
   
        45,514
 
Professional fees
 
         19,830
   
        10,248
   
          46,366
   
        36,124
                           
   
Total Operating
                     
   
  Expenses
 
       114,102
   
        22,160
   
        160,377
   
        82,769
                           
LOSS FROM OPERATIONS
 
         60,744
   
         (7,132)
 
 
          44,108
   
       (42,253)
                           
 
Income taxes
 
                  -
   
                 -
   
                   -
   
                 -
                           
NET LOSS
$
         60,744
 
$
         (7,132)
 
$
          44,108
 
$
       (42,253)
                           
BASIC AND DILUTED
                     
  LOSS PER SHARE
$
             0.00
   
           (0.00)
 
$
              0.00
   
           (0.00)
                           
WEIGHTED AVERAGE
                     
  NUMBER OF SHARES
                     
  OUTSTANDING
 
   17,800,000
 
 
  11,250,000
 
 
    13,150,000
 
 
  11,152,162
 
 

The accompanying notes are an integral part of these financial statements.



 
5

 


SILVERTON ADVENTURES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
(Unaudited)
                           
           
 Additional
           
 
 Common Stock
 
 Paid-in
 
 Accumulated
     
 
 Shares
 
 Amount
 
 Capital
 
 Deficit
 
 Total
                           
Balance, June 30, 2009
   11,061,000
 
 $
   11,061
 
 $
       6,039
 
 $
     (58,611)
 
 $
     (41,511)
                           
Common stock issued for cash
                         
at $0.10 per share
       189,000
   
       189
   
      18,711
   
              -
   
      18,900
                           
Net loss for the year ended
                         
June 30, 2010
                  -
   
            -
   
              -
   
     (56,370)
   
     (56,370)
                           
Balance, June 30, 2010
   11,250,000
   
   11,250
   
      24,750
   
   (114,981)
   
     (78,981)
                           
Common stock cancelled
      (500,000)
   
      (500)
   
          500
   
              -
   
               -
                           
Common stock issued for purchase of
                         
  Worldwide Media Organization
     7,050,000
   
     7,050
   
      40,389
   
              -
   
      47,439
                           
Net income for the nine months ended
                         
  March 31, 2011
                  -
   
            -
   
              -
   
      44,108
   
      44,108
                           
Balance, March 31, 2011
   17,800,000
 
 $
   17,800
 
 $
      65,639
 
 $
     (70,873)
 
 $
      12,566
 
 

The accompanying notes are an integral part of these financial statements.
















 
6

 


SILVERTON ADVENTURES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
                 
       
For the Nine Months Ended
       
March 31,
       
2011
 
2010
CASH FLOWS FROM OPERATING ACTIVITIES
         
 
Net income (loss)
 $
        44,108
 
 $
      (42,253)
 
Adjustments to reconcile net loss to
         
 
  net cash used by operating activities:
         
   
Depreciation expense
 
          3,955
   
         1,132
   
Bad debt expense
 
        14,098
     
   
Expenses paid on behalf of the Company by a related party
 
        24,772
     
 
Changes to operating assets and liabilities:
         
   
Changes in accounts receivable
 
       (69,567)
   
           (910)
   
Changes in accounts receivable - related party
 
         (1,154)
     
   
Changes in inventory
 
          3,035
   
                -
   
Changes in accounts payable and accrued liabilities
 
        61,923
   
       16,684
     
Net Cash Used in Operating Activities
 
        81,170
   
      (25,347)
                 
CASH FLOWS FROM INVESTING ACTIVITIES
         
 
Purchase of equipment
 
       (56,010)
   
                -
 
Cash acquired in purchase of subsidiary
 
          6,570
   
                -
                 
     
Net Cash Provided by Investing Activities
 
       (49,440)
   
                -
                 
CASH FLOWS FROM FINANCING ACTIVITIES
         
   
Common stock sold for cash
 
                 -
   
18,900
   
Proceeds from related party payables
 
                 -
   
       40,381
   
Repayments to related party payables
 
       (30,630)
   
      (39,372)
     
 
         
     
Net Cash Provided by Financing Activities
 
       (30,630)
   
       19,909
                 
NET INCREASE (DECREASE) IN CASH
 
          1,100
   
        (5,438)
CASH AT BEGINNING OF PERIOD
 
            775
   
         7,552
CASH AT END OF PERIOD
$
          1,875
 
$
         2,114
                 
SUPPLEMENTAL DISCLOSURES OF
         
 
CASH FLOW INFORMATION
         
 
CASH PAID FOR:
         
   
Interest
$
                 -
 
$
                -
   
Income Taxes
$
                 -
 
$
                -
 
NON CASH  FINANCING ACTIVITIES:
         
   
Common stock issued in purchase of subsidiary
$
        47,439
 
$
                -
                 
                 
The accompanying notes are an integral part of these financial statements.
 
 
 
7

 
 
SILVERTON ADVENTURES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2011 and June 30, 2010

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2011, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's June 30, 2010 audited financial statements.  The results of operations for the periods ended March 31, 2011 and 2010 are not necessarily indicative of the operating results for the full years.

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


 
8

 

SILVERTON ADVENTURES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2011 and June 30, 2010

Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of its financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTNOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Inventory
Inventory is recorded at the lower of cost or market (net realizable value) using the average cost method. The inventory on hand as of March 31, 2011 consists of media materials at a cost of $-0-. The Company does not have any work in progress.

NOTNOTE 4- RELATED PARTY TRANSACTIONS

During the nine month period ended March 31, 2011, related parties made cash advances to the Company in the amount of $9,435 and the Company made payments on these advances in the amount of $39,509. These funds are used for the Company’s ongoing operations.  In addition, related parties paid Company expenses totaling 24,672.  At March 31, 2011, the balance due to related parties was $23,287.  The advances are unsecured, non interest-bearing and due on demand.

NOTNOTE 5 – COMMON STOCK

On July 19, 2010 the Company cancelled 500,000 shares of common stock due to non-performance of service. 

NOTNOTE 6 – ACQUISITION OF SUBSIDIARY

On December 30, 2010 the Company acquired Worldwide Media Organization, Inc., a Nevada Corporation (“Worldwide”) pursuant to a share exchange agreement whereby the Company issued 7,050,000 shares of common stock in exchange for 100% of the issued and outstanding common stock of Worldwide.  At the close of the transaction, Worldwide became a wholly-owned subsidiary of the Company.  The acquisition was accounted for as a purchase.

On December 31, 2010 the Company formed Silverton Printing, Inc., a Nevada corporation, as a wholly-owned subsidiary.

NOTNOTE 7 – SUBSEQUENT EVENTS

In accordance with ASC 855, Company management reviewed all material events through the filing or these financial statements and there are no material subsequent events to report.




 
9

 

Item 2:  MANAGEMENT’S DISCUSSON AND ANALYSIS OF FINANCIALS CONDITION AND RESULTS OF OPERATIONS
 
This section must be read in conjunction with the unaudited Financial Statements included in this report.
 
A.      Management’s Discussion

 
Silverton Adventures, Inc. ("SAI" or the "Company"), was originally incorporated in the State of Nevada on May 31, 2006 as Mor Travel, Inc. (“Mor”). On December 26, 2007, the Company changed its name to Silverton Adventures, Inc.
 
The Company recently formed a new wholly owned subsidiary named Silverton Printing, Inc. (“Silverton Printing”) whereby it operates its original printing and mailing services to companies nationwide. On December 30, 2010, the Company acquired 100% of the outstanding common stock of Worldwide Media Organization, Inc. making it a wholly owned subsidiary (“Worldwide Media”). Worldwide Media is a marketing, production and distribution company with its principal business objective being the production, acquisition (through exclusive licensing arrangements with independent producers worldwide), sale and distribution of special interest, family oriented, inspirational and children’s DVDs and programs. Video distribution is made by a non-theatrical home video retailer, catalog, mass-merchant and rack-jobber markets (including specialty markets such as gift and museum shops, premium and direct response markets). WMO also licenses to the television broadcast markets, as well as the educational, school and public library markets, both nationally and worldwide.  This distribution includes emerging venues such as digital downloads via Internet, video-on-demand (VOD) and download streaming on various platforms, among others.
 
Company Overview
 
The Company operates two wholly owned subsidiaries. Through Silverton Printing, the Company has a principal business objective of providing printing and mailing services to companies nationwide. Through Worldwide Media, the Company has a principal business objective of the production, acquisition (through exclusive licensing arrangements with independent producers worldwide), sale and distribution of special interest, family oriented, inspirational and children’s DVDs and programs.
 
During the nine months ended March 31, 2011, the Company generated revenues of $247,792 while incurring $43,307 in cost of sales resulting in a gross margin of $204,485. After deducting $160,377 for total operating expenses resulted in a positive cash flow from operations of $44,108. The positive cash flow for this period is attributable primarily to the increasing productivity of our marketing efforts through the use of direct distributors for out DVD products and a more directed marketing plan for our printing.
 
During the nine months ended March 31, 2010, the Company generated revenues or $48,692 while incurring $8,176 in cost of sales resulting in a gross margin of $40,516. After deducting $82,769 for total operating expenses resulted in loss from operations of $42,253. The net loss for this period is attributable primarily to the continuing costs of operations (general and administrative expenses) and professional fees.
 
During the three months ended March 31, 2011 the Company generated revenues of $204,982 while incurring $30,136 in cost of sales resulting in a gross margin of $174,846. After deducting $114,102 for total operating expenses resulted in positive cash flows from operations of $60,744. The positive cash flow for this period is attributable primarily to the increasing productivity of our marketing efforts through the use of direct distributors for out DVD products and a more directed marketing plan for our printing.
 
 
10

 
During the three months ended March 31, 2010 the Company generated revenues of $19,196 while incurring $4,168 in cost of sales resulting in a gross margin of $15,028. After deducting $22,160 for total operating expenses resulted in loss from operations of $7,132. The net loss for this period is attributable primarily to the continuing costs of operations (general and administrative expenses) and professional fees.
 
The Company is beginning to show signs that its change in operations (along with the acquisition of Worldwide Media Organization, Inc. on December 31, 2010) is starting to result in the Company becoming cash flow positive.
 
The Company has changed its method of marketing its products in both subsidiaries.
 
Worldwide Media Organization, Inc. (“WMA”) started marketing its products directly to retailers through major distributors thus lowering its cost of marketing while at the same time increasing its sales.  This has resulted in the third quarter of 2011 being the first quarter whereby the Company has been cash flow positive.  In the future, WMA plans on raising capital in order to increase their DVD products through self productions and acquisition of DVD catalogs.  We anticipate WMA will continue to increase its revenue stream each quarter as we increase the titles available to our distributors.
 
Silverton Printing, Inc. has changed the printing services it provides and has focused on marketing to clients low run color jobs, high volume black and white printing, brochures, convention related booklets, and related printing.  We have also started to be more aggressive in our marketing efforts nationwide.
 
Liquidity and Capital Resources
 
As of March 31, 2011, the Company had negative working capital of $50,955, which is current assets minus current liabilities.  This negative working capital is attributable to monies owed to officers for related party payables. The Company’s current assets as of March 31, 2011 consisted of $1,875 in cash, $88,387 in accounts receivable, and $3,404 in related party receivables.
 
SAI has limited capital resources from which to operate.  Without the realization of either significant cash flow from ongoing revenue or additional capital investment, the Company may not be able to continue without short term loans from its current officer and director.  However, the Company’s independent auditors have expressed substantial doubt about the Company's ability to continue as a going concern.
 
B.      Plan of Operation
 
The Company operates two wholly owned subsidiaries. Through Silverton Printing, the Company has a principal business objective of providing printing and mailing services to companies nationwide. Through Worldwide Media, the Company has a principal business objective of the production, acquisition (through exclusive licensing arrangements with independent producers worldwide), sale and distribution of special interest, family oriented, inspirational and children’s DVDs and programs.
 

 
11

 
 
SILVERTON PRINTING, INC.

Business Segment Summary

Silverton Printing has a principal business objective of providing printing and mailing services to companies nationwide. The Company plans on completing the printing and mailing from its corporate offices depending on the size of the job. In other cases, the Company has developed accounts with wholesale printers who are more equipped to handle large print and mailing orders. Our mission is to provide the highest quality print and mail services to our clients.

Since inception, we have generated consistent revenues and have incurred a cumulative net loss as reflected in the financial statements. The Company has never been party to any bankruptcy, receivership or similar proceeding, nor has it undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.

Product Development

Silverton Printing’s mission is to provide small and large businesses a printing and mailing services of a wide variety of products (See list below). Also, the Company will provide a mailing service which will include Automated Presort and Insert and Address. This service will be primarily for companies that want to save money on postage. Instead of paying $0.42 for a first class letter, Silverton will sort the mail pieces by zip codes saving the customer almost 50% in postage costs.

The following are print and mail services offered by the Company:

• Business Cards
• Carbonless Forms
• Catalogs/Booklets
• Flyers
• Posters
• Graphic Design
• Automated Presort
• Brochures
• Copying
• Envelopes
• Letterhead
• Postcards
• Presentation Folders
• Insert and Address

Marketing

Silverton Printing is gearing up to be a direct marketer of printing and mailing to businesses nationwide. The Company will be placing Yellow Page advertisements offering our services under the classification of printers and mailers in major cities throughout the United States. Even though the Company maintains its facility in Las Vegas, Nevada, the Company will ship all orders directly to the customer for a small shipping charge. Additionally, the Company plans to constantly mail postcards throughout the United States to new and upcoming businesses that have been recently approved for a business license.
 
 
12

 
WORLDWIDE MEDIA ORGANIZATION, INC.

Business Segment Summary

Worldwide Media is a marketing, production and distribution company with its principal business objective being the production, acquisition (through exclusive licensing arrangements with independent producers worldwide), sale and distribution of special interest, family oriented, inspirational and children’s DVDs and programs.  Distribution is made into the non-theatrical home video retailer, catalog, mass-merchant and rack-jobber markets (including specialty markets such as gift and museum shops, premium and direct response markets). Worldwide Media also licenses to the television broadcast markets, as well as the educational, school and public library markets, both nationally and worldwide.  This distribution includes emerging venues such as digital downloads via Internet, video-on-demand (VOD) and download streaming on various platforms, among others.

Product Development

There are two key product development strategies for general market sale and distribution that Worldwide Media is involved in; inexpensive, but high quality and high-perceived value productions and, strategic partnership exclusive acquisition of other quality programs from outside producers.

First, Worldwide Media has established relationships with talented, highly experienced producers, writers and editors that contract with Worldwide Media to produce low-cost but high quality productions that are suitable for sale into Worldwide Media’s market niches.  One strategy Worldwide Media has developed in this regard is what is called in the industry “theatrical drafting” wherein smaller independent producers under contract with Worldwide Media create low budget, ancillary and parallel programs that tie into subjects and/or events dealing with current major theatrical releases, thereby taking advantage of the consumer interest and “buzz” caused by the multi-million dollar budget advertising campaigns major studios spend to successfully market their big-budget films, by tapping into this interest without the enormous financial expenditures associated in creating this “Buzz”, hence “drafting” in the studios wake.  This was done with Worldwide Media’s production of The Extraordinary Life of Amelia Earhart (following the Hillary Swank biopic, “Amelia”), The Mystery of Sherlock Holmes (following the Robert Downey blockbuster “Sherlock Holmes”) and the upcoming The True Legend of Robin Hood (in anticipation of the big budget 3D release of Russell Crowe’s “Robin Hood” later this year).  Worldwide Media is continually researching the upcoming film release announcements to anticipate these various potential hits.  Along with this, Worldwide Media is continually producing timely biographies and documentaries that would have interest in both the general consumer market, as well as the educational markets, including recent productions dealing with Great Women Leaders In World History, The Life of Albert Einstein, Famous Explorers, Joan of Arc (upcoming), the Korean War (upcoming) and a documentary on the life of, and conquest of Everest by, Sir Edmund Hillary (in anticipation of an upcoming feature film starring Liam Neeson, about the mysterious death and controversy surrounding George Mallory, who supposedly summited Everest 30 years before Hillary’s attempt.).
 
Secondly, Worldwide Media is also strategically acquiring various films, programs and series that meet its market niches.  There is a vast source of quality programming produced by numerous independent producers worldwide, that simply do not have the resources, nor ability, to distribute their product and profitably into the market.  Worldwide Media negotiates distribution contracts with these producers for the distribution of their programs in niche markets, often with little or no advance monies paid up front, providing instead the producers royalties on actual per unit sales.  This is a favorable situation for both Worldwide Media (in providing the marketplace with a steady stream of finished quality programs at virtually no upfront costs, other than package design, that are fresh and appealing to the markets that Worldwide Media services), and to the producer (in that, they now have an effective distribution partner, allowing them to continue producing quality programming, while realizing a steady stream of royalty revenue from their productions).  A good example of this is Worldwide Media’s recent acquisition of a series of entertaining inspirational feature films with a leading Christian producer, Eternal Pictures; and the imminent agreement with one of the industry’s leading independent family friendly production companies, Grizzly Adams Productions, Inc.  These are but two examples.  There are numerous others either consummated or in-negotiation.  To better effect this critical growth strategy, and in conjunction with e-mail and direct mail solicitations for programs, Worldwide Media also attends several key international film conventions throughout the year featuring independent producers, and is bringing unique, family friendly, inspirational and educational programs to the market from these sources.

 
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Marketing and Industry Analysis

Market research and analysis reveals that the population is gradually becoming older, thereby more conservative, with the aging of the baby boom generation.  With the increase in recreational and discretionary time that this maturing generation will have, along with their greater flexible spending ability, all indications point to even greater desire by the consumer for more family-friendly and special quality programming that is inexpensive and can be enjoyed by a wide demographic in society.  History has shown time and time again that G/PG and family films consistently do well at the box office both in audience attendance and revenue.  Furthermore, this programming has excellent “shelf life” in that these are generally films people want to watch over and over again, thereby driving greater sales (versus rental) of these types of DVD’s for home DVD collections.  Children’s programming in general can do particularly well. Another area that can do well, is the special interest niche market, such as travel, history, military, art, biography, and of course, wildlife and nature programming….all genres that have unique and devoted viewers and collectors served by different catalogs, specialty stores, retail chains and internet sites.  Worldwide Media’s product mix, both through acquisition and production, is specifically targeted for these markets…in content, packaging and retail pricing.

Worldwide Media has also pursued the inspirational DVD market, which is a vastly underserved market.  Surveys consistently show that over 85% of the population defines itself as spiritual in some way.  The usual Hollywood market has simply not addressed that market; which is numerous and broad-based, best described as mid-America having traditional family values, and highly desirous of programming that reflects those values.  Reasons for this lack of product content through traditional DVD venues may reside in the industry’s lack of understanding, or perhaps dismissiveness in general, of the potential of the market.  Worldwide Media is positioned to serve that market with general quality light inspirational programming provided through the traditional home video distribution venues consumers generally frequent (such as home catalogs, retail stores and mass-merchants, warehouse chains), and feels that Worldwide Media can become a leading brand and label for that market.  Furthermore, current management has extensive experience in servicing that market niche through previous business affiliations, thereby further solidifying understanding the needs of that market and how best to serve it with proper content.

Worldwide Media management also has extensive experience in creating high-perceived value combo, specialty DVD packs for price conscious consumers, thereby serving the mass market, all the while maintain maximum gross and net profit margins.  These “collection sets” are very popular in the sell-thru, versus rent-thru, markets, which relates back directly to Worldwide Media’s business model.

 
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Worldwide Media is becoming an established brand in the educational, public library and home-school markets.  The principles have over 25 years experience in servicing the needs of that particular market, with quality documentary, special interest and educational programs suited for the K-12 grade levels.  Education is a consistent priority in terms of funding and curriculum quality on the local, state and federal levels.  There is a constant need in the market for relevant and new programming to meet those requirements.  Worldwide Media is uniquely positioned in that regard, having relationships with hundreds of independent producers worldwide that have relevant quality content for the educational market, but lack the means to distribute it on a wide scale.  Worldwide Media has the distribution means in place either directly through direct solicitation or through strategic relationships with several of the top wholesalers and re-sellers into the educational/library markets.  Worldwide Media has also entered into strategic alliances with several companies in providing educational programming for on-line streaming and closed circuit broadcast into digital libraries serving schools and libraries throughout North America, a technology growing exponentially.

Growth Strategy of the Company

The home video/DVD/educational markets are broad, complex and fragmented into different distribution channels and niches: retail, mass merchants (box stores), catalog, internet, resellers that purchase from wholesalers and producers, specialty chains and stores (gift stores, museum shops, airport stores, etc.), and, of course, individual consumers served directly by web advertising, schools, libraries, and school districts, among others.  The time required establishing profitable relationships with these various venues and buyers directly can be both time consuming and capital intensive, in terms of direct face-to-face meetings, attending trade shows and constantly forwarding market material and press releases to generate interest in particular programs and films.  Worldwide Media’s management has made a strategic decision that, rather than expending the time, energy and resources in cultivating those markets, Worldwide Media’s business interests and growth strategies are better served by leveraging key relationships with a handful of well-established, well respected and aggressive sub-distributors, resellers and sub-licensors that have established, personal and solid vendor relationships and established SKU’s and vendor accounts with all of the key players and buyers in these various market niches and accounts.  By maintaining above average gross margins in the discount pricing provided to these resellers, Worldwide Media is able to penetrate the market more quickly, efficiently, cost effectively and deeply with its programs without the expenditures of time and resources noted above.  Examples of some of the key relationships are listed below:

Allegro Media Group - a direct premium independent distributor into the retail home video music CD’s, and digital content market with over 25 years in representing a handful of labels into the general retail market and over 400 direct vendor/buyer account relationships; including but not limited to, Walmart, Target, Sams Clubs, Anderson Merchandising, Costco, Amazon, Netflix, Barnes & Noble, Baker & Taylor, Ingram (serving over 5,000 individual stores), Best Buy, Critics Choice, Movies Unlimited, AAFES (Navy PX’s), Eurpac (military PX’s worldwide), Waxworks, Library Video, Midwest Tape, Blockbuster, Borders, VPD, etc. (complete account list available).

Total Content – a sub-licensor dealing with top catalogers with 20+ years experience; including, but not limited to:  Publishers Clearing House, Readers Digest, Avon, Carol Wright, Johnson Smith, Colombia House, Miles Kimball, Christian Book Distributors (serving over 25 million home schoolers), Discovery Catalog, Guideposts, Doubleday Direct, Harriet Carter, Wireless, Taylor Gifts, etc. (complete account list available).

 
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Echo Bridge – sub licensor with proprietary displays and end caps in a large number of grocery, retail, drugstores chains, mass merchants, specializing in very high volume (“tonnage”) discount videos/DVD sales for the consumer mass market; including, but not limited to Walmart, Safeway, a number of Midwest grocery chains and hardware/drug store chains, specialty catalogs, etc.  Echo Bridge is very focused and selective in product acquisition; and, when distributing, can generally move in excess of several thousand units per title.  Echo Bridge has licensed six family films from Worldwide Media and is considering a number of others.

Cerebellum – market’s leading distributor for educational media with 15+ years experience serving all major distributors and resellers into the educational, K-12, university, and public library markets; including but not limited to, Follett, Library Video, Barnes Noble, Christian Book Distributors (educational division), Brodarts, Midwest Tapes,  Mackin Distributors, Quality Books, Scholastic Media, Discovery, AIM, Learn 360 (digital downstreaming into individual classrooms nationwide), etc. (complete account list available).

John McClean Media – major distributor and licensor into the international television and DVD markets, with over 20 years experience and relationships cultivated with all major players in all broadcast and media markets worldwide.  Worldwide Media has entered into an exclusive licensing arrangement to have JMM represent all current, and future, productions into this sizable and very lucrative market.  Our current mix includes five of Worldwide Media’s productions, with a commitment for acquiring licensing rights to an additional twelve to thirteen productions, along with future productions still in developmental phase.

In addition to the above relationships, Worldwide Media has signed distribution agreements with major players in specialty markets, including:

Starcrest Catalog – major specialty catalog with mailings to over 26 million homes 4 to 6 times a year.  This brand is popular with buyers of family/special interest programs.

5min Media – an innovative 5 year-old company in the business as internet content provider that has established contracts with all major search engines whereby millions of users are directed to informational and themed streaming videos, based on their queries on-line, and whereby Worldwide Media is then paid a royalty for each “hit” on line.  Additionally links on the site are provided to drive the user directly to Worldwide Media’s various websites, leading to further consumer direct sales.

To control outside costs with key vendors, Worldwide Media has entered into relationships with large, fully licensed and industry professional duplication/replication companies to manufacture, assemble, shrinkwrap and ship its DVD programs:  CDI Media in Salt Lake City, Utah and VEA Associates in Irvine, CA.  Worldwide Media has negotiated very favorable most-favored-nation pricing for its manufacturing and shipping needs.  Worldwide Media is negotiating with a third lab, RLX Media, in Coral Gables, FL. as well; in order to cover all US retail and catalog drop-ship locations in the most cost effective way possible.

Competitor Analysis

Direct competition for Worldwide Media is hard to pinpoint and fragmented.  Worldwide Media’s management feels it is in a superior position to affectively seize market share in its niche over and above its competitors, due to Worldwide Media’s unique business paradigm and diversification into a number of distribution venues; its ability to leverage relationships in a highly favorable and profitable way with both independent production companies and major distributors in the industry; its control of overhead by having key production and marketing support elements in-house, including the ability to produce and edit high quality programs for very low cost, and print and reconfigure all packaging and ancillary marketing material quickly; a warehouse and duplication capabilities in house to handle smaller incremental orders for product; and finally, and perhaps most importantly, extensive experience in the industry on a senior management and sales.

 
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ITEM 4. CONTROLS AND PROCEDURES

The effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) was evaluated under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, as of the end of the period covered by this quarterly report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are not effective in providing reasonable assurance that the information required to be disclosed in this quarterly report is recorded, processed, summarized and reported within the time period required for the filing of this quarterly report.  This is due to inadequate segregation of duties and the lack of an audit committee.  The Company has plans to address these material weaknesses in internal controls as resources become available.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended) identified in connection with the evaluation of our internal control performed during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system no matter how well conceived and operated can provide only reasonable, not absolute assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of control systems must be considered relative to their cost. As a result of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues of fraud, if any, have been detected.
 
Based on their most recent review, which was completed within ninety days of the filing of this report, SAI’s Officers have concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by SAI in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to SAI’s management, including its Officers, as appropriate to allow timely decisions regarding required disclosure and are effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.  There were no significant changes in SAI’s internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation.

 
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PART II — OTHER INFORMATION
 
 
ITEM 1. LEGAL PROCEEDINGS
 
None
 
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the nine month period ended March 31, 2011, the Company issued 7,050,000 shares of its par value $0.001 common stock in exchange for 100% of the issued and outstanding common stock of Worldwide Media Organization, Inc., a Nevada corporation, which did not result in a change of control of the Issuer.
 
 
ITEMS 3. DEFAULTS UPON SENIOR SECURITIES
 
None.
 
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
None.
 
 
ITEM 5. OTHER INFORMATION
 
 
None
 
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
(a)
Exhibits required by Item 601 of Regulation S-B

Exhibit No.:
Description:
3.1(i)
Articles of Incorporation and amendments thereto (1) and (2)
3.1(ii)
Bylaws (1)
14
Code of Ethics (1)
31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
32.1
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
32.2
Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 
(1)
Filed with the Securities and Exchange Commission on September 23, 2008 as an exhibit numbered as indicated above, to the Registrant’s registration statement on Form S-1 (file no. 333-153626 which exhibit is incorporated herein by reference.
 

 
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(b) Reports on Form 8-K
 
During the period ended March 31, 2011, SILVERTON ADVENTURES, INC. filed the following Current Reports on Form 8-K:
Date of Report
Date Filed
Items Reported
December 31, 2010
January 12, 2011
Acquisition of Subsidiary -Worldwide Media Organization, Inc.
 

 

 

 

 

 
SIGNATURES
 
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Silverton Adventures, Inc.
(Registrant)
     
Signature
Title
Date
     
/s/ Ronald Miller
President
May 23, 2011
Ronald Miller
   
     
/s/ Sarit Mor
Secretary
May 23, 2011
Sarit Mor
   
     
/s/ Sarit Mor
Principal Financial Officer
May 23, 2011
Sarit Mor
   
     
/s/ Sarit Mor
Principal Accounting Officer
May 23, 2011
Sarit Mor
   


 
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