Silverton Adventures, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Silverton Adventures, Inc.	Financial_Report.xls
EX-32 - EXHIBIT 32 - Silverton Adventures, Inc.	silverton32_ex32.htm
EX-31.1 - EXHIBIT 31.1 - Silverton Adventures, Inc.	silverton311_ex31z1.htm
EX-31.2 - EXHIBIT 31.2 - Silverton Adventures, Inc.	silverton312_ex31z2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q

____________

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

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)

Wyoming	80-5072317
(State or jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6283-B South Valley View Boulevard
Las Vegas, Nevada 89118
(Address of principal executive offices)

949-436-9382
(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

As of December 9, 2014, there were 1,556,091,143 shares of the registrant’s $0.00001 par value Common Stock issued and outstanding.

TABLE OF CONTENTS



		Page
PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	3

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21

ITEM 3.	CONTROLS AND PROCEDURES	26


PART II.OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	26


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	26
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	27

ITEM 5.	OTHER INFORMATION	27

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	27

FORWARD-LOOKING STATEMENTS

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following

The availability and adequacy of our cash flow to meet our requirements;

Economic, competitive, demographic, business and other conditions in our local and regional markets;

Changes or developments in laws, regulations or taxes in our industry;

Actions taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities;

Competition in our industry;

The loss of or failure to obtain any license or permit necessary or desirable in the operation of our business;

Changes in our business strategy, capital improvements or development plans;

The availability of additional capital to support capital improvements and development; and

Other risks identified in this report and in our other filings with the Securities and Exchange Commission or the SEC.

This report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Use of Term

Except as otherwise indicated by the context, references in this report to “Company”, “SVAD”, “Technology”, “we”, “us” and “our” are references to Silverton Adventures Inc. All references to “USD” or United States Dollars refer to the legal currency of the United States of America.

PART I - FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

SILVERTON ADVENTURES, INC.

Condensed Consolidated Financial Statements

(Expressed in US dollars)

September 30, 2014 (unaudited)

Financial Statement Index

Condensed Consolidated Balance Sheets (unaudited)

Condensed Consolidated Statements of Operations (unaudited) 5

Condensed Consolidated Statements of Cash Flows (unaudited)

Notes to the Condensed Consolidated Financial Statements (unaudited)


Silverton Adventures, Inc.
Consolidated Balance Sheets

						September 30,		June 30,
						2014		2014
				ASSETS		(Unaudited)
Current Assets
			Cash			$ -		$ -
			Trade accounts receivable, net			14,953		11,796
			Prepaid Expenses			777		777
			Prepaid Royalties			8,999		8,999
		Total Current Assets				24,729		21,571
Non-Current Assets
			Property and Equipment			-		-
		Total Non-Current Assets				-		-
		TOTAL ASSETS				$ 24,729		$ 21,571

				LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
			Accounts payable and accrued liabilities			$ 440,004		$ 455,572
			Bank overdraft			5,011		5,470
			Royalty payables			40,377		40,377
			Notes payable			69,966		69,966
			Convertible note payable, net			264,389		257,594
			Derivative liability			286,474		253,822
		Total Current Liabilities				1,106,221		1,082,801
Stockholders' Deficit
Preferred Stock Series A
			Authorized: 10,000,000 shares, $0.001 par value;
			issued and outstanding: 82,400 and 82,400 shares
			as of September 30, 2014 and June 30, 2014, respectively			82		82
Preferred Stock Series B
			Authorized: 6 shares, $0.0001 par value;
			issued and outstanding: 2 and 2 shares
			as of September 30, 2014 and June 30, 2014, respectively			-		-
Preferred Stock Series C
			Authorized: 10,000,000 shares, $0.0001 par value;
			issued and outstanding: 202,470 and 328,270 shares
			as of September 30, 2014 and June 30, 2014, respectively			20		33
Common Stock:
			Authorized: 2,479,999,994 shares, $0.00001 par value;
			issued and outstanding: 5,607,111,143 and 1,570,001,143
			shares as at September 30, 2014 and June 30, 2014, respectively			56,071		15,700
Additional paid-in capital						2,837,400		2,848,818
Accumulated deficit						(3,975,067)		(3,925,862)
		Total stockholders' Deficit				(1,081,493)		(1,061,229)
		TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT				$ 24,729		$ 21,571

The accompanying notes are an integral part of these condensed consolidated financial statements.
Silverton Adventures, Inc.
Consolidated Statements of Operations

					For the three months ended
					September 30
					2014		2013
REVENUE
	Sales				$ 35,754		$ 25,135
	Royalty income				24		18,350
	Total Revenue				35,778		43,485

COST OF SALES					0		6,128

GROSS MARGIN					35,778		37,357

OPERATING EXPENSES
	Depreciation expense				-		932
	General and administrative				46,883		66,242
	Payroll expense				-		30,641
	Professional fees				1,245		45,066
	Royalty expense				-		1,137
	Total Operating Expenses				48,128		144,018

LOSS FROM OPERATIONS					(12,350)		(106,661)

OTHER INCOME (EXPENSES)
	Other income				-		20,331
	Interest expense				(85,977)		(77,167)
	Fair value change on derivative liability				49,123		(105,955)
	Total Other Income (Expenses)				(36,854)		(162,791)

NET LOSS BEFORE INCOME TAXES					(49,204)		(269,452)

	Income Taxes				-		-

NET LOSS					(49,204)		(269,452)

BASIC AND DILUTED LOSS PER SHARE					$ (0.00)		$ (0.00)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING					3,748,941,469		908,130,810

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


Silverton Adventures, Inc.
Consolidated Statements of Cash Flow

			For the three months ended
			September 30
			2014	2013
Operating Activities
	Net Loss		(49,204)	(269,452)
	Adjustments to reconcile net loss to net cash used by
	operating activities:
		Depreciation expense	-	932
		Excess interest on initial derivative liability	44,275	10,358
		Amortization of debt discount	34,736	63,160
		Change in fair value of derivative liability	(49,123)	105,955
		Stock issued for services	25,500	-
		Expenses paid on behalf of Company by an unrelated party	-	14,161
	Changes to operating assets and liabilities:
		Accounts receivable	(3,157)	357
		Accounts payable and accrued liabilities	(15,567)	37,002
		Royalties payable	-	1,138
Net cash used in Operating Activities			(12,541)	(36,389)
Investing Activities
	Investment		-	564
Net cash used in Investing Activities			-	564
Financing Activities
	Changes in bank overdraft		(459)	12,288
	Proceeds from convertible notes payable		13,000	24,700
	Repayments on notes payable		-	(1,000)
	Repayments of related party payables		-	(1,100)
Net cash provided by (used in) Financing Activities			12,541	34,888

Net increase (decrease) in cash			-	(937)
Cash at beginning of year			-	937
Cash at end of year			$ -	$ -

Supplemental Disclosures of Cash Flow Information
	Cash paid for:
		Interest	$ -	$ -
		Income taxes	$ -	$ -
Non Cash Financing and Investing Activities
	Note payable converted to common stock		$ 3,441	$ 236,266

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

SILVERTON ADVENTURES, INC.

Notes to Condensed Consolidated Financial Statements

September 30, 2014 and 2013

NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated 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 September 30, 2014, 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, 2014 audited financial statements. The results of operations for the periods ended September 30, 2014 and 2013 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. During the three months ended September 30, 2014, the Company realized a net loss of $49,204 and has incurred an accumulated deficit of $3,975,067. 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 plans to obtain such resources for the Company include (1) obtaining capital

from management and significant shareholders sufficient to meet its minimal operating expenses, and (2) seeking out and completing a merger with an existing operating company. 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.

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.

Basic (Loss) per Common Share

Basic loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares

outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are 1,556,091,143 common stock equivalents outstanding as of December 9, 2014.

NOTE 4 – RELATED-PARTY TRANSACTIONS

Related party payables totaled $0 and $0 at September 30, 2014 and September 30, 2013, respectively.

NOTE 5 – ROYALTIES

The Company entered into several royalty agreements wherein the Company acquired rights to licensed content. The Company intends to either reproduce and distribute the media or sublicense the rights to another party. The agreements require the Company to pay an upfront royalty fee and then ongoing royalty fees of 15 to 30 percent of gross sales receipts over the life of the licensing agreement. The agreements vary in length from three to five years. Royalty expenses totaled $0 and $1,137 for the three months ended September 30, 2014 and 2013, respectively.

As of September 30, 2014 and September 30, 2013, royalty payables under these agreements totaled $40,377 and $40,944, respectively.

Under some of these arrangements, the Company pays an upfront royalty fee that is applied to future royalties as the Company achieves sales and incurs corresponding royalty expense. The upfront fees that are to be applied against future royalty expenses are capitalized and amortized as royalty expenses are applied. As of September 30, 2014 and September 30, 2013, the Company has recorded $8,999 and $8,999 as prepaid royalties, respectively.

NOTE 6 – CONVERTIBLE NOTES PAYABLE


			September 30,	June 30,
Convertible notes			2014	2013
	Note #1		28,851	28,851
	Note #5		13,503	13,503
	Note #7		47,500	47,500
	Note #8		37,500	37,500
	Note #9		14,500	14,500
	Note #10		5,000	5,000
	Note #11		12,000	12,000
	Note #12		6,500	6,500
	Note #13		5,000	5,000
	Note #14		22,222	22,222
	Note #15		37,500	37,500
	Note #16		2,500	2,500
	Note #17		1,500	4,941
	Note #18		5,000	5,000
	Note #19		3,000	3,000
	Note #20		2,500	2,500
	Note #21		16,550	16,550
	Note #22		13,000	-
Total convertible note, principal			$ 274,126	$ 264,567
		Debt discount	(9,737)	(6,973)
Total convertible note, net of discount			264,389	257,594
		Accrued interest	22,681	15,715
			$ 551,459	$ 530,904

Note #1

On July 20, 2011, the Company entered into a convertible note payable in the amount of $10,000. The note bears interest at 8.50 percent per annum and has a maturity date of July 20, 2014. The creditor has the option at any time to convert the principal and any accrued interest into common stock of the Company according to the following stock prices: year one, $0.75 per share; year two, $1.00 per share; and year three, $1.25 per share. The entire note with a principal balance of $10,000 along with $1,306 was assigned to a third party. In addition the Company assigned another note payable in the amount of $30,000 and accrued interest of $2,544 to the third party. The total aggregate amount assigned to the third party was $43,851. The terms of the assigned notes were amended. The amended terms are:

The assigned notes bear interest at 10%

The assigned notes are due on demand

The principal balance of the note along with accrued interest is convertible at any time, at the option of the note holder, into the Company's common stock at a price of 45 percent of the current market price. The current market price is defined as the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date. As a result of this note assignment the Company determined that a beneficial conversion feature existed and because the assigned note is due on demand the full amount of the beneficial conversion feature of $43,851 was recorded to interest expense.

During the year ended June 30, 2013, $15,000 of the note was converted into 140,845 shares of common stock by the note holder.

As of September 30, 2014, principal balance of $28,851 (September 30, 2013 - $28,851) was recorded.

Note #5

On March 27, 2013 the Company borrowed $25,000 from an unrelated third party entity in the form of a convertible note. Pursuant to the note agreement the Company was charged an original issue discount of $2,778. The note bears no interest for the first three months. If the Company does not repay the note on or before 90 days from the effective date, a one-time interest charge of 12% shall be applied to the principle sum of the note. Principal and interest on the note are due in full on March 27, 2014. During the three months endedSeptember 30, 2014, the Company accrued $0 (September 30, 2013 - $3,333) in interest expense.

The principal balance of the note along with accrued interest is convertible at any time at the option of the note holder, into the Company's common stock at a price of the lessor of, $0.09, or 60 percent of the lowest trading price for the Common Stock during the twenty five day period on the latest complete trading day prior to the conversion date.

Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $36,222 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three months endedSeptember 30, 2014, the Company recorded a gain of $8,322 (three months ended September 30, 2013 – loss of $24,902) due to the change in value of the derivative liability during the period, and debt discount of $0 (three months ended September 30, 2013 - $14,087) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $13,503 (September 30, 2013 – $19,800), accrued interest of $3,333 (September 30, 2013 - $3,333), debt discount of $0 (September 30, 2013 - $10,913) and a derivative liability of $15,855 (September 30, 2013 - $58,964) was recorded.

Note #7

On May 24, 2013 the Company entered into a convertible note agreement. Pursuant to the agreement, the agreement was consummated on June 3, 2013 upon the Company’s receipt of $32,830 cash proceeds and $14,670 of which was for professional fees. The note bears interest at 8 percent per annum with principal and interest due in full on

February 28, 2014. During the three months endedSeptember 30, 2014, the Company accrued $2,634 (September 30, 2013 - $947) in interest expense.

After 180 days from issuance, the note may be converted at the option of the holder into common stock of the Company. The conversion price is 55% of the market price, where market price is defined as “the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.”

Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $120,160 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three months endedSeptember 30, 2014, the Company recorded a gain of $18,810 (three months ended September 30, 2013 – loss of $14,219) due to the change in value of the derivative liability during the period, and debt discount of $0 (three months ended September 30, 2013 – $20,935) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $47,500 (September 30, 2013 – $47,500), accrued interest of $6,819 (September 30, 2013 - $1,343), debt discount of $0 (September 30, 2013 - $26,565) and a derivative liability of $62,126 (September 30, 2013 - $90,056) was recorded.

Note #8

On July 26, 2013 the Company entered into a convertible note agreement to borrow $37,500. Pursuant to the agreement, the Company received cash proceeds of $24,700 and $12,800 of which was for professional fees. The note bears interest at 8 percent per annum with principal and interest due in full on April 30, 2014. During the three months endedSeptember 30, 2014, the Company accrued $2,079 (September 30, 2013 - $542) in interest expense.

Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $47,860 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three months endedSeptember 30, 2014, the Company recorded a gain of $14,851 (three months ended September 30, 2013 – loss of $24,766) due to the change in value of the derivative liability during the period, and debt discount of $0 (three months ended September 30, 2013 - $8,903) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $37,500 (September 30, 2013 – $37,500), accrued interest of $4,866 (September 30, 2013 - $542), debt discount of $0 (September 30, 2013 - $28,597) and a derivative liability of $49,046 (September 30, 2013 - $72,626) was recorded.

Note #9

On October 4, 2013 the Company entered into a convertible note agreement to borrow $14,500. Pursuant to the agreement, the Company received no cash and $14,500, which was for professional fees. The note bears interest at 8 percent per annum with principal and interest due in full on July 8, 2014. During the three months endedSeptember 30, 2014, the Company accrued $760 (September 30, 2013 - $0) in interest expense.

the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.”

Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $46,454 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three months endedSeptember 30, 2014, the Company recorded a gain of $5,742 (three months ended September 30, 2013 - $0) due to the change in value of the derivative liability during the period, and debt discount of $102 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $14,500 (September 30, 2013 – $0), accrued interest of $1,615 (September 30, 2013 - $0), debt discount of $0 (September 30, 2013 - $0) and a derivative liability of $18,965 (September 30, 2013 - $0) was recorded.

Note #10

On November 1, 2013 the Company borrowed $5,000 in the form of a convertible note payable. The note bears no interest and is due on demand. The note is convertible into shares of the Company’s common stock at a conversion price of $.00001. The Company analyzed the convertible debt for a beneficial conversion feature under ASC 470-20 on the date of the note and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $5,000 and was recorded as debt discount. During the three months endedSeptember 30, 2014, debt discount of $0 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $5,000 (September 30, 2013 – $0) was recorded.

Note #11

On November 8, 2013 the Company borrowed $12,000 in the form of a convertible note payable. The note bears no interest and is due on demand. The note is convertible into shares of the Company’s common stock at a conversion price of $.00001. The Company analyzed the convertible debt for a beneficial conversion feature under ASC 470-20 on the date of the note and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $12,000 and was recorded as debt discount. During the three months endedSeptember 30, 2014, debt discount of $0 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $12,000 (September 30, 2013 – $0) was recorded.

Note #12

On November 13, 2013 the Company entered into a convertible note agreement to borrow $6,500. Pursuant to the agreement, the Company received no cash and $6,500, which was for professional fees. The note bears interest at 8 percent per annum with principal and interest due in full on August 15, 2014. During the three months endedSeptember 30, 2014, the Company accrued $246 (September 30, 2013 - $0) in interest expense.

After 180 days from issuance, the note may be converted at the option of the holder into common stock of the Company. The conversion price is 31% of the market price, where market price is defined as “the average of the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.”

Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $20,607 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three months endedSeptember 30, 2014, the Company recorded a gain of $3,417 (three months ended September 30, 2013 - $0) due to the change in value of the derivative liability during the period, and debt discount of $447 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $6,500 (September 30, 2013 – $0), accrued interest of $572 (September 30, 2013 - $0), debt discount of $0 (September 30, 2013 - $0) and a derivative liability of $16,898 (September 30, 2013 - $0) was recorded.

Note #13

On November 18, 2013 the Company borrowed $5,000 in the form of a convertible note payable. The note bears no interest and is due on demand. The note is convertible into shares of the Company’s common stock at a conversion price of $.00001. The Company analyzed the convertible debt for a beneficial conversion feature under ASC 470-20 on the date of the note and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $5,000 and was recorded as debt discount. During the three months endedSeptember 30, 2014, debt discount of $0 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $5,000 (September 30, 2013 – $0) was recorded.

Note #14

On December 9, 2013 the Company borrowed $20,000 from an unrelated third party entity in the form of a convertible note. Pursuant to the note agreement the Company was charged an original issue discount of $2,222. The note bears no interest for the first three months. If the Company does not repay the note on or before 90 days from the effective date, a one-time interest charge of 12% shall be applied to the principle sum of the note. Principal and interest on the note are due in full on December 9, 2014. During the three months endedSeptember 30, 2014, the Company accrued $0 (September 30, 2013 - $0) in interest expense.

Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $32,332 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three months endedSeptember 30, 2014, the Company recorded a gain of $13,697 (three months ended September 30, 2013 – $0) due to the change in value of the derivative liability during the period, and debt discount of $5,192 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $22,222 (September 30, 2013 – $0), accrued interest of $2,667 (September 30, 2013 - $0), debt discount of $1,232 (September 30, 2013 - $0) and a derivative liability of $26,093 (September 30, 2013 - $0) was recorded.

Note #15

On January 17, 2014 the Company entered into a convertible note agreement to borrow $37,500. Pursuant to the agreement, the Company received no cash and $6,500, which was for professional fees. The note bears interest at 8 percent per annum with principal and interest due in full on October 22, 2014. During the three months endedSeptember 30, 2014, the Company accrued $756 (September 30, 2013 - $0) in interest expense.

the lowest three trading prices for the Common Stock during the ten day period on the latest complete trading day prior to the conversion date.”

Upon the holder’s option to convert becoming active the Company recorded a debt discount and derivative liability of $81,775 being the fair value of the conversion feature which was determined using the Black-Scholes valuation model. The debt discount is accreted to the statement of operations using the effective interest rate method over the term of the note or to the date of conversion, and the derivative liability is revalued at each reporting date to fair value. Any change in fair value is credited or charged to the statement of operations in the period.

During the three months endedSeptember 30, 2014, the Company recorded a loss of $15,716 (three months ended September 30, 2013 – $0) due to the change in value of the derivative liability during the period, and debt discount of $28,995 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $37,500 (September 30, 2013 – $0), accrued interest of $2,104 (September 30, 2013 - $0), debt discount of $8,505 (September 30, 2013 - $0) and a derivative liability of $97,491 (September 30, 2013 - $0) was recorded.

Note #16

On March 24, 2014 the Company borrowed $2,500 in the form of a convertible note payable. The note bears no interest and is due on demand. The note is convertible into shares of the Company’s common stock at a conversion price of $.00001. The Company analyzed the convertible debt for a beneficial conversion feature under ASC 470-20 on the date of the note and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $2,500 and was recorded as debt discount. During the three months endedSeptember 30, 2014, debt discount of $0 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $2,500 (September 30, 2013 – $0) was recorded.

Note #17

On March 28, 2014 the Company borrowed $5,000 in the form of a convertible note payable. The note bears no interest and is due on demand. The note is convertible into shares of the Company’s common stock at a conversion price of $.00001. The Company analyzed the convertible debt for a beneficial conversion feature under ASC 470-20 on the date of the note and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $5,000 and was recorded as debt discount. During the three months endedSeptember 30, 2014, debt discount of $0 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

During the three months endedSeptember 30, 2014, the Company issued 344,110,000 common shares upon the conversion of $3,441 of the principal balance.

As of September 30, 2014, principal balance of $1,500 (September 30, 2013 – $0) was recorded.

Note #18

On April 10, 2014 the Company borrowed $5,000 in the form of a convertible note payable. The note bears no interest and is due on demand. The note is convertible into shares of the Company’s common stock at a conversion price of $.00001. The Company analyzed the convertible debt for a beneficial conversion feature under ASC 470-20 on the date of the note and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $5,000 and was recorded as debt discount. During the three months endedSeptember 30, 2014, debt discount of $0 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $5,000 (September 30, 2013 – $0) was recorded.

Note #19

On April 18, 2014 the Company borrowed $3,000 in the form of a convertible note payable. The note bears no interest and is due on demand. The note is convertible into shares of the Company’s common stock at a conversion price of $.00001. The Company analyzed the convertible debt for a beneficial conversion feature under ASC 470-20 on the date of the note and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $3,000 and was recorded as debt discount. During the three months endedSeptember 30, 2014, debt discount of $0 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $3,000 (September 30, 2013 – $0) was recorded.

Note #20

On April 25, 2014 the Company borrowed $2,500 in the form of a convertible note payable. The note bears no interest and is due on demand. The note is convertible into shares of the Company’s common stock at a conversion price of $.00001. The Company analyzed the convertible debt for a beneficial conversion feature under ASC 470-20 on the date of the note and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $2,500 and was recorded as debt discount. During the three months endedSeptember 30, 2014, debt discount of $0 (three months ended September 30, 2013 - $0) was accreted to the statement of operations.

As of September 30, 2014, principal balance of $2,500 (September 30, 2013 – $0) was recorded.

Note #21

On May 2, 2014 the Company entered into a convertible note agreement to borrow $16,550. Pursuant to the agreement, the Company received no cash and $16,550 was for professional fees. The note bears interest at 8 percent per annum with principal and interest due in full on February 7, 2015. During the three months endedSeptember 30, 2014, the Company accrued $334 (September 30, 2013 - $0) in interest expense.

As of September 30, 2014, principal balance of $16,550 (September 30, 2013 – $0) and accrued interest of $548 was recorded.

Note #21

On August 6, 2014 the Company entered into a convertible note agreement to borrow $13,000. Pursuant to the agreement, the Company received $10,754 and $2,246 was for professional fees. The note bears interest at 8 percent per annum with principal and interest due in full on May 8, 2015. During the three months endedSeptember 30, 2014, the Company accrued $157 (September 30, 2013 - $0) in interest expense.

After 180 days from issuance, the note may be converted at the option of the holder into common stock of the Company. The conversion price is 35% of the market price, where market price is defined as “the average of the lowest three trading prices for the Common Stock during the thirty day period on the latest complete trading day prior to the conversion date.”

As of September 30, 2014, principal balance of $13,000 (September 30, 2013 – $0) and accrued interest of $157 was recorded.

NOTE 8 – NOTES PAYABLE

On January 5, 2012 the Company entered into a note payable with an unrelated third-party in the amount of $8,000. The Company received $6,000 in cash, but agreed to repay a total of $8,000. The $2,000 difference is accounted for as interest expense. As of June 30, 2013, the note was in default and the creditor had made demands for payment. As of September 30, 2014 the outstanding balance on this note was $5,100.

During the year ended June 30, 2012 the Company entered into a note payable with an unrelated third-party in the amount of $3,500. The Company received $3,000 but promised to repay a total of $3,500 as of June 28, 2012. The $500 difference is accounted for as interest expense. As of June 30, 2013 the note was in default and the creditor has demanded payment. The note term dictates that upon default, the Company is responsible for $100 per week in accrued interest. In August 2012, this weekly penalty interest was reduced to $50 per week. The note is unsecured and as of September 30, 2014 the outstanding balance on this note, including accrued interest, totaled $2,800.

On April 2, 2012 the Company entered into a note payable agreement with an unrelated third-party in which the related party would pay $6,500 of expenses on behalf of the Company. The note is due on demand and bears no interest. As of June 30, 2013 the outstanding balance on this note was $6,500.

On March 18, 2013 the Company entered into a note payable agreement with an unrelated third-party in the amount of $3,000. The note bears interest at 40 percent per annum and is due on April 18, 2013. The note is in default. As of September 30, 2014 the outstanding balance on this note was $1,000.

On January 27, 2014 the Company entered into a note payable with an unrelated third party in the amount of $50,000.

On May 30, 2014 the Company entered into a note payable with an unrelated third party in the amount of $3,500.

As of September 30, 2014 and 2013 the total outstanding notes payable balance was $69,966 and $39,828, respectively.

NOTE 9 – DERIVATIVE LIABILITIES

The Company issued financial instruments in the form of convertible notes with embedded conversion features. The convertible notes payable have conversion rates, which are indexed to the market value of the Company’s common stock price.

During the three months ended September 30, 2014, $3,441 of convertible notes payable principal and interest were converted into common stock of the Company.

These derivative liabilities have been measured in accordance with fair value measurements, as defined by GAAP. The valuation assumptions are classified within Level 2 inputs.

The following table represents the Company’s derivative liability activity for the embedded conversion features discussed above:


	September 30,
	2014
Balance, beginning of period	$ 253,822
Initial recognition of derivative liability	81,775
Conversion of derivative instruments to Common Stock	-
Mark-to-Market adjustment to fair value	(49,123)
Balance, end of period	$ 286,474

NOTE 10 – STOCKHOLDERS’ DEFICIT

The Company is authorized to issue four classes of stock. The total number of shares authorized to be issued by the Company is 10,000,000 shares of series A preferred stock at a par value of $0.001 per share, 6 shares of series B preferred stock at a par value of $0.0001 per share, 10,000,000 shares of series C preferred stock at a par value of $0.0001 per share, and 2,479,999,994 shares of common stock at a par value of $0.00001. As of September 30, 2014, the Company has 82,400 series A preferred shares issued and outstanding, 2 series B preferred shares issued and outstanding, 202,470 series C preferred shares issued and outstanding, and 5,607,111,143 common shares issued and outstanding.

During the year ended June 30, 2013 the Company amended its articles of incorporation and changed the par value of the Company’s common stock from $0.0001 to $0.00001.

On November 1, 2013, the Company approved a 1 for 500 reverse stock split of the Company’s common stock. All references to share and per share amounts in the consolidated financial statements and accompanying notes to the consolidated financial statements have been retroactively restated to reflect the stock split.

Preferred Stock – Series A

On December 2, 2011 the Company issued 100,000 shares of Series A preferred stock to two unrelated entities for cash at $0.10 per share in exchange for cash of $3,500 and services valued at $6,500. According to the terms of the preferred stock, each share of Series A preferred stock is convertible into shares of the Company’s common stock at a conversion ratio of one hundred (100) shares of common stock for every one (1) share of preferred stock. The Company ’ s Series A preferred stock is not entitled to receive any dividends, has no liquidation rights, and is not entitled to any voting rights.

Preferred Stock - Series B

On April 9, 2013, the Board of Directors authorized 6 shares of Class B Convertible Preferred Stock and 10,000,000 shares of Class C Convertible Preferred Stock. Class B and C Convertible Preferred Stock have the following attributes:

Each share of Series B Preferred Stock is convertible into the number of shares of Common Stock which equals 4 times the sum of: i) the total number of shares of Common Stock which are issued and outstanding at the time of conversion, plus ii) the total number of shares of Series C Preferred Stocks which are issued and outstanding at the time of conversion, divided by: the number of shares of Series B Preferred Stock issued and outstanding at the time of conversion.

The Series B Preferred Stock voting rights are equal to the number of shares of Common Stock which equals 4 times the sum of: i) the total number of shares of Common Stock which are issued and outstanding, plus ii) the total number of shares of Series C Preferred Stocks which are issued and outstanding at time of voting, divided by: the number of shares of Series B Preferred Stock issued and outstanding at the time of voting.

Preferred Stock - Series C

Each share of Series C Preferred Stock is convertible at common stock par value $0.00001 per share (the “ Series C Preferred ” ), at any time, and/or from time to time, into the number of shares of the Corporation's common stock, par value $0.00001 per share (the "Common Stock") equal to the price of the Series C Preferred Stock ($2.50), divided by the par value of the Series C Preferred (par value of $0.0001per share), subject to adjustment as may be determined by the Board of Directors from time to time (the "Conversion Rate").

Based on the $2.50 price per share of Series C Preferred Stock, and a par value of $0.0001 per share for Series C Preferred each share of Series B Preferred Stock is convertible into 250,000 shares of Common Stock.

Each share of Series C Preferred Stock has 10 votes for any election or other vote placed before the shareholders of the Common stock

The Preferred B stock has a stated value of $.0001 and no stated dividend rate and is non-participatory. The Series B and Series C has liquidation preference over common stock. The Voting Rights for each share of Series B is equal to 1 vote per share (equal to 4 times the number of common and Preferred C shares outstanding) and Series C Preferred Stock have 10 votes per shares.

The Holder has the right to convert the Preferred B and C to common shares of the Company with the Series B convertible to 4 times the number of common and Preferred C shares outstanding and Series C convertible to 250,000 common shares per Preferred C share. The Preferred Series B and Series C represents voting control based on management ’ s interpretation of the Company bylaws and Certificate of Designation.

Issuances of Preferred Stock

On April 15, 2013, the Company issued 2 shares of Series B Convertible Preferred Stock, with a fair market value of $214,556, for services to the President of the Company and one director who has since resigned.

On April 15, 2013 the Company issued 36,649 shares of Series C Convertible Preferred Stock for conversion of debt in the amount of $91,623.

On April 5, 2013 the company issued 2,000 shares of Series C Convertible Preferred Stock for cash of $5,000.

During the year ended June 30, 2013 pursuant to the conversion terms of the Series A preferred shares the Company issued 1,760,000 shares of common stock upon the conversion of 17,600 shares of Series A preferred stock.

On April 26, 2013 the Company issued 200,000 shares of Series C Convertible Preferred Stock, with a fair market value of $500,000, for services.

During the year ended June 30, 2014, the Company issued 127,270 shares of Series C Preferred Stock for services.

During the three months ended September 30, 2014, the Company issued 1,200 shares and retired 127,000 shares of Series C Preferred Stock.

Common Stock

On April 15 the Company amended its articles of incorporation and increased the authorized shares of common stock from 750,000,000 to 979,999,994 and changed the par value of common stock from 0.0001 to 0.00001.

On April 15, 2013 the Company issued 510,000,000 shares of common stock, with a fair market value of $1,116,642, to its President for services.

During the year ended June 30, 2013 the Company issued 148,740,845 shares of common stock for conversion of debt in the amount of $16,486. During the year ended June 30, 2013 the Company recorded a loss on settlement of debt in the amount of $295,714.

During the year ended June 30, 2014, the holders of convertible notes converted a total of $162,264 of principal and interest into 5,221,335 shares of common stock.

During the three months ended September 30, 2014, the holders of convertible notes converted a total of $3,441 of principal into 344,110,000 shares of common stock.

During the three months ended September 30, 2014 the Company issued an aggregate of 3,693,000,000 shares of common stock to various entities at par value of $.00001.

NOTE 11– INCOME TAXES

The Company had no income tax expense during the reported period due to net operating losses.A reconciliation of income tax expense to the amount computed at the statutory rates is as follows:


	September 30,
	2014	2013
Operating profit (loss) for the three month period ended September 30	$ (49,204)	$ (269,452)
Average statutory tax rate	34%	34%
Expected income tax provisions	$ (16,729)	$ (91,614)
Unrecognized tax gains (loses)	(16,729)	(91,614)
Income tax expense	$ -	$ -

The Company has net operating losses carried forward of approximately $3,975,067 for tax purposes which will expire in 2025 if not utilized beforehand.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Royalty Agreements

The Company entered into several royalty agreements wherein the Company acquired rights to licensed content. The Company intends to either reproduce and distribute the media or sublet the rights to another party. The agreements require the Company to pay royalties of 15 to 30 percent of gross sales receipts over the life of the licensing agreement. The agreements vary in length from three to five years. Royalty expenses totaled $0 and $1,137 for the three months ended September 30, 2014 and 2013, respectively.

Legal Proceedings

The Company may be party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. There is no litigation or contingencies that require accrual or disclosure as of September 30, 2014.

NOTE 13– FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2014 and 2013. As required by ASC 820, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. There were no transfers between fair value hierarchy levels for the three months ended September 30, 2014 and 2013.

The carrying amounts reported in the balance sheets for cash, accounts receivable, loans payable, and accounts payable and accrued expenses, approximate their fair market value based on the short-term maturity of these instruments. The following table presents assets and liabilities that are measured and recognized at fair value as of September 30, 2014 and 2013, on a recurring basis:



Liabilities measured
at fair value on a recurring basis at
September 30, 2014:
	Level 1	Level 2		Level 3		Total
Liabilities
Derivative liability	$ -		$ 286,474	$	-	$	286,474
Total	$ -		$ 286,474	$	-	$	286,474


Liabilities measured
at fair value on a recurring basis at
September 30, 2013:
	Level 1	Level 2		Level 3		Total
Liabilities
Derivative liability	$ -		$ 285,309	$	-	$	285,309
Total	$ -		$ 285,309	$	-	$	285,309

The carrying value of short term financial instruments including cash, accounts payable, accrued expenses and short-term borrowings approximate fair value due to the short period of maturity for these instruments. The long-term debentures payable approximates fair value since the related rates of interest approximate current market rates.

NOTE 14 - SUBSEQUENT EVENTS

Change in Control

On November 5, 2014, Rancho Capital Management, Inc., as the therein defined “Purchaser,” and Ron Miller, as the therein defined “Seller,” entered into and delivered a written Share Purchase Agreement (the “Purchase Agreement”). Pursuant to the provisions of the Purchase Agreement, Mr. Miller agreed to sell to the Purchaser all of Mr. Miller’s right, title and ownership interest in and to (i) 4,051,020,000 shares of our common stock and (ii) 6 shares of our Series B Preferred Stock in exchange for the payment by the Purchaser of $20,000.00 (the “Purchase Price”).

On or about November 17, 2014, Mr. Miller received the Purchase Price, i.e. $20,000.00. Accordingly, upon his receipt of that $20,000.00, Mr. Miller was obligated to deliver the (i)(a) share certificates evidencing those 4,051,020,000 shares of that common stock and (b) documentation to accommodate the transfer of those 4,051,020,000 shares of that common stock; (ii) documentation transferring all right, title and ownership interest in those 6 shares of our Series B Preferred Stock; and (iii) all documentation and other relevant information relating to our operations which will enable us to prepare and file with the Securities and Exchange Commission those reports necessary to cause us to be current with respect to our reporting obligations (the “Operations Information”). To date, Mr. Miller has not transferred to the Purchaser those share certificates, any such documentation transferring all right, title and ownership interest in and to those 6 shares of that preferred stock, or the Operations Information, notwithstanding the Purchaser’s request therefor.

We have been informed and, therefore, believe, that Rancho Capital Management, Inc. has caused the Purchase Price to be paid to the Seller and, therefore, is the rightful holder of those 4,051,020,000 shares of our common stock and 6 shares of our Series B preferred Stock and should be treated by as such.

Accordingly, the Purchaser has requested that we instruct our transfer agent to cancel the certificates that evidence and represent those 4,051,020,000 shares of our common stock and issue to the Purchaser, certificates evidencing

and representing those shares of that common stock. In that regard, on or about November 21, 2014, we instructed our transfer agent, Holladay Transfer Agency, to cancel certificates number 4442, 2421, 4256, 4403, and 4440, which evidence and represent those 4,051,020,000 shares of our common stock.

On or about November 24, 2014, Rancho Capital Management, Inc. requested us to issue certificates to Rancho Capital Management, Inc. evidencing and representing those 6 shares of our Series B Preferred Stock. In response, on or about November 25, 2014, we issued to Rancho Capital Management, Inc. certificates evidencing and representing those 6 shares of that Series B preferred stock.

On November 25, 2014, we issued six (6) shares of our Series B Preferred Stock to Rancho Capital Management, Inc. Each share of that Series B Preferred Stock has super voting rights regarding those matters submitted to our shareholders for their consideration and approval. Specifically, the vote of each share of that Series B Preferred Stock is equal in voting power to four times the total number of our issued and outstanding shares of (i) common stock and (ii) preferred stock on the date of any action for which the vote of our shareholders is taken.

Change in Management

On November 15, 2014, the Board of Directors (the “Board”) of Silverton Adventures, Inc. (the “Company”), appointed Ira Morris as the Chairman of the Board, Chief Executive Officer, President, Secretary and Treasurer of the Company. In connection with Mr. Morris’s appointment as a member of the Board and an officer, the Company entered into a consulting agreement with Mr. Morris dated November 17, 2014 (the “Consulting Agreement”).

Pursuant to the Consulting Agreement, Mr. Morris is required to devote such time as is necessary to complete the services required. Mr. Morris is not precluded from acting in any other capacity or for any other person, firm or business; provided, however, that such other services do not conflict with Mr. Morris’s obligations to the Company.

Pursuant to the Consulting Agreement, Mr. Morris will receive compensation of $2,500.00 per month, due and payable at the end of each month. The Company, in its sole discretion, may pay Mr. Morris bonuses, provide short or long term incentive plans, stock options, and other discretionary opportunities or payments. Mr. Morris is not an employee; rather, he is an independent contractor. Accordingly, Mr. Morris is responsible for payment of any and all local, provincial, state, and federal payroll-related taxes or assessments related to his compensation. Mr. Morris is not entitled to any benefits or privileges that may be provided by the Company to its employees.

Pursuant to the Consulting Agreement, Mr. Morris and the Company have the right to terminate the Consulting Agreement before the end of the one-year term, with or without cause; provided, however, one month’s written notice of termination must be given, or, at the discretion of the Company, payment by the Company to Mr. Morris of one month’s compensation, in lieu of notice.

On November 17, 2014, Ron Miller resigned from the Company’s Board and as the Company’s President, Treasurer, and Secretary.

In accordance with ASC 855, Company management reviewed all material events through the date of this filing, and there are no other material subsequent events to report other than those reported.

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 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 three months ended September 30, 2014, the Company generated revenues of $35,778 (as compared to revenues of $43,485 for three months ended September 30, 2013) while incurring $0 in cost of sales resulting in a gross margin of $35,778 (as compared to a gross margin of $37,357 for three months ended September 30, 2013). After the Company deducted $48,128 for total operating expenses we incurred a loss from operations of $12,350 for the three months ended September 30, 2014 (as compared to a loss from operations of $106,661 for three months ended September 30, 2013). During the three months ended September 30, 2014, the company incurred $36,854 in total other expenses (as compared to total other expenses of $162,791 for the three months ended September 30, 2013) resulting in a net loss of $49,204 and $269,452 for the three months ended September 30, 2014 and 2013, respectively.

To reach and maintain quarterly profitability, the Company must raise significant investment capital to be able to expand our inventory of educational and family oriented DVD titles under our subsidiary Worldwide Media, and marketing our printing services regionally under our subsidiary Silverton Printing.

Liquidity and Capital Resources

As of September 30, 2014, the Company had negative working capital of $1,081,492, which is current assets minus current liabilities. This negative working capital is attributable to accounts payable, accrued liabilities, notes payable, derivative liabilities, and convertible notes payable. The Company’s current assets as of September 30, 2014 consisted of $8,999 in prepaid royalties, $777 in prepaid expenses, $14,953 in trade account receivable, net, and $0 in cash.

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

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, but 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 $0.49 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.

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 (following the big budget epic of Russell Crowe’s “Robin Hood”). 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 the ability, to distribute their product 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 affect 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.

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.

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, Sam’s Club, 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).

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 down-streaming 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.

ITEM 3. 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

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

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⁾

3.1(ii)	Bylaws ⁽¹⁾

14	Code of Ethics ⁽¹⁾

31.1	Section 302 Certification by Principal Executive Officer and Principal Financial and Accounting Officer

32.1	Section 906 Certification by Principal Executive Officer and Principal Financial and Accounting Officer

(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.

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/ Ira Morris	President, CEO, Treasurer, and Director	January 28, 2015
Ira Morris

Silverton Adventures, Inc. - FORM 10-Q - January 29, 2015

Attached files

Silverton Adventures, Inc. Reports