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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K





 

 [X]

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 2013


[   ]

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 registrant as specified in its charter)



 

Nevada

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)


(702) 876-1539

(Issuer's telephone number)


(Former name, former address and former fiscal year, if changed since last report)


Securities registered under Section 12(b) of the Exchange Act: 

None


Securities registered under Section 12(g) of the Exchange Act:  

Common Stock, Par Value $0.00001


Indicate by check mark if the registrant is a well-season issuer, as defined in Rule 405 of the Securities Act. [  ] Yes    [X] No


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

[X] Yes [  ] No  


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 for such shorter period that the Registrant was required to file such reports), and (2) has been subject to the reporting requirements for the past 90 days. [X ] Yes [   ] No


Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]








1


Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated 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


State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter.


Note  If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.

 

The aggregate market value of the voting and non-voting common stock of the issuer held by non-affiliates as of December 31, 2012 was approximately $715,000 based upon the $0.55 price per share which was the price of the last trade on December 31, 2012. The current bid price is $0.0006 per share and the current offer is $0.0005 per share.


State the number of shares outstanding of each of the Issuers classes of common equity, as of the last practicable date:


·

1,061,664,939     November 5, 2013




DOCUMENTS INCORPORATED BY REFERENCE


List hereunder the following documents if incorporated by reference and the Part of the Form 10-K/A (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.




2


TABLE OF CONTENTS

PART I


Item 1  Business

  7   

Item 1A Risk Factors

12


Item 1B  Unresolved Staff Comments

12


Item 2  Properties 

13


Item 3  Legal Proceedings

13


Item 4  Submission of Matters to a Vote of Security Holders

13


PART II


Item 5

Market for Registrants Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities

14


Item 6  Selected Financial Data

15


Item 7  Managements Discussion and Analysis of Financial Condition and

Results of Operations

16


Item 8  Financial Statements and Supplementary Data

19


Item 9 Changes in and Disagreements With Accountants and Accounting and

Financial Disclosure

35


Item 9  A Controls and Procedures

35


Item 9  B Other Information

36


PART III


Item 10  Directors, Executive Officers and Corporate Governance

37


Item 11  Executive Compensation

39

 

Item 12  Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters

40


Item 13  Certain Relationships and Related Transactions and Director Independence

40


Item 14  Principal Accounting Fees and Service

41


PART IV


Item 15  Exhibits, Financial Statement Schedules

42


SIGNATURES

43




3


CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS


All readers of this document and any document incorporated by reference herein are advised that this document and documents incorporated by reference into this document contain forward-looking statements and statements of historical facts. Forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially for those indicated by the forward-looking statements. Examples of forward-looking statements include, but are not limited to (i) revenue projections, income (loss), earning (loss) per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of the plans and objectives of the Company or its management or Board of Directors, including the introduction of new products, or estimates or predictions with regards to customers, suppliers, competitors or regulatory authorities, (iii) statements of future performance, and (iv) statements of assumptions underlying other statements about the Company or its business.


This document and all documents incorporated herein by reference also identify factors which could cause actual results to differ materially from those indicated by the forward-looking statements.  Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations andRisk Factors.


The cautions outlined made in this statement and elsewhere in this document should not be construed as complete or exhaustive.  In many cases, we cannot predict factors which could cause results to differ materially from those indicated by the forward-looking statements.  Additionally, many items or factors that could cause actual results to differ materially from forward-looking statements are beyond our ability to control.  The Company will not undertake an obligation to further update or change any forward-looking statement, whether as a result of new information, future developments, or otherwise.




4


PART I


ITEM 1.  BUSINESS


Business Summary


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 (WMO). 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 childrens 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.


Operation Summary


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 childrens DVDs and programs.


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 merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.


Product Development


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


 Business Cards

 Carbonless Forms

 Catalogs/Booklets

 Flyers

 Posters



5


 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 childrens 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 Medias market niches.  One strategy Worldwide Media has developed in this regard is what is called in the industry based, best described as mid-America having traditional family values, and highly desirous of 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 Hillarys 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 are best described as mid-America having traditional family values and are highly desirous of programming that reflects those values.



6


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 recreational and discretionary time that this maturing generation will have, along with their 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. This market is also highly desirous of 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 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 Medias management has made a strategic decision that, rather than expending the time, energy and resources in cultivating those markets, Worldwide Medias 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 SKUs 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 CDs, 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 PXs), Eurpac (military PXs worldwide), Waxworks, Library Video, Midwest Tape, Blockbuster, Borders, VPD, etc. (complete account list available).




7


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  markets 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 McLean 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 Medias 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 Medias 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 Medias management feels it is in a superior position to affectively seize market share in its niche over and above its competitors, due to Worldwide Medias 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.




8


Competition


The Company will compete against established companies with significantly greater financial, marketing, research and development, personnel, and other resources than the Company. Such competition could have a material adverse effect on the Company's profitability.


Government Regulation


There are no government regulations regulating the business of printing and mailing services for business and other organizations or the educational and home video DVD sales.


ITEM 1A.  RISK FACTORS


Not required.


ITEM 1B.  UNRESOLVED STAFF COMMENTS


There are no unresolved staff comments.


ITEM 2.  PROPERTIES


Our principal Nevada executive offices are located at 6283-B South Valley View Boulevard Las Vegas, Nevada 89118 and our phone number is (702) 876-1539. This facility is currently being provided to the Company pursuant to a sub-lease from its officers and directors.  There are currently no proposed programs for the renovation, improvement or development of the facilities currently in use.


ITEM 3.  LEGAL PROCEEDINGS


We are not currently involved in any legal proceedings nor do we have any knowledge of any threatened litigation.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS


No matters were submitted to a vote of security holders during the fiscal year ended June 30, 2013.




9


PART II


ITEM 5.  MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


On September 24, 2010, our common stock was approved for listing on the OTCBB® under the ticker symbol SVAD.  As of the date of this filing, there have been few trades for our common stock and it remains relatively illiquid. Below is a list of the trading high, low and quarter end of our common stock of our most recent three quarter ends:






Quarter then Ended

Low Price

High Price

Last Trade





September 30, 2013

$0.0001

$0.03

$0.0003





June 30, 2013

$0.02

$0.09

$0.025





March 31, 2013

$0.06

$0.95

$0.09

December 31, 2012

$0.10

$0.99

$0.55

September 30, 2012

$0.10

$0.17

$0.10

June 30, 2012

No Trades

No Trades

No Trades

March 31, 2012

$0.55

$0.83

$0.55

December 31, 2011

$0.55

$0.83

$0.83






Additionally, the Company does not anticipate that any significant trading will occur until our common stock has been approved by the Depository Trust Company (DTC) for clearing of transactions electronically. We do not know when such approval by DTC will occur.


Additionally, once trading begins, the Company does not guarantee that a meaningful trading market will develop.  Silverton Adventures, Inc. and its management make no representation about the present or future value of our common stock. We have not registered our class of common stock for resale under the blue sky laws of any state and current management does not anticipate doing so. The holders of shares of common stock, and persons who may desire to purchase shares of our common stock in any trading market that might develop in the future, should be aware that, in addition to transfer restrictions imposed by federal securities laws, significant state blue sky law restrictions may exist which could limit the ability of stockholders to sell their shares and limit potential purchasers from acquiring our common stock. We are not obligated by contract or otherwise to issue any securities and there are not outstanding any securities that are convertible into or exchangeable for shares of our common stock.


Holders


As of June 30, 2013, we had 678,300,845 shares of common stock, par value $0.00001, issued and outstanding held by approximately 40 shareholders of record. The stock transfer agent for our securities is Holladay Stock Transfer, 2939 North 67th Place, Scottsdale, AZ 85251-6015 - Telephone: (480) 481-3940 and Facsimile: (480) 481-3941.



Dividends


There are no restrictions in our Articles of Incorporation or Bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring

dividends where, after giving effect to the distribution of the dividend:


1. We would not be able to pay our debts as they become due in the usual course of business; or

2. Our total assets would be less than the sum of the total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.




10


The Company has not declared any dividends, and does not plan to declare any dividends in the foreseeable future.


Recent Sales of Unregistered Securities


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 979,999,994 shares of common stock at a par value of $0.00001.  As of June 30, 2013, the Company has 82,400 series A preferred shares issued and outstanding, 2 series B preferred shares issued and outstanding, 238,649 series C shares issued and outstanding, and 678,300,845 common shares issued and outstanding.


The Company has issued the following shares of restricted common stock and preferred stock since the filing of its last annual statement for fiscal year ended June 30, 2012:


Preferred Stock Series A

According to the terms of the preferred stock, each share of Series A preferred stock is convertible into shares of the Companys common stock at a conversion ratio of one hundred (100) shares of common stock for every one (1) share of preferred stock.  The Companys 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 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.



11


 

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 managements 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.


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.


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, 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.


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. The company recorded a loss on coversion of debt in the amount of $295,714.


Securities Authorized for Issuance under Equity Compensation Plans


We do not have any equity compensation plans and accordingly we have no securities authorized for issuance thereunder.


Purchases of Equity Securities by the Registrant and Affiliated Purchasers


We did not purchase any of our shares of common stock or other securities during the year ended June 30, 2013.


















12


ITEM 6.  SELECTED FINANCIAL DATA


The following table includes select data extracted from, and should be examined in conjunction with, the audited financial statements and footnotes for the year ended June 30, 2013 and 2012 found under Item 8 of this annual report.


 

Year Ended

Year Ended

 

June 30, 2013

June 30, 2012

 


(as restated)

Revenues

$                    244,469

$                    329,228




Cost of Sales

97,360

109,177




Gross Margin

147,089

220,051




Total Operating Expenses

2,368,190

545,020




Net Loss

(2,737,319)

(309,273)




Net Cash Used in Operating Activities

(221,566)

(87,811)




Net Cash Provided by (Used in) Investing Activities

11,783

(35,385)




Net Cash Provided by Financing Activities

210,720

118,253




Cash on hand

937

-




Net loss per basic and diluted shares

(0.02)

(0.02)




Weighted average number of common shares outstanding:

141,343,379

17,800,000




Cash dividends declared per common share

-

-




Property and equipment, net

1,557

16,171




Stockholders deficit

(797,855)

(344,408)



ITEM 7.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following plan of operation should be read in conjunction with our financial statements and the notes thereto included elsewhere in this annual report. Statements contained herein which are not historical facts are forward-looking statements, as that term is defined by the Private Securities Litigation Reform Act of 1995, including statements relating to our plans, objectives, expectations and intentions. Although we believe that the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are subject to risks and



13


uncertainties that could cause actual results to differ from those projected. We caution investors that any forward-looking statements made by us are not guarantees of future performance and that actual result may differ materially from those in the forward-looking statements. Such risks and uncertainties include, without limitation: established competitors who have substantially greater financial resources and operating histories, regulatory delays or denials, ability to compete as a start-up company in a highly competitive market, and access to sources of capital.


Results of Operations


The following table provides selected financial data about our company for the year ended June 30, 2013 and 2012, respectively.  





Balance Sheet Data


June 30, 2013

June 30, 2012




Cash


$937


$-




Total Current Assets


$20,812


$24,940




Total Assets


$22,369


$41,111




Total Current Liabilities


$820,224


$385,519




Stockholders' Deficit


$(797,855)


$(344,408)



Plan of Operation


We have developed a plan of operation reflecting our objectives and anticipated growth for the next 12 months and beyond. In our plan, we identify our cash requirements, our new product development, and our required staffing and additional funding requirements to fulfill our business objectives.


Cash Requirements


We estimate that we require a minimum of approximately $250,000 and a maximum of approximately $500,000 to grow our operations for the next 12 months from the date of this annual report. The minimum of $250,000 is required for acquisition of educational and family titles, marketing of our printing services, operating expenses and general operational overhead.

The maximum will be required to fully implement our business plan which will include the following marketing of our services, new copiers, additional staff, purchase of educational and family video programs, and general working capital associated with the growth of the Company.


Revenues


The Company has recorded $244,469 and $329,228 in revenues from operations as of June 30, 2013 and 2012, respectively, which was generated from client printing (mainly color printing), mailing, sales of educational and family oriented DVD programs (through our acquired subsidiary Worldwide Media Organization, Inc.), and related services. The decrease in revenues is a result of lower consumer demand. Cost of sales for June 30, 2013 and 2012



14


respectively are $97,380 and $109,177, resulting in a gross margin of $147,089 and $220,051, respectively for such same time periods.


Operating and General & Administrative Expenses


The Companys operating expenses consisting of depreciation expense, advertising expense, bad debt expense, royalty expense, payroll, professional fees, stock based compensation and general and administrative expenses totaling $2,368,190 and $545,020, respectively, for June 30, 2013 and 2012 resulting in a net loss from operations of $2,737,319 and $309,273 for such same time periods. The increase in operating expenses and net loss is primarily due to stock based compensation valued at $1,116,642 paid to the Companys President for services during the year ended June 30, 2013 and stock issued for services valued at $500,000 to an outside consultant during the year ended June 30, 2013.


Income Taxes


The Company does not anticipate having to pay income taxes in the upcoming years due to our absence of net profits.


Capital and Liquidity


As of June 30, 2013 and 2012, we had total current assets of $20,812 and $24,940 respectively, and total current liabilities of $820,224 and $385,519, respectively.  


We had cash on hand of $937 and $-0- as of June 30, 2013 and 2012, respectively. We do not have sufficient cash to meet our short-term expansion needs over the next 12 months, which are to sell our printing and mailing services on a more regional basis and acquire more DVD titles, and hire more employees and staff. We are currently upgrading our ecommerce web site at www.silvertoninc.com for our subsidiary Silverton Printing, Inc. and at www.mediahomevideo.com for our subsidiary Worldwide Media Organization, Inc. in order to increase our revenues. We intend to bring in new clients through Internet and more traditional advertising means and attract customers by lowering our margins in hopes of increasing our capacity.


The Company has been funded through borrowings from related parties and unrelated third parties in the form of notes payable and convertible notes payable, and through the sale of shares of the Companys stock. During the year ended June 30, 2013 the Company received proceeds of $5,000 from the sale of preferred stock, received proceeds of $55,503 from notes payable, and received proceeds of $219,351 from convertible notes payable.





15


ITEM 8 Financial Statements and Supplementary Data



 




 

[f13june_10ksilvertonvedga001.jpg]



16


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors

Silverton Adventures, Inc.


We have audited the accompanying consolidated balance sheets of Silverton Adventures, Inc., as of June 30, 2013 and 2012, and the related consolidated statements of operations, consolidated statements of stockholders deficit and consolidated statements of cash flows for the years then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.


We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.


In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Silverton Adventures, Inc., as of June 30, 2013 and 2012, and the results of their operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company had accumulated losses of $3,189,063 as of June 30, 2013 which raises substantial doubt about its ability to continue as a going concern. Managements plans concerning these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ Sadler, Gibb & Associates, LLC


Sadler, Gibb & Associates, LLC

Salt Lake City, UT

November 5, 2013


Office

801.783.2950

Fax

801.783.2960


www.sadlergibb.com | 2455 Parleys Way, suite 320, Salt Lake City, Utah 84109


SILVERTON ADVENTURES, INC.

Consolidated Balance Sheets









ASSETS












June 30,


June 30,




2013


2012




 


 

CURRENT ASSETS















Cash

$

            937


$

                -


Trade accounts receivable, net


         9,534



        15,187


Other assets


            565



                -


Prepaid expenses


            777





Prepaid royalties


         8,999



         9,753




 

 


 

 



Total Current Assets

 

        20,812


 

        24,940









PROPERTY AND EQUIPMENT, net

 

         1,557


 

        16,171











TOTAL ASSETS

$

        22,369


$

        41,111









LIABILITIES AND STOCKHOLDERS' DEFICIT









CURRENT LIABILITIES















Accounts payable and accrued liabilities

$

      327,841


$

      211,923


Bank overdraft


         5,968



        19,972


Royalty payables


        39,806



        23,368


Notes payable


        40,564



      115,125


Convertible note payable, net


      126,823



        10,000


Derivative liability


      278,122



                -


Related party payables


         1,100



         5,131




 

 


 

 



Total Current Liabilities

 

      820,224


 

      385,519









STOCKHOLDERS' DEFICIT















Series A Preferred stock, 10,000,000 shares authorized at par







   value of $0.001, 82,400 and 100,000 shares issued and







   outstanding, respectively


              82



            100


Series B Preferred stock, 6 shares authorized at par







   value of $0.0001, 2 and no shares issued and







   outstanding, respectively


                -



                -


Series C Preferred stock, 10,000,000 shares authorized at par







   value of $0.0001, 238,649 and no shares issued and







   outstanding, respectively


              23



                -


Common stock, 979,999,994 shares authorized at par







  value of $0.00001; 678,300,845 and 17,800,000 shares







  issued and outstanding, respectively


         6,783



            178


Additional paid-in capital


   2,384,320



      107,058


Accumulated deficit

 

  (3,189,063)


 

     (451,744)











Total Stockholders' Deficit

 

 (797,855)


 

 (344,408)











TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)

$

        22,369


$

        41,111









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


SILVERTON ADVENTURES, INC.

Consolidated Statements of Operations



















For the Years Ended




June 30,




2013


 

2012




 



SALES INCOME

$

        207,528


$

      214,059

ROYALTY INCOME

 

          36,941


 

      115,169

TOTAL REVENUES


        244,469



      329,228









COST OF SALES

 

          97,380


 

      109,177




 

 


 

 

GROSS MARGIN

 

        147,089


 

      220,051









OPERATING EXPENSES















Royalty expense


          17,735



        17,467


Depreciation expense


           5,068



        14,050


General and administrative


        244,794



      201,050


Stock based compensation


     1,331,198



                 -


Payroll expense


        120,199



      251,772


Professional fees

 

        649,196


 

        60,681











Total Operating Expenses

 

     2,368,190


 

      545,020









LOSS FROM OPERATIONS

 

    (2,221,101)


 

     (324,969)









OTHER INCOME (EXPENSES)















Interest expense


       (326,805)



         (4,159)


Loss on disposal of assets


           2,881



         (1,951)


Gain on derivative


        103,420



                 -


Gain (Loss) on settlement of debt

 

       (295,714)


 

        21,806











Total Other Income (Expenses)

 

       (516,218)


 

        15,696









NET LOSS BEFORE INCOME TAXES


    (2,737,319)



     (309,273)










Income taxes

 

                  -


 

                 -









NET LOSS

$

    (2,737,319)


$

     (309,273)









BASIC AND DILUTED LOSS PER SHARE

$

            (0.02)


$

           (0.02)









WEIGHTED AVERAGE NUMBER OF






   SHARES OUTSTANDING

 

  141,343,379


 

  17,800,000









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


SILVERTON ADVENTURES, INC.

Consolidated Statements of Stockholders' Deficit



Series A


Series B


Series C






Additional






 Preferred Stock


 Preferred Stock


 Preferred Stock


 Common Stock


 Paid-in


 Accumulated





 Shares


 Amount


Shares


Amount


 Shares


Amount


 Shares


 Amount


 Capital


 Deficit


 Total

Balance, June 30, 2011

              -



      -


-



-


-



   -


   17,800,000



       178



97,158



 (142,471)



 (45,135)

 Preferred stock issued for cash and services rendered at $0.10 per share

   100,000



  100


-



-


-



-


                  -



           -



9,900



                -



       10,000

 Net loss for the year ended June 30. 2011

              -


 

      -


-


 

-


-


 

      -


                  -


 

           -


 

-


 

 (309,273)


 

 (309,273)

Balance, June 30, 2012

   100,000


   

  100


-


   

-


-


   

      -


   17,800,000


   

       178


   

107,058


   

 (451,744)


   

 (344,408)

Series B Preferred shares issued for compensation

              -



      -


2



-


-



      -


                  -



           -



214,556



                -



      214,556

Series C Preferred shares issued for services

-



-


-



-


200,000



20


-



-



499,980



-



500,000

Series C Preferred shares issued for cash

              -



      -


-



-


2,000



      -


                  -



           -



5,000



                -



         5,000

Series C Preferred shares issued for debt

              -



      -


-



-


36,649



3








91,620






       91,623

Common stock issued for conversion of debt

              -



      -


-



-


-



      -


  148,740,845



    1,487



310,713



                -



      312,200

Conversion of Series A Preferred shares into common shares

 (17,600)



   (18)


-



-


-



      -


     1,760,000



         18



-



                -



                -

Beneficial conversion feature

              -



      -


-



-


-



      -


                  -



           -



43,851



                -



       43,851

Stock based compensation

              -



      -


-



-


-



      -


  510,000,000



    5,100



1,111,542



                -



   1,116,642

 Net loss for the year ended June 30, 2013

              -


 

      -


-


 

-


-


 

      -


                  -


 

           -


 

-


 

(2,237,319)


 

(2,237,319)

Balance, June 30, 2013

     82,400

   

$

    82

   

2

   

$

-

   

238,649

   

$

     23

   

  678,300,845

   

$

    6,783

   

$

2,384,340

   

$

(3,189,063)

   

$

 (797,855)


























   




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


SILVERTON ADVENTURES, INC.

Consolidated Statements of Cash Flows






For the Years Ended





June 30,





2013


2012

CASH FLOWS FROM OPERATING ACTIVITIES

 




Net loss

$

  (2,737,319)


$

     (309,273)


Adjustments to reconcile net loss to







  net cash used by operating activities:








Depreciation expense


          2,830



       14,050



Excess interest on initial derivative liability


      195,909



                -



Amortization of debt discount


      132,956



                -



Gain on derivative liability


     (103,420)



                -



Bad debt expense


                 -



         2,005



Stock issued for services


      500,000



                -



Stock based compensation


   1,331,198



                -



Expenses paid on behalf of the Company









by a related party


          4,144



       23,251



Expenses paid on behalf of the Company









by a unrelated party


        19,000



         6,500



Loss (Gain) on debt conversion


      295,714



                -



Loss on disposal of fixed assets


                 -



         1,951


Changes to operating assets and liabilities:








Accounts receivable


          5,653



       46,811



Prepaid expenses


           (777)






Inventory


                 -



                -



Investments


           (564)



                -



Related-party receivables


                 -



                -



Prepaid royalties


            754



        (4,721)



Accounts payable and accrued liabilities


      115,918



      132,955



Royalties payable

 

        16,438


 

        (1,340)




Net Cash Used in Operating Activities

 

     (221,566)


 

      (87,811)

CASH FLOWS FROM INVESTING ACTIVITIES







Disposal of fixed assets


        11,783



                -


Purchase of property and equipment


                 -

 


      (35,385)




Net Cash Used in Investing Activities

 

        11,783


 

      (35,385)

CASH FLOWS FROM FINANCING ACTIVITIES








Proceeds from the sale of preferred stock


          5,000



       10,000



Changes in bank overdraft


       (14,004)



       19,972



Proceeds from related party payables


          1,100



       54,867



Proceeds from convertible notes payable


      219,351



       10,000



Proceeds from notes payable


        55,503



       47,000



Repayments on convertible notes payable


       (10,000)



                -



Repayments on notes payable


       (41,099)



        (5,500)



Repayments of related party payables

 

         (5,131)


 

      (18,086)




Net Cash Provided by Financing Activities

 

      210,720


 

      118,253

NET INCREASE (DECREASE) IN CASH


            937



        (4,943)

CASH AT BEGINNING OF YEAR

 

                 -


 

         4,943

CASH AT END OF YEAR

$

            937


$

                -










SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION







CASH PAID FOR:








Interest

$

                 -


$

         2,524



Income Taxes

$

                 -


$

                -

NON CASH FINANCING AND INVESTING ACTIVITIES:








Common stock issued for acquisition of subsidiary

$

                 -


$

                -



Common stock issued for conversion of debt

$

        16,486


$

                -



Series C Preferred stock issued for debt

$

        91,623


$

                -



Contributed capital for forgiveness of related party debt

$

                 -


$

                -



Cancellation of common stock

$

                 -


$

                -










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





21


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Business and Organization

Silverton Adventures, Inc. (the "Company"), was originally incorporated in the State of Nevada on May 31, 2006 as Mor Travel, Inc. On December 26, 2007, the Company changed its name to Silverton Adventures, Inc. The Company currently operates under the DBA Silverton Print and Mail in Clark County, Nevada.  The Companys principal business objectives are the licensing and distribution of educational and family media content to distributors and end consumers, and providing printing and mailing services to companies nationwide.


On December 30, 2010, the Company acquired Worldwide Media Organization, Inc. (Worldwide).  Worldwide is the owner or licensee of media content and also has important relationships with media distributers that the Company felt would allow significant growth in the media content and royalty business.  Worldwide operates as a wholly owned subsidiary of the Company.


On June 30, 2011 the Company formed Silverton Printing, Inc., a Nevada corporation, as a wholly-owned subsidiary.  The Company plans to operate its printing and mailing services through this subsidiary.


Accounting Basis

The Companys financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.  The Company has elected a June 30 fiscal year end.  


Principles of Consolidation

The accompanying consolidated financial statements for the years ended June 30, 2013 and 2012 include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany balances and transactions have been eliminated in consolidation.


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.


Cash and Cash Equivalents

The company considers all highly liquid investments with original maturities of three months or less to be cash or cash equivalents


Concentrations of Risk

The Companys bank accounts are held by insured institutions. The funds are insured up to $250,000. At June 30, 2013, the Companys bank deposits did not exceed the insured amounts.

Two of the Companys customers make up 31 percent of total sales and five vendors account for 28 percent of total purchases.
















22


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Accounts Receivable

The Companys accounts receivable are presented net of the allowance for estimated doubtful accounts. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts represents the Companys best estimate of the amount of probable credit losses in the existing accounts receivable balance. The Company determines the allowance for doubtful accounts based upon historical write-off experience and current economic conditions. The Company reviews the adequacy of its allowance for doubtful accounts on a regular basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.


The Companys accounts receivable, net of the allowance for doubtful accounts, was $9,534 and $15,187 at June 30, 2013 and 2012, respectively.


Property and Equipment

Property and equipment is recorded at cost.  Major additions and improvements are capitalized and depreciated over their estimated useful lives.  Depreciation of property and equipment is determined using the straight-line method over their useful lives, which ranges from three to five years.  Gains or losses on the sale or disposal of property and equipment are included in the statements of operations. Maintenance and repairs that do not extend the useful life of the assets are expensed as incurred.  


Valuation of Long-Lived Assets

The Company follows ASC 360 regarding the valuations and carrying values of its long-lived assets. Long-lived tangible assets and definite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses an estimate of undiscounted future net cash flows of the assets over the remaining useful lives in determining whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the expected future cash flows of the assets, the Company recognizes an impairment loss equal to the difference between the carrying values of the assets and their estimated fair values.  For the years ended June 30, 2013 and 2012, no impairment of fixed assets was recognized.

Fair Value of Financial Instruments

In accordance with ASC 820, the carrying value of cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to the short-term maturity of these instruments.  ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:


Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.


Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.


Level 3-Inputs are unobservable inputs which reflect the reporting entitys own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.













23


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Revenue Recognition

The Company's revenues are generated from the printing and mailing services and from royalties on rights to media owned or licensed by the Company, primarily film rights.  The Company follows guidance found in ASC 605, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements and ASC 926 which provides guidance on the recognition of revenue from the sales or licensing of films by producers or distributors of films.

ASC 605 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue related to goods and services provided when the following conditions are met:

a)

Persuasive evidence of an arrangement exists,

b)

Delivery has occurred or services have been rendered,

c)

The fee is fixed or determinable,

d)

Collectability is reasonably assured.  


Revenues from printing and reproduction, such as photo copies, catalogue printing or reproduction, DVD duplication or other similar services are recognized under ASC 605 and are recognized when the product is shipped.


The Company's royalty revenues are generated by licensing rights to media owned or licensed by the Company and is recognized under ASC 926 which states that a sale occurs when the Company transfers control of the master copy of a film or other media content and all the associated rights that accompany it. The following conditions are required before the Company recognizes revenue from a sale or licensing arrangement of a film or other media content:


a)

Persuasive evidence of a sale or licensing arrangement with a customer exists,

b)

The film or other media content is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery,

c)

The license period of the arrangement has begun and the customer can begin its exploitation, exhibition, sale or license of the film or media content,

d)

The arrangement fee is fixed or determinable,

e)

Collection of the arrangement fee is reasonably assured.  


Advertising Costs

The Companys policy regarding advertising is to expense advertising when incurred. The Company incurred $18,114 and $18,067 in advertising expense for the years ended June 30, 2013 and 2012, respectively.




NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


Reclassification


Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation.


Stock-based Compensation

The Company follows the provisions of ASC 718 which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.  The Company uses the Black-Scholes pricing model for determining the fair value of stock-based compensation.  


Equity instruments issued to non-employees for goods or services are accounted at fair value when the service is complete or a performance commitment date is reached, whichever is earlier.




24


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

Income Taxes

The Company accounts for income taxes in accordance with accounting guidance now codified as ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities.


A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.


The Company applies the provisions of ASC 740, Accounting for Uncertainty in Income Taxes. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements.  The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company did not identify any material uncertain tax positions on returns that have been filed or that will be filed.  The Company did not recognize any interest or penalties for unrecognized tax benefits during the years ended June 30, 2013 and 2012, nor were any interest or penalties accrued as of June 30, 2013.


Basic Loss per Share

Basic loss per share is calculated by dividing the Companys net loss applicable to common stockholders by the weighted average number of common shares during the period. Diluted loss per share is calculated by dividing the Companys net loss available to common stockholders 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.  As of June 30, 2013 the Company has an outstanding balance of convertible debt that is potentially dilutive.  There are no such common stock equivalents outstanding as of June 30, 2013 or 2012.


Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Companys management believes that these recent pronouncements will not have a material effect on the Companys consolidated financial statements.










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 year ended June 30, 2013, the Company realized a net loss of $2,737,319 and has incurred an accumulated deficit of $3,189,063.  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



25


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

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  PROPERTY AND EQUIPMENT 


As of June 30, 2013 and 2012, property and equipment consisted of the following:


June 30,


2013


2012







Printing and imaging equipment

$

16,270


$

28,053

Computer equipment


2,506



2,506

Total property and equipment


18,776



30,559

Accumulated depreciation


(17,218)



(14,388)







Total property and equipment, net

$

1,557)


$

16,171)


Depreciation expense for the years ended June 30, 2013 and 2012 was $5,068 and $14,050, respectively.  


NOTE 4 - RELATED PARTY TRANSACTIONS


Related Party Payables

Various general and administrative expenses of the Company as well as loans for operating purposes have been paid for or made by related parties of the Company.  During the year ended June 30, 2013 the Company received cash of $1,100 on these payables, and made payments totaling $5,131 on these related-party payables.  Related party payables totaled $1,100 and $5,131 at June 30, 2013 and 2012, respectively. These amounts payable bear no interest, are uncollateralized and due on demand.  










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 $17,735 and $17,467 for the years ended June 30, 2013 and 2012, respectively.  As of June 30, 2013 and 2012, royalty payables under these agreements totaled $39,806 and $23,368, 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



26


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

royalty expenses are capitalized and amortized as royalty expenses are applied.  As of June 30, 2013 and 2012, the Company has recorded $8,999 and $9,753 as prepaid royalties, respectively. 


The Company has also entered into similar royalty agreements wherein the Company licenses content rights to third parties in exchange for a royalty fee.  During the years ended June 30, 2013 and 2012, the Company recognized royalty revenue of $36,941 and $115,169, respectively.


NOTE 6 - 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 979,999,994 shares of common stock at a par value of $0.00001.  As of June 30, 2013, the Company has 82,400 series A preferred shares issued and outstanding, 2 series B preferred shares issued and outstanding, 238,649 series C preferred shares issued and outstanding, and 678,300,845 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 Companys common stock from $0.0001 to $0.00001.


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 Companys common stock at a conversion ratio of one hundred (100) shares of common stock for every one (1) share of preferred stock.  The Companys 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.

 





NOTE 6 - STOCKHOLDERS DEFICIT (continued)


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").

 



27


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

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 managements 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.


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.


NOTE 7 CONVERTIBLE NOTES PAYABLE

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 $1,306.44 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

·



28


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

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.

As of June 30, 2013, $15,000 of the note was converted into 140,845 shares of common stock by the note holder (see note 6).

On November 6, 2012, the Company borrowed $42,500 from an unrelated third party entity in the form of a convertible note, $33,000 of which was received in cash and $9,500 of which was for professional fees.  The note bears interest at 8 percent per annum with principal and interest due in full on August 8, 2013.  


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 55 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.  


Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $42,500 on the note date.  As of June 30, 2013 the Company had amortized $36,473 of the debt discount to interest expense, leaving $6,027 in unamortized debt discount at June 30, 2013.


The fair value of the conversion option of the convertible note of $67,374 has been recognized as a derivative liability on the date of issuance with all future changes in the fair value of these conversion options being recognized in earnings in the Companys statement of operations under the caption Other income (expense)  Gain (loss) on derivative liability until such time as the note is converted or the conversion feature expires.


The Company uses the Black-Scholes option pricing model to value the derivative liability and subsequent remeasurements.  Included in the model are the following assumptions: stock price at valuation date of $.025, exercise price of $0.0138, dividend yield of zero, years to maturity of 0.11, risk free rate of 0.03 percent, and annualized volatility of 312.97 percent.


ASC 815 requires the Company to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value of the derivatives as gain (loss) on the income statements.   At June 30, 2013 the derivative liability was revalued at $44,237, which led to the Company recording a gain on derivative liability in the amount of $23,137









NOTE 7 CONVERTIBLE NOTES PAYABLE (continued)


On December 26, 2012 the Company entered into a convertible note agreement. Pursuant to the agreement, the agreement was consummated on January 2, 2013 upon the Companys receipt of $32,500 cash proceeds from the note.   The note bears interest at 8 percent per annum with principal and interest due in full on September 30, 2013.  The principal balance of the note along with accrued interest is convertible after 180 days, at the option of the note holder, into the Company's common stock at a price of 55 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.




29


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $32,500 on the note date.  As of June 30, 2013 the Company had amortized $21,467 of the debt discount to interest expense, leaving $11,033 in unamortized debt discount at June 30, 2013.


The fair value of the conversion option of the convertible note of $41,012 has been recognized as a derivative liability on the date of issuance with all future changes in the fair value of these conversion options being recognized in earnings in the Companys statement of operations under the caption Other income (expense)  Gain (loss) on derivative liability until such time as the note is converted or the conversion feature expires.


The Company uses the Black-Scholes option pricing model to value the derivative liability and subsequent remeasurements.  Included in the model are the following assumptions: stock price at valuation date of $0.49 to $0.9, exercise price of $0.3025 to $0.0138, dividend yield of zero, years to maturity of 0.74to 0.25, risk free rate of 0.14 to 0.04 percent, and annualized volatility of 247 to 350 percent.


ASC 815 requires the Company to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value of the derivatives as gain (loss) on the income statements.   At June 30, 2013 the derivative liability was revalued at $39,943, which led to the Company recording a gain on derivative liability in the amount of $1,069.


On February 5, 2013 the Company borrowed $37,500 from an unrelated third party entity in the form of a convertible note. The note bears interest at 8 percent per annum with principal and interest due in full on November 7, 2013.  The principal balance of the note along with accrued interest is convertible after 180 days, at the option of the note holder, into the Company's common stock at a price of 55 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.


Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $37,500 on the note date.  As of June 30, 2013 the Company had amortized $19,773 of the debt discount to interest expense, leaving $17,727 in unamortized debt discount at June 30, 2013.


The fair value of the conversion option of the convertible note of $116,141 has been recognized as a derivative liability on the date of issuance with all future changes in the fair value of these conversion options being recognized in earnings in the Companys statement of operations under the caption Other income (expense)  Gain (loss) on derivative liability until such time as the note is converted or the conversion feature expires.


The Company uses the Black-Scholes option pricing model to value the derivative liability and subsequent remeasurements.  Included in the model are the following assumptions: stock price at valuation date of $0.68 to $0.025, exercise price of $0.1925 to $0.0138, dividend yield of zero, years to maturity of 0.75 to 0.36, risk free rate of 0.13 to 0.03 percent, and annualized volatility of 263 to 400 percent.


ASC 815 requires the Company to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value of the derivatives as gain (loss) on the income statements.   At June 30, 2013 the derivative liability was revalued at 56,663, which led to the Company recording a gain on derivative liability in the amount of $59,478.


NOTE 7 CONVERTIBLE NOTES PAYABLE (continued)


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 a 10% original issue discount of $2,500. 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. 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.




30


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $25,000 on the note date.  As of June 30, 2013 the Company had amortized $6,507 of the debt discount to interest expense, leaving $18,493 in unamortized debt discount at June 30, 2013.


The fair value of the conversion option of the convertible note of $36,222 has been recognized as a derivative liability on the date of issuance with all future changes in the fair value of these conversion options being recognized in earnings in the Companys statement of operations under the caption Other income (expense)  Gain (loss) on derivative liability until such time as the note is converted or the conversion feature expires.


The Company uses the Black-Scholes option pricing model to value the derivative liability and subsequent remeasurements.  Included in the model are the following assumptions: stock price at valuation date of $0.9 to $0.025, exercise price of $0.054 to .012, dividend yield of zero, years to maturity of 1 to 0.74, risk free rate of 0.14 to 0.13 percent, and annualized volatility of 274 to 323 percent.


ASC 815 requires the Company to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value of the derivatives as gain (loss) on the income statements.   At June 30, 2013 the derivative liability was revalued at $46308, which led to the Company recording a loss on derivative liability in the amount of $10,086.


On May 1, 2013 the Company entered into a convertible note agreement. Pursuant to the agreement, the agreement was consummated on May 2, 2013 upon the Companys receipt of $-0- cash proceeds and $9,500 of which was for professional fees. The note bears interest at 8 percent per annum with principal and interest due in full on February 3, 2014.  The principal balance of the note along with accrued interest is convertible after 180 days, at the option of the note holder, into the Company's common stock at a price of 55 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.


Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $9,500 on the note date.  As of June 30, 2013 the Company had amortized $135 of the debt discount to interest expense, leaving $498 in unamortized debt discount at June 30, 2013.


The fair value of the conversion option of the convertible note of $633 has been recognized as a derivative liability on the date of issuance with all future changes in the fair value of these conversion options being recognized in earnings in the Companys statement of operations under the caption Other income (expense)  Gain (loss) on derivative liability until such time as the note is converted or the conversion feature expires.


The Company uses the Black-Scholes option pricing model to value the derivative liability and subsequent remeasurements.  Included in the model are the following assumptions: stock price at valuation date of $0.035 to $0.025, exercise price of $0.3025 to $0.0138, dividend yield of zero, years to maturity of 0.76to 0.6, risk free rate of 0.1 percent, and annualized volatility of 311 to 355 percent.





NOTE 7 CONVERTIBLE NOTES PAYABLE (continued)


ASC 815 requires the Company to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value of the derivatives as gain (loss) on the income statements.   At June 30, 2013 the derivative liability was revalued at $15,134, which led to the Company recording a gain on derivative liability in the amount of $14,501.


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 Companys 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,



31


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

2014.  The principal balance of the note along with accrued interest is convertible after 180 days, at the option of the note holder, into the Company's common stock at a price of 55 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.


Pursuant to this conversion feature, the Company recognized a discount on convertible debt in the amount of $47,500 on the note date.  As of June 30, 2013 the Company had amortized $4,750 of the debt discount to interest expense, leaving $42,750 in unamortized debt discount at June 30, 2013.


The fair value of the conversion option of the convertible note of $120,160 has been recognized as a derivative liability on the date of issuance with all future changes in the fair value of these conversion options being recognized in earnings in the Companys statement of operations under the caption Other income (expense)  Gain (loss) on derivative liability until such time as the note is converted or the conversion feature expires.


The Company uses the Black-Scholes option pricing model to value the derivative liability and subsequent remeasurements.  Included in the model are the following assumptions: stock price at valuation date of $0.0299 to $0.025, exercise price of $0.011 to $0.0138, dividend yield of zero, years to maturity of 0.74to 0.67, risk free rate of 0.11 to 0.13 percent, and annualized volatility of 363 to 338 percent.


ASC 815 requires the Company to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value of the derivatives as gain (loss) on the income statements.   At June 30, 2013 the derivative liability was revalued at $75,837, which led to the Company recording a gain on derivative liability in the amount of $44,323.


NOTE 8  NOTES PAYABLE


On May 18, 2012 the Company entered into a note payable with an unrelated third party in the amount of $30,000. The note is unsecured, bears interest at a rate of 12.0 percent per annum, and is due on May 18, 2014. During the year ended June 30, 2013 the note was paid off in full.


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 June 30, 2013 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 June 30, 2013 the outstanding balance on this note, including accrued interest, totaled $2,800.





NOTE 8  NOTES PAYABLE (continued)


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 June 30, 2013 the outstanding balance on this note was $$1,000.During the year ended June 30, 2013 the Company issued 36,694 shares of Series C Preferred stock to an unrelated third party for $91,623 of debt.




32


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

During the year ended June 30, 2013 the Company issued 1,486 shares of common stock for debt in the amount of $1,486 (see note 6) for which the Company recognized a loss of $285,714.


As of June 30, 2013 and 2012 the total outstanding notes payable balance was $40,564 and 115,125, respectively.  


NOTE 9 INCOME TAXES


The Companys provision for income taxes was $-0- for the years ended June 30, 2013 and 2012, respectively, since the Company has accumulated taxable losses from operations.  ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Companys opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a full valuation allowance equal to the deferred tax asset has been recorded.


The total deferred tax asset is calculated by multiplying a 34 percent marginal tax rate by the cumulative Net Operating Loss (NOL).  At June 30, 2013, the Company has available $153,593 of NOLs which expire in various years beginning in 2026 and carrying forward through 2032.  The tax effects of significant items comprising the Company's net deferred taxes as of June 30, 2013 and 2012 were as follows:


June 30,


2013


2012







Cumulative NOL

$

3,189,063


$

451,744







Deferred Tax Assets:






Net operating loss carry forwards


(1,084,281)



(153,593)

Common and preferred stock issued for services


455,973



3,366

Valuation allowance


458,308



150,227


$

-


$

-


The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 34 percent to net loss before provision for income taxes for the following reasons:



June 30,


2013


2012







Income tax benefit at U. S. federal statutory rates:

$

930,688


$

105,180

Stock/options issued for services


(622,607)




Change in valuation allowance


(308,081)



(105,180)


$

-


$

-


The Company files federal and Nevada income tax returns subject to statutes of limitations. The years ended June 30, 2013, 2012, and 2011 are subject to examination by federal and state tax authorities.



NOTE 10  COMMITMENTS AND CONTINGENCIES


Lease Agreements

During the year ended June 30, 2013 the Company terminated its lease agreement. Rent expense totaled $64,081 and $34,566 for the years ended June 30, 2013 and 2012, respectively.


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



33


SILVERTON ADVENTURES, INC.

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

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 $17,735 and $17,467 for the years ended June 30, 2013 and 2012, 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 Companys 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 June 30, 2013.


NOTE 11 FAIR VALUE OF FINANCIAL INSTRUMENTS


The following tables set forth by level within the fair value hierarchy the Companys financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2013 and 2012. As required by ASC 820, a financial instruments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Companys 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 years ended June 30, 2013 and 2012.























NOTE 11 FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)


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 June 30, 2013 and 2012, on a recurring basis:



Liabilities measured

 

 

 

 

 

 

 

 

 

 

at fair value on a recurring

 

 

 

 

 

 

 

 

 


basis at June 30, 2013:

 

 

 

 

 

 

 

 

 



 

Level 1

 

 

Level 2

 

 

Level 3

 

Total

Liabilities















Derivative liability


$                 -




$      278,122




$

-


$

278,122

Total


$                 -




$      278,122




$

-


$

278,122

















Liabilities measured

 

 

 

 

 

 

 

 

 

 

at fair value on a recurring

 

 

 

 

 

 

 

 



basis at June 30, 2012:

 

 

 

 

 

 

 

 

 



 

Level 1

 

 

Level 2

 

 

Level 3

 

Total

Liabilities















Derivative liability

 

$                 -


 

 

$                  -


 

 

$

          -

 

$

          -

 Total

 

$                 -


 

 

$                  -


 

 

$

          -

 

$

          -



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 12 - SUBSEQUENT EVENTS


Subsequent to June 30, 2013 the Company amended five of its notes payable to include a conversion clause granting the note holder the conversion option to convert any portion of the principal amount plus the accrued and unpaid interest into fully paid and non-assessable shares of the Companys common stock based on a conversion price of $0.00001. The notes payable that were amended were the Kopjaggers Consulting January 5, 2012 note in the amount of $6,000, the Brad McAlpin July 18, 2012 note in the amount of $3,500, the Brad McAlpin June 3, 2011 note in the amount of $2,850, the Ted D. Campbell II January 2, 2013 note in the amount of $7,500, and the Ted D. Campbell II January 17, 2013 note in the amount of $7,500.


Subsequent to June 30, 2013 the Company issued 1,061,664,939 shares of common stock for conversion of debt in the amount of $70,840.


On July 26, 2013 the Company entered into a lease agreement with a term of twenty-four months and a monthly rate of $3,450. The lease commences on August 1, 2013 and continues until July 31, 2016.  


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.  






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Item 9 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure


None.  


Item 9A Controls and Procedures


Disclosure Controls and Procedures


Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, Ron Miller (Our President, Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer), concluded as of the evaluation date that our disclosure controls and procedures were not effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company,  and was made known to us by others within those entities, particularly during the period when this report was being prepared.


Managements Annual Report on Internal Control Over Financial Reporting.  


The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control process has been designed, under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Companys financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.


Management conducted an assessment of the effectiveness of the Companys internal control over financial reporting as of June 30, 2013, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring, based on the framework in  Internal Control  Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As of June 30, 2013, management has determined that the Companys internal control over financial reporting as of June 30, 2013 was not effective.  We are in the process of developing new policies and procedures with regards to internal control over financial reporting.


Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of assets; and provide reasonable assurances that: (1) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States; (2) receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) unauthorized acquisitions, use, or disposition of the Companys assets that could have a material effect on the Companys financial statements are prevented or timely detected.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparations and presentations. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


Changes in Internal Control Over Financial Reporting.


There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date.


Item 9B. Other Information


No items required to be reported on Form 8-K during the fourth quarter ended June 30, 2013 covered by this report were not previously reported on Form 8-K.




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PART III


Item 10. Directors, Executive Officers, and Corporate Governance.


Set forth below is the name and age of each individual who was a director or executive officer of Silverton Adventures, Inc. as of June 30, 2013, together with all positions and offices of the Company held by each and the term of office and the period during which each has served:





NAME

AGE

POSITION

DATES SERVED





Ron Miller

60

President and Director (Chairman of the Board)

December 2010 to Present






Biographical Information

The following paragraphs set forth brief biographical information for the aforementioned director and executive officer:


Ron Miller  President, Treasurer, and Chairman of the Board  Mr. Miller has a vast amount of experience in publishing, producing and marketing. Mr. Miller is a 1975 graduate of La Verne University in La Verne, California with a degree in business administration. He has produced and marketed over 70 educational programs since 1992. From 1989 to 1991, Mr. Miller, through a privately owned company called Entertainment Clearinghouse, operated a business of the distribution of paperback books from major publishers. He has published books such as The American Dream: Shadow and SubstanceThe Breaking of a President, and The Gambia. Also, Mr. Miller has been an executive producer of several educational videos which include:


The Rise and Fall of the Soviet Union


The History and Mystery of China


Japan: Land of the Rising Sun


The Life and Times of Ronald Reagan


World War I: Cause and Effect


The History and Function of Congress


The Extraordinary Life of Amelia Earhart


When Women Ruled: Great Women Leaders in World History


Einstein


The Mystery of Sherlock Holmes


Great American Landmarks


Helen Keller


Involvement in Certain Legal Proceedings


To our knowledge, during the past five years, no present or former director or executive officer of our company: (1) filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or present of such a person, or any partnership in which he was



37



a general partner at or within two years before the time of such filing, or any corporation or business association of which he was

an executive officer within two years before the time of such filing; (2) was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director of any investment company, or engaging in or continuing any conduct or practice in connection with such activity; (ii) engaging in any type of business practice; (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodity laws; (4) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity; (5) was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law and the judgment has not been subsequently reversed, suspended or vacated; or (6) was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.


Compliance with Section 16(a) of the Exchange Act


Because we do not have a class of equity securities registered pursuant to Section 12 of the Exchange Act, our executive officers, directors and persons who beneficially own more than 10% of our common stock are not required to file initial reports of ownership and reports of changes in ownership with the SEC under Section 16(a) of the Exchange Act.





Audit Committee and Audit Committee Financial Expert Disclosure


The Companys Board of Directors does not have a separately designated audit committee or an audit committee financial expert. Audit committee functions are performed by our Board of Directors. None of our directors is deemed independent. All directors also hold positions as our officers. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls, and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.


The Board of Directors does not have an audit committee financial expert at this time due to the fact that the Company has only limited operations and no revenues.  We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our limited operations, we believe the services of a financial expert are not warranted.


Code of Ethics


We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.


Item 11.  Executive Compensation




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(a) Since Silverton Adventures, Inc.s incorporation on May 31, 2006, we have not made any cash payments to any officer, director or employee. Our President has an employment agreement and pursuant to that agreement received 510,000,000 shares of common stock as compensation during the year ended June 30, 2013. We do not have any other employment agreements.  Any future compensation to be paid will be determined by the Board of Directors, and, as appropriate, an employment agreement will be executed.  We do not currently have plans to pay any compensation, other than the stock based compensation according to our Presidents employment agreement, until such time as the Company maintains a positive cash flow.

(b) There are no annuity, pension, or retirement benefits proposed to be paid to officers, directors, or employees of the Corporation in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the Corporation.


Director Compensation

On April 15, 2013 the Company entered into an employment agreement with its President. Pursuant to the terms of the agreement the President received 510,000,000 shares of common stock, valued at fair market value of $1,116,642, as compensation. The term of the agreement is for one year.





Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


The following table sets forth the beneficial ownership of the Company's officers, directors, and persons who own more than five percent of the Company's common stock as of June 30, 2013. Under relevant provisions of the Exchange Act, a person is deemed to be a "beneficial owner" of a security if he or she has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership in 60 days. More than one person may be deemed to be a beneficial owner of the same securities. The percentage ownership of each stockholder is calculated based on 1,061,664,939 total outstanding shares of our common stock as of November 1, 2013.

Amount and Nature of Beneficial Ownership as of June 30, 2013:





Name of Individual

# Shares Beneficially Owned

# of Class of Common Stock




Ron Miller

President and Director

5070 Arville Street, Suite 7

Las Vegas, Nevada 89118

516,500,000

48.65%




All Officers and Directors as a Group (1 Persons)

516,500,000

48.65%


Item 13  Certain Relationships and Related Transactions, Director Independence


Various general and administrative expenses of the Company as well as loans for operating purposes have been paid for or made by related parties of the Company.  During the year ended June 30, 2013 the Company received cash of $-0- on these payables, had $-0- expenses paid on behalf of the Company, and made payments totaling $5,131 on these related-party payables.  Related party payables totaled $1,100 and $5,131 at June 30, 2013 and 2012, respectively. These amounts payable bear no interest, are uncollateralized and due on demand.  


During the year ended June 30, 2013, the Company made cash payments totaling $5,131 to related parties, and received cash proceeds in the amount of $1,100.    












39



Item 14  Principal Accountant Fees and Services


Audit Fees: All fees which pertain to each of the last two fiscal year audits for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements and the review of interim financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.


2013:  $21,500


2012:  $21,500


Audit-Related Fees: All fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under Item 9(e)(f1) of Schedule 14A.


2013:   $ -0-


2012:

$ -0-

  

Tax Fees: The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning:


2013:    $ -0-


2012:    $ -0-


All Other Fees:


2013:

$ -0-

 

2012:   $ -0-


 (5)   Our audit committee's pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.

(6)   The percentage of hours expended on the principal accountant's engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was 0%.




40



PART IV


Item 15  Exhibits, Financial Statement Schedules


The following exhibits are included with this filing:





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 Registrants registration statement on Form S-1 (file no. 333-153626 which exhibit is incorporated herein by reference.






41



Signatures


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


November 5, 2013

    

Silverton Adventures, Inc.


By:

/s/ Ron Miller

Ron Miller, President

(Principal Executive and Accounting Officer)



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates included.



November 5, 2013

By:

/s/ Ron Miller


Ron Miller, President

Principal Executive Office

Principal Financial Officer

Principal Accounting Officer

Chairman of the Board of Directors



42