Orpheum Property Inc - FORM 10-Q

Attached files

file	filename
EX-32.1 - Orpheum Property Inc	plff_ex321.htm
EX-32.2 - Orpheum Property Inc	plff_ex322.htm
EX-31.1 - Orpheum Property Inc	plff_ex311.htm
EX-31.2 - Orpheum Property Inc	plff_ex312.htm

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from ____________ to ______________

Commission File Number 0-30595

CIK Number 0001092791

ORPHEUM PROPERTY, INC.

(Exact Name of small business issuer as specified in the charter)

Delaware		33-0619256
(State or other Jurisdiction of Incorporation or Organization)		( IRS Employer Identification No.)

201 St. Charles Ave., Ste. 2500, New Orleans, LA 70170

(Address of Principal Executive Offices)

(504) 599-5697

(Issuer’s Telephone Number, including Area Code)

Indicate by check mark whether the Registrant (i) 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 shorter period that the Registrant was required to file such reports) and (ii) has been Subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ

Indicate by 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	þ
(Do not check if smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

Common Stock, $.001 par value		215,918,394
Title of Class		Number of Shares outstanding at November14, 2012

Part I

ITEM1. FINANCIAL STATEMENT

ORPHEUM PROPERTY, INC.

(A Development Stage Company)

BALANCE SHEETS

ASSETS
	September 30,		March 31,
	2012		2012
	(Unaudited)		(Audited)

Current Assets
Cash in Bank	$	116	$	274
Prepaid Expenses		-		-

Total Current Assets		116		274

Fixed Assets
Unimproved properties		7,350,995		7,350,995
Improved properties		11,185,840		7,969,559
Less: Accumulated Depreciation		-		-

Total Fixed Assets		18,536,835		15,320,554

Other Assets
Investment - Contracts		555,502		555,502

Total Other Assets		555,502		555,502

TOTAL ASSETS	$	19,092,453	$	15,876,330

The accompanying notes are an integral part of the financial statements

LIABILITIES & STOCKHOLDERS' EQUITY

	September 30,			March 31,
	2012			2012
	(Unaudited)			(Audited)

Current Liabilities
Accounts Payable	$	119,972		$	63,198
Accrued Interest		825,323			649,930
Demand Note - Orpheum - Note 4		2,698,360			2,698,360

Total Current Liabilities		3,643,655			3,411,488

Long Term Liabilities
Mortgage - St. Phillips St.		1,200,000			-

TOTAL LIABILITIES		4,843,655			3,411,488

Stockholders' Equity
Preferred Stock - 1,000,000 shares authorized;
Par value of $5.00, Non-convertible, Non-Dividend
producing; 40,000 & -0- shares outstanding at
September 30, 2012 and March 31, 2012,
respectively		200,000			200,000
Common Stock - 500,000,000 shares authorized;
Par value of $.001 per share; 215,918,394 and
178,183,728 shares issued and outstanding at
September 30, 2012 and March 31, 2012,
respectively		215,918			178,184
Stock to be issued		92,000			1,752,000
Capital in excess of par value		19,114,489			15,045,042
Deficit accumulated during the development stage		(5,373,609	)		(4,710,384	)

Total Stockholders' Equity		14,248,798			12,464,842

TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY	$	19,092,453		$	15,876,330

The accompanying notes are an integral part of the financial statements

ORPHEUM PROPERTY, INC.

(A Development Stage Company)

Statements of Operation

For the Three and Six Months Ended September 30, 2012 and 2011

and for the Perod from Inception (February 14, 2003) Through September 30, 2011

													February 14,
	For the Three Months Ended						For the Six Months Ended						2003 through
	September 30,			September 30,			September 30,			September 30,			September 30,
	2012			2011			2012			2011			2012
Revenues
Rental income	$	6,800		$	-		$	6,800		$	-		$	6,800

Total Revenues		6,800			-			6,800			-			6,800

Cost of Sales		-			-			-			-			-

Gross Profit		6,800			-			6,800			-			6,800

General & Administrative Expenses		385,966			99,278			494,632			391,342			3,306,093

Net Loss from Operations		(379,166	)		(99,278	)		(487,832	)		(391,342	)		(3,299,293	)

Other Income (Expense):
Other income		-			-			-			-			4,000
Interest expense		(87,697	)		(87,697	)		(175,393	)		(175,393	)		(813,943	)

Total Other Income (Expense)		(87,697	)		(87,697	)		(175,393	)		(175,393	)		(809,943	)

Net Loss from Continuing Operations		(466,863	)		(186,975	)		(663,225	)		(566,735	)		(4,109,236	)

Discontinued Operations		-			-			-			-			(1,235,906	)
Loss - Sale of Disc. Operations		-			-			-			-			(28,467	)

Net Loss	$	(466,863	)	$	(186,975	)	$	(663,225	)	$	(566,735	)	$	(5,373,609	)

Basic/Diluted Income (Loss) Per Share
Continuing Operations		(0	)		(0	)		(0	)		(1	)
Discontinued Operations		-			-			-			-

Net Loss per Share	$	(0	)	$	(0	)	$	(0	)	$	(1	)

Weighted Average Shares
Outstanding		213,718,133			750,000			211,415,051			695,414

The accompanying notes are an integral part of these financial statements

ORPHEUM PROPERTY, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

For the Six Months Ended September 30, 2012 and 2011

and for the Perod from Inception (February 14, 2003) September 30, 2012

	For the Six Months Ended						2003 through
	September 30,			September 30,			September 30,
	2012			2011			2012
Cash Flows from Operating Activities
Net Loss		(663,225	)	$	(566,735	)	$	(5,373,609	)
Adjustments to reconcile net loss to net cash used by
operating activities
Contribution of interest on advances by officer		-			-			24,071
Common Stock issued for conversion of
subsidiary stock		-			-			6,880
Stock Issued/to be issued for payment of fees		219,080			260,000			2,522,078
Contributed Capital - noncash fair market value of start-up
and organization services and costs		-			-			1,000
Bad debt recognized		-			-			25,000
(Increase) Decrease in Prepaid expenses		-			5,000			-
Increase (Decrease) in accounts payable		56,774			31,158			119,972
Increase (Decrease) in accrued interest		175,393			175,393			792,193
Net Cash Used by Operating Activities		(211,978	)		(95,184	)		(1,882,415	)

Cash Flow from Investing Activities
Improvements to Orpheum Theater		-			(97,332	)		(242,701	)
Improvements to St. Philiips St.		(16,281	)		-			(16,281	)
Refunds from Escrow account		-			(1,402	)		15,583
Cash investments to Baja Coastal		(28,950	)		-			(38,950	)
Net Cash Used by Investing Activities		(45,231	)		(98,734	)		(282,349	)

Cash Flow from Financing Activities
Proceeds from the sale of stock/contributed cash		257,051			193,647			1,234,570
Proceeds from notes payable - related party		-			-			49,700
Payments on OKC payable		-			-			(10,000	)
Proceeds from advances from former officer - net		-			-			30,000
Proceeds from mergers		-			-			304,540
Payment to reduce Stock Payable		-			-			(22,500	)
Net Cash Provided (Used) by Financing Activities		257,051			193,647			1,586,310


Net Increase (Decrease) in Cash		(158	)		(271	)		(578,454	)

Beginning Cash Balance		274			727			-

Cash (Used in) Provided by Discontinued Operations		-			-			578,570

Ending Cash Balance		116		$	456			116

Supplemental Disclosure of Cash Flow Information
Cash paid during the year for interest		-		$	-		$	-

Cash paid during the year for income taxes	$	-		$	-		$	-

Business and Capital Acquisitions
Fair value of assets acquired		3,200,000		$	8,850,995		$	10,647,703
Issuance of debt/assumption of liabilities		(1,200,000	)		(10,000	)		(2,370,013	)
Liabilities assumed		-			-			(2,760,379	)
Stock Issued at acquisition		(20,000	)		(43,743	)		(180,961	)
Capital in Excess of Par		(1,980,000	)		(8,797,252	)		(5,336,350	)

Net Transaction		-			-			-

The accompanying notes are an integral part of the financial statements

Orpheum Property, Inc.

(A Development Stage Company)

Notes to Condensed Financial Statements

September 30, 2012

Note 1

Organization and Summary of Significant Accounting Policies

Organization

Orpheum Property, Inc. (the “Company”) was organized under the laws of the State of Delaware on February 14, 2003 as Back Channel Investments, Inc. The Company has elected a fiscal year end of March 31st. The Company was originally organized for the purpose of the research and development of tropical plantation plants, to own and sell real and personal property and to sell products. Currently, the Company is involved in the development and renovation of commercial property.

On May 20, 2003, the Company combined with Back Channel Investments, Inc., in a reverse merger pursuant to an Agreement and Plan of Reorganization. Back Channel acquired all the outstanding shares of common stock of the Company in exchange for 7,000,000 shares of Back Channel’s common stock. The surviving entity was the Company. Upon completion of the reverse merger, the combined Company was re-capitalized to have 10,000,000 shares outstanding. No change in net book value or goodwill was recognized. Subsequently, in August, 2007, these shares were reduced to 3,333,332 shares through a reverse stock split. The pre-merger financial statements of Orpheum Property, Inc. are now the historical financial statements of the Company.

Seeking to redirect its activities, on June 28, 2010, the Company acquired 129 University Place whose sole asset was the Orpheum Theater with the intention of restoring the historic commercial property. The transaction involved the issuance of 42,260 shares of a new class of Preferred Stock (B) with a par value of $2.00 per share and convertible into 2,000 shares of common stock for each share of preferred. The purchase price of the property was $6,172,360 with the Company assuming an existing liability on the property of $2,698,360 and an obligation to issue Company stock valued at $3,474,000.

The Company is considered a development stage company as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 915. The Company has at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors.

Basis of Presentation

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Security and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report filed with the SEC on Form 10K. In the opinion of management all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position and the results of operations and cash flows for the interim periods presented have been reflected herein.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s March 31, 2012 audited financial statements. The results of operations for the six months ended September 30, 2012, are not necessarily indicative of the results of operations to be expected for the full fiscal year.

Income Taxes

The Company applies the provisions of FASB ASC Topic 740, Income Taxes. Topic 740 requires an asset and liability approach for financial accounting and reporting for income taxes, and the recognition of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Due to a loss from inception, the Company has no tax liability. Deferred income tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with Accounting Principles Generally Accepted in the United States 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Basic Loss per Common Share

The Company computes basic loss per common share in accordance with FASB ASC Topic 260-10, Earnings Per Share. Net loss is divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using weighted average number of common shares plus dilutive common shares equivalents outstanding during the period using the treasury stock method. Because the Company incurred losses for the three and six months ended September 30, 2012 and 2011, the effect of any equivalent shares for each period would be excluded from the loss per share computation since the impact would be antidilutive. There were no common stock equivalents outstanding as September 30, 2012 and 2011.

Revenue Recognition

Revenues of the Company are recognized as earned in accordance with the nature of the income as it occurs. Anticipated revenues in future periods is expected from event receipts earned at the renovated theater, operating income from commercial properties invested into, and gains from the sale of properties that may be purchased. Revenues will not be recognized until such time as the service has been completed or escrows have closed.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the useful lives of the related assets. Expenditures for maintenance and repairs are charged to expenses as incurred.

Impairment of Long-lived Assets

Long-lived tangible assets, including property, plant and equipment, and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset or asset groups may not be recoverable. The Company evaluates, regularly, whether events and circumstances have occurred that indicate possible impairment and relies on a number of factors, including operating results, business plans, economic projections, and anticipated future cash flows. The Company uses an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Recently Issued Accounting Standards

In June 2009, the FASB changed the accounting guidance for the consolidation of variable interest entities. The current quantitative-based risks and rewards calculation for determining which enterprise is the primary beneficiary of the variable interest entity will be replaced with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. The new guidance became effective for the Company on April 1, 2010 with no impact on its financial statements.

In June 2009, the FASB changed the accounting guidance for transfers of financial assets. The new guidance increases the information that a reporting entity provides in its financial reports about a transfer of financial assets; the effects of a transfer on its statement of financial condition, financial performance and cash flows; and a continuing interest in transferred financial assets. In addition, the guidance amends various concepts associated with the accounting for transfers and servicing of financial assets and extinguishments of liabilities including removing the concept of qualified special purpose entities. This new guidance was adopted by the Company on April 1, 2010 with no impact on its financial statements.

In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures” (Topic 820) that requires new disclosures related to fair value measurements and clarifies existing disclosure requirements about the level of disaggregation, inputs and valuation techniques. Specifically, reporting entities now must disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. In addition, in the reconciliation for Level 3 fair value measurements, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities for disclosure of fair value measurement, considering the level of disaggregated information required by other applicable U.S. GAAP guidance and should also provide disclosures about the valuation techniques and inputs used to measure fair value for each class of assets and liabilities. The guidance was effective for financial statements issued for periods ending after December 15, 2009, except for disclosures about purchases, sales, issuances and settlements in reconciliation for Level 3 fair value measurements, which was effective for fiscal years beginning after December 15, 2010. The adoption of this guidance affects only the disclosure requirements and had no impact on the Company’s statements of operations and condition.

Recently Issued Accounting Standards (Continued)

In December 2010, the FASB issued authoritative guidance that modified Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist such as if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This new authoritative guidance was effective April 1, 2011 and did not have any impact on the Company’s financial statements.

In April 2011, the FASB issued ASU 2011-02, which amends the guidance for evaluating whether the restructuring of a receivable by a creditor is a troubled debt restructuring (TDR). In evaluating whether a restructuring constitutes a TDR both for purposes of recording an impairment loss and for disclosure purposes, a creditor must separately conclude that both of the following exist: (a) the restructuring constitutes a concession; and (b) the debtor is experiencing financial difficulties. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the annual period of adoption. However, an entity should apply prospectively changes in the method used to calculate impairment. At the same time a public entity adopts ASU 2011-02, it is required to disclose the activity based information that was previously deferred by ASU No. 2011-01. The adoption of this ASU is not expected to have a material impact on Company’s financial statements.

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. The ASU contains guidance on the application of the highest and best use and valuation premise concepts, the measurement of fair values of instruments classified in shareholders’ equity, the measurement of fair values of financial instruments that are managed within a portfolio, and the application of premiums and discounts in a fair value measurement. It also requires additional disclosures about fair value measurements, including information about the unobservable inputs used in fair value measurements within Level 3 of the fair value hierarchy, the sensitivity of recurring fair value measurements within Level 3 to changes in unobservable inputs and the interrelationships between those inputs, and the categorization by level of the fair value hierarchy for items that are not measured at fair value but for which the fair value is required to be disclosed. These amendments are to be applied prospectively for interim and annual periods beginning after December 15, 2011. The adoption of this guidance is not expected to have a significant effect on the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income”. The ASU increases the prominence of other comprehensive income in financial statements by requiring comprehensive income to be reported in either a single statement or in two consecutive statements which report both net income and other comprehensive income. It eliminates the option to report other comprehensive income and its components in the statement of changes in equity. The ASU is effective for periods beginning after December 15, 2011 and requires retrospective application. The ASU does not change the components of other comprehensive income, the timing of items reclassified to net income, or the net income basis for income per share calculations. As this ASU is disclosure related only, the adoption of this ASU will not impact reported financial position or results of operations.

In September 2011, the FASB amended guidance pertaining to goodwill impairment testing. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. An entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The guidance is effective January 1, 2012 with no significant impact expected on the Company’s financial statements.

In December 2011, the FASB issued guidance which relates to deconsolidation events. Under this amendment, when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of the default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20, Property, Plant and Equipment - Real Estate Sales, to determine whether it should derecognize the in substance real estate. This guidance is effective for the fiscal year ending December 31, 2013 and is not expected to have a significant impact on the Company’s financial statements.

Also, in December 2011, The FASB issued authoritative guidance to provide enhanced disclosures in the financial statements about offsetting and netting arrangements. The new guidance requires entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting agreement. This guidance was issued to facilitate comparison between financial statements prepared on a U.S. GAAP and IFRS reporting. The new guidance will be effective January 1, 2013 and is not expected to have a significant impact on the Company’s financial statements.

Note 2

Going Concern

The Company has limited operating capital with limited revenue from operations. Realization of a major portion of the assets is dependent upon the Company’s ability to meet its future financing requirements, and the success of future operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.

The Company is developing its operations from renovated theater property and from purchase/development of other commercial properties. The Company is planning on obtaining additional funds through equity financing. Should the Company fail to acquire these funds, expanding operations will be limited. Management has agreed to advance additional funds to cover the Company’s current operations. If the Company is unsuccessful in these efforts and cannot attain sufficient cash flows to permit profitable operations or if it cannot obtain a source of funding or investment, it may substantially curtail or terminate its operations.

Note 3

Investment in Unimproved Properties

On June 10, 2011, the Company purchased undeveloped property in Arkansas for $19,200 by issuing 80,000 shares of common stock.

On July 26, 2011, the Company issued 14,596,153 shares of common stock for the purchase of two undeveloped land parcels appraised at $3,795,000 located in California and Nevada.

On November14, 2011, the Company issued 1,066,667 shares of common stock for the purchase of ten (10) undeveloped land parcels in Hot Springs, Arkansas. Total purchase price, including closing costs was $164,878.

On December 13, 2011, the Company purchased approximately 22.5 acres of undeveloped land in Oklahoma for a total of $3,000,000. Payment consisted of a cash payment of $10,000 towards an outstanding mortgage paid in January 2012, and issuance of 29,900,000 shares of common stock.

Note 4

Investment in Improved Properties

On June 28, 2010, the Company acquired 129 University Place, LLC, whose sole asset was the Orpheum Theatre. The property is being held pending the completion of renovation activity.

On April 12, 2012, the Company acquired a commercial building at 1031 St. Phillips Street in the French Quarter. It has 6,520 square feet of space intended for leasing to commercial interests.

The carrying value at September 30, 2012 and March 31, 2012 consists of the following:

	September 30,		March 31,
	2012		2012

Orpheum Theater
Acquisition Costs	$	6,172,360	$	6,172,360
Renovation Costs		242,701		242,701
Real Estate Commission		610,000		610,000
Prepaid Development Fees		944,498		944,498
Total Orpheum Theater		7,969,559		7,969,559

1031 St. Phillips Street
Acquisition Costs		3,200,000		-
Renovation Costs		16,281		-
Total 1031 St. Phillips Street		3,216,281		-

Total Improved Properties	$	11,185,840	$	7,969,559

Note 5

Investment in Contracts

On February 21, 2012, the Company acquired two tax credit consulting contracts from Morris Kahn & Associates, owned by our CEO, Morris Kahn. These contracts entitle the Company to collect fees totaling $960,000 over a period of 20 years. The Present Value, calculated based on the expected dates of receipt, indicates that at March 31, 2012, the contracts had a value of $555,502 based on a 6.4% rate of return.

Note 6

Demand Note

The mortgage on the Orpheum property which bears an interest rate of 13% per annum accrued monthly based on a 360 day per year calculation. The principal is due on demand. The principal balance at September 30, 2012 and March 31, 2012, was $2,698,360. Accrued interest as of September 30, 2012, totaled $825,323.

The demand note consists of debentures that are held by numerous individuals. In February 2011, some of the debenture holders filed a lawsuit against the owners of the Orpheum Theater prior to its transfer to 129 University Place and against 129 University Place demanding either payment or release of the property. Terms of the agreement require that we participate in an arbitration process first. We are currently working with legal counsel, lending sources, and the debenture holders through arbitration to provide for a quick settlement of their claims and satisfaction of their complaint.

Note 7

Mortgage Obligation

The commercial property at 1031 St. Phillips Street is subject to a mortgage in the amount of $1,200,000 that is in Morris Kahn’s personal name and cannot be transferred to the Company. As part of the purchase agreement, the Company is to either refinance the mortgage or pay off the mortgage. As of this report date the Company had not completed qualifying for a new mortgage, but is working with several lenders to finalize an agreement.

Note 8

Preferred Stock

On June 6, 2011, the Company issued 40,000 shares of its Preferred Stock as compensation to a consultant that was owed $200,000.

Note 9

Common Stock

On July 8, 2011, the Company issued 11,045,250 shares of stock to consultants and recipients of common stock in January 2011, as an anti-dilution measure after increasing authorized shares of common stock from 50 million shares to 500 million.

Also on July 8, 2011, the Company issued 38,250,000 shares of stock as an anti-dilution measure to the companies that had converted their shares of preferred stock in January 2011.

On July 21, 2011, the Company issued 450,000 shares to consultants and recipients of common stock in March 2011, also as an anti-dilution measure.

On July 26, 2011, the Company issued 14,596,153 shares of stock to purchase properties in California and Nevada for the appraised value of $3,795,000.

On August 3, 2011, the Company issued 3,185,595 shares to a company that had purchased shares in 2010, again as an anti-dilution measure.

On August 16, 2011, the Company issued 800,000 shares to an investor in the Orpheum Theater prior to the Company’s purchase of the property. The issuance reduced the amount in Stock To Be Issued by $125,000.

On September 21, 2011, the Company issued 80,000 shares as payment for the June 6, 2011, acquisition of the property in Arkansas valued at $19,200.

On October 4, 2011, the Company issued 25,531,915 shares as a down payment for a 50% share in a commercial property in Baja, Mexico. The purchase was concluded on January 14, 2012, at which time an additional 16,662,690 shares were issued.

On November 5, 2011, the Company issued 805,000 shares to a consultant for services rendered and to be rendered per a service contract.

On November 9, 2011, the Company issued 1,066,667 shares to purchase ten vacant residential lots in Hot Springs, Arkansas. The purchase price and closing costs totaled $164,878.

On December 14, 2011, the Company issued 4,450,000 shares to three of the parties owed stock pursuant to the purchase of the Orpheum Theater. This reduced the Stock To Be Issued by $1,075,000.

On December 19, 2011, the Company issued 10,547,969 shares to the remaining parties owed stock pursuant to the purchase of the Orpheum Theater. This represented the balance of all amounts due to Orpheum Theater investors who were due stock due to that purchase.

On January 18, 2012, the Company issued 700,000 shares of common stock to an investor for $50,000 cash.

On January 19, 2012, the Company issued 14,134,615 shares of common stock as payment of commissions to a related company owned in part by the Company’s Chairman, Andrew Reid, as compensation for commissions earned on several of the Company’s asset purchases.

On January 23, 2012, the Company issued 416,538 shares of common stock to its Corporate Secretary as payment for services rendered during the 2012 fiscal year.

On January 27, 2012, the Company issued 1,000,000 shares of common stock as recognition to a newly appointed member of its Board of Directors.

On March 5, 2012, the Company issued 28,000,000 shares of common stock that had been set aside to complete the purchase of the Oklahoma property.

On April 12, 2012, the Company issued 15,000,000 shares of common stock to our CEO, Morris Kahn, as payment for certain contracts purchased from Morris Kahn & Associates and for the prepaid commission on the tax credits related to the Orpheum Theater.

Also, on April 12, 2012, the Company issued 20,000,000 shares of common stock to our CEO, Morris Kahn, as agreed upon with the purchase of commercial real estate.

On April 19, 2012, the Company issued 166,667 shares of common stock as payment for services rendered to the Company.

On July 19, 2012, the Company issued 368,000 shares of common stock to five individuals who had rendered consulting and planning services on behalf of the Company.

On September 28, 2012, the Company issued 200,000 shares of common stock as payment for services rendered to the Company.

Also, on September 28, 2012, the Company issued 2,000,000 shares of stock related to the purchase of the unimproved property located in Oklahoma. Previously, the Company had recorded 1,900,000 shares in Stock To Be Issued, with the difference being recorded as a late fee.

Note 10

Stock To Be Issued

At September 30, 2012 and March 31, 2012, the Company had the following commitments to issue Common Stock:

As part of the purchase of the Oklahoma unimproved property, the Company had an obligation to issue 1,900,000 shares of common stock valued at $190,000, as of March 31, 2012. These shares were issued on September 28, 2012.

Shares valued at $90,000 and $60,000, are due to our CEO, Morris Kahn, as of September 30, 2012 and March 31, 2012, respectively, as payment due for services per his consulting contract for his services as the Company’s CEO.

For the purchase of certain tax-credit consulting contracts as well as for the prepayment of tax-credit consulting services associated with the Orpheum Theatre from Morris Kahn & Associates, the Company had an obligation to issue 15,000,000 shares of stock valued $1,500,000, as of March 31, 2012. These shares were issued on April 12, 2012.

Shares valued at $2,000 are due to a cash investor at September 30, 2012, and March 31, 2012.

Note 11

Related Party Transactions

On February 21, 2012, the Company purchased two tax credit consulting contracts from its CEO’s company, Morris Kahn & Associates. These contracts were recorded at their estimated fair value of $555,502. Cash inflows associated with the contracts are expected to begin in late 2012, and continue through 2032. In addition, the Company prepaid the estimated tax credit consulting fees pertaining to the contract it had with Morris Kahn & Associates for the Orpheum Theatre project. In exchange, Mr. Kahn agreed to accept 15,000,000 shares of the Company’s common stock valued at approximately $1.5 million.

On April 12, 2012, the Company issued 20,000,000 shares to its CEO, Morris Kahn to purchase a commercial property. As of the date of this report, there has been a delay in obtaining the required loan agreed to per the contract, however, Morris Kahn has authorized the Company to use the building in the interim.

For the three and six months ended September 30, 2012, and for the year ended March 31, 2012, the Company’s majority shareholder has advanced a total of $158,255, $257,051 and $229,996, respectively, to the Company for renovation costs to the Orpheum Theater, the 1031 St. Phillips commercial property and for operating costs.

Note 12

Significant Concentration of Credit Risk

The Company has a significant concentration of activities currently in commercial real estate primarily in the City of New Orleans. Any natural disasters or acts of vandalism or terrorism could prove detrimental to the holdings of the Company. During and subsequent to the year ended March 31, 2012, the Company has begun to diversify its geographic locations to other areas of the country.

Note 13

Subsequent Events

In accordance with FASB ASC Topic 855, Subsequent Events, the Company evaluates events and transactions that occur after the balance sheet date for potential recognition in the financial statements. The effects of all subsequent events that provide additional evidence of conditions that existed at the balance sheet date are recognized in the financial statements as of September 30, 2012. In preparing these financial statements, the Company evaluated the events and transactions that occurred through the date these financial statements were issued. The Company determined that there were no events requiring disclosure.

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

Forward looking information

Information included in this report includes forward looking statements, which can be identified by the use of forward-looking terminology such as may, will, expect, anticipate, believe, estimate, or continue, or the negative thereof or other variations thereon or comparable terminology. The disclaimers in this report constitute cautionary statements identifying important factors, including risks and uncertainties, relating to the forward-looking statements that could cause actual results to differ materially from those reflected in the forward-looking statements.

Our future operating results are subject to many factors, including:

●	Our ability to raise finance to renovate the Orpheum Theater and pay the monthly mortgage interest due on the property

●	Our ability to restore the Orpheum Theater and successfully reopen it as an entertainment venue

●	Our ability to identify, close and finance other suitable property acquisitions

●	Our ability to identify and manage suitable contactors and specialist advisers to assist in the development of our property portfolio

●	The general economic climate as well as that specific to the New Orleans region

●	Fluctuation in the prices of commercial real estate in New Orleans

●	Other risks currently unknown but which could arise in the future

In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "predict," "potential," "continue," "expect," "anticipate," "future," "intend," "plan," "believe," "estimate" and similar expressions (or the negative of such expressions). Any or all of our forward looking statements in this report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward looking statement can be guaranteed. In addition, we undertake no responsibility to update any forward-looking statement to reflect events or circumstances which occur after the date of this report.

Change in Business Emphasis

On June 28, 2010, we acquired 129 University Place LLC, which owns the Orpheum Theater located in the New Orleans central business district. The purchase price was 42,260 shares of Series B Preferred Stock. The Series B Preferred Stock was convertible into 84,520,000 (pre-split) shares of common stock. We obtained 100% ownership and voting interest in 129 University Place LLC, and the Orpheum Theater is the sole asset of 129 University Place LLC. The Orpheum Theater is listed in the National Register of Historic Places. The Company intends to refurbish this historic venue to repair damage caused by Hurricane Katrina.

129 University Place LLC had recently purchased the Orpheum Theatre with the assumption of a mortgage lien of $2,698,360 on that same property and a commitment to provide stock valued at $3,474,000 to the prior owners. The stock to be issued was to be from a publicly traded company, which is now identified as Orpheum Property, Inc. The Company has included this asset in its books at its cost basis of $6,172,360. The Company plans to renovate the Orpheum Theater.

On June 30, 2010, the Company developed a strategic plan to dispose of its existing loss generating coffee subsidiaries, Coscina Brothers Coffee, LLC and Integrated Coffee Technologies Inc., and focus on building a quality portfolio of property assets. The plan is to hold these property assets for development and investment purposes with a view to them becoming income producing assets. Opportunities to sell these assets will be considered as well. The Orpheum Theater was the first property acquisition in line with this strategy. A number of other property acquisitions are currently being reviewed by the Directors for their suitability in accordance with this strategy.

On June 30, 2010, the Company sold Coscina Brothers Coffee, LLC and Integrated Coffee Technologies Inc. to entities controlled by former officers and directors of the Company. In accordance with ASC 205-20, the Company has classified all results from operations of its former coffee business into discontinued operations line items within the Company’s statements of operations and statements of cash flow.

On October 22, 2010, the Company changed its name from Pacific Land & Coffee Corporation.

While the Company’s balance sheet has been considerably improved as a result of the strategic decisions referred to above, the Company still has limited working capital and no certain means of access to additional capital. Our activities to date have been limited to the acquisition of the Orpheum Theater, development of a business plan which includes the renovation of the Orpheum, acquisition of land for investment and development, as well as seeking additional capital.

The Company will need to obtain suitable financing in order to renovate the Orpheum Theater. While the Company has no existing commitments for such financing the Company believes that the required funds can be obtained from a combination of equity and debt financing as well as possible grants and tax credits available from the State of Louisiana and City of New Orleans in relation to the Orpheum Theater. The Company is currently accruing $29,232 as monthly mortgage interest due on the Orpheum Property.

Recent Land Acquisitions

On July 26, 2011, the Company acquired 42.9 acres of vacant land in Tehachapi, California. The purchase price for this property was $795,000, which was paid in shares of Orpheum common stock. On the same day, the Company acquired 5.48 acres of vacant land in Pampa, Nevada. The purchase price for the land was $3,000,000, which was paid in shares of Orpheum common stock. The acquisition of the vacant land has expanded the Company’s business focus to real estate development as well as the refurbishing of the Orpheum Theater.

On October 27, 2011, the Company acquired commercial property in Oklahoma City, Oklahoma, valued at $3,000,000. Per the agreement, the Company obligated itself to make the January, 2012, payment under an existing mortgage and agreed to issue 29,900,000 shares of common stock for the balance of $2,990,000. As of this report date, 28,000,000 shares have been issued. The remaining 1,900,000 shares are reflected in the Stock To Be Issued account.

On November 9, 2011, the Company purchased ten (10) vacant residential lots located in Hot Springs, Arkansas. The purchase price and closing costs of $164,878 were paid though an issuance of common stock.

On April 12, 2012, the Company acquired commercial property owned by its’ CEO, Morris Kahn. The purchase contract called for a purchase price of $3,200,000, to be paid with 20,000,000 shares of common stock and the acceptance of a $1,200,000 mortgage. As of September 30, 2012, the title to this property had not been transferred to the Company due to delays in transferring the mortgage, however, the Company does have use of the property pending resolution of the title issues and financing options are being vigorously pursued.

Critical Accounting Policies

Our discussion and analysis of results of operations and financial condition are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies that we follow conform to accounting principles generally accepted in the United States, and have been consistently applied in the preparation of the financial statements.

Off-Balance Sheet Arrangements

We have no off balance sheet arrangements.

Revenue Recognition

The Company recognizes revenues in accordance with the Securities and Exchange Commission, Staff Accounting Bulletin (SAB) number 104, Revenue Recognition. SAB 104 clarifies application of U.S. generally accepted accounting principles to revenue transactions.

RESULTS OF OPERATIONS

We incurred net losses of $466,863 and $186,975 for the three months ended September 30, 2012 and 2011, respectively, and net losses of $663,225 and $566,735 for the six months ended September 30, 2012 and 2011, respectively. We do not anticipate having positive net income in the immediate future. Net cash used by operations for the six months ended September 30, 2012 and 2011, were $211,978 and $95,184, respectively. These conditions create an uncertainty as to our ability to continue as a going concern.

Results of Operations for the three and six months ended September 30, 2012 compared to the three and six months ended September 30, 2011

Revenue

Revenue from rental activities were $6,800 and $6,800 for the three and six months ended September 30, 2012, compared to $-0- and $-0- for the three and six months ended September 30, 2011. This is a reflection of the leasing of space in the 1031 Phillips St. commercial property beginning in the three months ended September 30, 2012.

General & Administrative Expenses

General and Administrative Expenses increased in the three months ended September 30, 2012, as compared to the three months ended September 30, 2011 from $99,278 to $385,966. The majority of the increase was due to consulting expenses of $345,609 paid in the three months ended September 30, 2012 versus $63,455 paid in the three months ended September 30, 2011.

General and Administrative Expenses increased in the six months ended September 30, 2012, as compared to the six months ended September 30, 2011 from $391,342 to $494,632. The majority of the increase was due to professional and consulting expenses of $432,383 paid in the six months ended September 30, 2012 versus $341,554 paid in the six months ended September 30, 2011.

Loss from Operations

The increase in our operating loss for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011 from $99,278 to $379,166, is due to the increase in general and administrative expenses described above.

The increase in our operating loss for the six months ended September 30, 2012, as compared to the three months ended September 30, 2011 from $391,342 to $487,832, is due to the increase in general and administrative expenses described above.

Interest Expense

We incurred interest expense of $87,697 and $87,697 during the three months ended September 30, 2012 and September 30, 2011, respectively. We incurred interest expense of $173,383 and $173,383 during the six months ended September 30, 2012 and September 30, 2011, respectively. There was no increase or decrease in interest expense for either comparative periods.

Net Income (Loss)

We recognized a net loss from continuing operations of $466,863 and 186,975 for the three months ended September 30, 2012, and September 30, 2011, respectively, and $663,225 and $566,735 for the six months ended September 30, 2012 and September 30, 2011, respectively. The changes in net loss are primarily attributable to the changes in operating loss and interest expense described above.

LIQUIDITY AND CAPITAL RESOURCES

The Company funds its expenditures from loans or cash contributions from a related party that controls a significant portion of the stock of the Company. The Company will be seeking outside funding for some projects while attracting investors to purchase equity interests in order to maintain operations for the foreseeable future.

There is no guarantee that we can continue to raise the capital required to continue the Orpheum Theater refurbishment, maintain our current asset holdings, or continue with our asset expansions. The Company’s current liabilities consist primarily of the amount owed on its demand note. If the holders of the demand note exercise their right to payment under the note the Company would not have sufficient capital to pay the note and it could lose the Orpheum Theater property.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES.

The Company's principal executive officer and its principal financial officer, carried out an evaluation of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d -14 (c) as of September 30, 2012. As a result of this evaluation, they concluded that our disclosure controls and procedures were not effective. Specifically, our disclosure controls and procedures were not effective to enable us to accurately record, process, summarize and report certain information required to be include in the Company’s periodic SEC filings within the required time periods, and to accumulate and communicate to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in internal controls.

There were no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's internal controls subsequent to the date of their evaluation.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In connection with the Company’s acquisition of the Orpheum Theatre, the Company has a demand note which consists of debentures that are held by various individuals. In February 2011, some of the debenture holders filed a lawsuit against the owners of the Orpheum Theater prior to its transfer to 129 University Place and against 129 University Place, LLC demanding either payment of the debentures or release of the property. Terms of the agreement require that we participate in an arbitration process first. We are currently working with legal counsel, lending sources, and the debenture holders through arbitration to provide for a quick settlement of their claims and satisfaction of their complaint.

ITEM 1A. RISK FACTORS

Not applicable

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibits

2.	Agreement and Plan of Reorganization between Back Channel Investments, Inc. and Orpheum Property, Inc. (2)

3.1	(a)	Articles of Incorporation (1)

	(b)	December 13, 2004 Certificate of Amendment to Certificate of Incorporation of Back Channel Investments, Inc. (2)

	(c)	September 25, 2007 Certificate of Amendment to Certificate of Incorporation of Pacific Land and Coffee Corporation (3)

	(d)	December 23, 2010 Certificate of Amendment to Certificate of Incorporation of Pacific Land and Coffee Corporation (3)

	(e)	June 13, 2011 Certificate of Amendment to Certificate of Incorporation of Orpheum Property Inc. (3)

3.2	Bylaws (1)

10.1	Stock Option Plan (1)

31.1	Certification of Chief Executive Officer pursuant to Rule 15d-14(a) of the Exchange Act

31.2	Certification of the Chief Financial Officer pursuant to Rule 15d-14(a) of the Exchange Act

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

100.	XBRL-Related Documents

101.	Interactive Data File

__________

(1)	Incorporated by reference to our Form 10-SB filed May 10, 2000

(2)	Incorporated by reference to our Registration Statement on Form SB-2. File No. 333-105564 and incorporated by reference filed May 27, 2003

(3)	Incorporated by reference to Form 10-Q for the period ended December 31, 2011.

SIGNATURES

Pursuant to the requirements 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.

	ORPHEUM PROPERTY, INC.

Date: November 14, 2012	By:	/s/ Tyrus C. Young
		Tyrus C. Young
		Chief Financial Officer

	By:	/s/ Morris Kahn
		Morris Kahn
		Chief Executive Officer

Orpheum Property Inc - FORM 10-Q - November 14, 2012

Attached files

Orpheum Property Inc Reports