PINX:PLFF Orpheum Property Inc Annual Report 10-K Filing - 3/31/2012

Effective Date 3/31/2012

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

þ
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended March 31, 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

ORPHEUM PROPERTY, INC.
(Exact name of registrant in its charter)
 
Delaware   33-0619256
(State or other jurisdiction of incorporation or organization)    (I.R.S. Employer Identification No.)
 
201 St. Charles Ave.  Suite 2500
New Orleans, LA
   70170
(Address of principal executive offices)    (Zip Code)
 
Registrant's telephone number, including area code:  (808) 478-7894
 
Securities registered pursuant to Section 12(b) of the Act:   None
 
Securities registered pursuant to Section 12(g) of the Act:  Common Stock, par value $0.001
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No þ
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o No þ
 
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 such filing requirements for the past 90 days.     Yes þ No o
 
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's 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. 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 o Accelerated filer o
Non-accelerated filer o    (Do not check if a smaller reporting company) Smaller reporting company þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o No þ

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 registrant’s most recently completed second fiscal quarter:  $1,650,000 based on a closing sale price of $1.10 on that date.
 
The number of shares outstanding of the issuer's classes of Common Stock as of September 30, 2012:
 
Common Stock, $0.001 Par Value – 178,183,728 shares

DOCUMENTS INCORPORATED BY REFERENCE:  NONE
 


 
 

 
PART I

ITEM 1.  BUSINESS

When used in this Form 10-K, the words “expects,” “anticipates,” “estimates” and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties, including those set forth below under “Risks and Uncertainties,” that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based. This discussion should be read together with the financial statements and other financial information included in this Form 10-K.

Background

Orpheum Property, Inc. (“Orpheum” or the “Company”) was originally formed as a Delaware corporation under the name of Back Channel Investments, Inc. in April 1994.  The Company was formed solely to seek for and make an acquisition.  On May 20, 2003, the Company entered into an acquisition whereby it acquired all of the common stock of Orpheum Property, Inc., a Hawaii corporation formed on February 14, 2003.  There were two officers, directors and shareholders of the Hawaii corporation.  The acquisition was effected as a tax free share exchange, with the two shareholders of Orpheum Property, Inc. (Hawaii) receiving 7,000,000 new shares of common stock and the existing shareholders of the Delaware parent retaining all of their 3,000,000 shares (after giving effect to a 3-for-1 forward stock split) of common stock, which were originally issued in April 1994 for total consideration of $1,015 ($0.0003 per share).  The stockholders of Orpheum Property, Inc. (Hawaii) believed that the acquisition would enable their company to benefit from being part of a reporting company, that the combined entity would likely be able to become publicly trading, and that it would be better able to attract debt or equity financing for its business. No promoter or any other person was paid or compensated in connection with the acquisition.  There was no particular value assigned to the shares of either company since neither had any appreciable assets or history of operations.  As a result of these transaction, the Company subsequently changed its name from Back Channel Investments, Inc. to Pacific Land and Coffee Corporation and then in 2010, to Orpheum Property, Inc.  Unless we state otherwise, all references to Orpheum Property, Inc. refer to the combined entity.

On November 6, 2006, Alfred Coscina, a director, officer and shareholder, contributed 100% of his interest in Coscina Brothers Coffee, LLC to the Company.  Mr. Coscina did not receive any item of value in return for the capital contribution.  Coscina Brothers Coffee, LLC was the Company’s principal supplier and is in the same principal business as the Company. The results of operations of the Company include the operations of Coscina Brothers Coffee, LLC from November 6, 2006.

On December 18, 2007, we acquired 70.3% of the outstanding common stock of Integrated Coffee Technologies, Inc., a Delaware corporation herein as (“Integrated Coffee Technologies”).  The acquisition was effected pursuant to an Agreement and Plan of Reorganization dated December 18, 2007.  In connection with the acquisition, we issued 7,644,149 newly authorized shares of common stock, and reserved 4,355,850 additional shares for the acquisition of the remaining Integrated Coffee Technologies shares.  Since December 18, 2007 through March 31, 2008, an additional 892,904 shares were issued to exchanging Integrated Coffee Technologies shareholders, bringing our ownership of Integrated Coffee Technologies up to 75.54%.  The operations of Integrated Coffee Technologies have been suspended due to lack of capital to develop this business and we have written off the technology associated with this business.

On June 28, 2010, we acquired 129 University Place, LLC, whose sole asset was the Orpheum Theater, a property of historical renown, but unusable without significant renovations.  It is intended that through the use of available tax credits we would be able to fund that project and restore the theater to its former glory.  In connection with the acquisition, the Company issued 42,260 Class B Preferred shares to the owners of 129 University Place, LLC, obligated itself to issue stock valued at $3,474,000 to former investors in the Orpheum project, and assumed demand obligations with a principal amount due of $2,698,360 and accrued interest of $33,130.

The executive offices of the Company are located at 201 St. Charles Avenue, Suite 2500, New Orleans, LA 70170.  The telephone number is 808-478-7894.
 
 
2

 

Our Operations

As of March 31, 2012, Orpheum Properties, Inc. did not have any operations generating current revenue.  The acquisition of certain tax-credit consulting contracts made during the year ended March 31, 2012, from Kahn & Associates is anticipated to begin generating revenues during the year ended March 31, 2013.  We are looking at additional purchases during the next fiscal period that will contribute to revenues.
 
Employees

As of March 31, 2012, we had no employees.

ITEM 1A. RISK FACTORS.

The securities of Orpheum Property, Inc. are highly speculative and very risky.  Before you buy consider the following risk factors and the rest of this report.

We are still in the development stage and may never be successful.

Orpheum Property, Inc.'s activities have been limited. There can be no assurance that Orpheum Property, Inc. will be able to develop sufficient revenues through our various operations, although Orpheum Property, Inc. can continue to exist indefinitely at its current level if its officers continue to fund its operating deficit.  If we do not increase our level of operations our common stock will not attain any value in any market that might develop, and investors will not be able to realize any value from their ownership of shares.
 
We need funding to implement our business plan.

Orpheum Property, Inc. is in need of approximately $50,000,000 in funding to carry out its business plan for the next 12 months for continued investments and general and administrative expenses.  We intend to raise these funds through sales of Company stock, both common and preferred.
 
ITEM 1B. UNRESOLVED STAFF COMMENTS

This section is not required for smaller reporting companies.

ITEM 2.  DESCRIPTION OF PROPERTY
 
We rent 200 square feet of office space under a lease expiring in October 2014.

ITEM 3.  LEGALPROCEEDINGS
 
Orpheum Property, Inc. is not a party to any pending legal proceedings.

ITEM 4.  MINE SAFETY DISCLOSURES
 
NA

 
3

 
 
PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK­HOLDER MATTERS AND ISSUER’S PURCHASE OF EQUITY SECURITIES

Our common stock commenced trading in the quarter ended June 30, 2005 under the symbol PLCF.OB on the OTC Bulletin Board.  The symbol was changed to PLFF.OB in September 2007 in connection with a one-for-three reverse stock split effective September 25, 2007. On December 10, 2010, the Company effected a one for twenty reverse stock split.

In the two years ended March 31, 2012 the high and low trading prices were as follows:
 
         
High
   
Low
 
                   
                   
June 30, 2010
          2.00       2.00  
September 30, 2010
          3.00       2.00  
December 31, 2010
    *       20.00       0.20  
March 31, 2011
    *       1.50       1.01  
                         
June 30, 2011
    *       1.50       0.23  
September 30, 2011
    *       0.51       0.10  
December 31, 2011
    *       0.15       0.10  
March 31, 2012
    *       2.74       0.13  
 
* Subsequent to 12/10/11 20:1 Stock split
 
These prices do not include retail mark up and mark down and may not represent actual transactions.
 
As of March 31, 2012, there were approximately 382 holders of common stock.
 
ITEM 6.  SELECTED FINANCIAL DATA

This information is not required for a smaller reporting company.
 
 
4

 
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDTIONS AND RESULTS OF OPERATIONS

In our plan of operation for fiscal 2010-11 we stated a need to find a third party to acquire the public shell for the purpose of generating additional investment capital.  As disclosed in the Notes to the Financial Statements, such an investor was located and prior to June 30, 2010, a deal was consummated which includes the contribution of real estate which significantly increased the net assets and equity of the Company.  Additionally, the coffee company and research subsidiaries were sold to former Directors, which helped the company in eliminating a material amount of liabilities.

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 statements in "Risk Factors" and other statements and 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.
 
Since we have not yet generated significant and consistent revenues, we are a development stage company as that term is defined in Accounting Standards Codification (“ASC”) Topic 915.  Our activities to date have been limited to seeking capital; seeking supply contracts and development of a business plan.  Our auditors have included an explanatory paragraph in their report on our financial statements, relating to the uncertainty of our business as a going concern, due to our lack of operating history or current revenues, its nature as a startup business, management's limited experience and limited funds.  We do not believe that conventional financing, such as bank loans, is available to us due to these factors.  Management believes that it will be able to raise the required funds for operations from one or more future offerings, in order to affect our business plan.  No terms have been discussed, and we cannot predict the price or terms of any offering nor the amount of dilution existing shareholders may experience as a result of such offering.

Forward looking information

Due to the significant change in operations during our fiscal year and subsequent to our year end, forward looking information related to our current operations would not be useful.  As the re-organization and revamping of operations of the public company appear to be favorable, the recent changes do not have adequate historical documentation to formulate a definitive plan of action beyond stating that the company’s intention is to acquire additional investment capital and purchase numerous other properties for improvement, restoration and development.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information is not required for a smaller reporting company.

 
5

 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 
 
Report of Independent Registered Public Accounting Firm


The Board of Directors and Shareholders
Orpheum Property, Inc. (a development stage company)
New Orleans, Louisiana:

We have audited the accompanying consolidated balance sheet of Orpheum Property, Inc. (a development stage company) as of March 31, 2012 and 2011, and the related statements of operations, stockholders' deficit, and cash flows for the years ended March 31, 2012 and 2011 and for the period from inception (February 14, 2003) through March 31, 2012.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Orpheum Property, Inc. (a development stage company) as of March 31, 2012, and the results of its operations and cash flows for the years ended March 31, 2012 and 2011 and for the period from inception (February 14, 2003) to March 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that Orpheum Property, Inc. will continue as a going concern.  As discussed in Note 2 to the financial statements, 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. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.

As more fully described in Notes 5, 8, 9 and 12 to the financial statements, the Company has transactions with related parties primarily to cover the Company’s cash flow needs associated with its operating expenses as well as in regards to its development of certain real estate assets.

LaPorte, A Professional Accounting Corporation
October 15, 2012
 

 
6

 
 
ORPHEUM PROPERTY, INC
(A Development Stage Company)
BALANCE SHEETS
 
ASSETS
           
   
March 31,
   
March 31,
 
   
2012
   
2011
 
             
Current Assets
           
Cash in Bank
  $ 274     $ 727  
Prepaid Expenses
    -       5,000  
                 
     Total Current Assets
    274       5,727  
                 
Fixed Assets
               
Unimproved properties
    7,350,995       -  
Improved properties
    7,969,559       6,296,935  
Less: Accumulated Depreciation
    -       -  
                 
      Total Fixed Assets
    15,320,554       6,296,935  
                 
Other Assets
               
Investment - Contracts
    555,502       -  
                 
       Total Other Assets
    555,502       -  
                 
TOTAL ASSETS
  $ 15,876,330     $ 6,302,662  
 
The accompanying notes are an integral part of the financial statements
 
 
7

 
 
LIABILITIES & STOCKHOLDERS' EQUITY
           
   
March 31,
   
March 31,
 
   
2012
   
2011
 
             
Current Liabilities
           
Accounts Payable
  $ 63,198     $ 31,867  
Accrued Interest
    649,930       299,143  
Demand Note - Orpheum - Note 4
    2,698,360       2,698,360  
                 
     Total Current Liabilities
    3,411,488       3,029,370  
                 
Long Term Liabilities
    -       -  
                 
Total Liabilities
    3,411,488       3,029,370  
                 
Stockholders' Equity
               
Preferred Stock Class A - 1,000,000 shares authorized;
         
        Stated value of $5.00 per share; 40,000 and 0 shares
               
        issued and outstanding at March 31, 2012 and
               
     March 31, 2011, respectively
    200,000       -  
Common Stock - 500,000,000 shares authorized;
               
       Par value of $.001 per share; 178,183,728 shares
               
       and 6,461,336 shares issued and outstanding
               
       at March 31, 2012 and 2011, respectively
    178,184       6,462  
 Stock to be Issued
    1,752,000       3,415,734  
Capital in excess of par value
    15,045,042       3,133,706  
Deficit accumulated during the development stage
    (4,710,384 )     (3,282,610 )
                 
    Total Stockholders' Equity
    12,464,842       3,273,292  
                 
 TOTAL LIABILITIES & STOCKHOLDERS'
               
EQUITY
  $ 15,876,330     $ 6,302,662  
 
The accompanying notes are an integral part of the financial statements

 
8

 
 
ORPHEUM PROPERTY, INC.
(A Development Stage Company)
STATEMENTS OF OPERATION
For the Years Ended March 31, 2012 and 2011
and for the Perod from Inception (February 14, 2003) Through March 31, 2012
 
               
February 14,
 
               
2003 through
 
   
For the Year Ended March 31,
   
March 31,
 
   
2012
   
2011
   
2012
 
Revenues
                 
Sales
  $ -     $ -     $ -  
                         
   Total Revenues
    -       -       -  
                         
Cost of Sales
    -       -       -  
                         
Gross Profit
    -       -       -  
                         
General & Administrative Expenses
    1,080,987       1,427,644       2,811,461  
                         
                         
Net Loss from Operations
    (1,080,987 )     (1,427,644 )     (2,811,461 )
                         
Other Income (Expense):
                       
   Other revenue
    4,000       -       4,000  
   Interest Expense
    (350,787 )     (264,870 )     (638,550 )
                         
   Total Other Income (Expense)
    (346,787 )     (264,870 )     (634,550 )
                         
Net Loss from Continuing Operations
    (1,427,774 )     (1,692,514 )     (3,446,011 )
                         
Discontinued Operations
    -       6,113       (1,235,906 )
Loss - Sale of Disc. Operations
    -       (28,467 )     (28,467 )
                         
Net Loss
  $ (1,427,774 )   $ (1,714,868 )   $ (4,710,384 )
                         
Basic and Diluted Income (Loss) Per Share
                       
Continuing Operations
    (0.02 )     (1.05 )        
Discontinued Operations
    -       -          
                         
Net Loss per Share
  $ (0.02 )   $ (1.05 )        
   
 
               
Weighted Average Shares
                       
Outstanding
    82,663,796       1,615,550          
 
The accompanying notes are an integral part of these financial statements
 
 
9

 
 
ORPHEUM PROPERTY, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Years Ended March 31, 2012 and 2011
and for the Perod from Inception (February 14, 2003) Through December 31, 2007
 
   
For the Year
   
For the Year
   
February 14,
 
   
Ended
   
Ended
   
2003 through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
 
Cash Flows from Operating Activities
                 
Net Loss
  $ (1,427,774 )   $ (1,714,868 )   $ (4,710,384 )
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
    -       -       6,881  
Stock Issued for payment of fees
    840,750       1,333,465       2,302,998  
Contributed Capital - noncash fair market value of start-up and organization services and costs
    -       -       1,000  
Bad debt recognized - Hales Receivable
    -       25,000       25,000  
(Increase) Decrease in Prepaid expenses
    5,000       (5,000 )     -  
Increase (Decrease) in accounts payable
    31,331       (19,555 )     63,198  
Increase (Decrease) in accrued interest
    350,787       266,013       616,800  
                         
  Net Cash Used by Operating Activities
    (199,906 )     (114,945 )     (1,670,436 )
                         
Cash Flow from Investing Activities
                       
Improvements to Orpheum Theater
    (118,126 )     (124,575 )     (242,701 )
Escrow refunds, net of fees paid
    15,583               15,583  
Cash investments to Baja Coastal
    (10,000 )     -       (10,000 )
                         
  Net Cash Used by Investing Activities
    (112,543 )     (124,575 )     (237,118 )
                         
Cash Flow from Financing Activities
                       
Proceeds from the sale of stock/contributed cash
    321,996       184,043       977,519  
Proceeds from notes payable - related party
    -       -       49,700  
Payment on OKC payable
    (10,000 )     -       (10,000 )
Proceeds from advances from former officer - net
    -       75,000       30,000  
Proceeds from mergers
    -       -       304,540  
Payment to reduce Stock to be Issued
    -       (22,500 )     (22,500 )
                         
Net Cash Provided (Used) by Financing Activities
    311,996       236,543       1,329,259  
                         
Net Increase (Decrease) in Cash
    (453 )     (2,977 )     (578,295 )
                         
Beginning Cash Balance
    727       8,628       ----  
                         
Cash provided (used) by Discontinued Operating Activities
    -       (4,924 )     578,569  
                         
Ending Cash Balance
  $ 274     $ 727       274  
                         
Supplemental Disclosure of Cash Flow Information
                       
Cash paid during the year for interest
    -       -       -  
Cash paid during the year for income taxes
    -       -       -  
                         
Business Acquisitions
                       
Fair value of assets acquired
  $ -     $ 6,172,360     $ 7,447,703  
Issuance of debt/assumption of liabilities
    -       -       (1,170,013 )
Liabilities assumed
    -       (2,731,490 )     (2,760,379 )
Stock Issued at acquisition
    -       (84,520 )     (160,961 )
Capital in Excess of Par
    -       (3,356,350 )     (3,356,350 )
                         
Asset Acquisitions
                       
Unimprovevd properties
    6,979,078       -       6,979,078  
Contracts
    555,502       -       555,502  
Prepaid tax credit consulting costs
    944,498       -       944,498  
Issuance of debt/assumption of liabilities
    (14,878 )     -       (14,878 )
Stock Issued at acquisition
    (43,743 )     -       (43,743 )
Capital in Excess of Par
    (6,730,457 )     -       (6,730,457 )
Stock to be issued
    (1,690,000 )     -       (1,690,000 )
                         
Capitalized real estate commissions paid via issuance of common stock
    997,500       -       997,500  

The accompanying notes are an integral part of the financial statements

 
10

 

ORPHEUM PROPERTY INC
 
(A Development Stage Company)
 
Statement of Stockholder's Equity (Deficit)
 
For the Perod from Inception (February 14, 2003) Through March 31, 2011
 
                                                       
                           
Capital in
   
Accu-
   
Non
   
Common
   
Net
 
   
Preferred
   
Preferred
   
Common
   
Common
   
Addition
   
mulated
   
Controlling
   
Stock
   
Stockholder's
 
   
Shares
   
Stock
   
Shares
   
Stock
   
Par Value
   
Deficit
   
Interest
   
to be Issued
   
Equity(Deficit)
 
                                                       
Balance February 14, 2003
    -     $ -       -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                         
Shares issued to initial stockholders for cash
    -       -       166,667       167       835       -       -       -       1,002  
                                                                         
Contributed Capital-Corporate
                                                                       
Organization and Start-up Costs, at
                                                                       
Inception, Services and Costs at
                                                                       
Estimated Fair Market Value
    -       -       -       -       1,000       -       -       -       1,000  
                                                                         
Net Loss from February 14, 2003
                                                                       
(Inception) to March 31, 2003
    -       -       -       -       -       (1,195 )     -       -       (1,195 )
                                                                         
Balance, March 31, 2003
                    166,667       167       1,835       (1,195 )     -       -       807  
                                                                         
Cash contributed for Working Capital
    -       -       -       -       1,978       -       -       -       1,978  
                                                                         
Net Loss - Year Ended March 31, 2004
    -       -       -       -       -       (1,176 )     -       -       (1,176 )
                                                                         
Balance, March 31, 2004
    -       -       166,667       167       3,813       (2,371 )     -       -       1,609  
                                                                         
Net Loss - Year Ended March 31, 2005
    -       -       -       -       -       (6,695 )     -       -       (6,695 )
                                                                         
Balance, March 31, 2005
    -       -       166,667       167       3,813       (9,066 )     -       -       (5,086 )
                                                                         
Net Loss - Year Ended March 31, 2006
    -       -       -       -       -       (7,733 )     -       -       (7,733 )
                                                                         
Balance, March 31, 2006
    -       -       166,667       167       3,813       (16,799 )     -       -       (12,819 )
                                                                         
Cash contributed by shareholders
    -       -       -       -       3,500               -       -       3,500  
                                                                         
Net Loss - Year Ended March 31, 2007
    -       -       -       -       -       (52,841 )     -       -       (52,841 )
                                                                         
Balance, March 31, 2007
    -       -       166,667       167       7,313       (69,640 )     -       -       (62,160 )
                                                                         
Issuance of Preferred Shares
    900,000       900       (45,000 )     (45 )     (855 )     -       -       -       -  
Issuance of Shares for Service
    -       -       74,715       75       91,459       -       -       -       91,534  
Conversion of Debt to Shares
    -       -       2,489       2       93,260       -       -       -       93,262  
Issuance of Shares for Merger
    -       -       382,207       382       76,059       -       28,884       -       105,325  
Adjustment for Conversion of ICTI Stock
    -       -       44,645       45       43,259       -       (43,304 )     -       -  
Adjutment for ICTI stock changes
    -       -       -       -       360,620       -       173,361       -       533,981  
                                                                         
Net Loss - Year Ended March 31, 2008
    -       -       -       -       -       (328,249 )     (55,776 )     -       (384,025 )
                                                                         
Balance, March 31, 2008
    900,000       900       625,723       625       671,115       (397,889 )     103,165       -       377,916  
                                                                         
Adjustment for Conversion of ICTI Stock
    -       -       13,021       13       6,869               (6,882 )     -       -  
Contribution of Interest earned by
                                                                       
   Shareholder
    -       -       -       -       6,796       -       -       -       6,796  
                                                                         
Net Loss - Year Ended March 31, 2009
    -       -       -       -       -       (1,005,177 )     (241,866 )     -       (1,247,043 )
                                                                         
Balance, March 31, 2009
    900,000       900       638,744       638       684,780       (1,403,066 )     (145,583 )     -       (862,331 )
                                                                         
Conversion of Officer Debt to Equity
    -       -       -       -       269,097       -       -       -       269,097  
Imputed interest
    -       -       -       -       17,275       -       -       -       17,275  
                                                                         
Net Loss - Year Ended March 31, 2010
    -       -       -       -       -       (164,676 )     (5,251 )     -       (169,927 )
                                                                         
Balance, March 31, 2010
    900,000       900       638,744       638       971,152       (1,567,742 )     (150,834 )     -       (745,886 )
                                                                         
Issuance of Class B Preferred Stock
                                                                       
  & purchase of Orpheum
    42,260       84,520       -       -       (117,650 )     -       -       3,474,000       3,440,870  
Conversion Class A Preferred Stock
                                                                       
   to Common Stock
    (900,000 )     (900 )     45,000       45       855       -       -       -       -  
Issuance of Common Stock
    -       -       66,251       66       (66 )     -       -       -       -  
Sale of Integrated Coffee Tech.   &
                                                                       
  Coscina Coffee Brothers
    -       -       -       -       643,319       -       150,834       -       794,153  
Donation from Officer
    -       -       -       -       4,015       -       -       -       4,015  
Conversion - Preferred to Common
    (42,260 )     (84,520 )     4,226,000       4,226       80,294       -       -       -       -  
Conversion of Stock to be Issued
    -       -       137,561       138       35,628       -       -       (35,766 )     -  
Payment to reduce Stock to be Issued
    -       -       -       -       -       -       -       (22,500 )     (22,500 )
Issuance of Common Stock for services
    -       -       1,347,780       1,348       1,332,117       -       -       -       1,333,465  
Investment by Shareholder
    -       -       -       -       184,043       -       -       -       184,043  
                                                                         
Net Loss - Year Ended 03/31/11
    -       -       -       -       -       (1,714,868 )     -       -       (1,714,868 )
                                                                         
Balance, March 31, 2011
    -       -       6,461,336       6,461       3,133,707       (3,282,610 )     -       3,415,734       3,273,292  
                                                                         
Shares issued to avoid anti-dilution
    -       -       52,930,845       52,931       (52,931 )     -       -       -       -  
Issued for purchase of Property
                                                                       
Arkansas
    -       -       80,000       80       19,120       -       -       -       19,200  
Calfornia/Nevada
    -       -       14,596,153       14,596       3,780,404       -       -       -       3,795,000  
Oklahoma City
    -       -       28,000,000       28,000       2,772,000       -       -       190,000       2,990,000  
Hot Springs
    -       -       1,066,667       1,067       158,933       -       -       -       160,000  
Issued for purchase of Investment
                                                                       
Baja Coastal Property
    -       -       42,194,605       42,193       (42,195 )     -       -       -       (2 )
Contracts
    -       -       -       -       -       -       -       1,500,000       1,500,000  
Issued for payment of cash
    -       -       700,000       700       49,300       -       -       2,000       52,000  
Conversion of "To Be Issued Stock"
    -       -       15,797,969       15,798       3,399,936       -       -       (3,415,734 )     -  
Stock issued/To Be Issued for services
    40,000       200,000       16,356,153       16,356       1,527,644       -       -       60,000       1,804,000  
Investment by Shareholder
    -       -       -       -       299,125       -       -       -       299,125  
Rounding
    -       -       -       1       (1 )     -       -       -       -  
                                                                         
Net Loss - Year Ended 03/31/12
    -       -       -       -       -       (1,427,774 )     -       -       (1,427,774 )
                                                                         
Balance, March 31, 2012
    40,000     $ 200,000       178,183,728     $ 178,183     $ 15,045,042     $ (4,710,384 )   $ -     $ 1,752,000     $ 12,464,841  

The accompanying notes are an integral part of the financial statements

 
11

 
 
Orpheum Property, Inc.
(A Development Stage Company)

Notes to the Financial Statements

March 31, 2012
 
Note 1
Organization and Summary of Significant Accounting Policies

(a)  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 LLC, 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 2000 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.
 
(b)  Basis of Presentation and Discontinued Operations
 
The financial statements as of and for the year ended March 31, 2011, as well as for the period of inception (February 14, 2003) through March 31, 2011 include the accounts of Orpheum Property, Inc., and the activity of its former majority owned subsidiaries, Coscina Brothers Coffee Company and Integrated Coffee Technologies, Inc.  On June 30, 2010, the board of directors elected to dispose of the coffee-related business and focus on building a real estate portfolio, and the coffee-related business were sold to former directors of the Company.  Accordingly, the activity of the coffee-related businesses through June 30, 2010 has been accounted for as discontinued operations and the results of operations of the coffee-related businesses have been removed from the results of continuing operations for all periods presented.

 
12

 
 
(c)  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.

(d)  Use of Estimates in Preparation of Financial Statements

 
The preparation of financial statements in conformity with U.S. 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 revenue and expenses during the reporting period.  Actual results could differ from those estimates.

(e)  Basic Loss Per Common Share

The Company computes basic loss per common share in accordance with FASB ASC Topic 260-10, Earnings Per Share.  Basic loss per common share is computed using 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 years ended March 31, 2012 and March 31, 2011, the effect of any equivalent shares for each year would be excluded from the loss per share computation since the impact would be antidilutive.  There were no common stock equivalents outstanding at March 31, 2012 and March 31, 2011.

(f)  Revenue Recognition

Revenues of the Company will be 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 in the Orpheum portfolio, 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.

(g)  Property and Equipment

Property and equipment are stated at cost.  Depreciation is provided using the straight-line method over the useful lives (5-7 years) of the related assets.  Expenditures for maintenance and repairs are charged to expenses as incurred.

As of March 31, 2012, the Company had not placed any of its fixed assets into service, therefore no depreciation is included for the year then ended.
 
 
13

 
 
(h)  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.

(i)  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.

(j)  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.

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.
 
 
14

 

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 April 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 March 31, 2014 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 April 1, 2013 and is not expected to have a significant impact on the Company’s financial statements.

 
15

 
 
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.  The carrying value at March 31, 2012 and 2011 consists of the following:
 
   
March 31,
2012
   
March 31,
2011
 
             
 Acquisition Costs   $ 6,172,360     $ 6,172,360  
 Renovation Costs     242,701       124,575  
 Real Estate Commission     610,000       -  
 Prepaid Development Fees     944,498       -  
                 
  Total   $ 7,969,559     $ 6,296,935  
 
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 have a value of $555,502 based on a 6.4% rate of return.
 
 
16

 
 
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 March 31, 2012, was $2,698,360.

At the time of the Company’s acquisition the note had accrued interest of $33,130.  Between June 28, 2010 and March 31, 2012, additional interest of $616,800 has been accrued, with a March 31, 2012 accrued interest balance of $649,930.

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
Preferred Stock

 
On August 22, 2007, the Company effected a one-for-three reverse stock split of its common stock, and authorized the issuance of a class of preferred stock (1,000,000 shares) of which 900,000 shares were issued.  They are convertible to one share of common stock for each share of preferred.  There are no stated dividend payments attributed at this time to those shares and they bear a par value of $0.001 each.  On June 28, 2010, these shares were converted to common stock.

 
Also on June 28, 2010, the Company issued 42,260 shares of Class B Preferred Stock as part of its offer to purchase the Orpheum Theater.  These shares had a par value of $2.00 per share and were convertible into 2000 shares of common stock (100 shares of post-reverse split shares).  On December 31, 2010, the shares were converted into 4,226,000 shares of common 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 8
Common Stock

 
The Company, at inception, issued 1,000 shares of common stock to two initial stockholders at approximately $1.00 per share for a total amount of $1,002.

 
On May 20, 2004, the Company combined with Back Channel Investments, Inc., in a reverse merger pursuant to an Agreement and Plan of Reorganization.  Back Channel acquired all of the outstanding shares of common stock of the Company in exchange for 7,000,000 shares of Back Channel’s common stock.  Prior to the combination, Back Channel had 1,000,000 shares of common stock outstanding which were forward split o