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 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.
Our future operating results are subject to many factors, including:
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Our ability to raise finance to renovate the Orpheum and pay the monthly mortgage interest
due on the property;
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Our ability to restore the Orpheum and successfully reopen it as an entertainment venue
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Our ability to identify, close and finance other suitable property acquisitions
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Our ability to identify and manage suitable contactors and specialist advisers to assist in the
development of our property portfolio
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The general economic climate as well as that specific to the New Orleans region and property
in particular
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Other risks currently unknown but which could arise in the future
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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 October 22, 2010, the Company changed its name from Pacific Land & Coffee Corporation.
On June 30, 2010, the Company developed a strategic plan to dispose of its existing loss making 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. It was also decided that consideration would be given to the sale of these same assets should it become appropriate and in the best interests of shareholders. 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.
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 fresh 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 and identification of other potential property acquisitions 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 Directors believe 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.
Critical Accounting Policies
Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated 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 a net loss of $ 379,761 for the three months ended June 30, 2011, and had a working capital deficit of $ 7,495 as of June 30, 2011. We do not anticipate having positive net income in the immediate future. Net cash used by operations for the three months ended June 30, 2011 was $37,810. These conditions create an uncertainty as to our ability to continue as a going concern.
Results of Operations for the three months ended June 30, 2011 compared to the three months ended June 30, 2010
General & Administrative Expenses
General and Administrative Expenses increased in the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 from $5,222 to $292,064. The majority of the increase was due to consulting expenses incurred in 2011.
Loss from Operations
The increase in our operating loss for the three months ended June 30, 2011, as compared to the period ended June 30, 2010 from $5,222 to $292,064 is due to the increase in general and administrative expenses described above.
Interest Expense
We incurred interest expense of $87,697 during the three months ended June 30, 2011 as compared to $1,780 for the three months ended June 30, 2012. The increase in interest expense is due to the accrual of the debenture interest in 2011 for a full quarter, yet only for 3 days during the three months ended June 30, 2010.
Net Income (Loss)
We recognized a net loss from continuing operations of $379,761 for the three months ended June 30, 2011 as compared to a loss of $7,002 for the same period of 2010. The change in net loss is primarily attributable to the changes in operating loss and interest expense described above.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2011, the Company had a bank overdraft of $7,495. While the overdraft was cleared within days, 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.
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
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CONTROLS AND PROCEDURES. DISCLOSURE CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE
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 June 30, 2011. 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
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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 -
None
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS -
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES -
None
ITEM 4. MINE SAFETY DISCLOSURES -
None
ITEM 5. OTHER INFORMATION -
None
ITEM 6. EXHIBITS
Exhibits
2.
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Agreement and Plan of Reorganization between Back Channel Investments, Inc. and Orpheum Property,
Inc.
(2)
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3.1
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(a) Articles of Incorporation
(1)
(b) Articles of Amendment
(2)
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10.1
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Stock Option Plan
(1)
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31.
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Certifications, Morris Kahn and Tyrus C. Young, CEO and CFO respectively.
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32.
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Certification pursuant to 18 U.S.C. Section 1350 of Morris Kahn and Tyrus C. Young
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100.
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XBRL-Related Documents
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101.
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Interactive Data File
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(1)
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Incorporated by reference to our Form 10-SB.
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(2)
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Incorporated by reference to our Registration Statement on Form SB-2. File No. 333-105564 and incorporated by reference.
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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.
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ORPHEUM PROPERTY, INC.
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Date: August 22, 2012
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By:
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/s/ Tyrus C. Young
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Tyrus C. Young
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Chief Financial Officer
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By:
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/s/ Morris Kahn
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Morris Kahn
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Chief Executive Officer
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