|
OMB APPROVAL |
OMB Number: 3235-0416 |
Expires: April 30,2003 |
Estimated average burden
hours per response: 32.00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X ] | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended ___March 31, 2003______________________________ |
|
[ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _________________ to _________________ |
|
Commission file number ___0-30118____________________________________ |
EMPYREAN COMMUNICATIONS INC.
(exact name of small business issuer as specified in its charter)
2537 South Gessner, Suite 114,
Houston, TX 77063
(address of principal executive offices)
Issuers telephone number: (713) 260 7236
|
|
___NEVADA_____________________________________
(State or other jurisdiction of incorporation or organization) | _________88-0413417________________________
(IRS Employer Identification No.) |
|
|
|
(713) 260-7236
(Issuer's telephone number)( 713) 260 7236 |
|
_________________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report) |
Check whether the issuer
filed all documents and reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 12months(or for such shorter period that the registrant was required to file such reports)and
has been subject to such filing requirements for the past 90 days (X) Yes ( ) No
_As of March 31, 2003 there were 3,450,112 shares of common stock issued and outstanding
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Following are the un-audited financial statements for the period ended March 31, 2003:
EMPYREAN COMMUNICATIONS INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the three month periods ended March 31, 2003 and 2002
and for the period October 30,2000 (Date of Incorporation) to March 31, 2003
(Unaudited)
| | For the Three Months Ended March 31, 2003 | | For the Three Months Ended March 31, 2002 | | | October 30,2000 (Date of Incorporation) to March 31,2003 |
Cash Flows used in Operating Activites | | | | | | |
| Net loss for the period | (5,890) | | (104,023) | | | (10,325,172) |
| Items not affecting cash: | | | | | | |
| Accounts Payable written-off | - | | - | | | (68,227) |
| Investments written-off | - | | - | | | 2,600,000 |
| Loss on write-off of technology | - | | - | | | 5,843,140 |
| Gain on forgiveness of debt | - | | - | | | (29,578) |
| Non-cash: | | | | | | |
| Legal expenses | - | | - | | | 56,100 |
| Consulting expenses | - | | - | | | 750,966 |
| Changes in non-cash working capital balances | | | | | | |
| balances related to operations: | | | | | | |
| Prepaid expenses | - | | (433,500) | | | 16,000 |
| Accounts Payable | 5,458 | | (490,176) | | | 1,098,612 |
| Net Cash (used by) from operating activities | (432) | | (1,027,699) | | | (58,159) |
| | | | | | | |
Investing Activities | | | | | | |
| Cash acquired on business acquisition | 0 | | 0 | | | 316 |
| Increase(Decrease) in shareholder loans | (2,439) | | 3,097 | | | 31,572 |
| Net Cash (used by) from Investing Activities | (2,439) | | 3,097 | | | 31,888 |
| | | | | | | |
Financing Activities | | | | | | |
| Exchange of debt for common shares | 0 | | 1,024,476 | | | - |
| Proceeds from issuance of common shares | 4,000 | | 0 | | | 27,400 |
| Net Cash (used by) from Financing Activities | 4,000 | | 1,024,476 | | | 27,400 |
| | | | | | | |
| Net increase (decrease) in cash during the period | 1,129 | | (126) | | | 1,129 |
| | | | | | | |
| Cash, beginning of the period | 0 | | 191 | | | 0 |
| | | | | | | |
| Cash, end of the period | 1,129 | | 65 | | | 1,129 |
EMPYREAN COMMUNICATIONS INC.
(A Development Stage Company)
BALANCE SHEETS
for the periods ended March 31, 2003 and December 31, 2002
| | | March 31, 2003 | | December 31, 2002 |
| | | Unaudited | | |
Assets | | | | | |
| Cash | | 1,129 | | - |
| Prepaid expenses - see accompanying notes | 258,679 | | 258,679 |
| | to financial statements | | | |
| | | | | |
Total Assets | | 259,808 | | 258,679 |
| | | | | |
| | | | | |
Liabilities | | | | | |
| Accounts Payable | 72,349 | | 66,891 |
| Due to shareholders - see accompanying notes | | | |
| | to financial statements | 31,572 | | 34,011 |
| | | | | |
Total Liabilities | | 103,921 | | 100,902 |
| | | | | |
Stockholders Equity | | | | |
| Capital Stock | | | |
| Authorized: | | | |
| 50,000,000 common shares, $0.001 par value | | | |
| 10,000,000 preferred sharess, $0.001 par value | | | |
| Issued: | | | | |
| 3,450,112 (2002: 3,250,112) common shares - see | | | |
| | accompanying notes to financial statements | 3,450 | | 3,250 |
| 10,000,000 preferred sharess | 10,000 | | 10,000 |
| Additional paid in capital | 10,467,609 | | 10,463,809 |
| Deficit accumulated during the development stage | (10,325,172) | | (10,319,282) |
| | | | | |
Total Stockholders Equity/(Deficit) | 155,887 | | 157,777 |
| | | | | |
| Liabilities and Shareholders Equity/(Deficit) | 259,808 | | 258,679 |
EMPYREAN COMMUNICATIONS INC.
(A Development Stage Company)
Income Statement
with cummulative since inception
(UNAUDITED)
| | | For the Three Months Ended March 31, 2003 | | For the Three Months Ended March 31, 2002 | | | October 30,2000 (Date of Incorporation) to March 31, 2003 |
| | | | | | | | |
Operating Expenses | | 5,890 | | 104,023 | | | 1,989,830 |
| | | | | | | | |
Operating Loss | | (5,890) | | (104,023) | | | (1,989,830) |
| | | | | | | | |
Other Income/(Expenses) | | | | | | | |
| Investments written-off | | - | | - | | | (2,600,000) |
| Loss on write-off of technology | | - | | - | | | (5,843,140) |
| Accounts payable written-off | | - | | - | | | 68,227 |
| Miscellaneous Income | | - | | - | | | 9,993 |
| Gain on forgiveness of debt | | - | | - | | | 29,578 |
| | | | | | | | |
Net Loss for the period | | (5,890) | | (104,023) | | | (10,325,172) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Basic loss per share | | | | | | | |
Shares Outstanding | | | | | | | |
Weighted Average Shares Outstanding | | | | | | | |
EMPYREAN COMMUNICATIONS INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS EQUITY/(DEFICIT)
for the period ended March 31, 2003
(Unaudited)
| | Preferred Shares issued | Par Value | Common Shares, issued | Par Value | Additional Paid in Capital | Deficit Accumulated During the Development Stage | Total |
Issued for Cash | | | | 750,000 | 750 | 250 | | 1,000 |
| | | | | | | | |
Net Loss for the period | | | | | | | (70,583) | (70,583) |
| | | | | | | | |
Balance, December 31, 2000 | | - | - | 750,000 | 750 | 250 | (70,583) | (69,583) |
| | | | | | | | |
Issued for cash pursuant to exercise of warrants - at $200 | | | | 112 | - | 22,400 | - | 22,400 |
| | | | | | | | |
Issued for acquistion of subsidiary | | | | 37,500 | 38 | 5,805,370 | | 5,805,408 |
| | | | | | | | |
Net loss for the period | | | | | | | (6,748,095) | (6,748,095) |
| | | | | | | | |
Balance, December 31, 2001 | | - | - | 787,612 | 788 | 5,828,020 | (6,818,678) | (989,870) |
| | | | | | | | |
| | | | | | | | |
Issued for acquisition of subsidiary | | 10,000,000 | 10,000 | | | 1,290,000 | | 1,300,000 |
| | | | | | | | |
Net loss for the period | | | | | | | (104,023) | (104,023) |
| | | | | | | | |
Balance, March 31, 2002 | | 10,000,000 | 10,000 | 787,612 | 788 | 7,118,020 | (6,922,701) | 196,107 |
| | | | | | | | |
Issued for controlling interest in Basalt Fiber Company | | | | 500,000 | 500 | 1,299,500 | | 1,300,000 |
| | | | | | | | |
Net loss for the period | | | | | | | (444,772) | (444,772) |
| | | | | | | | |
Issued pursuant to consulting fee agreements | | | | 1,775,000 | 1,775 | 612,225 | | 614,000 |
| | | | | | | | |
Balance, June 30, 2002 | | 10,000,000 | 10,000 | 3,062,612 | 3,063 | 9,029,745 | (7,367,473) | 1,665,335 |
| | | | | | | | |
Issued pursuant to consulting fee agreements | | | | 187,500 | 187 | 1,434,064 | | 1,434,251 |
| | | | | | | | |
Net loss for the period | | | | | | | (6,052) | (6,052) |
| | | | | | | | |
Balance, September 30, 2002 | | 10,000,000 | 10,000 | 3,250,112 | 3,250 | 10,463,809 | (7,373,525) | 3,093,534 |
| | | | | | | | |
Net loss for the period | | | | | | | (2,945,757) | (2,945,757) |
| | | | | | | | |
Balance, December 31, 2002 | | 10,000,000 | 10,000 | 3,250,112 | 3,250 | 10,463,809 | (10,319,282) | 157,777 |
| | | | | | | | |
Issued for cash at $0.02 | | | | 200,000 | 200 | 3,800 | | 4,000 |
| | | | | | | | |
Net loss for the period | | | | | | | (5,890) | (5,890) |
| | | | | | | | |
Balance, March 31, 2003 | | 10,000,000 | 10,000 | 3,450,112 | 3,450 | 10,467,609 | (10,325,172) | 155,887 |
Item 2. Management's Plan of Operation.
The company is in its initial stages of development with no revenues or income and is subject to all the risks inherent in the creation of a new business. Since the company's principal activities to date have been limited to organizational activities, prospect development, and acquisition of interest, it has no record of revenue-producing operations. Consequently, there is no operating history upon which to base an assumption that the company will be able to achieve it's business plans
The company's aggressive and unwavering business focus is to pursue all available avenues in order to obtain the funding required to commence the manufacture and sales of continuous basalt fiber and related products.
As previously reported, its wholly owned subsidiary, Basalt Fiber Company terminated the lease for the factory building in South Hill, Virginia in order to reduce expenditure. The action taken however does not affect in any way the Industrial Revenue Bonds, various grants and tax abatements granted to the company by the State of Virginia, provided the company sets up it's manufacturing facilities in the county of Mecklenburg, before the end of 2004. Management continues to be fully primed to either reinstate this lease or secure another suitable lease property in Mecklenburg county and install manufacturing facilities as soon as the financing being sourced, is obtained. Production of basalt fiber is expected to commence within a year of financing being obtained and conservative gross sales revenues are projected to be in excess of $2.50 million in the second year and should exceed $8.50 million by the fifth year.
In brief, Basalt fiber is the newest fiber application technology available to the Western Hemisphere. Basalt Fiber can effectively replace fiberglass in all its applications. It is also stronger, ecologically safer and more cost effective than fiberglass. As the properties of Basalt Fiber are far superior than fiber glass, it will command premium prices for all its products. The many exciting uses of basalt fiber include its application in industry, the military, local law enforcement and fire safety. Furthermore, Basalt Fiber's superior strength and advanced thermal properties will aid in the construction of much stronger and more fire resistant structures. It can also be used to enhance fire resistant apparel for firefighters and stronger bulletproof vests for law enforcement personnel.
Negotiations to obtain for Basalt Fiber Company the exclusive world wide marketing rights for quality basalt fiber was terminated and will no longer be pursued. The prolonged, depressed and uncertain economic conditions have placed a severe constraint on the company's efforts to raise start up capital. Management, however, continues to pursue all available avenues to obtain financing and will reconsider the use of a Private Placement to raise $5.00 million from accredited Investors, once the economy picks up.
Principal Product
The company's principal business is therefore for it's wholly owned subsidiary, Basalt Fiber Company, to manufacture Continuous Fiber products for resale in the world market. From start up, the company is expected to grow at a 20% to 25% rate and the list of the main objectives to be strictly pursued by top management are:
- to provide Basalt fiber Company the market presence, which is necessary to support production, marketing and sale goals and to attract customers from the niche markets for the basalt Fiber products
- Generate a fair return for shareholders and finance continued growth and development of quality products with earned profits
- To have sales of more than8.50 million by the fifth year .
- To achieve a gross margin of 73 % and to have checks and balances in place, to maintain this level
- To continue research and development into the next generation of fiber products and
- Achieve a steady and reliable production stream
Liquidity
During the next 12 months, the company will need significant working capital to fund its marketing efforts and to commence the manufacture of Basalt Fiber products. The Company continues to actively pursue financing from all available sources both in this country and overseas. As it has still not been possible to obtain a suitable financing package from the Banks and Private investors that management met and worked with in Panama, it has been decided not to pursue these sources any further.
PART II - OTHER INFORMATION
Item 5. Other Information
Board Meetings:
The Board of Directors, at a Special meeting held in Houston, Texas on February 21, 2003, approved the filing of a form S 8 registration statement for common shares to be issued to pay for professional fees and as compensation for consultants serving the Company.
Sale of restricted stock:
During the quarter 200,000 restricted shares were sold to an investor for 2 cents per share or $4,000.00
Item 6. Exhibits and Reports on Form 8-K.
Exhibit No. Document Location
3(i) Articles of Incorporation Previously Filed
3(ii) Bylaws Previously filed
________________________________________________________________________
Reports on Form 8-K
NIL
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
EMPYREAN COMMUNICATIONS, INC.
/s/ Robert L. Lee Dated May 16, 2003
Robert L. Lee, President and Director
/s/ Anthony Fanale Dated May 16, 2003
Anthony Fanale, Director
*Print the name and title of each signing officer under his signature.
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Robert L. Lee, certify that:
I have reviewed this quarterly report on Form 10-QSB of Claremont Empyrean Communications, Inc..;
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.
Dated: May 19, 2003
/s/ Robert L. Lee
By: Robert L. Lee
President (or equivalent)
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Annual Report of Empyrean Communications, Inc.., a Nevada corporation (the "Company"), on Form 10-QSB for the quarter ending March 31, 2003 as filed with the Securities and Exchange Commission (the "Report"), I, Robert L. Lee, President of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Robert L. Lee
Robert L. Lee, President
Dated: May 19, 2003
