American Asset Development (EPYH) 10QSB 2003 Q2 Quarterly report (small business)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
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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 ___June 30, 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

1. 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
2. has been subject to such filing requirements for the past 90 days (X) Yes ( ) No

_As of June 30, 2003 there were 9,415,951 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 June 30, 2003:

EMPYREAN COMMUNICATIONS INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the three month periods ended June 30, 2003 and 2002 and the six month periods ended June 30, 2003 and 2002
and for the period October 30,2000 (Date of Incorporation) to June 30, 2003
(Unaudited)
		For the Three Months Ended June 30, 2003	For the Three Months Ended June 30, 2002	For the Six Months Ended June 30, 2003	For the Six Months Ended June 30, 2002	October 30,2000 (Date of Incorporation) to June 30,2003
Cash Flows used in Operating Activites
	Net loss for the period	(14,328)	(444,772)	(20,218)	(548,795)	(10,339,500)
	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	(148,043)	(18,000)	(148,043)	(451,500)	(132,043)
	Accounts Payable	(729)	(275,584)	4,729	(765,825)	1,097,883
	Net Cash (used by) from operating activities	(163,100)	(738,356)	(163,532)	(1,766,120)	(221,259)
Investing Activities
	Investment in Basalt Fiber Company		(900,000)		(900,000)
	Cash acquired on business acquisition					316
	Short Term note issued May 7, 2003	7,500	0	7,500		7,500
	Increase(Decrease) in shareholder loans	(8,323)	9,291	(10,762)	12,388	23,249
	Net Cash (used by) from Investing Activities	(823)	(890,709)	(3,262)	(887,612)	31,065
Financing Activities
	Exchange of debt for common shares		270,000		1,294,476
	Exchange of prepaid services for common shares	156,000	459,000	156,000	459,000	156,000
	Exchange of common shares for investment in Basalt Fiber Company		900,000		900,000
	Proceeds from issuance of common shares	6,800	0	10,800		34,200
	Net Cash (used by) from Financing Activities	162,800	1,629,000	166,800	2,653,476	190,200
	Net increase (decrease) in cash during the period	(1,123)	(65)	6	(256)	6
	Cash, beginning of the period	1,129	65	0	256	0
	Cash, end of the period	6	0	6	0	6

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		6	-
	Prepaid expenses - see accompanying notes		406,722	258,679
		to financial statements
Total Assets			406,728	258,679
Liabilities
	Accounts Payable - see accompanying notes
		to financial statements	71,620	66,891
	Short Term Note Payable		7,500	-
	Due to shareholders - see accompanying notes
		to financial statements	23,249	34,011
Total Liabilities			102,369	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:
	8,265,951 (2002: 2,525,951) common shares - see
		accompanying notes to financial statements	8,240	2,500
	10,000,000 preferred sharess		10,000	10,000
	Additional paid in capital		10,625,619	10,464,559
	Deficit accumulated during the development stage		(10,339,500)	(10,319,282)
Total Stockholders Equity/(Deficit)			304,359	157,777
	Liabilities and Shareholders Equity/(Deficit)		406,728	258,679

EMPYREAN COMMUNICATIONS INC.

(A Development Stage Company)

Income Statement

for the Three Months and Six Months Periods Ended June 30, 2003 and 2002

with cummulative since inception

(UNAUDITED)

		For the Three Months Ended June 30, 2003	For the Three Months Ended June 30, 2002	For the Six Months Ended June 30, 2003	For the Six Months Ended June 30, 2002	October 30,2000 (Date of Incorporation) to June 30, 2003
Operating Expenses		14,328	444,772	20,218	548,795	2,004,158
Operating Loss		(14,328)	(444,772)	(20,218)	(548,795)	(2,004,158)
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		(14,328)	(444,772)	(20,218)	(548,795)	(10,339,500)
Basic loss per share
Shares Outstanding
Weighted Average Shares Outstanding

(A Development Stage Company)
STATEMENT OF STOCKHOLDERS EQUITY/(DEFICIT)
for the period ended June 30, 2003
(Unaudited)
	Preferred Shares issued	Par Value	Common Shares, issued	Par Value	Additional Paid in Capital	Deficit Accumulated During the Development Stage	Total
Balance, December 31, 2001	-	-	63,451	38	5,828,770	(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	63,451	38	7,118,770	(6,922,701)	196,107
Issued for controlling interest in Basalt Fiber Company			500,000	500	1,299,500		1,300,000
Issued pursuant to consulting fee agreements			1,775,000	1,775	612,225		614,000
Net loss for the period						(444,772)	(444,772)
Balance, June 30, 2002	10,000,000	10,000	2,338,451	2,313	9,030,495	(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	2,525,951	2,500	10,464,559	(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	2,525,951	2,500	10,464,559	(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	2,725,951	2,700	10,468,359	(10,325,172)	155,887
Issued for cash at $0.02			340,000	340	6,460		6,800
Issued pursuant to consulting fee agreements			5,200,000	5,200	150,800		156,000
Net loss for the period						(14,328)	(14,328)
Balance, June 30, 2003	10,000,000	10,000	8,265,951	8,240	10,625,619	(10,339,500)	304,359

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.

The company's wholly owned subsidiary, Basalt Fiber Company terminated the lease for the factory building in South Hill, Virginia to reduce monthly expenditures. 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. During this quarter, several promising sources of financing have been in contact with management and meetings held.

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.

The prolonged, depressed and uncertain economic conditions have, no doubt, placed a severe constraint on the company's efforts to raise capital. In June, 2003,a revamping of the company's strategy was undertaken and announced in a Press Release. Management has rationalized its Basalt Fiber business with a revised Business Plan that will require only $650,000 to become revenue producing. It is also the intention to diversify into the Real Estate, Financial services and Oil and gas sectors and management is actively pursuing these objectives. A promising Real Estate development project is being reviewed and to reflect the company's diversification strategy a name change will be undertaken at a shareholders meeting tentatively scheduled for the end of September this year. Shareholders will also be requested to approve the increase of the company's capital structure.

Principal Product

Until the company's recently formulated diversification policy makes significant progress, Management will continue to give priority to obtaining the financing that it's wholly owned subsidiary, Basalt Fiber Company, requires 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 than 8.50 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 manufacturing of Basalt Fiber products. The Company continues to actively pursue financing from all available sources both in this country and overseas. Consideration will also be given to raising funds through a Private Placement once the economy improves.

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 issuance of 5.200,000 common shares through an S 8 filing , for prepaid legal fees and in lieu of future consulting fees. .Shares were issued as follows:

James B. Parsons 500,000 shares for Prepaid legal fees of $15,000.00

James D. Smith 200,000 shares for prepaid consulting fees of $6,000.00

Howard A, Scala 1,500,000 shares for prepaid consulting fees of $45,000.00

Anthony Fanale 1,500,000 shares for prepaid consulting fees of $45,000.00

Robert L. Lee 1,500,000 shares for prepaid consulting fees of $45,000.00

Sale of restricted stock:

During the quarter 340,000 restricted shares were sold to an investor for $5,800.00

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                                 Date August 14, 2003

Robert L. Lee, President and Director

/s/ Anthony Fanale                          Date August 14, 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:

     1. I have reviewed this quarterly report on Form 10-QSB of Empyrean Communication, Inc. for the quarter ended June 30, 2003;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state 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;

     3. 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.

     4. The registrant's other certifying offering officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

     6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: August 14, 2003

/s/ Robert L. Lee
Robert L. Lee
President

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Empyrean Communications, Inc.., a Nevada corporation (the "Company"), on Form 10-QSB for the quarter ending June 30, 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: August 14, 2003