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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 ___June 30, 2004______________________________ |
| |
| [ ] | 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)
___NEVADA_____________________________________
(State or other jurisdiction of incorporation or organization) | _________88-0413417________________________
(IRS Employer Identification No.) |
2537 South Gessner, Suite 114,
Houston, TX 77063
(address of principal executive offices)
Issuers telephone number: (713) 260 7236
(Registrant's telephone number, including area code)
_________________________________________________________________________________
(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 June 30, 2004 there were 31,765,951* shares of common stock issued and outstanding
Note: * Does not include 1,150,000 shares "on hold" and awaiting return from third party
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, 2004:
EMPYREAN COMMUNICATIONS, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
June 30, 2004
ASSETS
Current Assets
Cash $ 3,543
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Current Liabilities
Accounts Payable $ 14,607
Notes payable to shareholders 61,049
- ------------
Total Current Liabilities 75,656
- ------------
Commitments and Contingencies
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par, 10,000,000 shares
authorized, 10,000,000 shares issued and outstanding 10,000
Common stock, $.001 par, 50,000,000 shares
authorized, 31,765,951 shares issued and outstanding 31,766
Paid in capital 5,445,250
Deficit accumulated during the development stage (5,559,129)
- ------------
Total Stockholders' Deficit ( 72,113)
- ------------
Total Liabilities & Stockholders' Deficit $ 3,543
============
EMPYREAN COMMUNICATIONS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF EXPENSES
Three and Six Months Ended June 30, 2004 and 2003 and the Period from
October 30, 2000 (Inception) Through June 30, 2004
Inception
Three Months Six Months Through
Ended June 30, Ended June 30, June 30,
2004 2003 2004 2003 2004
- ----------- ----------- ----------- ----------- ----------
General & Administrative $ 104,500 $ 14,328 $ 200,860 $ 20,218 $ 3,055,985
Impairment of investment 2,600,000
Gain on forgiveness of debt - - - - ( 96,856)
- ----------- ----------- ----------- ----------- ----------
NET LOSS $(104,500 ) $(14,328 ) $ (200,860 ) $ (20,218 ) $(5,559,129 )
=========== =========== =========== =========== ===========
Basic and diluted loss)
per share $ (.00) $ (.00 ) $ (.01) $ (.00)
Weighted average common
shares outstanding 23,304,413 8,137,380 20,914,303 6,448,918
EMPYREAN COMMUNICATIONS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2004 and 2003 and the Period from
October 30, 2000 (Inception) Through June 30, 2004
Inception
Through
June 30,
2004 2003 2004
- --------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (200,860) $ (20,218 ) $(5,559,129 )
Adjustments to reconcile net loss
to cash used in operating activities:
Stock issued for services 222,500 156,000 1,908,425
Stock issued for settlement - - 38,000
Fair value of stock issued in excess
of debt - - 500
Imputed interest 2,501 - 6,797
Impairment of investment - - 2,600,000
Gain on forgiveness of debt - - ( 96,856 )
Changes in:
Accounts payable ( 33,742 ) 4,729 1,026,458
Prepaid expenses - (148,043 ) -
- --------- ---------- -----------
NET CASH USED IN OPERATING ACTIVITIES ( 9,601 ) ( 7,532 ) ( 75,805 )
- --------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable to
shareholders 12,865 7,500 83,717
Payments on notes payable to
shareholders ( 404 ) ( 10,762 ) (15,169 )
Stock issued for cash - 10,800 10,800
- --------- ---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,461 7,538 79,348
- --------- ---------- -----------
NET CHANGE (INCREASE/DECREASE)IN CASH 2,860 6 3,543
Cash balance, beginning 683 - -
- --------- ---------- -----------
Cash balance, ending $ 3,543 $ 6 $ 3,543
========= ========== ===========
NON-CASH DISCLOSURES:
Forgiveness of debt by a related party $ - $ - $ 29,578
Stock issued for accounts payable - - 885,417
Stock issued for notes payable - - 7,500
EMPYREAN COMMUNICATIONS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Empyrean Communications, Inc. ("Empyrean") have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in Empyrean's latest annual report filed with the SEC on Form 10KSB. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure contained in the audited financial statements for fiscal year 2003, as reported in the 10KSB, have been omitted.
NOTE 2 - Equity
In February 2004, Empyrean issued 5,500,000 shares of common stock for services valued at $112,500. 5,000,000 of the shares with value of $100,000 were issued to two Empyrean officers.
In June 2004, Empyrean issued 10,000,000 shares to an Empyrean officer in exchange for services valued at $100,000.
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 main business focus is to pursue all available avenues in order to obtain the funding required for its wholly owned subsidiary, Basalt Fiber Company, to commence the manufacture and sales of continuous basalt fiber and related products.
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.
Principal Product
Liquidity
During the next 12 months, the company will need significant working capital to fund its business development efforts and to complete the acquisition of Basalt Specialty Products, Inc. The Company continues to actively pursue financing from all available sources both in the US and overseas. To serve our shareholders and other interested parties more efficiently, a company website, www.epyr.com was launched in mid-July, 2004.
Item 3. Controls and Procedures
As of June 30, 2004, the Company carried out an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined by Rule 13a-14(c) under the Securities Exchange Act of 1934) under the supervision and with the participation of the Company's chief executive officer and chief financial officer. Based on and as of the date of such evaluation, the aforementioned officers have concluded that the Company's disclosure controls and procedures were effective.
The Company also maintains a system of internal accounting controls that is designed to provide assurance that assets are safeguarded and that transactions are executed in accordance with management's authorization and properly recorded. This system is continually reviewed and is augmented by written policies and procedures, the careful selection and training of qualified personnel and an internal audit program to monitor its effectiveness. During the nine-month period ended June 30, 2003, there were no significant changes to this system of internal controls or in other factors that could significantly affect those controls.
PART II - OTHER INFORMATION
Item 5. Other Information
Board Meetings:
The Board of Directors, at a Special meeting held in Houston, Texas on April 19, 2004, approved the filing of a form S-8 registration for an Employees stock option plan (ESOP) for common shares to be issued to pay for professional fees and as compensation for consultants serving the Company.
The following shares were issued:
Mr. Robert L. Lee 10,000,000 shares for consulting fees of $100,000
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
31 President Certification Included
32 Section 906 Certification Included
________________________________________________________________________
Reports on Form 8-K - None
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 13, 2004
Robert L. Lee, President and Director
/s/ Anthony Fanale Date: August 13, 2004
Anthony Fanale, Director
