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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 ___March 31, 2005______________________________ |
| |
| [ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _________________ to _________________ |
| |
| Commission file number ___0-30118____________________________________ |
EMPYREAN HOLDINGS 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)
EMPYREAN COMMUNICATIONS, INC.
2537, South Gessner, Suite 114,
Houston, TX 77063
(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, 2005, there were 68,765,951* 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 March 31, 2005
EMPYREAN HOLDINGS, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
March 31, 2005
ASSETS |
| | | | |
Current Assets |
| Cash | $ 3,139 |
| | | | ============ |
| | | | |
LIABILITIES AND STOCKHOLDERS' DEFICIT |
| | | | |
LIABILITIES |
| | | | |
Current Liabilities |
| | | Accounts payable | $ 12,503 |
| | | Notes payable to shareholders | 103,577 |
| | | | ------------ |
Total Current Liabilities | 116,080 |
| | | | ------------ |
Commitments and Contingencies | - |
| | | | |
STOCKHOLDERS' DEFICIT |
| | | | |
| Preferred stock, $.001 par, 200,000,000 shares | |
| | authorized, 10,000,000 shares issued and outstanding 10,000 | |
| Common stock, $.001 par, 1,000,000,000 shares | |
| | authorized, 68,765,951 shares issued and outstanding | 68,766 |
| Paid in capital | 5,636,241 |
| Deficit accumulated during the development stage | (5,827,948) |
| | | | ------------ |
| | Total Stockholders' Deficit | (112,941) |
| | | | ------------ |
| | | Total Liabilities & Stockholders' Deficit | $ 3,139 |
| | | | ============ |
EMPYREAN HOLDINGS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF EXPENSES
Three Months Ended March 31, 2005 and 2004 and the Period from
October 30, 2000 (Inception) Through March 31, 2005
| | | | | Inception |
| | | | | Through |
| | | | | March 31, |
| 2005 | | 2004 | | 2005 |
| --------- | | ----------- | | ----------- |
General and administrative | $ 119,779 | | $ 86,369 | | $ 3,317,912 |
Interest expense | 1,522 | | - | | 6,892 |
Impairment of investment | - | | - | | 2,600,000 |
Gain on forgiveness of debt | - | | - | | (96,856 ) |
| --------- | | ----------- | | ----------- |
Net loss | $(121,301 ) | | $ (86,369 ) | | $(5,827,948 ) |
| ========= | | =========== | | =========== |
Basic and diluted net loss per | | | | | |
common share | $ (.00 ) | | $ (.00 ) | | |
Weighted average common | | | | | |
shares outstanding | 50,321,507 | | 18,524,193 | | |
|
EMPYREAN HOLDINGS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2005 and 2004 and the Period from
October 30, 2000 (Inception) Through March 31, 2005
| | | | | | | Inception |
| | | | | | | Through |
| | | | | | | March 31, |
| | | 2005 | | 2004 | | 2005 |
| | | --------- | | ---------- | | ----------- |
CASH FLOWS FROM OPERATING ACTIVITIES |
| Net loss | $(121,301) | | $(86,369 ) | | $(5,827,948) |
| Adjustments to reconcile net loss | | | | | |
| | to cash used in operating activities: | | | | | |
| Stock issued for services | 100,000 | | 112,500 | | 2,132,025 |
| Stock issued for settlement | - | | - | | 38,000 |
| Fair value of stock issued in excess | | | | | |
| | of debt | - | | - | | 500 |
| Imputed interest | 1,522 | | 1,194 | | 11,187 |
| Impairment of investment | - | | - | | 2,600,000 |
| Gain on forgiveness of debt | - | | - | | (96,856 ) |
| Changes in: | | | | | |
| | Accounts payable | 2,086 | | (32,753) | | 1,024,354 |
| | Prepaid Expenses | - | | - | | - |
| | | --------- | | ---------- | | ----------- |
NET CASH USED IN OPERATING ACTIVITIES | (17,693 ) | | (5,428) | | (118,738 ) |
| | | --------- | | ---------- | | ----------- |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
| Proceeds from notes payable to | | | | | |
| | shareholders | 18,526 | | 7,270 | | 126,846 |
| Payments on notes payable to | | | | | |
| | shareholders | (600 ) | | (404 ) | | (15,769 ) |
| Stock issued for cash | - | | - | | 10,800 |
| | | --------- | | ---------- | | ----------- |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 17,926 | | 6,866 | | 121,877 |
| | | --------- | | ---------- | | ----------- |
NET CHANGE IN CASH | 233 | | 1,438 | | 3,139 |
| Cash balance, beginning | 2,906 | | 683 | | - |
| | | --------- | | ---------- | | ----------- |
Cash balance, ending | $ 3,139 | | $ 2,121 | | $ 3,139 |
| | | ========= | | ========== | | =========== |
| | | | | | | |
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 HOLDINGS, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Empyrean Holdings, 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 2004, as reported in the 10KSB, have been omitted.
NOTE 2 - EQUITY
In January 2005, Empyrean increased its authorized common shares to 1,000,000,000 shares and increased its authorized preferred shares to 200,000,000 shares.
In March 2005, Empyrean issued 20,000,000 shares to an Empyrean officer in exchange for services valued at $100,000.
NOTE 3 - SUBSEQUENT EVENTS
On April 8, 2005, Empyrean exchanged 200,000,000 shares of Empyrean common stock for 100% of the ownership interest in Tradewinds International Corp., ("Tradewinds") a Nevada corporation located in Orlando, Florida. 51% has been transferred to Empyrean and the remaining 49% is being held in escrow until the seller transfers $1,000,000 of real estate into Tradewinds. At that time, Empyrean will issue 75,000,000 shares of preferred stock to the seller and the remaining 49% will be transferred to Empyrean. The transaction will be accounted for as a reverse merger.
The interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in U.S. dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2004 and notes thereto included in the Company's 10-KSB annual report. The Company follows the same accounting policies in the preparation of interim reports.
Results of operations for the interim periods are not indicative of annual results.
These conditions raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might arise from this uncertainty.
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, until the recent acquisition of Tradewinds International Corp., 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 its business plans.
With the acquisition of Tadewinds International Corp., a Nevada corporation located in Orlando, FL, on April 12, 2005 the company has, however, taken a significant step towards becoming revenue producing. The company acquired 51 % of the issued and outstanding shares of Tradewinds from its owners, Hesperia Advisors Limited, through the issue of 200,000,000 restricted common shares. Tradewinds currently owns real estate assets of about $1.50 million and is active in the real estate investment and consulting business in several states. Tradewinds is now a subsidiary of the company, and will contribute significantly towards increasing shareholder value in the near future.
Upon completion of the terms set forth in the agreement, the owners of Tradewinds will acquire additional shares of Empyrean Holdings, Inc. and transfer all remaining issued and outstanding shares of Tradewinds to the company, thereby making Tradewinds a wholly owned subsidiary.
With this acquisition in place, the company has recently implemented its Corporate Development Plan. Management has embarked on forming strong strategic alliances, targeting hard assets with high-anticipated income and employing strict management guidelines to set a strong foundation for the future growth of the company
Through the implementation of strategic relationships with national construction and property management companies, the company is diversifying its scope of business while improving the efficiency of operations. In order to keep pace with the rapid growth expected on a national level, offices in Florida and California are being established with regional analysts in both locations.
Liquidity
During the next 12 months, the company will need significant working capital to fund its business development efforts and to be prepared to make other acquisitions as and when suitable opportunities arise. Having determined that up to $40 million will be required for its expansion and real property investment activities, the company has revamped its strategies for raising funds and the use of private placements is also being considered.
Following the name change to Empyrean Holdings Inc. in January of this year, the website launched in July 2004 was revised to reflect the company's new ticker symbol- www.epyh.com.
Item 3. Controls and Procedures
As of September 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 three-month period ended March 31, 2005, 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 4: Submission of matters to a Vote of Security Holders
As reported in the 10KSB for the year ending December 31, 2004 a special shareholders meeting was held on January 5, 2005, and all the corporate matters, summarized below, were approved by adequate majorities and adopted.
1. Name change to Empyrean Holdings
2. Increase of authorized common shares to 1,000,000,000 (par value 0.001) and Preferred shares to 200,000,000 (par value 0.001)
3. Malone & Bailey to continue as independent auditors
4. Grant Board of Directors discretionary powers to convert to be treated as a Business Development Company under Section 54 of the Company Act of 1940 and
5. Election of Robert L. Lee to the Board of Directors
Item 5. Other Information
Board Meetings:
The Board of Directors, at a special meeting held in Houston, Texas on February 3, 2005, approved the filing of a form S-8 registration of an Employees stock option plan for 150,000,000 shares. This new plan, which is required to deal with the increase in consulting work anticipated, was filed on March 10, 2005.
The Board of Directors, at a Special meeting held in Houston, Texas on March 21, 2005 approved the issue of 20,000,000 shares from the Employees stock option plan to Robert L. Lee for the extensive consulting work provided. The Board also authorized Mr. Lee, in his capacity as President and CEO, to proceed with the acquisition of Tradewinds International Corp. for the best terms obtainable.
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 | Certification | Included |
| 32 | Certification | Included |
________________________________________________________________________
Reports on Form 8-K.
A Form 8-K was filed February 1, 2005 reporting the results of the Shareholders Meeting held January 5, 2005, as detailed above.
A Form 8-K filing was done on April 12, 2005 reporting that the company had completed the acquisition of Tradewinds International Corp., a Nevada corporation located in Orlando, FL. through a stock swap. In consideration of fifty-one percent (51%) of the issued and outstanding shares of Tradewinds acquired the company issued two hundred million (200,000,000) common shares. Tradewinds became a subsidiary of the company on the completion of this stock swap. Upon completion of the terms set forth in the Stock purchase agreement, the owners of Tradewinds will purchase additional shares of Empyrean and transfer all remaining issued and outstanding shares of Tradewinds to Empyrean, thereby becoming a wholly owned subsidiary.
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 HOLDINGS, INC.
/s/ Robert L. Lee Date May 4, 2005
Robert L. Lee, President and Director
