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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     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| OMB APPROVALOMB Number: 3235-0070 Expires: March 31, 2006Estimated average burden    hours per response: 192.00**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, 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, 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.)
 

10700 Richmond Avenue,Suite 100

Houston, TX 77042

(address of principalexecutive offices)

 

Issuers telephonenumber: (713) 260 7236

(Registrant'stelephone number, including area code)

 

EMPYREANCOMMUNICATIONS, INC.

2537, South Gessner,Suite 114,

Houston, TX 77063(Former name, former address and former fiscal year, if changed since lastreport)

 

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, 2005, there were 298,765,951* shares of common stock issuedand outstanding

Note: * Does not include 1,150,000 shares "on hold" and awaiting return fromthird 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 June30, 2005

 

 

 

 

EMPYREAN HOLDINGS,INC. 

(formerly TRADEWINDSINTERNATIONAL CORP.)

(A Development StageCompany)

BALANCE SHEET

June 30, 2005

 

See accompanyingsummary of accounting policies

and notes to financialstatements.

 

EMPYREAN HOLDINGS,INC.

(formerly TRADEWINDSINTERNATIONAL CORP.)

(A Development StageCompany)

STATEMENTS OF EXPENSES

Three and Six MonthsEnded June 30, 2005 and the Period from December

30, 2004 (Inception)Through June 30, 2005

 

 

See accompanyingsummary of accounting policies

and notes to financialstatements.

 

EMPYREAN HOLDING, INC.

(formerly TRADEWINDSINTERNATIONAL CORP.)

(A Development StageCompany)

STATEMENTS OF CASHFLOWS

Six Months Ended June30, 2005 and the Period from

December 30, 2004(Inception) Through June 30, 2005

 

 

 

 

 

See accompanyingsummary of accounting policies

and notes to financialstatements.

 

EMPYREAN HOLDING, INC.

(formerly TRADEWINDSINTERNATIONAL CORP.)

(A Development StageCompany)

NOTES TO FINANCIALSTATEMENTS

(unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Empyrean Holdings,Inc. ("Empyrean") (formerly Tradewinds International Corp. ("Tradewinds")) havebeen prepared in accordance with accounting principles generally accepted in theUnited States of America and the rules of the Securities and Exchange Commission("SEC"), and should be read in conjunction with Tradewinds' audited 2004 annualfinancial statements and notes thereto contained in Empyrean's Form 8-K/A. Inthe opinion of management, all adjustments, consisting of normal recurringadjustments, necessary for a fair presentation of financial position and theresults of operations for the interim periods presented have been reflectedherein. The results of operations for interim periods are not necessarilyindicative of the results to be expected for the full year. Notes to thefinancial statements, which would substantially duplicate the disclosurecontained in Tradewinds' audited 2004 annual financial statements, as reportedin Empyrean's Form 8-K/A, have been omitted.

Use of Estimates. In preparing financial statements, management makesestimates and assumptions that affect the reported amounts of assets andliabilities in the balance sheet and revenue and expenses in the statements ofincome and expenses. Actual results could differ from those estimates.

NOTE 2 - ACQUISITION OF REAL ESTATE INVESTMENT PROPERTY

On March 7, 2005, Tradewinds acquired a condominium property located in KeyWest, Florida for $779,085.

Tradewinds financed the purchase of the Key West property with a series ofborrowings as follows:
A promissory note dated March 7, 2005, for $570,000 from Huck Finn, LLC,  the seller of the Key West property. The note is an interest only note that  bears interest at 6.5% per annum. Interest only in the amount of $3,088 shall  be payable in 35 monthly installments beginning April 2005. The 36
th
  and final installment of the principal balance and all remaining accrued  interest is due and payable on March 7, 2008. The note is secured by a first  lien on the Key West property.
A promissory note dated March 7, 2005, for $207,663 from Thomas Bojadzijev,  who at the time was Tradewinds' president. The subordinated note is an  interest only note that bears interest at 6.5% per annum. Payment is due on  March 6, 2008 and may be prepaid at any time. The subordinated note is secured  by a second lien on the Key West property.
An additional borrowing under of $1,422.

 

NOTE 3 - REVERSE MERGER TRANSACTION

On April 11, 2005, Tradewinds' parent, Hesperia Advisors Limited executed astock purchase agreement with Empyrean. Pursuant to the agreement, Empyreanexchanged 200,000,000 shares of common stock to Hesperia for 100% of theownership interest in Tradewinds. At closing, 51% of Tradewinds common stock wastransferred to Empyrean with the remaining 49% being transferred to escrow untilsuch time as Hesperia transfers additional real estate property with a value ofat least $1,000,000 into Tradewinds. At such time as Hesperia transfers theadditional real estate into Tradewinds, Empyrean will issue Hesperia 75,000,000shares of Empyrean's convertible preferred stock and the remaining 49% ofTradewinds' common stock will be released from escrow to Empyrean. Each share ofthe convertible preferred stock will be convertible into four shares of Empyreancommon stock. As of June 30, 2005, the additional real estate had not beentransferred to Tradewinds.

As a result of the share issuance, the Tradewinds shareholders end upcontrolling approximately 74% of Empyrean's issued and outstanding sharesresulting in the transaction being accounted for as reverse merger withTradewinds being deemed the accounting acquirer. Since this transaction involvedthe merger of a private company (i.e., Tradewinds) into a public shell (i.e.,Empyrean), it is considered to be a capital transaction rather than a businesscombination. This transaction is being accounted for as a reverse merger, exceptthat no goodwill or other intangible assets are being recorded. For financialaccounting and reporting purposes, the historical financial statements ofEmpyrean prior to the merger have been restated to be those of Tradewinds, theaccounting acquirer. 

NOTE 4 - EQUITY

In January 2005, Empyrean increased its authorized commonshares to 1,000,000,000 shares and increased its authorized preferred shares to200,000,000 shares.

In March 2005, Empyrean issued 20,000,000 shares to anEmpyrean officer in exchange for services valued at $100,000.

In April, 2005, Empyrean issued 200,000,000 shares inconnection with Tradewinds reverse merger transaction. See Note 3 for additionaldiscussion of the reverse merger transaction.

In May, 2005, Empyrean issued 30,000,000 shares to ThomasBojadzijev, who at the time was Tradewinds' president, for consulting servicesvalued at $180,000.

NOTE 5 - SUBSEQUENT EVENT

In August, 2005, the May, 2005, agreement by ThomasBojadzijev, Tradewinds' former president, to forgive the Subordinated SecuredNote - Related Party was rescinded. Consequently, Empyrean has reflected theSubordinated Secured Note - Related Party, with accrued interest thereon, on itsbalance sheet as of June 30, 2005.

The interim financial statements included herein, presented in accordancewith United States generally accepted accounting principles and stated in U.S.dollars, have been prepared by the Company, without audit, pursuant to the rulesand regulations of the Securities and Exchange Commission. Certain informationand footnote disclosures normally included in financial statements prepared inaccordance with generally accepted accounting principles have been condensed oromitted pursuant to such rules and regulations, although the Company believesthat the disclosures are adequate to make the information presented notmisleading. 

These statements reflect all adjustments, consisting of normal recurringadjustments which, in the opinion of management, are necessary for fairpresentation of the information contained therein. It is suggested that theseinterim financial statements be read in conjunction with the financialstatements of the Company for the year ended December 31, 2004 and notes theretoincluded in the Company's Form 8-K/A. The Company follows the same accountingpolicies in the preparation of interim reports. 

Results of operations for the interim periods are not indicative of annualresults. 

These conditions raise substantial doubt about the Company's ability tocontinue as a going concern. These financial statements do not include anyadjustments relating to the recoverability and classification of recorded assetamounts or amounts and classification of liabilities that might arise from thisuncertainty. 
**Item 2. Management's Plan of Operation.**
Since the company's principal activities, until the recent acquisition ofTradewinds International Corp., have been limited to organizational activities,prospect development, and acquisition of interests, it has no record ofrevenue-producing operations. There is, therefore, no operating history uponwhich to base an assumption that the company will be able to achieve itsbusiness plans. 

With the acquisition of Tradewinds International Corp., a Nevada corporation,on April 11, 2005, however, the company has taken a positive step towardsbecoming revenue producing in the near future. Tradewinds owns a 2- roomcondominium in Key West and is actively pursuing other real estate acquisitionsto enhance the company's investments. However, for the second quarter underreview, no income of any kind was realized.

Following the Tradewinds acquisition, the company commenced operating as anational real estate holding firm and continues to make good headway in itsCorporate Development Master Plan. Aided by management's extensive contacts,useful relationships and strategic alliances have been formed with severalcompanies active in the real estate business. The company's close affiliationwith an established national real estate development and construction company,United Construction Group (UCG), has provided the solid anchor for the futuregrowth and profitability of the company. Currently, the company's developmentportfolio to be featured in joint ventures with UCG totals approximately $120million in construction and development. This portfolio which consists ofseveral projects in California, Wisconsin, Missouri and Florida includeresidential, commercial and retail structures to be constructed by UCG.

To cater for its fast expending development plans the company recently formeda wholly owned subsidiary, Empyrean Properties, Inc, a Texas corporation. Theacquisition of other established companies in the real estate industry that willprovide the synergy for the long term efficiency and profitability of thecompany is also being pursued.
**Liquidity**
During the next 12 months, the company will need significant working capitalto fund its current development portfolio and to make other acquisitions as andwhen suitable opportunities arise. It has been determined that the companyrequires approximately $50 million in total, $20 million to finance its currentprojects and another $30 million to cater for future projects underconsideration. A start has therefore been made on working with severalinvestment banking advisors to raise this $50 million through real propertybacked bond offerings or other collateralized instruments.
**Item 3. Controls and Procedures**
As of June 30, 2005, the Company carried out an evaluation of theeffectiveness of the Company's disclosure controls and procedures (as defined byRule 13a-14(c) under the Securities Exchange Act of 1934) under the supervisionand with the participation of the Company's chief executive officer and chieffinancial officer. Based on and as of the date of such evaluation, theaforementioned officers have concluded that the Company's disclosure controlsand procedures were effective, except that adjustments were required by ourauditors in their review. We are reviewing our accounting department proceduresto ensure that future adjustments in these areas are not required. 

The Company also maintains a system of internal accounting controls that isdesigned to provide assurance that assets are safeguarded and that transactionsare executed in accordance with management's authorization and properlyrecorded. This system is continually reviewed and is augmented by writtenpolicies and procedures, the careful selection and training of qualifiedpersonnel and an internal audit program to monitor its effectiveness. During thethree-month period ended June 30, 2005, there were no significant changes tothis system of internal controls or in other factors that could significantlyaffect those controls. 
**PART II - OTHER INFORMATION

Item 5. Other Information**
Board Meetings:

The Board of Directors, at a special meeting held at Houston, Texas on May23, 2005, approved that the company's corporate offices be relocated to 10700,Richmond Avenue, Suite 100, Houston, TX 77042 and this move was finalized inearly July, 2005. The corporate office for the company's subsidiary, TradewindsInternational Corp was also moved to this new office at the same time.

Board meeting of subsidiary, Tradewinds International Corp.

Following the acquisition of Tradewinds International Corp. in April 2005,the corporate affairs of this subsidiary was reorganized and formalized at aspecial meeting, held in Houston, Texas on May 27, 2005. The former presidentand secretary of Tradewinds, Thomas Bojadzijev, voluntarily submitted hisresignation from the Board of Directors prior to the meeting. By unanimousconsent, Robert L. Lee was appointed Director, President and Secretary ofTradewinds with immediate effect.

 
** 

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.**- An Amended Form 8-K was filed on June 27, 2005 providing the audited  financial statements for the company's recently acquired subsidiary,  Tradewinds International Corp. The unaudited pro forma condensed financial  statements for the company were also provided at the same time.
- To comply with comments made by the SEC on the Amended Form 8-K filing of  June 27, 2005, a 2 nd  Amended Form 8-K filing was done on July 8,  2005. 
- An 8-K was filed April 13, 2005 announcing the completion of the  acquisition of Tradewinds International Corp.
** 

SIGNATURES**
In accordance with the requirements of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized. 
**EMPYREAN HOLDINGS, INC.**
 

 

***/s/ Robert L. Lee                   **   *Date*    August 22, 2005       ***

Robert L. Lee, President and Director

 

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