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 __March 31, 2007_                                 |
| [  ]                                                                        | TRANSITION REPORT UNDER SECTION 13 OR 15(d)    OF THE EXCHANGE ACT                   |
| For the transition period from _________________ to            _________________ |
|                                                                             |
| Commission file number ___0-30118____                                            |

 

EMPYREANHOLDINGS INC.

(exact nameof small business issuer as specified in its charter)

 

| ___NEVADA_____________________________________    (State or other jurisdiction of incorporation or organization)
_88-0413417________________    (IRS Employer Identification No.)
 

11200 Westheimer Rd.,Suite 900

Houston, TX 77042

(address of principalexecutive offices)

 

Issuers telephonenumber: (713) 243 8731

(Registrant'stelephone number, including area code)

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

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 

Indicate by check mark whether the registrant is a shell company (as definedin Rule 12b-2 of the Exchange Act). Yes (__) No (X)
As of March 31, 2007, there were 9,858,066* shares of common stock issued andoutstanding

Note: * Includes 22,501 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 unaudited financial statements for the period ended March31, 2007.

 

 

EMPYREAN HOLDINGS,INC. 

(A Development StageCompany)

CONSOLIDATED BALANCESHEETS

As of March 31, 2007and December 31, 2006

(Unaudited)

 

See accompanyingsummary of accounting policies

and notes to financialstatements.

 

 

EMPYREAN HOLDINGS,INC.

(A Development StageCompany)

CONSOLIDATEDSTATEMENTS OF INCOME & EXPENSES

Three Months EndedMarch 31, 2007 and 2006 and the

Period from December30, 2004 (Inception) through March 31, 2007

(Unaudited)
 
Three Months Ended March 31,
Inception Through March 31, 
2007
2006
2007INCOME   Rental    income 
$                   -
 
$             6,714 
$                6,714
Total income
-
6,714
6,714    EXPENSES   General &    administrative
20,494
15,814
547,945Depreciation    expense
-
-
21,232Interest    expense
261
7,372
78,687Cost of    recapitalization
-
-
115,479Loss on sale    of property
-
-
43,975Interest    income
(1,973)
-
(1,973)Write down of    property to fair value
-
-
11,500Loss on    abandonment of investment property
-
 
- 
154,354    
Total expenses
18,782 
23,186 
971,199    
Net loss
$        (18,782) 
$      (16,472)
 
$              (964,485)    Basic and    diluted net loss per   common share
$               (0.00) 
 
$             (0.00)     Weighted    average common shares outstanding
9,858,066
7,474,899     

 

 

 

 

 

 

See accompanyingsummary of accounting policies

and notes to financialstatements.

 

 

EMPYREAN HOLDINGS,INC.

(A Development StageCompany)

CONSOLIDATEDSTATEMENTS OF CASH FLOWS

Three Months EndedMarch 31, 2007 and 2006 and the

Period from December30, 2004 (Inception) through March 31, 2007

(Unaudited)
 
 

 

Three Months Ended March 31,
Inception Through March 31,  
2007
2006
2007    CASH FLOWS    FROM OPERATING ACTIVITIES   Net loss
$       (18,782)
$      (16,472)
$     (964,485)    Adjustments to reconcile net loss to   
cash used in operating activities:   
Stock issued for services
-
5,000
243,000
Stock based compensation
-
-
120,000
Cost of recapitalization
-
-
115,479
Loss on sale of property
-
-
43,977
Write down of property to fair value
-
-
11,500
Loss on abandoned investment property 
-
-
154,354
Depreciation
-
-
21,232    Changes in:
  
Note receivable 
(1,973) 
-
(1,973)
Deposits
-
-
(525)
Accounts payable and notes
(14,628) 
(14,781) 
110,106    NET CASH USED    IN OPERATING ACTIVITIES
(35,383) 
(26,253) 
(147,335)    CASH FLOWS    FROM INVESTING ACTIVITIES   
Proceeds from sale of real estate
-
-
330,023
Issuance of note receivable
-
 
- 
(100,000)    NET CASH    PROVIDED BY INVESTING ACTIVITIES
-
 
-
 
230,023    CASH FLOWS    FROM FINANCING ACTIVITIES   
Payments on related party debt
-
(3,500)
(182,585)
Proceeds from related party debt
2,500
33,500 
99,919
Proceeds from issuance of common stock 
-
 
-
 
2,538    NET CASH    PROVIDED BY (USED IN) FINANCING ACTIVITIES
2,500
 
30,000 
(80,128)    NET CHANGE IN    CASH
(32,883)
3,747
2,560
Cash balance, beginning of period
35,443 
140 
-
Cash balance, end of period
$               2,560
 
$             3,887
 
 $             2,560    SUPPLEMENTAL    DISCLOSURES:   
Cash paid for interest
$                 -
$               -
$       10,914
Cash paid for income taxes
$                 -
$               -
$               -    NON-CASH    INVESTING AND FINANCING ACTIVITIES:   
Shares issued to settle related party debt
$                 -
$               -
$       72,759
Shares issued for property
$                 -
$               -
$      772,000
Forgiveness of related party debt
$                 -
$               -
$      226,334
 

 

 

See accompanyingsummary of accounting policies and notes 

to financialstatement.

 

EMPYREAN HOLDINGS,INC.

(A Development StageCompany)

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS 

(unaudited)

 

 

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Empyrean Holdings,Inc. have been prepared in accordance with accounting principles generallyaccepted in the United States of America and the rules of the Securities andExchange Commission, and should be read in conjunction with Empyrean's audited2006 year end financial statements. In the opinion of management, alladjustments, consisting of normal recurring adjustments, necessary for a fairpresentation of financial position and the results of operations for the interimperiod have been reflected herein. The results of operations for interim periodsare, however, not necessarily indicative of the results to be expected for thefull year.

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 - NOTE RECEIVABLE

The 8 % per annum interest bearing loan of $100,000 made to IndependentManagement Resources, LLC, at the end of December 2006 has yet to be repaid. Theextension of the repayment date of this loan for another 120 days commencing May1, 2007, as requested by the borrower, is under consideration.

 

NOTE 3 - NOTES PAYABLE - RELATED PARTY

Advances made by Tom Bojadzijev before his termination as a real estateconsultant for the company continue to accrue interest at 8% per annum. Theamount of this Note is $16,536 inclusive of accrued interest through March 31,2007. 

On March 30, 2007, an advance was made by an officer in the amount of $2,500.The advance is due on demand with no stated interest rate and is unsecured.

 
** 

Item 2. Management's Plan of Operation.**
The company continues to pursue its long-term corporatedevelopment plan to become a diversified holding company providing competitivereturns to shareholders and investors. Brief updates on progress made by theCompany's subsidiaries follow.

Empyrean Properties, Inc. ("Empyrean Properties") is anactive real estate company, and is pursuing the sale of two town homes it ownsin Kewaskum, WI (the "Properties"). As of March 31, 2007, the carrying value ofthe Properties is $386,500. There are no monetary encumbrances on theProperties. Funds obtained from these sales, if consummated, will be utilizedfor working capital and to fund other corporate activities. Negotiations are inprogress to purchase additional properties through the use of shares of theCompany as consideration. There is no guarantee that any of these transactionswill be completed.

Empyrean Staffing, Inc. ("Empyrean Staffing") is movingforward on the development of its Professional Employer Organization (PEO)business. Current plans call for a third party to receive, in exchange forcontributing assets and an ongoing outsourcing business to Empyrean Staffing,70% of the common stock of Empyrean Staffing. Leading consultants and advisorsin the outsourcing industry are being used to assist the Company to successfullygrow this business.

Empyrean Financial Services, Inc. ("EFS") hopes to finalizeagreements to provide financial accounting and consulting services to severalclients. Due to some recent business restructuring by these clients, initialrevenues expected from fees is estimated at $120,000 per annum assuming that allthese clients sign up. However, the agreements have not been finalized and evenif EFS is successful in entering into such agreements there is no guarantee itwill realize any revenues resulting from the agreements.

The Company has also formed another subsidiary, EmpyreanConstruction, Inc. ("Empyrean Construction"). Empyrean Construction is currentlyin the process of negotiations whereby it will receive, in consideration for amajority interest in Empyrean Construction, contributions of services, goodwilland existing development projects from a third party.
**Liquidity**
During the next 12 months, significant working capital willbe needed to fund businesses to be undertaken by our two most recently formedsubsidiaries, Empyrean Staffing. and Empyrean Construction.

A final decision has yet to be made on the source offinancing for the Company or the amounts required to execute its business plan.It is expected that either equity or debt financing, or a combination of both,will be needed to raise sufficient capital to advance the Company's business.There can be no guarantee that any such financing will be located or iffinancing is obtained that it will be available on terms that are beneficial tothe Company. 

Without locating additional financing, on favorable terms,the Company may be forced to scale back or halt the development of the variousbusinesses of its subsidiaries. In such an event it is unlikely the Company willcontinue to operate as a going concern and its stock may become worthless.Holders of Company stock may be faced with the inability to liquidate part orall of their investment on terms which are financially profitable. Because aninvestment in Company stock is highly speculative, investors in Company stockmust be prepared to lose some or all of their investment in the stock.
** 

Item 3. Controls and Procedures**
As of March 31, 2007, we carried out an evaluation of theeffectiveness of our disclosure controls and procedures (as defined by Rule13a-14(c) under the Securities Exchange Act of 1934) under the supervision andwith the participation of our chief executive officer and chief financialofficer. Based on and as of the date of such evaluation, the aforementionedofficers have concluded that our disclosure controls and procedures areeffective for timely gathering, analyzing and disclosing the information we arerequired to disclose in our reports filed under the Securities Exchange Act of1934, as amended. There were no changes in our internal control over financialreporting (as defined in Rules 13a-15(F) and 15d-15(f) under the 1934 Act)during the period ended March 31, 2007, that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

PART II -- OTHER INFORMATION
** 

Item 6. Exhibits**
Exhibit No.                    Document                                        Location

3(i)                                Articles of Incorporation                  Previously Filed

3(ii)                                Bylaws                                           Previously filed 

31.1                               Section 302 Certification                 Included

31.2                               Section 302 Certification                 Included

32.1                               Section 906 Certification                 Included

32.2                               Section 906 Certification                 Included

_______________________________________________________________________

 

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 

Robert L. Lee, 

President and Director                                                        Date: May 10, 2007

 

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