UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

AMENDED FORM 10-QSB

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | QUARTERLY REPORT UNDER    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended __June 30, 2006_
[  ] 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 smallbusiness 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)

 

EMPYREANCOMMUNICATIONS, INC.

10700 Richmond Avenue,Suite 100,

Houston, TX 77042(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)andhas been subject to such filing  requirements for the past 90 days (X) Yes ( ) No 
Indicate by check mark whether theregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes (X) No (  )

 

As of June 30, 2006, there were7,835,528* shares of common stock issued and outstanding

Note: * Does not include 22,501shares "on hold" and awaiting return from third party

 

Transitional Small BusinessDisclosure Format (Check one): Yes [ ] No [ X ] 

 

 

 

 

 

EMPYREAN HOLDINGS,INC.

(A Development StageCompany)

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS 

(unaudited)

 

 

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements ofEmpyrean Holdings, Inc.  have been prepared in accordance withaccounting principles generally accepted in the United States of America and therules of the Securities and Exchange Commission, and should be read inconjunction with Empyrean's audited 2005 year end financial statements. 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 period have been reflected herein. Theresults of operations for interim periods are, however, not necessarilyindicative of the results to be expected for the full year.

Use of Estimates. In preparing financial statements,management makes estimates and assumptions that affect the reported amounts ofassets and liabilities in the balance sheet and revenue and expenses in thestatements of income and expenses. Actual results could differ from thoseestimates.

 

NOTE 2 - SHARE-BASED COMPENSATION

On January 1, 2006, Empyrean adopted SFAS No. 123 (R),"Share-Based Payment." SFAS 123(R) replaced SFAS No. 123 andsupersedes APB Opinion No. 25. SFAS 123(R) requires all share-based payments toemployees, including grants of employee stock options, to be recognized in thefinancial statements based on their fair values. The pro forma disclosurespreviously permitted under SFAS 123 are no longer an alternative to financialstatement recognition. Empyrean adopted SFAS 123(R) using the modifiedprospective method which requires the application of the accounting standard asof January 1, 2006. The consolidated financial statements as of and for thequarter ended June 30, 2006 reflect the impact of adopting SFAS 123(R). Inaccordance with the modified prospective method, the consolidated financialstatements for prior periods have not been restated to reflect, and do notinclude, the impact of SFAS 123(R). Since Empyrean has not granted optionsduring the quarter ended June 30, 2006 or during any period prior to January 1,2006, the adoption of SFAS 123(R) had no impact.

NOTE 3 - EQUITY

On June 2, 2006 10,000,000 (200,000 on a split adjustedbasis) restricted shares were issued to William Melchiori as a signing bonus forhim to serve as Director and Chief Financial Officer of Empyrean Holdings, Inc.He will also serve as President and Director of Empyrean's wholly ownedsubsidiary, Empyrean Financial Services, Inc. and also as a Director of Empyrean's recently formed wholly owned subsidiary, Empyrean Properties, Inc.

On June 30, 2006, four townhomes valued at $772,000 werecontributed and $226,334 in debt was cancelled by Hesperia Advisors Limited inexchange for 1,000,000 convertible preferred shares.  These shares areconvertible in exchange for 1,000,000 convertible preferred shares.  Theseshares are convertible any time by the holder for 4,000,000 post-split (see Note4) common shares.

NOTE 4 REVERSE STOCK SPLIT

A 1:50 (one to fifty) reverse split of Empyrean's commonshares was implemented  on June 26, 2006, resulting in 7,858,039 outstandingcommon shares.  All share and per share information has been retroactivelyrestated in the consolidated financial statements to reflect the reverse split. 

Also, Empyrean's symbol was changed to EMPY 

 

 
** 

Item 2. Management's Plan of Operation.**
Our principal activities are presently concentratedon implementing our newly formulated corporate development plan. Our initial two phases which entailed the finalization of theAddendum to the Stock purchase agreement of April 8, 2005 with Hesperia AdvisorsLimited were completed in a timely manner and the details are provided below:

 

The Addendum to the Stock purchase agreement of April 8, 2005was finalized with Hesperia Advisors Limited on June 30, 2006. 

The terms of the Addendum are twofold:
-  To make amends for the loss of the Key West condominium in  December last year an unencumbered town home with an appraised value of  $211,000 will be transferred to Empyrean's wholly owned subsidiary, Empyrean  Properties, Inc. Furthermore, Hesperia will fully forgive the Note of $226,334  that remains outstanding in Empyrean's books, and  As provided in Phase II of the Stock purchase agreement of  April 8, 2005 Hesperia will also transfer another three unencumbered town  homes with a total appraised value of $561,000 to Empyrean Properties, Inc and  accept 1,000,000 of Empyrean's convertible preferred shares as full payment.
All these four town homes were deeded to our new subsidiary Empyrean Properties,Inc before the close of business on June 30, 2006 and the 1,000,000 preferredshares have been issued to Hesperia.

 

The master plan for moving the business ahead for the longterm is under review and work on obtaining financing through an SB2 registrationfor $5 million initially has commenced. After a detailed review, a firmdecision has been taken to avoid using PIPES financing as besides beingexpensive it will severely dilute the company's shares. Share dilution in turnwill have a negative effect on the long term interests of present and futureshareholders. This is contrary to Empyrean's mission statement of expeditiouslydeveloping into an exemplary holding company that will provide shareholders withcompetitive returns for their investments. As the company has yet to have atrack record of revenue-producing operations however, there is no operatinghistory upon which to base any assumption that the company will be able toachieve its business objectives.

With the completion of the first two Phases of the company'scorporate development plan, our total stockholders' equity has been enhanced by nearly$500,000. Discussions have commenced with our affiliate, UnitedConstruction Group (UCG) for our subsidiary, Empyrean Properties, Inc,to participate in several development projects. Being an experienced nationaldevelopment and construction company UCG will also act as our realproperty consultant and provide expert advice for any other real estate projectsor businesses that we may consider undertaking in thefuture. 

Diversification into the financial services business has beenimplemented with the activation of Empyrean Financial Services, Inc. and theacquisition of viable businesses in other sectors, should suitable ventures beidentified, remains an option that is being given due attention.

 
**Liquidity**
During the next 12 months, we will need significantworking capital to fund our current plans to participate in real estatedevelopment projects with UCG and to make other acquisitions as appropriate. 

It is our intention to start the financing process with aninitial SB2 registration to raise $5 million and work has just commenced. Theuse of Investment bankers and qualified underwriters for the offering is alsounder review.
**Item 3. Controls and Procedures**
As of June 30, 2006, we carriedout an evaluation of the effectiveness of our disclosure controls and procedures(as defined by Rule 13a-14(c) under the Securities Exchange Act of 1934) underthe supervision and with the participation of our chief executive officer andchief financial officer.  Based on and as of the date of such evaluation, theaforementioned officers have concluded that our disclosure controls andprocedures are not effective for timely gathering, analyzing and disclosing theinformation we are required to disclose in our reports filed under theSecurities Exchange Act of 1934, as amended, because of adjustments required byour independent auditors, primarily in the area of stockholders equitytransactions. 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 June 30, 2006, that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

PART II -- OTHER INFORMATION

 
**Item 5. Other Information - 

Capitalization Structure.

1. The Board of Directors at a special meeting held in Houston, TX on June  16, 2006 unanimously approved that it is in the best interests of the company  in order to assist in financing and corporate governance to implement a 1 to  50 (one new share for fifty old shares) reverse split of the company's common  stock as soon as practicable.

2. It is recorded that the reverse split took effect at the close of  business on June 26, 2006 and from the next day Empyrean's trading symbol was  changed to EMPY. After the reverse split the company's issued and outstanding  new common shares stood at 7,835,538 excluding the 22,501 of new shares  awaiting return from a third party.
** 

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 filing was done on June 1, 2006 to report the appointment of    William Melchiori as Chief Financial Officer and a member of the Board of    Directors. He will also serve as President of the company's wholly owned    subsidiary, Empyrean Financial Services, Inc. and will be active in    obtaining Clients for this subsidiary.

On July 11, 2006 another Form 8-K filing was done to report the    finalization of the Addendum to the Stock purchase agreement of April 8,    2005 between the company and Hesperia Advisors Limited. The terms of the    Addendum allowed for Hesperia to make amends for the loss of the Key West    condo in December 2005 by transferring an unencumbered town home with an    appraised value $211,000 to the company's wholly owned subsidiary, Empyrean    Properties, Inc. 

Hesperia also fully forgave Empyrean the Note of $226,334 outstanding in    its books and for the payment of 1,000,000 convertible preferred shares,    transferred another three town homes with clear titles and a total appraised    value of $561,000 to Empyrean Properties, Inc. 

 

 

 

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: August 14, 2006

 

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