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

2nd Amendment to 

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, 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

(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 June 30, 2006, there were 7,835,538* shares of common stock issued andoutstanding

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

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

EXPLANATORY NOTE

As previously disclosed on our Current Report on Form 8-K filed on October 6,2006, we concluded that our previously issued financial statements as of and forthe six months ended June 30, 2006, as included in in our Quarterly Report onForm 10-QSB and Amendment No. 1 thereto as filed on August 14, 2006 and August16, 2006, respectively (the "Q2 10-QSB"), should be restated to properly accountfor certain real estate assets contributed to the company by a majorityshareholder. The misstatement had the effect of understating the Company's realestate investment property account and additional paid-in capital account by$518,334. See Note 5 to the financial statements for additional discussion ofthe restatement. This Amendment No. 2 to our Q2 10-QSB is being filed to amendand restate Items 1 and 2 of Part I. In accordance with Rule 12b-15 under theSecurities Act of 1934, each of the foregoing items has been amended orrestated, in its entirety, and no attempt has been made to modify or update anyother items or other disclosures presented except as required to reflect theeffects of the restatement.

EMPYREAN HOLDINGS,INC. 

(A Development StageCompany)

CONSOLIDATED BALANCESHEETS

As of June 30, 2006and December 31, 2005

(Unaudited)

 

EMPYREAN HOLDINGS,INC.

(A Development StageCompany)

CONSOLIDATEDSTATEMENTS OF INCOME & EXPENSES

Three and Six MonthsEnded June 30, 2006 and 2005

Period from December30, 2004 (Inception) through June 30, 2006

(Unaudited)

 
Three Months      Ended
Three Months      Ended
Six Months Ended
Six Months Ended
Inception      Through
 
June 30, 2006

(restated)
June 30, 2005
June 30, 2006

(restated)
June 30, 2005
June 30, 2006

(restated)
INCOME
  
 
 
 
 
Rental income from condo
 

$-
$ -
$ 6,714
$ -
$ 6,714
 
  
  
  
  
  
EXPENSES
  
  
  
  
  
General & administrative 
89,529
 203,745
 105,343
 204,745
 369,163
Depreciation expense
 -
 8,182
 -
 8,182
 21,232
Interest expense
 6,938
 14,950
 14,310
 18,413
 74,203
Cost of recapitalization
 -
 -
 -
 -
 115,479
Loss on abandonment of      investment property
 -
 -
 -
 -
 154,354
 
  
  
  
  
  
Total expenses
 96,467
 226,877
 119,653
 231,340
 734,431
 
  
  
  
  
  
Net loss
$ (96,467)
$ (226,877)
$ (112,939)
$ (231,340)
$ (727,717)
 
  
  
  
  
  
Basic and diluted net loss per
  
  
  
  
  
common share
$  (0.01)
$ (0.04) 
$ (0.01) 
$ (0.06) 
  
 
  
  
  
  
  
Weighted average common shares      outstanding
 7,696,437
 6,199,918
 7,620,810
 3,742,629
  
 
  
  
  
  
  
 
  
  
  
  
  
 

 

EMPYREAN HOLDINGS,INC.

(A Development StageCompany)

CONSOLIDATEDSTATEMENTS OF CASH FLOWS

Six Months Ended June30, 2006 and 2005

Period from December30, 2004 (Inception) through June 30, 2006

(Unaudited)

 
Six Months Ended 
      Inception Through
 
June 30, 2006

(restated)
June 30, 2005
June 30, 2006

(restated)
  
  
 
 
CASH FLOWS FROM OPERATING      ACTIVITIES 
  
 
 
Net loss$
 (112,939)$
 (231,340)$
 (727,717)
Adjustments to reconcile net      loss to 
  
 
 
cash used in operating      activities: 
  
 
 
Stock issued for services 
63,000 
180,000
243,000
Cost of recapitalization 
- 
-
115,479
Loss on abandoned investment      property  
- 
-
154,354
Depreciation 
- 
8,182
21,232
  
  
 
 
Changes in: 
 
 
 
Other assets  
- 
(525)
(525)
Accounts payable and notes 
(25,111) 
43,386
116,729
  
  
 
 
NET CASH USED IN OPERATING      ACTIVITIES 
(75,050) 
(297)
(77,448)
  
  
 
 
  
  
 
 
CASH FLOWS FROM FINANCING      ACTIVITIES 
  
 
 
Payments on related party debt 
(3,600) 
-
(3,600)
Proceeds from related party      debt 
84,807 
-
84,807
Proceeds from issuance of      common stock 
- 
2,538
2,538
  
  
 
 
NET CASH PROVIDED BY FINANCING 
  
 
 
          ACTIVITIES 
81,207 
2,538
83,745
  
  
 
 
NET CHANGE IN CASH 
6,157 
2,241
6,297
     Cash      balance, beginning of period 
140 
-
-
     Cash      balance, end of period$
 6,297$
 2,241$
6,297
  
  
 
 
SUPPLEMENTAL DISCLOSURES: 
  
 
 
Cash paid for interest$
-$
 -$
 -
Cash paid for income taxes$
 -$
 -$
 -
  
  
 
 
NON-CASH INVESTING AND      FINANCING ACTIVITIES: 
  
 
 Shares issued to settle related party      debt$ 72,759$ -$ 72,759Shares issued for property$ 772,000$ -$ 772,000Forgiveness of Related Party Debt$ 226,334$ -$ 226,334
 

 

 

 

 

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 audited2005 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 - SHARE-BASED COMPENSATION

On January 1, 2006, Empyrean adopted SFAS No. 123 (R), "Share-Based Payment."SFAS 123(R) replaced SFAS No. 123 and supersedes APB Opinion No. 25. SFAS 123(R)requires all share-based payments to employees, including grants of employeestock options, to be recognized in the financial statements based on their fairvalues. The pro forma disclosures previously permitted under SFAS 123 are nolonger an alternative to financial statement recognition. Empyrean adopted SFAS123(R) using the modified prospective method which requires the application ofthe accounting standard as of January 1, 2006. The consolidated financialstatements as of and for the quarter ended June 30, 2006 reflect the impact ofadopting SFAS 123(R). In accordance with the modified prospective method, theconsolidated financial statements for prior periods have not been restated toreflect, and do not include, the impact of SFAS 123(R). Since Empyrean has notgranted options during the quarter ended June 30, 2006 or during any periodprior 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 adjusted basis) restrictedshares were issued to William Melchiori as a signing bonus for him to serve asDirector and Chief Financial Officer of Empyrean Holdings, Inc. He will alsoserve as President and Director of Empyrean's wholly owned subsidiary, EmpyreanFinancial Services, Inc. and also as a Director of Empyrean's recently formedwholly owned subsidiary, Empyrean Properties, Inc.

On June 30, 2006, four townhomes valued at $772,000 were contributed and$226,334 in debt was canceled by Hesperia Advisors Limited in exchange for1,000,000 convertible preferred shares. These shares are convertible any time bythe holder for 4,000,000 post-split (see Note 4) common shares.

 

NOTE 4 - REVERSE STOCK SPLIT

A 1:50 (one to fifty) reverse split of Empyrean's common shares wasimplemented on June 26, 2006, resulting in 7,858,039 total outstanding commonshares. All share and per share information has been retroactively restated inthe consolidated financial statements to reflect the reverse stock split.

Also, Empyrean's trading symbol was changed to EMPY.

NOTE 5 - RESTATEMENT

On October 4, 2006, we concluded that we should restate our interim financialstatements as of June 30, 2006, for the three and six-month periods ended June30, 2006, and for the period from December 30, 2004 (inception) through June 30,2006 to correct a misstatement relating to our investment in real estateinvestment property. We should have reported the carrying value of the fourtownhomes contributed by Hesperia Advisors Limited, a majority shareholder, tobe equal to $772,000 which was Hesperia Advisors Limited's basis in the fourtownhomes on the date of the contribution. As a result of the restatement, wehave increased the carrying amount of real estate investment property andpaid-in capital by $518,334. The restatement did not have an affect on any ofthe other previously reported amounts.

 
**Item 2. Management's Plan of Operation.**
Our principal activities are presently concentrated onimplementing our newly formulated corporate development plan. Our initial twophases which entailed the finalization of the Addendum to the Stock purchaseagreement of April 8, 2005 with Hesperia Advisors Limited were completed in atimely 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:

(a) 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 fully forgave the Note of $226,334 and  

(b) As provided in Phase II of the Stock purchase agreement  of April 8, 2005.  Hesperia transferred another three unencumbered town  homes with a total appraised value of $561,000 to Empyrean Properties, Inc and  accepted 1,000,000 of Empyrean's convertible preferred shares as full payment.

All these four town homes were deeded to our new subsidiaryEmpyrean Properties, Inc before the close of business on June 30, 2006 and the1,000,000 preferred shares 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 $5.00 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 our corporatedevelopment plan, our total stockholders' equity has been enhanced by nearly$1,000,000. Discussions have commenced with our affiliate, United ConstructionGroup (UCG) for our subsidiary, Empyrean Properties, Inc., to participate inseveral development projects. Being an experienced national development andconstruction company, UCG will also act as our real property consultant andprovide expert advice for any other real estate projects or businesses that wemay consider undertaking in the future. 

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 significant workingcapital to fund our current plans to participate in real estate developmentprojects 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 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 are noteffective for timely gathering, analyzing and disclosing the information we arerequired to disclose in our reports filed under the Securities Exchange Act of1934, as amended, because of adjustments required by our independent auditors,primarily in the area of stockholders equity transactions. There were no changesin our internal control over financial reporting (as defined in Rules 13a-15(F)and 15d-15(f) under the 1934 Act) during the period ended June 30, 2006, thathave materially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

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: October 10, 2006

 **** |