FORM 10-QSB

U.S. Securities andExchange Commission

Washington, D.C 20549

 

(Mark One)

 

[X] **Quarterly reportpursuant to section 13 or 15(d) of the Securities Exchange of 1934** for theperiod ended March 31, 2002

 

[ ] **Transition reportpursuant to section 13 or 15(d) of the Securities Exchange Act of 1934**forthe transition period from _____ to _____

 

Commission file number:0-30118

 

EMPYREANCOMMUNICATIONS, INC.

(Exact name of smallbusiness issuer as specified in its charter)

 

| NEVADA
88-0413417
(State or Other      Jurisdiction of Incorporation or organization)
(I.R.S. Employer      I.D. No.)
 

2537 South Gessner,Suite 114

Houston, TX 77063

(Address of principalexecutive offices)

 

Issuer's telephonenumber: (713) 260-7236

 

Check whether the issuer

 

(1) filed all reports  required to be filed by Section 13 or 15(d) of the Exchange Act during the  past 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

 

As of March 31, 2002,there were 28,018,348 shares of common stock issued and outstanding.

 

Transitional SmallBusiness Disclosure Format (check one): [ ] Yes [X] No

 
**PART I - FINANCIALINFORMATION

Item 1. FinancialStatements

 **
 

Following are theun-audited financial statements for the period ended March 31, 2002.

 

EMPYREAN      COMMUNICATIONS INC.      

(A      Development Stage Company)      

BALANCE      SHEETS      

for      the periods ended March 31,2001 and December 31, 2001      

       

       

       

       

       

31-Mar-02      

       

31-Dec-01      

       

       

       

       

       

Unaudited      

       

       

Assets      

       

       

       

       

       

       

       

Cash      

       

       

       

65      

       

191      

       

Prepaid      expenses - see accompanying notes  to      financial statements      

433,500      

       

0      

       

       

       

       

Total      Assets      

       

       

       

$433,565      

       

$191      

       

       

       

       

       

       

       

       

Liabilities      

       

       

       

       

       

       

       

Accounts      Payable   - see      accompanying notes to financial statements      

479,041      

       

969,217      

       

       

       

       

       

Due      to shareholders  - see      accompanying notes to financial statements      

23,941      

       

20,844      

       

       

       

       

Total       Liabilities      

       

       

       

502,981      

       

990,061      

Stockholders      Equity      

       

       

       

       

       

       

Capital      Stock      

       

       

       

       

       

       

Authorized:      

       

       

       

       

       

       

       

50,000,000       common shares, $0.001 par value      

       

       

       

       

10,000,000      preferred sharess, $0.001 par value      

       

       

       

       

Issued:      

       

       

       

       

       

       

       

19,502,240      common shares - see accompanying notes to financial statements      

19,795      

       

16,045      

       

       

       

       

       

Additional      paid in capital      

       

       

6,833,489      

       

5,812,763      

       

Deficit      accumulated during the development stage      

-6,922,701      

       

-6,818,678      

       

       

       

       

       

       

       

       

Total      Stockholders Equity/(Deficit)      

       

-69,417      

       

-989,870      

       

       

       

       

       

       

       

       

       

Liabilities      and Shareholders Equity/(Deficit)      

$433,565      

       

$191      

 

 

 

 

 
EMPYREAN      COMMUNICATIONS INC.(A      Development Stage Company)Income      Statementfor      the Three Months Ending March 31,2002 and 2001with      cumulative since inception10/30/2000      (Date of
UnauditedIncorporation)      to
March 31,2002March      31,2001March      31,2002Operating Expenses
104,023
454,230
1,119,132Operating Loss(104,023)(454,230)(1,119,132)Other      Income/(Expenses)Loss on write-off of technology
(5,843,140)Miscellaneous Income9,993Gain on forgiveness of debt

29,577
29,578Net Loss for the      period(104,023)(424,653)(6,922,701)Basic loss per share-0.01-0.02Shares Outstanding,      3/31/02,3/31/0119,502,240*
25,366,800Weighted Average      Shares Outstanding797,293255,201* Net of Treasury Shares to be      repurchased
 

 

 

EMPYREAN      COMMUNICATIONS INC.
(A Development Stage      Company)
STATEMENT OF CASH FLOWS
For the three month periods      ended March 31, 2002 and 2001
and for the period October      30,2000 (Date of Incorporation) to March 31, 2002
(Unaudited)October 30, 2000Three MonthsThree Months(Date of      Incorporation)EndedEndedto
March 31, 2002March 31, 2001March 31, 2002Cash Flows used in Operating      ActivitiesNet loss for the period(104,023)
(523,240)(6,922,701)Items not affecting cash:Loss on write-off of technology
-
-5,843,140Gain on forgiveness of debt
-
(29,577)
(29,578)(104,023)(552,817)
(1,109,139)Changes in non-cash working      capital balancesbalances related to operations:Prepaid expenses(433,500)16,000(417,500)Accounts Payable
(490,176)
499,804
454,571Net Cash (used by) from operating      activities(1,027,699)(37,013)(1,072,068)Investing ActivitiesCash acquired on business      acquisition
-
19,888316Increase in shareholder loans
3,097
23,941Net Cash (used by) from Investing      Activities3,09719,88824,257Financing ActivitiesExchange of debt for common      shares1,024,476
-1,024,476.35Proceeds from issuance of common      shares
-
22,400
23,400Net Cash (used by) from Financing      Activities1,024,47622,4001,047,876Net increase (decrease) in cash      during the period(126)5,27565Cash, beginning of the period
191
121
-Cash, end of the period
65
5,396
65Supplemental disclosure of cash      flow informationCash Paid for:Interest
-
-
-Income taxes
-
-
-Non-cash transactions - see notes      to accompanying financial statements
    

 

 

 

 

EMPYREAN      COMMUNICATIONS INC.
(A Development      Stage Company)
STATEMENT OF      STOCKHOLDERS EQUITY/(DEFICIT)
for the period      ended March 31,2002
(Unaudited)
Deficit
Accumulated
Additional
During the
Common
Par
Paid In
Development
Shares
Value
Capital
Stage
Total
Issued for Cash
15,000,000
1,000
1,000
Net Loss for the      period
(70,583)
(70,583)
 
 
 
 
 
 
Balance, December      31, 2000
15,000,000
1,000
0
(70,583)
(69,583)
Issued for cash      pursuant to exercise of warrants - at $ 10.00
2,240
45
22,355
22,400
Issued for      acquisition of subsidiary
750,000
15,000
5,790,408
5,805,408
Net loss for the      period
(6,748,095)
(6,748,095)
 
 
 
 
 
 
Balance, December      31, 2001
15,752,240
16,045
5,812,763
(6,818,678)
(989,870)
Issued for debt      extinguishments and future services
3,750,000
3,750
1,020,726
1,024,476
Net loss for the      period
(104,023)
(104,023)
 
 
 
 
 
 
Balance, March 31,      2002
19,502,240
 
19,795
6,833,489
(6,922,701)
(69,417)** 

Item 2. Management'sPlan of Operation

 **
The Company is in itsinitial stages of development with no revenues or income and is subject to allthe risks inherent in the creation of a new business. Since the Company'sprincipal activities to date have been limited to organizational activities,prospect development, and acquisition of interest, it has no record of anyrevenue-producing operations. Consequently, there is no operating history uponwhich to base an assumption that the Company will be able to achieve it'sbusiness plans.

 

During the 1stQuarter of 2002, the Company agreed to purchase two Fiber related companies.Basalt Fiber Company and Belfiber Company. The companies were purchased on ashare for share basis and issued 10,000,000 of the company's common stock and10,000,000 of the company's preferred stock. Mr. Anthony Fanale, previousowner of both companies has joined ECI and will direct all operations of theCompany and will serve as a member of the Board of Directors.

 

Principal Product.

 

Empyrean Communications,Inc. which originally planned to create inroads into the development ofbroadband telecommunications capabilities, has chosen after considering theplight of the broadband market over the past six months has determined that thefuture of the Company should lie in other directions capable of providing theCompany with ongoing income streams. The Company choose to enter into the Basaltand Fiberglass product development market.

In February of 2002, theCompany acquired, by way of a stock swap, two Virginia fiber-manufacturingcompanies, Belfiber Company and Basalt Fiber Company. In so doing, the Companyacquired 100% of all outstanding stock of both companies and intends to directall of its efforts to the development of these companies, as well as possiblefuture acquisitions within the same scope of business.

Basalt Fiber Company isa Virginia Corporation created for the sole purpose of introducing basalt fiberand related products to the American market. Basalt Fiber hopes to generate afair return for shareholders and finance continued growth and development ofquality products with earned profits. The Company hopes to maintain a friendly,fair and creative work environment, and one that respects diversity, new ideasand hard work. The Company anticipates that basalt fiber, in specific markets,will replace the commonly used E or S Glass products. Basalt fiber is anadvanced technology for the fiber and composites industry that offers thepotential to replace many of the conventional fiberglass products. The Companyanticipates providing the marketplace with reliable sources of basalt products,including continuous woven fiber..

 

Basalt is a start upcompany that will manufacture Continuous Fiber Products for re-sale in the Worldmarket. Sales are anticipated to be in the range of 2 to 3 million dollars inthe first 12 months from start-up and expectations are for the Company to growat a 20% to 25% rate. Start-up operations are anticipated by September, 2002with full capacity anticipated by year-end 2002.

Belfiber was formed tomarket imported basalt and fiberglass fiber materials. It will provide for anexisting high margin product line serving the high-performance pulsejet segmentof the high temperature filtration market. Domestic Basalt products will beadded to the product development produced by Belfiber for the thermalinsulation, acoustic and corrosion resistant FRP applications to provide marketpotential for increasing sales and profit. Current alliances with othermanufacturing companies may be phased out of the company's plans in the nearfuture. Additional alliances and more high tech products will replace currentrevenue streams..

Belfiber is aninternational provider of various fiber products sold to various industries. TheCompany is currently negotiating long-term contracts with major users in NorthAmerican and the European Markets. Belfiber anticipates becoming a major user ofBasalt products produced from Basalt Fiber Company and anticipates using thematerial to improve the overall quality of various products. Belfiberanticipates second quarter sales volumes of approximately $1 million and futureexpectations are for sales to increase to the 3 to 4 million-dollar volumewithin 24 months.

 

Liquidity.

During the next 12months, the Company will need significant working capital to fund its marketingefforts and to manufacture product. The Company intends to obtain workingcapital from the sale of product and through private investments made by thirdparties. The Company is currently negotiating with The State of Virginia onvarious Bond Issues and Agency guarantee programs that are available. CertainFinancial Grant applications have been reviewed and the Company expects toreceive its first funding from such grants within the next 90 days.

 
**PART II - OTHERINFORMATION

 

Item 2. Changes inSecurities and Use of Proceeds**
 

Pursuant to an agreementdated January 26, 2002, the Company issued 10,000,000 common shares to acquire100% of the shares of Basalt Fiber Company ("Basalt") and issued10,000,000 preferred shares to acquire 100% of the shares of Belfiber Company("Belfiber").

 
**Item 4. Submission ofMatters to a Vote of Security Holders**
 

During the 1stQuarter of 2002, the Board of Directors instructed management to convene aShareholders meeting on or before July 30, 2002 for the purpose of discussingand voting on changes to the Articles of Incorporation of the Company includingbut not limited to a Corporate Name Change, changes to the Company's capitalStock structure, changes to voting rights of the Company's capital stock andthe election of Corporate Officers..

 
**Item 5. OtherInformation

 **
Changes in Control ofRegistrant:

 

On April 30, 2002, anSEC Form 13D was filed by Aegis Capital Corporation, a Texas Corporation,indicating the acquisition of 59.88% of the outstanding stock of the Company inexchange for 100% stock ownership of two fiber-related manufacturing companies.The Company's Board of Directors approved the transaction on April 17, 2002.
** **
Acquisition orDisposition of Assets:

 

On March 27,2002, theCompany received a "suspension" letter from VNet Investment Companyand its Executive Director, Mr. Thomas Skippon, that VNet was suspending thecontinuance of a certain Bandwidth Contract. On March 30, 2002, the Companyreceived a demand for payment and a ten-day cure period before cancellation.Company management has disputed these actions and has asked Corporate Counsel toreview the matter and report back to management by May 30, 2002. Over the past60 days management has continued to carefully examine bandwidth marketconditions. As a result of discussions with its outside auditors, managementwill support their recommendations to bring about a complete write-down of itsbandwidth asset in keeping with new Accounting Rules and Regulations pertainingto the treatment of intangible assets. Management anticipates the Company'syear-end 2001 audit to reflect such changes.

 

Board Meetings:

 

The Board of Directors,at a Special called meeting held in Houston Texas, February 13, 2002,

approved the issuance of3,400,000 shares of common stock in lieu of current accrued debt and prepaidlegal and consulting expenses. Shares issue were as follows:

 

Dale Renaud ' debt toequity conversion of $202,556.17.

Tom Skippon ' debt toequity conversion of $197, 140.72

George Burks ' debt toequity conversion of $194,949.50

Anthony Fanale 'Prepaid Consulting Fees of $22,500

Marlon Lawrie 'Prepaid Consulting Fees of $51,218

Robert L. Lee -Prepaid Consulting Fees of 31,238

James Parsons -Prepaid Legal Fees of $21,000

Thomas Bojadzijev -Prepaid Consulting Fees of $255,000

 

 

The Board of Directorsat a Special Called meeting held in Houston, Texas, April 9, 2002

approved the issuance of3,500,000 shares of it's common stock in lieu of future consulting services tobe performed for the company and ratified managements action in issuing 350,000shares of it's common stock to Anthony Fanale for future consultationservices. Shares issued were as follows:

 

George Burks - PrepaidLegal Fees of $18,000

James Parsons -Prepaid Legal Fees of $18,000

Robert L. Lee -Prepaid Consulting Fees of $54,000

Thomas Bojadzijev 'Prepaid Consulting Fees of $540,000

Anthony Fanale -Prepaid Consulting Fees of $52,500

 

All common stock issuedfor the above purposes were subject to the April 29, 2002 reverse split. To thebest of management's knowledge, no control individual had sold any stockresulting from the above issues at the time of the reverse split.

 

The Board of Directors,at a Special called Board Meeting held in Houston Texas, Wednesday April 17,2002:

 

1. acted upon a writtenrecommendation and consent of the holders of a majority of the issued andoutstanding shares, and approved a Reverse Split of the issued and outstandingCommon Stock Shares on a one new share for twenty old shares basis. Anyfractional shares will be rounded up. Effective date of the Reverse Split isApril 29, 2002.

 

2. approved a change ofthe corporate name from Empyrean Communications Inc. to Therma Tech Corporation.This action was felt to be prudent as a result of the decision of the Board tosteer the company in a new direction. The Company acted to drop its bandwidthholdings and to direct its efforts toward more productive goals in themanufacturing sector.

 

3. approved a change inthe status of all of the Company's Preferred Stock to allow holders ofPreferred Stock voting rights equal to those of common stock holders.

 

4. approved an increasethe Company's capital structure as follows:
-  the Company's preferred stock    would be increased from 10,000,000 shares to
25,000,000 shares.
-  the Company's common stock    would be increased from 50,000,000 shares to
175,000,000 shares.

5. accepted theresignation from the Board of Directors of Mr. Colin Campbell, effective April12, 2002.

 
** 

Item 6. Exhibits andReports on Form 8-K**
Exhibits:

 

Exhibit No.
Document
Location
3(i)
Articles of      Incorporation
Previously Filed
3(ii)
Bylaws
Previously Filed
 

Reports on 8-K

 

On February 19, 2002,the Company filed a Current Report on Form 8-K, reporting on Item 1, change incontrol, Item 2, acquisition of assets, Item 5, other events - regarding loannegotiations, and Item 6, resignation of directors.
** 

SIGNATURES

 **
In accordance with therequirements of the Exchange Act, the registrant caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 

EMPYREAN COMMUNICATIONS,INC.

 

Robert L. Lee, Presidentand Director

 

____________________________________

 

 

Dale Renaud, Director

 

 

____________________________________

  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|