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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 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| OMB APPROVALOMB Number: 3235-0416 Expires: March 31, 2007Estimated average burden    hours per response: 182.00**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-QSB**(Mark One) [X ] QUARTERLY REPORT UNDER    SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended __March 31, 2006_
[  ] TRANSITION REPORT    UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT 
For the transition period from _________________ to            _________________
 
Commission file number ___0-30118____

 

EMPYREAN HOLDINGS INC.

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

 

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

11200 Westheimer Rd.,Suite 900

Houston, TX 77042

(address of principalexecutive offices)

 

Issuers telephonenumber: (713) 243 8731

(Registrant'stelephone number, including area code)

 

EMPYREANCOMMUNICATIONS, INC.

10700 Richmond Avenue,Suite 100,

Houston, TX 77042(Former name, former address and former fiscal year, if changed since lastreport)

Check whether the issuer
- filed all documents and reports required to be filed by Section 13 or  15(d) of the Exchange Act during the last 12months(or for such shorter period  that the registrant was required to file such reports)and
- has been subject to such filing requirements for the past 90 days (X) Yes  ( ) No 

Indicate by check mark whether the registrant is a shell company (as definedin Rule 12b-2 of the Exchange Act). Yes _____ No X__
As of March 31, 2006, there were 381,744,939* shares of common stock issuedand outstanding

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

Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
**PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements.
Following are the unaudited financial statements for the period ended March31, 2006.

 

 

 

 

 

 

 

 

 

EMPYREAN HOLDINGS,INC. 

(A Development StageCompany)

CONSOLIDATED BALANCESHEETS

(Unaudited)

As of March 31, 2006and December 31, 2005

 

See accompanyingsummary of accounting policies

and notes to financialstatements.

 

 

EMPYREAN HOLDINGS,INC.

(A Development StageCompany)

CONSOLIDATEDSTATEMENTS OF INCOME & EXPENSES

(Unaudited)

Three Months EndedMarch 31, 2006 and 2005, and the

Period from December30, 2004 (Inception) through March 31, 2006

See accompanyingsummary of accounting policies

and notes to financialstatements.

 

EMPYREAN HOLDINGS,INC.

(A Development StageCompany)

CONSOLIDATEDSTATEMENTS OF CASH FLOWS

(Unaudited)

Three Months EndedMarch 31, 2006 and 2005, and the

Period from December30, 2004 (Inception) through March 31, 2006

See accompanyingsummary of accounting policies

and notes to financialstatements.

 

EMPYREAN HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited interim financial statements ofEmpyrean Holdings, Inc. (formerly Tradewinds International Corp.) (hereinaftercollectively referred to as the "Company") have been prepared in accordance withaccounting principles generally accepted in the United States of America and therules of the Securities and Exchange Commission ("SEC"), and should be read inconjunction with the Company's audited 2005 year end financial statements. Inthe opinion of management, all adjustments, consisting of normal recurringadjustments, necessary for a fair presentation of financial position and theresults of operations for the interim period have been reflected herein. Theresults of operations for interim periods are, however, not necessarilyindicative of the results to be expected for the full year.

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

 

NOTE 2 - SHARE-BASED COMPENSATION

On January 1, 2006, the Company adopted SFAS No. 123(R),"Share-Based Payment" ("SFAS 123(R)"). SFAS 123(R) replaced SFAS No. 123 andsupersedes APB Opinion No. 25. SFAS 123(R) requires all share-based payments toemployees, including grants of employee stock options, to be recognized in thefinancial statements based on their fair values. The pro forma disclosurespreviously permitted under SFAS 123 are no longer an alternative to financialstatement recognition. The Company adopted SFAS 123(R) using the modifiedprospective method which requires the application of the accounting standard asof January 1, 2006. The consolidated financial statements as of and for thequarter ended March 31, 2006 reflect the impact of adopting SFAS 123(R). Inaccordance with the modified prospective method, the consolidated financialstatements for prior periods have not been restated to reflect, and do notinclude, the impact of SFAS 123(R). Since the Company has not granted optionsduring the quarter ended March 31, 2006 or during any period prior to January 1,2006, the adoption of SFAS 123(R) had no impact.

 

NOTE 3 - NOTES PAYABLE - RELATED PARTY
**Current 
Note Payable - Independent Management Resources, LLC;    advances made from time to time on an as needed basis, due on demand;    interest accrues at a rate of 8%; includes accrued interest through March    31, 2006.
$ 126,916
 
Note Payable - Thomas Bojadzijev; advances made from time    to time on an as needed basis, due on demand; accrues interest at a rate of    8%; includes accrued interest through March 31, 2006.
15,504
Current notes payable - related party
$ 142,420  **Non-Current 
Note Payable - Hesperia; dated March 7, 2005; balloon    payment (including principal and accrued interest) due March 6, 2008;    interest accrues at a rate of 6.5%; includes accrued interest through March    31, 2006.
$ 222,725
NOTE 4 ' EQUITY

On July 20, 2005, the Company's Board of Directors declared a25% stock split, payable in the form of a 25% stock dividend to shareholders ofrecord as of August 30, 2005.  All share and per share information has beenretroactively restated in the consolidated financial statements to reflect thestock split.

On February 4, 2006, 500,000 restricted shares were issued toFalcon Consulting Group, Inc. as a retainer for providing consulting services.This transaction resulted in a charge to share-based compensation of $5,000. 

On February 21, 2006, 7,500,000 restricted shares were issuedto an officer of the Company as consideration for debt of $72,759 that was dueto him from the Company. 

 
**Item 2. Management's Plan of Operation.**
The company's principal activities are presently limited toorganizational matters, revising its business plan, prospect development, andacquisition of interests. As the company has no record of revenue-producingoperations, there is no operating history upon which to base any assumption thatthe company will be able to achieve its business plans.

Discussions with Hesperia Advisors Limited on arriving at afair solution to make up for the loss of the Key West condominium in Decemberlast year continues but so far no firm agreement has been reached. Managementintends to pursue this matter as a matter of priority and remain confident thatan equitable conclusion in line with the Stock purchase agreement of April 8,2005 will be obtained in the near future.

The plans in place to raise working capital to participate asa minority partner in real estate development projects are in the process offinalization. These projects are currently being undertaken by Empyrean'saffiliate United Construction Group (UCG), an established national real estatedevelopment and construction company. Several projects in WI and CA are beingconsidered, but the Company's efforts to raise up to $15 million in workingcapital will be given priority. This is being arranged by the company'sfinancial consultants, Falcon Financial Consulting (www.falcon.com) of SanDiego, CA.

The company's wholly owned subsidiary, Empyrean Properties,Inc, remains dormant but consideration is being given to utilizing it for thedevelopment projects to be undertaken with UCG.

The company is presently working on diversifying into thefinancial services business. The acquisition of viable businesses in othersectors should suitable ventures be identified is also an option beingconsidered. In brief, the long term master plan is to grow Empyrean into adiversified holding company that will enhance shareholder value greatly.
**Liquidity**
During the next 12 months, the company will need significantworking capital to fund its current plans to participate in real estatedevelopment projects with UCG and to make other acquisitions as and whensuitable opportunities arise. 

As a close working relationship has been established with thecompany's financial consultants, Falcon Financial Consulting, financingprocedures are expected to be move more rapidly from now on.
**Item 3. Controls and Procedures**
As of March 31, 2006, the Company carried out an evaluationof the effectiveness of the Company's disclosure controls and procedures (asdefined by Rule 13a-14(c) under the Securities Exchange Act of 1934) under thesupervision and with the participation of the Company's chief executive officerand chief financial officer. Based on and as of the date of such evaluation, theaforementioned officers have concluded that the Company's disclosure controlsand procedures were effective. 

The Company also maintains a system of internal accountingcontrols that is designed to provide assurance that assets are safeguarded andthat transactions are executed in accordance with management's authorization andproperly recorded. This system is continually reviewed and is augmented bywritten policies and procedures, the careful selection and training of qualifiedpersonnel and an internal audit program to monitor its effectiveness. During thethree-month period ended March 31, 2006, there were no significant changesto this system of internal controls or in other factors that could significantlyaffect those controls.

 

 
**PART II -- OTHER INFORMATION

 

Item 5. Other Information - None.

 

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.

No filing of any Form 8-K report was done during the first quarter.
** 

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____________________May 15, 2006
Robert L. Lee, President and DirectorDate******** |