U.S.
SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549  FORM
10-KSB  ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF1934  FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2007  EMPYREAN
HOLDINGS, INC. ---------------------------- (Name of
Small Business Issuer in its charter)  Nevada
000-30118
88-0413417State or other jurisdiction of incorporation
Commission File Number
IRS Identification No.  11200 Westheimer Rd., Suite 900, Houston, TX 77042 ------------------------------------------- (Address
of principal executive offices) (Zip Code)  Issuer's
telephone number: (713) 243 8714    Securities registered
pursuant to Section 12(b) of the Act:  None  Securities registered
pursuant to Section 12(g) of the Act:  Title
of Class: Common
Stock  Title
of Class: Preferred   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 12 months (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.     Yes [X] No
[_]  Check if there is no
disclosure of delinquent filers in response to Item 405 of Regulation S-B
contained in this form, and no disclosure will be contained, to the best of
registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.  [X]  1     Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes  [  ] No
 [X]  Revenues for the
fiscal year ended December 31, 2007 were:  $542,000 The Aggregate market
value of the voting and non-voting common equity held by non-affiliates computed
by reference to the average bid and asked price of such common equity as of
April  11, 2008:  $174.387.12  Number of shares of
Common Stock, $0.001 par value per share, of the registrant outstanding as of
December 31, 2007: * 10,258,066  Note: * Inclusive of 22,501
shares on hold and awaiting return by a third party.  Number of shares of
Preferred Stock of the registrant outstanding as of December 31, 2007:
 15,140,000  DOCUMENTS
INCORPORATED BY REFERENCE No documents are
incorporated herein by reference.  Transitional Small
Business Issuer Format   Yes      No
 X ----
   ----  CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION  Certain
statements in this annual report on Form 10-KSB contain or may contain
forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause our actual
results to differ materially from those in the forward-looking statements. These
factors include, but are not limited to, our ability to consummate a merger or
business combination, economic, political and market conditions and
fluctuations, government and industry regulation, interest rate risk, U.S. and
global competition, and other factors. Most of these factors are difficult to
predict accurately and are generally beyond our control. You should consider the
areas of risk described in connection with any forward-looking statements that
may be made herein. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report.
 Readers should carefully review this annual report in its entirety,
including but not limited to our financial statements and the notes thereto.
 Except for our ongoing obligations to disclose material information under
the Federal securities laws, we undertake no obligation to release publicly any
revisions to any forward-looking statements, to report events or to report the
occurrence of unanticipated events. For any forward-looking statements contained
in any document, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of
1995.       2     PART
I. ITEM
1.  DESCRIPTION OF BUSINESS  (a)
Business Development and Objectives  Empyrean
Holdings, Inc., a Nevada corporation (the "Company" or Empyrean), was
originally organized on April 30, 1998 as Fuji International, Inc.; the name was
changed on December 28, 1998 to Direction Technologies, Inc.  In March of
2001, Direction Technologies, Inc. merged with Empyrean Communications, Inc.,
and the name was changed to Empyrean Communications, Inc.  Following
approval obtained at the Special shareholders meeting held on January 5, 2005,
the Companys name was changed to Empyrean Holdings, Inc. effective January 25,
2005. The new name was adopted to reflect the Companys revised business plan to
develop and expand as a holding company.  The
mission is to continue to develop Empyrean through selective diversification and
acquisitions into a profitable multi-based holding company that will provide
competitive return on investments for its shareholders and investors.  Over
the last year, however, the progress made in the development of the companys
wholly owned subsidiaries have been below expectation. Empyrean Staffing, Inc.
which was formed to gradually develop into a PEO (Professional Employers
Organization) commenced payroll processing from its California office during the
last quarter of 2007. This business obtained through an affiliate, however, did
not last long as the fees the Clients were willing to pay did not justify the
costs involved. The last employee was terminated and business suspended in
December 2007. The development of this subsidiary and Empyrean Financial
Services, Inc. as a full service PEO has been set back due to this unanticipated
problem and can only be reactivated once the financing required is obtained.  On
the positive side, Empyrean Properties, Inc. acquired four additional real
estate properties located near Kewaskum and Green Bay, Wisconsin during June
2007. These unencumbered properties had a combined appraised value of $405,000
and were purchased from Hesperia Advisors Limited for $372,000.  Full
payment was made through the issue of 4,140,000 Convertible Preferred shares
(one (1) preferred share to four (4) common shares).  Furthermore,
the other wholly owned subsidiary, Empyrean Construction, Inc, (ECI) which
operates from Sacramento, California obtained its General Contractor license for
California during September 2007 and modest revenues have been obtained during
the first quarter of 2008.  As contingent approval has been obtained for
ECIs license for Nevada, this license is expected to be issued soon. In
anticipation of doing business in Nevada as soon as approval is obtained, a
branch office for ECI has been established in Las Vegas in an executive
suite  The
financial and corporate office of the Company is located in an executive suite
managed by a large national company, Corporate Office Centers, at 11200
Westheimer Rd., Suite 900, Houston Texas 77042.  Services for basic office
requirements are also provided by Corporate Office  3    Centers.
The Company has no full time employees in this location.  ECI currently has
three employees.  Presently, Empyrean Holdings, Inc. has only the ongoing business
that was recently started for its subsidiary, ECI and Empyrean Properties, Inc.
 Barring any unforeseen circumstances and provided the working capital
required is obtained, acceptable growth for these subsidiaries is expected in
the New Year.   ITEM 2.   DESCRIPTION OF PROPERTY  (a) Ownership  After sales made during the year, the Company through its wholly
owned subsidiary, Empyrean Properties, Inc., owns three lots in Kewaskum and
Green Bay, Wisconsin.  The three properties have a carrying value of
$202,000 and are being held for sale. It is the intention to utilize the sales
proceeds to finance business development and fund-raising activities.  (b) Office leases  The current lease agreement with Corporate Office Centers is
for two 160 square foot offices located at 11200 Westheimer Rd., Suite 900,
Houston Texas, 77042. The term of the lease is month to month and basic rental
is $1,580 per month. Extra costs averaging about $250 per month are incurred for
other office services and facilities.  The ECI office at 817 14th Street, Suite 200,
Sacramento, California 95814 is leased from Sterling Pacific Real Estate for
$1,873.50 per month and the branch office at Las Vegas located at 3960 Howard
Hughes Parkway, Suite 500, Las Vegas, Nevada 89109 is leased from Regus Business
Centers for $400 per month.   ITEM
3.   LEGAL PROCEEDINGS  The
condominium located at 12 Coral Way, Key West, FL, and owned by the Companys
wholly owned subsidiary, Tradewinds International Corp. (Tradewinds) was lost
through foreclosure action taken by the previous owner and mortgagee, Huck Finn
LLC on December 20, 2005.  The full amount of the debt owed on the property
is a debt of Tradewinds.  The debt was incurred by Tradewinds prior to the
acquisition of Tradewinds stock by the Company and that debt has never been
assumed by Empyrean Holdings.  Management believes that, although
Tradewinds has no assets with which to pay the debt, that debt is not an
obligation of Empyrean.  The Company recognized a loss of $139,000 on
abandoned real estate investment.  At the time of the completion of this
report, management believes that this property has yet to be resold by Huck Finn
LLC.  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS  No matters were submitted for a vote of security holders during
the fourth quarter of the fiscal year ended December 31, 2007.  4     PART
II. ITEM
5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS MATTERS.  On
March 3, 2000 the Company was approved by the NASD for trading on the OTC
Bulletin Board.  The trading symbol under the former name, Empyrean
Communications, Inc, was EPYR.  As required by the name change to Empyrean
Holdings Inc. made on January 25, 2005, the Companys symbol was changed to
EPYH. Following the implementation of the 1 to 50 (one to fifty) reverse split
of the Companys common shares on June 26, 2006, however, the trading symbol was
changed once more to EMPY.  At
the present time, there are no funds available for the payment of dividends. The
Company also does not anticipate paying any dividends in the next twelve
months.  The
Articles of Incorporation currently authorize the issuance of 1,000,000,000
shares of common stock, with a par value of $0.001.  The holders of the
Shares: (a) have equal ratable rights to dividends from funds legally available
therefore, when, as, and if declared by the Board of Directors of the Company;
(b) are entitled to share ratably in all of the assets of the Company available
for distribution upon winding up of the affairs of the Company; (c) do not have
preemptive subscription or conversion rights and there are no redemption or
sinking fund applicable thereto; and (d) are entitled to one non-cumulative vote
per share on all matters on which shareholders may vote at all meetings of
shareholders. These securities do not have any of the following rights: (a)
cumulative or special voting rights; (b) preemptive rights to purchase in new
issues of Shares; (c) preference as to dividends or interest; (d) preference
upon liquidation; or (e) any other special rights or preferences.  In
addition, the Shares are not convertible into any other security.  There
are no restrictions on dividends under any loan other financing arrangements or
otherwise.  See a copy of the Articles of Incorporation, and an amendment
thereto, and Bylaws of the Company, attached as Exhibit 3.1, Exhibit 3.2, and
Exhibit 3.3, respectively, to this Form 10-SB/A.  As of December 31, 2007,
the Company had 10,258,066 shares (inclusive of 22,501 shares on hold and
awaiting return by a third party) of common stock outstanding.  Non-Cumulative
Voting.  The
holders of shares of Common Stock of the Company do not have cumulative voting
rights, which means that the holders of more than 50% of such outstanding
Shares, voting for the election of directors, can elect all of the directors to
be elected, if they so choose.  In such event, the holders of the remaining
Shares will not be able to elect any of the Company's directors.  Preferred
Stock  The
Preferred Stock holders have the right to convert one (1) preferred share to
four (4) common shares at their discretion  The
Companys Articles of Incorporation, as amended, authorize 200,000,000 $.001 per
share par value of Preferred Stock.  As of December 31, 2007, the Company
had issued and outstanding 15,140,000 shares of Preferred Stock.  5    Share
Purchase Warrants  At
December 31, 2007, no share purchase warrants were outstanding.  Dividends.  The
Company does not currently intend to pay cash dividends.  The Company's
proposed dividend policy is to make distributions of its revenues to its
stockholders when the Company's Board of Directors deems such distributions
appropriate.  Because the Company does not intend to make cash
distributions, potential shareholders would need to sell their shares to realize
a return on their investment.  There can be no assurances of the projected
values of the neither shares, nor can there be any guarantees of the success of
the Company. A distribution of revenues will be made only when, in the judgment
of the Company's Board of Directors, it is in the best interest of the Company's
stockholders to do so.  The Board of Directors will review, among other
things, the investment quality and marketability of the securities considered
for distribution; the impact of a distribution of securities on its customers,
joint venture associates, management contracts, other investors, financial
institutions, and the Company's internal management, plus the tax consequences
and the market effects of an initial or broader distribution of such
securities.  Transfer
Agent.  The
Company continues to retain the services of Pacific Stock Transfer Company, 500
E. Warm Springs Road, Suite 240, Las Vegas, NV 89119, to act as transfer agent
and registrar.  ITEM
6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.  The
Company will still require significant working capital for the next 12 months.
An updated Business Plan is being prepared for the Company to raise funds
through a private placement or the sale of shares through public registration.
Management believes that its working capital requirements for 2008 will be
approximately $5,000,000 for general overhead and the expansion of its
construction subsidiary, the reactivation of its PEO subsidiary and to pursue
other business opportunities under consideration.  The
average high and low prices of the Companys stock by quarters are given
below:   1st Quarter
2nd Quarter
3rd Quarter
4th QuarterHigh
0.07
0.05
0.04
0.03Low
0.06
0.04
0.03
0.02  6    ITEM
7.  FINANCIAL STATEMENTS  Included
herewith are the following financial statements:  EMPYREAN HOLDINGS, INC(A Development Stage Company)CONSOLIDATED BALANCE SHEETDecember 31, 20072007CURRENT
ASSETSCash
$    1,969Prepaid
expenses
7,500Account
Receivable
1,495Deposits
1,175Real
Estate Held For Sale
202,000Total
current assets
214,139Property
and Equipment, net of accumulated depreciation of $2,792
38,708TOTAL
ASSETS
$  252,847LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT
LIABILITIESAccounts
payable - trade
$   64,979Note
Payable - related parties
157,238Total
current liabilities
222,217COMMITMENTS
AND CONTINGENCIES
-STOCKHOLDERS'
EQUITYConvertible
preferred stock, $.001 par, 200,000,000 shares authorized, 15,140,000
shares issued and outstanding
15,140Common
stock, $0.001 par value per share; 1,000,000,000 shares authorized;
10,258,066 shares issued and outstanding
10,258Additional
paid-in capital
1,791,234Accumulated
deficit during development stage
(1,786,002)Total
stockholders' equity
30,630TOTAL
LIABILITIES AND STOCKHOLDERS' Equity
$  252,847     See accompanying summary of accounting policies and notes to
financial statements. 7     EMPYREAN HOLDINGS, INC
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF INCOME & EXPENSES
Years Ended December 31, 2007 and 2006 and the
Period from December 30,2004 (Inception) through December
31,2007Year Ended      December
31,2007
Year Ended December 31, 2006
Inception Through December 31, 2007INCOMERental
Income
$
       -
$      6,714
$
   6,714Sale
of real estate
525,500
358,700
884,200Payroll
Processing and other
16,564
-
16,564Total Income
542,064
365,414
907,478COSTS
AND EXPENSESCost
of real estate sold
601,778
414,175
1,015,953General
and administrative
623,508
263,631
1,172,191Impairment
of Note receivable  related party
162,148
-
162,148Loss
on abandonment of  property held for sale
-
-
154,354Total
Costs and Expenses
1,387,434
677,806
2,504,646LOSS
FROM OPERATIONS
(845,370)
(312,392)
(1,597,168)OTHER
INCOME (EXPENSES)Interest
income (expense), net
5,071
(18,533)
(73,355)Cost
of recapitalization
-
-
(115,479)Total
other income (expenses)
5,071
(18,533)
(188,834)NET
LOSS
$(840,299)
$     (330,925)
$(1,786,002)Deemed
dividend on preferred stock issuance
373,200
-
373,200Net
loss attributable to common shareholders
$(1,213,499)
-
$(2,159,202)BASIC
AND DILUTED NET LOSS PER SHARE
$(0.12)
$(0.04)BASIC
AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
9,871,217
7,713,392    See accompanying summary of accounting policies and notes to
financial statements. 8     Empyrean Holdings Inc
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2007 and 2006 and the
Period from December 30, 2004 (Inception) through December
31, 2007Year Ended December 31,
Year Ended,
December 31,
Inception Through December 31,2007
2006
2007Cash
Flows From Operating ActivitiesNet
loss
(840,299)
(330,925)
(1,786,002)Adjustments
to reconcile net loss to net cashused
in operating activitiesDepreciation
and amortization
2,792
-
24,024Stock
issued for services
8,000
63,000
251,000Stock
based compensation
-
120,000
120,000Cost
of recapitalization
-
-
115,479Impairment
of note receivable  related party
162,148

162,148Loss
on sale of property
-
43,977
43,977Impairment
loss on property
-
11,500
11,500Loss
on abandoned investment property
-
-
154,354Changes
in:Account
Receivable
(1,495)
-
(1,495)Other
Current Assets
(8,149)
-
(8,674)Land
Held for sale
184,500
-
184,500Accounts
payable
49,715
(17,106)
174,449Net
cash used by operating activities
(442,788)
(109,554)
(554,740)Cash
Flows from Investing ActivitiesPayment
received on note receivable  related party
46,500
-
46,500Purchase
of Fixed Assets
(41,500)

(41,500)Proceeds
from sale of real estate
-
330,023
330,023Issuance
of note receivable
(108,648)
(100,000)
(208,648)Net
Cash used in Investing Activities
(103,648)
230,023
126,375Cash
Flows from Financing ActivitiesProceeds
from related party debt
247,962
97,419
345,381Payments
on notes payable-related party
(107,000)
(182,585)
(289,585)Proceeds
from issuance of common stock
372,000
-
374,538Net
cash Provided in (Used)in Financing Activities
512,962
(85,166)
430,334Net
Increase (Decrease) in Cash
(33,474)
35,303
1,969Cash
at beginning of year
35,443
140
-Cash
at end of year
$1,969
$35,443
$1,969SUPPLEMENTAL
DISCLOSURES:Cash
paid for interest
$
       -
$
       -
$     10,914Cash
paid for income taxes
$
       -
$
       -
$
       -NON-CASH
INVESTING AND FINANCING ACTIVITIESShares
issued to settle related party debt
$
       -
$     72,759
$  72,759Shares
issued for property
$  372,000
$    772,000
$  1,517,200Forgiveness
of related party debt
$
       -
$    226,334
$    226,334


See accompanying summary of accounting policies and notes to
financial statements. 9     EMPYREAN HOLDINGS, INC
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS
EQUITY
Period from December 30, 2004 (Inception)
Through December 31, 2007Preferred
Common
Additional Paid in Capital
Deficit Accumulated During the Development
Stage
TotalShares
Amount
Shares
AmountStock
issued for:-
25% stock dividend declared in July 2004

50,000,000
$        50,000
$(50,000)

--reverse
acquisition


200,000,000
200,000
(200,000)

--reverse
split declared Jun 26, 2004


(245,000,000)
(245,000)
245,000

-Net
Loss





(75)
(75)Balances,
December 31, 2004
-
-
5,000,000
5,000
(5,000)
(75)
(75)Stock
issued for:-
25% stock dividend declared in July 2005

24,978,988
24,979
(24,979)

--reverse
acquisition
10,000,000
10,000
68,765,951
68,766
(76,228)

2,538-reverse
split declared Jun 26, 2005


(121,269,873)
(121,270)
121,270

--services


30,000,000
30,000
150,000

180,000Net
Loss





(614,703)
(614,703)Balances,
December 31, 2005
10,000,000
10,000
7,475,066
7,475
165,063
(614,778)
(432,240)Stock
Issued for:-
debt


150,000
150
303,615

303,765-Services


2,233,000
2,233
176,097

178,330-property
1,000,000
1,000


252,664

253,664Debt
forgiveness




518,335

518,335Net
Loss





(330,925)
(330,925)Balance,
December 31, 2006
11,000,000
$
  11,000
9,858,066
$       9,858
$1,415,774
$(945,703)
$  490,929Stock
issued for:-property
4,140,000
4,140


741,060

745,200-services


400,000
400
7,600

8,000Deemed
Dividend




(373,200)

(373,200)Net
Loss





(840,299)
(840,299)Balance,
December 31, 2007
15,140,000
$
   15,140
10,258,066
$        10,258
$1,791,234
$(1,786,002)
$30,630


See accompanying summary of accounting policies and notes to
financial statements. 10     EMPYREAN HOLDINGS,
INC. (A
Development Stage Company) NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)    NOTE 1 - BASIS OF
PRESENTATION Nature
of business: Empyrean Holdings, Inc. (Empyrean) was incorporated in Nevada on
December 30, 2004.  Empyrean is a development stage entity whose activities
to date have included business planning and capital raising activities and
limited purchases and sales of real estate. One of
its subsidiaries, Empyrean Staffing, Inc. took over the payroll processing
business of an affiliate early in the fourth quarter but due to unforeseen
circumstances, this arrangement had to be suspended in December 2007. The plans
to develop this subsidiary as a PEO (Professional Employers Organization) has
therefore been delayed and can only be reactivated when the funds required are
obtained. Empyrean Construction , Inc., a wholly owned subsidiary of Empyrean,
has  obtained its General Contractors license for the State of California.
The contingent approval of its license for the State of Nevada has been received
and the final approval is expected soon. Use of Estimates.  In
preparing financial statements, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities in the balance sheet and
revenue and expenses in the statements of income and expenses.  Actual
results could differ from those estimates.  Principles of Consolidation:
 The accompanying financial statements include the accounts of Empyrean and
it's wholly owned subsidiaries, Tradewinds International Corporation, Empyrean
Properties, Inc., Empyrean Construction, Inc. and Empyrean Staffing, Inc. All
significant inter-company balances and transactions with consolidated
subsidiaries have been eliminated in consolidation.  Cash and Cash Equivalents. For
purposes of the statements of cash flow, Empyrean considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.  Property and Equipment.
Property and equipment is stated at cost, net of accumulated depreciation.
 Depreciation is computed using the straight-line method over the estimated
useful lives of the respective assets, which range from three to seven
years.  Revenue Recognition: Revenue is
recognized when persuasive evidence of an arrangement exists, service has been
rendered, the sales price is fixed or determinable, and collectibility is
reasonably assured.  Income Taxes: Empyrean
recognizes deferred tax assets and liabilities based on differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that are expected to be in effect when the differences are
expected to be recovered. Empyrean provides a valuation allowance for deferred
tax assets for which it does not consider realization of such assets to be more
likely than not.    11    Share-Based
Compensation: Empyrean accounts for stock-based compensation issued to employees
and non-employees as required by SFAS No. 123 (R), "Accounting for Stock Based
Compensation." Under these provisions, Empyrean records expense over the related
service period based on the fair value of the awards at the date of grant.  Earnings Per Share: The basic
net loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding. Diluted net loss per common share
is computed by dividing the net loss adjusted on an "as if converted" basis, by
the weighted average number of common shares outstanding plus potential dilutive
securities. For the years ended December 31, 2007 and 2006, there were no
dilutive securities outstanding.  Recent Accounting
Pronouncements  In July 2006, the FASB issued
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48)
 an interpretation of FASB Statement No. 109, Accounting for Income Taxes
(SFAS No. 109) (FIN 48).  FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in accordance with SFAS No. 109 and
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a return. Guidance is also provided on de-recognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition. FIN 48 is effective for fiscal years beginning after December 15,
2006. Empyrean adopted the provisions of FIN 48 in 2007 and no material
uncertain tax positions were identified. Thus, the adoption of FIN 48 did not
have an impact on Empyreans financial statements.  In September 2006, the FASB
issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157
establishes a framework for measuring fair value under generally accepted
accounting procedures and expands disclosures on fair value measurements. This
statement applies under previously established valuation pronouncements and does
not require the changing of any fair value measurements, though it may cause
some valuation procedures to change. Under SFAS No. 157, fair value is
established by the price that would be received to sell the item or the amount
to be paid to transfer the liability of the asset as opposed to the price to be
paid for the asset or received to transfer the liability. Further, it defines
fair value as a market specific valuation as opposed to an entity specific
valuation, though the statement does recognize that there may be instances when
the low amount of market activity for a particular item or liability may
challenge an entitys ability to establish a market amount. In the instances
that the item is restricted, this pronouncement states that the owner of the
asset or liability should take into consideration what affects the restriction
would have if viewed from the perspective of the buyer or assumer of the
liability. This statement is effective for all assets valued in financial
statements for fiscal years beginning after November 15, 2007. Empyrean is
currently evaluating the impact of SFAS No. 157 on its financial position and
result of operations.  In February 2007, the FASB
issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS No. 159), which provides companies with an option to report
selected financial assets and liabilities at fair value. SFAS No. 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. SFAS No. 159 is effective as of the
beginning of an entitys first fiscal   12    year
beginning after November 15, 2007 with early adoption allowed. Empyrean has not
yet determined the impact, if any, that adopting this standard might have on its
financial statements.   NOTE 2 - GOING CONCERN  As shown in the accompanying
financial statements, Empyrean has incurred recurring net losses of $840,299 and
$330,925 in 2007 and 2006, respectively, and an accumulated deficit of
$1,786,002 as of December 31, 2007. These conditions raise substantial doubt
about Empyrean's ability to continue as a going concern. Management is trying to
raise additional capital through sales of common stock as well as seeking
financing from third parties. The financial statements do not include any
adjustments that might be necessary if Empyrean is unable to continue as a going
concern.  NOTE 3 ABANDONMENT OF REAL
ESTATE INVESTMENT PROPERTY  As previously reported, the Key
West condominium was lost through foreclosure action taken by Huck Finn, LLC,
the Note holder and mortgagee.  As of the date of these financial
statements, it is Empyreans understanding that the Key West Property had not
yet been sold by Huck Finn, LLC.  In connection with the Key West Property
foreclosure, Empyrean has removed both the Key West Property and Senior Secured
Note (including related default accruals) from its books and has recognized a
loss on abandoned real estate investment property of $139,095.  Recent appraisals of the Key
West Property indicate that it is valued between $468,900(in the case of a
forced or liquidation sale) and $521,000 (in the case of other than forced or
liquidation sale). It is therefore managements belief that, once sold, the
proceeds realized from the sale of the Key West Property should be sufficient to
settle the amount due under the foreclosure judgment. In the event that the
proceeds from the ultimate sale are not sufficient to cover the amount due under
the foreclosure judgment, Empyrean may be responsible for making up the
shortfall.  NOTE 4 - INCOME TAXES  Deferred
tax assets - NOLs $
607,000 Less:
valuation allowance (607,000) -------- Net
deferred taxes $
     - ========  Empyrean has net operating loss
carry-forwards of approximately $1,786,000 at December 31, 2007, which begin
expiring in 2025.  NOTE 5- EQUITY AND PURCHASE OF
REAL ASSETS   On June 2, 2006, 10,000,000
(200,000 on a split adjusted basis) restricted shares valued at $58,000 were
issued to William Melchiori as a signing bonus for him to serve as Director and
Chief Financial Officer of Empyrean Holdings, Inc. He also served as President
and Director of Empyrean's wholly owned subsidiary, Empyrean Financial Services,
Inc. and also as a Director of Empyrean's recently formed wholly owned
subsidiary, Empyrean Properties, Inc.  A 1:50 (one to fifty) reverse
split of Empyrean's common shares was implemented on June 26, 2006, resulting in
7,858,039 total outstanding common   13    shares.
All share and per share information has been retroactively restated in the
consolidated financial statements to reflect the reverse stock split.  On June 30, 2006, four town
homes valued at $772,000 were contributed and $226,334 in debt was canceled by
Hesperia Advisors Limited in exchange for 1,000,000 convertible preferred
shares. These shares are convertible any time by the holder for 4,000,000
post-split shares.  On December 11, 2006, 2,000,000
restricted common shares valued at $120,000 were issued to the two Directors and
officers of Empyrean as compensation for the extensive consulting services
provided during the year.  During June 2007, four real
estate properties located in Kewaskum, Wisconsin were purchased from Hesperia
Advisors Limited, a related party, for the agreed price of $372,000. These
unencumbered properties which had an appraised value of $405,000 were purchased
through the issuance of 4,140,000 convertible preferred shares. Each preferred
share is convertible to four common shares.  As the purchase price based on
the fair value of the preferred shares if converted was more than the actual
amount paid for the properties by $373,200, this amount recorded as a deemed
dividend to the recipients of the preferred shares.  NOTE 6  SALE OF REAL ASSETS  One of the four town homes
acquired on June 30, 2006 was sold for a net loss of $18,631. The net cash
amount of $168,368 was received on September 22, 2006. From the funds received
$160,000 was paid to Independent Management Resources, LLC to reduce Empyrean's
debt with this company.  One more unit of the three
remaining town homes was sold on December 21, 2006 for a net loss of $18,887
when compared to this unit's carrying value of $187,000. The net amount of
$168,113 obtained for this sale was received on December 22, 2006. Out of the
funds received, $32,000 was paid to Independent Management Resources, LLC to
settle fully Empyrean's debt with this company.  Due to the fact that the above
mentioned properties were sold for less than book value, Empyrean took a charge
of $11,500 to write down the remaining two town homes to market value.  In early August 2007, one of
the town homes in Kewaskum, Wisconsin was sold and the net proceeds of $166,962
were utilized as working capital. The sale resulted in a loss of $3,038 to the
company.  During October 2007, another
two of the town homes in Kewaskum, Wisconsin were sold for total net proceeds of
$316,844 which were use as working capital and to develop the companys
subsidiaries.  As the proceeds received were less than the original
carrying value of these assets, the company incurred a loss equal to the excess
book value of $78,738.  NOTE 7  PROPERTY &
EQUIPMENT  Property and equipment are
carried at cost and as of December 31, 2007, consists solely of furniture and
fixtures, computer equipment and software. Depreciation is provided using the
straight-line method for financial reporting purposes based on estimated useful
lives as shown in the table below. Accumulated depreciation as of December 31,
2007 amounted to $2,792.   14     Life (Years)
Cost
Accumulated
Depreciation
Net Book ValueFurniture &
fixtures
7
14,000
500
13,500Computer
Equipments
3
17,500
1,458
16,042Computer Softwares
3
10,000
834
9,167Total

41,500
2,792
38,708   The cost of asset additions and
improvements that extend the useful lives of property and equipment are
capitalized. Routine maintenance and repair items are charged to current
operations.   NOTE 8  NOTES RECEIVABLE AND
PAYABLE - RELATED PARTY  The company loaned Independent
Management Resources, LLC (IMR, LLC) $100,000 at the end of December 2006 that
yielded interest at 8 % per annum. During 2007, Empyrean advanced an additional
$97,000 and received payments of $46,500, resulting in a balance of $150,500.
This note receivable, plus $11,648 of accrued interest, was impaired at December
31, 2007 due to IMR, LLC filing for bankruptcy.  During the year ended December
31, 2007 Empyrean received advances from IMR, LLC of $216,385 and repaid
$98,000, resulting in a note payable balance of $118,385. This note payable
incurs interest at 8% per annum.  Advances made by Tom Bojadzijev
before his termination as a real estate consultant for Empyrean continues to
accrue interest at 8 % per annum. The amount of this note is $17,493 inclusive
of accrued interest through December 31, 2007.  During 2007, loans totaling
$16,000 were made by an officer to the company.  These advances incur
interest at a rate of 8% per annum.   NOTE 9 - COMPENSATION FOR
OFFICERS  For the extensive development
work provided by the two officers a total of $199,500 was paid as consulting
fees during the year. One officer, however, resigned his position as Director
and CFO in November 2007 and a replacement has yet to be obtained. The remaining
officer was issued 400,000 restricted shares vesting immediately in December
2007 as compensation for dealing with the extra work load. These shares had a
value, based upon the market price at date of grant, of $8,000, which was
expensed during 2007.   NOTE 10  RECLASSIFICATION  Certain amounts from 2006 have
been reclassified to agree with 2007 classifications  NOTE 11  LEASES  The current lease
agreement with Corporate Office Centers is for two 160 square foot offices
located at 11200 Westheimer Rd., Suite 900, Houston Texas, 77042. The term of
the lease is month to month and basic rental is $1,580 per month. Extra costs
averaging about $250 per month are incurred for other office services and
facilities.   15     The ECI office at
817 14th Street, Suite 200, Sacramento, California 95814 is leased
from Sterling Pacific Real Estate for $1,873 per month and the term is three (3)
years. The branch office at Las Vegas located at 3960 Howard Hughes Parkway,
Suite 500, Las Vegas, Nevada 89109 is leased on a month to month basis from
Regus Business Centers for $400 per month.     16     ITEM
8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND
FINANCIAL DISCLOSURE  None.  ITEM
8A. CONTROLS AND PROCEDURES  MANAGEMENTS
ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control
system was designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes, in accordance with generally accepted accounting principles. Because
of inherent limitations, a system of internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate due to change in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.  Our
management conducted an evaluation of the effectiveness of our internal control
over financial reporting using the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal
ControlIntegrated Framework. Based on its evaluation, our management concluded
that there is a material weakness in our internal control over financial
reporting. A material weakness is a deficiency, or a combination of control
deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the Companys annual or
interim financial statements will not be prevented or detected on a timely
basis. The
material weakness relates to the monitoring and review of work performed by our
Chief Financial Officer in the preparation of audit and financial statements,
footnotes and financial data provided to the Companys registered public
accounting firm in connection with the annual audit. All of our financial
reporting is carried out by our Chief Financial Officer, and we do not have an
audit committee. This lack of accounting staff results in a lack of segregation
of duties and accounting technical expertise necessary for an effective system
of internal control.  In
order to mitigate this material weakness to the fullest extent possible, all
financial reports are reviewed by the Chief Executive Officer as well as the
Board of Directors for reasonableness. All unexpected results are investigated.
At any time, if it appears that any control can be implemented to continue to
mitigate such weaknesses, it is immediately implemented. As soon as our finances
allow, we will hire sufficient accounting staff and implement appropriate
procedures for monitoring and review of work performed by our Chief Financial
Officer.   ITEM
8B. OTHER INFORMATION  None.     17    PART III  ITEM
9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT.  The
names, ages, and respective positions of the directors, officers, and
significant employees of the Company are set forth below.  Mr. Lee has held
his positions since March 2001 and there are no other person(s) who can be
classified as a promoter or controlling person of the Company. Mr. William
Melchiori a Director and CFO of the Company on resigned in November 2007 and has
yet to be replaced.  Robert
L. Lee, Director, President and CEO, Secretary and Treasurer   Age
65.  ITEM
10.  EXECUTIVE COMPENSATION.  (a) During
the year consulting fees of $199,500 was paid to two officers and 400,000
restricted common shares were issued to the remaining officer during December
2007. (b) (b)
There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors or employees of the corporation in the event of retirement
at normal retirement date pursuant to any presently existing plan provided or
contributed to by the corporation or any of its subsidiaries.   ITEM
11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  The
majority shareholder, Hesperia Advisors Limited owns 5,000,000 shares or 48.74 %
of the issued and outstanding common shares. Hesperia also 5,140,000 convertible
Preferred shares (1 preferred to 4 common) and Aegis Capital Corp owns another
10,000,000 Preferred shares.  As
on December 31, 2007, only two other persons or entities own more than 5 % of
the Companys shares as shown below:  Robert
L. Lee owns 1,614,000 common shares or 15.73 % and William Melchiori owns
1,235,336 common shares or 12.04 % of the issued and outstanding common
shares.   ITEM
12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.  INCLUDE LIST OF DIRECTORS, COMMITTEES ON WHICH THEY SERVE
AND IF THEY ARE INDEPENDENT DIRECTORS-  Other
than as set forth in Item 7, there are no relationships, transactions, or
proposed transactions to which the registrant was or is to be a party, in which
any of the named persons set forth in Item 404 of Regulation SB had or is to
have a direct or indirect material interest.    18    ITEM
13.  EXHIBITS  Exhibit No.
Document
Location3.1
Articles
of Incorporation
Incorporated
by Reference3.2
Bylaws
Incorporated
by Reference31.1 and 31.2
Certifications
per Rule 13a-14(a)/15d-14(a)
Included32.1 and 32.2
Certifications
per Section 1350
Included  ITEM14.
 PRINCIPAL ACCOUNTANT FEES AND SERVICES.  1. Audit
Fees: Aggregate
fees billed for each of the last two (2) fiscal years for professional services
rendered by the principal accountant for the audit of the annual financial
statements and review of financial statements included on Form 10-QSB:  2006: $29,157 2007: $31,380  2. Audit-Related
Fees: Aggregate
fees billed in each of the last two (2) fiscal years for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit or review of the financial statements and are not
reported previously.  2006: $0 2007: $0  3. Tax
Fees: Aggregate
fees billed in each of the last two (2) fiscal years for professional services
rendered by the principal accountant for tax compliance, tax advice, and tax
planning.  2006: $0 2007: $0  4. All
Other Fees: Aggregate
fees billed in each of the last two (2) fiscal years for products and services
provided by the principal accountant, other than the services previously
reported.  2006: $0 2007: $0  5. Audit
Committee Pre-Approval Procedures.  The Board of Directors has not, to
date, appointed an Audit Committee.   19     SIGNATURES  In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.  EMPYREAN
HOLDINGS, INC.  /s/
Robert L. Lee_ Robert
L. Lee, President and CEO Date:  April
14 2008  In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.  /s/
Robert L. LeeRobert
L. Lee, President and CEODate:
 April 14, 2008    20