UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                 Form 10-QSB


    [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended April 30, 2005

    [ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
         THE EXCHANGE ACT

         For the transition period from _______________ to _______________


                      Commission File Number: 000-30794


                     INTEGRATED PERFORMANCE SYSTEMS, INC.
      -----------------------------------------------------------------
      (Exact name of small business issuer as specified in its charter)


             New York                               11-3042779
    ------------------------            ---------------------------------
    (State of incorporation)            (IRS Employer Identification No.)

       901 Hensley Lane Wylie, Texas                      75098
 ----------------------------------------               ----------
 (Address of principal executive offices)               (Zip Code)

                                (972) 771-1930
                         ---------------------------
                         (Issuer's telephone number)


      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 [  ]

      At June 2, 2005 there were 61,003,230 shares of the issuer's common
 shares outstanding.

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

<PAGE>

                                GENERAL INDEX
                                                                     Page
                                                                    Number
----------------------------------------------------------------------------


                                 PART I -
                           FINANCIAL INFORMATION


 ITEM 1.   FINANCIAL STATEMENTS..................................     3

 ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR
           PLAN OF OPERATION.....................................    18

 ITEM 3.   CONTROLS AND PROCEDURES...............................    21


                    PART II - OTHER INFORMATION

 ITEM 1.   LEGAL PROCEEDINGS.....................................    22

 ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND
           USE OF PROCEEDS ......................................    22

 ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.......................    23

 ITEM 5.   OTHER INFORMATION.....................................    23

 ITEM 6.   EXHIBITS..............................................    23

 SIGNATURES......................................................    24

 EXHIBIT INDEX...................................................    25

<PAGE>

                     PART 1 - FINANCIAL INFORMATION

 ITEM 1.  FINANCIAL STATEMENTS

                     INTEGRATED PERFORMANCE SYSTEMS, INC.

                          Consolidated Balance Sheet
                                 (Unaudited)

 ============================================================================

                                                     April 30,
                                                        2005
                                                    ------------
 ASSETS
 Current assets:
   Cash                                            $   1,193,456
   Trade accounts receivable, net                      4,417,962
   Other receivables                                       9,467
   Inventory                                           1,921,376
   Deferred income tax asset                             124,138
   Income tax receivable                                 551,090
                                                    ------------
         Total current assets                          8,217,489
                                                    ------------

 Property and equipment, net                           2,071,996
                                                    ------------
 Other assets:
   Goodwill                                            8,590,656
   Customer Base, net of accumulated
     amortization of $225,854                          4,110,537
   Other                                                 135,007
                                                    ------------
                                                      12,836,200
                                                    ------------
         Total assets                              $  23,125,685
                                                    ============

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
   Accounts payable                                $   2,837,234
   Accrued expenses (including $133,333
     interest to related party)                        1,696,375
   Line of credit                                      1,855,560
   Notes payable, current portion                        730,691
   Notes payable to related party                      3,200,000
                                                    ------------
         Total current liabilities                    10,319,860
                                                    ------------
 Noncurrent liabilities:
   Notes payable, net of current maturities               17,079
   Notes payable to related party                      1,000,000
   Deferred income tax liability                       1,732,864
                                                    ------------
      Total long-term liabilities                      2,749,943
                                                    ------------
 Stockholders' equity:
 Preferred stock; par value $0.01; 10,000,000
   shares authorized
   Series F Convertible; $1,000 per share
     redemption, 300,000 shares authorized,
     193,829 shares issued and outstanding                 1,938
 Common stock; par value $0.01; 100,000,000 shares
   authorized, 58,603,230 shares issued
   and outstanding                                       586,032
 Additional paid-in capital                            5,811,699
 Retained Earnings                                     3,656,213
                                                    ------------
     Total stockholders' equity                       10,055,882
                                                    ------------

     Total liabilities and stockholders' equity    $  23,125,685
                                                    ============

                 The accompanying notes are an integral part
                  of this consolidated financial statement.

<PAGE>

                     INTEGRATED PERFORMANCE SYSTEMS, INC.

                    Consolidated Statements of Operations
                                 (Unaudited)

 =============================================================================

                               Three        Three        Nine         Nine
                           Months Ended Months Ended Months Ended Months Ended
                             April 30,    April 30,    April 30,    April 30,
                               2005         2004         2005          2004
                            -----------  -----------  -----------  -----------

 Net sales                  $ 8,615,430  $ 6,660,727  $22,972,423  $16,292,972

 Cost of sales                6,830,199    5,597,009   18,817,357   13,690,984
                             ----------   ----------   ----------   ----------
 Gross profit                 1,785,231    1,063,718    4,155,066    2,601,988
                             ----------   ----------   ----------   ----------

 Selling, general and
   administrative expenses    1,379,771      614,017    3,380,887    2,002,820
 Amortization of customer
   base                         135,512            -      225,854            -
                             ----------   ----------   ----------   ----------
                              1,515,283      614,017    3,606,741    2,002,820
                             ----------   ----------   ----------   ----------
 Income from operations         269,948      449,701      548,325      599,168
                             ----------   ----------   ----------   ----------
 Other income (expense):
   Interest expense             (62,978)     (17,946)    (143,012)     (47,691)
   Interest expense
     related party              (80,000)           -     (133,333)           -
   Interest income                   70            7          226          119
   Other income                   6,700        5,925       21,685      136,306
                             ----------   ----------   ----------   ----------
                               (136,208)     (12,014)    (254,434)      88,734
                             ----------   ----------   ----------   ----------
 Income before provision
   for income taxes             133,740      437,687      293,891      687,902

 Provision for income taxes      39,293      161,932      110,566      262,126
                             ----------   ----------   ----------   ----------
 Net income                 $    94,447  $   275,755  $   183,325  $   425,776
                             ==========   ==========   ==========   ==========
 Net income per share
   Basic                    $      0.00  $      0.02  $      0.00  $      0.03
                             ==========   ==========   ==========   ==========
   Diluted                  $      0.00  $      0.02  $      0.00  $      0.03
                             ==========   ==========   ==========   ==========
 Weighted average common
 shares outstanding
   Basic                     58,209,972   16,678,515   43,652,166   15,727,469
                            ===========   ==========  ===========   ==========
   Diluted                  282,438,972   16,678,515  172,621,957   15,727,469
                            ===========   ==========  ===========   ==========


                 The accompanying notes are an integral part
                 of these consolidated financial statements.

<PAGE>

                     INTEGRATED PERFORMANCE SYSTEMS, INC.

                    Consolidated Statements of Cash Flows
                                (Unaudited)

 ============================================================================

                                                  Nine Months Ended April 30,
                                                  ---------------------------
                                                      2005           2004
                                                  ------------   ------------
 Cash flows from operating activities:
 Net income                                      $     183,325  $     425,776
   Adjustments to reconcile net income to net
   cash provided by operating activities:
     Depreciation and amortization                     808,663        607,344
     Stock based compensation                           89,000              -
     Deferred tax expense                               58,613        262,126
     Changes in operating assets and liabilities:
       Trade accounts receivable                      (641,351)    (1,051,531)
       Other receivables                                (7,311)             -
       Inventory                                       (79,173)      (849,720)
       Income tax receivable                                 -         57,505
       Other assets                                    (50,387)        10,334
       Bank overdraft                                        -              -
       Accounts payable                                565,455        849,950
       Accrued expenses                                362,774       (136,969)
                                                  ------------   ------------
     Net cash provided by operating activities       1,289,608        174,815
                                                  ------------   ------------
 Cash flows from investing activities:
   Cash acquired through merger                         78,763              -
   Merger costs                                       (209,805)             -
   Acquisition of property and equipment              (199,451)      (198,099)
                                                  ------------   ------------
     Net cash used in investing activities            (330,493)      (198,099)
                                                  ------------   ------------
 Cash flows from financing activities:
   Payments on long-term debt                         (967,191)      (326,801)
   Net advances from related parties                    37,972        162,028
   Line of credit                                      945,560        283,194
                                                  ------------   ------------
     Net cash provided by financing activities          16,341        118,421
                                                  ------------   ------------
 Increase in cash                                      975,456         95,137

 Cash, beginning of period                             218,000        195,319
                                                  ------------   ------------
 Cash, end of period                             $   1,193,456  $     290,456
                                                  ============   ============


                 The accompanying notes are an integral part
                 of these consolidated financial statements.

<PAGE>

                     Integrated Performance Systems, Inc.
              Notes to Interim Consolidated Financial Statements
                                April 30, 2005
                                 (Unaudited)

 NOTE 1 - BASIS OF PRESENTATION

 UNAUDITED FINANCIAL INFORMATION

 The unaudited condensed consolidated financial statements have been prepared
 by Integrated Performance Systems, Inc. and its subsidiaries (the  "Company"
 or "IPS"),  pursuant to  the rules  and regulations  of the  Securities  and
 Exchange  Commission  and  reflect  all  adjustments  consisting  of  normal
 recurring entries, which, in  the opinion of the  Company,  are necessary to
 present fairly the results for the  interim periods.  Results of  operations
 for the periods presented are not  necessarily indicative of the results  to
 be expected for the year ending July 31, 2005.

 These financial statements should be read in conjunction with the  financial
 statements and notes  thereto contained in  the Company's  Form 8-K/A  dated
 November 24, 2004, filed on February 7, 2005.


 NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

 Inventory
 ---------

 Inventory consists of finished goods, work in process and raw materials  and
 is priced at lower of cost or market (determined product by product based on
 management's knowledge  of  current  market conditions  and  existing  sales
 levels).  Cost of raw materials  is determined on a weighted average  basis;
 cost of work  in process  and finished  goods is  determined using  specific
 identification.  At April 30, 2005,  inventory consisted of $775,648 in  raw
 materials, $1,063,209 in work  in process, and  $160,482 in finished  goods,
 less a valuation allowance of $77,963.

 Revenue recognition
 -------------------

 The Company recognizes revenue as products are shipped.

 Stock based compensation
 ------------------------

 The  Company  accounts  for  employee  stock  options  in  accordance   with
 Accounting Principles Board Opinion  No. 25 (APB  25), Accounting for  Stock
 Issued to Employees, and Financial Accounting Standards Board Interpretation
 No. 44, Accounting  for Certain Transactions  Involving Stock  Compensation,
 and  interpretation  of  APB Opinion  No.  25.  Under  APB 25,  the  Company
 recognizes no compensation  expense related  to employee  or director  stock
 options when options are granted with  exercise prices at, or in excess  of,
 the fair value of the stock on the date of grant.

 The Company  has  adopted the  disclosure-only  provisions of  Statement  of
 Financial Accounting Standards No. 123 (FAS 123), Accounting for Stock-Based
 Compensation, and Statement of Financial  Accounting Standards No. 148  (FAS
 148), Accounting for Stock-Based Compensation - Transition and Disclosure  -
 an Amendment of FASB Statement  No. 123.  Under  the provisions of FAS  123,
 compensation expense is recognized based on the fair value of options on the
 grant date.

 The following  tables illustrate  the effect  on net  income (loss)  if  the
 Company had applied the fair value recognition provision of FAS 123 to stock
 based compensation:

                                  For the Three Months    For the Nine Months
                                     Ended April 30,        Ended April 30,
                                 --------------------------------------------
                                     2005       2004        2005       2004
                                 --------------------------------------------
 Net income, as reported        $    94,447  $ 275,755   $ 183,325  $ 425,776
 Less stock based compensation
 expense determined under fair
 value method                             -          -    (955,733)         -
                                 --------------------------------------------
 Net income (loss), pro forma   $    94,447  $ 275,755   $(772,408) $ 425,776
                                 ============================================

 Basic earnings per share -
   as reported                  $     0.00   $    0.02   $   0.00   $   $0.03
                                 ============================================

 Basic earnings per share -
   pro forma                    $     0.00   $    0.02   $  (0.02)  $   $0.03
                                 ============================================

 Earnings per share
 ------------------

 Basic net income per share is computed using the weighted average number  of
 common shares outstanding during the period.  Diluted  net income per  share
 is computed using the  weighted average number of  common and, if  dilutive,
 potential  common shares  outstanding during  the period.  Potential  common
 shares consist of the incremental common  shares issuable upon the  exercise
 of stock options and the conversion  of the Company's convertible  preferred
 stock and notes payable.

 The following table sets forth the  reconciliation of basic and diluted  net
 income (loss) per share:

                                  For the Three Months    For the Nine Months
                                     Ended April 30,        Ended April 30,
                                 ---------------------------------------------
                                     2005       2004        2005        2004
                                 ---------------------------------------------
 Net income, as reported        $   94,447  $  275,755  $  183,325  $  425,776
   Interest on convertible
   notes payable to related
   party                            80,000      -                         -
                                 ---------------------------------------------
 Net income, diluted            $  174,447  $  275,755  $  316,658  $  425,776
                                 =============================================
 Weighted average common
 shares outstanding - basic     58,209,972  16,678,515  43,652,166  15,727,469

   Convertible note payable      2,400,000       -       1,397,802       -
   Convertible notes payable
     to related party           28,000,000       -      16,102,564       -
   Convertible preferred stock 193,829,000       -     111,469,425       -
                               -----------------------------------------------
 Weighted average common
 shares outstanding - diluted  282,438,972  16,678,515 172,621,957  15,727,469
                               ===============================================

 Basic  income per share           $  0.00     $  0.02     $   0.00    $  0.03
                               ===============================================

 Diluted  income per share         $  0.00     $  0.02     $   0.00    $  0.03
                               ===============================================

 The Company currently does not have a sufficient number of authorized shares
 of common  stock to  allow for  the  conversion of  all of  its  outstanding
 convertible securities.

 Recent Accounting Pronouncements
 --------------------------------

 In December  2004, the  FASB issued  SFAS No.  123R, "Share-Based  Payment,"
 which requires companies  to recognize in  the statement  of operations  all
 share-based  payments  to  employees, including  grants  of  employee  stock
 options based on their fair values.  Accounting for share-based compensation
 transactions  using  the   intrinsic  method  supplemented   by  pro   forma
 disclosures will no longer be permissible. In April 2005, the Securities and
 Exchange Commission issued a  ruling that SFAS No.  123(R) is now  effective
 for annual, rather than interim periods that begin for small pubic  entities
 after December 15, 2005.  The Company has not yet completed its analysis  of
 the impact of adopting SFAS 123R.


 NOTE 3 - CONCENTRATIONS OF RISK

 At April 30,  2005, four customers  accounted for approximately  59% of  the
 total accounts receivable and for the three and nine months ended April  30,
 2005, these customers accounted for approximately 50% and 51% of net  sales,
 respectively.


 NOTE 4 - MERGER WITH BEST CIRCUIT BOARDS, INC.

 On November 24, 2004,  a wholly owned  subsidiary of Integrated  Performance
 Systems, Inc.  merged  with  Best Circuit  Boards,  Inc.,  d/b/a  Lone  Star
 Circuits ("LSC"), resulting  in LSC becoming  a wholly  owned subsidiary  of
 IPS.  The  beneficial  owner of  LSC acquired  controlling interest  in  the
 Company and the  Company has therefore  determined that  the  transaction be
 accounted for as a reverse merger.  The transaction has been treated  as  if
 LSC  acquired  the  Company  and,  consequently,  the  historical  financial
 statements of LSC  have become the historical  financial  statements of  the
 Company for all periods presented.

 IPS is  a  printed  circuit board  and  electronics  component  manufacturer
 located in Frisco, Texas; LSC is  a fabrication services company located  in
 Wylie, Texas,  engaged  in time sensitive,  high technology prototypes,  and
 is  a  manufacturer  of complex  electronic circuit boards.  IPS's corporate
 headquarters have been moved to LSC's  101,000 square foot facility  located
 in Wylie, Texas.  See Note 12.

 The significant terms of the merger were as follows:

   *  LSC Asset Acquisition Corp. (a wholly owned subsidiary of LSC) acquired
      all of the assets and  some, but not all,  of the liabilities of  three
      IPS subsidiaries (North Texas PC Dynamics, Inc. ("NTPCD"),  Performance
      Application Technologies,  Inc. ("PAT"),  and Performance  Interconnect
      Corp. of North Texas, Inc. ("PI").  These three subsidiaries  comprised
      substantially all  of  the business  operations  of IPS  prior  to  the
      merger.

   *  Immediately subsequent to the asset sales  above, the Company sold  its
      100% ownership interest in NTPCD, PAT, and PI to Integrated Performance
      Business Services Corp.  ("IPBSC"), an entity  controlled by D.  Ronald
      Allen, former  chief  executive officer,  controlling  shareholder  and
      director of the Company.  These entities held liabilities having a book
      value of $748,653.

   *  IPS issued $4.2  million in  convertible promissory  notes and  193,829
      shares  of  IPS  Series  F  Convertible  Preferred  Stock,  subject  to
      adjustment to  represent 67.25%  of  the Company's  outstanding  common
      stock, to  the beneficial  owner of  LSC in  exchange for  100% of  the
      outstanding shares of LSC.

   *  Associates Funding Group and CMLP  Group, Ltd., entities controlled  by
      D. Ronald  Allen,  agreed to  contribute  8,634,000 shares  of  Company
      common stock to the Company.

   *  D. Ronald  Allen entered  into a  stock escrow  and security  agreement
      whereby  10,851,832  shares of IPS common stock beneficially  owned  by
      him  were  placed  into escrow as security for (1) advances made by LSC
      to IPS prior to the  closing of the merger,  (2) the Company's and  Mr.
      Allen's indemnification obligations under the merger agreement, and (3)
      the convertible promissory notes issued to the beneficial owner of LSC.
      The merger agreement  provides that the  shares used  to satisfy  those
      obligations be  valued  based  on a  future  equity  financing  of  the
      Company.   As  of  the date  of  filing  of this  report,  that  equity
      financing has not occurred.

   *  Brad  Jacoby,  the  beneficial  owner  of  LSC,  became  the   majority
      shareholder, Chief Executive Officer, and sole director of the Company.

 Series F Convertible Preferred Stock
 ------------------------------------

 The terms of the merger agreement provide for the issuance of 193,829 shares
 of Series F Convertible Preferred Stock, subject to adjustment as  discussed
 below,  to the beneficial owner  of  LSC as part  of the  consideration  for
 100%  of the  outstanding common stock of LSC.  The terms  of the  Series  F
 Convertible Preferred Stock contain no mandatory redemption provisions.  The
 liquidation value per  share is equal  to the value  of LSC  divided by  the
 number of outstanding shares of Series F Convertible Preferred Stock, and is
 payable prior to  any distribution to  the holders of  the Company's  common
 stock.  Holders of the Series  F Convertible Preferred Stock have the  right
 to convert  the preferred  shares into  common  shares at  the rate  of  one
 thousand shares  of common  stock for  each share  of Series  F  Convertible
 Preferred Stock outstanding.  Holders of the Series F Convertible  Preferred
 Stock  are  entitled  to  one  thousand  votes  for  each  share  of  Series
 F Convertible Preferred  Stock  held.  The  merger  agreement  provides  for
 adjustment to the number of Series F Convertible Preferred Stock issuable to
 the beneficial owner  of LSC based  upon a subsequent  determination of  the
 number of  shares of  Series  F Preferred  Stock  necessary to  provide  the
 beneficial owner  of LSC  with the  equivalent of  67.25% of  the  Company's
 outstanding common  stock, after  an equity  financing contemplated  by  the
 merger agreement.  As  of the  date of filing  of this  report, that  equity
 financing has not occurred.

 Convertible Promissory Notes
 ----------------------------

 Other  terms  of  the  merger  include  the  issuance  of  $4.2  million  in
 convertible promissory notes (the "Notes") to the beneficial owner of LSC as
 part  of the  merger consideration.  The Notes are  convertible into  common
 stock at any time  at a conversion price  of $.15  per share.  Notes in  the
 principal amount of $3.2 million bear 8% interest payable monthly,  with the
 principal balance originally due February 28, 2005, subsequently renewed and
 extended to July 31, 2005.  (See Note 8 below regarding subsequent renewal).
 A note in the principal amount of $1 million bears 8% interest payable semi-
 annually, with the principal balance due in  November 2007.  The  notes  are
 secured by all assets of the Company and of LSC, by the outstanding stock of
 LSC and by the Company capital stock beneficially owned by  D. Ronald Allen.
 The  issuance  of the Notes  has  been  accounted  for as a  distribution of
 capital in the amount of $4.2 million.

 Employment Agreement
 --------------------

 Prior to  consummating the  merger, the  Company entered  into a  consulting
 agreement with  Mr. Jacoby  to manage  the  Company.  This  arrangement  was
 superseded by a three year employment agreement as CEO effective December 1,
 2004.

 Stock Escrow and Security Agreement
 -----------------------------------

 In connection with the merger,  D. Ronald Allen delivered 10,851,832  shares
 of common stock beneficially  owned by him into  escrow as security  for (1)
 advances made by LSC to the Company prior to the closing of the merger,  (2)
 the Company's and Mr. Allen's  indemnification obligations under the  merger
 agreement, and (3) the convertible promissory notes issued to the beneficial
 owner of LSC.  The term of  the stock escrow and security agreement  expires
 on November 24, 2006.  The former  beneficial owner of LSC was also  granted
 the right to vote these shares for the duration of the escrow agreement.

 Contribution of Common Shares
 -----------------------------

 In connection  with  the  merger,  entities  controlled  by  D. Ronald Allen
 contributed 8,634,000 shares of common stock into the Company's treasury  at
 fair value in the amount of $949,740.  The treasury shares  were canceled in
 February 2005.

 Commitments and Contingencies
 -----------------------------

 See Notes 8  and 12 for  a description of  certain contingencies arising  in
 connection with the merger.

 Merger Accounting
 -----------------

 The merger was accounted for using the purchase method of accounting and LSC
 has been determined to be the accounting acquirer.  Accordingly, a new basis
 was established for IPS's assets and liabilities based upon the fair  values
 thereof.  The  purchase  price  was  determined to be $10,487,993 based upon
 the  fair value  of  IPS on the  transaction measurement  date ($10,278,188)
 plus acquisition  costs totaling  $209,805.  The  measurement date  for  the
 transaction was October 22,  2004, the date  a substantially revised  merger
 agreement was signed  and  announced.  The fair value of IPS was  determined
 based upon the  quoted market  price per share  times the  number of  common
 shares outstanding on October 22, 2004.

 The preliminary purchase price allocation to the fair value of the IPS
 assets and liabilities is as follows:

 Cash                                             $     78,763
 Accounts receivable                                   705,736
 Inventory                                             425,143
 Property and equipment                                607,173
 Goodwill                                            8,764,536
 Customer base                                       4,336,391
 Other assets                                           32,911
                                                   -----------
      Total assets acquired                         14,950,653

 Accounts payable and accrued expenses               1,546,897
 Deferred income taxes                               1,597,618
 Notes payable                                       1,318,145
                                                   -----------
      Total liabilities assumed                      4,462,660
                                                   -----------
                                                  $ 10,487,993
                                                   ===========

 The purchase  price allocation  has not  been finalized  and is  subject  to
 change based upon the outcome of the July 2005 trial related to the  Frisco,
 Texas lease modification agreement (see Note  12).  An unfavorable  decision
 regarding the effectiveness  of the lease  modification could  result in  an
 increase in the allocation to liabilities assumed in the merger.

 Customer base was recorded as a result  of the merger and will be  amortized
 over a period of eight years. The fair value of customer base was determined
 using estimated discounted future cash flows.  Estimated future amortization
 expense for the years ended July 31, is as follows:

                     2005           $    361,366 *
                     2006                542,049
                     2007                542,049
                     2008                542,049
                     2009                542,049
                     Thereafter        1,806,829
                                     -----------
                     Total          $  4,336,391
                                     ===========

      * Includes the $225,854 expense recorded for the nine months ended
        April 30, 2005.

 Pro Forma Results of Operations
 -------------------------------

 The following unaudited pro forma consolidated  results  of operations  have
 been prepared as if the Best Circuit Boards, Inc. merger discussed above had
 occurred on August 1, 2003:

                         For the Three Months         For the Nine Months
                            Ended April 30,             Ended April 30,
                       ------------------------    ------------------------
                          2005          2004          2005          2004
                       ----------------------------------------------------
 Revenues
   As reported        $ 8,615,430   $ 6,660,727   $22,972,423   $16,292,972

   Pro forma          $ 8,615,430   $ 8,105,795   $25,048,341   $20,279,496

 Net Income (loss)
   As reported        $    94,447   $   275,755   $   183,325   $   425,776

   Pro forma          $    94,447   $   315,459   $(1,067,975)  $(4,035,045)

 Earnings (loss)
 per share - Basic
   As reported        $      0.00   $      0.02   $      0.00   $      0.03

   Pro forma          $      0.00   $      0.02   $     (0.02)  $     (0.26)

 The proforma net loss for the nine months ended April 30, 2004,  includes  a
 non-recurring impairment charge of $1,710,472 incurred  by IPS prior  to the
 merger.  The proforma net loss for the three and nine months ended April 30,
 2004 included a non-recurring gain on the sale of subsidiaries in the amount
 of $935,422 realized by IPS prior to the merger.


 NOTE 5 - INCOME TAXES

 The income tax provision for the three and nine month periods ended April
 30, 2005 consists of the following:

                                                       Three         Nine
                                                       Months       Months
                                                      --------     --------
 Current expense                                     $  51,953    $  51,953
 Deferred expense (benefit)                            (12,660)      58,613
                                                      ---------------------
                                                     $  39,293    $ 110,566
                                                      =====================

 Significant temporary differences used in the computation of deferred tax
 assets and liabilities at April 30, 2005 are as follows:

 Deferred tax assets, current
   Allowance for bad debts                         $     5,032
   Accrued vacation                                     90,383
   Inventory reserves                                   28,723
                                                    ----------
                                                   $   124,138
                                                    ==========

 Deferred tax assets (liabilities), non-current
 Depreciation of property and equipment            $  (236,176)
 Other                                                  17,721
 Net operating loss carry forwards                   6,377,391
 Valuation allowance                                (6,377,391)
 Customer base                                      (1,514,409)
                                                    ----------
                                                   $(1,732,864)
                                                    ==========

 At April 30,  2005, the Company  had tax net  operating loss carry  forwards
 (NOLs)  of  approximately $17,310,000  that begin  to expire  in  2018.  The
 utilization of these NOLs  is limited due  to the change  in ownership of  a
 majority of the  outstanding shares  of IPS.  During the  nine months  ended
 April 30, 2005, the Company utilized NOL's totaling $471,960, resulting in a
 decrease in the valuation allowance in the amount of $173,880.  The decrease
 to the valuation allowance was recorded as an adjustment to goodwill as  the
 allowance was originally recorded in connection with the merger.

 In assessing the  realization of deferred  tax assets, management  considers
 whether it is  more likely  than not that some  or all of  its deferred  tax
 assets  will  not be  realized.  The ultimate  realization of  deferred  tax
 assets is dependent upon the existence of, or generation of, taxable  income
 in  the  periods  in  which  those  temporary  differences  are  deductible.
 Management considers  the scheduled  reversal of  deferred tax  liabilities,
 projected future taxable income and tax  planning strategies in making  this
 assessment.  Based upon historical taxable income and projections of  future
 taxable  income  over  the  periods  which  the  deferred  tax  assets   are
 deductible, management does  not believe that  further valuation  allowances
 are necessary as of April 30, 2005.


 NOTE 6 - LINE OF CREDIT

 Effective August 26, 2003,  the Company  entered into a  $2 million line  of
 credit agreement ("LOC") with a bank, which was due on demand, bore interest
 at the  bank's prime  rate plus  1%  (6.5%  at April 30, 2005)  and  matured
 October 15, 2004.  As of  March 17, 2005, the  LOC was renewed and  extended
 until October 31, 2006.  The LOC  is subject to certain financial and  other
 covenants, is collateralized by all of the Company's accounts receivable and
 inventory, and is  guaranteed by the  Company's majority stockholder,  chief
 executive officer  and sole  director.  At  April 30, 2005,  $1,855,560  was
 outstanding under this LOC.


 NOTE 7 - NOTES PAYABLE

   Long-term debt consists of the following at April 30, 2005:

   Note payable to financial institution payable in monthly
   installments of $7,185 including interest
   at 6.75%, matures March 31, 2006, collateralized
   by equipment                                                   $   75,046

   Note payable to bank, payable in monthly
   installments of $17,450 including interest
   at 5.75%, matures August 29, 2005, collateralized
   by equipment                                                      68,960

   Note payable to individual A, accruing interest at
   24%, unsecured, in default as of June 20, 2004                   117,858

   Note payable to individual B, accruing interest at
   24%, unsecured, in default as of August 4, 2004                   50,000

   Convertible note payable to individual C, accruing interest at
   12%, unsecured, in default as of September 27, 2004               15,000

   Note payable to individual D, accruing interest at
   24%, unsecured, in default as of April 15, 2005                   45,000

   Note payable to Company E, accruing interest at
   8%, unsecured, maturing December 31, 2005
   (see below)                                                       73,035

   Convertible note payable to Company F, accruing interest
   at 8%, unsecured, in default as of November 22, 2004
   (see below)                                                      277,909

   Other                                                             24,962
                                                                   --------
                                                                    747,770
          Less current maturities of long-term debt                 730,691
                                                                   --------
          Total long-term debt, less current maturities           $  17,079
                                                                   ========

 Subsequent to  April 30,  2005,  the Company  settled  the note  payable  to
 Company E  for $60,000,  payable $15,000  upon execution  of the  settlement
 agreement plus three monthly installments of $15,000.

 The convertible note payable to Company F was  in default as of November 22,
 2004.  The original face value  of the note  was  $250,000.  On November 22,
 2004, under provisions provided in  the agreement, the noteholders  demanded
 payment in  the amount  of  125% of  the  outstanding principal  balance  of
 $222,327, bringing  the demand  amount to  $277,909, plus  accrued  interest
 through October 31, 2004 of $15,222.

 Under the terms of  the agreement, the per  diem interest after October  31,
 2004 was $49.41 plus an additional  $5,000 monthly penalty for the first  90
 days,  increasing  to  $10,000  per  month  thereafter.   Additionally,  the
 noteholder demanded that  10,000 shares  of common  stock be  issued to  the
 noteholder per the default  provisions.  As of  April 30, 2005, the  Company
 had accrued unpaid interest and penalties  in the amount of $69,165  related
 to this debt and had not issued the demanded shares of common stock.

 The terms of this  note allowed for the  conversion of the  debt, up to  the
 full principal amount, into common shares at the option  of the holder.  The
 number of common shares into which this debt could be converted was equal to
 the dollar amount  of the principal  being converted  multiplied by  eleven,
 minus the product of the conversion  price multiplied by six and  two-thirds
 times the dollar  amount of the  principal being converted,  and the  entire
 foregoing result divided by the conversion price.  The conversion price  was
 equal to the  lesser of  $1.50 or eighty  percent of  the average  of the  5
 lowest volume weighted average prices during  the twenty trading days  prior
 to the holder's election to convert.

 Subsequent to April 30,  2005, the Company settled  this note and all  other
 obligations to the noteholder for $200,000 in cash and the conversion of the
 note into  2,400,000  shares  of common  stock,  with  certain  registration
 rights. A  warrant  to  purchase  1,666,666  common  shares  issued  to  the
 noteholder was  also cancelled.  The dilutive effects  of the common  shares
 have been considered in the computation of diluted earnings per share above.


 NOTE 8 - NOTES PAYABLE TO RELATED PARTY

 On  November 24, 2004,  the  Company  issued  $4.2  million  in  convertible
 promissory notes (the "Notes") to the beneficial owner of LSC as part of the
 consideration in the merger.  As a  result of the merger, Mr. Jacoby  became
 the majority shareholder, chief executive officer  and sole director of  the
 Company.  The  Notes are  convertible into  common stock  at any  time at  a
 conversion price of $.15 per share.  Notes in the principal amount  of  $3.2
 million bear  interest at  8% payable  monthly, with  the principal  balance
 originally  due February 28, 2005.  A note  in  the principal  amount of  $1
 million bears 8% interest payable semi-annually, with the principal  balance
 due in November 2007.  The  Notes are secured by  all assets  of the Company
 and LSC, by the outstanding  stock of LSC and  by the Company capital  stock
 owned by D. Ronald Allen.  As of April 20, 2005, the $3.2 million notes have
 been  extended to  July 31, 2005.  Interest expense  related to these  notes
 totaled $80,000 and $133,333 for the  three and nine months ended April  30,
 2005.

 The Company is in the process of negotiating the extension or conversion  of
 $3.2 million  of the notes.  No assurance can be given that the Company will
 be successful  in negotiating  this extension  or  conversion or  that  such
 extension or conversion would be on terms favorable to the Company.  In  the
 event that the  Company is  unsuccessful in  extending the  $3.2 million  of
 notes or converting the notes into shares of common stock, Mr. Jacoby  could
 demand  payment  of  the  notes  and  exercise  his  security  interests  in
 substantially all  of our assets.  The exercise of these security  interests
 would leave insufficient assets  to continue our  operations.  These  events
 would have a material  adverse effect on  our business, financial  condition
 and results of operations.


 NOTE 9 - RELATED PARTY TRANSACTIONS AND GUARANTEES

 Prior to the  merger described  in Note 4  above, LSC  leased its  operating
 facilities from JACCO  Investments, an entity  owned by LSC's  (and now  the
 Company's) majority shareholder and CEO.

 Prior to the merger,  LSC has guaranteed payment  of mortgage notes owed  by
 JACCO Investments  to  financial institutions.  At April  30, 2005,  amounts
 owed by JACCO Investments under mortgage note arrangements guaranteed by LSC
 totaled $5,136,388.  In the event that JACCO Investments defaults on any  of
 these respective loans, LSC would be required to make cash payments equal to
 the unpaid  principal  portion  of  the  mortgage  notes  plus  all  accrued
 penalties  and  interest.   The  guarantees  do  not  contain  any  recourse
 provisions or collateral for LSC in the event  that the  guarantee  payments
 are made. The Company assumed the operating leases and guarantee obligations
 as a result of the merger.

 See Note 6 - Line of Credit above.


 NOTE 10 - STOCK BASED COMPENSATION

 The Company has  entered into verbal  and written agreements  to pay  common
 stock in lieu of  cash for professional  services.  For  the three and  nine
 months ended April 30, 2005, the  Company has recorded professional fees  in
 the amount of $59,000  and $89,000 and 700,000  shares of common stock  have
 been issued under these arrangements.


 NOTE 11 - STOCK OPTIONS AND WARRANTS

 On November 30, 2004, the Company's  Chief Executive Officer, sole  director
 and controlling  shareholder  issued to  certain  employees of  the  Company
 options to purchase 40,000,000 shares of  common stock issuable to him  upon
 the conversion of shares of his Series F Preferred Stock.  The options  have
 an exercise price of $.15 per  share, vest immediately, and expire  November
 30, 2014.  The  Company is  not a direct  party to the  agreement as no  new
 shares  will  be issued  upon the  exercise of  the options.  For  financial
 reporting purposes, these  options will be  accounted for  as deemed  grants
 from the Company.  Since the options had  no intrinsic value on the date  of
 grant, no compensation expense has been recorded.

 As of April 30,  2005, there were 500,000  outstanding warrants to  purchase
 common  stock held by  certain employees.  These  warrants have an  exercise
 price of $.75 per share and expire November 5, 2009.

 As of April 30, 2005, there were 1,708,333 outstanding warrants to  purchase
 common  stock held  by debt holders.  These warrants  have an exercise price
 of  $1.50  per  share  and  expire  October 24, 2006  and  February 8, 2011.
 Subsequent to April 30, 2005, 1,666,666  warrants were canceled as a  result
 of the settlement of the associated debt.  See Note 7 above.


 NOTE 12 - COMMITMENTS AND CONTINGENCIES

 New Lease Commitments
 ---------------------

 In March 2005, the Company entered into  a $1.2 million operating lease line
 to provide financing for the acquisition of manufacturing equipment.  As  of
 April 30, 2005 the Company had used $700,000 under the line comprised of two
 operating leases with total monthly lease payments of $15,909.  These leases
 expire in March, 2009.

 As of June 3, 2005  the Company used an  additional $240,000 under the  line
 comprised of an additional operating lease with total monthly lease  payment
 of $4,935.  This lease expires in June 2009.

 Sale of Subsidiaries
 --------------------

 In connection with the merger with  Best Circuit Boards, Inc. (see Note  4),
 on November 24, 2004, the Company sold its 100% ownership interest in  three
 of its subsidiaries  (North Texas PC  Dynamics, Inc. ("NTPCD"),  Performance
 Application Technologies, Inc. ("PAT"),  and Performance Interconnect  Corp.
 of North Texas,  Inc. ("PI"))  to Integrated  Performance Business  Services
 Corp., an  entity controlled  by D.  Ronald  Allen, former  chief  executive
 officer, controlling shareholder and director of  the Company.  On the  date
 of sale, these entities held liabilities having a book value of $748,653.

 On April  23,  2004,  the  Company  sold  its  100%  ownership  interest  in
 subsidiaries Cadsouth  Inc. ("CAD"),  PC  Dynamics Corporation  ("PCD"),  PC
 Dynamics of  Texas,  Inc.  ("PCDT"),  and  Integrated  Performance  Business
 Services Corp.  ("IPBSC"),  including  its wholly  owned  subsidiary,  Power
 Development, Inc.   At  the time  of the  sale these  subsidiaries owned  no
 assets and  maintained  liabilities  with an  aggregate  carrying  value  of
 approximately $1,477,000. In exchange for the sale, IPS issued to the  buyer
 678,000 shares of common stock of IPS.

 The debts of NTPCD, PAT, PI, CAD, PCD, PCDT, and IPBSC represent  contingent
 liabilities of the Company.  Future  enforcement of these debts against  the
 Company could have a material adverse impact on the cash flow and  liquidity
 of the Company.

 Lease Agreement
 ---------------

 The Company leases a 60,000 sq. ft. manufacturing facility in Frisco,  Texas
 from C-Gate  Construction  Company ("C-Gate"),  an  affiliate of  D.  Ronald
 Allen, the  former  chief  executive officer,  controlling  shareholder  and
 director of the Company.  Prior to,  and in connection with the merger,  Mr.
 Allen executed a lease modification document which, according to its  terms,
 reduced  monthly  rents  from  $35,000  to  $17,000 and reduced the  20-year
 lease term to  a month-to-month tenancy.  The enforceability  of  the  lease
 modification is currently  being disputed by  C-Gate's lender in  litigation
 against the Company pending in C-Gate's Chapter 11 bankruptcy proceedings in
 the  U.S. Bankruptcy  Court  for the  Eastern  District  of  Texas,  Sherman
 Division.  The issues in that litigation include whether (a) C-Gate received
 approval for the modification from its  lender in accordance with the  terms
 of the mortgage on the property, (b)  C-Gate had the authority to execute  a
 lease modification without the prior approval  of the bankruptcy court,  and
 (c) an attornment agreement that was  apparently previously executed by  the
 Company in favor of the lender,  would prevent the Company from effecting  a
 modification of the  lease without the  lender's specific  consent.  In  the
 pending litigation,  the  Company has  asserted  certain claims  against  D.
 Ronald Allen and C-Gate's principal to  recover damages against them  should
 the lease modification document not be enforceable.  Mr. Allen and  C-Gate's
 principal have indicated that they may assert claims for indemnification and
 breach of contract under the merger agreement.  The  trial  of the  lender's
 claims against the Company  have been set  for trial in  July 2005, and  the
 Company's claims against Mr. Allen and C-Gate's principal for February 2006.
 The ultimate outcome of the claims by and against the Company is  uncertain.

 Also, the  Company is  currently in  arrears in  its rent  and property  tax
 payments under  the lease  and the  lender has  indicated that  it may  take
 action to  accelerate  future rent  payments  under the  lease,  subject  to
 certain  offsets.  An unfavorable  decision regarding  the effectiveness  of
 lease modification document  or action by  the lender  to accelerate  future
 rent payments would  have a  material adverse effect  on the  Company.   The
 Company is  currently  working  to restructure  these  obligations,  but  no
 assurance of such can be provided.


 ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR
           PLAN OF OPERATION

                          Forward Looking Statements

      This report may  contain "Forward  Looking Statements,"  which are  our
 expectations,  plans  and   projections,  including  statements   concerning
 expected income and  expenses and  the adequacy of  our sources  of cash  to
 finance current and future operations, which may or may not materialize  and
 which are subject to various risks  and uncertainties.  Factors which  could
 cause actual results to materially differ from our expectations include  the
 following:   general  economic  conditions  and  growth  in  the  high  tech
 industry; competitive factors and pricing pressures; changes in product mix;
 the timely development and  acceptance of new products;  the effects of  the
 contingencies described herein;  the availability  of capital;  loss of  key
 suppliers,  significant  customers  or  key  management  personnel;  payment
 defaults  by  our  customers;  limitations  upon  financial  and   operating
 flexibility due to the  terms of our indebtedness;  changes in our  business
 strategy or development plans; and the risks described from time to time  in
 our other filings with the Securities and Exchange Commission ("SEC").  When
 used  in  this  report,  the  words  "may,"  "will,"  "plans,"   "believes,"
 "expects," "projects,"  "targets," "anticipates,"  "estimates,"  "continue,"
 "intend" and similar  expressions are intended  to identify  forward-looking
 statements.  These forward-looking statements speak  only as of the date  of
 this report, and we have based our forward-looking statements on our current
 assumptions and expectations  about future events.   We  have expressed  our
 assumptions  and  expectations  in  good  faith,  and  we  believe there  is
 a  reasonable basis  for them.  However,  we  cannot  assure  you  that  our
 assumptions and expectations will prove to be accurate We expressly disclaim
 any obligation or undertaking to release  publicly any updates or change  in
 our expectations or  any change in  events, conditions  or circumstances  on
 which any such statement may be  based, except as may be otherwise  required
 by the securities laws.

                                   Overview

      On  November  24,  2004,  a  wholly  owned  subsidiary  of   Integrated
 Performance Systems, Inc. merged with Best Circuit Boards, Inc., d/b/a  Lone
 Star Circuits ("LSC"), resulting in LSC  becoming a wholly owned  subsidiary
 of the Company.  The beneficial  owner of LSC acquired controlling  interest
 in the Company and the Company has therefore determined that the transaction
 be accounted for as a reverse merger.  The  transaction has been treated  as
 if LSC  acquired the  Company and,  consequently, the  historical  financial
 statements of LSC  have become the  historical financial  statements of  the
 Company for all periods presented.

 The significant terms of the merger were as follows:

   *  LSC Asset Acquisition Corp. (a wholly owned subsidiary of LSC) acquired
      all of the assets and  some, but not all,  of the liabilities of  three
      IPS subsidiaries (North Texas PC Dynamics, Inc. ("NTPCD"),  Performance
      Application Technologies,  Inc. ("PAT"),  and Performance  Interconnect
      Corp. of North Texas, Inc. ("PI").  These three subsidiaries  comprised
      substantially all  of  the business  operations  of IPS  prior  to  the
      merger.

   *  Immediately subsequent to the asset sales  above, the Company sold  its
      100% ownership interest in NTPCD, PAT, and PI to Integrated Performance
      Business Services Corp.  ("IPBSC"), an entity  controlled by D.  Ronald
      Allen, former  chief  executive officer,  controlling  shareholder  and
      director of the Company.  These entities held liabilities having a book
      value of $748,653.

   *  IPS issued $4.2  million in  convertible promissory  notes and  193,829
      shares  of  IPS  Series  F  Convertible  Preferred  Stock,  subject  to
      adjustment to  represent 67.25%  of  the Company's  outstanding  common
      stock, to  the beneficial  owner of  LSC in  exchange for  100% of  the
      outstanding shares of LSC.

   *  Associates Funding Group and CMLP  Group, Ltd., entities controlled  by
      D. Ronald  Allen,  agreed to  contribute  8,634,000 shares  of  Company
      common stock to the Company.

   *  D. Ronald  Allen entered  into a  stock escrow  and security  agreement
      whereby  10,851,832  shares  of  IPS  common  stock beneficially  owned
      by him were placed into escrow as security for (1) advances made by LSC
      to IPS prior to the  closing of the merger,  (2) the Company's and  Mr.
      Allen's indemnification obligations under the merger agreement, and (3)
      the convertible promissory notes issued to the beneficial owner of LSC.
      The merger agreement  provides that the  shares used  to satisfy  those
      obligations be  valued  based  on a  future  equity  financing  of  the
      Company.   As  of  the date  of  filing  of this  report,  that  equity
      financing has not occurred.

   *  Brad  Jacoby,  the  beneficial  owner  of  LSC,  became  the   majority
      shareholder, Chief Executive Officer, and sole director of the Company.

      Integrated Performance  Systems, Inc.  (the  "Company") is  a  contract
 manufacturer of high  quality, high  performance circuit  boards located  in
 Wylie, Texas,  just east  of Dallas.   The  Company's products  are used  in
 computers,  communication   equipment,  the   aerospace  industry,   defense
 electronics and  other  applications requiring  reliable,  high  performance
 electrical capability.

      The  following  discussion  provides  information  to  assist  in   the
 understanding of our financial condition and  results of operations for  the
 three and nine months periods ended  April 30, 2005 and 2004.  It should  be
 read in  conjunction with  the financial  information for  the twelve  month
 period ended July 31, 2004, appearing  in the Form 8-K/A dated  November 24,
 2004, filed on February 7, 2005.

                            Results of Operations

      Revenues.  Net revenues  increased to $8,615,430  for the three  months
 ended April 30,  2005 from $6,660,727  for the same  period in  2004, a  net
 increase of $1,954,703 or  29%.  Net revenues  increased to $22,972,423  for
 the nine months ended April 30, 2005 from $16,292,972 for the same period in
 2004,  a net  increase of  $6,679,451 or  41%.  The increase  for the  three
 months ended April 30, 2005 is  due to net sales increases  of 17% to 10  of
 our  major  customers,  and  approximately  $1,300,000  from  new  customers
 acquired through the merger.  The  increase for the nine months ended  April
 30, 2005 is due primarily to a net sales increase of 50% to 10 of our  major
 customers, and from the addition of customers acquired through the merger.

      Gross Profit.  Gross profit for  the three months ended April 30,  2005
 was $1,785,231 versus a  gross  profit  of  $1,063,718  for  the same period
 in 2004.  Gross  profit for  the  nine  months  ended  April  30,  2005  was
 approximately $4,155,066 versus a  gross profit of  $2,601,988 for the  same
 period in 2004.  The  increases  are attributable to  the increase in  sales
 resulting in fixed costs being spread over a larger number of units produced
 and higher  demand for  premium  services.  In  addition  during  the  three
 months ended April 30, 2005 two of our largest customers placed high volume,
 quick-turn premium orders for the period.  These  orders  are  non-recurring
 and  cannot  necessarily  be  expected  in  the  future.   However,  we  are
 continuing to see improvement in our gross margins, which were 20% and  18%,
 respectively, for the three and nine months ended April 30, 2005.

      Selling, general  and administrative  expenses.   Selling, general  and
 administrative  expenses  consist  primarily  of  the  direct  charges   for
 advertising, sales  promotion,  and  marketing,  as  well  as  the  cost  of
 executive, administrative and accounting  personnel and related expenses  as
 well  as  professional fees.  Selling,  general and  administrative  expense
 increased to  $1,379,771  for the three  months ended  April 30,  2005  from
 $614,017  in  2004,  a  net  increase  of  $765,754.  Selling,  general  and
 administrative expense increased  to $3,380,887  for the  nine months  ended
 April 30, 2005 from  $2,002,820 in 2004, a  net increase of $1,378,067.  The
 increases were primarily attributable to increased number of  administrative
 and  accounting  personnel,  increased   employee  benefits  and   insurance
 expenses, and  additional  accounting,  legal and  other  professional  fees
 relating to (1) the ongoing integration  of the merged entities and (2)  the
 cost of filing and reporting as a public entity.

      Amortization of  Customer  Base.  Amortization  of  customer  base  was
 $135,512 and $225,854 for  the three and nine  months ended April 30,  2005,
 respectively.  The  customer base was  recorded as a  result of the  merger,
 effective November 24, 2004 and accordingly, no amortization was recorded in
 the comparable periods in the prior year.

      Other income (expense).  Other income (expense) increased to $(136,208)
 for the three months  ended April 30,  2005 from ($12,014)  in 2004.   Other
 income (expense) increased to  $(254,434)  for the  nine months  ended April
 30, 2005  from  other  income of  $88,734 for the same period in  2004.  The
 increases are attributable to (1) interest on notes payable acquired  in the
 merger; (2) interest on notes payable to the former beneficial owner of  LSC
 issued in connection with the merger; and (3) increased interest on the line
 of credit which had larger average outstanding balances in 2005 compared  to
 the  comparable  periods  in  the  prior year.  Other income  (expense)  was
 comprised primarily of interest income and expense and material reclamation.

      Income Tax Provision.  The income tax provision declined to $39,293 and
 $110,566 for the three and nine  months ended April 21, 2005,  respectively,
 from $161,932 and  $262,126 for the  three and nine  months ended April  21,
 2004, respectively.  The lower income tax provision for these periods is the
 result of the decline in pretax income.


                       Liquidity and Capital Resources

      We  have  generally  financed  our  business  from  cash  generated  by
 operations and borrowings, and in some periods our majority shareholder  has
 loaned the Company operating capital at prevailing market rates of  interest
 or has guaranteed our indebtedness.

      Cash  flows  from  operations.  Net  cash  of  $1,289,608  provided  by
 operations  during  the  nine  months  ended  April 30,  2005  consisted  of
 $1,139,601 provided  by net  income, as  adjusted  from non-cash  items  and
 $150,007 provided by working capital.  This compares  to $174,815 during the
 same period in 2004 which consisted of $1,295,246 provided by net income, as
 adjusted from non-cash items, and $1,120,431 used by working capital.

      Cash used for  investing  activities.  Net  cash  of $330,493 used  for
 investing activities during the nine months  ended April 30, 2005  consisted
 of cash acquired in the merger of $78,763, offset by merger related costs of
 $209,805 and investments in property and  equipment of $199,451.  Cash  used
 for investing activities during the same  period ending April 30, 2004,  was
 approximately $198,099,  which  is  all  attributable  to  the  purchase  of
 property and equipment.

      Cash flows from financing activities.   Net cash provided by  financing
 activities during  the  nine  months  ended  April  30,  2005  was  $16,341,
 consisted  of proceeds  of  $945,560 from our  line of  credit, $739,343  of
 which was used  to pay off  a high-interest  factoring arrangement  acquired
 through the merger, $37,972 in advances  from related parties ; and uses  of
 cash  consisting  of  payments  of  $967,191  on  notes  payable,  including
 $739,343 to pay off of the factoring arrangement  discussed above.  Net cash
 provided by financing activities during the nine months ended April 30, 2004
 was $118,421, consisted primarily of proceeds  of $283,194 from our line  of
 credit and  advances  of $162,028  from  related parties,  and  payments  of
 $326,801 on long term debt.

      Indebtedness and  guarantees.   We have  a $2  million line  of  credit
 described in Note 6 of our financial statements set forth in Part I, Item  1
 above.  We have other long-term indebtedness in the amount of  approximately
 $747,770,  some  of which  was  originally  incurred by the acquired company
 in  the  merger,  as  described  in  Note  7 to  our  financial  statements.
 Approximately $730,691 is accounted for  as current maturities of  long-term
 debt, which includes certain amounts  in  default.  Subsequent  to April 30,
 2005, we successfully  settled or restructured  $350,944 in  long term  debt
 that was in default, as described in Note 7 to our financial statements.  We
 are  currently  attempting   to  negotiate  resolution   of  the   remaining
 indebtedness that is in default, however, no assurance can be given that any
 such resolution can be reached.  We have issued $4.2 million in  convertible
 promissory notes to a related party, as described in Note 8 to our financial
 statements.  The maturity of these notes has been extended to July 31, 2005.
 We have guaranteed certain indebtedness of related parties, as described  in
 Note 9 to our financial statements.

      Contingent  Liabilities.  We  are  subject  to  significant  contingent
 liabilities, as described in Note 12  to our financial statements set  forth
 in Part I, Item 1 above.

      Overview.   We  are subject  to  current liabilities  substantially  in
 excess of  our current  assets and  are  subject to  significant  contingent
 liabilities.   We  are  in  the process  of  negotiating  the  extension  or
 conversion of  $3.2  million  of  current  notes  payable  to  our  majority
 shareholder and are in the process  of restructuring our notes payable  with
 other lenders.  We are in discussions with our bank to use our manufacturing
 equipment as collateral for a midterm  loan, the proceeds of which would  be
 used to pay down our line of credit and to provide working capital.  We  are
 also attempting to restructure  out obligations under  our lease in  Frisco,
 Texas.   We  can  provide  no  assurance  that  we  will  be  successful  in
 restructuring, converting  or extending  our indebtedness,  restructure  our
 lease obligations or that any such  transaction would be on terms  favorable
 to the Company.  In the event that we are unsuccessful in extending the $3.2
 million notes payable to  our majority shareholder  or converting the  notes
 into shares of common  stock, such shareholder could  demand payment of  the
 notes and  exercise  his security  interests  in substantially  all  of  our
 assets.  The exercise of these  security interests would leave  insufficient
 assets to  continue our  operations.   These events  would have  a  material
 adverse  effect  on  our  business,  financial  condition  and  results   of
 operations.


 ITEM 3.   CONTROLS AND PROCEDURES

      Evaluation of Disclosure Controls and Procedures.  Our management, with
 the participation  of  our  Chief  Executive  Officer  and  Chief  Financial
 Officer, has  reviewed and  evaluated the  effectiveness of  the design  and
 operation of our disclosure controls and procedures (as defined in Rule 13a-
 15(e) under the Securities Exchange Act of 1934) as of the end of the period
 covered  by this report.  Based on  that evaluation, and  based on the  fact
 that our Form 10-QSB for the period  ending January 31, 2005 was filed  past
 our extension date, our Chief Executive Officer and Chief Financial  Officer
 have concluded that our disclosure controls and procedures are not effective
 to ensure that  information required to  be disclosed by  us in the  reports
 that we  file  or  submit under  the  Securities  Exchange Act  of  1934  is
 recorded,  processed,  summarized  and  reported  within  the  time  periods
 specified in the rules and forms of the Securities and Exchange  Commission.
 Our management expects  to address and  improve upon the  weaknesses in  our
 disclosure controls and procedures in the near future.

      Annual report on internal control over financial reporting.  Based upon
 the most recent  pronouncements of the  Securities and Exchange  Commission,
 our first annual report on internal control over financial reporting is  due
 for inclusion  in our  annual report  on Form  10-KSB for  the twelve  month
 period  ending July 31, 2006.  We expect  to begin the  process in the  near
 future of identifying a  framework to use to  evaluate the effectiveness  of
 our internal control over financial reporting as required by  Rule 13a-15(c)
 under the Securities Exchange Act  of 1934.  Although we have not yet  begun
 the formal evaluation process, we have informally identified certain  areas,
 such as project job cost accounting,  in which we expect to see  improvement
 in our internal controls as a result of the process.

      Changes in internal control over financial reporting.  Our  management,
 with the participation of  our Chief Executive  Officer and Chief  Financial
 Officer, has  evaluated whether  any change  in  our internal  control  over
 financial reporting occurred during the last  fiscal quarter. Based on  that
 evaluation, our Chief  Executive Officer  and Chief  Financial Officer  have
 concluded that  there  have  been  changes  in  our  internal  control  over
 financial reporting during the period that  have materially affected or  are
 reasonably likely to materially affect  our internal control over  financial
 reporting.  As a result of the merger with LSC, the internal controls of LSC
 have  become  the  internal  controls  of  the  Company,  including  without
 limitation  the  personnel,   policies,  systems   and  administrative   and
 accounting functions  of LSC.   Management  has not  had an  opportunity  to
 conduct a detailed comparison of these changes.


                         PART II - OTHER INFORMATION

 ITEM 1.   LEGAL PROCEEDINGS

      The Company leases  a 60,000 sq.ft.  manufacturing facility in  Frisco,
 Texas from C-Gate Construction Company ("C-Gate"), an affiliate of D. Ronald
 Allen, the  former  chief  executive officer,  controlling  shareholder  and
 director of the Company.  Prior to, and in connection with, the merger,  Mr.
 Allen executed a lease modification document which, according to its  terms,
 reduced  monthly  rents  from  $35,000  to  $17,000 and reduced the  20-year
 lease term  to  a month-to-month tenancy.  The  enforceability  of the lease
 modification is currently being disputed by C-Gate's lender, Legacy Bank  of
 Texas, in  litigation against  the Company  pending in  C-Gate's Chapter  11
 bankruptcy proceedings in the U.S. Bankruptcy Court for the Eastern District
 of Texas, Sherman  Division initiated by  Legacy Bank of  Texas on March  4,
 2005.  The  issues in that  litigation include whether  (a) C-Gate  received
 approval for the modification from its  lender, enforceability of the  lease
 modification is currently being disputed by C-Gate's lender, Legacy Bank  of
 Texas, in accordance with the terms of the mortgage on the property, (b)  C-
 Gate had the  authority to execute  a lease modification  without the  prior
 approval of the bankruptcy court, and  (c) an attornment agreement that  was
 apparently previously executed by the Company  in favor of the lender  would
 prevent the Company from effecting a  modification of the lease without  the
 lender's  specific  consent.  In the  pending  litigation, the  Company  has
 asserted certain claims against  D. Ronald Allen  and C-Gate's principal  to
 recover damages against them should the  lease modification document not  be
 enforceable.  Mr. Allen and C-Gate's principal have indicated that they  may
 assert claims for indemnification  and breach of  contract under the  merger
 agreement.  The trial of the  lender's claims against the Company have  been
 set for trial in July 2005, and  the Company's claims against Mr. Allen  and
 C-Gate's principal for February 2006. The ultimate outcome of the claims  by
 and against the  Company  is uncertain.  Also, the  Company is currently  in
 arrears in its rent payments  under the lease and  Legacy Bank of Texas  has
 indicated that it may take action  to accelerate future rent payments  under
 the lease, subject to  certain  offsets.  An unfavorable decision  regarding
 the effectiveness of lease modification document or action by Legacy Bank of
 Texas to  accelerate future  rent payments  would  have a  material  adverse
 impact on the  Company.  The Company  is  currently  working to  restructure
 these obligations but no assurance of such can be provided.


 ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

      Issuances of equity securities during the period covered by this report
 that were not registered under the  Securities Act of 1933 consisted of  the
 following:

      On  March 22, 2005,  we issued  to consultants 700,000 shares of Common
 Stock  in consideration  for  $89,000 in services  rendered to the  Company.
 These  issuances  were  made pursuant  to  the  exemption  from registration
 provided by Section 4(2) of the Securities Act of 1933, in that they did not
 involve a public offering.

      Subsequent  to April 30, 2005 in  conjunction with  the settlement  and
 conversion of a $277,909 convertible note payable and the settlement of  all
 related obligations, including  the cancellation  of a  warrant to  purchase
 1,666,666 shares of common stock (see  Note 7 to the consolidated  financial
 statements), we issued 2,400,000 shares of  Common Stock to the  noteholder,
 an unrelated party.  This issuance  was made pursuant to the exemption  from
 registration provided by Section 4(2) of the Securities Act of 1933, in that
 it did not involve a public offering.


 ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

      For information concerning defaults on our indebtedness, see Note 6  to
 our financial statements set forth in Part I, Item 1 above and  Management's
 Discussion and Analysis or Plan of Operation in Part I, Item 2 above,  which
 are incorporated herein by reference.


 ITEM 5.   OTHER INFORMATION

      We are currently  in arrears  in rent and  property tax  payments under
 the lease for our Frisco, Texas  manufacturing  facility.  The landlord  has
 indicated that it may take action  to accelerate future rent payments  under
 the lease, subject to certain offsets.  See  Note 12 - Contingencies - Lease
 Agreement to our financial statements set forth in Part I, Item 1 above  and
 Part II, Item 1 above, which are incorporated herein by reference.

      Effective August 26, 2003, the Company  entered into a $2 million  line
 of credit agreement with a bank, which  was due on demand, bore interest  at
 the bank's prime rate plus 1% (6.5%  at April 30, 2005) and matured  October
 15, 2004.  As of March 17, 2005, the line of credit was renewed and extended
 until October 31, 2006.  The line of credit is subject to certain  financial
 and other  covenants, is  collateralized by  all of  the Company's  accounts
 receivable and  inventory,  and  is guaranteed  by  the  Company's  majority
 stockholder, chief executive officer and sole director.  At April 30,  2005,
 $1,855,560 was outstanding under this line of credit.

      In March 2005, the Company entered into a $1.2 million operating  lease
 line to provide  financing for the  acquisition of manufacturing  equipment.
 As of April 30, 2005 the Company had used $777,300 under the line  comprised
 of two operating leases with total monthly lease payments of $15,909.  These
 leases expire  in  March  2009.  As  of  June 3, 2005  the Company  used  an
 additional $240,000  under the  line comprised  of an  additional  operating
 lease with total  monthly lease payment  of $4,935.   This lease expires  in
 June 2009.


 ITEM 6.   EXHIBITS

      Reference is made to the Exhibit Index  of this Form 10-QSB for a  list
 of all exhibits filed with and incorporated by reference in this report.



                                  SIGNATURES

      In accordance with the requirements of the Exchange Act, the registrant
 caused this report to be signed on its behalf by the undersigned,  thereunto
 duly authorized.

                          INTEGRATED PERFORMANCE SYSTEMS, INC.
                          (Registrant)

 Date: June 13, 2005      By:  /s/ BRAD J. PETERS
                          -------------------------------------------
                          Brad J. Peters
                          Vice President and Chief Financial Officer
                          (On behalf of the registrant and as
                          principal financial and accounting officer)

<PAGE>

                                EXHIBIT INDEX

 Exhibit
 Number               Description of Exhibit
 ------               ----------------------
 10.1      Compromise and Settlement Agreement,  dated May 26, 2005,  between
           the Company and  LaJolla Cove  Investors, Inc.  (filed as  Exhibit
           10.1 to  the  Company's  Form  8-K  filed  on  May  27,  2005  and
           incorporated herein by reference).

 10.2 **   Compass Bank Letter Loan Agreement dated August 22, 2003

 10.3 **   M&I First National Leasing Corp. Lease of Personal Property  dated
           3/21/05

 31.1 **   Certification  of  Brad  Jacoby,  President  and  Chief  Executive
           Officer, pursuant to Rule 13a-14(a) of the Securities and Exchange
           Act of 1934.

 31.2 **   Certification  of  Brad  J.  Peters,  Vice  President  and   Chief
           Financial Officer, pursuant  to Rule 13a-14(a)  of the  Securities
           and Exchange Act of 1934.

 32.1 **   Certifications of Brad Jacoby,  President and Principal  Executive
           Officer, and Brad  J. Peters, Vice  President and Chief  Financial
           Officer, pursuant to 18 U.S.C. Section 1350.
 _______________________
 **  Filed herewith.