**U.S.
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 March
31, 2005
 
 **[
] Transition Report under Section 13 or 15(d) of the Exchange Act For the
Transition Period from ________ to ___________**
 
 Commission
File Number: 000-30646
 
 **Industrial
Enterprises of America, Inc.**
 (formerly
known as Advanced Bio/Chem, Inc.)
 (Exact
name of registrant as specified in its charter)
 
 
 Nevada
    13-3963499(State or jurisdiction of
      incorporation
    (I.R.S. Employeror organization)
    Identification No.)**770
      South Post Oak Lane, Suite 330Houston, Texas**
    **77056**(Address of principal executive
      offices)
    (Zip Code)
 
 **(713)
622-2875**
 (Registrant’s
telephone number, including area code)
  Advanced
Bio/Chem, Inc., December 31
 (Former
name, former address and former fiscal year, if changed since last
report)
 
 Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or 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 [ ] No [X]
 
 APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
 PROCEEDING
DURING THE PRECEDING FIVE YEARS
 
 Check
whether the registrant filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
 
 APPLICABLE
ONLY TO CORPORATE ISSUERS
 
 Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
 
 As of
March 31, 2005, 25,894,190 shares of the registrant’s Common Stock were
outstanding.
 
 Transitional
Small Business Disclosure Format (Check one): Yes [ ]  No
[x]
 
 
 
  **Table
of Contents**
 
 
 **Page**Recent
      Developments.......................................................................
    1**Part
      I**Item
      1. Financial Statements.................................................................
    3Item
      2. Management’s Discussion and Analysis or Plan of Operations
      ......
    3Item
      3. Controls and Procedures............................................................
    7**Part
      II**Item
      1. Legal Proceedings...................................................................
    8Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds
      .........
    8Item
      3. Defaults Upon Senior Securities................................................
    8Item
      4. Submission of Matters to a Vote of Security Holders
    ...................
    8Item
      5. Other Information...................................................................
    8Item
      6. Exhibits.................................................................................
    9
 
 
 
 
   ***Recent
Developments***
 
 ***Change
in Fiscal Year End***
 
 On
December 22, 2004, the Board of Directors of Industrial Enterprises of America,
Inc., a Nevada corporation (the “Company”), approved the change in the Company’s
fiscal year end from December 31 to June 30. The Company, as the parent of EMC
Packaging, Inc., a Delaware corporation (“EMC”), is now a holding company of an
operating subsidiary. The fiscal year end of EMC is June 30; therefore, in order
to more closely align its operations and internal controls **** with that
of its wholly owned subsidiary, the Board of Directors approved the change in
the Company’s fiscal year end.
 
 The
change is described in further detail in the Company’s Current Report on Form
8-K, filed with the Securities and Exchange Commission (the “Commission”) on
March 29, 2005.
 
 ***Potential
Acquisition***
 
 As the
Company disclosed in a Current Report on Form 8-K filed with the Commission on
April 22, 2005, the Company issued a press release on April 21, 2005 announcing
that management had agreed in principal to acquire one hundred percent (100%)
ownership in a leading manufacturer and seller of automotive chemicals and
additives. The acquisition of this private company will result in the target
becoming the Company’s wholly owned subsidiary. The Company further announced
that management believes that a definitive agreement will be reached, and the
transaction will likely be consummated, within forty-five (45) days of the date
of the press release, subject to definitive due diligence and certain other
conditions. Once a definitive agreement is in fact reached, the Company will
file another Current Report on Form 8-K.
 
 ***Power3
Dispute***
 
 As
previously disclosed, effective as of May 18, 2004, the Company sold to Power3
Medical Products, Inc., a New York corporation ("Power3"), all of the Company’s
assets in consideration for 15,000,000 shares of the common stock, par value
$.001 per share, of Power3 (the “Power3 Sale”). The assets disposed of by the
Company included all tangible personal property, intellectual property, rights
in contracts that the Company was a party to, along with intangible property,
including goodwill. In consideration for the benefits that they received by
virtue of the transaction, each of the Company’s shareholders that were a party
to the Power3 Sale (Ira Goldknopf and Steven B. Rash) (the “Shareholders”)
agreed to make the representations, warranties, and indemnifications in the
Asset Purchase Agreement between Power3, the Company and the Shareholders (the
“Agreement”), jointly and severally, along with the Company.
 
 On May
12, 2005, the Company filed a Current Report on Form 8-K to disclose that the
Company’s management is currently reviewing the Power3 Sale. Under the
Agreement, Power3 agreed to purchase all of the assets and assume all of the
liabilities (with the exception of those specifically excluded) of the Company.
Additionally, Section 4.5 of the Agreement provided that the Shareholders would
repay the Company’s indebtedness within five (5) business days of the closing
date of the Power3 Sale. However, following such sale, $2.8 million in
liabilities remained on the books of the Company (the “Liabilities”). Until
recently, the Company and Power3 had been negotiating an agreement with respect
to the settlement of any and all claims between the Company, Power3 and each of
the companies’ principals stemming from the Power3 Sale. However, the Company
has terminated settlement discussions. The Company disclosed that it would take
action to enforce any rights and remedies it may have with respect to the Power3
Sale and the Liabilities.
 
 Page
1
 Power3
contends that the terms of the Agreement are not clear and are therefore subject
to different interpretations. The Company’s management notes Mr. Rash owned
approximately 3.92% of the Company’s common stock at the time of the Power3 Sale
and Mr. Goldknopf owned approximately 8.23% of the Company’s common stock,
resulting in their indirect beneficial ownership at the time of the transaction
of an aggregate of approximately 1,822,500 shares. The Company has since
informed the Shareholders that management has determined to suspend the shares
of the Company’s common stock owned by the Shareholders while it investigates
whether these parties breached the fiduciary duties that may have been owed by
each of them to the Company, among other matters.
 
 In
connection with this dispute, the Company has cancelled the debt of certain
former officers, directors and shareholders totaling $699,434 during the quarter
ended March 31, 2005 based on a determination that such debt should have been
either assumed by Power3 or paid by the shareholder upon consummation of the
Power3 Transaction.  While the Company believes that it has a valid basis
for such cancellation, there can be no assurance that the cancellation of the
liabilities will not be disputed. This cancelled debt was comprised of $388,110
of notes payable; $123,382 of accrued interest; $92,663 of credit card debt; and
$95,279 of accounts payable to former shareholders.
 
  Page
2
  **Item
1. Financial Statements.**
 
 ***Critical
Accounting Policies***
 
 The
Company believes that the following critical accounting policies reflect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements
 
 The
following significant accounting policies pertain to EMC Packaging, Inc.
(“EMC”), the Company’s current sole operating unit at March 31, 2005.
 
 Revenue
Recognition
 
 EMC is
primarily engaged in the manufacturing and sale of packaged refrigerants for the
automotive and dusting markets. Revenue is recognized with the successful
manufacture and delivery of such product to the end user customer.
 
 Inventory
 
 Inventory
is stated at the lower of cost or market, with cost determined on a first-in,
first-out basis.
 
 Machinery
and Equipment
 
 Machinery
and equipment are recorded at cost. Depreciation is computed on the estimated
useful lives of the assets ranging from three to ten years using the
straight-line method.
 
 Accounting
for Stock-Based Compensation
 
 The
Company has adopted the disclosure provisions of SFAS No. 123, “Accounting for
Stock-Based Compensation.” In accordance with the provisions of SFAS No. 123,
the Company applies Accounting Principles Board Opinion 25 and related
interpretations in accounting for stock issued to its employees and consultants.
Management exercises judgment in its determination of when significant non-cash
stock transactions have occurred.
 
 Please
see the Financial Statements beginning on page F-1 **.**
 
 
 **Item
2. Management’s Discussion and Analysis or Plan of
Operations.**
 
 **Acquisition
of EMC Packaging, Inc.**
 
 On
October 7, 2004, the Company’s Board of Directors approved the purchase of all
of the issued and outstanding capital stock of EMC, which had been in business
since 1974. On the effective date of the purchase, EMC became the Company’s
wholly owned subsidiary. In consideration for their shares of EMC common stock,
the EMC stockholders received an aggregate of 2,296,800 shares of the Company’s
common stock, valued at $808,474. The Company, as the new parent company of EMC
and through EMC, intends to continue to market and sell the products that had
been offered by EMC prior to the acquisition.
  Page
3
 **Change
in Fiscal Year End and Reporting Periods**
 
 In
December 2004, the Company changed its fiscal year from one ending on December
31 to one ending on June 30. Application for the change in accounting year is
pending with the Internal Revenue Service. Accordingly, the Company’s transition
period that ended on December 31, 2004, includes the six months ended December
31, 2004 (“Transition 2004”) and incorporates the operating results of EMC for
that period (as opposed to since EMC’s acquisition on October 7, 2004).
 
 The
following are selected financial data for Transition 2004 and the comparable
nine-month period of the prior year:
 
 **ILNP**
    **EMC**
    **Combined************Nine
      Months Ended****March
      31, 2005**
    **March
      31, 2005**
    **March
      31, 2005****(unaudited)**
    **(unaudited)**
    **(unaudited)**Net
      sales
    $ -
    $
      3,121,559
    $
      3,121,559Cost
      of goods sold
    -
    2,613,977
    2,613,977Gross
      profit
    $ -
    $
      507,582
    $
      507,582Selling
      and administrative expenses
    $
      242,801
    $
      242,830
    $
      485,631Salaries
      and contract labor
    250,000
    222,168
    472,168Depreciation
      and amortization
    -
    6,515
    6,515Legal
      and professional
    1,402,016
    43,674
    1,445,690Total
      expenses
    $
      1,894,817
    $
      515,187
    $
      2,410,004Net
      (loss) from operations
    $
      (1,894,817)
    $
      (7,605)
    $
      (1,887,212)Interest
      expense
    $
      181,972
    $
      119,753
    $
      301,725Income
      before income taxesand
      discontinued operations
    $
      (2,076,789)
    $
      (127,358)
    $
      (2,204,147)Gain
      on discontinued operations
    $ -
    $ -
    $ -Income
      before income taxes
    $
      (2,076,789)
    $
      (127,358)
    $
      (2,204,147)Income
      tax expense
    $ -
    $
      -
    $
      -Net
      income
    $
      (2,076,789)
    $
      (127,358)
    $
      (2,204,147)
 
 
  Page
4
  
 The
following is the pro forma operating results for the nine months ended March 31,
2004 assuming EMC had been included in the operating results of the Company
during that period.
 
 **ILNP**
    **EMC**
    **Combined********Nine
      Months Ended****March
      31, 2004**
    **March
      31, 2004**
    **March
      31, 2004****(unaudited)**
    **(unaudited)**
    **(unaudited)**Net
      sales
    $
      224,157
    $
      2,763,026
    $
      2,987,183Cost
      of goods sold
    -
    2,113,356
    2,113,356Gross
      profit
    $
      224,157
    $
      649,670
    $
      873,827Selling
      and administrative expenses
    $
      160,573
    $
      258,000
    $
      418,573Salaries
      and contract labor
    1,611,925
    205,846
    1,817,771Depreciation
      and amortization
    67,535
    8,754
    76,289Legal
      and professional
    141,373
    207,000
    348,373Total
      expenses
    $
      1,981,406
    $
      679,600
    $
      2,661,006Net
      (loss) from operations
    $
      (1,757,249)
    $
      (29,930)
    $
      (1,727,319)Interest
      expense
    $
      175,153
    $
      99,073
    $
      274,226Income
      before income taxesand
      discontinued operations
    $
      (1,932,402)
    $
      (129,003)
    $
      (2,001,545)Gain
      on discontinued operations
    $ -
    $ -
    $ -Income
      before income taxes
    $
      (1,932,402)
    $
      (129,003)
    $
      (2,001,545)Income
      tax expense
    $ -
    $
      -
    $
      -Net
      income
    $
      (1,932,402)
    $
      (129,003)
    $
      (2,001,545)
 
 
 Results
of operations for the interim periods are not indicative of annual results.
 
 ***Results
of Operations*** ****
 
 *For
the Three Months ended March 31, 2005 and 2004*
 
 Revenue
and gross profit for the three months ended March 31, 2005 was $831,831 and
$91,239, respectively, and reflects the revenue and gross profit derived from
EMC’s operations during the quarter. The miscellaneous revenue and gross profit
of $137,837 for the same period in the prior year represented residual income
from the bio tech division which was sold in May 2004 to Power3.
 
 Total
operating expenses for the three-month period ended March 31, 2005 was $946,745.
Of this amount, $172,231 was due to EMC’s operations and the balance, or
$774,514, was due to the Company’s corporate expenses. The greater majority of
these corporate expenses pertained to legal and professional fees of $502,079,
arising from the ongoing reorganization of the Company.
 
 The
operating expenses in the same three-month period in the prior year were
$167,727. Interest expenses for the three months ended March 31, 2005 and 2004
was $103,769 and $51,942, respectively, with the increase primarily attributable
to $39,705 of interest expense incurred by EMC during the three months ended
March 31, 2005.
 
 During
the quarter ended March 31, 2005, the Company cancelled $699,434 of certain
liabilities related to the Power3 Liabilities disclosed above in “Recent
Developments - Power3 Dispute”. These cancelled liabilities are comprised of
$388,110 of notes payable; $123,382 of accrued interest; $92,663 of credit card
debt; and $95,279 of accounts payable to former shareholders.
 
 Page
5
 
 The
result of the above was a net loss for the three months ended March 31, 2005 of
$(956,275), compared to a loss of $(81,832) in the same period in 2004.
 
 *For
the Nine Months ended March 31, 2005 and 2004*
 
 Revenue
and gross profit for the nine months ended March 31, 2005 was $2,180,618 and
$313,521, respectively, and reflects the revenue and gross profit derived from
EMC’s operations since the acquisition on October 7, 2004. The miscellaneous
revenue and gross profit of $224,157 for the same period in the prior year
represented residual income from the bio tech division sold in May 2004 to
Power3.
 
 Total
operating expenses for the nine-month period ended March 31, 2005 was
$2,275,147. Of this amount, $336,048 was due to EMC’s operations and the
balance, or $1,939,099, was due to the Company’s corporate expenses. The greater
majority of these corporate expenses pertained to legal and professional fees of
$1,446,297 arising from the acquisition of EMC and the reorganization of the
Company. The operating expenses in the same nine-month period in the prior year
were $1,981,406. Salary and contract labor accounted for $1,611,925 of this
total.
 
 Interest
expense for the nine months ended March 31, 2005 and 2004 was $264,964 and
$175,153, respectively. Interest expense in the nine months ended March 31, 2005
incurred by the EMC operation was $82,992 incurred since the October 7, 2004
acquisition.
 
 As
previously discussed, during the quarter ended March 31, 2005, the Company
cancelled $699,434 of certain liabilities related to the Power3 Liabilities
disclosed above in “Recent Developments - Power3 Dispute”. These cancelled
liabilities are comprised of $388,110 of notes payable; $123,382 of accrued
interest; $92,663 of credit card debt; and $95,279 of accounts payable to former
shareholders.
 
 The
result of the above was a net loss for the nine months ended March 31, 2005 of
$(2,220,590) compared to a loss of $(1,929,954) in the same period in 2003-2004.
 
 Net
(loss) income per share basic and diluted for the three and nine months ended
March 31, 2005 was $(0.04) and $(0.09) per share, respectively, compared to
$(0.01) and $(0.15) in the respective periods for the prior year.
 
 ***Liquidity
and Capital Resources***
 
 The
Company had a working capital deficit of $(99,812) as of March 31, 2005. This
compares to a working capital deficit of $(1,745,622) as of March 31, 2004.
 
 Net cash
provided by operations for the nine months ended March 31, 2005 was a negative
$(1,231,090), compared to a negative cash flow in the same period in 2003-2004
of $(708,598). This increase in funds used by operations was attributable to the
increased net loss and $734,206 of stock-based compensation (a non-cash item) in
the 2003-2004 nine-month period.
 
 Net cash
used by investing activities was minimal in the nine-month period ended March
31, 2005; there was no investing activity in the comparable period in
2003-2004.
 
 Page
6
 
 The
Company obtained funds to operate in the nine months ended March 31, 2005 from
the issuance of common stock and subscriptions in the amount of $901,000 and a
net increase in notes payable shareholders and related parties of approximately
$340,000.
 
 CAUTIONARY
STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
 
 It should
be noted that this Management's Discussion and Analysis or Plan of Operations
contains "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The terms "believe", "anticipate", "intend", "goal",
"expect" and similar expressions may identify forward-looking statements. These
forward-looking statements represent the Company's current expectations or
beliefs concerning future events. The matters covered by these statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those set forth in the forward-looking statements,
including, but not limited to: (i) the Company's history of ongoing operating
losses; (ii) the Company's ability to reach a definitive agreement with the
target described in “Recent Developments - Potential Acquisition”; (iii) the
overall marketplace and clients' usage of EMC's products and those of the
target, if and when the potential acquisition is consummated,
including  demand
therefor, the impact of competitive technologies, products and pricing,
particularly given the substantially larger size and scale of certain
competitors and potential competitors, control of expenses, and revenue
generation by the acquisition of new customers; (iv) the consequent results of
operations given the aforementioned factors; and (v) the requirement for the
Company to raise additional working capital to fund operations and the
availability and terms of any such funding to the Company. Without any such
funding, the Company believes it may be forced to curtail operations, and if no
alternative to financing, such as a merger or acquisition, is consummated, the
Company may not continue as a going concern. Other risks are detailed from time
to time in the Company's 2003 Annual Report on Form 10-KSB, as amended and in
its other Commission reports and statements. The foregoing list should not be
construed as exhaustive, and the Company disclaims any obligation to
subsequently revise any forward-looking statements to reflect events or
circumstances after the date of such statements, or to reflect the occurrence of
anticipated or unanticipated events. The Company wishes to caution readers not
to place undue reliance on any such forward-looking statements, which speak only
as of the date made.
 
 **Item
3. Controls and Procedures.**
 
 ***Evaluation
of Disclosure Controls and Procedures***
 
 The
Company's Chief Executive Officer and Chief Financial Officer, after evaluating
the effectiveness of the Company's disclosure controls and procedures (as
defined in Exchange Act Rule 13a-15(e)) as of the end of the period being
reported (the "Evaluation Date"), have concluded that as of the Evaluation Date,
the Company's disclosure controls and procedures, while improving, were still
not effective in ensuring that information required to be disclosed by the
Company in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms. Such officers reached this conclusion because this
current filing was delayed. Management has reviewed the recommendations set
forth in a letter from the Company’s auditors and are still implementing such
recommendations to bring the Company’s disclosure controls and procedures in
line with such recommendations. The Company’s independent auditors have made a
number of recommendations including, but not limited to, the following: (i) the
Company should improve accounting controls through the formalization of
accounting practices through promulgation of accounting policies and procedures,
and (ii) additional recommendations related to improving internal controls
through the separation of duties within the accounting function. Management has
hired outside consultants to help with this process.
 
 Page
7
 ******
 ***Changes
in Internal Controls***
 
 No
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls following the Evaluation Date came to
management's attention.
 
 **PART
II**
 **Item
1. Legal Proceedings.**
 
 As of
March 31, 2005, the Company was neither a party nor were any of its properties
subject to any material legal proceedings.
 
 **Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.**
 
 The
following sets forth information relating to all sales of our common stock
during the quarter ended March 31, 2005, which sales were not registered under
the Securities Act.
 
 During
the quarter ended March 31, 2005, the Company sold an aggregate of 3,757,500
shares of its common stock in a private placement to accredited investors as
well as for accrued interest and services rendered, at prices between $0.05 and
$0.20 per share. Each of the purchasers in this private placement represented
his or her intention to acquire the securities for investment only and not with
a view toward distribution. None of the shares of the Company’s common stock
were sold through an underwriter and there were no underwriting discounts or
commissions involved. These sales and purchases in the private placement were
exempt from registration under the Securities Act pursuant to Section 4(2) and
the regulations promulgated thereunder, on the basis that the private placement
did not involve a public offering.
 
 Other
than the securities mentioned above, the Company did not issue or sell any
securities during the quarter ended March 31, 2005.
 
 **Item
3. Defaults Upon Senior Securities.**
 
 None.
 
 **Item
4. Submission of Matters to a Vote of Security Holders.**
 
 None
 
 **Item
5. Other Information.**
 
 Please
see “Recent Developments” on page 1.
 
 Page
8
 **Item
6. Exhibits.**
 
 ***Exhibit
Index***
 
 31.1
    Certification
      of the Principal Executive Officer pursuant to Rule
    13a-14(a).31.2
    Certification
      of the Principal Financial Officer pursuant to Rule
    13a-14(a).32.1
    Section
      1350 Certification of the Chief Executive Officer.32.2
    Section
      1350 Certification of the Chief Financial
Officer.
 
  Page
9
  **Signatures**
 
 In
accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 **Industrial
Enterprises of America, Inc** .
 (Registrant)
 
 Date:
June 3, 2005
 By: /s/
John D. Mazzuto
 John D.
Mazzuto, Chief Financial
 Officer,
Vice Chairman of the Board, Assistant Secretary
 and a
Director
 
 
 
 Date:
June 3, 2005
 By: /s/
Crawford Shaw
 Crawford
Shaw, Chief Executive Officer,
 Chairman
of the Board, President and a Director
 
  Page
10
  **INDUSTRIAL
ENTERPRISES OF AMERICA, INC.**
 **Balance
Sheet**
 **March
31, 2005**
 **(Unaudited)**
 
 **March
      31, 2005****(Unaudited)**ASSETSCurrent
      AssetsCash
    
    
    $
      15,530Accounts
      receivable
    572,772Due
      from related parties
    6,984Inventory
    
    573,728Prepaid
      expenses
    65,798Total
      Current Assets
    $
      1,234,812Investment
      in common stock
    145,725Property,
      plant and equipment net of accumulated depreciation
    102,475Other
      Assets
    
    95,833Goodwill
    
    
    418,029TOTAL
      ASSETS
    
    
    $
      1,996,874
 
  F-1
 See Notes
to Financials
  
 LIABILITIES
      & SHAREHOLDERS' DEFICITCurrent
      LiabilitiesCurrent
      maturities of long term debt
    $
      646,115Accounts
      payable
    391,572Other
      accrued payables
    250,000Accrued
      interest to shareholders and related parties
    46,937Total
      Current Liabilities
    $
      1,334,624Long
      Term LiabilitiesConvertible
      notes payable shareholders
    350,000Disputed
      debt
    1,994,150Total
      Long Term Liabilities
    $
      2,344,150Total
      Liabilities
    
    $
      3,678,774Shareholders'
      DeficitCommon
      stock, $0.001 par value,50,000,000
      shares authorized,25,894,190
      shares issued and outstandingat
      March 31, 2005
    $
      25,894Additional
      paid-in capital
    4,805,776Subscribed
      stock
    2,000Stock
      subscriptions receivable
    (10,000)Retained
      (deficit)
    (6,505,570)Total
      Shareholders' Deficit
    $
      (1,681,900)TOTAL
      LIABILITIES & SHAREHOLDERS' DEFICIT
    $
      1,996,874
 
  F-2
See Notes
to Financials
  **INDUSTRIAL
ENTERPRISES OF AMERICA, INC.**
 **Statement
of Operations**
 **(Unaudited)**
 **Three
      Months Ended**
    
    **Nine
      Months Ended****March
      31, 2005**
    
    **March
      31, 2004**
    
    **March
      31, 2005**
    
    **March
      31, 2004**Revenues
    $
      831,831
    
    $
      137,837
    
    $
      2,180,618
    
    $
      224,157Cost
      of Goods Sold
    740,592.00
    
    -
    
    1,867,097
    
    -Gross
      Profit
    $
      91,239
    
    $
      137,837
    
    $
      313,521
    
    $
      224,157Expenses:Selling,
      general & administrative
    $
      112,452
    
    $
      40,094
    
    $
      413,260
    
    $
      160,573Salaries
      and contract labor
    326,140
    
    56,311
    
    410,414
    
    1,611,925Depreciation
      and amortization
    3,900
    
    22,508
    
    4,502
    
    67,535Legal
      and professional fees
    504,253
    
    48,814
    
    1,446,971
    
    141,373Total
      Expenses
    $
      946,745
    
    $
      167,727
    
    $
      2,275,147
    
    $
      1,981,406(Loss)
      from operations
    $
      (855,506)
    
    $
      (29,890)
    
    $
      (1,961,626)
    
    $
      (1,757,249)Interest
      expense
    $
      103,769
    
    51,942
    
    264,964
    
    175,153Net
      (Loss) from operations
    $
      (959,275)
    
    $
      (81,832.07)
    
    $
      (2,226,590)
    
    $
      (1,932,401)Miscellaneous
      income
    3,000
    
    -
    
    6,000
    
    2,448Net
      income (loss)
    $
      (956,275)
    
    $
      (81,832)
    
    $
      (2,220,590)
    
    $
      (1,929,954)Net
      income (loss) per share basic and diluted
    $
      (0.04)
    
    $
      (0.01)
    
    $
      (0.09)
    
    $
      (0.15)Weighted
      average number of common shares outstanding
    25,894,190
    
    12,624,672
    
    25,894,190
    
    12,624,672
 
 F-3
See Notes
to Financials
 **INDUSTRIAL
ENTERPRISES OF AMERICA, INC.**
 **Statement
of Cash Flows**
 **(Unaudited)**
 **Nine
      Months Ended****March
      31, 2005**
    
    **March
      31, 2004****Operating
      activities**Net
      income (loss)
    $
      (2,220,590)
    
    $
      (1,788,720)Non-cash
      itemsDepreciation
      and amortization
    4,502
    
    69,948Stock
      based compensation
    -
    
    734,206Net
      changes in working capital accounts
    984,998
    
    275,968**Net
      cash (used) by operating activities**
    **$
      (1,231,090)**
    
    **$
      (708,598)****Investing
      activities**Additions
      to property, plant and equipment
    (9,353)
    
    -Other
    
    (1,013)
    
    -**Net
      cash (used) by investing activities**
    **$
      (10,366)**
    
    **$
      -****Financing
      activities**Bank
      overdraft
    -
    
    14,996Proceeds
      from bank line of credit
    58,361
    
    (9,160)Payments
      towards bank line of credit
    (50,825)
    
    15,001Proceeds
      from issuance of debt
    -
    
    58,343Principal
      payments on debt
    -
    
    (36)Proceeds
      from notes payable related party and shareholders
    911,722
    
    (100)Payments
      on related party loans
    (572,706)
    
    (1,963)(Decrease)
      increase in credit card debt
    (15,024)
    
    (4,212)Proceeds
      from issuance of common stock
    899,000
    
    582,000Stock
      subscriptions
    2,000
    
    (12,487)Stock
      subscriptions receivable
    (10,000)
    
    -**Net
      cash provided by Financing Activities**
    **$
      1,222,527**
    
    **$
      642,383****Net
      cash increase for period**
    **$
      (18,929)**
    
    **$
      (66,215)**Cash
      at beginning of period
    34,459
    
    68,171**Cash
      at end of period**
    **$
      15,530**
    
    **$
      1,956**SUPPLEMENTAL
      DISCLOSURES RELATED TO CASH FLOWS:Interest
      paid
    $
      94,802
    
    $
      12,318SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Debt
      converted to common stock
    $
      96,409
    
    $
      10,000Accrued
      interest converted to stock
    $
      33,660
    
    $
      2,991Lease
      payable converted to stock
    $ -
    
    $
      14,474Stock
      issued for services
    $
      723,000
    
    $
      734,206Debt
      converted to paid in capital
    $
      699,434
    
    $ -
 F-4
See Notes
to Financials
  **Note
1 - Basis of presentation**
 
 Effective
February 11, 2005, the Company changed its name to Industrial Enterprises of
America, Inc. from Advanced Bio/Chem, Inc.
 
 The
Company has suffered recurring losses from operations and its total liabilities
exceed its total assets. This raises substantial doubt about the Company’s
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
 
 The
condensed financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading.
 
 These
statements reflect all adjustments, consisting of normal recurring adjustments,
which, in the opinion of management, are necessary for fair presentation of the
information contained therein. It is recommended that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company’s 2003 Form 10-KSB.
 
 During
2004, the Company changed its fiscal year from one ending on December 31 to one
ending on June 30. Application for the change in accounting year is pending with
the Internal Revenue Service. Accordingly, the Company’s transition period that
ended on December 31, 2004, includes the six months ended December 31, 2004
(Transition 2004). The following are selected financial data for Transition 2004
and the comparable nine-month period of the prior year:
 
 **ILNP**
    
    **EMC**
    
    **Combined****March
      31, 2005**
    
    **March
      31, 2005**
    
    **March
      31, 2005****(Nine
      months)**
    
    **(Nine
      months)**
    
    **(Nine
      months)**Net
      sales
    $ -
    
    $
      3,121,559
    
    $
      3,121,559Cost
      of goods sold
    -
    
    2,613,977
    
    2,613,977Gross
      profit
    $ -
    
    $
      507,582
    
    $
      507,582Selling
      and administrative expenses
    $
      242,801
    
    $
      242,830
    
    $
      485,631Salaries
      and contract labor
    250,000
    
    222,168
    
    472,168Depreciation
      and amortization
    -
    
    6,515
    
    6,515Legal
      and professional
    1,402,016
    
    43,674
    
    1,445,690Total
      expenses
    $
      1,894,817
    
    $
      515,187
    
    $
      2,410,004Net
      (loss) from operations
    $
      (1,894,817)
    
    $
      (7,605)
    
    $
      (1,887,212)Interest
      expense
    $
      181,972
    
    $
      119,753
    
    $
      301,725Income
      before income taxesand
      discontinued operations
    $
      (2,076,789)
    
    $
      (127,358)
    
    $
      (2,204,147)Gain
      on discontinued operations
    $ -
    
    $ -
    
    $ -Income
      before income taxes
    $
      (2,076,789)
    
    $
      (127,358)
    
    $
      (2,204,147)Income
      tax expense
    $ -
    
    $
      -
    
    $
      -Net
      income
    $
      (2,076,789)
    
    $
      (127,358)
    
    $
      (2,204,147)
  F-5
  
 **ILNP**
    
    **EMC**
    
    **Combined****March
      31, 2004**
    
    **March
      31, 2004**
    
    **March
      31, 2004****(Nine
      months)**
    
    **(Nine
      months)**
    
    **(Nine
      months)**Net
      sales
    $
      224,157
    
    $
      2,763,026
    
    $
      2,987,183Cost
      of goods sold
    -
    
    2,113,356
    
    2,113,356Gross
      profit
    $
      224,157
    
    $
      649,670
    
    $
      873,827Selling
      and administrative expenses
    $
      160,573
    
    $
      258,000
    
    $
      418,573Salaries
      and contract labor
    1,611,925
    
    205,846
    
    1,817,771Depreciation
      and amortization
    67,535
    
    8,754
    
    76,289Legal
      and professional
    141,373
    
    207,000
    
    348,373Total
      expenses
    $
      1,981,406
    
    $
      679,600
    
    $
      2,661,006Net
      (loss) from operations
    $
      (1,757,249)
    
    $
      (29,930)
    
    $
      (1,727,319)Interest
      expense
    $
      175,153
    
    $
      99,073
    
    $
      274,226Income
      before income taxesand
      discontinued operations
    $
      (1,932,402)
    
    $
      (129,003)
    
    $
      (2,001,545)Gain
      on discontinued operations
    $ -
    
    $ -
    
    $ -Income
      before income taxes
    $
      (1,932,402)
    
    $
      (129,003)
    
    $
      (2,001,545)Income
      tax expense
    $ -
    
    $
      -
    
    $
      -Net
      income
    $
      (1,932,402)
    
    $
      (129,003)
    
    $
      (2,001,545)
 
 Results
of operations for the interim periods are not indicative of annual results.
 
 **Note
2 - Earnings per share**
 
 Basic
earnings per share (EPS) includes dilution and is determined by dividing income
available to common stockholders by the weighted average number of shares of
common stock outstanding. Diluted EPS reflects the potential dilution that could
occur if options and other contracts to issue shares of common stock were
exercised or converted into common stock. There are warrants to issue an
additional 2,400,000 shares as of March 31, 2005, and no warrants or options as
of March 31, 2004. None of the warrants have been exercised as of March 31,
2005.
 
 F-6
 ****
 **Note
3 - Stock based compensation**
 
 As
permitted under generally accepted accounting principles, stock-based awards
granted to employees are accounted for following APB 25. Accordingly, the
Company has not recognized compensation expense for its stock-based awards to
employees. Outlined below are pro forma results had compensation costs for the
Company’s stock-based compensation plans been determined based on the fair value
approach of SFAS 123.
 
  For the
      Three Months EndedMarch
      312005
    
    2004Net
      income (loss), as reported
    $(956,275)
    
    $(81,832)Less
      compensation cost determined under the fair value method
    -
    
    -Pro
      forma net income (loss)
    $(956,275)
    
    $(81,832)
 
 Basic
      and dilutive (loss) per share:As
      reported
    $
      (0.04)
    
    $
      (0.01)Pro
      forma
    $
      (0.04)
    
    $
      (0.01)
 
 For the
      Nine Months EndedMarch
      312005
    
    2004Net
      income (loss), as reported
    $(2,220,590)
    
    $(1,929,954)Less
      compensation cost determined under the fair value method
    -
    
    -Pro
      forma net (loss)
    $(2,220,590)
    
    $(1,929,954)
 
 Basic
      and dilutive (loss) per share:As
      reported
    $
      (0.09)
    
    $
      (0.15)Pro
      forma
    $
      (0.09)
    
    $
      (0.15)
 
 These pro
forma amounts may not be representative of future disclosures since the
estimated fair value of stock options is amortized to expense over the vesting
period and options may be granted in future years.
 
 Steven
Rash, former CEO, was granted 825,000 shares of common stock at $0.80 per share
for a charge of $660,000 against operations for the quarter ended September 30,
2003. In addition, pursuant to Mr. Rash’s September 5, 2003, employment
contract, an option agreement for an additional 200,000 shares at the exercise
price of $0.80 was promised, but as yet not executed. No charge to current
operations has been made for the unexecuted option. These options are not
anticipated to be executed. As of March 31, 2005, and in connection with the
disputed liabilities related to the dispute between the Company and Power 3
Medical Products, Inc. (Power3) (Please see “Recent Development - Power3 Dispute
in the Company’s 10-QSB for the quarter ended March 31, 2005), the Company
elected to suspend the shares of common stock previously issued to Mr. Rash
while it investigates whether Mr. Rash (i) breached his fiduciary duties while
holding the position of officer of the Company, and (ii) perpetrated a fraud on
the rights of the other Company stockholders in connection with the Company’s
sale of all of its assets to Power3. At the time of the sale of assets to
Power3, Mr. Rash owned approximately 3.92% of the Company’s common
stock.
 
 Disclosures
required by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), including pro forma operating
results had the Company prepared its financial statements in accordance with the
fair value based method of accounting for stock- based compensation prescribed
therein are shown below. There are no stock options granted or outstanding as of
March 31, 2005.
 
 The
following table summarizes the pro forma operating results of the Company for
March 31, 2005, had compensation costs for the stock options granted to
employees been determined in accordance with the fair value based method of
accounting for stock based compensation as prescribed by SFAS No. 123.
  
 Proforma net income (loss) available to
      common stockholders
    $ (2,220,590)Proforma basic and diluted loss per
      share
    $ (0.09)
 
 As of
March 31, 2005, warrants for 2,500,000 shares of common stock have not been
exercised.
 
 F-7
 ****
 **Note
4 - Line of credit with bank**
 
 The
Company has a $150,000 renewable line of credit with a commercial bank. The line
bears interest at the bank’s prime rate plus 1%. There was an outstanding
balance as of March 31, 2005, of $150,000. The line is guaranteed by the
personal guarantees of certain shareholders and contains certain financial
covenants. The balance on this line of credit is one of the disputed liabilities
related to the sale of assets to Power3. See “Recent Developments - Power3
Dispute” in the Company’s 10-QSB for the quarter ended March 31,
2005.
 
 The
Company recorded interest expense totaling $264,964 and $175,153 for the nine
months ended March 31, 2005 and 2004, respectively.
 
 **Note
5 - Changes in common shares outstanding**
 
 Included
in the table below are the changes in common shares since June 30, 2004. See
Note 6 for discussion of mergers and acquisitions affecting common
shares.
 
 CommonSharesOutstanding
      common shares at June 30, 2004
    15,384,275Stock
      options exercised
    1,875,000Stock
      certificates cancelled
    (6,730,173)Debt
      converted to stock
    190,615Stock
      issued to EMC shareholders
    2,296,800Stock
      issued for services
    6,515,000Stock
      issued for cash
    6,362,500Outstanding
      common shares at March 31, 2005
    25,894,017
 
 **Note
6 - Discontinued operations**
 
 On May
11, 2004, by unanimous consent of the Board of Directors and a majority of the
shareholders of the Company, the Company entered into an Asset Purchase
Agreement with Power 3 Medical Products, Inc. Effective May 18, 2004, the
purchase agreement was finalized and the assets and certain liabilities were
acquired by Power 3 for 15,000,000 shares of common stock of Power 3. (See Note
7 - Mergers and acquisitions for further details.)
 
 The
assets and liabilities of the Company as of May 17, 2004 consisted of the
following:
 
 Cash
    $
      3,796Accounts
      receivable - trade
    5,785Equipment,
      net of accumulated depreciation
    128,881Patents,
      net of accumulated amortization
    16,844Leasehold
      security deposit
    2,968Total
      Assets
    $
      158,274Capital
      leases
    147,639Accounts
      payable
    80,437Accrued
      expenses
    31,675Total
      Liabilities Disposed of
    $
      259,751Liabilities
      due to discontinued operations
    $(101,477)
 
 F-8
 
 The
operating results of this discontinued operation for the period ended May 17,
2004, consisted of the following:
 
 Revenues
    $
      141,362Operating
      expenses
    (355,974)Interest
      expense
    (
      58,221)Net
      (loss)
    $(272,884)
 
 **Note
7 - Mergers and acquisitions**
 
 On May
18, 2004, all fixed assets and intellectual property were acquired by Power 3
Medical Products, Inc. (Power 3), a Nevada corporation, for 15,000,000
restricted shares of Power 3 common stock, plus employment of certain of the
Company’s employees, and assumption of certain liabilities of the Company. The
transaction is recognized as a related party transaction and was recorded as an
exchange of assets at the book value of the fixed and intellectual properties
for the restricted shares.
 
 On
October 7, 2004, the Company’s Board of Directors approved a merger with EMC
Packaging, Inc. In consideration for each EMC share, the EMC stockholders
received an aggregate of 2,296,800 shares of the Company’s common stock valued
at $808,474. For accounting purposes, the merger has been considered a business
combination.
 
 **Note
8 - Disputed Liabilities**
 
 In
connection with the disposed assets to Power 3 Medical Products as discussed in
Note 6 and Note 7, various liabilities were to transfer to Power 3 along with
the assets. In May 2005, the Company disclosed that its management was reviewing
the terms of the sale of assets to Power3. Pursuant to the Asset Purchase
Agreement (Agreement) between Power3, the Company and Steven B. Rash and Ira
Goldknopf (Shareholders), Power3 was to assume all of the outstanding
liabilities of the Company in consideration for the purchase of all of the
Company’s assets. However, following the sale, approximately $2.8 million in
liabilities (liabilities) remained with the Company. As previously disclosed by
the Company, the parties were attempting to settle the dispute, but the
Company’s management has elected to discontinue settlement discussions and to
pursue any rights and remedies it may have with respect to the sale of all of
its assets to Power3 and the Liabilities.
 
 **Note
9 - Cancellation of Debt**
 
 The
Company has cancelled the debt of certain former officers, directors and
shareholders totaling $699,434 during the quarter ended March 31, 2005, based on
a determination that such debt should have been either assumed by Power3 or paid
by the shareholder upon consummation of the Power3 transaction. While the
Company believes that it has a valid basis for such cancellation, there can be
no assurance that the cancellation of the liabilities will not be disputed. The
cancelled debt comprising of $388,110 of notes payable; $123,382 of accrued
interest; $92,663 of credit card debt; and $95,279 of accounts payable to former
shareholders, was adjusted to additional paid-in capital.
 
 F-9