**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-QSB**


**Amendment
      No. 2**





**[x]
      Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of
      1934**





For
      the
      quarterly period ended **September
      30, 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.)**711
                Third Avenue, Suite 1505, New York, New York**
            **10017**(Address
                of principal executive offices)
            (Zip
                Code)





**(212)
      490-3100**


(Registrant’s
      telephone number, including area code)





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
        September 11, 2006 7,618,889 shares
        of the registrant’s Common Stock were outstanding.





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




















**Table
      of Contents**








**Page**Explanatory
                Note.........................................................................................................
            iRecent
                Developments.......................................................................
            1**Part
                I**Item
                1. Financial Statements.................................................................
            3Item
                2. Management’s Discussion and Analysis or Plan of Operations
                ............
            3Item
                3. Controls and Procedures............................................................
            5**Part
                II**Item
                1. Legal Proceedings...................................................................
            5Item
                2. Unregistered Sales of Equity Securities and Use of Proceeds
                .........
            5Item
                3. Defaults Upon Senior Securities................................................
            6Item
                4. Submission of Matters to a Vote of Security Holders
                ...................
            6Item
                5. Other Information...................................................................
            6Item
                6. Exhibits.................................................................................
            6




















**Explanatory
          Note**
 
 As
          previously disclosed by Industrial Enterprises of America, Inc., a Nevada
          corporation (the “Company”), in Amendment No. 1 to the Transition Report on Form
          10-KSB for the six months ended June 30, 2004 (the “Transition Report”), filed
          with the Securities and Exchange Commission (the “SEC”) on September 12, 2006,
          the Company amended and restated its financial statements, including the
          notes
          therein, for the six months ended June 30, 2004, in order to correct an
          error in
          recording the sale of its operating assets under the equity method of accounting
          instead of recording the transaction as an arms length transaction recognizing
          the fair market value of the securities received in the transaction. 
 This Amendment No. 2 (this “Amendment No. 2”) to the Quarterly Report on
          Form 10-QSB for the period ended September 30, 2005 makes the same correction
          to
          the Company’s unaudited financial statements for such period.
  Pursuant
          to the rules of the SEC, Item 6, "Exhibits," of Part II of Amendment No.
          1 to
          the Quarterly Report on Form 10-QSB for the period ended September 30,
          2005 (the
“Original Filing”) has been amended to contain updated certifications from our
          Chief Executive Officer and Chief Financial Officer, as required by Sections
          302
          and 906 of the Sarbanes-Oxley Act of 2002.
  This
          Amendment No. 2 only amends and restates the Items described above to reflect
          the effects of the restatement, and we have not modified or updated other
          disclosures presented in our Original Filing.  Accordingly, this Amendment
          No. 2 does not reflect events occurring after the filing of the Original
          Filing
          and does not modify or update those disclosures affected by subsequent
          events,
          except as specifically referenced herein.  Information not affected by this
          Amendment No. 2 is unchanged and reflects the disclosures  made
          at
          the time of the Original Filing on December 28, 2005.










i











**Recent
      Developments**





***Potential
      Acquisition***





As
      disclosed by the Company in a Current Report on Form 8-K filed with the
      Commission on November 1, 2005, the Company issued a press release on that
      date
      announcing that management had signed a letter of intent to acquire one hundred
      percent (100%) ownership of an automotive holding company. The Company further
      announced that management believes that a definitive agreement will be reached,
      and the transaction will likely be consummated, within sixty (60) 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
      of
      November 1, 2005, the Company decided to withdraw its litigation against Power3
      Medical Products, Inc., a New York corporation ("Power3"), which purchased
      all
      of the Company’s assets in consideration for 15,000,000 shares of the common
      stock, par value $.001 per share, of Power3 in May 2004. The Company has
      determined that many of the liabilities that were not assumed or paid off in
      the
      Power3 transaction were in fact liabilities of a subsidiary of the Company
      that
      was purchased by Power3 when Power3 purchased all of the assets of the Company.
      As such, the litigation was deemed unnecessary at this time. The litigation
      was
      withdrawn without prejudice and the Company can refile the litigation if its
      position is determined to be improper.





In
      connection with this determination and 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. In
      addition, the Company removed $1,900,000 from its disputed liabilities based
      on
      the determination that these liabilities were liabilities of a subsidiary
      purchased by Power3.





***Sale
      of Securities***





As
      of
      November 21, 2005, the Company offered and sold to certain accredited investors
      an aggregate of $2,500,000 worth of convertible promissory notes and warrants
      to
      purchase shares of common stock at prices between $.15 and $.175 **** a
      share.
      This private placement was conducted through a placement agent, and the
      commissions to such agent from the offering amounted to 153,900. The purchasers
      in this private placement represented his or her intention to acquire the
      securities for investment purposes only and not with a view toward distribution.
      The sales and purchases in this private placement were exempt from registration
      under Section 4(2) of the Securities Act of 1933, as amended (the “Securities
      Act”), and, specifically, Regulation D thereunder, on the basis that the private
      placement did not involve a public offering.





Page
      1





***Board
      of Directors***





As
      previously disclosed by the Company on a Current Report on Form 8-K filed on
      October 17, 2005, on October 14, 2005, the Board of Directors of the Company
      appointed Scott L. Margulis as a new Director of the Company, effective as
      of
      October 14, 2005. Mr. Margulis will serve as a Director until the next annual
      meeting of stockholders or thereafter until his successor is chosen and
      qualified. Mr. Margulis joined one of the Company’s operating subsidiaries,
      Unifide Industries, Limited Liability Company, a New Jersey limited liability
      company (“Unifide”), in 1999.





Additionally,
      on October 14, 2005, the Board of Directors elected John Mazzuto as the
      Company’s Chief Executive Officer and President. Mr. Mazzuto will still continue
      on as the Company’s Chief Financial Officer until a replacement can be
      found. **** Mr.
      Mazzuto will also continue as the Company’s Assistant Secretary. Mr. Mazzuto
      replaces Crawford Shaw, who stepped down from his position as the Chief
      Executive Officer and President as of October 14, 2005.





Finally,
      as previously disclosed by the Company on a Current Report on Form 8-K filed
      on
      December 5, 2005, on November 11, 2005 the following individuals were elected
      to
      serve on the Board of Directors of the Company by written consent of the
      shareholders in lieu of an annual meeting: Robert Casper, Jerome Davis, Lou
      Frey, Scott Margulis and John Mazzuto.





***Change
      in Authorized Shares***





As
      previously disclosed on a Current Report on Form 8-K filed on October 19, 2005,
      effective as of October 18, 2005, the Company amended its Articles of
      Incorporation by filing a Certificate of Amendment (the “Amendment”) with the
      Secretary of State of the State of Nevada. The Amendment changed the number
      of
      authorized shares of the Company’s common stock, par value $.001 per share, from
      50,000,000 to 150,000,000. Additionally, the Amendment authorized for issuance
      10,000,000 shares of preferred stock, par value $.001 per share. The Company’s
      board of directors is authorized, subject to limitations prescribed by Nevada
      law and the Company’s Articles of Incorporation, **** as
      amended, to determine the terms and conditions of the preferred stock, including
      whether the shares of preferred stock will be issued in one or more series,
      the
      number of shares to be included in each series and the powers, designations,
      preferences and rights of the shares. The board of directors also is authorized
      to designate any qualifications, limitations or restrictions on the
      shares **** without
      any further vote or action by the stockholders. The issuance of preferred stock
      may have the effect of delaying, deferring or preventing a change in control
      of
      the Company and may adversely affect the voting and other rights of the holders
      of the Company’s common stock, which could have an adverse impact on the market
      price of the Company’s common stock. The Company has no current plan to issue
      any shares of preferred stock.





***Refinancing***





On
      November 7, 2005, the Company secured a $5,000,000 credit facility for its
      subsidiaries, EMC and Unifide, from Mercantile Business Credit, L.P. of Ardmore,
      PA. This secured asset based credit facility replaces the Company's existing
      credit line and provides additional working capital for expanding operations.
      The credit facility is an annual, renewable facility. This new credit facility
      results in the Lender Line of Credit from the Balance Sheet of $2,082,445 being
      categorized as a Long Term Liability instead of a Current Liability going
      forward.





Page
      2








**Item
      1. Financial Statements.**





***Critical
      Accounting Policies***





Revenue
      Recognition





EMC
      Packaging 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.





Unifide
      Industries markets and distributes a full line of automotive aftermarket
      chemicals. Distribution markets include retail, wholesale, value chains, and
      private labeling. Unifide brands consist of Unifide (retail), Taylor Made
      Products (professional), NuEnergy and Phoenix (value). Revenue is recognized
      with sales to the distribution chain.





Today’s
      Way Manufacturing is a contract manufacturer of liquid and aerosol products.
      Currently, Today’s Way is solely producing for Unifide Industries. Revenue is
      recognized by toll manufacture of products.





All
      intercompany transactions have been eliminated.





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.




**Item
      2. Management’s Discussion and Analysis or Plan of
      Operations.**





The
      comparative data included in the Results of Operations and the Liquidity and
      Capital Resources sections below contain data for the three month period ended
      September 30, 2004, consisting of pre-acquisition EMC, Unifide and Today’s Way
      data. The three month period ended September 30, 2005 data consists of
      post-acquisition EMC, Unifide and Today’s Way data and includes the operations
      of EMC, Unifide and Today’s Way.


Page
      3





*Three
      Months Ended September 30, 2005 as Compared to Three Months Ended September
      30,
      2004*





Revenues
      for the three months ending September 30, 2005 were $4,909,803 and
      $-0- for the same period in 2004, and reflects the revenue and gross profit
      derived from EMC’s, Unifide’s and Today’s Way’s operations during the quarter.





Total
          operating expenses for the three months ending September 30, 2005 were
          $1,487,948 as compared to $150,049, an increase of $1,337,899. Of this
          amount, $902,159 was due to the operations of EMC, Unifide and Today’s Way
          and the balance was due to the Company’s corporate expenses.
 
 Interest
          expense in 2005 amounted to $268,600 as compared to $2,013 during the same
          three
          month period of 2004.  The increase in interest expense is primarily
          attributable to the convertible debentures issued to purchase Unifide and
          Today’s Way.
  The
          result of the above was a net loss for the three months ending September
          30,
          2005 of $(337,938) compared to a loss of $(152,062) for the three months
          ending
          September 30, 2004.
  ***Liquidity
          and Capital Resources***
  Net
          loss
          from operations for the three months ending September 30, 2005 was $(337,938),
          compared to a negative cash provided by operations for the three months
          ending
          September 30, 2004 of $(152,062). This increase in funds used by operations
          was
          attributable to the operations of EMC, Unifide and Today’s Way.
  Net
          cash
          (used) by investing activities was $(2,174,629) in the three months ending
          September 30, 2005 as compared to -0- for the three months ending September
          30,
          2004.
  Net
          cash
          used by operating activities for the three months ending September 30,
          2005 was
          $(161,655), compared to cash used by operating activities for the three
          months
          ending September 30, 2004 of $(196,244).
  Net
          cash
          provided by financing activities was $2,777,257 in the three months ending
          September 30, 2005 as compared to $198,475 for the three months ending
          September
          30, 2004.


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
      may contain "forward-looking statements." 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. Although the Company's
      management believes that such forward-looking statements are reasonable, it
      cannot guarantee that such expectations are, or will be, correct. These
      forward-looking statements involve a number of risks and uncertainties which
      could cause the Company's future results to differ materially from those
      anticipated, including: (i) the Company's history of ongoing operating losses;
      (ii) the overall marketplace and clients' usage of EMC's and Unifide’s products,
      including demand therefore, 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
      generated by the acquisition of new customers; (iii) the





Page
      4





ultimate
      consequences of Hurricane Katrina on the supply and/or distribution chain;
      (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 an additional merger or acquisition, is
      consummated, the Company may not continue as a going concern. The foregoing
      list
      should not be construed as exhaustive, and the Company disclaims any obligation
      subsequently to 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. Other risks are detailed in the Company’s
      Annual Report on Form 10-KSB


for
      the
      year ended June 30, 2005. In light of the significant uncertainties inherent
      in
      the forward-looking information included herein, the inclusion of such
      information should not be regarded as a representation that the strategy,
      objectives or other plans of the Company will be achieved. 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 the Securities Exchange Act of 1934 (the “Exchange Act”) Rule
      13a-15(e)) as of the end of the period being reported (the "Evaluation Date"),
      has 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
      officer 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 and believes that improvements are being made.





***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
      September 30, 2005, the Company was neither a party nor was 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 September 30, 2005, which sales were not registered
      under the Securities Act.





Page
      5








During
      the quarter ended September 30, 2005, the Company sold an aggregate of 6,633,900
      shares of its common stock/securities convertible into its common stock in
      a
      private placement to accredited investors as well as for accrued interest and
      services rendered, at prices between $0.10 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. Additionally, the Company issued 6,000,000 shares of its common stock
      in connection with the acquisition of Unifide and Today’s Way.





Other
      than the securities mentioned above, the Company did not issue or sell any
      securities during the quarter ended September 30, 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.





**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
      6











**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: **September
        18, 2006**
 By: /s/
        John D. Mazzuto
 John
        D. Mazzuto, President,
        Chief Executive Officer, Assistant Secretary, and a
        Director





Date: **September
        18, 2006**
 By: /s/
        James W. Margulies
 James
        W. Margulies ,
        Chief
        Financial Officer








Page
      7





**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Balance
      Sheet**


**September
      30, 2005**


**(Unaudited)**


**(restated)**








**September
                  30, 2005****(Unaudited)**ASSETSCurrent
                  AssetsCash
              
              
              $
                  795,556Accounts
                  receivable
              2,974,632Due
                  from Power 3 Medical Products, Inc.
              
              149,551Allowance
                  for doubtful account
              
              (149,551)Inventory
              
              4,294,927Prepaid
                  expenses
              43,049Total
                  Current Assets
              $
                  8,108,164Investment
                  in common stock
              3,600,000Property,
                  plant and equipment net of accumulated depreciation
              264,991Other
                  Assets
              102,531Other
                  intangibles net of amortization
              88,329Goodwill
              4,519,038TOTAL
                  ASSETS
              $
                  16,683,053
















The accompanying
          Notes are an
          integral part of these financial statements.
 F-1





**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Balance
      Sheet**


**September
      30, 2005**


**(Unaudited)**


**(restated)**





LIABILITIES
                  & SHAREHOLDERS' EQUITYCurrent
                  LiabilitiesCurrent
                  maturities of long term debt
              $
                  341,728Current
                  maturities of long term debt related parties
              986,700Lender
                  line of credit
              2,082,445Accounts
                  payable
              3,224,359Payable
                  related parties
              697,462Accrued
                  payables
              127,558Accrued
                  interest
              31,585Accrued
                  interest to shareholders and related parties
              167,457Total
                  Current Liabilities
              $
                  7,659,294Long
                  Term LiabilitiesNotes
                  payable net of current debt
              319,201Convertible
                  notes payable
              1,780,000Notes
                  payable related parties
              1,533,198Total
                  Long Term Liabilities
              $
                  3,632,399Total
                  Liabilities
              
              $
                  11,291,693Shareholders'
                  EquityPreferred
                  stock, $0.001 par value,10,000,000
                  shares authorized; -0- shares issued andoutstanding
                  as of September 30, 2005
              $
                  -Common
                  stock, $0.001 par value,150,000,000
                  shares authorized; 49,773,090 shares issued andoutstanding
                  as of September 30, 2005
              $
                  49,773Additional
                  paid-in capital
              8,598,627Subscribed
                  stock payable
              46,489Director
                  fees, unamortized
              (45,000)Equity
                  development fees, unamortized
              (666,243)Unrealized
                  securities gains
              600,000Retained
                  (deficit)
              (3,192,286)Total
                  Shareholders' Equity
              $
                  5,391,360TOTAL
                  LIABILITIES & SHAREHOLDERS' EQUITY
              $
                  16,683,053












The accompanying
          Notes are an
          integral part of these financial statements.
 F-2


**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Statement
      of Operations**


**(Unaudited)**


**(restated)**








**Three
                  Months Ended****September
                  30, 2005**
              
              **September
                  30, 2004**Revenues
              $
                  4,909,803
              
              $
                  -Cost
                  of Goods Sold
              3,493,425
              
              -Gross
                  Profit
              $
                  1,416,378
              
              $
                  -Expenses:Selling,
                  general & administrative
              $
                  727,862
              
              $
                  20,833Doubtful
                  account expense
              149,551
              
              97,716Salaries
                  and contract labor
              203,922
              
              31,000Depreciation
                  and amortization
              29,202
              
              -Legal
                  and professional fees
              377,411
              
              500Total
                  Expenses
              $
                  1,487,948
              
              $
                  150,049Income
                  (loss) from operations
              $
                  77,982
              
              $
                  (150,049)Interest
                  expense
              $
                  268,600
              
              2,013Net
                  (loss) from operations
              $
                  (340,169)
              
              $
                  (152,062)Miscellaneous
                  income
              2,231
              
              -Net
                  (loss)
              $
                  (337,938)
              
              $
                  (152,062)Net
                  (loss) per share basic and diluted
              $
                  (0.01)
              
              $
                  (0.01)Weighted
                  average number of common shares outstanding
              40,820,212
              
              15,186,421







The accompanying
          Notes are an
          integral part of these financial statements.
 F-3


**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Statement
      of Cash Flows**


**(Unaudited)**


**(restated)**


**Three
                    Months Ended****September
                    30, 2005**
                
                **September
                    30, 2004****Operating
                    activities**Net
                    income (loss)
                (337,938)
                
                (152,062)Non-cash
                    itemsDepreciation and amortization
                
                29,202
                
                -Doubtful account expense
                
                149,551
                
                97,716Stock based compensation
                
                3,750
                
                -Net
                    changes in working capital accountsAccounts receivable
                11,931
                
                -Due from Power 3 Medical Products Inc.
                -
                
                (143,911)Inventory
                (404,832)
                
                -Prepaid expenses
                6,799
                
                -Accounts payable
                64,187
                
                -Due from related party
                605,546
                
                -Accrued interest payable
                25,752
                
                -Accrued interest payable related party
                106,853
                
                2,013Accrued expenses
                (422,455)
                
                -**Net
                    cash (used) by operating activities**
                **(161,655)**
                
                **(196,244)****Investing
                    activities**Additions
                    to property, plant and equipment
                (25,816)
                
                -Investment
                    in subsidiaries
                (2,148,813)
                
                -**Net
                    cash (used) by investing activities**
                **(2,174,629)**
                
                **$
                    -****Financing
                    activities**Proceeds
                    from issuance of debt
                3,973,099
                
                -Principal
                    payments on debt
                (2,730,266)
                
                -Proceeds
                    from notes payable related party and shareholders
                1,550,000
                
                50,000Payments
                    on related party loans
                (15,576)
                
                -Proceeds
                    from issuance of common stock
                20,000
                
                98,475Stock
                    subscriptions
                (20,000)
                
                50,000**Net
                    cash provided by Financing Activities**
                **2,777,257**
                
                **198,475****Net
                    cash increase for period**
                **440,973**
                
                **2,231**Cash
                    at beginning of period
                354,583
                
                34,459**Cash
                    at end of period**
                
                **795,556**
                
                **36,690**SUPPLEMENTAL
                    DISCLOSURES RELATED TO CASH FLOWS:Interest
                    paid
                
                $
                    135,225
                
                -SUPPLEMENTAL
                    SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Debt
                    converted to common stock
                $
                    52,500
                
                $
                    -Accrued
                    interest converted to stock
                $
                    -
                
                $
                    -Stock
                    issued for Unifide acquisition
                $1,050,000
                
                $
                    -Stock
                    issued for Today’s Way acquisition
                $
                    450,000Stock
                    issued for services
                $
                    802,140
                
                $
                    -




The accompanying
          Notes are an
          integral part of these financial statements.
 F-4


**Industrial
      Enterprises of America, Inc.**


**Notes
      to Interim Financial Statements**


**(restated)**


**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
            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 Form 10-KSB for the year ended June 30, 2005.
 
 **Note
            2 - Restatement of financial statements due to accounting
            error**
 
 After
            lengthy discussions with the Securities and Exchange Commission personnel
            and
            the Company’s auditors, the Company has determined that it should restate the
            financial statements for the three months ended September 30, 2005, due
            to an
            error in recording the sale of its operating assets under the equity
            method of
            accounting instead of recording the transaction as an arms' length transaction
            recognizing the fair market value of the securities received in a transaction
            disposing its assets during the fiscal year ended June 30, 2004, the
            transition
            period. (See Footnote 15 - Mergers and Acquisitions.) The effect of the
            change
            required a restatement of the September 30, 2004, financial statements
            in order
            to properly reflect the asset value and the related adjustment to current
            and
            prior period earnings. The effect of this change was to increase the
            net loss
            for the period ended September 30, 2005, by $167,443, increase assets
            by
            $3,950,021, decrease total liabilities by $136,360, and increase shareholders’
equity by $4,086,381.
 
 **Note
            3 - Going concern**
 
 As
            shown
            in the accompanying financial statements, the Company has incurred recurring
            losses from operations. This raises substantial doubt about the Company’s
            ability to continue as a going concern. The accompanying financial statements
            do
            not include any adjustments that might be necessary if the Company is
            unable to
            continue as a going concern.
 
 **Note
            4 - Inventory**
 
 As
            of
            September 30, 2005, inventory consisted of the following:
  Raw
                      materials
                  $1,210,511Work-in-process
                  54,807Packaging
                      materials
                  1,121,465Finished
                      goods
                  1,908,144Total
                      inventory
                  $4,294,927
  F-5
 Note
            5 - Property and
            equipment
  Property
            and equipment are recorded at cost. Depreciation is computed using the
            straight-line method over the estimated useful lives of the respective
            assets.
            Repairs and maintenance, which are not considered betterments and do
            not extend
            the useful life of property, are charged to expense as incurred. When
            property
            and equipment are retired or otherwise disposed of, the asset and accumulated
            depreciation are removed from the accounts and the resulting gain or
            loss is
            reflected in income. The ranges of estimated useful lives used in computing
            depreciation are as follows:
  Equipment
                  7
                      -
                      10 yearsVehicles
                  3
                      -
                      5 yearsOffice
                      equipment
                  7
                      years
 
 Property
            and equipment, consisting primarily of molds, tools, and office equipment,
            additions for the three months ended September 30, 2005 totaled
            $25,816.
 
 September
                      30, 2005
                  
                  September
                      30, 2004Plant
                      equipment
                  
                  $
                      374,677
                  
                  $
                      -Office
                      equipment
                  
                  40,104
                  
                  4,070Vehicles
                  
                  30,483
                  
                  -Leasehold
                      improvements
                  
                  6,701
                  
                  -Less:
                      Accumulated depreciation
                  
                  (186,974)
                  
                  (407)Net
                      fixed assets
                  
                  $
                      264,991
                  
                  $
                      3,663
 
 Depreciation
            for the three months ended September 30, 2005, totaled $16,128.
 
 **Note
            6 - Goodwill**
 
 Goodwill
            is the result of the acquisitions of EMC Packaging (October 2004), Unifide
            Industries (July 2005), and Today’s Way Manufacturing (July 2005). The following
            outlines the calculations for goodwill related to these
            acquisitions:
 
 EMC
                      Pkg
                  
                  Unifide
                  
                  Today’s
                      Way
                  
                  TotalPurchase
                      price
                  $
                      808,474
                  
                  $3,050,000
                  
                  $
                      950,000
                  
                  $
                      4,808,474Less
                      assets acquired
                  (1,730,325)
                  
                  (4,959,477)
                  
                  (399,257)
                  
                  (7,089,059)Add
                      liabilities assumed
                  1,339,880
                  
                  5,017,960
                  
                  441,783
                  
                  6,799,623Costs
                      in excess of net assets acquired
                  $
                      418,029
                  
                  $3,108,483
                  
                  $
                      992,526
                  
                  $
                      4,519,038
 
 Amortization
            expense related to goodwill for the three months ended September 30,
            2005, and
            2004, were $-0- and $-0-, respectively.
 F-6
 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 21,334,780 shares as of September 30,
            2005, and
            -0- as of September 30, 2004. None of the warrants have been exercised
            as of
            September 30, 2005.
 
 **Note
            8 - Warrants and Options**
 
 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 955,000 stock options granted and
            outstanding
            as of September 30, 2005, issued in connection with the acquisitions
            of Unifide
            Industries, LLC and Todays Way Manufacturing, LLC.
 
 The
            following table summarizes the pro forma operating results of the Company
            for
            September 30, 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.
 
 Pro
                      forma net (loss) available to common stockholders
                  
                  $
                      (337,938)Pro
                      forma basic and diluted gain per share
                  
                  $
                      (0.01)
 
 As
            of
            September 30, 2005, warrants for 21,334,780 shares of common stock have
            not been
            exercised.
 
 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 Ended
                    September2005
                  
                  2004Net
                      (loss), as reported
                  $(337,938)
                  
                  $(152,062)Less
                      compensation cost determined under the fair value method
                  -
                  
                  -Pro
                      forma net (loss)
                  $(337,938)
                  
                  $(152,062)
  Basic
                      and dilutive (loss) per share:As reported
                  $
                      (0.01)
                  
                  $
                      (0.01)Pro forma
                  $
                      (0.01)
                  
                  $
                      (0.01)
  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.  F-7
 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. Exercise prices and weighted-average contractual
            lives
            of stock options outstanding as of September 30, 2005, are as follows:
 
 Options
                      Outstanding
                  
                  Options
                      ExercisableWeighted
                      Average
                  
                  Weighted
                      Average
                  
                  
                  
                  Weighted
                      AverageExercise
                      Prices
                  
                  Number
                      Outstanding
                  
                  Remaining
                      Contractual Life
                  
                  Exercise
                      Prices
                  
                  Number
                      Exercisable
                  
                  Exercise
                      Price$0.00
                  
                  -0-
                  
                  0.00
                  
                  $0.00
                  
                  -0-
                  
                  $0.00
 
 Summary
            of Options Granted and Outstanding:
 
 For
                      the three months ended September 302005
                  
                  2004Shares
                  
                  Weighted
                      Average Exercise Price
                  
                  Shares
                  
                  Weighted
                      Average Exercise PriceOptions:Outstanding
                      at beginning of period
                  
                  -
                  
                  $
                      -
                  
                  -
                  
                  $
                      -Granted
                  
                  -
                  
                  $
                      -
                  
                  200,000
                  
                  $
                      0.80Exercised
                  
                  -
                  
                  $
                      -
                  
                  -
                  
                  $
                      -Cancelled
                  
                  -
                  
                  $
                      -
                  
                  (200,000)
                  
                  $
                      (0.80)Outstanding
                      at end of period
                  
                  -
                  
                  -
                  
                  -
                  
                  $
                      -
 
 The
            following table summarizes the pro forma operating results of the Company
            for
            September 30, 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.
 
 Pro
                      forma net (loss) available to common stockholders
                  
                  $
                      (337,938)Pro
                      forma basic and diluted gain per share
                  
                  $
                      (0.10)
 
 A
            summary
            of warrant activity for the three months ended September, 2005, is as
            follows:
  Number
                      of Warrants
                  
                  Weighted
                      Average Exercise Price
                  
                  Warrants
                      Exercisable
                  
                  Weighted
                      Average Exercise PriceOutstanding
                      at June 30, 2005
                  
                  8,975,000
                  
                  $0.299
                  
                  8,975,000
                  
                  $0.299Warrants
                      cancelled
                  
                  -
                  
                  $
                      -
                  
                  -
                  
                  $
                      -Warrants
                      granted
                  
                  12,359,780
                  
                  $0.288
                  
                  12,359,780
                  
                  $0.288Outstanding
                      at September 30, 2005
                  
                  21,334,780
                  
                  $0.293
                  
                  21,334,780
                  
                  $0.293
 F-8
 At
            September 30, 2005, the range of warrant prices for shares under warrants
            and
            the weighted-average remaining contractual life is as follows:
 
 Warrants
                      Outstanding
                  
                  Warrants
                      ExercisableRange
                      of Warrant
                  
                  
                  
                  Weighted
                      Average
                  
                  Weighted
                      Average
                  
                  
                  
                  Weighted
                      AverageExercise
                      Prices
                  
                  Number
                      of Warrants
                  
                  Exercise
                      Price
                  
                  Remaining
                      Contractual Life
                  
                  Number
                      of Warrants
                  
                  Exercise
                      Price$0.50
                  
                  2,500,000
                  
                  $0.50
                  
                  5.37
                      yrs
                  
                  2,500,000
                  
                  $0.50$0.33
                  
                  125,000
                  
                  $0.33
                  
                  5.00
                      yrs
                  
                  125,000
                  
                  $0.33$0.20
                  
                  5,000,000
                  
                  $0.20
                  
                  4.39
                      yrs
                  
                  5,000,000
                  
                  $0.20
 
 The
            Company has issued 12,359,780 warrants since the year ended June 30,
            2005, at
            the rate of one warrant for each common share. The warrants have an exercise
            price range of $0.12 to $0.50 per share and a term ranging from 5 to
            7 years.
            The fair value of the warrants has been estimated on the date of grant
            using the
            Black-Scholes option pricing model. The weighted average fair value of
            these
            warrants was $0.05. The following assumptions were used in computing
            the fair
            value of these warrants: weighted average risk-free interest rate of
            7%, zero
            dividend yield, volatility of the Company's common stock of 50% and an
            average
            remaining life of the warrants of 4.8094 years.
 
 **Note
            9 - Convertible debt to shareholders**
 
 The
            Company received $1,550,000 convertible debt from shareholders during
            the three
            months ended September 30, 2005. The notes bear interest at 8% to 18%
            per annum
            and mature in October and December, 2007. There was an outstanding balance
            as of
            September 30, 2005, of $2,450,000. The notes are convertible into the
            Company’s
            common stock, par value $.001 per share at the lesser of (i) $0.10 per
            share or
            (ii) sixty-five (65%) percent of the average closing price of the common
            shares
            for the five (5) trading days prior to the date of the conversion provided,
            however, the Payee does not become the beneficial owner of ten (10%)
            percent or
            more of the voting securities of the Company, or otherwise be considered
            an
“affiliate” of the Company. The Company shall not be obligated to issue the
            common stock in such an event.
 
 The
            Company recorded interest expense totaling $268,600 and $2,013 for the
            three
            months ended September 30, 2005 and 2004, respectively.
 
 **Note
            10 - Due from Power 3 Medical Products, Inc.**
 
 In
            May
            2004, the Company entered into an Asset Purchase Agreement (the “Agreement”),
            among the Company, Power3, and Steven B. Rash and Ira Goldknopf (collectively,
            the "Shareholders"). The sale was approved by the Company’s shareholders by
            proxy. As provided in the Agreement, the Company sold to 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 assets disposed of by the Company
            included
            all tangible personal property, intellectual property, rights in contracts
            that
            the Company is 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 Shareholders agreed to make the representations,
            warranties, and indemnifications in the Agreement jointly and severally,
            along
            with the Company, and each of the Shareholders agreed to enter into and
            be bound
            by a Non-Competition Agreement and an Employment Agreement containing,
            among
            other things, covenants respecting confidentiality, non-competition and
            non-solicitation. The terms of the Agreement were determined by arms'
            length
            negotiations between the parties. Various amounts were expended subsequent
            to
            the transaction that are deemed to be the responsibility of Power3 et
            al. The
            total of those amounts is $149,551. Due to the nature of the ongoing
            discussions with the management team at Power3, this receivable has been
            determined to be impaired and a like amount has been recorded as doubtful
            account expense.  F-9
 **Note
            11 - Related party transactions**
 
 At
            September 30, 2005 and 2004, the Company had incurred payables to certain
            officers for various operational related expenses in the amount of $697,462
            and
            $-0-, respectively.
 
 The
            Company has notes payable to the following related parties:
 
 September
                      30, 2005
                  
                  September
                      30, 2004Shareholders,
                      unsecured, 18% interest, due October 26, 2005
                  50,000
                  
                  -0-Shareholders,
                      unsecured, 5% interest per month, due July 15, 2005
                  350,000
                  
                  -0-Shareholders,
                      unsecured, 18% interest , due October 30, 2007
                  400,000
                  
                  -0-Shareholders,
                      unsecured, 18% interest, due November 3, 2007
                  50,000
                  
                  -0-Shareholders,
                      unsecured, 18% interest, due November 16, 2007
                  50,000
                  
                  -0-Shareholders,
                      unsecured, 18% interest, due November 26, 2007
                  50,000
                  
                  -0-Shareholders,
                      unsecured, 8% interest, due December 1, 2007
                  1,500,000
                  
                  -0-$
                      2,450,000
                  
                  $
                      -0-
 
 **Note
            12 - Changes in common shares outstanding**
 
 Included
            in the table below are the changes in common shares since June 30, 2005.
            See
            Note 15 for discussion of mergers and acquisitions affecting common
            shares.
 
 CommonSharesOutstanding
                      common shares at June 30, 2005
                  37,139,190Debt
                      converted to stock
                  1,200,000Stock
                      issued to Unifide Industries LLC members
                  4,188,000Stock
                      issued to Todays Way Manufacturing LLC members
                  1,812,000Stock
                      issued for services
                  5,333,900Stock
                      issued for cash
                  100,000Outstanding
                      common shares at September 30, 2005
                  49,773,090
 
  F-10
  **Note
            13 - Investment in common stock**
 
 The
            following table shows the Company’s fair market value method of investments’
gross unrealized gains and fair value, aggregated by length of time that
            individual securities have been in a continuous unrealized gain position,
            at
            September 30, 2005:
  Less
                        Than 12 Months
                    
                    12
                        Months or More
                    
                    TotalDescription
                        of Securities
                    
                    Fair
                        Value
                    
                    Unrealized
                        Gains
                    
                    Fair
                        Value
                    
                    Unrealized
                        Gains
                    
                    Fair
                        Value
                    
                    Unrealized
                        GainsInvestments
                        in equity securities carried at fair market value
                    
                    $3,600,000
                    
                    $
                        600,000
                    
                    $
                        -0-
                    
                    $
                        -0-
                    
                    $3,600,000
                    
                    $
                        600,000
 
 The
            aggregate fair market value of the Company’s investments totaled $3,600,000 at
            September 30, 2005. The investments were evaluated for impairment pursuant
            to
            FAS-107, *Disclosures
            about Fair Value of Financial Instruments* ,
            and the
            Company did not identify any events or changes in circumstances that
            may have
            had a significant adverse effect on the fair value of those investments.
 
 **Note
            14 - Unrealized securities gains**
 
 The
            Company classifies its debt and marketable equity securities into
            held-to-maturity, trading, or available-for-sale categories. Debt securities
            are
            classified as held-to-maturity when the Company has the positive intent
            and
            ability to hold the securities to maturity. Debt securities for which
            the
            Company does not have the intent or ability to hold to maturity are classified
            as available for sale. Held-to-maturity securities are recorded as either
            short-term or long-term on the balance sheet based on contractual maturity
            date
            and are stated at amortized cost. Marketable securities that are bought
            and held
            principally for the purpose of selling them in the near term are classified
            as
            trading securities and are reported at fair value, with unrealized gains
            and
            losses recognized in earnings. Debt and marketable equity securities
            not
            classified as held-to-maturity or as trading are classified as
            available-for-sale and are carried at fair market value, with the unrealized
            gains and losses, net of tax, included in the determination of comprehensive
            income and reported in shareholders’ equity. The fair value of substantially all
            securities is determined by quoted market prices. The estimated fair
            value of
            securities for which there are no quoted market prices is based on similar
            types
            of securities that are traded in the market. Gains or losses on securities
            sold
            are based on the specific identification method.
 
 **Note
            15 - Mergers and acquisitions**
 
 On
            June
            1, 2005, the Company’s Board of Directors approved a merger with Unifide
            Industries, Limited Liability Company, a New Jersey limited liability
            company.
            One hundred (100%) percent of the Membership Interests of Unifide were
            acquired
            in exchange for $800,000 in cash, $1,200,000 in promissory notes, common
            stock
            valued at $1,050,000 as of July 10, 2005, and 200,000 options to purchase
            200,000 shares of the Company’s common stock at a purchase price of $0.40. The
            options are not vested until two (2) years of employment after the date
            of
            closing. The options expire ten (10) years after the Closing Date. The
            agreement
            was finalized on July 1, 2005, at which time all of the assets, liabilities
            and
            operations of Unifide were acquired. Reference is made to that Form 8K
            filed by
            the Company on July 18, 2005, as related to Unifide Industries LLC.
 
  F-11
  On
            June
            1, 2005, the Company’s Board of Directors approved a merger with Todays Way
            Manufacturing, LLC, a New Jersey limited liability company. One hundred
            (100%)
            percent of the Membership Interests of Todays Way were acquired in exchange
            for
            $200,000 in cash, $300,000 in promissory notes, common stock valued at
            $450,000
            as of July 10, 2005, and 755,000 options to purchase 755,000 shares of
            the
            Company’s common stock at a purchase price of $0.23. The options expire on May
            31, 2015. The agreement was finalized on July 1, 2005, at which time
            all of the
            assets, liabilities and operations of Todays Way were acquired.
            Reference is made to that Form 8K filed by the Company on July 18, 2005,
            as
            related to Todays Way Manufacturing, LLC.
 
 **Note
            16 - Disputed Liabilities and Cancellation of Debt**
 
 On
            November 28, 2005, the Board of Directors of the Company, based on legal
            and
            accounting research, concluded that the approximately $1,900,000 should
            be
            removed from the Company’s disputed liabilities. It was concluded that in the
            Power3 transaction, many of the liabilities of the Company were actually
            assumed
            by Power3 when Power3 purchased the stock of a subsidiary of the Company,
            Advanced Bio/Chem, Inc. (Texas) (“AVBC Texas”). Power3 purchased all of the
            assets of the Company in the transaction and the stock of AVBC Texas
            was one of
            those assets. The liabilities being removed were liabilities of AVBC
            Texas and
            should not have been reflected as liabilities of the Company following
            the
            Power3 transaction.
 
 **Note
            17 - Commitments and contingencies**
 
 As
            previously stated above, on May 18, 2004, the Company sold all of its
            assets in
            exchange for fifteen million shares of Power 3 Medical Products, Inc.
            stock and
            the assumption of certain liabilities by Power 3 and the repayment of
            all other
            indebtedness by certain shareholders of the Company. As such the Company
            should
            have had no liabilities as of May 18, 2004. The Company is taking this
            position
            based upon advice of legal counsel. If the Company is found to be responsible
            for the payment of any of these liabilities, it would have indemnification
            rights against either Power 3 or those certain shareholders who signed
            the Asset
            Purchase Agreement.
 
  F-12
  **Note
            18 - Pro forma Statement of Operations for the three months ended September
            30,
            2004 and September 30, 2005**
 
 The
            following unaudited data reflects the combined operations of the Company
            and its
            subsidiaries as of September 30, 2004.
 
 **ILNP**
                  **EMC**
                  **UNIFIDE**
                  **TODAYS
                      WAY**
                  
                  **COMBINED****Three
                      months ended September 30, 2004**
                  **Three
                      months ended September 30, 2004**
                  **Three
                      months ended September 30, 2004**
                  **Three
                      months ended September 30, 2004**
                  **Eliminations**
                  **Three
                      months ended September 30, 2004**Net
                      sales
                  $
                      -
                  $
                      940,941
                  $2,674,050
                  $
                      207,987
                  (207,987)
                  $3,614,991Cost
                      of goods sold
                  
                  746,880
                  2,117,168
                  87,667
                  (207,987)
                  2,743,727Gross
                      profit
                  $
                      -
                  $
                      194,062
                  $
                      556,883
                  $
                      120,320
                  
                  $
                      871,265Selling
                      & admin
                  20,833
                  74,171
                  324,190
                  80,609
                  
                  499,803Doubtful
                      account expense
                  97,716
                  -
                  -
                  -
                  
                  97,716Salaries
                      & contract labor
                  31,000
                  61,754
                  55,192
                  -
                  
                  147,946Depreciation
                      & amortization
                  -
                  3,454
                  1,320
                  -
                  
                  4,774Legal
                      & professional
                  500
                  6,081
                  20,872
                  -
                  
                  27,453Total
                      expenses
                  $
                      150,049
                  $
                      145,460
                  $
                      401,573
                  $
                      80,609
                  
                  $
                      777,691Net
                      income (loss) from operations
                  (150,049)
                  48,602
                  155,310
                  39,711
                  
                  93,574Interest
                      expense
                  2,013
                  36,761
                  27,891
                  5,447
                  
                  72,112Net
                      income (loss) before income tax expense
                  $
                      (152,062)
                  $
                      11,841
                  $
                      127,419
                  $
                      34,264
                  
                  $
                      21,462Income
                      tax expense
                  -
                  -
                  -
                  -
                  
                  -Net
                      income (loss)
                  $
                      (152,062)
                  $
                      11,841
                  $
                      127,419
                  $
                      34,264
                  
                  $
                      21,462
 F-13
 The
            following unaudited data reflects the combined operations of the Company
            and its
            subsidiaries as of September 30, 2005.
 
 **ILNP**
                  **EMC**
                  **UNIFIDE**
                  **TODAYS
                      WAY**
                  
                  **COMBINED****Three
                      months ended September 30, 2005**
                  **Three
                      months ended September 30, 2005**
                  **Three
                      months ended September 30, 2005**
                  **Three
                      months ended September 30, 2005**
                  **Eliminations**
                  **Three
                      months ended September 30, 2005**Net
                      sales
                  $
                      -
                  $2,010,974
                  $2,898,830
                  $
                      67,745
                  (67,745)
                  $4,909,804Cost
                      of goods sold
                  
                  1,512,389
                  2,023,090
                  25,691
                  (67,745)
                  3,493,425Gross
                      profit
                  $
                      -
                  $
                      498,585
                  $
                      875,740
                  $
                      42,054
                  
                  $1,416,379Selling
                      & admin
                  82,612
                  82,017
                  529,248
                  41,978
                  
                  735,855Doubtful
                      account expense
                  149,551
                  -
                  -
                  -
                  
                  149,551Salaries
                      & contract labor
                  -
                  54,450
                  149,472
                  -
                  
                  203,922Depreciation
                      & amortization
                  12,795
                  3,951
                  3,939
                  8,517
                  
                  29,202Legal
                      & professional
                  340,830
                  2,445
                  23,911
                  -
                  
                  367,186Total
                      expenses
                  $
                      585,789
                  $
                      142,863
                  $
                      706,570
                  $
                      50,495
                  
                  $1,485,716Net
                      income (loss) from operations
                  $(585,789)
                  $
                      355,722
                  $
                      169,170
                  $
                      (8,441)
                  
                  $
                      (69,338)Interest
                      expense
                  191,080
                  37,788
                  38,962
                  770
                  
                  268,600Net
                      income (loss) before income tax expense
                  $
                      (777,597)
                  $
                      317,934
                  $
                      130,208
                  $
                      (9,211)
                  
                  $
                      (338,666)Income
                      tax expense
                  -
                  -
                  -
                  -
                  
                  -Net
                      income (loss)
                  $
                      (777,597)
                  $
                      317,934
                  $
                      130,208
                  $
                      (9,211)
                  
                  $
                      (338,666)
 
  F-14
  **Note
            19 - Balance sheet variances since June 30, 2005**
 
 Cash
            has
            increased by more than $440,000, principally from the issuance of debt
            and
            operational activities. It did increase by $20,000 from the issuance
            of stock
            and $20,000 from stock subscriptions. Accounts receivable, inventory,
            fixed
            assets, goodwill, line of credit with equipment lessor, accounts payable,
            and
            certain debt have increased as a result of the acquisitions of Unifide
            Industries LLC and Today’s Way Manufacturing LLC as discussed in Note 15 and in
            the Form 8K filed on July 18, 2005. Equity development fees paid for
            the
            assistance in locating equity financing totaled $678,835. Amortization
            of such
            fees totaled $12,592. Certain directors, upon their admittance to the
            Board of
            Directors, were issued a total of 300,000 shares of common stock in
            consideration for their services to be rendered to the Company’s Board over the
            twelve months of their appointment.
 
 Selected
            balance sheet data as of September 30, 2004, follows:
 
 **ILNP**
                  **EMC**
                  **UNIFIDE**
                  **TODAYS
                      WAY**
                  
                  **COMBINED****September
                      30, 2004**
                  **September
                      30, 2004**
                  **September
                      30, 2004**
                  **September
                      30, 2004**
                  **Eliminations**
                  **September
                      30, 2004**Total
                      assets
                  $33,486,690
                  $
                      1,855,927
                  $
                      4,289,207
                  $
                      409,486
                  
                  $40,041,310Total
                      Liabilities
                  $
                      52,013
                  $
                      1,361,611
                  $
                      3,617,645
                  $
                      415,464
                  
                  $
                      5,446,733
 
 Selected
            balance sheet data as of September 30, 2005, follows:
 
 **ILNP**
                  **EMC**
                  **UNIFIDE**
                  **TODAYS
                      WAY**
                  
                  **COMBINED****September
                      30, 2005**
                  **September
                      30, 2005**
                  **September
                      30, 2005**
                  **September
                      30, 2005**
                  **Eliminations**
                  **September
                      30, 2005**Total
                      assets
                  $
                      9,490,923
                  $
                      3,081,318
                  $
                      5,578,700
                  $
                      376,575
                  (1,991,095)
                  $16,536,421Total
                      Liabilities
                  $
                      4,931,394
                  $
                      1,283,712
                  $
                      5,116,976
                  $
                      428,311
                  (468,701)
                  $11,291,692
 
 **Note
            20 - Subsequent events**
 
 On
            November 7, 2005, the Company secured a $5,000,000 credit facility for
            its
            subsidiaries, EMC and Unifide, from Mercantile Business Credit, L.P.
            of Ardmore,
            PA. This secured asset based credit facility replaces the Company's existing
            credit line and provides additional working capital for expanding operations.
            The credit facility is an annual, renewable facility. This new credit
            facility
            results in the Lender Line of Credit from the Balance Sheet of $2,082,445
            being
            categorized as a Long Term Liability instead of a Current Liability going
            forward.
 F-15