**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**

**September      30, 2006**

**[      ] Transition Report under Section 13 or 15(d) of the Exchange Act For the      Transition Period from ________ to ___________**

**Industrial      Enterprises of America, Inc.**

|   |  Nevada                                                                    | ** 13-3963499**                     |
|--------|---------------------------------------------------------------------------------|------------------------------------------|
|   |  (State                or jurisdiction of incorporation                    |  (I.R.S.                Employer    |
|   |  or                organization)                                           |  Identification                No.) |
|   |                                                                            |                                     |
|   |  **711                Third Avenue, Suite 1505, New York, New York**  | ** 10017**                          |
|   |  (Address                of principal executive offices)                   |  (Zip                Code)          |

**(212)      490-3100**

----

**Table      of Contents**

|                                                                                                                                                                                                         | **Page**      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|
|                                                                                                                                                                                                         |          |
| Explanatory                Note                                                                                                                                                                              | 1   |
| **Part                I**                                                                                                                                                                                    |          |
| Item                1. Financial Statements.................................................................                         | 1             |
| Item                2. Management’s Discussion and Analysis or Plan of Operations                ............                                                                          | 17            |
| Item                3. Controls and Procedures............................................................                                   | 18            |
|                                                                                                                                                                                                         |          |
| **Part                II**                                                                                                                                                                                   |          |
| Item                1. Legal Proceedings...................................................................                      | 18            |
| Item                2. Unregistered Sales of Equity Securities and Use of Proceeds                .........                                                                                      | 19            |
| Item                3. Defaults Upon Senior Securities................................................                                               | 19            |
| Item                4. Submission of Matters to a Vote of Security Holders                ...................                                                                        | 19            |
| Item                5. Other Information...................................................................                  | 19            |
| Item                6. Exhibits................................................................................. | 20            |
|                                                                                                                                                                                                         |          |
|                                                                                                                                                                                                         |          |

----

**Explanatory      Note**

**Item      1. Financial Statements.**

***Critical      Accounting Policies***

**Revenue      Recognition**

**Inventory**

**Machinery      and Equipment**

**Accounting      for Stock-Based Compensation**

**Page            1**

----

**Restatement      of Financial Statements**

**Change      of Fiscal Year**

**The            accompanying Notes are an integral part of these Financial            Statements.**

**Page          2**

----

**INDUSTRIAL      ENTERPRISES OF AMERICA, INC.**

**Consolidated      Balance Sheet**

**September      30, 2006**

**(Unaudited)**

|                                                        |                                                                         |                                                              |                                                                 |                        |                       |                     | **September                30, 2006** |
|-------------------------------------------------------------|------------------------------------------------------------------------------|-------------------------------------------------------------------|----------------------------------------------------------------------|-----------------------------|----------------------------|--------------------------|---------------------------------------|
|                                                        |                                                                         |                                                              |                                                                 |                        |                       |                     | **(Unaudited)**                       |
| ASSETS                                                      |                                                                         |                                                              |                                                                 |                        |
|                                                        | Current                Assets                                                |                                                              |                                                                 |                        |
|                                                        |                                                                         | Cash                                                              |                                                                 |                        |                       | $                147,713 |
|                                                        |                                                                         | Accounts                receivable, net of allowances of $462,065 |                                                                 | 6,002,342                   |
|                                                        |                                                                         | Due                from related parties                           |                                                                 | 430,368                     |
|                                                        |                                                                         | Inventory                                                         |                                                                 |                        | 9,699,487                  |
|                                                        |                                                                         | Note                receivable                                    |                                                                 | 500,000                     |
|                                                        |                                                                         | Prepaid                expenses                                   |                                                                 | 4,716,012                   |
|                                                        | Total                Current Assets                                          |                                                              | $                21,495,922                                          |
|                                                        | Investment                in common stock                                    |                                                              | 943,420                                                              |
|                                                        | Prepaid                acquisition costs                                     |                                                              | 1,013,997                                                            |
|                                                        | Property,                plant and equipment net of accumulated depreciation |                                                              | 8,455,969                                                            |
|                                                        | Note                receivable                                               |                                                              |                                                                 | 611,307                     |
|                                                        | Other                intangibles, net of amortization                        |                                                              |                                                                 | 131,732                     |
|                                                        | Goodwill                                                                     |                                                              |                                                                 | 5,890,418                   |
|                                                        | Debt                issuance costs, unamortized                              |                                                              |                                                                 | 1,087,582                   |
|                                                        | Other                Assets                                                  |                                                              |                                                                 | 62,279                      |
| TOTAL                ASSETS                                 |                                                                         |                                                              |                                                                 | $                39,692,626 |
| LIABILITIES                & SHAREHOLDERS' EQUITY       |                                                                         |                                                              |
|                                                        |                                                                         | Current                Liabilities                                |                                                                 |                        |
|                                                        |                                                                         |                                                              | Accounts                payable                                      |                        | $                6,620,307 |
|                                                        |                                                                         |                                                              | Accrued                expenses payable                              |                        | 616,114                    |
|                                                        |                                                                         |                                                              | Due                to related parties                                |                        | 126,854                    |
|                                                        |                                                                         |                                                              | Notes                payable                                         |                        | 334,104                    |
|                                                        |                                                                         |                                                              | Notes                payable related parties                         |                        | 946,333                    |
|                                                        |                                                                         |                                                              | Deferred                Taxes                                        |                        | 68,574                     |
|                                                        |                                                                         |                                                              | Accrued                interest payable                              |                        | 677,754                    |
|                                                        |                                                                         | Total                Current Liabilities                          |                                                                 | $                9,390,040  |
|                                                        |                                                                         | Long                Term Liabilities                              |                                                                 |                        |
|                                                        |                                                                         |                                                              | Notes                payable net of current maturities               |                        | 8,500,654                  |
|                                                        |                                                                         |                                                              | Notes                payable convertible                             |                        | 5,925,000                  |
|                                                        |                                                                         |                                                              | Notes                payable related parties                         |                        | 3,409,506                  |
|                                                        |                                                                         |                                                              | Lease                payable                                         |                        | 172,091                    |
|                                                        |                                                                         |                                                              | Discount                on convertible debt, net of amortization     |                        | (13,352,020)               |
|                                                        |                                                                         | Total                Long Term Liabilities                        |                                                                 | $                4,655,229  |
|                                                        | Total                Liabilities                                             |                                                              | $                14,045,270                                          |
|                                                        | Shareholders'                Equity                                          |                                                              |                                                                 |
|                                                        |                                                                         | Common                stock, $0.001 par value                     |                                                                 |                        |
|                                                        |                                                                         |                                                              | 150,000,000                shares authorized 8,153,980 shares issued |                        |                       |
|                                                        |                                                                         |                                                              | and                outstanding at September 30, 2006                 |                        | 82,500                     |
|                                                        |                                                                         | Additional                paid-in capital                         |                                                                 | 38,877,700                  |
|                                                        |                                                                         | Subscribed                stock                                   |                                                                 | (116,427)                   |
|                                                        |                                                                         | Shareholder                receivable                             |                                                                 | (6,000)                     |
|                                                        |                                                                         | Director                fees, unamortized                         |                                                                 | (14,250)                    |
|                                                        |                                                                         | Equity                development fees, unamortized               |                                                                 | (480,656)                   |
|                                                        |                                                                         | Unrealized                security gain (loss)                    |                                                                 | (1,992,966)                 |
|                                                        |                                                                         | Retained                (deficit)                                 |                                                                 | (10,702,544)                |
|                                                        | Total                Shareholders' Equity                                    |                                                              | $                25,647,356                                          |
| TOTAL                LIABILITIES & SHAREHOLDERS' EQUITY |                                                                         | $                39,692,626                                       |

**The            accompanying Notes are an integral part of these Financial            Statements.**

**Page          3**

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**INDUSTRIAL      ENTERPRISES OF AMERICA, INC.**

**Statement      of Operations**

**(Unaudited)**

|                                                                                                    |                                                   |                         | **For                  the three months ended** |       | **For                  the three months ended**    |
|---------------------------------------------------------------------------------------------------------|--------------------------------------------------------|------------------------------|-------------------------------------------------|------------|----------------------------------------------------|
|                                                                                                    |                                                   |                         | **September                  30, 2006**         |       | **September                  30, 2005 (restated)** |
|                                                                                                    |                                                   |                         |                                            |       |                                               |
| Revenues                                                                                                | $                  10,035,386                          |                         | $4,909,803                                      |
|                                                                                                    |                                                   |                         |                                            |       |                                               |
| Cost                  of Goods Sold                                                                     | 7,314,083                                              |                         | 3,493,425                                       |
|                                                                                                    |                                                   |                         |                                            |       |                                               |
| Gross                  Profit                                                                           | $                  2,721,303                           |                         | $1,416,378                                      |
|                                                                                                    |                                                   |                         |                                            |       |                                               |
| Expenses:                                                                                               |                                                   |                         |                                            |
|                                                                                                    | Selling,                  general & administrative | 1,253,549                    |                                            | 909,875    |
|                                                                                                    | Salaries                  and contract labor           | 526,992                      |                                            | 203,922    |
|                                                                                                    | Doubtful                  account expense              | -                            |                                            | 149,551    |
|                                                                                                    | Depreciation                  and amortization         | 414,625                      |                                            | 30,659     |
|                                                                                                    | Legal                  and professional fees           | 180,542                      |                                            | 377,411    |
|                                                                                                    | Total                  Expenses                        | $                  2,375,708 |                                            | $1,671,418 |
|                                                                                                    | Total                  Income (Loss) from operations   | $                  345,595   |                                            | $(255,040) |
|                                                                                                    |                                                   |                         |                                            |       |                                               |
| Foreign                  exchange losses                                                                | 11,939                                                 |                         | -                                               |
| Interest                  expense                                                                       | 1,829,868                                              |                         | 599,981                                         |
| Net                  (Loss) from operations                                                             | $(1,496,212)                                           |                         | $(855,021)                                      |
|                                                                                                    |                                                   |                         |                                            |
| Other                  Revenues                                                                         | 2,420,739                                              |                         | -                                               |
| Sale                  of securities                                                                     | 41,602                                                 |                         | -                                               |
| Miscellaneous                  income                                                                   | 19,642                                                 |                         | 2,231                                           |
|                                                                                                    |                                                   |                         |                                            |       |                                               |
| Net                  income (loss)                                                                      | $                  985,771                             |                         | $(852,790)                                      |
|                                                                                                    |                                                   |                         |                                            |       |                                               |
|                                                                                                    |                                                   |                         |                                            |       |                                               |
| Net                  income (loss) per share basic and diluted                                          | $0.14                                                  |                         | $(0.21)                                         |
|                                                                                                    |                                                   |                         |                                            |       |                                               |
| Weighted                  average number of common shares outstanding                  (split-adjusted) | 6,891,587                                              |                         | 4,082,021                                       |

**Page          4**

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**INDUSTRIAL      ENTERPRISES OF AMERICA, INC.**

**Statement      of Cash Flow**

**(Unaudited)**

|                                                                                                            |                                                                 |                                                                            |                                                 | **For                    the three months ended** |      | **For                    the three months ended** |
|-----------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|---------------------------------------------------------------------------------|------------------------------------------------------|---------------------------------------------------|-----------|---------------------------------------------------|
| **Operating                    activities**                                                                     | **September                    30, 2006**                            |                                                                            | **September                    30, 2005 (restated)** |
|                                                                                                            | Net                    income (loss)                                 | $985,771                                                                        |                                                 | $(852,790)                                        |
|                                                                                                            | Non-cash                    items                                    |                                                                            |                                                 |                                              |
|                                                                                                            |                                                                 | Depreciation                    and amortization                                | 432,625                                              |                                              | 164,451   |
|                                                                                                            |                                                                 | Debt                    issuance costs amortized                                | 223,526                                              |                                              | 133,792   |
|                                                                                                            |                                                                 | Debt                    discount and beneficial conversion feature amortization | 884,608                                              |                                              | 197,589   |
|                                                                                                            |                                                                 | Doubtful                    account expense                                     | -                                                    |                                              | 149,551   |
|                                                                                                            |                                                                 | Stock                    based compensation                                     | 28,100                                               |                                              | 426,981   |
|                                                                                                            |                                                                 | Litigation                    and equipment options settled to debt             | (2,420,739)                                          |                                              | -         |
|                                                                                                            | Net                    changes in working capital accounts           |                                                                            |                                                 |                                              |
|                                                                                                            |                                                                 | Accounts                    receivable trade                                    | (268,499)                                            |                                              | 11,931    |
|                                                                                                            |                                                                 | Payable                    related party                                        | 62,709                                               |                                              | -         |
|                                                                                                            |                                                                 | Due                    from related parties                                     | 28,000                                               |                                              | 605,546   |
|                                                                                                            |                                                                 | Inventory                                                                       | (1,282,279)                                          |                                              | (404,832) |
|                                                                                                            |                                                                 | Prepaid                    expenses                                             | 1,884,567                                            |                                              | (368,211) |
|                                                                                                            |                                                                 | Notes                    receivable                                             | (11,307)                                             |                                              | -         |
|                                                                                                            |                                                                 | Other                    assets                                                 | 49,970                                               |                                              | -         |
|                                                                                                            |                                                                 | Accounts                    payable                                             | (668,981)                                            |                                              | 64,187    |
|                                                                                                            |                                                                 | Accrued                    interest payable convertible debt                    | 143,493                                              |                                              | 25,752    |
|                                                                                                            |                                                                 | Accrued                    interest related parties                             | 21,532                                               |                                              | 106,853   |
|                                                                                                            |                                                                 | Accrued                    expenses                                             | (200,126)                                            |                                              | (422,455) |
|                                                                                                            |                                                                 | Accrued                    interest converted to stock                          | (123,254)                                            |                                              | -         |
|                                                                                                            |                                                                 | Debt                    converted to common stock                               | (716,896)                                            |                                              | -         |
|                                                                                                            | **Net                    cash (used) by operating activities**       | $                    (947,180)                                                  |                                                 | $(161,655)                                        |
| **Investing                    activities**                                                                     |                                                                 |                                                                            |                                                 |
|                                                                                                            | Additions                    to property, plant and equipment        | (480,276)                                                                       |                                                 | (25,816)                                          |
|                                                                                                            | Investment                    in common stock                        | 4,430                                                                           |                                                 | -                                                 |
|                                                                                                            | Investment                    in subsidiaries                        | (816,227)                                                                       |                                                 | (2,148,813)                                       |
|                                                                                                            | Other                                                                |                                                                            | (216,797)                                            |                                              | -         |
|                                                                                                            | **Net                    cash (used) by investing activities**       | $(1,508,870)                                                                    |                                                 | $(2,174,629)                                      |
| **Financing                    activities**                                                                     |                                                                 |                                                                            |                                                 |
|                                                                                                            | Proceeds                    from issuance of debt                    | 12,576,184                                                                      |                                                 | 3,973,099                                         |
|                                                                                                            | Proceeds                    from issuance of debt to related parties | 398,514                                                                         |                                                 | 1,550,000                                         |
|                                                                                                            | Loan                    payments                                     | (12,187,401)                                                                    |                                                 | (2,730,266)                                       |
|                                                                                                            | Loan                    payments to related parties                  | -                                                                               |                                                 | (15,576)                                          |
|                                                                                                            | Proceeds                    from issuance of common stock            | 1,502,258                                                                       |                                                 | 20,000                                            |
|                                                                                                            | Stock                    subscriptions                               | 5,834                                                                           |                                                 | (20,000)                                          |
|                                                                                                            | **Net                    cash provided by Financing Activities**     | $2,295,389                                                                      |                                                 | $2,777,257                                        |
| **Net                    cash increase (decrease) for period**                                                  | $                    (160,661)                                       |                                                                            | 440,973                                              |
| Cash                    at beginning of period                                                                  | 308,374                                                              |                                                                            | 354,583                                              |
| **Cash                    at end of period**                                                                    | $                    147,713                                         |                                                                            | 795,556                                              |
|                                                                                                            |                                                                 |                                                                            |                                                 |                                              |      |                                              |
| **SUPPLEMENTAL                    DISCLOSURES RELATED TO CASH FLOWS:**                                          |                                                                 |                                                                            |                                                 |
|                                                                                                            | Interest                    paid                                     | $513,072                                                                        |                                                 | $135,225                                          |
|                                                                                                            | Income                    taxes paid                                 | -                                                                          |                                                 | -                                            |
|                                                                                                            |                                                                 |                                                                            |                                                 |                                              |      |                                              |
| **SUPPLEMENTAL                    SCHEDULE OF NON-CASH INVESTING AND FINANCING                    ACTIVITIES:** |
|                                                                                                            | Accrued                    interest converted to debt                | $119,755                                                                        |                                                 | $                    -                            |
|                                                                                                            | Debt                    converted to common stock                    | $702,494                                                                        |                                                 | $52,500                                           |
|                                                                                                            | Accrued                    interest converted to stock               | $123,254                                                                        |                                                 | $                    -                            |
|                                                                                                            | Stock                    issued for Unifide acquisition              | $                    -                                                          |                                                 | $1,050,000                                        |
|                                                                                                            | Stock                    issued for Today’s Way acquisition    | $                    -                                                          |                                                 | $450,000                                          |
|                                                                                                            | Stock                    issued for services                         | $                    -                                                          |                                                 | $802,140                                          |
|                                                                                                            | Stock                    issued for employment agreement             | $390,000                                                                        |                                                 | -                                                 |
|                                                                                                            | Stock                    issued for warrant conversions              | $2,150,136                                                                      |                                                 | -                                                 |
|                                                                                                            | Stock                    issued for option conversions               | $2,049,125                                                                      |                                                 | -                                                 |

**The            accompanying Notes are an integral part of these Financial            Statements.**

**Page          5**

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**Industrial      Enterprises of America, Inc.**

**Notes      to Interim Financial Statements**

**Note      1 - Basis of presentation**

**Note      2 - Restatement of financial statements due to accounting      error**

**Note      3 - Inventory**

| Raw                materials   | $4,664,760 |
|--------------------------------|------------|
| Work-in-process                | 53,008     |
| Finished                goods  | 4,981,719  |
|                           |       |
| Total                inventory | $9,699,487 |

**Note      4 - Property and equipment**

**Page          6**

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|                                                                                                     |   | September                30, 2006 |   | September                30, 2005 |
|----------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|-----------------------------------|
| Plant                & equipment                                                                     |   | $6,727,154                        |   | $374,677                          |
| Office                equipment                                                                          |   | 201,698                           |   | 40,104                            |
| Vehicles                                                                                                 |   | 120,982                           |   | 30,483                            |
|                            Leasehold improvements |   | 2,277,675                         |   | 6,701                             |
| Less:                Accumulated depreciation                                                            |   | (871,540)                         |   | (186,974)                         |
| Net                fixed assets                                                                          |   | $8,455,969                        |   | $264,991                          |

**Note      5 - Goodwill**

|                                                  | EMC                      |   | Unifide     |   | Todays                Way |   | Spinwell           |   | Total                      |
|-------------------------------------------------------|--------------------------|--------|-------------|--------|---------------------------|--------|--------------------|--------|----------------------------|
| Purchase                price                         | $                808,474 |   | $3,050,000  |   | $                950,000  |   | $4,000,000         |   | $                8,808,474 |
| Less                assets acquired                   | (1,730,325)              |   | (4,959,477) |   | (399,257)                 |   | (11,716,799)       |   | (18,805,858)               |
| Less                adjustment to fair market value   | 755,380                  |   | 429,968     |   | 186,032                   |   | (4,172,861)        |   | (2,801,481)                |
| Add                liabilities assumed                | 1,339,880                |   | 5,017,960   |   | 441,783                   |   | 11,889,661         |   | 18,689,284                 |
|                                                  |                     |   |        |   |                      |   |               |   |                       |
| Costs                in excess of net assets acquired | $1,173,409               |   | $3,538,451  |   | $1,178,558                |   | $                - |   | $5,890,418                 |

**Note      6 - Earnings per share**

**Note      7 - Warrants and options**

**Page          7**

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|                                                                         | For                the Three Months EndedSeptember  |
|------------------------------------------------------------------------------|----------------------------------------------------------|
|                                                                         | 2006                                                     |   | 2005                (restated) |
| Net                income, as reported                                       | $985,771                                                 |   | $(852,790) |
| Less                compensation cost determined under the fair value method | -                                                        |   | - |
| Pro                forma net income                                          | $985,771                                                 |   | $(852,790) |

| Basic                and dilutive (loss) per share: |   |   |    |
|-----------------------------------------------------|--------|--------|---------|
| As                reported                          | $0.14  |   | $(0.21) |
| Pro                forma                            | $0.14  |   | $(0.21) |
|                                                |   |   |    |

| Options                Outstanding |   | Options                Exercisable |
|------------------------------------|--------|------------------------------------|
|                               |   |                               |   | Weighted                Average |   | Weighted                Average |   |   |
| Exercise                Prices     |   | Number                Outstanding  |   | Remaining                Contractual Life |   | Exercise                Prices |   | Number                Exercisable |
| $2.00                              |   | 36,220                             |   | 8.09                yrs |   | $2.00 |   | 39,460 |
| $2.30                              |   | 1,250                              |   | 8.67                yrs |   | $2.30 |   | 1,250 |
| $1.30                              |   | 40,000                             |   | 9.09                yrs |   | $1.30 |   | 40,000 |
| $1.40                              |   | 5,000                              |   | 9.34                yrs |   | $1.40 |   | 5,000 |
| $1.00                              |   | 10,000                             |   | 9.19                yrs |   | $1.00 |   | 10,000 |
| $1.00                              |   | 35,000                             |   | 9.22                yrs |   | $1.00 |   | 35,000 |
| $1.30                              |   | 30,000                             |   | 9.28                yrs |   | $1.30 |   | 30,000 |
| $6.00                              |   | 200,000                            |   | 9.77                yrs |   | $6.00 |   | 200,000 |

|                                              |   | For                the three months ended September 30 |
|---------------------------------------------------|--------|--------------------------------------------------------|
|                                              |   | 2006                                                   |   | 2005                (restated) |
|                                              |   | Shares                                                 |   | Weighted                Average Exercise Price |   | Shares |   | Weighted                Average Exercise Price |
| Options:                                          |   |                                                   |   |   |   |   |   |   |
| Outstanding                at beginning of period |   | 608,720                                                |   | $                1.93 |   | $                - |   | $                - |
| Granted                                           |   | 200,000                                                |   | $                6.00 |   | $                - |   | $                - |
| Exercised                                         |   | (451,250)                                              |   | $                2.12 |   | $                - |   | $                - |
| Cancelled                                         |   | -                                                      |   | $                - |   | $                - |   | $                - |
| Outstanding                at end of period       |   | 357,470                                                |   | $                3.99 |   | $                - |   | $                - |

**Page          8**

----

|                                             |   | Number                of Warrants |   | Weighted                Average Exercise Price |   | Warrants                Exercisable |   | Weighted                Average Exercise Price |
|--------------------------------------------------|--------|-----------------------------------|--------|------------------------------------------------|--------|-------------------------------------|--------|------------------------------------------------|
|                                             |   |                              |   |                                           |   |                                |   |                                           |
| Outstanding                at June 30, 2006      |   | 6,728,534                         |   | $3.81                                          |   | 6,728,534                           |   | $3.81                                          |
| Warrants                cancelled                |   | -                                 |   | $                -                             |   | -                                   |   | $                -                             |
| Warrants                exercised                |   | (833,435)                         |   | $(3.49)                                        |   | (833,435)                           |   | $(3.49)                                        |
| Warrants                granted                  |   | 250,000                           |   | $6.40                                          |   | 250,000                             |   | $6.40                                          |
| Outstanding                at September 30, 2006 |   | 5,895,099                         |   | $2.81                                          |   | 5,895,099                           |   | $2.81                                          |

|                            |   | Warrants                Outstanding |   | Warrants                Exercisable |
|---------------------------------|--------|-------------------------------------|--------|-------------------------------------|
| Range                of Warrant |   |                                |   | Weighted                Average     |   | Weighted                Average |   |   |   | Weighted                Average |
| Exercise                Prices  |   | Number                of Warrants   |   | Exercise                Price       |   | Remaining                Contractual Life |   | Number                of Warrants |   | Exercise                Price |
| $6.40                           |   | 38,500                              |   | $6.40                               |   | 2.78                yrs |   | 38,500 |   | $6.40 |
| $5.00                           |   | 310,000                             |   | $5.00                               |   | 4.26                yrs |   | 310,000 |   | $5.00 |
| $3.40                           |   | 1,233,659                           |   | $3.40                               |   | 2.41                yrs |   | 1,233,659 |   | $3.40 |
| $3.30                           |   | 115,000                             |   | $3.30                               |   | 5.06                yrs |   | 115,000 |   | $3.30 |
| $3.00                           |   | 87,373                              |   | $3.00                               |   | 3.78                yrs |   | 87,373 |   | $3.00 |
| $2.85                           |   | 759,026                             |   | $2.85                               |   | 3.80                yrs |   | 759,026 |   | $2.85 |
| $2.40                           |   | 2,918,318                           |   | $2.40                               |   | 2.41                yrs |   | 2,918,318 |   | $2.40 |
| $1.82                           |   | 62,386                              |   | $1.82                               |   | 3.80                yrs |   | 62,386 |   | $1.82 |
| $1.75                           |   | 350,836                             |   | $1.75                               |   | 4.12                yrs |   | 350,836 |   | $1.75 |
| $1.20                           |   | 20,000                              |   | $1.20                               |   | 5.66                yrs |   | 20,000 |   | $1.20 |

**Note      8- Interest Expense**

**Note      9 - Debt issuances**

**Page          9**

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**Note      10 - Related party transactions**

|                                                                                                                                                                | September                30, 2006 |   | September                30, 2005 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------|--------|-----------------------------------|
| Shareholders,                unsecured, 18% interest, due October 26, 2005                                                                                          | $                -                |   | $50,000                           |
| Shareholders,                unsecured, 5% interest per month, due July 15, 2005                                                                                    | $                -                |   | $350,000                          |
| Shareholders,                unsecured, 18% interest, due October 30, 2007                                                                                          | $                -                |   | $400,000                          |
| Shareholders,                unsecured, 18% interest, due November 3, 2007                                                                                          | $                -                |   | $50,000                           |
| Shareholders,                unsecured, 18% interest, due November 16, 2007                                                                                         | $                -                |   | $50,000                           |
| Shareholders,                unsecured, 18% interest, due November 26, 2007                                                                                         | $                -                |   | $50,000                           |
| Shareholders,                unsecured, 8% interest, due December 1, 2007                                                                                           | $                -                |   | $1,500,000                        |
| Shareholders,                secured with certain Company assets, Wall Street Prime plus 4%, not                less                than 8%, due July 19, 2007      | $926,720                          |   | $                -                |
| Shareholders,                secured with certain Company assets, Wall Street Prime plus 4%, not                less                than 8%, due September 8, 2008  | $600,000                          |   | $                -                |
| Shareholders,                secured with certain Company assets, Wall Street Prime plus 4%, not                less                than 8%, due September 14, 2008 | 79,734                            |   | $                -                |
| Shareholders,                secured with certain Company assets, Wall Street Prime plus 4%, not                less                than 8%, due November 2, 2007   | 500,000                           |   | $                -                |
| Shareholders,                unsecured, 8% interest, due August 11, 2006                                                                                            | 50,000                            |   | $                -                |
| Shareholders,                secured with certain Company assets, Wall Street Prime plus                4%, due July 27, 2008                                       | 5,000,000                         |   | $                -                |
| Related                party, 12% interest, due February 1, 2007                                                                                                    | 345,000                           |   | $                -                |
|                                                                                                                                                                |                              |   |                              |
|                                                                                                                                                                | $7,500,454                        |   | $2,450,000                        |

**Page          10**

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**Note      11 - Due from Power3 Medical Products, Inc.**

**Note      12 - Changes in common shares outstanding**

|                                                      | Common    |
|-----------------------------------------------------------|-----------|
|                                                      | Shares    |
| Outstanding                common shares at June 30, 2006 | 5,944,586 |
| Debt                converted to stock                    | 354,845   |
| Warrants                converted to stock                | 632,374   |
| Options                converted to stock                 | 637,250   |
| Stock                issued for services                  | 584,925   |

**Page          11**

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**Note      13 - Investment in common stock**

|                                                                         |   | Less                Than 12 Months |   | 12                Months or More |   | Total                     |
|------------------------------------------------------------------------------|--------|------------------------------------|--------|----------------------------------|--------|---------------------------|
| Description                of Securities                                     |   | Fair                Value          |   | Unrealized                losses |   | Fair                Value |   | Unrealized                losses |   | Fair                Value |   | Unrealized                losses |
| Investments                in equity securities carried at fair market value |   | $-0-                          |   | -0-                         |   | $943,420             |   | $1,992,966  |   | $943,420  |   | $1,992,966  |

*Disclosures      about Fair Value of Financial Instruments*

**Note      14 - Gain on sale of securities**

**Note      15 - Unrealized securities losses**

**Note      16- Disputed Liabilities and Cancellation of Debt**

**Page          12**

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**Note      17 - Commitments and contingencies**

**Note      18 - Proforma Statement of Operations for the three months ended September,      2006      and September 30, 2005**

**Page          13**

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|                                                       | **IEAM**                                                 |   | **EMC**                                                  |   | **UNIFIDE**                                              |   | **TODAYS                WAY**                            |   | **SPINWELL**                                             |   |             |   | **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** |   | **Three                months ended September 30, 2005** |   | **Eliminations** |   | **Three                months ended September 30, 2005** |
|                                                       |                                                     |   |                                                     |   |                                                     |   |                                                     |   |                                                     |   |             |   |                                                     |
| Net                sales                                   | $                -                                       |   | $2,010,974                                               |   | $2,898,830                                               |   | $67,745                                                  |   | $7,760,964                                               |   | $(67,745)        |   | $12,670,768                                              |
| Cost                of goods sold                          | -                                                        |   | 1,512,389                                                |   | 2,023,090                                                |   | 25,691                                                   |   | 7,867,885                                                |   | $(67,745)        |   | 11,361,310                                               |
|                                                       |                                                     |   |                                                     |   |                                                     |   |                                                     |   |                                                     |   |             |   |                                                     |
| Gross                profit                                | $                -                                       |   | $498,585                                                 |   | $875,740                                                 |   | $42,054                                                  |   | $(106,921)                                               |   |             |   | $1,309,458                                               |
|                                                       |                                                     |   |                                                     |   |                                                     |   |                                                     |   |                                                     |   |             |   |                                                     |
| Selling                & admin                         | 82,612                                                   |   | 82,017                                                   |   | 529,248                                                  |   | 41,978                                                   |   | 427,594                                                  |   |             |   | 1,080,837                                                |
| Doubtful                account expense                    | 149,551                                                  |   | -                                                        |   | -                                                        |   | -                                                        |   | -                                                        |   |             |   | 149,551                                                  |
| Salaries                & contract labor               | -                                                        |   | 54,450                                                   |   | 149,472                                                  |   | -                                                        |   | 205,389                                                  |   |             |   | 409,311                                                  |
| Depreciation                & amortization             | 14,252                                                   |   | 3,951                                                    |   | 3,939                                                    |   | 8,517                                                    |   | 46,806                                                   |   |             |   | 77,465                                                   |
| Legal                & professional                    | 522,842                                                  |   | 2,445                                                    |   | 23,911                                                   |   | -                                                        |   | 61,128                                                   |   |             |   | 610,326                                                  |
|                                                       |                                                     |   |                                                     |   |                                                     |   |                                                     |   |                                                     |   |             |   |                                                     |
| Total                expenses                              | $769,257                                                 |   | $142,863                                                 |   | $706,570                                                 |   | $50,495                                                  |   | $740,917                                                 |   |             |   | $2,327,490                                               |
|                                                       |                                                     |   |                                                     |   |                                                     |   |                                                     |   |                                                     |   |             |   |                                                     |
| Net                income (loss) from operations           | $(769,257)                                               |   | $355,722                                                 |   | $169,170                                                 |   | $(8,441)                                                 |   | $(847,838)                                               |   |             |   | $(1,018,032)                                             |
|                                                       |                                                     |   |                                                     |   |                                                     |   |                                                     |   |                                                     |   |             |   |                                                     |
| Interest                expense                            | 522,461                                                  |   | 37,788                                                   |   | 38,962                                                   |   | 770                                                      |   | 104,305                                                  |   |             |   | 704,286                                                  |
|                                                       |                                                     |   |                                                     |   |                                                     |   |                                                     |   |                                                     |   |             |   |                                                     |
| Net                income (loss) before income tax expense | $(1,291,718)                                             |   | $317,934                                                 |   | $130,208                                                 |   | $(9,211)                                                 |   | $(952,143)                                               |   |             |   | $(1,722,318)                                             |
|                                                       |                                                     |   |                                                     |   |                                                     |   |                                                     |   |                                                     |   |             |   |                                                     |
| Income                tax expense                          | -                                                        |   | -                                                        |   | -                                                        |   | -                                                        |   | -                                                        |   |             |   | -                                                        |
|                                                       |                                                     |   |                                                     |   |                                                     |   |                                                     |   |                                                     |   |             |   |                                                     |
| Net                income (loss)                           | $(1,291,718)                                             |   | $317,934                                                 |   | $130,208                                                 |   | $(9,211)                                                 |   | $(952,143)                                               |   |             |   | $(1,722,318)                                             |

**Page          14**

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|                                                       | **IEAM**                                                 | **EMC**                                                  | **UNIFIDE**                                              | **TODAYS                WAY**                            | **SPINWELL**                                             |            | **COMBINED**                                             |
|------------------------------------------------------------|----------------------------------------------------------|----------------------------------------------------------|----------------------------------------------------------|----------------------------------------------------------|----------------------------------------------------------|-----------------|----------------------------------------------------------|
|                                                       | **Three                months ended September 30, 2006** | **Three                months ended September 30, 2006** | **Three                months ended September 30, 2006** | **Three                months ended September 30, 2006** | **Three                months ended September 30, 2006** | **Elimination** | **Three                months ended September 30, 2006** |
|                                                       |                                                     |                                                     |                                                     |                                                     |                                                     |            |                                                     |
| Net                sales                                   | $                -                                       | $1,100,653                                               | $3,133,640                                               | $                -                                       | $7,607,093                                               | $(1,806,000)    | $10,035,386                                              |
| Cost                of goods sold                          | -                                                        | 827,469                                                  | 1,502,232                                                | -                                                        | 6,790,383                                                | $(1,806,000)    | 7,314,083                                                |
|                                                       |                                                     |                                                     |                                                     |                                                     |                                                     |            |                                                     |
| Gross                profit                                | $                -                                       | $273,185                                                 | $1,631,408                                               | $                -                                       | $816,711                                                 |            | $2,721,303                                               |
|                                                       |                                                     |                                                     |                                                     |                                                     |                                                     |            |                                                     |
| Selling                & admin                         | 232,361                                                  | 74,691                                                   | 411,079                                                  | (418)                                                    | 535,835                                                  |            | 1,253,549                                                |
| Salaries                & contract labor               | -                                                        | 64,602                                                   | 168,681                                                  | -                                                        | 293,709                                                  |            | 526,992                                                  |
| Depreciation                & amortization             | 156,271                                                  | 7,141                                                    | 15,710                                                   | -                                                        | 235,503                                                  |            | 414,625                                                  |
| Legal                & professional                    | 139,483                                                  | 13,218                                                   | 23,013                                                   | -                                                        | 4,828                                                    |            | 180,542                                                  |
|                                                       |                                                     |                                                     |                                                     |                                                     |                                                     |            |                                                     |
| Total                expenses                              | $528,115                                                 | $159,651                                                 | $618,483                                                 | $(418)                                                   | $1,069,876                                               |            | $2,375,706                                               |
|                                                       |                                                     |                                                     |                                                     |                                                     |                                                     |            |                                                     |
| Net                income (loss) from operations           | $(528,115)                                               | $113,533                                                 | $1,012,925                                               | $418                                                     | $(253,165)                                               |            | $345,595                                                 |
|                                                       |                                                     |                                                     |                                                     |                                                     |                                                     |            |                                                     |
| Interest                expense                            | 1,561,273                                                | 22,372                                                   | 21,664                                                   | -                                                        | 224,560                                                  |            | 1,829,868                                                |
| Foreign                exchange losses                     | -                                                        | -                                                        | -                                                        | -                                                        | 11,939                                                   |            | 11,939                                                   |
| Gain                sale of securities                     | 41,602                                                   | -                                                        | -                                                        | -                                                        | -                                                        |            | 41,602                                                   |
| Equipment                and realty option revenues        | 1,375,000                                                | -                                                        | -                                                        | -                                                        | -                                                        |            | 1,375,000                                                |
| Litigation                settlement revenues              | 1,045,739                                                | -                                                        | -                                                        | -                                                        | -                                                        |            | 1,045,739                                                |
| Miscellaneous                income                        | 13                                                       | 7                                                        | -                                                        | -                                                        | 19,622                                                   |            | 19,642                                                   |
|                                                       |                                                     |                                                     |                                                     |                                                     |                                                     |            |                                                     |
| Net                income (loss) before income tax expense | $372,965                                                 | $91,169                                                  | $991,261                                                 | $418                                                     | $(470,042)                                               |            | $985,771                                                 |
|                                                       |                                                     |                                                     |                                                     |                                                     |                                                     |            |                                                     |
| Income                tax expense                          | -                                                        | -                                                        | -                                                        | -                                                        | -                                                        |            | -                                                        |
|                                                       |                                                     |                                                     |                                                     |                                                     |                                                     |            |                                                     |
| Net                income (loss)                           | $372,965                                                 | $91,169                                                  | $991,261                                                 | $418                                                     | $(470,042)                                               |            | $985,771                                                 |

**Page            15**

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**Note      19 - Balance sheet variances since June 30, 2006**

|                             | **IEAM**                              | **EMC**                               | **UNIFIDE**                           | **TODAYS                WAY**         | **SPINWELL**                          |            | **COMBINED**                          |
|----------------------------------|---------------------------------------|---------------------------------------|---------------------------------------|---------------------------------------|---------------------------------------|-----------------|---------------------------------------|
|                             | **September                30, 2005** | **September                30, 2005** | **September                30, 2005** | **September                30, 2005** | **September                30, 2005** | **Elimination** | **September                30, 2005** |
|                             |                                  |                                  |                                  |                                  |                                  |            |                                  |
| Total                assets      | $12,354,901                           | $3,081,318                            | $5,578,700                            | $376,575                              | $12,882,278                           | $(1,991,095)    | $32,282,677                           |
|                             |                                  |                                  |                                  |                                  |                                  |            |                                  |
| Total                Liabilities | $4,931,394                            | $1,283,712                            | $5,116,976                            | $428,311                              | $13,291,177                           | $(468,701)      | $24,582,869                           |

|                             | **IEAM**                              | **EMC**                               | **UNIFIDE**                           | **TODAYS                WAY**         | **SPINWELL**                          |            | **COMBINED**                          |
|----------------------------------|---------------------------------------|---------------------------------------|---------------------------------------|---------------------------------------|---------------------------------------|-----------------|---------------------------------------|
|                             | **September                30, 2006** | **September                30, 2006** | **September                30, 2006** | **September                30, 2006** | **September                30, 2006** | **Elimination** | **September                30, 2006** |
|                             |                                  |                                  |                                  |                                  |                                  |            |                                  |
| Total                assets      | $24,572,701                           | $2,291,586                            | $5,114,488                            | $363,783                              | $21,197,203                           | $(10,939,214)   | $39,692,626                           |
|                             |                                  |                                  |                                  |                                  |                                  |            |                                  |
| Total                Liabilities | $15,582,866                           | $743,202                              | $3,514,814                            | $412,868                              | $14,496,701                           |            | $34,750,451                           |

**Note      20 - Subsequent events**

**Note      21 - Other Revenue**

**Page          16**

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

*Three      Months Ended September 30, 2006 as Compared to Three Months Ended September      30,      2005 *

***Liquidity      and Capital Resources***

**Page          17**

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**Item      3. Controls and Procedures.**

***Evaluation      of Disclosure Controls and Procedures***

***Changes      in Internal Controls***

**PART      II**

**Item      1. Legal Proceedings.**

**Page          18**

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** **

**Item      2. Unregistered Sales of Equity Securities and Use of      Proceeds.**

**Item      3. Defaults Upon Senior Securities.**

**Item      4. Submission of Matters to a Vote of Security Holders.**

**Item      5. Other Information.**

**Page          19**

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**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          20**

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**Signatures**

**Industrial      Enterprises of America, Inc**

**December      5**
**      2006**

**December      5**
**      2006**