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


**Washington,
      D.C. 20549**





**Form
      10-QSB**


**Amendment
      No. 1**





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




For
                the quarterly period ended
            ******December
                31, 2004**





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





Commission
      File Number: 000-30646





**Industrial
      Enterprises of America, Inc.**


(formerly
      known as Advanced Bio/Chem, Inc.)


(Exact
      name of registrant as specified in its charter)


Nevada
              ******13-3963499**(State
                  or jurisdiction of incorporation
              (I.R.S.
                  Employer Identification No.)or
                  organization)******711
                  Third Avenue, Suite 1505, New York, NY**
              ******10017******(Address
                  of principal executive offices)
              (Zip
                  Code)(Registrant’s
                  telephone number, including area code)
              ******(212)
                  490-3100**




Advanced
      Bio/Chem, Inc., December 31


(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
      by check mark whether the registrant (1) filed all reports required to be filed
      by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
      12
      months (or such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing


requirements
      for the past 90 days. Yes [ ] No [X]





APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDING
      DURING THE PRECEDING FIVE YEARS





Check
      whether the registrant filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Securities Exchange Act after the distribution
      of
      securities under a plan confirmed by a court. Yes [ ] No [ ]





APPLICABLE
      ONLY TO CORPORATE ISSUERS





Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date.





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





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








**Explanatory
          Note**
  As
          previously disclosed by Industrial Enterprises of America, Inc., a Nevada
          corporation (the “Company”), in Amendment No. 1 to the Transition Report on Form
          10-KSB for the six months ended June 30, 2004, filed with the Securities
          and
          Exchange Commission (the “SEC”) on September 12, 2006, the Company amended and
          restated its financial statements, including the notes therein, for the
          six
          months ended June 30, 2004, in order to correct an error in recording the
          sale
          of its operating assets under the equity method of accounting instead of
          recording the transaction as an arm’s length transaction recognizing the fair
          market value of the securities received in the transaction. This Amendment
          No. 1
          (this “Amendment”) to the Quarterly Report on Form 10-QSB for the period ended
          December 31, 2004 makes the same correction to the Company’s unaudited financial
          statements for such period.
  Pursuant
          to the rules of the SEC, Item 13, "Exhibits," of Part III of the original
          Quarterly Report on Form 10-QSB for the period ended December 31, 2004
          (the
“Original Filing”) has been amended to contain updated certifications from our
          Chief Executive Officer and Chief Financial Officer, as required by Sections
          302
          and 906 of the Sarbanes-Oxley Act of 2002.
  This
          Amendment only amends and restates the Items described above to reflect
          the
          effects of the restatement, and we have not modified or updated other
          disclosures presented in our Original Filing. Accordingly, this Amendment
          does
          not reflect events occurring after the filing of the Original Filing and
          does
          not modify or update those disclosures affected by subsequent events, except
          as
          specifically referenced herein. Information not affected by this Amendment
          is
          unchanged and reflects the disclosures  made
          at
          the time of the Original Filing on April 1, 2005.













**Table
      of Contents**








**Page**Recent
                Developments................................................................
            1**Part
                I**Item
                1. Financial Statements.........................................................
            2Item
                2. Management’s Discussion and Analysis or Plan of Operations
                ......
            3Item
                3. Controls and Procedures.....................................................
            8**Part
                II**Item
                1. Legal Proceedings.............................................................
            8Item
                2. Unregistered Sales of Equity Securities and Use of Proceeds
                .........
            9Item
                3. Defaults Upon Senior Securities............................................
            9Item
                4. Submission of Matters to a Vote of Security Holders
                ..................
            9Item
                5. Other Information............................................................
            9Item
                6. Exhibits..........................................................................
            9




















***Recent
      Developments***





***Change
      in Fiscal Year End***





On
      December 22, 2004, the Board of Directors of Industrial Enterprises of America,
      Inc., a Nevada corporation (the “Company”), approved the change in the Company’s
      fiscal year end from December 31 to June 30. The Company, as the parent of
      EMC
      Packaging, Inc., a Delaware corporation (“EMC”), is now a holding company of an
      operating subsidiary. The fiscal year end of EMC is June 30; therefore, in
      order
      to more closely align its operations and internal controls **** with
      that
      of its wholly owned subsidiary, the Board of Directors approved the change
      in
      the Company’s fiscal year end. The change is described in further detail in the
      Company’s Current Report on Form 8-K, filed with the Securities and Exchange
      Commission (the “Commission”) on March 30, 2005.




Page
          1


**Item
      1.  Financial Statements**




***Critical
      Accounting Policies***





The
      Company believes that the following critical accounting policies reflect its
      more significant judgments and estimates used in the preparation of its
      consolidated financial statements **:**





The
      following significant accounting policies pertain to EMC Packing, Inc.(“EMC”),
      the Company’s current sole operating unit at December 31, 2004.





Revenue
      Recognition





EMC
      is
      primarily engaged in the manufacturing and sale of packaged refrigerants for
      the
      automotive and dusting markets. Revenue is recognized with the successful
      manufacture and delivery of such product to the end user customer.





Inventory





Inventory
      is stated at the lower of cost or market, with cost determined on a first-in,
      first-out basis.





Machinery
      and Equipment





Machinery
      and equipment are recorded at cost. Depreciation is computed on the estimated
      useful lives of the assets ranging from three to ten years using the
      straight-line method.





Income
      Tax





The
      Company recognizes deferred tax assets and liabilities based on differences
      between the financial reporting and tax bases of assets and liabilities using
      the enacted tax rates and laws that are expected to be in effect when the
      differences are expected to be recovered. The Company provides a valuation
      allowance for deferred tax assets for which it does not consider realization
      of
      such assets to be more likely than not. Management has determined as of December
      31, 2004 that it is not probable that the Company will realize a future tax
      benefit from its deferred tax assets.





Accounting
      for Stock-Based Compensation





The
      Company has adopted the disclosure provisions of SFAS No. 123, “Accounting for
      Stock-Based Compensation.” In accordance with the provisions of SFAS No. 123,
      the Company applies Accounting Principles Board Opinion 25 and related
      interpretations in accounting for stock issued to its employees and


Page
          2


consultants.
      Management exercises judgment in its determination of when significant non-cash
      stock transactions have occurred.





Please
      see the Financial Statements beginning on page F-1 **.**





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





***Acquisition
      of EMC Packaging, Inc.***





As
      previously disclosed, on October 7, 2004, the Company’s Board of Directors
      approved the purchase of all of the issued and outstanding capital stock of
      EMC,
      which had been in business since 1974. On the effective date of the purchase,
      EMC became the Company’s wholly owned subsidiary. In consideration for their
      shares of EMC common stock, the EMC stockholders received an aggregate of
      2,296,800 shares of the Company’s common stock, valued at $808,474. The Company,
      as the new parent company of EMC and through EMC, intends to continue to market
      and sell the products that had been offered by EMC prior to the acquisition.





The
      calculation of cost in excess of net assets acquired is as follows:




Purchase
                price of EMC
            
            $ 808,474Less
                assets acquired
            
            (1,730,325)Add
                liabilities assumed
            
            1,339,880Cost
                in excess of net assets acquired
            
            $ 418,029




The
      cost
      in excess of net assets acquired has been recorded as goodwill on the Company’s
      financials.





The
      following is a summary of the operating results of EMC since acquisition that
      has been included in the Company’s three and six months ended December 31, 2004
      statement of operations in this quarterly report on Form
      10-QSB:


Page
          3





**EMC****From
                October 7 to****December
                31, 2004**Net
                sales
            
            $
                1,348,787Cost
                of goods sold
            
            1,126,505Gross
                profit
            
            $
                222,282Selling
                and administrative expenses
            
            $
                11,488Salaries
                and contract labor
            
            146,028Depreciation
                and amortization
            
            5,971Legal
                and professional
            
            42,781Total
                expenses
            
            $
                206,268Net income
                from operations
            
            $
                16,014Interest
                expense
            
            $
                43,286(Loss) before
                income taxesand
                discontinued operations
            
            $
                (27,272)Gain
                on discontinued operations
            
            $
                -(Loss)
                before income taxes
            
            $
                (27,272)Income
                tax (benefit) expense
            
            $
                (9,338)Net
                (loss)
            
            $
                (17,934)





**Change
      in Fiscal Year End and Reporting Periods**





In
      December 2004, the Company changed its fiscal year from one ending on December
      31 to one ending on June 30. Application for the change in accounting year
      is
      pending with the Internal Revenue Service. Accordingly, the Company’s transition
      period that ended on December 31, 2004, includes the six months ended December
      31, 2004 (“Transition 2004”) and incorporates the operating results of EMC for
      that period (as opposed to since EMC’s acquisition on October 7, 2004).


Page
          4


The
      following are selected financial data for Transition 2004 and the comparable
      six-month period of the prior year:





**ILNP**
              
              **EMC**
              
              **Combined****December
                  31, 2004**
              
              **December
                  31, 2004**
              
              **December
                  31, 2004****(Six
                  months)**
                **(as
                  adjusted)**
              
              **(Six
                  months)**
                **(as
                  adjusted**
              
              **(Six
                  months)**
                **(as
                  adjusted)**Net
                  sales
              $
                  -
              
              $
                  2,289,728
              
              $
                  2,289,728Cost
                  of goods sold
              -
              
              1,873,385
              
              1,873,385Gross
                  profit
              $
                  -
              
              $
                  416,343
              
              $
                  416,343Selling
                  and administrative expenses
              $
                  119,867
              
              $
                  145,613
              
              $
                  265,480Salaries
                  and contract labor
              33,228
              
              146,028
              
              179,256Depreciation
                  and amortization
              -
              
              4,056
              
              4,056Legal
                  and professional
              936,898
              
              85,781
              
              1,022,679Total
                  expenses
              $
                  1,089,993
              
              $
                  381,478
              
              $
                  1,471,471Net
                  income (loss) from operations
              $
                  (1,089,993)
              
              $
                  34,865
              
              $
                  (1,055,128)Interest
                  expense
              $
                  117,909
              
              $
                  80,047
              
              $
                  197,956(Loss)before
                  income taxesand
                  discontinued operations
              $
                  (1,207,902)
              
              $
                  (45,182)
              
              $
                  (1,253,084)Gain
                  on discontinued operations
              $
                  -
              
              $
                  -
              
              $
                  -Income
                  before income taxes
              $
                  (1,207,902)
              
              $
                  (45,182)
              
              $
                  (1,253,084)Income
                  tax benefit
              $
                  -
              
              $
                  18,073
              
              $
                  18,073Net
                  income
              $
                  (1,207,902)
              
              $
                  (27,109)
              
              $
                  (1,235,011)





Page
          5


The
      following is the pro-forma operating results for the six months ended December
      31, 2003 assuming EMC had been included in the operating results of the Company
      during that period.





**ILNP**
            
            **EMC**
            
            **Combined****December
                31, 2003**
            
            **December
                31, 2003**
            
            **December
                31, 2003****(Six
                months)**
              **(as
                adjusted)**
            
            **(Six
                months)**
              **(as
                adjusted)**
            
            **(Six
                months)**
              **(as
                adjusted)**Net
                sales
            $
                86,320
            
            $
                1,684,267
            
            $
                1,770,587Cost
                of goods sold
            -
            
            1,288,120
            
            1,288,120Gross
                profit
            $
                86,320
            
            $
                396,147
            
            $
                482,467Selling
                and administrative expenses
            $
                95,855
            
            $
                165,862
            
            $
                261,717Salaries
                and contract labor
            1,416,885
            
            133,800
            
            1,550,685Depreciation
                and amortization
            46,637
            
            5,516
            
            52,153Legal
                and professional
            111,418
            
            138,000
            
            249,418Total
                expenses
            $
                1,670,795
            
            $
                443,178
            
            $
                2,113,973Net
                (loss) from operations
            $
                (1,584,475)
            
            $
                (47,031)
            
            $
                (1,631,506)Interest
                expense
            $
                122,097
            
            $
                63,458
            
            $
                185,555(Loss) before
                income taxesand
                discontinued operations
            $
                (1,706,572)
            
            $
                (110,489)
            
            $
                (1,817,061)Gain
                on discontinued operations
            $
                -
            
            $
                -
            
            $
                -(Loss) before
                income taxes
            $
                (1,706,572)
            
            $
                (110,489)
            
            $
                (1,817,061)Income
                tax expense
            $
                -
            
            $
                (44,195)
            
            $
                (44,195)Net
                (loss)
            $
                (1,706,572)
            
            $
                (66,294)
            
            $
                (1,772,866)





Results
      of operations for the interim periods are not indicative of annual
      results.





***Results
      of Operations*** **:**





*For
      the Three Months ended December 31, 2004 and 2003*





Revenue
      and gross profit for the three months ended December 31, 2004 was $1,348,787
      and
      $222,282, respectively, and reflects the revenue and gross profit derived from
      EMC’s operations since acquisition on October 7, 2004. The miscellaneous revenue
      and gross profit of $60,921 for the same period in the prior year represented
      residual income from the bio tech division sold in May 2004 to Power
      3.





Total
        operating expenses for the three-month period ended December 31, 2004 was
        $1,236,967. Of this amount, $209,268 was due to EMC’s operations and the
        balance, or $1,027,699, was due to ILNP corporate. The greater majority of
        these
        corporate expenses pertained to legal and professional fees of $901,937,
        arising
        from the acquisition of EMC and the reorganization of the Company. The operating
        expenses in the same three-month period in the prior year were $455,079.
        Salary
        and contract labor accounted for $387,791 of this total. Interest expenses
        for
        the three months ended December 31, 2004 and 2003 was $52,311 and $67,848,
        respectively. Interest expense in the three months ended December 31, 2004
        pertaining to the EMC operation was $43,286.




Page
          6


The
        result of the above was a net loss for the three months ended December 31,
        2004
        of $(1,054,658), compared to a loss of $(462,006) in the same period in 2003.





*For
      the Six Months ended December 31, 2004 and 2003*





Revenue
      and gross profit for the six months ended December 31, 2004 was $1,348,787
      and
      $222,282, respectively, and reflects the revenue and gross profit derived from
      EMC’s operations since the acquisition on October 7, 2004. The miscellaneous
      revenue and gross profit of $86,320 for the same period in the prior year
      represented residual income from the bio tech division sold in May 2004 to
      Power
      3.





Total
          operating expenses for the six-month period ended December 31, 2004 was
          $1,387,015. Of this amount, $209,268 was due to EMC’s operations and the
          balance, or $1,177,747, was due to ILNP corporate. The greater majority
          of these
          corporate expenses pertained to legal and professional fees of $924,085,
          arising
          from the acquisition of EMC and the reorganization of the Company. The
          operating
          expenses in the same six-month period in the prior year were $1,670,795.
          Salary
          and contract labor accounted for $1,416,885 of this total. Included in
          the six
          month amounts in 2003 was a current period expense of $660,000 for the
          stock
          grant of 825,000 shares (at $0.80 per share) to the former CEO of the Company.
          In addition, an additional 200,000 shares (at $0.80 per share) was promised
          under an option agreement entered into on September 5, 2003 but not yet
          executed; nor are they anticipated to be executed since the officer is
          no longer
          employed by the Company.
 
 Interest
          expenses for the six months ended December 31, 2004 and 2003 was $54,324
          and
          $122,097 respectively. Interest expense in the six month ended December
          31, 2004
          pertaining to the EMC operation was $43,286.
 
 The
          result of the above was a net loss for the six months ended December 31,
          2004 of
          $(1,206,719) compared to a loss of $(1,706,572) in the same period in 2003.
 
 Net
          (loss) income per share basic and diluted for the three and six months
          ended
          December 31, 2004 was $(0.06) and $(0.07) per share respectively in each
          of the
          periods, compared to $(0.04) and $(0.16) in the same respective periods
          in 2003.


***Liquidity
      and Capital Resources:***





The
          Company had a working capital deficit of $(203,578) as at December 31,
          2004.
          This compares to a working capital deficit of $(1,977,216) as at December
          31,
          2003.
 
 Net
          cash
          (used) by operations for the six months ended December 31, 2004 was $(783,980),
          compared to a negative cash flow in the same period in 2003 of $(443,275).
          The
          majority of the increase is attributable to the decrease in losses for
          the
          comparable periods offset by the non cash requirement generated from stock
          based
          compensation in the 2003 period.


The
        Company obtained funds to operate in the six months ended December 31, 2004
        from
        the issuance of common stock and subscriptions in the amount of $323,000
        and
        increased notes payable and bank debt of approximately $403,356.





CAUTIONARY
      STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
      LITIGATION REFORM ACT OF 1995





It
      should
      be noted that in this Management's Discussion and Analysis or Plan of Operations
      contains "forward-looking statements" within the meaning of Section 27A of
      the
      Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of
      the Securities Exchange Act of 1934, as amended (the


Page
          7


“Exchange
      Act”), and are made pursuant to the safe harbor provisions of the Private
      Securities Litigation Reform Act of 1995. The terms "believe", "anticipate",
      "intend", "goal", "expect" and similar expressions may identify forward-looking
      statements. These forward-looking statements represent the Company's current
      expectations or beliefs concerning future events. The matters covered by these
      statements are subject to certain risks and uncertainties that could cause
      actual results to differ materially from those set forth in the forward-looking
      statements, including, but not limited to: (i) the Company's history of ongoing
      operating losses; (ii) the overall marketplace and clients' usage of EMC’s
      products, including demand therefor, the impact of competitive technologies,
      products and pricing, particularly given the substantially larger size and
      scale
      of certain competitors and potential competitors, control of expenses, and
      revenue generation by the acquisition of new customers; (iii) the consequent
      results of operations given the aforementioned factors; and (iv) the requirement
      for the Company to raise additional working capital to fund operations and
      the
      availability and terms of any such funding to the Company. Without any such
      funding, the Company believes it may be forced to curtail operations, and if
      no
      alternative to financing, such as a merger or acquisition, is consummated,
      the
      Company may not continue as a going concern. Other risks are detailed from
      time
      to time in the Company's 2003 Annual Report on Form 10-K, as amended, and in
      its
      other Securities and Exchange Commission reports and statements. The foregoing
      list should not be construed as exhaustive, and the Company disclaims any
      obligation to subsequently revise any forward-looking statements to reflect
      events or circumstances after the date of such statements, or to reflect the
      occurrence of anticipated or unanticipated events. The Company wishes to caution
      readers not to place undue reliance on any such forward-looking statements,
      which speak only as of the date made.





**Item
      3. Controls and Procedures.**





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





The
      Company's Chief Executive Officer and Chief Financial Officer, after evaluating
      the effectiveness of the Company's disclosure controls and procedures (as
      defined in Exchange Act Rule 13a-15(e)) as of the end of the period being
      reported (the "Evaluation Date"), have concluded that as of the Evaluation
      Date,
      the Company's disclosure controls and procedures were not effective in ensuring
      that information required to be disclosed by the Company in the reports it
      files
      or submits under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Commission's rules and forms.
      Such officers reached this conclusion because the Company’s records, prior to
      the recent change in management, had not been maintained and processed to meet
      both financial reporting and other Commission disclosure needs and requirements.
      Management has reviewed the recommendations set forth in a letter from the
      Company’s auditors and have set March 30, 2005 as a deadline to bring the
      Company’s disclosure controls and procedures in line with such recommendations.
      The Company’s independent auditors have made a number of recommendations
      including, but not limited to, the following: (i) the Company should improve
      accounting controls through the formalization of accounting practices through
      promulgation of accounting policies and procedures, and (ii) additional
      recommendations related to improving internal controls through the separation
      of
      duties within the accounting function. Management has hired outside consultants
      to help with this process.





***Changes
      in Internal Controls***





No
      significant changes in the Company's internal controls or in other factors
      that
      could significantly affect these controls following the Evaluation Date came
      to
      management's attention.





**PART
      II**


**Item
      1. Legal Proceedings.**





As
        of
        December 31, 2004, the Company was neither a party nor was any of its properties
        subject to any legal proceedings.


Page
          8


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





The
      following sets forth information relating to all sales of our common stock
      during the quarter ended December 31, 2004, which sales were not registered
      under the Securities Act.





During
      the quarter ended December 31, 2004, had no sales of shares of its common stock.
      Shares of common stock were subscribed to during the quarter but were not
      issued.





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





None.





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





None.





**Item
      5. Other Information.**





Please
      see “Recent Developments” on page 1.





**Item
      6. Exhibits.**





***Exhibit
      Index***





31.1
            Certification
                of the Principal Executive Officer pursuant to Rule
                13a-14(a).31.2
            Certification
                of the Principal Financial Officer pursuant to Rule
                13a-14(a).32.1
            Section
                1350 Certification of the Chief Executive Officer.32.2
            Section
                1350 Certification of the Chief Financial
                Officer.





Page
          9





**Signatures**





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





**Industrial
      Enterprises of America, Inc** .


(Registrant)





Date: **September
        13, 2006**
 By: /s/
        John D. Mazzuto
 John
        D. Mazzuto
 Chief
        Executive Officer, President, Assistant Secretary and Director
 
 
 Date: **September
        13, 2006**
 By: /s/
        James W. Margulies
 James
        W. Margulies
 Chief
        Financial Officer








Page
          10


**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Balance
      Sheet**


**December
      31, 2004**


**(Unaudited)**


**(restated)**




ASSETSCurrent
                    AssetsCash
                $10,904Accounts
                    receivable
                929,330Other
                    receivable
                104,272Allowance
                    for doubtful account
                (104,272)Inventory
                655,913Prepaid
                    expenses
                13,632Total
                    Current Assets
                $1,609,779Investment
                    in common stock
                12,750,000Property,
                    plant and equipment net of accumulated depreciation
                100,043Other
                    Assets
                100,000Goodwill
                418,029TOTAL
                    ASSETS
                $14,977,851
  LIABILITIES
                    & SHAREHOLDERS' EQUITYCurrent
                    LiabilitiesBank
                    line of credit
                $680,804Accounts
                    payable
                521,812Other
                    payable
                6,794Accrued
                    interest payable related parties
                11,038Accrued
                    expenses
                592,908Total
                    Current Liabilities
                $1,813,356Long
                    Term LiabilitiesNotes
                    payable related parties and shareholders
                300,000Other
                    debt
                53,740Deferred
                    taxes
                92,099Total
                    Long Term Liabilities
                $445,839Total
                    Liabilities
                $2,259,195Shareholders'
                    EquityCommon
                    stock, $0.001 par value,50,000,000
                    shares authorized,18,577,750
                    shares issued and outstandingat
                    December 31, 2004
                18,578Additional
                    paid-in capital
                2,692,169Subscribed
                    stock
                1,170,962Unrealized
                    security (losses)
                (750,000)Retained
                    earnings
                9,586,947Total
                    shareholders' equity
                $12,718,656TOTAL
                    LIABILITIES & SHAREHOLDERS' EQUITY
                $14,977,851


See
        accompanying footnotes to financial statements.


F-1


**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Statement
      of Operations**


**(Unaudited)**


**(restated)**




**Three
                    Months Ended**
                
                **Six
                    Months Ended****December
                    31, 2004**
                
                **December
                    31, 2003**
                
                **December
                    31, 2004**
                
                **December
                    31, 2003**Revenues
                $
                    1,348,787
                
                $
                    60,921
                
                $
                    1,348,787
                
                $
                    86,320Cost
                    of Goods Sold
                1,126,505
                
                -
                
                1,126,505
                
                -Gross
                    Profit
                $
                    222,282
                
                $
                    60,921
                
                $
                    222,282
                
                $
                    86,320Expenses:Selling,
                    general & administrative
                $
                    171,948
                
                $
                    16,048
                
                $
                    193,632
                
                $
                    95,855Doubtful
                    account expense
                6,556
                
                -
                
                104,272
                
                -Salaries
                    and contract labor
                107,774
                
                387,791
                
                116,274
                
                1,416,885Depreciation
                    and amortization
                5,971
                
                23,319
                
                5,971
                
                46,637Legal
                    and professional fees
                944,718
                
                27,921
                
                966,866
                
                111,418Total
                    Expenses
                $
                    1,236,967
                
                $
                    455,079
                
                $
                    1,387,015
                
                $
                    1,670,795(Loss)
                    from operations
                $
                    (1,014,685)
                
                $
                    (394,158)
                
                $
                    (1,164,733)
                
                $
                    (1,584,475)Interest
                    expense
                52,311
                
                67,848
                
                54,324
                
                122,097Net
                    (Loss) from operations
                $
                    (1,066,996)
                
                $
                    (462,006)
                
                $
                    (1,219,057)
                
                $
                    (1,706,572)Miscellaneous
                    income
                3,000
                
                -
                
                3,000
                
                -Provision
                    for income taxes
                9,338
                
                -
                
                9,338
                
                -Net
                    income (loss)
                $
                    (1,054,658)
                
                $
                    (462,006)
                
                $
                    (1,206,719)
                
                $
                    (1,706,572)Net
                    income (loss) per share basic and diluted
                $
                    (0.06)
                
                $
                    (0.04)
                
                $
                    (0.07)
                
                $
                    (0.16)Weighted
                    average number of common shares outstanding
                18,577,750
                
                10,452,688
                
                18,108,344
                
                10,472,114




See
      accompanying footnotes to financial statements.





F-2


**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Statement
      of Cash Flows**


**(Unaudited)**


**(restated)**


**Six
                  Months Ended****December
                  31, 2004**
              
              **December
                  31, 2003****Operating
                  activities**Net
                  (loss)
              $
                  (1,206,719)
              
              $
                  (1,706,572)Non-cash
                  itemsDepreciation
                  and amortization
              5,971
              
              46,636Stock
                  based compensation
              -
              
              734,206Net
                  changes in working capital accountsAccounts
                  receivable
              (284,619)
              
              840Other
                  receivable
              (150,466)
              
              -Inventory
              41,128
              
              -Prepaid
                  expenses
              77,435
              
              (2,361)Accounts
                  payable
              10,474
              
              105,013Bank
                  credit cards payable
              -
              
              (550)Related
                  party payable
              6,794
              
              (37,966)Accrued
                  interest
              -
              
              60,730Accrued
                  interest payable related party
              11,038
              
              (7,694)Current
                  portion notes payable
              100,638
              
              (67,830)Accrued
                  expenses
              545,932
              
              317,524Deferred
                  revenues
              -
              
              114,749**Net
                  cash (used) by operating activities**
              **$
                  (842,394)**
              
              **$
                  (443,275)****Investing
                  activities**Additions
                  to property, plant and equipment
              (5,264)
              
              -Other
              
              (1,013)
              
              -**Net
                  cash (used) by investing activities**
              **$
                  (6,277)**
              
              **$
                  -****Financing
                  activities**Bank
                  overdraft
              -
              
              7,498Bank
                  line of credit
              103,356
              
              6,642Notes
                  payable
              -
              
              58,307Notes
                  payable related party and shareholders
              300,000
              
              (1,856)Common
                  stock issued
              8,000
              
              317,000Stock
                  subscriptions
              315,000
              
              (12,487)**Net
                  cash provided by Financing Activities**
              **$
                  726,356**
              
              **$
                  375,104****Net
                  cash (decrease) for period**
              **$
                  (122,315)**
              
              **$
                  (68,171)**Cash
                  at beginning of period
              133,219
              
              68,171**Cash
                  at end of period**
              **$
                  10,904**
              
              **$
                  -**




See
      accompanying footnotes to financial
      statements.


F-3


**INDUSTRIAL
        ENTERPRISES OF AMERICA, INC.**
 **Statement
        of Cash Flows**
 **(Unaudited)**
 **(restated)**
 (continued)




SUPPLEMENTAL
                  DISCLOSURES RELATED TO CASH FLOWS:Interest
                  paid
              $
                  43,286
              
              $
                  58,827Provision
                  for income taxes
              
              
              
              $
                  -
              
              $
                  -SUPPLEMENTAL
                  SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Debt
                  converted to common stock
              $
                  70,404
              
              $
                  10,000Accrued
                  interest converted to stock
              $
                  20,071
              
              $
                  2,487Accrued
                  interest - notes payable capitalized
              $
                  -
              
              $
                  13,354Accrued
                  interest - notes payable shareholders capitalized
              $
                  -
              
              $
                  19,248Stock
                  issued for EMC Packaging, Inc. acquisition
              $
                  808,474
              
              $
                  -Stock
                  issued for services
              $
                  -
              
              $
                  660,000
   See
        accompanying footnotes to financial
        statements.
  F-4


**Note
          1 - Basis of presentation**
 
 Effective
          February 11, 2005, the Company changed its name to Industrial Enterprises
          of
          America, Inc. from Advanced Bio/Chem, Inc.
 
 Effective
          April, 2003, the Company elected to file as a non-reporting entity in accordance
          with Rule 12g-4 of the Securities Exchange Act of 1934. The Company has
          currently elected to reinstate as a filing entity and, as such, reference
          to
          year-end financial statements should be referred to the Company’s Amended Form
          10-KSB/A for the fiscal year ended June 30, 2004.
 
 The
          condensed financial statements included herein have been prepared by the
          Company
          pursuant to the rules and regulations of the Securities and Exchange Commission.
          Certain information and footnote disclosures normally included in financial
          statements prepared in accordance with generally accepted accounting principles
          have been condensed or omitted pursuant to such rules and regulations,
          although
          the Company believes that the disclosures are adequate to make the information
          presented not misleading.
 
 These
          statements reflect all adjustments, consisting of normal recurring adjustments,
          which, in the opinion of management, are necessary for fair presentation
          of the
          information contained therein. It is recommended that these condensed financial
          statements be read in conjunction with the financial statements and notes
          thereto included in the Company’s amended 2004 Form 10-KSB/A.
 
 During
          2004, the Company changed its fiscal year from one ending on December 31
          to one
          ending on June 30. Application for the change in accounting year is pending
          with
          the Internal Revenue Service. Accordingly, the Company’s transition period that
          ended on December 31, 2004, includes the six months ended December 31,
          2004
          (Transition 2004). The following are selected financial data for Transition
          2004
          and the comparable six-month period of the prior year:
 **(Unaudited)****ILNP**
                  
                  **EMC**
                  
                  **Combined****December
                      31, 2004**
                  
                  **December
                      31, 2004**
                  
                  **December
                      31, 2004****(Six
                      months)**
                  
                  **(Six
                      months)**
                  
                  **(Six
                      months)**Net
                      sales
                  $
                      -
                  
                  $
                      2,289,728
                  
                  $
                      2,289,728Cost
                      of goods sold
                  -
                  
                  1,873,385
                  
                  1,873,385Gross
                      profit
                  $
                      -
                  
                  $
                      416,343
                  
                  $
                      416,343Selling
                      and administrative expenses
                  $
                      117,390
                  
                  $
                      145,613
                  
                  $
                      263,003Doubtful
                      account expense
                  104,272
                  
                  -
                  
                  104,272Salaries
                      and contract labor
                  32,000
                  
                  146,028
                  
                  178,028Depreciation
                      and amortization
                  -
                  
                  4,056
                  
                  4,056Legal
                      and professional
                  924,085
                  
                  85,781
                  
                  1,009,866Total
                      expenses
                  $
                      1,177,747
                  
                  $
                      381,478
                  
                  $
                      1,559,225Net
                      income (loss) from operations
                  $
                      (1,177,747)
                  
                  $
                      34,865
                  
                  $
                      (1,142,882)Interest
                      expense
                  $
                      11,038
                  
                  $
                      80,047
                  
                  $
                      91,085(Loss)
                      before income taxes
                  $
                      (1,188,785)
                  
                  $
                      (45,182)
                  
                  $
                      (1,233,967)Income
                      tax expense
                  $
                      -
                  
                  $
                      -
                  
                  $
                      -Net
                      (loss)
                  $
                      (1,188,785)
                  
                  $
                      (45,182)
                  
                  $
                      (1,233,967)
 
 F-5
  **(Unaudited)****ILNP**
                  
                  **EMC**
                  
                  **Combined****December
                      31, 2003**
                  
                  **December
                      31, 2003**
                  
                  **December
                      31, 2003****(Six
                      months)**
                  
                  **(Six
                      months)**
                  
                  **(Six
                      months)**Net
                      sales
                  $
                      86,320
                  
                  $
                      1,684,267
                  
                  $
                      1,770,587Cost
                      of goods sold
                  -
                  
                  1,288,120
                  
                  1,288,120Gross
                      profit
                  $
                      86,320
                  
                  $
                      396,147
                  
                  $
                      482,467Selling
                      and administrative expenses
                  $
                      95,855
                  
                  $
                      165,862
                  
                  $
                      261,717Salaries
                      and contract labor
                  1,416,885
                  
                  133,800
                  
                  1,550,685Depreciation
                      and amortization
                  46,637
                  
                  5,516
                  
                  52,153Legal
                      and professional
                  111,418
                  
                  138,000
                  
                  249,418Total
                      expenses
                  $
                      1,670,795
                  
                  $
                      443,178
                  
                  $
                      2,113,973Net
                      (loss) from operations
                  $
                      (1,584,475)
                  
                  $
                      (47,031)
                  
                  $
                      (1,631,506)Interest
                      expense
                  $
                      122,097
                  
                  $
                      63,458
                  
                  $
                      185,555(Loss)
                      before income taxesand
                      discontinued operations
                  $
                      (1,706,572)
                  
                  $
                      (110,489)
                  
                  $
                      (1,817,061)Gain
                      on discontinued operations
                  $
                      -
                  
                  $
                      -
                  
                  $
                      -Loss
                      before income taxes
                  $
                      (1,706,572)
                  
                  $
                      (110,489)
                  
                  $
                      (1,817,061)Income
                      tax expense
                  $
                      -
                  
                  $
                      -
                  
                  $
                      -Net
                      (loss)
                  $
                      (1,706,572)
                  
                  $
                      (110,489)
                  
                  $
                      (1,817,061)
 Results
          of operations for the interim periods are not indicative of annual results.
 
 **Note
          2 - Restatement of financial statements due to accounting
          error**
 
 After
          lengthy discussions with the Securities and Exchange Commission personnel
          and
          the Company’s auditors, the Company has determined that it should restate the
          financial statements for the six months ended December 31, 2004, due to
          an error
          in recording the sale of its operating assets under the equity method of
          accounting instead of recording the transaction as an arms length transaction
          recognizing the fair market value of the securities received in the transaction
          during the fiscal year ended June 30, 2004, the transition period. (See
          Footnote 13 - Mergers and Acquisitions.) The effect of the change required
          a restatement of the December 31, 2004, financial statements in order to
          properly reflect the asset value and the related adjustments to current
          and
          prior period earnings. The effect of this change reduced the net loss for
          the
          period ended December 31, 2004, by $19,116, increased assets by $12,604,279,
          decreased total liabilities by $2,756,354, and increased shareholders’ equity by
          $15,360,633.
  **Note 3
            - Going Concern**
  As
            shown in the accompanying financial statements, the Company has incurred
            recurring losses from operations. This raises substantial doubt about
            the
            Company’s ability to continue as a going concern. The accompanying financial
            statements do not include any adjustments that might be necessary if
            the Company
            is unable to continue as a going concern.
  **Note 4
          - Earnings per share**
 
 Basic
          earnings per share (EPS) includes dilution and is determined by dividing
          income
          available to common stockholders by the weighted average number of shares
          of
          common stock outstanding. Diluted EPS reflects the potential dilution that
          could
          occur if options and other contracts to issue shares of common stock were
          exercised or converted into common stock. There are warrants to issue an
          additional 7,500,000 shares as of December 31, 2004, and no warrants or
          options
          as of December 31, 2003. None of the warrants have been exercised as of
          December
          31, 2004. (See Note 5 -- Warrants and Options)
  F-6
 **Note
            5 - Warrants and options**
 
 As
            permitted under generally accepted accounting principles, stock-based
            awards
            granted to employees are accounted for following APB 25. Accordingly,
            the
            Company has not recognized compensation expense for its stock-based awards
            to
            employees. Outlined below are pro forma results had compensation costs
            for the
            Company’s stock-based compensation plans been determined based on the fair value
            approach of SFAS 123.
  For
                        the Three Months Ended
                      December
                        31st2004
                    
                    2003Net
                        (loss), as reported
                    $(1,054,658)
                    
                    $(462,006)Less
                        compensation cost determined under the fair value method
                    -
                    
                    -Pro
                        forma net (loss)
                    $(1,054,658)
                    
                    $(462,006)
 
 Basic
                      and dilutive (loss) per share:As
                      reported
                  $
                      (0.06)
                  
                  $
                      (0.04)Pro
                      forma
                  $
                      (0.06)
                  
                  $
                      (0.04)
 
 For
                        the Six Months Ended
                      December
                        31st2004
                    
                    2003Net
                        (loss), as reported
                    $(1,206,719)
                    
                    $(1,706,572)Less
                        compensation cost determined under the fair value method
                    -
                    
                    -Pro
                        forma net (loss)
                    $(1,206,719)
                    
                    $(1,706,572)
 
 Basic
                      and dilutive (loss) per share:As
                      reported
                  $
                      (0.07)
                  
                  $
                      (0.16)Pro
                      forma
                  $
                      (0.07)
                  
                  $
                      (0.16)
 F-7
 These
            pro
            forma amounts may not be representative of future disclosures since the
            estimated fair value of stock options is amortized to expense over the
            vesting
            period and options may be granted in future years.
 
 Steven
            Rash, former CEO, was granted 825,000 shares of common stock at $0.80
            per share
            for a charge of $660,000 against operations for the quarter ended September
            30,
            2003. In addition, pursuant to Mr. Rash’s September 5, 2003, employment
            contract, an option agreement for an additional 200,000 shares at the
            exercise
            price of $0.80 was promised, but as yet not executed. No charge to current
            operations has been made for the unexecuted option. These options are
            not
            anticipated to be executed.
 
 Disclosures
            required by Statement of Financial Accounting Standards No. 123, "Accounting
            for
            Stock-Based Compensation" ("SFAS No. 123"), including pro forma operating
            results had the Company prepared its financial statements in accordance
            with the
            fair value based method of accounting for stock-based compensation prescribed
            therein are shown below. In connection with acquisition of EMC Packaging,
            Inc.
            to retain the staff and management of EMC Packaging, Inc., the Company
            issued
            2,600,000 option shares convertible into one (1) common share per option
            of the
            Company. The options have an exercise price of $0.50 per share and a
            term of 5
            years. The fair value of the options has been estimated on the date of
            grant
            using the Black-Scholes option pricing model. The weighted average fair
            value of
            these warrants was $0.07. The following assumptions were used in computing
            the
            fair value of these warrants: weighted average risk-free interest rate
            of 7%,
            zero dividend yield, volatility of the Company's common stock of 50%
            and an
            average remaining life of the warrants of 4.8 years. Exercise prices
            and
            weighted-average contractual lives of stock options outstanding as of
            December
            31, 2004 are as follows:
 
 Options
                      Outstanding
                  
                  Options
                      ExercisableWeighted
                      Average
                  
                  Weighted
                      Average
                  
                  
                  
                  Weighted
                      AverageExercise
                      Prices
                  
                  Number
                      Outstanding
                  
                  Remaining
                      Contractual Life
                  
                  Exercise
                      Prices
                  
                  Number
                      Exercisable
                  
                  Exercise
                      Price$0.50
                  
                  2,600,000
                  
                  4.25
                  
                  $0.50
                  
                  2,600,000
                  
                  $0.50
 
 Summary
            of Options Granted and Outstanding:
 
 For
                      the six months ended December 312004
                  
                  2003Shares
                  
                  Weighted
                      Average Exercise Price
                  
                  Shares
                  
                  Weighted
                      Average Exercise PriceOptions:Outstanding
                      at beginning of period
                  
                  200,000
                  
                  $
                      0.80
                  
                  -
                  
                  $
                      -Granted
                  
                  2,600,000
                  
                  $
                      0.50
                  
                  200,000
                  
                  $
                      0.80Cancelled
                  
                  (200,000)
                  
                  $
                      (0.80)
                  
                  -
                  
                  $
                      -Outstanding
                      at end of period
                  
                  2,600,000
                  
                  $
                      0.50
                  
                  200,000
                  
                  $
                      0.80
 
 The
            following table summarizes the pro forma operating results of the Company
            for
            December 31, 2004, had compensation costs for the stock options granted
            to
            employees been determined in accordance with the fair value based method
            of
            accounting for stock based compensation as prescribed by SFAS No. 123.
  Pro
                    forma net (loss) available to common stockholders
                  
                  $
                    (1,206,719)Pro
                    forma basic and diluted loss per share
                  
                  $
                    (0.07)
 F-8
 A
            summary
            of warrant activity for the six months ended December 31, 2004, is as
            follows:
 Number
                      of Warrants
                  
                  Weighted
                      Average Exercise Price
                  
                  Warrants
                      Exercisable
                  
                  Weighted
                      Average Exercise PriceOutstanding
                      at June 30, 2004
                  
                  2,500,000
                  
                  $
                      0.50
                  
                  2,500,000
                  
                  $0.50Warrants
                      cancelled
                  
                  (2,500,000)
                  
                  $(0.50)
                  
                  (2,500,000)
                  
                  $(0.50)Warrants
                      granted
                  
                  7,500,000
                  
                  $0.30
                  
                  7,500,000
                  
                  $0.30Outstanding
                      at December 31, 2004
                  
                  7,500,000
                  
                  
                  
                  7,500,000
 
 At
            December 31, 2004, the range of warrant prices for shares under warrants
            and the
            weighted-average remaining contractual life is as follows:
 
 Warrants
                      Outstanding
                  
                  Warrants
                      ExercisableWeighted
                      Average
                  
                  Weighted
                      Average
                  
                  
                  
                  Weighted
                      AverageNumber
                      of Warrants
                  
                  Exercise
                      Price
                  
                  Remaining
                      Contractual Life
                  
                  Number
                      of Warrants
                  
                  Exercise
                      Price2,500,000
                  
                  $0.50
                  
                  5.83
                      yrs
                  
                  2,500,000
                  
                  $0.507,500,000
                  
                  $0.20
                  
                  4.92
                      yrs
                  
                  7,500,000
                  
                  $0.20
 
 The
            Company has issued 7,500,000 warrants since the year ended June 30, 2004,
            at the
            rate of one warrant for each common share. The warrants have an exercise
            price
            range of $0.20 to $0.50 per share and a term ranging from 5 to 6 years.
            The fair
            value of the warrants has been estimated on the date of grant using the
            Black-Scholes option pricing model. The weighted average fair value of
            these
            warrants was $0.12. The following assumptions were used in computing
            the fair
            value of these warrants: weighted average risk-free interest rate of
            7%, zero
            dividend yield, volatility of the Company's common stock of 50% and an
            average
            remaining life of the warrants of 5.2 years.
 
 **Note
            6 - Shareholder and related party debt**
 
 The
            Company received $250,000 convertible debt from a shareholder during
            the quarter
            ended December 31, 2004. The notes bear interest at the rate of 18% and
            matures
            in November, 2007. The total outstanding balance as of December 31, 2004,
            was
            $300,000. The notes are convertible into the Company’s common stock, par value
            $.001 per share at the lesser of (i) $0.10 per share or (ii) sixty-five
            (65%)
            percent of the average closing price of the common shares for the five
            (5)
            trading days prior to the date of the conversion provided, however, the
            Payee
            does not become the beneficial owner of ten (10%) percent or more of
            the voting
            securities of the Company, or otherwise be considered an “affiliate” of the
            Company. The Company shall not be obligated to issue the common stock
            in such an
            event.
 
 The
            Company recorded interest expense totaling $54,324 and $122,097 for the
            six
            months ended December 31, 2004 and 2003, respectively.
 
 **Note
            7 - Due from Power 3 Medical Products, Inc.**
 
 In
            May
            2004, the Company entered into an Asset Purchase Agreement (the “Agreement”),
            among the Company, Power3, and Steven B. Rash and Ira Goldknopf (collectively,
            the "Shareholders"). The sale was approved by the Company’s shareholders by
            proxy. As provided in the Agreement, the Company sold to Power3 all of
            the
            Company’s assets in consideration for 15,000,000 shares of the common stock,
            par
            value $.001 per share, of Power3. The assets disposed of by the Company
            included
            all tangible personal property, intellectual property, rights in contracts
            that
            the Company is a party to, along with intangible property, including
            goodwill.
            In consideration for the benefits that they received by virtue of the
            transaction, each of the Shareholders agreed to make
 F-9
 the
              representations, warranties, and indemnifications in the Agreement
              jointly and
              severally, along with the Company, and each of the Shareholders agreed
              to enter
              into and be bound by a Non-Competition Agreement and an Employment
              Agreement
              containing, among other things, covenants respecting confidentiality,
              non-competition and non-solicitation. The terms of the Agreement were
              determined
              by arms' length negotiations between the parties. Various amounts were
              expended
              subsequent to the transaction that are deemed to be the responsibility
              of Power3
              et al. The total of those amounts are $104,272. Due to the nature of
              the ongoing
              discussions with the management team at Power3, this receivable has
              been
              determined to be impaired and a like amount has been recorded as Bad
              Debt.
 
 **Note
            8 - Changes in common shares outstanding**
 
 Included
            in the table below are the changes in common shares since June 30, 2004.
            See
            Note 6 for discussion of mergers and acquisitions affecting common
            shares.
 
 CommonSharesOutstanding
                      common shares at June 30, 2004
                  15,384,275Debt
                      converted to stock
                  113,475Stock
                      issued for services
                  3,000,000Stock
                      issued for cash
                  80,000Outstanding
                      common shares at December 31, 2004
                  18,577,750
 
 **Note
            9 - Commitments and contingencies**
 
 As
            previously stated above, on May 18, 2004, the Company sold all of its
            assets in
            exchange for fifteen million shares of Power 3 Medical Products, Inc.
            stock and
            the assumption of certain liabilities by Power 3 and the repayment of
            all other
            indebtedness by certain shareholders of the Company. As such the Company
            should
            have had no liabilities as of May 18, 2004. The Company is taking this
            position
            based upon advice of legal counsel. If the Company is found to be responsible
            for the payment of any of these liabilities, it would have indemnification
            rights against either Power 3 or those certain shareholders who signed
            the Asset
            Purchase Agreement.
 
 **Note
            10 - Stock subscriptions**
 
 A
            subscription for 1,000,000 shares of the common stock of the Company
            at $0.05
            has been paid. A subscription for 100,000 shares of common stock at $0.15
            has
            been paid. A subscription for 1,437,500 shares of common stock at $0.17
            has been
            paid. Also, a debt of $43,689 incurred during the year ended June 30,
            2004, was
            agreed to be converted to common stock. In addition, services valued
            at $3,800
            rendered under consulting agreements during the fiscal year ended June
            30, 2004,
            are to be settled with common stock. Further, as a condition to the acquisition
            of EMC Packaging, 2,296,800 shares of common stock valued at $808,474
            has been
            set aside for the former owners of EMC. As of December 31, 2004, the
            total value
            of these subscriptions for common stock was $1,170,962.
 F-10
 **Note
            11 - Investment in common stock**
 
 The
            following table shows the Company’s fair market value method of investments’
gross unrealized losses and fair value, aggregated by length of time
            that
            individual securities have been in a continuous unrealized loss position,
            at
            December 31, 2004:
 
 Less
                      Than 12 Months
                  
                  12
                      Months or More
                  
                  TotalDescription
                      of Securities
                  
                  Fair
                      Value
                  
                  Unrealized
                      Losses
                  
                  Fair
                      Value
                  
                  Unrealized
                      Losses
                  
                  Fair
                      Value
                  
                  Unrealized
                      LossesInvestments
                      in equity securities carried at fair market value
                  
                  $12,750,000
                  
                  $(750,000)
                  
                  $
                      -0-
                  
                  $
                      -0-
                  
                  $12,750,000
                  
                  $(750,000)
 
 The
            aggregate fair market value of the Company’s investments totaled $12,750,000 at
            December 31, 2004. The investments were evaluated for impairment pursuant
            to
            FAS-107, *Disclosures
            about Fair Value of Financial Instruments* ,
            and the
            Company did not identify any events or changes in circumstances that
            may have
            had a significant adverse effect on the fair value of those investments.
 
 **Note
            12 - Unrealized securities losses**
 
 The
            Company classifies its debt and marketable equity securities into
            held-to-maturity, trading, or available-for-sale categories. Debt securities
            are
            classified as held-to-maturity when the Company has the positive intent
            and
            ability to hold the securities to maturity. Debt securities for which
            the
            Company does not have the intent or ability to hold to maturity are classified
            as available for sale. Held-to-maturity securities are recorded as either
            short-term or long-term on the balance sheet based on contractual maturity
            date
            and are stated at amortized cost. Marketable securities that are bought
            and held
            principally for the purpose of selling them in the near term are classified
            as
            trading securities and are reported at fair value, with unrealized gains
            and
            losses recognized in earnings. Debt and marketable equity securities
            not
            classified as held-to-maturity or as trading are classified as
            available-for-sale and are carried at fair market value, with the unrealized
            gains and losses, net of tax, included in the determination of comprehensive
            income and reported in shareholders’ equity. The fair value of substantially all
            securities is determined by quoted market prices. The estimated fair
            value of
            securities for which there are no quoted market prices is based on similar
            types
            of securities that are traded in the market. Gains or losses on securities
            sold
            are based on the specific identification method.
 
 **Note
            13 - Mergers and acquisitions**
 
 On
            May 5,
            2003, the Company and GESJ, Inc. (“GESJ”), a Texas corporation, owned by four
            officers of the Company, entered into an agreement and plan of merger
            in which
            GESJ merged into the Company in a tax-free exchange of shares. 1,903,000
            shares
            of common stock of the Company were exchanged for all the issued and
            outstanding
            shares of GESJ. The Company continued as the surviving entity. The purpose
            of
            the merger was to acquire the management team of GESJ. GESJ had no assets
            or
            liabilities as of the merger date. The Company has not recorded the transaction
            as stock issued for compensation to the officers involved due to the
            cancellation of the shares.
 
 On
            June
            12, 2003, the Company’s directors approved a merger with Ciro International,
            Inc. (“Ciro”), a Nevada Corporation, whereby the Company would be the surviving
            entity in a reverse acquisition with Ciro, a public shell company. For
            accounting purposes, the combination was treated as an issuance of shares
            for
            cash by the Company and has not been considered a business
            combination.
 
 On
            May
            18, 2004, all fixed assets and intellectual property were acquired by
            Power 3
            Medical Products, Inc. (Power 3), a Nevada corporation, for 15,000,000
            restricted shares of Power 3 common stock, plus employment of certain
            of the
            Company’s employees, and assumption of certain liabilities of the
            Company.
 
 On
            October 7, 2004, the Company’s Board of Directors approved a merger with EMC
            Packaging, Inc. In consideration for each EMC share, the EMC stockholders
            received an aggregate of 2,296,800 shares of the Company’s common stock valued
            at $808,474.