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


**Washington,
      D.C. 20549**





**Form
      10-QSB**


**Amendment
      No. 2**





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




For
      the
      quarterly period ended **March
      31, 2005**





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





Commission
      File Number: 000-30646





**Industrial
      Enterprises of America, Inc.**


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


(Exact
      name of registrant as specified in its charter)





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





**(212)
        490-3100**


(Registrant’s
      telephone number, including area code)




Advanced
      Bio/Chem, Inc., December 31


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





Indicate
      by check mark whether the registrant (1) filed all reports required to be filed
      by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
      12
      months (or such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days. Yes [ ] No [X]





APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDING
      DURING THE PRECEDING FIVE YEARS





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





APPLICABLE
      ONLY TO CORPORATE ISSUERS





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





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





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





**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. 2 (this “Amendment No. 2”) to the Quarterly Report on Form 10-QSB
          for the period ended March 31, 2005 makes the same correction to the Company’s
          unaudited financial statements for such period.
  Pursuant
          to the rules of the SEC, Item 6, "Exhibits," of Part III of Amendment No.
          1 to
          the Quarterly Report on Form 10-QSB for the period ended March 31, 2005
          (the
“Original Filing”), has been amended to contain updated certifications from our
          Chief Executive Officer and Chief Financial Officer, as required by Sections
          302
          and 906 of the Sarbanes-Oxley Act of 2002.
  This
          Amendment No. 2 only amends and restates the Items described above to reflect
          the effects of the restatement, and we have not modified or updated other
          disclosures presented in our Original Filing.  Accordingly, this Amendment
          No. 2 does not reflect events occurring after the filing of the Original
          Filing
          and does not modify or update those disclosures affected by subsequent
          events,
          except as specifically referenced herein.  Information not affected by this
          Amendment No. 2 is unchanged and reflects the disclosures  made
          at
          the time of the Original Filing on June 3, 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.................................................................................
            5**Part
                II**Item
                1. Legal
                Proceedings...........................................................................................
            6Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds...................
            6.Item
                3. Defaults Upon Senior
                Securities...................................................................
            6Item
                4. Submission of Matters to a Vote of Security
                Holders.................................
            6Item
                5. Other
                Information............................................................................................
            6Item
                6.
                Exhibits.............................................................................................................
            6














***Recent
      Developments***





***Change
      in Fiscal Year End***





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





The
      change is described in further detail in the Company’s Current Report on Form
      8-K, filed with the Securities and Exchange Commission (the “Commission”) on
      March 29, 2005.





***Potential
      Acquisition***





As
      the
      Company disclosed in a Current Report on Form 8-K filed with the Commission
      on
      April 22, 2005, the Company issued a press release on April 21, 2005 announcing
      that management had agreed in principal to acquire one hundred percent (100%)
      ownership in a leading manufacturer and seller of automotive chemicals and
      additives. The acquisition of this private company will result in the target
      becoming the Company’s wholly owned subsidiary. The Company further announced
      that management believes that a definitive agreement will be reached, and the
      transaction will likely be consummated, within forty-five (45) days of the
      date
      of the press release, subject to definitive due diligence and certain other
      conditions. Once a definitive agreement is in fact reached, the Company will
      file another Current Report on Form 8-K.





***Power3
      Dispute***





As
      previously disclosed, effective as of May 18, 2004, the Company sold to Power3
      Medical Products, Inc., a New York corporation ("Power3"), all of the Company’s
      assets in consideration for 15,000,000 shares of the common stock, par value
      $.001 per share, of Power3 (the “Power3 Sale”). The assets disposed of by the
      Company included all tangible personal property, intellectual property, rights
      in contracts that the Company was a party to, along with intangible property,
      including goodwill. In consideration for the benefits that they received by
      virtue of the transaction, each of the Company’s shareholders that were a party
      to the Power3 Sale (Ira Goldknopf and Steven B. Rash) (the “Shareholders”)
      agreed to make the representations, warranties, and indemnifications in the
      Asset Purchase Agreement between Power3, the Company and the Shareholders (the
      “Agreement”), jointly and severally, along with the Company.





On
      May
      12, 2005, the Company filed a Current Report on Form 8-K to disclose that the
      Company’s management is currently reviewing the Power3 Sale. Under the
      Agreement, Power3 agreed to purchase all of the assets and assume all of the
      liabilities (with the exception of those specifically excluded) of the Company.
      Additionally, Section 4.5 of the Agreement provided that the Shareholders would
      repay the Company’s indebtedness within five (5) business days of the closing
      date of the Power3 Sale. However, following such sale, $2.8 million in
      liabilities remained on the books of the Company (the “Liabilities”). Until
      recently, the Company and Power3 had been negotiating an agreement with respect
      to the settlement of any and all claims between the Company, Power3 and each
      of
      the companies’ principals stemming from the Power3 Sale. However, the Company
      has terminated settlement discussions. The Company disclosed that it would
      take
      action to enforce any rights and remedies it may have with respect to the Power3
      Sale and the Liabilities.





Power3
      contends that the terms of the Agreement are not clear and are therefore subject
      to different interpretations. The Company’s management notes Mr. Rash owned
      approximately 3.92% of the Company’s common stock at the time of the Power3 Sale
      and Mr. Goldknopf owned approximately 8.23% of the Company’s common stock,
      resulting in their indirect beneficial ownership at the time of the transaction
      of an aggregate of approximately


Page
          1


1,822,500
      shares. The Company has since informed the Shareholders that management has
      determined to suspend the shares of the Company’s common stock owned by the
      Shareholders while it investigates whether these parties breached the fiduciary
      duties that may have been owed by each of them to the Company, among other
      matters.





In
      connection with this dispute, the Company has cancelled the debt of certain
      former officers, directors and shareholders totaling $699,434 during the quarter
      ended March 31, 2005 based on a determination that such debt should have been
      either assumed by Power3 or paid by the shareholder upon consummation of the
      Power3 Transaction.  While the Company believes that it has a valid basis
      for such cancellation, there can be no assurance that the cancellation of the
      liabilities will not be disputed. This cancelled debt was comprised of $388,110
      of notes payable; $123,382 of accrued interest; $92,663 of credit card debt;
      and
      $95,279 of accounts payable to former shareholders.





**Item
      1. Financial Statements.**





***Critical
      Accounting Policies***





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





The
      following significant accounting policies pertain to EMC Packaging, Inc.
      (“EMC”), the Company’s current sole operating unit at March 31, 2005.





Revenue
      Recognition





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





Inventory





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





Machinery
      and Equipment





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





Accounting
      for Stock-Based Compensation





The
      Company has adopted the disclosure provisions of SFAS No. 123, “Accounting for
      Stock-Based Compensation.” In accordance with the provisions of SFAS No. 123,
      the Company applies Accounting Principles Board Opinion 25 and related
      interpretations in accounting for stock issued to its employees and consultants.
      Management exercises judgment in its determination of when significant non-cash
      stock transactions have occurred.





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


Page
          2


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





**Acquisition
      of EMC Packaging, Inc.**





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




**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).
 
 ***Results
          of Operations*** ****


*For
      the Three Months ended March 31, 2005 and 2004*





Revenue
      and gross profit for the three months ended March 31, 2005 was $831,831 and
      $91,239, respectively, and reflects the revenue and gross profit derived from
      EMC’s operations during the quarter. The miscellaneous revenue and gross profit
      of $137,837 for the same period in the prior year represented residual income
      from the bio tech division which was sold in May 2004 to Power3.





Total
          operating expenses for the three-month period ended March 31, 2005 was
          $731,745.
          Of this amount, $172,232 was due to EMC’s operations and the balance, or
          $559,513, was due to the Company’s corporate expenses. The greater majority of
          these corporate expenses pertained to legal and professional fees of $231,640,
          arising from the ongoing reorganization of the Company.
 
 The
          operating expenses in the same three-month period in the prior year were
          $167,727. Interest expenses for the three months ended March 31, 2005 and
          2004
          was $65,705 and $51,942, respectively, with the increase primarily attributable
          to $39,705 of interest expense incurred by EMC during the three months
          ended
          March 31, 2005.


During
      the quarter ended March 31, 2005, the Company cancelled $699,434 of certain
      liabilities related to the Power3 Liabilities disclosed above in “Recent
      Developments - Power3 Dispute”. These cancelled liabilities are comprised of
      $388,110 of notes payable; $123,382 of accrued interest; $92,663 of credit
      card
      debt; and $95,279 of accounts payable to former shareholders.





The
        result of the above was a net loss for the three months ended March 31, 2005
        of
        $(748,490), compared to a loss of $(81,832) in the same period in 2004.





*For
      the Nine Months ended March 31, 2005 and 2004*





Revenue
      and gross profit for the nine months ended March 31, 2005 was $2,180,618 and
      $313,521, respectively, and reflects the revenue and gross profit derived from
      EMC’s operations since the acquisition on October 7, 2004. The miscellaneous
      revenue and gross profit of $224,157 for the same period in the prior year
      represented residual income from the bio tech division sold in May 2004 to
      Power3.


Page
          3


Total
          operating expenses for the nine-month period ended March 31, 2005 was
          $2,209,064. Of this amount, $380,330 was due
          to EMC’s operations and the balance, or $1,828,734, was
          due
          to the Company’s corporate expenses. The greater majority of these corporate
          expenses pertained to legal and professional fees of $1,473,196 arising
          from the
          acquisition of EMC and the reorganization of the Company. The operating
          expenses
          in the same nine-month period in the prior year were $1,981,406. Salary
          and
          contract labor accounted for $1,611,925 of this total.
 
 Interest
          expense for the nine months ended March 31, 2005 and 2004 was $120,030
          and
          $175,153, respectively. Interest expense in the nine months ended March
          31, 2005
          incurred by the EMC operation was $82,992 incurred since the October 7,
          2004
          acquisition.


As
      previously discussed, during the quarter ended March 31, 2005, the Company
      cancelled $699,434 of certain liabilities related to the Power3 Liabilities
      disclosed above in “Recent Developments - Power3 Dispute”. These cancelled
      liabilities are comprised of $388,110 of notes payable; $123,382 of accrued
      interest; $92,663 of credit card debt; and $95,279 of accounts payable to former
      shareholders.





The
        result of the above was a net loss for the nine months ended March 31, 2005
        of
        $(2,009,573) compared to a loss of $(1,929,954) in the same period in 2003-2004.





Net
        (loss) income per share basic and diluted for the three and nine months ended
        March 31, 2005 was $(0.03) and $(0.10) per share, respectively, compared
        to
        $(0.01) and $(0.15) in the respective periods for the prior
        year.





***Liquidity
      and Capital Resources***





The
          Company had working capital of $543,620 as of March 31, 2005. This compares
          to a
          working capital deficit of $(1,745,622) as of March 31, 2004.
 
 Net
          cash
          provided by operations for the nine months ended March 31, 2005 was a negative
          $(1,345,549), compared to a negative cash flow in the same period in 2003-2004
          of $(767,761). This increase in funds used by operations was attributable
          to the
          increased net loss and $734,206 of stock-based compensation (a non-cash
          item) in
          the 2003-2004 nine-month period.


Net
      cash
      used by investing activities was minimal in the nine-month period ended March
      31, 2005; there was no investing activity in the comparable period in
      2003-2004.





The
      Company obtained funds to operate in the nine months ended March 31, 2005 from
      the issuance of common stock and subscriptions in the amount of $901,000 and
      a
      net increase in notes payable shareholders and related parties of approximately
      $340,000.





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





It
      should
      be noted that this Management's Discussion and Analysis or Plan of Operations
      contains "forward-looking statements" within the meaning of Section 27A of
      the
      Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are made
      pursuant to the safe harbor provisions of the Private Securities Litigation
      Reform Act of 1995. The terms "believe", "anticipate", "intend", "goal",
      "expect" and similar expressions may identify forward-looking statements. These
      forward-looking statements represent the Company's current expectations or
      beliefs concerning future events. The matters covered by these statements are
      subject to certain risks and uncertainties that could cause actual results
      to
      differ materially from those set forth in the forward-looking statements,
      including, but not limited to: (i) the Company's history of ongoing operating
      losses; (ii) the Company's ability to reach a definitive agreement with the
      target described in “Recent Developments - Potential Acquisition”; (iii) the
      overall marketplace and clients' usage of EMC's products and those of the
      target, if and when the potential acquisition is consummated,
      including demand therefore, the impact of competitive technologies,
      products and pricing, particularly given the substantially larger size and
      scale
      of certain


Page
          4


competitors
      and potential competitors, control of expenses, and revenue generation by the
      acquisition of new customers; (iv) the consequent results of operations given
      the aforementioned factors; and (v) the requirement for the Company to raise
      additional working capital to fund operations and the availability and terms
      of
      any such funding to the Company. Without any such funding, the Company believes
      it may be forced to curtail operations, and if no alternative to financing,
      such
      as a merger or acquisition, is consummated, the Company may not continue as
      a
      going concern. Other risks are detailed from time to time in the Company's
      2003
      Annual Report on Form 10-KSB, as amended and in its other Commission reports
      and
      statements. The foregoing list should not be construed as exhaustive, and the
      Company disclaims any obligation to subsequently revise any forward-looking
      statements to reflect events or circumstances after the date of such statements,
      or to reflect the occurrence of anticipated or unanticipated events. The Company
      wishes to caution readers not to place undue reliance on any such
      forward-looking statements, which speak only as of the date made.





**Item
      3. Controls and Procedures.**





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





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





***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.




Page
          5


**PART
      II**


**Item
      1. Legal Proceedings.**





As
      of
      March 31, 2005, the Company was neither a party nor were any of its properties
      subject to any material legal proceedings.





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





The
      following sets forth information relating to all sales of our common stock
      during the quarter ended March 31, 2005, which sales were not registered under
      the Securities Act.





During
      the quarter ended March 31, 2005, the Company sold an aggregate of 3,757,500
      shares of its common stock in a private placement to accredited investors as
      well as for accrued interest and services rendered, at prices between $0.05
      and
      $0.20 per share. Each of the purchasers in this private placement represented
      his or her intention to acquire the securities for investment only and not
      with
      a view toward distribution. None of the shares of the Company’s common stock
      were sold through an underwriter and there were no underwriting discounts or
      commissions involved. These sales and purchases in the private placement were
      exempt from registration under the Securities Act pursuant to Section 4(2)
      and
      the regulations promulgated thereunder, on the basis that the private placement
      did not involve a public offering.





Other
      than the securities mentioned above, the Company did not issue or sell any
      securities during the quarter ended March 31, 2005.





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





None.





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





None





**Item
      5. Other Information.**





Please
      see “Recent Developments” on page 1.





**Item
      6. Exhibits.**





***Exhibit
      Index***





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





Page
          6








**Signatures**





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





**Industrial
      Enterprises of America, Inc** .


(Registrant)





Date: **September
      14, 2006**


By: /s/
      John D. Mazzuto


**John
      D. Mazzuto** ,
      Chief
      Executive


Officer,
      President, Assistant Secretary and Director











Date: **September
      14, 2006**


By: /s/
      James W. Margulies


**James
      W. Margulies** ,
      Chief
      Financial Officer








**INDUSTRIAL
      ENTERPRISES OF AMERICA**


**Balance
      Sheet**


**March
      31, 2005**


**(unaudited)**


**(restated)**





**March
                  31, 2005****(Unaudited)**ASSETSCurrent
                  AssetsCash
              
              
              $
                  15,530Accounts
                  receivable
              572,772Due
                  from related parties
              269,984Due
                  from Power 3 Medical Products Inc.
              
              149,551Allowance
                  for doubtful account
              
              (149,551)Inventory
              
              573,728Prepaid
                  expenses
              65,798Total
                  Current Assets
              $
                  1,497,813Investment
                  in common stock
              8,100,000Property,
                  plant and equipment net of accumulated depreciation
              102,475Other
                  Assets
              
              95,833Goodwill
              
              
              418,029TOTAL
                  ASSETS
              
              
              $
                  10,214,150





















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


**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Balance
      Sheet**


**March
      31, 2005**


**(unaudited)**


**(restated)**




LIABILITIES
                    & SHAREHOLDERS' EQUITYCurrent
                  maturities of long term debt
              $
                  376,463Accounts
                  payable
              391,255Due
                  to officer
              3,000Accrued
                  interest to shareholders and related parties
              37,038Total
                  Current Liabilities
              $
                  807,756Long
                  Term LiabilitiesConvertible
                  notes payable shareholders
              550,000Total
                  Long Term Liabilities
              $
                  550,000Total
                  Liabilities
              
              $
                  1,357,756Shareholders'
                  EquityCommon
                  stock, $0.001 par value,50,000,000
                  shares authorized,32,624,190 shares
                  issued and outstandingat
                  March 31, 2005
              $
                  32,624Additional
                  paid-in capital
              5,197,555Subscribed
                  stock
              49,489Unrealized
                  security (losses)
              (5,400,000)Retained
                  earnings
              8,976,726Total
                  Shareholders' Equity
              $
                  8,856,394TOTAL
                  LIABILITIES & SHAREHOLDERS' EQUITY
              $
                  10,214,150





















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


**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Statement
      of Operations**


**(unaudited)**


**(restated)**





**Three
                  Months Ended**
              
              **Nine
                  Months Ended****March
                  31, 2005**
              
              **March
                  31, 2004**
              
              **March
                  31, 2005**
              
              **March
                  31, 2004**Revenues
              $
                  831,831
              
              $
                  137,837
              
              $
                  2,180,618
              
              $
                  224,157Cost
                  of Goods Sold
              740,592
              
              -
              
              1,867,097
              
              -Gross
                  Profit
              $
                  91,239
              
              $
                  137,837
              
              $
                  313,521
              
              $
                  224,157Expenses:Selling,
                  general & administrative
              $
                  139,727
              
              $
                  40,094
              
              $
                  336,707
              
              $
                  160,573Doubtful
                  account expense
              45,279
              
              -
              
              149,551
              
              -Salaries
                  and contract labor
              82,640
              
              56,311
              
              198,914
              
              1,611,925Depreciation
                  and amortization
              3,900
              
              22,508
              
              4,502
              
              67,535Legal
                  and professional fees
              505,478
              
              48,814
              
              1,473,196
              
              141,373Total
                  Expenses
              $
                  777,024
              
              $
                  167,727
              
              $
                  2,162,870
              
              $
                  1,981,406(Loss)
                  from operations
              $
                  (685,785)
              
              $
                  (29,890)
              
              $
                  (1,849,349)
              
              $
                  (1,757,249)Interest
                  expense
              $
                  65,705
              
              51,942
              
              120,030
              
              175,153Net
                  (Loss) from operations
              $
                  (751,490)
              
              $
                  (81,832.07)
              
              $
                  (1,969,379)
              
              $
                  (1,932,401)Miscellaneous
                  income
              3,000
              
              -
              
              6,000
              
              2,448Net
                  (loss)
              $
                  (748,490)
              
              $
                  (81,832)
              
              $
                  (1,963,379)
              
              $
                  (1,929,954)Net (loss)
                  per share basic and diluted
              $
                  (0.03)
              
              $
                  (0.01)
              
              $
                  (0.10)
              
              $
                  (0.15)Weighted
                  average number of common shares outstanding
              21,594,811
              
              12,624,672
              
              19,279,832
              
              12,624,672











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


**INDUSTRIAL
      ENTERPRISES OF AMERICA, INC.**


**Statement
      of Cash Flows**


**(Unaudited)**


**Nine
                    Months Ended****March
                    31, 2005**
                
                **March
                    31, 2004****Operating
                    activities**Net
                    (loss)
                $
                    (1,963,379)
                
                $
                    (1,929,954)Non-cash
                    itemsDepreciation
                    and amortization
                4,502
                
                69,948Doubtful
                    account expense
                149,551
                
                -Stock
                    based compensation
                318,000
                
                734,206Net
                    changes in working capital accountsAccounts receivable
                71,939
                
                (4,290)Other receivable
                (82,234)
                
                -Related party receivable
                (269,984)
                
                -Prepaid expenses
                25,269
                
                (1,368)Inventory
                123,313
                
                -Accounts payable
                (7,735)
                
                156,813Bank credit card payable
                -
                
                (5,959)Accrued interest
                -
                
                67,926Accrued interest related parties
                37,036
                
                8,618Related party payable
                3,000
                
                (38,726)Accrued expenses
                245,173
                
                189,853Deferred revenue
                -
                
                (14,828)**Net
                    cash (used) by operating activities**
                **$
                    (1,345,549)**
                
                **$
                    (767,761)****Investing
                    activities**Additions
                    to property, plant and equipment
                (1,803)
                
                -Other
                
                (1,013)
                
                -**Net
                    cash (used) by investing activities**
                **$
                    (2,816)**
                
                **$
                    -****Financing
                    activities**Proceeds
                    from bank line of credit
                -
                
                (9,160)Payments
                    towards bank line of credit
                -
                
                15,001Proceeds
                    from issuance of debt
                -
                
                58,343Principal
                    payments on debt
                (210,636)
                
                (36)Proceeds
                    from notes payable related party and shareholders
                550,000
                
                -Payments
                    on related party loans
                -
                
                (2,063)Proceeds
                    from issuance of common stock
                899,000
                
                582,000Stock
                    subscriptions
                2,000
                
                (12,487)**Net
                    cash provided by Financing Activities**
                **$
                    1,240,364**
                
                **$
                    701,546****Net
                    cash (decrease) for period**
                **$
                    (108,001)**
                
                **$
                    (66,215)**Cash
                    at beginning of period
                123,531
                
                68,171**Cash
                    at end of period**
                **$
                    15,530**
                
                **$
                    1,956**SUPPLEMENTAL
                    DISCLOSURES RELATED TO CASH FLOWS:Interest
                    paid
                $
                    82,992
                
                $
                    12,318SUPPLEMENTAL
                    SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Debt
                    converted to common stock
                $
                    96,409
                
                $
                    10,000Accrued
                    interest converted to stock
                $
                    33,660
                
                $
                    2,991Lease
                    payable converted to stock
                $
                    -
                
                $
                    14,474Stock
                    issued for services
                $
                    723,000
                
                $
                    734,206Debt
                    converted to paid in capital
                $
                    699,434
                
                $
                    -Stock
                    issued for EMC Packaging, Inc. acquisition
                $
                    808,474
                
                $
                    -


The
            accompanying Notes are an integral part of these 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.
 
 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 2004 Form 10-KSB.
 
 During
            2004, the Company changed its fiscal year from one ending on December
            31 to one
            ending on June 30. Application for the change in accounting year is pending
            with
            the Internal Revenue Service. Accordingly, the Company’s transition period that
            ended on December 31, 2004, includes the six months ended December 31,
            2004
            (Transition 2004). The following are selected financial data for Transition
            2004
            and the comparable nine-month period of the prior year:
 
 **(Unaudited)****ILNP**
                  
                  **EMC**
                  
                  **Combined****March
                      31, 2005**
                  
                  **March
                      31, 2005**
                  
                  **March
                      31, 2005****(Nine
                      months)**
                  
                  **(Nine
                      months)**
                  
                  **(Nine
                      months)**Net
                      sales
                  $
                      -
                  
                  $
                      3,121,559
                  
                  $
                      3,121,559Cost
                      of goods sold
                  -
                  
                  2,613,977
                  
                  2,613,977Gross
                      profit
                  $
                      -
                  
                  $
                      507,582
                  
                  $
                      507,582Selling
                      and administrative expenses
                  $
                      166,248
                  
                  $
                      242,830
                  
                  $
                      409,078Doubtful
                      account expense
                  149,551
                  
                  -
                  
                  149,551Salaries
                      and contract labor
                  925,992
                  
                  222,168
                  
                  1,148,160Depreciation
                      and amortization
                  -
                  
                  6,515
                  
                  6,515Legal
                      and professional
                  540,749
                  
                  43,674
                  
                  584,423Total
                      expenses
                  $
                      1,782,540
                  
                  $
                      515,187
                  
                  $
                      2,297,727Net
                      (loss) from operations
                  $
                      (1,782,540)
                  
                  $
                      (7,605)
                  
                  $
                      (1,790,145)Interest
                      expense
                  $
                      37,038
                  
                  $
                      119,753
                  
                  $
                      156,791(Loss)
                      before income taxesand
                      discontinued operations
                  $
                      (1,819,578)
                  
                  $
                      (127,358)
                  
                  $
                      (1,946,936)Gain
                      on discontinued operations
                  $
                      -
                  
                  $
                      -
                  
                  $
                      -(Loss)
                      before income taxes
                  $
                      (1,819,578)
                  
                  $
                      (127,358)
                  
                  $
                      (1,946,936)Income
                      tax expense
                  $
                      -
                  
                  $
                      -
                  
                  $
                      -Net
                      (loss)
                  $
                      (1,819,578)
                  
                  $
                      (127,358)
                  
                  $
                      (1,946,936)
 F-5
  
 **(Unaudited)****ILNP**
                  
                  **EMC**
                  
                  **Combined****March
                      31, 2004**
                  
                  **March
                      31, 2004**
                  
                  **March
                      31, 2004****(Nine
                      months)**
                  
                  **(Nine
                      months)**
                  
                  **(Nine
                      months)**Net
                      sales
                  $
                      224,157
                  
                  $
                      2,763,026
                  
                  $
                      2,987,183Cost
                      of goods sold
                  -
                  
                  2,113,356
                  
                  2,113,356Gross
                      profit
                  $
                      224,157
                  
                  $
                      649,670
                  
                  $
                      873,827Selling
                      and administrative expenses
                  $
                      160,573
                  
                  $
                      258,000
                  
                  $
                      418,573Salaries
                      and contract labor
                  1,611,925
                  
                  205,846
                  
                  1,817,771Depreciation
                      and amortization
                  67,535
                  
                  8,754
                  
                  76,289Legal
                      and professional
                  141,373
                  
                  207,000
                  
                  348,373Total
                      expenses
                  $
                      1,981,406
                  
                  $
                      679,600
                  
                  $
                      2,661,006Net
                      (loss) from operations
                  $
                      (1,757,249)
                  
                  $
                      (29,930)
                  
                  $
                      (1,787,179)Interest
                      expense
                  $
                      175,153
                  
                  $
                      99,073
                  
                  $
                      274,226(Loss)
                      before income taxesand
                      discontinued operations
                  $
                      (1,932,402)
                  
                  $
                      (129,003)
                  
                  $
                      (2,061,405)Gain
                      on discontinued operations
                  $
                      -
                  
                  $
                      -
                  
                  $
                      -(Loss)
                      before income taxes
                  $
                      (1,932,402)
                  
                  $
                      (129,003)
                  
                  $
                      (2,061,405)Income
                      tax expense
                  $
                      -
                  
                  $
                      -
                  
                  $
                      -Net
                      (loss)
                  $
                      (1,932,402)
                  
                  $
                      (129,003)
                  
                  $
                      (2,061,405)
 
 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 nine months ended March 31, 2005, due to
            an error
            in recording the sale of its operating assets under the equity method
            of
            accounting instead of recording the transaction as an arms' length transaction
            recognizing the fair market value of the securities received in the transaction
            during the fiscal year ended June 30, 2004, the transition period. (See
            Footnote 15 - Mergers and Acquisitions.) The effect of the change required
            a restatement of the March 31, 2005 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
            March 31, 2005, by $257,211, increased assets by $8,217,276, decreased
            total
            liabilities by $2,174,581, and increased shareholders’ equity by
            $10,391,857.
 
 **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.
 
 F-6
 **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 7,625,000 shares as of March 31, 2005, and no warrants or
            options as
            of March 31, 2004. None of the warrants have been exercised as of March
            31,
            2005.
 
 **Note
            5 - Stock based compensation**
 
 As
            permitted under generally accepted accounting principles, stock-based
            awards
            granted to employees are accounted for following APB 25. Accordingly,
            the
            Company has not recognized compensation expense for its stock-based awards
            to
            employees. Outlined below are pro forma results had compensation costs
            for the
            Company’s stock-based compensation plans been determined based on the fair value
            approach of SFAS 123.
  For
                        the Three Months Ended
                      March
                        31st2005
                    
                    2004Net
                        (loss), as reported
                    $(748,490)
                    
                    $(81,832)Less
                        compensation cost determined under the fair value method
                    -
                    
                    -Pro
                        forma net (loss)
                    $(748,490)
                    
                    $(81,832)
 
 Basic
                      and dilutive (loss) per share:As reported
                  $
                      (0.03)
                  
                  $
                      (0.01)Pro forma
                  $
                      (0.03)
                  
                  $
                      (0.01)
 
 For
                        the Nine Months Ended
                      March
                        31st2005
                    
                    2004Net
                        (loss), as reported
                    $(1,963,379)
                    
                    $(1,929,954)Less
                        compensation cost determined under the fair value method
                    -
                    
                    -Pro
                        forma net (loss)
                    $(1,963,379)
                    
                    $(1,929,954)
 
 Basic
                      and dilutive (loss) per share:As reported
                  $
                      (0.10)
                  
                  $
                      (0.15)Pro forma
                  $
                      (0.10)
                  
                  $
                      (0.15)
 
 These
            pro
            forma amounts may not be representative of future disclosures since the
            estimated fair value of stock options is amortized to expense over the
            vesting
            period and options may be granted in future years.
 
 Steven
            Rash, former CEO, was granted 825,000 shares of common stock at $0.80
            per share
            for a charge of $660,000 against operations for the quarter ended September
            30,
            2003. In addition, pursuant to Mr. Rash’s September 5, 2003, employment
            contract, an option agreement for an additional 200,000 shares at the
            exercise
            price of $0.80 has subsequently been cancelled. No charge to current
            operations
            has been made for the unexecuted option. As of March 31, 2005, and in
            connection
            with the disputed liabilities related to the dispute between the Company
            and
            Power 3 Medical Products, Inc. (Power3) (Please see “Recent Development - Power3
            Dispute in the Company’s 10-QSB for the quarter ended March 31, 2005), the
            Company elected to suspend the shares of common stock previously issued
            to Mr.
            Rash while it investigates whether Mr. Rash (i) breached his fiduciary
            duties
            while holding the position of officer of the Company, and (ii) perpetrated
            a
            fraud on the rights of the other Company stockholders in connection with
            the
            Company’s sale of all of its assets to Power3. At the time of the sale of assets
            to Power3, Mr. Rash owned approximately 3.92% of the Company’s common
            stock.
 
 F-7
 Disclosures
            required by Statement of Financial Accounting Standards No. 123, "Accounting
            for
            Stock-Based Compensation" ("SFAS No. 123"), including pro forma operating
            results had the Company prepared its financial statements in accordance
            with the
            fair value based method of accounting for stock- based compensation prescribed
            therein are shown below. There are no stock options granted or outstanding
            as of
            March 31, 2005.
 
 The
            following table summarizes the pro forma operating results of the Company
            for
            the nine months ended March 31, 2005, had compensation costs for the
            stock
            options granted to employees been determined in accordance with the fair
            value
            based method of accounting for stock based compensation as prescribed
            by SFAS
            No. 123.
  Proforma net income (loss) available
                    to
                    common stockholders
                  
                  $ (1,963,379)Proforma basic and diluted loss
                    per
                    share
                  
                  $
                    (0.10)
 
 As
            of
            March 31, 2005, warrants for 7,500,000 shares of common stock have not
            been
            exercised.
 
 **Note
            6 - 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
                      March
                        31st2005
                    
                    2004Net
                        (loss), as reported
                    $(748,490)
                    
                    $(81,832)Less
                        compensation cost determined under the fair value method
                    -
                    
                    -Pro
                        forma net (loss)
                    $(748,490)
                    
                    $(81,832)
 
 Basic
                      and dilutive (loss) per share:As reported
                  $
                      (0.03)
                  
                  $
                      (0.01)Pro forma
                  $
                      (0.03)
                  
                  $
                      (0.01)
 
  For
                      the Nine Months Ended
                    March
                      31st2005
                  
                  2004Net
                      (loss), as reported
                  $(1,963,379)
                  
                  $(1,929,954)Less
                      compensation cost determined under the fair value method
                  -
                  
                  -Pro
                      forma net (loss)
                  $(1,963,379)
                  
                  $(1,929,954)
 
 Basic
                      and dilutive (loss) per share:As reported
                  $
                      (0.10)
                  
                  $
                      (0.15)Pro forma
                  $
                      (0.10)
                  
                  $
                      (0.15)
 
 These
            pro
            forma amounts may not be representative of future disclosures since the
            estimated fair value of stock options is amortized to expense over the
            vesting
            period and options may be granted in future years.
 
 F-8
 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 have subsequently been cancelled. No
            charge to
            current operations has been made for the unexecuted option.
 
 Disclosures
            required by Statement of Financial Accounting Standards No. 123, "Accounting
            for
            Stock-Based Compensation" ("SFAS No. 123"), including pro forma operating
            results had the Company prepared its financial statements in accordance
            with the
            fair value based method of accounting for stock-based compensation prescribed
            therein are shown below. Exercise prices and weighted-average contractual
            lives
            of stock options outstanding as of March 31, 2005, are as follows:
 
 Options
                      Outstanding
                  
                  Options
                      ExercisableWeighted
                      Average
                  
                  Weighted
                      Average
                  
                  
                  
                  Weighted
                      AverageExercise
                      Prices
                  
                  Number
                      Outstanding
                  
                  Remaining
                      Contractual Life
                  
                  Exercise
                      Prices
                  
                  Number
                      Exercisable
                  
                  Exercise
                      Price$0.00
                  
                  -0-
                  
                  0.00
                  
                  $0.00
                  
                  -0-
                  
                  $0.00
 
 Summary
            of Options Granted and Outstanding:
 
 For
                      the nine months ended March 312005
                  
                  2004Shares
                  
                  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
                  
                  $
                      0.80Exercised
                  
                  (2,600,000)
                  
                  $
                      (0.50)
                  
                  -
                  
                  $
                      -Cancelled
                  
                  (200,000)
                  
                  $
                    (0.80)
                  
                  -
                  
                  $
                      -Outstanding
                      at end of period
                  
                  -
                  
                  -
                  
                  200,000
                  
                  $
                      0.80
 
 The
            following table summarizes the pro forma operating results of the Company
            for
            March 31, 2005, had compensation costs for the stock options granted
            to
            employees been determined in accordance with the fair value based method
            of
            accounting for stock based compensation as prescribed by SFAS No. 123.
 
 Pro forma net (loss) available
                    to
                    common stockholders
                  
                  $ (1,963,379)Pro forma basic and diluted loss
                    per
                    share
                  
                  $
                    (0.10)
 
 F-9
 A
            summary
            of warrant activity for the nine months ended March 31, 2005, 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
                  
                  7,625,000
                  
                  $0.30
                  
                  7,625,000
                  
                  $0.30Outstanding
                      at March 31, 2005
                  
                  7,625,000
                  
                  
                  
                  7,625,000
 
 At
            March
            31, 2005, the range of warrant prices for shares under warrants and the
            weighted-average remaining contractual life is as follows:
 
 Warrants
                      Outstanding
                  
                  Warrants
                      ExercisableRange
                      of Warrant
                  
                  
                  
                  Weighted
                      Average
                  
                  Weighted
                      Average
                  
                  
                  
                  Weighted
                      AverageExercise
                      Prices
                  
                  Number
                      of Warrants
                  
                  Exercise
                      Price
                  
                  Remaining
                      Contractual Life
                  
                  Number
                      of Warrants
                  
                  Exercise
                      Price$0.50
                  
                  2,500,000
                  
                  $0.50
                  
                  5.37
                      yrs
                  
                  2,500,000
                  
                  $0.50$0.33
                  
                  125,000
                  
                  $0.33
                  
                  5.00
                      yrs
                  
                  125,000
                  
                  $0.33$0.20
                  
                  5,000,000
                  
                  $0.20
                  
                  4.39
                      yrs
                  
                  5,000,000
                  
                  $0.20
 
 The
            Company has issued 7,625,000 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 $0.21. 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 4.71 years.
 
 **Note
            7 - Shareholder and related party debt**
 
 The
            Company received $550,000 convertible debt from shareholders during the
            nine
            months ended March 31, 2005. The notes bear interest at various rates
            of 18% per
            annum to 5% per month. $250,000 matures in July, 2005, $50,000 matures
            in
            October, 2005, and $250,000 matures in October and November, 2007. There
            was an
            outstanding balance as of March 31, 2005, of $550,000. 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 $120,030 and $175,153 for
            the nine
            months ended March 31, 2005 and 2004, respectively.
 
 F-10
 **Note
            8 - Due from Power 3 Medical Products, Inc.**
 
 In
            May
            2004, the Company entered into an Asset Purchase Agreement (the “Agreement”),
            among the Company, Power3, and Steven B. Rash and Ira Goldknopf (collectively,
            the "Shareholders"). The sale was approved by the Company’s shareholders by
            proxy. As provided in the Agreement, the Company sold to Power3 all of
            the
            Company’s assets in consideration for 15,000,000 shares of the common stock,
            par
            value $.001 per share, of Power3. The assets disposed of by the Company
            included
            all tangible personal property, intellectual property, rights in contracts
            that
            the Company is a party to, along with intangible property, including
            goodwill.
            In consideration for the benefits that they received by virtue of the
            transaction, each of the Shareholders agreed to make the representations,
            warranties, and indemnifications in the Agreement jointly and severally,
            along
            with the Company, and each of the Shareholders agreed to enter into and
            be bound
            by a Non-Competition Agreement and an Employment Agreement containing,
            among
            other things, covenants respecting confidentiality, non-competition and
            non-solicitation. The terms of the Agreement were determined by arms'
            length
            negotiations between the parties. Various amounts were expended subsequent
            to
            the transaction that are deemed to be the responsibility of Power3 et
            al. The
            total of those amounts are $149,551. Due to the nature of the ongoing
            discussions with the management team at Power3, this receivable has been
            determined to be impaired and a like amount has been recorded as Bad
            Debt.
 
 **Note
            9 - Goodwill**
 
 In
            October 2004, the Company’s directors approved a merger with EMC Packaging, Inc.
            (“EMC”) whereby the Company would acquire EMC as a wholly owned subsidiary.
            For
            accounting purposes, the combination will be treated as an issuance of
            shares
            for cash by the Company and is considered a business combination and
            has been
            accounted for with the purchase method. EMC is primarily engaged in the
            manufacturing and sales of packaged refrigerants for the automotive and
            dusting
            markets. In consideration for their EMC shares of common stock, the EMC
            stockholders received an aggregate of 2,296,800 shares of the Company’s common
            stock, valued at $808,474, in exchange for 100% of the issued and outstanding
            stock of EMC. 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
            cost
            in excess of net assets acquired has been recorded as Goodwill on the
            Company’s
            financials.
 
 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
  **Note
            10 - Changes in common shares outstanding**
 
 Included
            in the table below are the changes in common shares since June 30, 2004.
            See
            Note 15 for discussion of mergers and acquisitions affecting common
            shares.
 
 CommonSharesOutstanding
                      common shares at June 30, 2004
                  15,384,275Stock
                      options exercised
                  1,875,000Debt
                      converted to stock
                  190,615Stock
                      issued to EMC shareholders
                  2,296,800Stock
                      issued for services
                  6,515,000Stock
                      issued for cash
                  6,362,500Outstanding
                      common shares at March 31, 2005
                  32,624,190
 
 F-11
 **Note
            11 - 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
            12 - Stock subscriptions**
 
 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, a payment of $2,000 has been received.
            As of
            March 31, 2005, the total value of these subscriptions for common stock
            was
            $49,489.
 
 **Note
            13 - 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
            March 31, 2005:
 
 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
                  
                  $8,100,000
                  
                  $(5,400,000)
                  
                  $
                      -0-
                  
                  $
                      -0-
                  
                  $8,100,000
                  
                  $(5,400,000)
 
 The
            aggregate fair market value of the Company’s investments totaled $8,100,000 at
            March 31, 2005. The investments were evaluated for impairment pursuant
            to
            FAS-107, *Disclosures
            about Fair Value of Financial Instruments* ,
            and the
            Company did not identify any events or changes in circumstances that
            may have
            had a significant adverse effect on the fair value of those investments.
 
 **Note
            14 - Unrealized securities 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.
 
 F-12
 **Note
            15 - 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.
 F-13