ADVANCED BIO/CHEM INC - 10-Q Quarterly Report

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB

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

For the quarterly period ended September 30, 2003

[ ] 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)

770 South Post Oak Lane, Suite 330 Houston, Texas 77056& nbsp;

(Address of principal executive offices) (Zip Code)

(713) 622-2875

(Registrant’s telephone number, including area code)

Ciro International, Inc., 445 Fifth Avenue, Suite 11A, New York, New York 10016

(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 October 15, 2004, 21,015,250 shares of the registrant’s Common Stock were outstanding.

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

Table of Contents

	Page
Recent Developments……………………………………………………….	1
Part I
Item 1. Financial Statements….……………………………………………..	3
Item 2. Management’s Discussion and Analysis or Plan of Operations ……	4
Item 3. Controls and Procedures…...………………………………………..	5

Part II
Item 1. Legal Proceedings..…………………………..………………………	6
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds…………	6
Item 3. Defaults Upon Senior Securities……………………………………..	7
Item 4. Submission of Matters to a Vote of Security Holders………………	7
Item 5. Other Information……………………………………………………	7
Item 6. Exhibits…………………………...………………………………….	7

Recent Developments

Name Change and Adoption of Amended and Restated Bylaws

Effective as of December 9, 2004, Advanced Bio/Chem, Inc., a Nevada corporation, formerly Ciro International, Inc. (the “Company”), amended its Articles of Incorporation to change its name from “Advanced Bio/Chem, Inc.” to “Industrial Enterprises of America, Inc.” by filing a Certificate of Amendment with the Secretary of State of the State of Nevada.

Effective as of December 9, 2004, the Board of Directors of the Company adopted the Company’s Amended and Restated Bylaws. The Board of Directors desired to amend the existing bylaws mainly due to the fact that such bylaws were adopted by the Company’s predecessor, Mid-Way Medical and Diagnostic Center, Inc., in 1997.

Sale to Power3 Medical Products, Inc.

In May 2004, the Company entered into an Asset Purchase Agreement (the “Agreement”), among the Company, Power3 Medical Products, Inc., a New York corporation ("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 agre ed 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.

Appointment of New Directors and Officers

In May 2004, Steven B. Rash, the Company’s Chief Executive Officer, and Ira Goldknopf, the Company’s Chief Science Officer, resigned. In July 2004, the sole director of the Company, Helen Park, resigned and Crawford Shaw was appointed as sole director, President and Chief Executive Officer. The Company’s current management has no information as to the departure or service of Eric Becker and Gene Thomas. The Company will continue to research to see if such information is available. In August 2004, John Mazzuto and Michael Collyer were appointed as directors to fill the vacancies on the Board of Directors. On October 15, 2004, the Board of Directors elected Crawford Shaw as the Company’s Chairman of the Board, Chief Executive Officer and President, John D. Mazzuto as Vice Chairman of the Board, Ch ief Financial Officer and Assistant Secretary, Michael Collyer as Secretary and General Counsel, Dennis O’Neill as Controller and Ilene Engelberg as Assistant Controller. Unfortunately, Mr. Collyer, a director, member of the Company’s Compensation Committee and the Company’s Secretary and General Counsel, passed away on December 15, 2004.

2004 Stock Option Plan

In August 2004, the Company’s Board of Directors approved the adoption of the 2004 Stock Option Plan. The 2004 Stock Option Plan permits the grant of (i) options exercisable for shares of the Company’s common stock, (ii) stock appreciation rights entitling the recipient to receive cash or shares of our common stock and (iii) restricted shares of our common stock to our officers and other employees, outside directors and consultants, upon such terms, including exercise price and conditions and vesting schedule, as may be determined by the Compensation Committee of our Board of Directors. The plan authorizes the granting of awards of up to a maximum of 15,000,000 shares of the Company’s common sto ck.

Purchase of EMC Packaging, Inc.

In October 2004, the Company purchased all of the issued and outstanding capital stock (the “EMC Shares”) of EMC Packaging, Inc., a Delaware corporation (“EMC”), from the holders of all of the issued and outstanding capital stock of EMC (the “EMC Stockholders”). On the effective date of the purchase of the EMC Shares, EMC became the Company’s wholly owned subsidiary. In consideration for their EMC Shares, the EMC Stockholders received an aggregate of 2,296,800 shares of the Company’s common stock.

Departure of Independent Auditors and Retention of New Independent Auditors

The independent auditors of Ciro International, Inc., Lazar Levine and Felix LLP, predecessor auditor of the legal acquirer, for accounting purposes, in a reverse merger, resigned as the independent auditors of Ciro International, Inc. effective December 7, 2004 because such auditors had no dealings with the Company since July 24, 2003. In October 2003, the Company filed a Form 15 with the Securities and Exchange Commission (the “Commission”) under Rule 12g-4(a)(1)(i) of Securities Exchange Act of 1934, as amended ( the “Exchange Act”), electing to become a non-reporting company on the basis that its common stock was held by fewer than 300 persons. On February 28, 2003, the board of directors of Advanced Bio/Chem, Inc., a Texas corporation (“ABC Texas”), approved the retention of Fitts, Roberts & Co., P.C to audit the financial statements of ABC Texas for the years ended December 31, 2002 and 2001. On June 3, 2004, the board of directors of ABC Texas again approved the retention of Fitts, Roberts & Co., P.C. to audit the financial statements of ABC Texas for the year ended December 31, 2003. On December 29, 2004, Fitts, Roberts & Co., P.C. informed the Company that it would not stand for reelection as the Company’s independent auditors. The Company received certain observations from Fitts, Roberts & Co., P.C., including, but not limited to, the following: (i) the Company lac ks specific policies and a procedure guide; (ii) the separation of duties to support internal controls is lacking; (iii) there is poor documentation and a lack of trained accounting staff; and (iv) the Company has a lack of reconciliation of accounts and has a number of audit adjusting journal entries. On December 9, 2004, the Company’s Board of Directors approved the retention of Beckstead and Watts, LLP as the Company’s independent auditors going forward. There have been no disagreements with any of the Company’s independent auditors to the knowledge of the Company’s Board of Directors.

2004 Private Placement

In September 2004, the Company offered and sold an aggregate of 1,000,000 shares of its common stock to several accredited investors for $0.05 per share. 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. These securities were not 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 of 1933, as amended (the “Securities Act”) and the regulations promulgated thereunder, on the basis that the private placement did not involve a public offering.

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:

Revenue Recognition

The Company recognizes revenue principally from contract services performed in the area of protein identification as the services are completed. Payments by customers for services not yet performed are classified as deferred revenue. Revenue recognition, in part, depends on management’s assessment of when services are deemed completed.

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, 2003 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 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.

Note Regarding Ciro and ABC Texas

The Company’s discussion and analysis of its financial condition for the nine months ended September 30, 2003 treats the assets of Ciro International Inc. (the Company’s predecessor (“Ciro”), as existing prior to the merger (the “Merger”) between Ciro Acquisition Corp., a Texas corporation and a wholly owned subsidiary of Ciro formed for purposes of the Merger (“Ciro Acquisition”), and ABC Texas, consummated pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) among Ciro, Ciro Acquisition (which was inappropriately identified in the Merger Agreement as Advanced Bio/Chem Acquisition Corp.) and ABC Texas, on their own, as immaterial, as illustrated in the Company’s unaudited financial statements contained herein. Under the Merger Agreement, Ciro A cquisition merged with and into ABC Texas in a tax free exchange of shares at which time ABC Texas became a wholly owned subsidiary of Ciro. Prior June 12, 2003, the effective date of the Merger, Ciro was in essence a “shell” company since, as of December 31, 2002, all licenses issued by the Company expired. Following the effectiveness of the Merger, the Company became a holding company for ABC Texas and all of the Company’s assets consisted of the assets of ABC Texas. As a result, comparisons of the nine months ended September 30, 2003 and 2002 are solely of ABC Texas.

Results of Operations

The Company had revenues of $25,399 and $217,193, respectively, for the quarter and the ninth months ended September 30, 2003 compared to revenues of $57,343 and $131,200, respectively, for the same periods of 2002. The difference is attributable to a decrease in the fees received for the quarter for services performed.

Selling, general and administrative expenses ("SG&A") were $55,519 for the third quarter of 2003 and $89,659 for the nine month period ended September 30, 2003, compared to $815 and $36,017, respectively, for the same periods of 2002. Total expenses were $1,213,045 and 1,900,429, respectively, for the three and nine months ended September 30, 2003, compared to $248,367 and $683,989 for the same periods in 2002. This difference is a result of an increase in salaries and contract labor.

The Company had net losses of $1,241,895 for the third quarter of 2003 and net losses of $1,835,430 for the nine month period ended September 30, 2003, compared to losses of $243,473 in the same quarter of 2002 and losses of $693,917 for the nine month period ended September 30, 2002. This difference is mainly attributable to salaries and compensation expenses. The Company experienced a three and nine month current period expense of $660,000 for the stock grant of 825,000 shares of common stock, at a price of $0.80 per share, to the former Chief Executive Officer of the Company. An additional 200,000 shares of common stock was to be granted to the former Chief Executive Officer at a price of $0.80 per share under an option agreement entered into on September 5, 2003, which has not yet been executed and is not expec ted to be executed since this officer is no longer with the Company

Liquidity and Capital Resources

The Company had a working capital deficit of $(1,784,656) for the nine months ended September 30, 2003. This compares to a working capital deficit of $(1,177,484) at the fiscal year ended December 31, 2002. The majority of the increase deficit was increased accounts payable ($42,858

increase), accrued interest expense ($80,423 increase) and accrued salaries and benefits ($381,179 increase).

Net cash provided by operations for the nine months ended September 30, 2003 was a negative $(567,504). The Company obtained funds to operate in the nine months ended September 30, 2003 from the issuance of common stock in the amount of $560,487.

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 and Section 21E of 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 the Company's dependence on weather-related fact ors, introduction and customer acceptance of new products, the impact of competition and price erosion, as well as supply and manufacturing constraints and other risks and uncertainties. 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 C ommission 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 date of evaluation came to management's attention.

PART II

Item 1. Legal Proceedings.

As of September 30, 2003, the Company was neither a party nor were any of its properties subject to any legal proceedings.

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

The following sets forth information relating to all sales of our common stock during the quarter ended September 30, 2003, which sales were not registered under the Securities Act.

On September 24, 2003, the Company sold 400,000 shares of its common stock in a private placement transaction at a an average selling price of $0.2777 per share. The purchaser of these shares represented their 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.

On July 18, 2003, the Company converted an accounts payable to a vendor into 15,608 shares of the Company’s common stock. These conversions of payables to a vendor were in the context of a the private placement and 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 September 30, 2003.

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

4.1	Form of Specimen Stock Certificate for the common stock, included as Exhibit 4.1 to the Registrant’s Form 10-QSB for the quarter ended June 30, 2003, filed with the Commission on December30, 2004, which is incorporated herein by reference.
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.

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: December 30, 2004

By: /s/ John D. Mazzuto

John D. Mazzuto, Chief Financial

Officer, Vice Chairman of the Board, Assistant

Secretary and a Director

Date: December 30, 2004

By: /s/ Crawford Shaw

Crawford Shaw, Chief Executive Officer,

Chairman of the Board, President and a

Director

Date: December 30, 2004

By:/s/ Dennis O’Neill

Dennis O’Neill, Controller

Advanced Bio/Chem, Inc.

Condensed Balance Sheets


			September 30, 2003	December 31, 2002
ASSETS
	Current Assets
		Cash	$ 34,253	$ 19,175
		Accounts receivable trade	3,595	10,600
		Receivable - officers and employees		903
		Prepaid insurance	644	3,542
		Deposits	2,968	2,967
	Total Current Assets		41,460	37,187
	Property and equipment, net of
		accumulated depreciation
		of $208,007 in 2003 and
		$140,466 in 2002	189,280	256,821
	Patents, net of accumulated amortization
		of $4,077 in 2003 and $1,663 in 2002	18,453	20,868
TOTAL ASSETS			$ 249,193	$ 314,876

See notes to the financial statements

F-1

Advanced Bio/Chem, Inc.

Condensed Balance Sheets

					September 30, 2003	December 31, 2002

LIABILITIES & SHAREHOLDERS' DEFICIT
		Current Liabilities
			Current maturities of long term debt		$ 228,527	$ 117,881
			Credit card debt - related parties		114,521	118,742
			Bank line of credit		149,029	149,989
			Accounts payable		431,162	388,304
			Accrued salaries, benefits and severance pay		398,387	17,208
			Accrued interest		238,889	158,466
			Accrued interest to shareholders and related parties		46,799	33,855
			Related party payable		79,059	80,459
			Lease payables		108,993	114,017
			Property taxes payable		16,099	16,099
			Deferred revenues		9,828	14,828
			Contractor payable		4,823	4,823
		Total Current Liabilities			1,826,116	1,214,671
		Long Term Liabilities
			Notes payable, net of current maturities		714,993	786,843
			Notes payable related parties and
				shareholders, net of current maturities	324,761	305,413
		Total Long Term Liabilities			1,039,754	1,092,256
	Total Liabilities				2,865,870	2,306,927
	Shareholders' Deficit
		Common stock, $0.001 par value,
			50,000,000 shares authorized,
			11,045,100 shares issued and outstanding
			at September 30, 2003, and 3,760,034
			outstanding shares issued and
			outstanding at December 31, 2002		11,045	3,760
		Additional paid-in capital			1,371,148	167,946
		Due from officers for stock			(74,206)	(74,206)
		Retained (deficit)			(3,924,664)	(2,089,551)
	Total Shareholders' Deficit				(2,616,677)	(1,992,051)
TOTAL LIABILITIES & SHAREHOLDERS' DEFICIT					$ 249,193	$ 314,876

See notes to the financial statements

F-2

Advanced Bio/Chem, Inc.

Condensed Statements of Operations

					Three Months Ended		Nine Months Ended
					Sept. 30, 2003	Sept. 30, 2002	Sept. 30, 2003	Sept. 30, 2002

	Revenues				$ 25,399	$ 57,343	$ 217,193	$ 131,200


	Expenses:
		Selling, general & administrative			55,519	815	89,659	36,017
		Salaries and contract labor			369,094	77,366	854,333	344,409
		Rent expense			11,426	11,514	34,278	31,048
		Lab supplies			3,618	10,362	16,230	44,413
		Depreciation and amortization			23,318	25,351	69,955	71,633
		Legal and professional fees			90,070	12,698	175,974	46,208
		Loss on disposition of asset			-	110,261	-	110,261
		Compensation expense related to
			the fair value of stock granted
				to employees	660,000	-	660,000	-
		Total Expenses			1,213,045	248,367	1,900,429	683,989

(Loss) from operations					(1,187,646)	(191,024)	(1,683,236)	(552,789)

	Interest expense				54,249	52,449	152,194	141,128

Net (Loss) from operations before
	income taxes				(1,241,895)	(243,473)	(1,835,430)	(693,917)

Provision for income taxes					-	-	-	-

Net (Loss)					$ (1,241,895)	$ (243,473)	$ (1,835,430)	$ (693,917)

Net (loss) per share - basic and diluted					$ (0.15)	$ (0.06)	$ (0.25)	$ (0.18)

Weighted average number of common
	shares outstanding				8,543,818	3,760,034	7,374,066	3,760,034

See notes to the financial statements

F-3

Advanced Bio/Chem, Inc.

Condensed Statement of Cash Flows

				For the Nine Months Ended
				Septemer 30, 2003	September 30, 2002

	Net cash (used) in operating activities			$ (567,504)	$ (246,991)
	Investing activities
		Purchase of equipment		-	(23,538)
		Purchase of patents		-	(18,672)
		Net cash (used) in Investing Activities		-	(42,210)
	Financing activities
		Bank overdraft (repayment)		-	(1,046)
		Proceeds from bank line of credit		44,289	49,164
		Payments towards bank line of credit		(45,249)	(44,499)
		Proceeds from issuance of debt		55,000	34,500
		Principal payments on notes payable		(19,558)	-
		Proceeds from note payable shareholders and related parties		100	304,325
		Payments towards notes payable shareholders and
			related parties	-	(18,032)
		Issuance of common stock		548,000	1,000
		Net cash provided by Financing Activities		582,582	325,412
	Net cash increase for period			15,078	36,211
	Cash at beginning of period			19,175	-
Cash at end of period				$ 34,253	$ 36,211



	SUPPLEMENTAL DISCLOSURES RELATED TO CASH FLOWS:

		Interest paid		$ 58,827	$ 50,335

	SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
	AND FINANCING ACTIVITIES:
		Equipment aqcquired and returned		$ -	$ 224,520
		Debt converted to common stock		10,000	-
		Accrued interest converted to common stock		2,487	-
		Accrued interest - notes payable capitalized		13,354	-
		Accrued interest - notes payable shareholders capitalized		19,248	-
		Stock issued for services		660,000	-

See notes to the financial statements

F-4

Advanced Bio/Chem, Inc.

Notes to Condensed Financial Statements

Note 1 - Basis of presentation

Effective October, 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 Form 10-KSB for the fiscal year ended December 31, 2003.

The condensed financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is recommended that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s 2003 Form 10-KSB.

The Company amended its Articles of Incorporation effective December 9, 2004 to change its name from “Advanced Bio/Chem, Inc.” to “Industrial Enterprises of America, Inc.”

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

Note 2 - Financial results, liquidity and basis of presentation

In order to continue, the Company will be required to obtain additional funding from outside sources, or sell additional assets to meet its debt service obligations. Management is in the process of seeking additional financing. Without continued forbearance of the Company’s creditors, additional financing, or the sale of assets, the Company would be unable to continue as a going concern. There can be no assurance that the Company can obtain sufficient additional financing or raise adequate funds through the sale of its assets to service its debt obligations. The Company’s financial statements are presented on the basis of a going concern and do not include any adjustments that might result from this uncertainty.

Note 3 - Earnings per share

Basic earnings per share (EPS) excludes 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 no warrants or options to issue additional shares as of September 30, 2003, or 2002. Due to net loss, the effect of the conversion of any potentially dilutive securities would be anti-dilutive.

F-5

Advanced Bio/Chem, Inc.

Notes to Condensed Financial Statements

Note 3 - Earnings per share (continued)

The following table reflects the effect on EPS of the reverse split approved on March 17, 2003 by the Board of Directors whereby holders of the Company’s common stock on the effective date received one new share of common stock for every 3.22 shares owned prior to the split. The reverse stock split became effective June 10, 2003, and has been applied retroactively to the financial statements as of December 31, 2002.

Three Months Ended Nine Months Ended

Effect of reverse stock split at June 10, 2003:		September 30, 2003	September 30, 2002	September 30, 2003	September 30, 2002
	Net Loss	$ (1,241,895)	$ (243,473)	$ (1,835,430)	$ (693,917)
	Weighted average number of common shares outstanding	8,543,818	3,760,034	7,374,066	3,760,034
	Net (loss) per share	$ (0.15)	$ (0.06)	$ (0.25)	$ (0.18)

Note 4 - Segment disclosures and related information

The Company consists of a single segment. All revenues have been derived from the sale of a single service. Foreign revenues are not material.

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

September 30

	2003	2002
Net (loss), as reported	$(1,241,895)	$(243,473)
Less compensation cost determined under the fair value method	-	-
Pro forma net (loss)	$(1,241,895)	$(243,473)

Basic and dilutive (loss) per share:
As reported	$ (0.15)	$ (0.06)
Pro forma	$ (0.15)	$ (0.06)

For the Nine Months Ended

September 30

	2003	2002
Net (loss), as reported	$(1,835,430)	$(693,917)
Less compensation cost determined under the fair value method	-	-
Pro forma net (loss)	$(1,835,430)	$(693,917)

Basic and dilutive (loss) per share:
As reported	$ (0.25)	$ (0.18)
Pro forma	$ (0.25)	$ (0.18)

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-6

Advanced Bio/Chem, Inc.

Notes to Condensed Financial Statements

Note 5 - Stock based compensation (continued)

Steven Rash, former CEO, was granted 825,000 shares of common stock at $0.80 per share for a current period expense of $660,000. 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 operations has been made for the unexecuted option. These options are not anticipated to be executed as Mr. Rash is no longer employed by the Company.

Note 6 - Notes payable

The Company’s bank revolving line of credit agreement contains a covenant requiring the bank’s approval for, among other things, mergers and sales of substantial assets. The Compnay has not obtained required waivers from the bank and is in default on its loan. Certain debts to individuals have matured and are past due. The Company has not obtained waivers for these defaults

Note 7 - Changes in common shares outstanding

Included in the table below are the changes in common shares since December 31, 2002. See Note 8 for discussion of mergers and acquisitions affecting common shares.

	Common
	Shares
Outstanding common shares at December 31, 2002	12,120,046
Reverse stock split	(8,360,012)
Adjusted outstanding common shares at December 31, 2002	3,760,034
GESJ merger April 2003	1,903,000
Ciro reverse merger June 2003	3,619,554
Stock issued for cash	400,000
Private placement March 2003	521,904
Debt converted to stock	15,608
Stock granted to employees	825,000
Outstanding common shares at September 30, 2003	11,045,100

Note 8 - 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 recorded the transaction as stock issued for compensation to the officers involved.

F-7

Advanced Bio/Chem, Inc.

Notes to Condensed Financial Statements

Note 8 - Mergers and acquisitions (continued)

On June 12, 2003, the Advanced Bio/Chem, Inc., a Texas corporation, merged with a wholly owned subsidiary of Ciro International, Inc. (“Ciro”),a Nevada corporation, resulting in the Texas corporation being the surviving entity. The common stock of the Texas corporation was then exchanged for one share of common stock in Ciro and Ciro changed it’s name from Ciro International, Inc. to Advanced Bio/Chem, Inc. This tranaction was accounted for as 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.

Note 9- Subsequent events

On December 31, 2003, the Company entered into an agreement whereby 1,000,000 shares of common stock would be sold to two investors along with warrants for an additional 600,000 shares. These shares were subsequently issued January 6, 2004 when payment of $100,000 was received by the Company.

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. Also, in consideration of Stephen B. Rash, Chairman and CEO, and Ira L. Goldknopf, Ph.D., Chief Science Officer, resigning their respective offices with the Company and accepting similar positions with Power 3, Power 3 designated 3,000,000 shares of its Series B Convertible Preferred Stock that, voting as a class, represents a majority of the voting interest of Power 3. 1,500,000 shares of Series B Convertible Preferred Stock of Power 3 were issued each to Stephen B. Rash, and Ira L. Goldknopf, Ph.D. In the ev ent either holder of shares of Series B Convertible Preferred Stock ceases to be an officer, director or employee of Power 3, their preferred shares automatically convert to common shares at a ratio of one common share for each preferred share. In addition, 13,250,000 shares of common stock were issued each to Stephen B. Rash and Ira L. Goldknopf, Ph.D. in consideration of their executing an employment agreement with Power 3.

In July 2004, the sole director of the Company, Helen Park, resigned and Crawford Shaw was appointed as sole director, president and chief executive officer. In August 2004, John Mazzuto and Michael Collyer were added as directors.

In August 2004, the Company’s Board of Directors approved the adoption of the 2004 Stock Option Plan. 15,000,000 shares of common stock of the Company were reserved as incentives to certain employees, outside directors and consultants in the form of stock options of the Company.

In September 2004, the Company sold 1,000,000 shares of common stock to a private investor for $0.05 per share.

In October 2004, the Company purchased all the issued and outstanding capital stock (the “EMC Shares”) of EMC Packaging, Inc., a Delaware corporation (“EMC”), from the holders of all the issued and outstanding capital stock of EMC. On the effective date of the purchase of the EMC Shares, EMC became the Company’s wholly owned subsidiary.

The Company amended its Articles of Incorporation effective December 9, 2004 to change its name from “Advanced Bio/Chem, Inc.” to “Industrial Enterprises of America, Inc.”

F-8