Industrial Enterprises of America Reports Second Quarter Revenue of $17 Million

NEW YORK--Industrial Enterprises of America, Inc. (OTC BB:IEAM), a specialty automotive aftermarket supplier, today announced results for the fiscal second quarter and six months ended December 31, 2006.

Revenue for the second quarter was a record $17.0 million as compared with $10.0 million in the first fiscal quarter of 2007 and $5.6 million for the same period in fiscal 2006. The increase over last year’s second quarter was partially due to the inclusion of the Pitt Penn Group, acquired January 31, 2006, which added approximately $5.0 million in revenue, and also reflects increased demand across the Pitt Penn and Unifide product lines. The 70% sequential revenue gain over the first quarter was due to the company’s higher production level, resulting from operating efficiencies combined with strong order flow within the company’s end markets.

The company reported gross profit of $4.0 million, representing a gross margin of 23.7%, versus $2.7 million, or 27.1%, in the first quarter of fiscal 2007 and $1.4 million, or 24.7%, in the second quarter of fiscal 2006. The decrease in margins was due to a different product mix as a result of expanding operations and the mild weather in the December quarter. EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was $2.8 million, or $0.20 per share. Income from operations was $2.3 million in the quarter versus $345,000 in the first quarter. Notably, operating expenses were 25%, or $600,000, lower than the first quarter reflecting the absence of one-time expenses arising from the consolidation of our facilities. The net loss for the quarter was ($1.8 million), which includes $4.1 million in non-cash expenses associated with the company’s convertible securities and warrants. The conversion of over 50% of the convertible notes and exercise of warrants resulted in an accelerated charge to income of the valuation of such securities added to the balance sheet arising from their issuance. The company’s fully diluted shares calculated using the treasury method as of December 31, 2006 was 13.9 million.

For the six months of fiscal 2007, Industrial Enterprises of America reported revenue of $27.0 million versus $10.6 million in the same period last year, reflecting the acquisition of Pitt Penn and increased demand for its automotive products. Gross profit was $6.8 million, representing a gross margin of 25.2%, versus $2.8 million, or 26.6%, for the same period in fiscal 2006. EBITDA was $5.8 million, or $0.41 per share. The net loss for the period was ($1.1) million, versus a loss of $(0.8) million for the first half of fiscal 2006.

“We exceeded our revenue target while EBITDA came within an acceptable range. We are pleased with these results given that December temperatures in the Northeast were among the highest on record – limiting sales of our higher-margin seasonal products,” stated John Mazzuto, Chief Executive Officer of Industrial Enterprises of America. “By focusing on non-seasonal items and limiting our winter inventory, our production, up 70% from just three months ago, allowed us to grow dramatically. Our Pitt Penn facility performed to plan utilizing a single-shift operation, resulting in lower costs as we produced to match order intake. In addition, our integrated sales force expanded our product penetration across existing outlets. Our order flow now outpaces shipments, and we have already begun our second shift at the Pitt Penn facility ahead of schedule

“Strategically, we have also taken a number of steps to expand our product portfolio and further reduce seasonality in the business,” Mr. Mazzuto continued. “We are moving to longer production runs to maximize line efficiency, as our end markets are able to absorb the increased output. Our aerosol business – which recently announced a joint venture in China – continues to move forward on a variety of fronts. This operation should contribute substantially in the coming fiscal year.

“In addition, as part of our strategy to acquire virtual marketing companies, we purchased Fire 1^st Defense, a firm that sells innovative, consumer-friendly fire extinguishers and suppressants. We anticipate growing demand for this product, boosted by our current distribution channels, and increasing operating efficiency through the utilization of existing capacity at our EMC Packaging plant.”

Mr. Mazzuto concluded, “Looking ahead, we are confident that the steps taken in the past six months to improve production efficiencies and rationalize assets place the company in an excellent position to drive top line growth, margin expansion, and return on net assets going forward. We will continue to optimize capacity to meet demand while enhancing productivity.”

Between January 17 and February 15, 2007, Industrial Enterprises purchased 100,000 shares of its outstanding common stock. The company has thus purchased 950,000 shares as part of its $10 million buyback program announced December 11, 2006.

Guidance

Management believes that EBITDA is the performance measure that best reflects the company’s economic value and provides investors with a consistent metric to track historical results and monitor future results. In providing guidance, management assumes normal weather patterns.

For the third fiscal quarter, Industrial Enterprises estimates revenue of approximately $25 million, with EBITDA per share of $0.32-$0.34. For the fourth fiscal quarter, the company estimates revenue of approximately $30 million, with EBITDA per share of $0.50-$0.52. For fiscal year 2007, Industrial Enterprises estimates total revenue of approximately $80 million, with EBITDA per share of $1.22-$1.24 including the first quarter’s $2.4 million income from asset sales. EBITDA per share is calculated using the current fully diluted share count, including treasury method, of 13.9 million shares.

The company makes use of EBITDA (earnings before interest, taxes, depreciation and amortization) as a financial measure which it believes is a useful performance indicator. EBITDA is not a recognized term under generally accepted accounting principles, or "GAAP," and should not be considered as an alternative to net income/(loss) or net cash provided by operating activities, which are GAAP measures. A reconciliation of EBITDA to net income/(loss) appears at the end of this release, as do both actual results for the quarter and year-to-date periods.

Conference Call

Industrial Enterprises of America will host an earnings conference call at 11:00 a.m. Eastern on February 16, 2007 for the company’s fiscal second quarter ended December 31, 2006. During the call, John Mazzuto, Chief Executive Officer, will discuss the company’s quarterly performance and financial results. The telephone number for the conference call is 877-407-0782. The call will be webcast and can be accessed at http://www.investorcalendar.com.

Investors will be able to access an encore recording of the conference call for one week by calling 877-660-6853 and referencing account number 286, conference number 232183; the recording will be available two hours after the conference call has concluded. In addition, a replay of the webcast will be available for 180 days after the call on http://www.investorcalendar.com.

About Industrial Enterprises of America

Industrial Enterprises of America, Inc., headquartered in New York, NY, is an automotive aftermarket supplier that specializes in the sale of anti-freeze, auto fluids, charcoal fluids, and other additives and chemicals. The company has distinct proprietary brands that collectively serve the retail, professional and discount automotive aftermarket channels.

Except for the historical information contained herein, the matters discussed in this press release may include forward-looking statements or information. All statements, other than statements of historical fact, including, without limitation, those with respect to the objectives, plans and strategies of Industrial Enterprises of America set forth herein and those preceded by or that include the words ``believes,'' ``expects,'' ``given,'' ``targets,'' ``intends,'' ``anticipates,'' ``plans,'' ``projects,'' ``forecasts'' or similar expressions, are forward-looking statements. Although the Company's management believes that such forward-looking statements are reasonable, it cannot guarantee that such expectations are, or will be, correct. These forward-looking statements involve a number of risks and uncertainties which could cause the Company's future results to differ materially from those anticipated, including: (i) the Company's history of ongoing operating losses; (ii) the overall marketplace and clients' usage of products, including demand therefore, the impact of competitive technologies, products and pricing, particularly given the substantially larger size and scale of certain competitors and potential competitors, control of expenses, and revenue generation by the acquisition of new customers; Other risks are detailed from time to time in the Company's 2006 Annual Report on Form 10-K, as amended, its Quarterly Reports on Form 10-QSB, and in its other Securities and Exchange Commission reports and statements. The Company assumes no obligation to update any of the information contained or referenced in this press release.

INDUSTRIAL ENTERPRISES OF AMERICA, INC.
Consolidated Balance Sheet
December 31, 2006
(Unaudited)
						December 31, 2006
						(Unaudited)
ASSETS
	Current Assets
		Cash				$	1,717,581
		Accounts receivable, net of allowance of $462,065					13,105,422
		Due from related parties					342,166
		Inventory					6,147,752
		Notes receivable					1,141,583
		Prepaid expenses					4,636,960
	Total Current Assets					$	27,091,464
	Investment in common stock						609,230
	Property, plant and equipment net of accumulated depreciation						9,371,141
	Investment in joint venture						6,993,931
	Other Assets						413,461
	Other intangibles, net of amortization						83,367
	Debt issuance costs, net of amortization						866,917
	Goodwill						5,890,418
TOTAL ASSETS						$	51,319,927
LIABILITIES & SHAREHOLDERS' EQUITY
	Current Liabilities
		Current maturities of long term debt				$	5,670,499
		Current maturities of long term debt related parties					2,575,758
		Accounts payable					7,398,684
		Payable related parties					22,952
		Accrued payables					459,373
		Accrued interest					120,467
		Accrued interest to shareholders and related parties					207,042
	Total Current Liabilities					$	16,454,775
	Long Term Liabilities
		Notes payable net of current debt					1,115,675
		Convertible notes payable					1,350,000
		Notes payable related parties					3,583,996
		Discount on notes payable					(3,620,189)
	Total Long Term Liabilities					$	2,429,482
	Total Liabilities					$	18,884,257
	Shareholders' Equity
		Preferred stock, $0.001 par value, 10,000,000 shares authorized; -0- shares issued and outstanding as of December 31, 2006
						$	-
		Common stock, $0.01 par value, 15,000,000 shares authorized; 12,543,622 shares issued and outstanding as of December 31, 2006
							125,436
		Additional paid-in capital					47,313,387
		Subscribed stock payable					672,608
		Shareholder receivable					(168,000)
		Equity development fees, unamortized					(439,003)
		Unrealized securities gains (losses)					(2,323,957)
		Retained (deficit)					(12,744,801)
	Total Shareholders' Equity					$	32,435,670
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY						$	51,319,927

INDUSTRIAL ENTERPRISES OF AMERICA, INC.
Consolidated Statement of Operations
(Unaudited)
				Three Months Ended						Six Months Ended
				Dec 31, 2006			Dec 31, 2005 (restated)			Dec 31, 2006			Dec 31, 2005 (restated)
Revenues				$	16,981,153		$	5,626,379		$	27,016,539		$	10,551,573
Cost of Goods Sold					12,957,840			4,236,325			20,203,356			7,745,140
Gross Profit				$	4,023,313		$	1,390,054		$	6,813,183		$	2,806,433
Expenses:
	Selling, general & administrative				890,923			880,310			2,133,536			1,748,560
	Doubtful account expense				-			-			312,514			-
	Salaries and contract labor				273,453			216,365			806,800			293,211
	Depreciation and amortization				487,968			88,508			907,593			119,167
	Legal and professional fees				113,776			334,774			281,318			470,967
	Total Expenses			$	1,766,120		$	1,519,957		$	4,441,761		$	2,631,906
	Income (loss) from operations			$	2,257,193		$	(129,903)		$	2,371,422		$	174,527
Other income (expense)
Interest expense					(4,096,012)			(938,539)			(5,925,881)			(1,539,966)
Foreign exchange loss					(9,952)			-			(21,891)			-
Proceeds from sale of securities					22,733			506,778			64,335			506,778
Litigation settlement revenues					-			-			1,045,739			-
Equipment and realty option revenues					-			-			375,000			-
Gain on disposition of plan and facilities					-			-			1,000,000			-
Miscellaneous income					15,147			8,775			34,790			10,289
Net income (loss)				$	(1,810,891)		$	(552,889)		$	(1,056,486)		$	(848,371)
Net income (loss) per share basic and diluted				$	(0.19)		$	(0.12)		$	(0.12)		$	(0.21)
Weighted average number of common shares outstanding					9,690,961			4,532,831			9,059,764			4,085,187

EBITDA Reconciliation
		Three Months Ended				Six Months Ended
		Dec 31, 2006				Dec 31, 2006
Earnings(loss)		$	(1.81)	million		$	(1.06)	million
Interest			4.09				5.92
D&A			0.48				0.90
EBITDA		$	2.76			$	5.76
Diluted Shares Outstanding
(treasury method)			13.9				13.9
EBITDA/share		$	0.20			$	0.41

INDUSTRIAL ENTERPRISES OF AMERICA, INC.
Consolidated Statements of Cash Flows
(Unaudited)
					Six Months Ended
					December 31, 2006			December 31, 2005 Restated
Operating activities
	Net income (loss)				$	(1,056,486)		$	(848,371)
	Non-cash items
		Depreciation and amortization				520,416			119,167
		Amortization of prepaid consulting fees				284,245			-
		Debt discount and beneficial conversion feature amortization				1,802,123			468,949
		Debt issuance costs amortized				444,191			295,415
		Gain on settlement of litigation				38,399			-
	Write-off of prepaid acquisition costs					125,000			-
		Amortization of directors fees				32,625			-
		Amortization of equity development fees				74,806			-
		Stock based compensation				-			155,880
		Stock based charitable donations				-			-
		Stock sales for notes receivable				-			(494,233)
	Net changes in working capital accounts
	Accounts receivable					(7,340,412)			(852,950)
	Other receivable					377,286			-
	Related party receivable					-			186,684
	Prepaid expenses					21,143			(170,179)
	Inventory					2,207,122			(415,537)
	Other current assets					4,358			-
	Accounts payable					732,437			544,767
	Related party payable					-			304,773
	Accrued interest					106,877			86,128
	Accrued interest related parties					-			281,733
	Current notes payable related party					-			644,326
	Accrued expenses					(351,091)			(504,817)
	Other payables					(1,373)			13,784
	Net cash (used) by operating activities				$	(1,978,334)		$	(184,481)
Investing activities
	Notes receivable – other				$	(641,583)		$	5,767
	Payments on due to related parties					(41,194)			-
	Payments on related party loans					(306,684)			(334,068)
	Sale of shares in marketable securities					7,629			-
	Additions to property, plant and equipment					(683,140)			(134,864)
	Investment in First Defense, Inc.					(214,398)			-
	Investment in subsidiaries					-			(1,306,463)
	Note receivable – Fortco					500,000			-
	Note receivable – JS Realty					(100,000)			-
	Other					67,288			(20,000)
	Net cash (used) by investing activities				$	(1,412,082)		$	(1,455,560)
Financing activities
	Proceeds from issuance of debt				$	10,231,540		$	9,328,277
	Principal payments on debt					(11,982,173)			(7,273,194)
	Proceeds from notes payable related party and shareholders					375,000			50,000
	Payments on lease payable					(90,499)			-
	Accrued interest to related parties					84,806			-
	Proceeds from issuance of convertible debt					1,000,000			-
	Payments on convertible debt					(1,973,000)			-
	Proceeds from issuance of common stock					7,176,114			40,000
	Proceeds from un-issued common stock					77,834			-
	Subscribed stock					(100,000)			-
	Equity development fees					-			(50,000)
	Net cash provided by Financing Activities				$	4,799,622		$	1,761,015
Net cash increase for period					$	1,409,206		$	120,974
Cash at beginning of period						308,375			354,583
Cash at end of period					$	1,717,581		$	475,557
SUPPLEMENTAL DISCLOSURES RELATED TO CASH FLOWS:
	Interest paid				$	1,449,084		$	407,741
	Taxes paid				$	-		$	-
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
	Notes receivable for Power3 Medical Products stock sales				$	-		$	500,000
	Notes payable for Unifide and Todays Way acquisition				$	-		$	3,750,000
	Debt converted to common stock				$	1,019,494		$	-
	Litigation settlement for convertible debt				$	2,042,760		$	-
	Accrued interest converted to stock				$	422,400		$	-
	Fixed assets purchased with options				$	375,000		$	-
	Fixed assets purchased with exercise of warrants				$	739,200		$	-
	Options issued for investment in joint venture				$	6,993,931		$	-
	Stock issued for Unifide acquisition				$	-		$	1,050,000
	Stock issued for Todays Way acquisition				$	-		$	450,000
	Stock issued for services				$	25,000		$	890,140
	Stock issued for prepaid consulting fees				$	4,497,333		$	-
	Stock issued for convertible debt				$	42,485		$	-
	Stock issued for employment agreement				$	-		$	42,500
	Stock issued for equity development fees				$	-		$	628,890
	Stock issued for director fees				$	-		$	45,000
	Stock cancelled				$	-		$	(5,000)
	Unrealized securities gain				$	174,929		$	-