Can Industrial Enterprises Fix the Mess?

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The board of directors of automotive aftermarket supplier Industrial Enterprises of America terminated chief financial officer Jorge Yepes, who had been suspendedsince last Nov. 6pending an internal integrity review by independent counsel to investigate possible violations of the companys policies and procedures.

The board notified Yepes of his termination on Feb. 11. As part of that notice IEAM has reserved any and all legal recourse against Mr. Yepes, according to an Industrial Enterprises statement. Whats in the press release is all the company will say about Yepes termination, David Zazoff, director of corporate communications, told Lube Report.

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On Feb. 5, the company announced James Margulies as interim chief executive officer and chief financial officer. He previously served as interim CFO of Industrial Enterprises from Januaryto early December 2006.

In conjunction with Margulies appointment, John Mazzuto resigned his positions as CEO, interim CFO and as a director. As part of the separation agreement, Mazzuto agreed to act as a consultant to the company to assist in answering any questions relating to filing of the companys financials.

Mazzuto will also assume more than $4 million of unsecured debt. As a result, the company expects to incur an extraordinary, non-recurring, non-cash gain of more than $4 million. He will also return 500,000 shares of common stock that were granted to him last year.

My primary goal as interim CEO and CFO will be to make the companys financials transparent through the completion of the 10KSB and quarterly filings which are currently delinquent, Margulies said, adding that he requested a three to four week extension in the filing deadline for the 10KSB to allow him to get comfortable with the information being filed. Securities and Exchange Commission form 10KSB is an annual report that provides a comprehensive overview of a company’s business and must be filed within 90 days after the end of a company’s fiscal year unless an extension is granted.

On Jan. 24, Industrial Enterprises had received notice from NASDAQ that the company fails to comply with the minimum bid price requirements for continued listing.During the preceding 30 consecutive trading days, the closing bid price for the companys common stock was below the minimum $1 per share as required by NASDAQ under marketplace rules. NASDAQ said Industrial Enterprises has until July 22 to demonstrate compliance with the requirement. To comply, the closing bid price of the companys common stock must be at $1 per share or more for at least 10 consecutive trading days.

We are in continuing discussions with NASDAQ, Zazoff said.

In April 2007, Industrial Enterprises purchased lubes and additives marketer Hi-Tach Oil Co. Inc. for $350,000 in a combination of cash and promissory notes. In January 2006, Industrial Enterprises acquired Pitt Penn Oil, a compounder blender in Creighton, Pa., for $4 million. The company said it would move manufacturing of Hi-Tach Oils product lines to the Pitt Penn facilities. Pitt Penn President Scott Margulis resigned from the Industrial Enterprises board of directors in November 2007.

Industrial Enterprisesbegan operationsin late 2004, acquiring EMC Packaging Inc., a refrigerant gases supplier that had been publicly traded. Industrial Enterprises later added Todays Way Manufacturing, a producer of specialty automotive products, and Unifide Industries Ltd., which markets and sells them.