FORM 10-QSECURITIES AND EXCHANGE COMMISSION
			WASHINGTON, DC  20549[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
			SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2007OR[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
			SECURITIES EXCHANGE ACT OF 1934
			For the Transition Period From _________ to ________Commission File Number 0-20979INDUSTRIAL SERVICES OF AMERICA, INC.(Exact Name of Registrant as specified in its Charter)




Florida
			59-0712746(State or other jurisdiction of
			(IRS
			EmployerIncorporation or Organization)
			Identification No.)




7100
			Grade Lane, PO Box 32428
			Louisville, Kentucky  40232
			(Address of principal executive offices)(502)
			368-1661
			(Registrant's Telephone Number, Including Area Code)Check whether the registrant (1) has filed all
			Reports required to be filed by Section 13 or 15(d) of the
			Securities Exchange Act of 1934 during the preceding 12 months (or
			for 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 X   No ___Indicate by check mark whether the registrant
			is a large accelerated filer, an accelerated filer, or a
			non-accelerated filer.  See definition of "accelerated filer and
			large accelerated filer" in Rule 12b-2 of the Exchange Act.  
			(Check one):  Large accelerated filer ___  Accelerated filer ___ 
			Non-accelerated filer _X__Indicate by check
			mark whether the registrant is a shell company (as defined in Rule
			12b-2 of the Exchange Act).  Yes ___  No _X__Indicate the number
			of shares outstanding of each of the issuer's classes of common
			stock, as of March 31, 2007:  3,640,899.




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INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESINDEXPage No.Part I
			Financial InformationCondensed Consolidated Balance SheetsMarch 31, 2007 (Unaudited) and December 31,
			2006
			3Condensed Consolidated Statements ofOperations - Three Months EndedMarch 31, 2007 and 2006 (Unaudited)
			5Condensed Consolidated Statement of
			Shareholders' EquityThree months ended March 31, 2007
			(Unaudited)
			6Condensed Consolidated Statements ofCash Flows - Three Months EndedMarch 31, 2007 and 2006 (Unaudited)
			7Notes to Condensed ConsolidatedFinancial Statements (Unaudited)
			8Management's Discussion and Analysisof Financial Condition and Resultsof Operations
			12Part II
			Other Information
			18




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Part
			I -- FINANCIAL INFORMATIONITEM
			1: Condensed CONSOLIDATED FINANCIAL STATEMENTS.INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETSASSETS




March 31,
			2007
			(Unaudited)
			
			December 31,
			2006Current assetsCash and cash equivalents
			$    1,205,404
			
			$   1,331,807Accounts receivable - trade (after allowance
			
			    for doubtful accounts of $100,000
			    in 2007 and 2006)
			7,117,048
			
			5,026,441Net investment in sales-type leases
			54,500
			
			50,586Inventories
			3,154,440
			
			3,428,226Deferred income taxes
			124,548
			
			106,725Other
			169,368
			
			88,113Total current assets
			11,825,308
			
			10,031,898Net property and equipment
			8,012,651
			
			8,152,606Other AssetsGoodwill
			560,005
			
			560,005Net investment in sales-type leases
			170,949
			
			186,215Notes receivable -- related party
			230,114
			
			238,566Other assets
			155,275
			
			162,5271,116,343
			
			1,147,313$ 20,954,302
			
			$ 19,331,817_____________________________See accompanying notes to consolidated financial statements.3.




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INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETSCONTINUEDLIABILITIES AND STOCKHOLDERS'
			EQUITY




March 31,
			2007
			(Unaudited)
			
			December 31,
			2006Current liabilitiesCurrent maturities of long term debt
			$    151,997
			
			$    149,431Current maturities of capital lease
			obligation
			203,622
			
			228,533Accounts payable
			4,884,275
			
			4,545,057Income tax payable
			822,594
			
			1,185,717Other current liabilities
			418,779
			
			399,062Total current liabilities
			6,481,267
			
			6,507,800Long-term liabilitiesLong-term debt
			3,740,610
			
			2,790,460Capital lease obligation
			34,561
			
			67,853Deferred income taxes
			158,479
			
			219,3993,933,650
			
			3,077,712Stockholders' equityCommon stock, $.005 par value, 10,000,000
			shares authorized,
			    4,295,000 shares issued in 2007 and 2006,
			    3,640,899 shares outstanding in 2007 and 2006
			21,475
			
			21,475Additional paid-in capital
			3,194,816
			
			3,194,816Retained earnings
			8,028,070
			
			7,234,990Treasury stock, 654,101 shares at average
			costin 2007 and 2006
			(704,976)
			
			(704,976)10,539,385
			
			9,746,305$
			20,954,302
			
			$
			19,331,817______________________________See
			accompanying notes to consolidated financial statements.4.




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INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSTHREE
			MONTHS ENDED MARCH 31, 2007 AND 2006(UNAUDITED)




2007
			
			2006Revenue from services
			$  3,844,227
			
			$  3,944,919Revenue from product sales
			14,060,522
			
			10,539,101Total Revenue
			17,904,749
			
			14,484,020Cost of goods sold for services
			3,452,143
			
			3,349,481Cost of goods sold for product sales
			11,754,347
			
			8,945,993Reduction of cost of goods sold
			35,278
			
			150,000Total Cost of goods sold
			15,241,768
			
			12,445,474Selling, general and administrative expenses
			1,364,007
			
			1,349,853Income before other income (expense)
			1,298,974
			
			688,693Other income (expense)Interest expense
			(42,457)
			
			(27,385)Interest income
			28,973
			
			28,222Loss on sale of assets
			(5,775)
			
			(2,281)Other income (expense), net
			22,053
			
			6,9622,794
			
			5,518Income before income taxes
			1,301,768
			
			694,211Income tax provision
			508,688
			
			277,685Net income
			$     793,080
			
			$     416,526Basic earnings per share
			$           0.22
			
			$           0.12Diluted earnings per share
			$           0.22
			
			$           0.12Weighted shares outstanding:Basic
			3,640,899
			
			3,560,899Diluted
			3,640,899
			
			3,574,328______________________________See
			accompanying notes to consolidated financial statements.5.




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INDUSTRIAL SERVICES OF AMERICA, INC.
			AND SUBSIDIARIES
			CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
			THREE MONTHS ENDED MARCH 31, 2006(UNAUDITED)______________________________________________________________________________________________________________________AdditionalCommon Stock
			
			Paid-in
			
			Retained
			
			Treasury StockShares
			
			Amount
			
			Capital
			
			Earnings
			
			Shares
			
			Cost
			
			TotalBalance as of December 31, 2006
			
			4,295,000
			
			$21,475
			
			$3,194,816
			
			$7,234,990
			
			(654,101)
			
			$
			(704,976)
			
			$9,746,305Net income
			
			-
			
			-
			
			-
			
			793,080
			
			-
			
			-
			
			793,080Balance as of March 31, 2007
			
			4,295,000
			
			$21,475
			
			$3,194,816
			
			$8,028,070
			
			(654,101)
			
			$
			(704,976)
			
			$10,539,385______________________________See
			accompanying notes to consolidated financial statements.6.




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INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSTHREE
			MONTHS ENDED MARCH 31, 2007 AND 2006(UNAUDITED)




2007
			
			2006Cash flows from operating activitiesNet income
			$    793,080
			
			$    416,526Adjustments to reconcile net income to
			    net cash from operating activities:Depreciation and
			amortization
			456,497
			
			431,298Loss on sale of property and equipment
			5,775
			
			2,281Deferred income taxes
			(78,743)
			
			-Change in assets and liabilitiesReceivables
			(2,090,607)
			
			(1,118,604)Net investment in sales-type leases
			11,352
			
			17,766Inventories
			273,786
			
			(25,669)Other assets
			(74,002)
			
			(33,818)Accounts payable
			339,218
			
			(2,145,738)Other current liabilities
			(343,406)
			
			209,951Net cash from operating activities
			(707,050)
			
			(2,246,007)Cash flows from investing activitiesProceeds from sale of property and equipment
			46,950
			
			-Purchases of property and equipment
			(369,268)
			
			(242,920)Payments from related party
			8,452
			
			1,155Net cash from investing activities
			(313,866)
			
			(241,765)Cash flows from financing activitiesPurchases of common stock
			-
			
			(16,338)Payments on capital lease obligation
			(58,203)
			
			(29,119)Proceeds from long-term debt
			2,750,000
			
			1,500,000Payments on long-term debt
			(1,797,284)
			
			-Net cash from financing activities
			894,513
			
			1,454,543Net decrease in cash
			(126,403)
			
			(1,033,229)Cash at beginning of period
			1,331,807
			
			1,721,301Cash at end of period
			$   1,205,404
			
			$   688,072Supplemental disclosure of cash flow
			informationCash paid for interest
			$       42,457
			
			$      27,385Cash paid for taxes
			950,554
			
			200,253______________________________See
			accompanying notes to consolidated financial statements.7.




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INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(Unaudited)



NOTE 1 -- BASIS OF PRESENTATION



The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with U. S.
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. 
Accordingly, they do not include all of the information and footnotes required
by U. S. generally accepted accounting principles for complete consolidated
financial statements.  The information furnished includes all adjustments, which
are, in the opinion of management, necessary to present fairly our financial
position as of March 31, 2007 and the results of our operations and changes in
our cash flow for the periods ended March 31, 2007 and 2006.  Results of
operations for the period ended March 31, 2007 are not necessarily indicative of
the results that may be expected for the entire year.  Additional information,
including the audited December 31, 2006 consolidated financial statements and
the Summary of Significant Accounting Policies, is included our Annual Report on
Form 10-K for the year ended December 31, 2006 on file with the Securities and
Exchange Commission.



NOTE 2 --
ESTIMATES



In preparing the condensed consolidated
financial statements in accordance with U. S. generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X, management must make estimates and
assumptions.  These estimates and assumptions affect the amounts reported for
assets, liabilities, revenues and expenses, as well as affecting the disclosures
provided.  Future results could differ from the current estimates.



NOTE 3 -- LONG TERM DEBT AND
NOTES PAYABLE TO BANK



On December 22, 2006, we executed a new
revolving credit facility with Branch Banking and Trust Company increasing the
borrowing line from $5.0 million to $10.0 million to provide us with working
capital to support the current needs of our business.  This revolving credit
facility has a three year term expiring December 22, 2009, and provides for
advances of up to eighty percent (80%) of our eligible accounts receivable and
up to forty percent (40%) of eligible inventory, and up to one hundred (100%) of
the net book value of our eligible equipment less an outstanding indebtedness on
the equipment.  The revolving credit facility bears interest at the one month
LIBOR rate, as published in the Wall Street Journal, plus two and twenty-five
one-hundredths percent (2.25%) per annum which was 7.57% as of March 31, 2007,
and is secured by all our assets (except rental fleet equipment).  The balance
of the credit facility at March 31, 2007 was $2,000,000.  The revolving credit
facility contains certain restrictive and financial covenants.  At March 31,
2007, we were in compliance with all restrictive covenants and the entire amount
of our credit facility less our outstanding borrowings was available for
borrowings.



We also have a note payable to Fifth Third Bank secured by our rental fleet
equipment with a fixed interest rate of 6.83% and monthly payments of $23,047. 
The maturity date under this agreement is June 2011 with a ten-year amortization
schedule.  The balance on the note was $1,892,607 at March 31, 2007 and
$1,929,016 at December 31, 2006.



8



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NOTE 4 -- SEGMENT
INFORMATION



Our operations
include three primary segments:  ISA Recycling, Computerized Waste Systems (CWS),
and Waste Equipment Sales & Service (WESSCO).  ISA Recycling provides products
and services to meet the needs of its customers related to ferrous, non-ferrous
and fiber recycling at two locations in the Midwest.  CWS provides waste
disposal services including contract negotiations with service providers,
centralized billing, invoice auditing, and centralized dispatching.  WESSCO
sells, leases, and services waste handling and recycling equipment.



Our three
reportable segments are determined by the products and services that each
offers.  The recycling segment generates its revenues based on buying and
selling of ferrous, non-ferrous and fiber scrap; CWS's revenues consist of
charges to customers for waste disposal services; and WESSCO sales and lease
income comprise the primary source of revenue for this segment.  The components
of the column labeled "other" are selling, general and administrative expenses
that are not directly related to the three primary segments.



We evaluate segment
performance based on gross profit or loss and the evaluation process for each
segment includes only direct expenses and selling, general and administrative
costs, omitting any other income and expense and income taxes.

FOR THE
			THREE MONTHS ENDEDMARCH 31, 2007
			ISARECYLING
			
			COMPUTERIZED 
			WASTESYSTEMS
			
			WASTE 
			EQUIMENT
			SALES &SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$  13,531,586
			
			$                  -
			
			$    
			          -
			
			$               -
			
			$
			13,531,586Equipment sales, serviceand leasing revenues
			-
			
			-
			
			528,936
			
			-
			
			528,936Management fees
			-
			
			3,844,227
			
			-
			
			-
			
			3,844,227Cost of goods sold
			(11,533,464)
			
			(3,487,421)
			
			(220,883)
			
			-
			
			(15,241,768)Selling, general andadministrative expenses
			(384,918)
			
			(282,931)
			
			(181,139)
			
			(515,019)
			
			(1,364,007)Segment profit (loss)
			$ 
			 1,613,204
			
			$        73,875
			
			$     126,914
			
			$  (515,019)
			
			$   1,298,974Segment assets
			$
			13,993,441
			
			$   1,102,160
			
			$  2,146,936
			
			$  3,711,765
			
			$20,954,302




FOR THE
			THREE MONTHS ENDEDMARCH 31, 2006
			ISARECYCLING
			
			COMPUTERIZED
			WASTESYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$  10,103,299
			
			$                  -
			
			$    
			          -
			
			$               -
			
			$ 10,103,299Equipment sales, serviceand leasing revenues
			-
			
			-
			
			435,802
			
			-
			
			435,802Management fees
			-
			
			3,944,919
			
			-
			
			-
			
			3,944,919Cost of goods sold
			(8,722,662)
			
			(3,499,481)
			
			(223,331)
			
			-
			
			(12,445,474)Selling, general andadministrative expenses
			(306,794)
			
			(406,668)
			
			(137,460)
			
			(498,931)
			
			(1,349,853)Segment profit (loss)
			$  1,073,843
			
			$        38,770
			
			$      75,011
			
			$  (498,931)
			
			$     688,693Segment assets
			$  10,462,541
			
			$   1,842,972
			
			$ 1,959,354
			
			$  3,554,887
			
			$17,819,754




9



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NOTE 5 -- INVENTORIES



Our inventories primarily consist of ferrous and
non-ferrous scrap metals and are valued at the lower of average purchased cost
or market. Quantities of inventories are determined based on our inventory
systems and are subject to periodic physical verification using estimation
techniques including observation, weighing and other industry methods. We would
recognize inventory impairment when the market value, based upon current market
pricing, falls below recorded value or when the estimated volume is less than
the recorded volume of the inventory.  We would record the loss in cost of goods
sold in the period during which we identified the loss.



Some commodities are in saleable condition
at acquisition.  We purchase these commodities in small amounts until we have a
truckload of material available for shipment.  Some commodities are not in
saleable condition at acquisition.  These commodities must be torched, sheared
or baled.  We do not have work-in-process inventory that needs to be
manufactured to become finished goods.  We include processing costs in inventory
for all commodities.   Ferrous inventory of $1,614,284 at March 31, 2007 was
comprised of $633,233 in raw materials and $981,051 of finished goods. 
Non-ferrous inventory of $1,500,790 at March 31, 2007 was comprised of $571,345
in raw materials and $929,445 of finished goods.  Ferrous inventory of
$1,667,937 at December 31, 2006 was comprised of $382,445 in raw materials and
$1,285,492 of finished goods.  Non-ferrous inventory of $1,678,655 at December
31, 2006 was comprised of $451,289 in raw materials and $1,227,366 of finished
goods.  We charged $644,658 in general and administrative processing costs to
cost of sales for the quarter ended March 31, 2007 and $2,353,435 for the year
ended December 31, 2006.



Inventory also includes all
types of industrial waste handling equipment and machinery held for resale such
as compactors, balers, and containers.   Other inventory includes cardboard and
baling wire.  Inventories as of March 31, 2007 and December 31, 2006 consist of
the following:



March 31, 2007(unaudited)
			
			December 31,2006Ferrous materials
			$ 1,614,284
			
			$ 1,667,937Non-ferrous
			materials
			1,500,790
			
			1,678,655Waste equipment
			machinery
			18,726
			
			56,200Other
			20,640
			
			25,434Total
			inventories
			$
			3,154,440
			
			$
			3,428,226




10



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NOTE 6 -- PER SHARE DATA



The computation for basic and diluted earnings per share is as follows:





2007
			2006Basic earnings per shareNet income
			$     793,080
			$      416,526Weighted average shares outstanding
			3,640,899
			3,560,899Basic earnings per share
			$             .22
			$             .12Diluted earnings per shareNet income
			$     793,080
			$     416,526Weighted average shares outstanding
			3,640,899
			3,560,899Add dilutive effect of assumed exercising ofstock options
			-
			13,429Diluted weighted average sharesoutstanding
			3,640,899
			3,574,328Diluted earnings per share
			$             .22
			$              .12




11



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ITEM 2:  MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



The following discussion and
analysis should be read in conjunction with our consolidated financial
statements and the accompanying notes thereto included elsewhere in this
report.



The following discussion and
analysis contains certain financial predictions, forecasts and projections which
constitute "forward-looking statements" within the meaning of the federal
securities laws.  Actual results could differ materially from those financial
predictions, forecasts and projections and there can be no assurance that we
will achieve such financial predictions, forecasts and projections.  Factors
that could affect financial predictions, forecasts and projections include the
fluctuations in the commodity price index and any conditions internal to our
major customers, including loss of their accounts and other factors as listed in
our Form 10-K for the year ended December 31, 2006, as filed with the Securities
and Exchange Commission.



General



We are primarily focusing our
attention now and in the future towards our recycling business segment.  We sell
processed ferrous and non-ferrous scrap material to end-users such as steel
mini-mills, integrated steel makers, foundries and refineries.  We purchase
ferrous and non-ferrous scrap material primarily from industrial and commercial
generators of steel, iron, aluminum, copper, stainless steel and other metals as
well as from other scrap dealers who deliver these materials directly to our
facilities. We process these materials by sorting, shearing, cutting and/or
baling. We will also continue to focus on initiating growth in our management
services business segment and our waste and recycling equipment sales, service
and leasing division.



We continue to pursue a growth
strategy in the waste management services arena by adding new locations of
existing customers as well as marketing our services to potential customers. 
Currently, we service 1,730 customer locations throughout the United States and
we utilize an active database of over 6,300 vendors to provide timely, thorough
and cost-effective service to our customers.



Our goal is to remain dedicated
to the recycling, management services, and equipment industry while sustaining
steady growth at an acceptable profit, adding to our net worth, and providing
positive returns for stockholders.  We intend to increase efficiencies and
productivity in our core business while remaining alert for possible
acquisitions, strategic partnerships, mergers and joint-ventures that would
enhance our profitability.



We have operating locations in
Louisville, Kentucky, Seymour, Indiana and Dallas, Texas.  We closed our
Lexington location in the first quarter of 2007.  We do not have operating
locations outside the United States.



Liquidity and Capital
Resources



As of March 31, 2007 we held
cash and cash equivalents of $1,205,404.



12



---





We currently maintain a $10.0
million senior revolving credit facility with the Branch Banking and Trust
Company.  This revolving credit facility has a three year term, provides for
advances of up to eighty percent (80%) of our eligible accounts receivable and
up to forty percent (40%) of eligible inventory, and up to one hundred (100%) of
our net book value of eligible equipment less an outstanding indebtedness on the
equipment.  The revolving credit facility bears interest at the one month LIBOR
rate, as published in the Wall Street Journal, plus two and twenty-five
one-hundredths percent (2.25%) per annum, 7.57% as of March 31, 2007, and is
secured by all our assets (except rental fleet equipment).  The revolving credit
facility contains certain restrictive and financial covenants.  At March 31,
2007, we were in compliance with all restrictive covenants.



We also have a $2.0 million
loan with Fifth Third Bank secured by our rental fleet equipment.  Indebtedness
under this loan agreement accrues interest at a fixed interest rate of 6.83%. 
The maturity date under this agreement is June 2011 with a ten-year amortization
schedule.  As of March 31, 2007 we had borrowed $1,892,607 and as of December
31, 2006 we had borrowed $1,929,016 against this loan.  The terms of the loan
agreement place certain restrictive covenants on us, including maintenance of a
specified tangible net worth, debt to net worth and EBITDA ratio.  Consequently,
these covenants restrict our ability to incur as much additional debt as we may
desire for future growth.  At March 31, 2007, we were in compliance with all
restrictive covenants.



During the first quarter of
2007, we purchased $369,268 of property and equipment.  In the recycling segment
we spent $193,735 for a truck scale, hauling trailer, and other operating
equipment.  In the equipment sales, leasing and service segment, we purchased
$143,619 in rental equipment that we located at customer sites.  This rental
fleet equipment consists of solid waste handling and recycling equipment such as
compactors, pre-crushers, containers and balers. It is our intention to continue
to pursue this market.  We purchased office equipment of $31,914.



We implemented the use of a
purchasing card with a credit limit of $6.0 million in the second quarter of
2004.  We have included the balance due on the purchasing card as part of
accounts payable.  The outstanding balance on the purchasing card at March 31,
2007 was $732,436 with a due date of April 27, 2007.  The card accrues interest
at prime plus 5.9% after the first twenty-five days of the purchase; our
intention is to pay off the full balance every month so as to not incur finance
charges.  To date we have not incurred any interest charges on this purchasing
card.  The card requires monthly minimum payments on any balance outstanding at
month end.  We receive rebates on an annual basis for all purchases made with
the card.



We expect that existing cash
flow from operations and available credit under our existing credit facilities
will be sufficient to meet our cash needs in 2007.



Results of Operations



The following table presents, for the years indicated, the
percentage relationship that certain captioned items in our Consolidated
Statements of Operations bear to total revenues and other pertinent data:



Quarter ended March 31,2007
			
			2006Statements of Operations Data:Total Revenue
			................................................................................
			100.0%
			
			100.0%Cost of goods
			sold.........................................................................
			85.1%
			
			85.9%Selling, general and administrative expenses
			...................................
			7.6%
			
			9.3%Income before other
			expenses........................................................
			7.3%
			
			4.8%




13



---



Three months ended March
31, 2007 compared to three months ended March 31, 2006



Total revenue increased
$3,420,729 or 23.6% to $17,904,749 in 2007 compared to $14,484,020 in 2006. 
Recycling revenue increased $3,428,287 or 33.9% to $13,531,586 in 2007 compared
to $10,103,299 in 2006.  This is primarily due to an increase of 18% in the
volume of shipments.  Management services revenue decreased $100,692 or 2.6% to
$3,844,227 in 2007 compared to $3,944,919 in 2006.  This is primarily due to a
decrease in the number of customer locations managed as well as a decrease in
volume of solid waste that is produced by each customer location.  Equipment,
service and leasing revenue increased $93,134 or 21.4% to $528,936 in 2007
compared to $435,802 in 2006.  This increase is due to an increase in rental
revenue.



Total cost of goods sold
increased $2,796,294 or 22.5% to $15,241,768 in 2007 compared to $12,445,474 in
2006.  Recycling cost of goods sold increased $2,810,802 or 32.2% to $11,533,464
in 2007 compared to $8,722,662 in 2006.  This is due to an increase of 19% in
the volume of purchases.  Management services cost of goods sold decreased
$12,060 or 0.3% to $3,487,421 in 2007 compared to $3,499,481 in 2006 primarily
due to a decrease in the number of customer locations managed as well as a
decrease in volume of solid waste that is produced by each customer location. 
Equipment, service and leasing cost of goods sold decreased $2,448 or 1.1% to
$220,883 in 2007 compared to $223,331 in 2006.  The decrease is primarily due to
a decrease in equipment costs.



Selling, general and
administrative expenses increased $14,154 or 1.0% to $1,364,007 in 2007 compared
to $1,349,853 in 2006.  As a percentage of revenue, selling, general and
administrative expenses were 7.6% in 2007 compared to 9.3% in 2006.  The
percentage of revenue decrease is due to higher revenue in the first quarter of
2007.



Other income decreased $2,724
to $2,794 in 2007 compared to $5,518 in 2006.



The income tax provision
increased $231,003 to $508,688 in 2007 compared to $277,685 in 2006.  As a
percentage of income before income taxes, the income tax provision was 39.1% in
2007  compared to 40.0% in 2006.



Financial condition at March
31, 2007 compared to December 31, 2006



Cash and cash equivalents
decreased $126,403 to $1,205,404 as of March 31, 2007 compared to $1,331,807 as
of December 31, 2006.



We used net cash from operating
activities of $707,050 for the quarter ended March 31, 2007.  Primarily this was
due to an increase of $2,090,607 in accounts receivable in the first quarter of
2007 partially offset by net income of $793,080.



We used net cash from investing
activities of $313,866 for the quarter ending March 31, 2007.  Primarily, we
purchased recycling and rental fleet equipment.  We made recycling equipment
purchases of $193,735 for a truck scale, hauling trailer, and other operating
equipment.  In the equipment sales, leasing and service segment, we purchased
$143,619 in rental equipment that we located at customer sites.  This rental
fleet equipment consists of solid waste handling and recycling equipment such as
compactors, pre-crushers, containers and balers. It is our intention to continue
to pursue this market.



14



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Our net cash from financing
activities of $894,513 for the quarter ended March 31, 2007 is primarily due to
advances of $2,750,000 on our line of credit, offset by payments on debt of
$1,797,284.



Accounts receivable trade
increased $2,090,607 or 41.6% to $7,117,048 as of March 31, 2007 compared to
$5,026,441 as of December 31, 2006.  This change is primarily due to an increase
in the volume of shipments in the recycling segment.



Inventories consist principally
of ferrous and nonferrous scrap materials and waste equipment machinery held for
resale.  We value inventory at the lower of cost or market.  Inventory decreased
$273,786 or 8% to $3,154,440 as of March 31, 2007 compared to $3,428,226 as of
December 31, 2006.



Inventory aging for the quarter
ended March 31, 2007 (Days Outstanding):



Description
			
			1-30
			
			31-60
			
			61-90
			
			Over
			90
			
			TotalEquipment & parts
			
			$    18,726
			
			$             -
			
			$           -
			
			$           -
			
			$   18,726Ferrous materials
			
			1,111,768
			
			389,851
			
			29,258
			
			83,407
			
			1,614,284Non-ferrous materials
			
			1,190,991
			
			84,092
			
			43,248
			
			182,459
			
			1,500,790Other
			
			20,640
			
			-
			
			-
			
			-
			
			20,640$2,342,125
			
			$
			473,943
			
			$
			72,506
			
			$
			265,866
			
			$3,154,440




Inventory aging for the year ended December 31, 2006 (Days
Outstanding):



Description
			
			1-30
			
			31-60
			
			61-90
			
			Over
			90
			
			TotalEquipment & parts
			
			$     33,720
			
			$   22,480
			
			$            -
			
			$           -
			
			$    56,200Ferrous Materials
			
			864,489
			
			448,842
			
			166,509
			
			188,097
			
			1,667,937Non-ferrous materials
			
			1,467,679
			
			41,840
			
			42,989
			
			126,147
			
			1,678,655Other
			
			25,434
			
			-
			
			-
			
			-
			
			25,434$2,391,322
			
			$
			513,162
			
			$ 209,498
			
			$314,244
			
			$ 3,428,226






Accounts payable trade
increased $339,218 or 7.5% to $4,884,275 as of March 31, 2007 compared to
$4,545,057 as of December 31, 2006, primarily due to market conditions.



Working capital increased
$1,819,943 to $5,344,041 as of March 31, 2007 compared to $3,524,098 as of
December 31, 2006.  The increase was primarily driven by the $2.1 million
increase in accounts receivable.



15



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Contractual Obligations



The following table provides
information with respect to our known contractual obligations for the quarter
ended March 31, 2007.



Obligation Description
			Total
			Less
			than 1 year
			1-3
			years
			3-5
			years
			More
			than 5 yearsLong-Term Debt Obligations (1)
			$3,892,607
			$
			151,997
			$336,886
			$3,403,724
			$0Capital Lease Obligations (2)
			238,183
			203,622
			29,125
			5,436
			0Operating Lease Obligations (3)
			877,329
			557,170
			221,159
			99,000
			0Total
			$5,008,119
			$ 912,789
			$587,170
			$
			3,508,160
			$0




(1) We currently maintain a
$10.0 million senior revolving credit facility with the Branch Banking and Trust
Company.  We have collateralized the credit facility with all our assets except
for rental fleet.  We also have a note payable to Fifth Third Bank secured by
our rental fleet equipment with a fixed interest rate of 6.83% and monthly
payments of $23,047.  The maturity date under this agreement is June 2011 with a
ten-year amortization schedule.



(2) We lease various pieces of
equipment that qualify for capital lease treatment.  These lease arrangements
require monthly lease payments expiring at various dates through May 2008.



(3) We lease the Louisville,
Kentucky facility from K&R, LLC, the sole member of which is Harry Kletter, our
chief executive officer, under an operating lease expiring December 2007.  We
have monthly rental payments of $42,106 through December 2007.  In the event of
a change of control, the monthly payments become $62,500.



We also lease a management services
operations facility and various pieces of equipment in Dallas, Texas for which
monthly payments of $2,525 are due through September 2007.



Long-term debt increased
$950,150 to $3,740,610 as of March 31, 2007 compared to $2,790,460 as of
December 31, 2006.



Impact of Recently Issued Accounting Standards



The Financial Accounting
Standards Board has published SFAS No. 157, Fair Value Measurements, to
eliminate the diversity in practice that exists due to the different definitions
of fair value and the limited guidance for applying those definitions in GAAP
that are dispersed among the many accounting pronouncements that require fair
value measurements.  SFAS No. 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (an exit price).
SFAS No. 157 also stipulates that, as a market-based measurement, fair value
measurement should be determined based on the assumptions that market
participants would use in pricing the asset or liability, and establishes a fair
value hierarchy that distinguishes between (a) market participant assumptions
developed based on market data obtained from sources independent of the
reporting entity (observable inputs) and (b) the reporting entity's own
assumptions about market participant assumptions developed based on the best
information available in the circumstances (unobservable inputs).



16



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SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years, although earlier application is
encouraged.  Additionally, prospective application of the provisions of SFAS No.
157 is required as of the beginning of the fiscal year in which it is initially
applied, except when certain circumstances require retrospective application.



Interpretation No. 48, Accounting for Uncertainty in Income Taxes--an interpretation of FASB Statement
No. 109 (issued June 2006), clarifies the accounting for uncertainty in
income taxes recognized in an enterprise's financial statements in accordance
with FASB Statement No. 109, Accounting for Income Taxes. This
Interpretation prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. This Interpretation also provides guidance
on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition.  This Interpretation is effective for
fiscal years beginning after December 15, 2006.  The adoption of this standard
on January 1, 2007 did not have an impact on our consolidated financial
statements.





ITEM 3:     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.



Fluctuating
commodity prices affect market risk in our recycling segment.  We mitigate this
risk by selling our product on a monthly contract basis.  Each month we
negotiate selling prices for all commodities.  Based on these monthly
agreements, we determine purchase prices based on a margin needed to cover
processing and administrative expenses.



We are exposed to
interest rate risk on our floating rate borrowings. As of March 31, 2007,
variable rate borrowings consisted of outstanding borrowings of $2.0 million
under our credit agreement with BB&T.  This revolving credit facility bears
interest at the one month LIBOR rate, as published in the Wall Street Journal,
plus two and twenty-five one-hundredths percent (2.25%) per annum which was
7.57% as of March 31, 2007. Any increase in this rate would lead to higher
interest expense. We do not have any interest rate swaps or caps in place, which
would mitigate our exposure to fluctuations in the interest rate on this
indebtedness. Based on our average anticipated borrowings under our credit
agreement in fiscal 2007, a hypothetical increase or decrease in the LIBOR rate
by 1% would increase or decrease interest expense on our variable borrowings by
approximately $20,000 per year, with a corresponding change in cash flows.



ITEM 4:    CONTROLS AND PROCEDURES



(a)        Evaluation of disclosure controls and
procedures.



Based on the
evaluation of the ISA Chief Executive Officer and the ISA Chief Financial
Officer of our disclosure controls and procedures as of March 31, 2007, it has
been concluded that the disclosure controls and procedures are effective for the
purposes contemplated by Rules 13a-15(e) and 15d - 15(e) promulgated by the
Securities and Exchange Commission.



17



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(b)        Changes in internal controls over financial
reporting.



There have been no
significant changes to ISA's internal controls or in other factors that have
materially affected, or are reasonably likely to materially affect, these
controls over financial reporting during the period covered by this report.



18



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PART II -- OTHER INFORMATIONItem 1.
			Legal ProceedingsNoneItem 1A.
			Risk FactorsWe
			have had no material changes from the risk factors reported in our
			Form 10-K for the year ended December 31, 2006, as filed with the
			Securities and Exchange Commission on March 27, 2007.Item 2.
			Unregistered Sales of Equity Securities and Use of
			ProceedsOn
			November 15, 2005, our Board of Directors authorized a new program
			to repurchase up to 200,000 shares of our common stock at current
			market prices.  During 2007, we have not repurchased any shares.  In
			2006 we repurchased 5,509 shares.  We repurchased 673,400 shares of
			our common stock in a prior stock repurchase program that began in
			August 2000.Item 3.
			Defaults upon Senior SecuritiesNoneItem 4.
			Submission of Matters to a Vote of Security
			HoldersNoneItem 5.
			Other InformationNoneExhibitsSee exhibit index




19



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SIGNATURESPursuant to the requirements of the Securities
			Exchange Act of 1934, the Registrant has duly caused this report to
			be signed on its behalf by the undersigned thereunto duly
			authorized.INDUSTRIAL SERVICES OF AMERICA, INC.Date:  May 7, 2007
			/s/  Harry KletterChairman and Chief Executive Officer(Principal Executive and FinancialOfficer)Date:  May 7, 2007
			/s/ Alan L. SchroeringChief Financial Officer




20



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INDEX TO EXHIBITSExhibit Number
			
			Description of Exhibits31.1
			
			Rule 13a-14(a) Certification of
			Harry Kletter for the Form 10-Q for the quarter ended March 31,
			2007.31.2
			
			Rule 13a-14(a) Certification of Alan Schroering
			for the Form 10-Q for the quarter ended March 31, 2007.32.1
			
			Section 1350 Certification of Harry Kletter and
			Alan Schroering for the Form 10-Q for the quarter ended March 31,
			2007




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