FORM 10-Q



SECURITIES 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 September 30, 2009

OR

[  ]   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 0-20979



INDUSTRIAL 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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).

Yes ____  No ____



Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.  
See the definitions of "large accelerated filer," "accelerated filer" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.

(Check one):   Large accelerated filer                   Accelerated
filer                            Non-accelerated filer                    Smaller
reporting company 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 September 30,
2009:  4,286,292.





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INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESINDEXPage No.Part I
			Financial InformationCondensed Consolidated Balance SheetsSeptember 30, 2009 (Unaudited) and December 31, 2008
			3Condensed Consolidated Statements ofOperations - Three Months EndedSeptember 30, 2009 and 2008 (Unaudited)
			5Condensed Consolidated Statements ofOperations - Nine Months EndedSeptember 30, 2009 and 2008 (Unaudited)
			6Condensed Consolidated Statements of Shareholders' EquitySeptember 30, 2009 (Unaudited) and December 31, 2008
			7Condensed Consolidated Statements ofCash Flows - Nine Months EndedSeptember 30, 2009 and 2008 (Unaudited)
			8Notes to Condensed ConsolidatedFinancial Statements (Unaudited)
			9Management's Discussion and Analysisof Financial Condition and Resultsof Operations
			22Part II
			Other Information
			33




---



Part I -- FINANCIAL
INFORMATION



ITEM 1: Condensed
CONSOLIDATED FINANCIAL STATEMENTS.



INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS



ASSETS



September 30,
			2009
			(Unaudited)
			
			December 31,
			2008Current assetsCash and cash equivalents
			$      962,301
			
			$    1,103,842Income tax receivable
			36,016
			
			36,016Accounts receivable - trade (after allowance 
			    for doubtful accounts of $100,000 in 2009
			    and $490,000 in 2008)
			15,957,026
			
			3,811,484Net investment in sales-type leases
			61,364
			
			54,629Inventories
			21,369,791
			
			4,371,348Deferred income taxes
			912,337
			
			912,337Other
			603,880
			
			126,902Total current assets
			39,902,715
			
			10,416,558Shredder system construction in progress
			-
			
			6,547,902Net property and equipment
			28,999,132
			
			10,895,477Total property and equipment
			28,999,132
			
			17,443,379Other AssetsGoodwill
			560,005
			
			560,005Net investment in sales-type leases
			24,315
			
			71,222Notes receivable -- related party
			138,907
			
			167,594Other assets
			427,225
			
			132,6721,150,452
			
			931,493$  70,052,299
			
			$  28,791,430




____________________



See accompanying
notes to consolidated financial statements.

3.



---



INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS

CONTINUED



LIABILITIES AND
STOCKHOLDERS' EQUITY





September 30, 2009
			(Unaudited)
			
			December 31,
			2008Current
			liabilitiesCurrent maturities of long term debt  (Note 4)
			$  12,524,963
			
			$       857,863Current maturities of capital lease obligation
			40,481
			
			80,771Accounts payable
			12,992,851
			
			3,701,895Income tax payable
			2,447,791
			
			566,025Note payable to BB&T (Note 4)
			5,000,000
			
			-Liability for legal settlements
			-
			
			1,037,165Interest rate swap agreement liability  (Note 4)
			647,723
			
			792,236Accrued bonuses
			1,338,800
			
			54,500Other current liabilities
			658,277
			
			337,231Total current liabilities
			35,650,886
			
			7,427,686Long-term liabilitiesLong-term debt (Note 4)
			13,626,501
			
			8,510,014Capital lease obligation
			-
			
			20,798Deferred income taxes
			549,520
			
			491,71514,176,021
			
			9,022,527Stockholders' equityCommon stock, $.005 par value, 10,000,000 shares 
			    authorized, 4,795,000 shares issued in 2009 and 2008, 
			    4,286,292 shares and 3,575,292 shares outstanding in 2009 
			    and 2008, respectively
			23,975
			
			21,475Additional paid-in capital
			7,347,275
			
			3,742,373Retained earnings
			14,338,589
			
			10,601,102Accumulated other comprehensive loss
			(388,634)
			
			(475,342)Treasury stock, 508,708 and 719,708 shares at average costin 2009 and 2008, respectively
			(1,095,813)
			
			(1,548,391)20,225,392
			
			12,341,217$  70,052,299
			
			$  28,791,430




____________________



See accompanying
notes to consolidated financial statements.

4.



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INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(UNAUDITED)





2009
			
			2008Revenue from services
			$  1,552,696
			
			$  4,875,379Revenue from product sales
			78,416,778
			
			23,962,449Total Revenue
			79,969,474
			
			28,837,828Cost of goods sold for services
			972,874
			
			4,588,163Cost of goods sold for product sales
			72,483,157
			
			19,786,821Total Cost of goods sold
			73,456,031
			
			24,374,984Selling, general and administrative expense
			2,606,476
			
			2,522,428Income before other income (expense)
			3,906,967
			
			1,940,416Other income (expense)Interest expense
			(350,589)
			
			(76,628)Interest income
			5,619
			
			19,060Gain on sale of assets
			42,137
			
			14,133Other income (expense)
			(2,111)
			
			158,884(304,944)
			
			115,449Income before income taxes
			3,602,023
			
			2,055,865Income tax provision
			1,440,809
			
			775,750Net income
			$  2,161,214
			
			$  1,280,115Basic earnings per share
			$           0.55
			
			$           0.36Diluted earnings per share
			$           0.55
			
			$           0.36Weighted shares outstanding:Basic
			3,900,422
			
			3,593,966Diluted
			3,909,723
			
			3,593,966


____________________



See accompanying
notes to consolidated financial statements.

5.



---



INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(UNAUDITED)





2009
			
			2008Revenue from service
			$    5,720,398
			
			$   13,759,177Revenue from product sales
			137,623,313
			
			75,673,131Total Revenue
			143,343,711
			
			89,432,308Cost of goods sold for services
			4,388,861
			
			12,855,591Cost of goods sold for product sales
			124,305,531
			
			62,235,557Total Cost of goods sold
			128,694,392
			
			75,091,148Selling, general and administrative expense
			7,756,020
			
			7,701,687Income before other income (expense)
			6,893,299
			
			6,639,473Other income (expense)Interest expense
			(702,255)
			
			(305,197)Interest income
			27,779
			
			63,057Gain on sale of assets
			53,109
			
			30,614Other income (expense)
			(42,787)
			
			287,550(664,154)
			
			76,024Income before income taxes
			6,229,145
			
			6,715,497Income tax provision
			2,491,658
			
			2,686,199Net income
			$    3,737,487
			
			$     4,029,298Basic earnings per share
			$             1.01
			
			$              1.12Diluted earnings per share
			$             1.01
			
			$              1.12Weighted shares outstanding:Basic
			3,710,395
			
			3,602,703Diluted
			3,713,529
			
			3,602,703




____________________



See accompanying
notes to consolidated financial statements.

6.



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INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2009

(UNAUDITED)






AccumulatedAdditional
			
			
			
			OtherCommon Stock
			
			Paid-in
			
			Retained
			
			Comprehensive
			
			Treasury StockShares
			
			Amount
			
			Capital
			
			Earnings
			
			Loss
			
			Shares
			
			Cost
			
			TotalBalance
			as of December 31, 2008
			
			4,295,000
			
			$21,475
			
			$3,742,373
			
			$10,601,102
			
			$  (475,342)
			
			(719,708)
			
			$ (1,548,391)
			
			$12,341,217Net
			unrealized loss on derivative
			    instruments, net of tax
			
			-
			
			-
			
			-
			
			-
			
			86,708
			
			-
			
			-
			
			86,708Stock
			bonuses
			
			-
			
			-
			
			37,402
			
			-
			
			-
			
			11,000
			
			22,578
			
			59,980Purchase
			of real estate (CGR)
			
			-
			
			-
			
			370,000
			
			-
			
			-
			
			200,000
			
			430,000
			
			800,000Purchase
			of real estate (GL)
			
			500,000
			
			2,500
			
			3,197,500
			
			-
			
			-
			
			-
			
			-
			
			3,200,000Net income
			
			-
			
			-
			
			-
			
			3,737,487
			
			-
			
			-
			
			-
			
			3,737,487Balance
			as of September 30, 2009
			
			4,795,000
			
			$23,975
			
			$7,347,275
			
			$14,338,589
			
			$  (388,634)
			
			(508,708)
			
			$ (1,095,813)
			
			$20,225,392CGR = 3409
			Campground RoadGL = 7124
			& 7200 Grade Lane




____________________



See accompanying
notes to consolidated financial statements.

7.



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INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(UNAUDITED)



2009
			
			2008Cash flows
			from operating activitiesNet income
			$    3,737,487
			
			$    4,029,298Adjustments to reconcile net income to net cash from operating
			activities:Depreciation and amortization
			2,024,559
			
			1,575,843Stock distribution to employees
			59,980
			
			-Deferred income taxes
			144,513
			
			880,000Reduction in provision for doubtful accounts
			(390,000)
			
			-Gain on sale of property and equipment
			(53,108)
			
			(30,614)Change in assets and liabilitiesReceivables
			(11,755,542)
			
			(2,069,243)Net investment in sales-type leases
			40,172
			
			47,968Inventories
			(7,889,385)
			
			(1,843,786)Other assets
			771,531
			
			284,903Accounts payable
			9,290,956
			
			201,692Other current liabilities
			2,305,434
			
			2,090,954Net cash from operating activities
			(3,256,465)
			
			5,167,015Cash flows
			from investing activitiesProceeds from sale of property and equipment
			86,022
			
			82,827Purchases of property and equipment
			(1,677,756)
			
			(2,453,593)Payments for shredder system
			(6,436,584)
			
			(2,946,360)Acquisition from Venture Metals
			(10,607,944)
			
			-Payments from related party
			28,687
			
			27,155Net cash from investing activities
			(18,607,575)
			
			(5,289,971)Cash flows
			from financing activitiesPurchases of common stock
			-
			
			(527,687)Issuance of common stock
			-
			
			161,400Proceeds from note payable to BB&T
			5,000,000
			
			-Payments on capital lease obligation
			(61,088)
			
			(113,312)Payment of cash dividend
			-
			
			(364,190)Proceeds from long-term debt
			20,202,887
			
			6,513,703Payments on long-term debt
			(3,419,300)
			
			(3,988,504)Net cash from financing activities
			21,722,499
			
			1,681,410Net increase/(decrease) in cash
			(141,541)
			
			1,558,454Cash at beginning of period
			1,103,842
			
			1,501,685Cash at end of period
			$       962,301
			
			$    3,060,139Supplemental disclosure of cash flow informationCash paid for interest
			$       702,255
			
			$       305,197Cash paid for taxes
			$       642,717
			
			$       291,214Supplemental disclosure of noncash investing and financing
			activities:Common stock issued to acquire real estate
			4,000,000




____________________



See accompanying
notes to consolidated financial statements.

8.



---



INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(Unaudited)



NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of Presentation



The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance
with U. S. generally accepted accounting principles (GAAP) 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 September 30, 2009 and the results of our
operations and changes in our cash flow for the periods ended September 30, 2009
and 2008.  Results of operations for the period ended September 30, 2009 are not
necessarily indicative of the results that may be expected for the entire year. 
Additional information, including the audited December 31, 2008 consolidated
financial statements and the Summary of Significant Accounting Policies, is
included in our Annual Report on Form 10-K for the year ended December 31, 2008
on file with the Securities and Exchange Commission.



Adoption of the FASB
Accounting Standards Codification



In June 2009, the Financial
Accounting Standards Board (FASB) issued the FASB Accounting Standards
Codification (ASC).  Effective this quarter, the ASC became the single source
for all authoritative GAAP recognized by the FASB and is required to be applied
to financial statements issued for interim and annual periods ending after
September 15, 2009.  The ASC does not change GAAP and did not impact our
consolidated financial statements.



Fair Value



We carry
certain of our financial assets and liabilities at fair value on a recurring
basis. These financial assets and liabilities are composed of trading account
assets, investment securities available for sale and various types of derivative
instruments. In addition, we measure certain assets, such as goodwill and other
long-lived assets, at fair value on a non-recurring basis to evaluate those
assets for potential impairment. Fair value is defined 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.



In accordance with the accounting standard, which we
adopted effective January 1, 2008, we categorize our financial assets and
liabilities into the following fair value hierarchy:



Level 1 - Financial assets and liabilities with values
based on unadjusted quoted prices for identical assets or liabilities in an
active market. Examples of level 1 financial instruments include active
exchange-traded equity securities and certain U.S. government securities.



Level 2 - Financial assets and liabilities with values based on
quoted prices for similar assets and liabilities in active markets, and inputs
that are observable for the asset or liability, either directly or indirectly,
for substantially the full term of the asset or liability. Examples of level 2
financial instruments include commercial paper purchased from the State
Street-administered asset-backed commercial paper conduits, various types of
interest-rate derivative instruments, and various types of fixed-income
investment securities. Pricing models are utilized to estimate fair value for
certain financial assets and liabilities categorized in level 2.



Level 3 - Financial assets and liabilities with values based on
prices or valuation techniques that require inputs that are both unobservable in
the market and significant to the overall fair value measurement. These inputs
reflect management's judgment about the assumptions that a market participant
would use in pricing the asset or liability, and are based on the best available
information, some of which is internally developed. Examples of level 3
financial instruments include certain corporate debt, asset- and mortgage-backed
securities and certain derivative instruments with little or no market activity
and a resulting lack of price transparency.



When determining the fair value measurements for financial assets
and liabilities carried at fair value on a recurring basis, we consider the
principal or most advantageous market in which we would transact and consider
assumptions that market participants would use when pricing the asset or
liability. When possible, we look to active and observable markets to price
identical assets or liabilities. When identical assets and liabilities are not
traded in active markets, we look to market observable data for similar assets
and liabilities. Nevertheless, certain assets and liabilities are not actively
traded in observable markets, and we use alternative valuation techniques to
derive fair value measurements.



We use the fair value methodology outlined in the related
accounting standard to value the assets and liabilities for cash, debt and
derivatives. All of our cash is defined as Level 1 and all our debt and
derivative contracts are defined as Level 2.  The following table represents our
fair value hierarchy for financial instruments at September 30, 2009:





Asset/Liability
			Level 1
			Level 2
			Level 3
			TotalCash and cash
			equivalents
			$     962,301
			-
			-
			$        962,301Long term debt
			-
			$  (31,151,464)
			-
			(31,151,464)Derivative
			Contract
			-
			(647,723)
			-
			(647,723)




Subsequent Events



We have evaluated the
period from September 30, 2009 through November 16, 2009, the date the financial
statements herein were issued, for subsequent events requiring recognition or
disclosure in the financial statements.  No material subsequent events were
identified.



Accounting Standards Issued Not Yet Adopted



In June 2009, the FASB
issued authoritative guidance on accounting for transfers of financial assets,
which is effective for reporting periods beginning after November 15, 2009. 
This new guidance limits the circumstances in which a financial asset may be
de-recognized when the transferor has not transferred the entire financial asset
or has continuing involvement with the transferred asset.  The concept of a
qualifying special-purpose entity, which had previously facilitated sale
accounting for certain asset transfers, is removed by this new guidance.  We
expect that the adoption of this new guidance will not have a material effect on
our financial position or results of operations.



In June 2009, the FASB
issued authoritative guidance on accounting for variable interest entities
(VIE), which is effective for reporting periods beginning after November 15,
2009 and changes the process for how an enterprise determines which party
consolidates a VIE, to a primarily qualitative analysis.  The party that
consolidates the VIE (the primary beneficiary) is defined as the party with (1)
the power to direct activities of the VIE that most significantly affect the
VIE's economic performance and (2) the obligation to absorb losses  of the VIE
or the right to receive benefits from the VIE.  Upon adoption, reporting
enterprises must reconsider their conclusions on whether an entity should be
consolidated and should a change result, the effect on net assets will be
recorded as a cumulative effect adjustment to retained earnings.  We expect that
the adoption of this new guidance will not have a material effect on our
financial position or results of operations.



NOTE 2 -- INCOME STATEMENT RECLASSIFICATIONS



We have reclassified
certain items in the accompanying Financial Statements and Notes to the
Financial Statements for the prior period in order to be comparable with the
current classifications.   These reclassifications had no effect on previously
reported net income. We have reclassified certain expenses in our income
statement to more accurately reflect segment performance and we have
reclassified cost of goods sold and selling, general and administrative expenses
for the quarter ended September 30, 2008 to be consistent with current
presentation.  These reclassifications had no effect on previously reported net
income.



NOTE 3 -- 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 4
-- LONG TERM DEBT AND NOTES PAYABLE TO BANK



On June
30, 2009, we executed a promissory note, loan agreement and related security
documents with Branch Banking and Trust Company in the amount of $5,000,000 to
support our ongoing growth and as a first step in our planned and forthcoming
restructuring of our banking facilities.  Over the past seven years, we have
been acquiring real estate and have made substantial investments in our real
property infrastructure using operating cash.  We have acquired a valuable
portfolio of real estate and this is a first step in maximizing its value to
us.



Together with the loan agreement
we executed a promissory note, which matured September 28, 2009 at which time
the principal plus accrued interest thereon was to be paid in full.  On October
15, 2009, we executed a note modification agreement, which extended the maturity
date to December 15, 2009.  The note payable is a non-revolving credit facility
and provides that we may borrow from time to time through the maturity date. 
The loan bears interest at the one month LIBOR plus 3.25% per annum, which shall
be adjusted monthly on the first day of each month for each LIBOR interest
period.  The minimum rate of interest is 4.5%, which was the interest rate as of
September 30, 2009.  Accrued interest is payable monthly commencing November 15,
2009 with the balance due at maturity on December 15, 2009.  We have secured the
note payable with mortgages, related assignments of leases and rents and
environmental certificates against our properties or those of our affiliates,
ISA Real Estate, LLC, ISA Indiana Real Estate, LLC and 7021 Grade Lane, LLC.   
In addition we have cross-collateralized this note with our other indebtedness
owed to BB&T.  As a result of this short term financing BB&T has reduced our
available amount under the BB&T Bankcard from $2.5 million to an amount not to
exceed $500,000 so long as this note is outstanding.  In addition to the
cross-collateralization of these other financings with this note, if ISA
defaults on any note with BB&T, it is considered to have defaulted on all notes
with BB&T.  The terms of the note payable agreement place certain restrictive
covenants on us, including maintenance of a specified tangible net worth, debt
to net worth and EBITA ratio.  Consequently, these covenants restrict our
ability to incur as much additional debt as we may desire for future growth.  At
September 30, 2009, we were in compliance with all restrictive covenants related
to our indebtedness owed to BB&T.  As of September 30, 2009, the outstanding
balance on this note payable was $5,000,000.



Management is currently in
discussions with BB&T and several other banks regarding the modification of the
current debt structure with targeted completion prior to the December 15, 2009 maturity
date of the note described above and would ideally consolidate all of our
outstanding debt.  Currently, no commitments are in place with any of the banks
to facilitate this modification.



Last year,
we entered into three interest rate swap agreements swapping variable rates for
fixed rates. The first swap agreement covers $5.8 million in debt and commenced
October 15, 2008 and matures on April 7, 2014. The second swap agreement covers
approximately $2.7 million in debt and commenced October 15, 2008 and matures on
May 7, 2013.  The third swap agreement covers approximately $571,000 in debt
and commenced October 22, 2008 and matures on October 22, 2013.  The three swap
agreements fix our interest rate at approximately 5.8%.  At September 30, 2009,
we recorded the estimated fair value of the three swaps at approximately
$648,000.  We entered into the swap agreements for the purpose of hedging the
interest rate market risk for the respective notional amounts.



Excluding the $5,000,000 short term credit facility, our long term debt as of
September 30, 2009 and December 31, 2008 consisted of the following:



2009
			
			2008(unaudited)Non-revolving line of credit with BB&T effective February 11, 2009
			in the amount of $12,000,000 with a maturity date of February 11,
			2010.  Interest is payable monthly starting March 11, 2009, and the
			note bears interest at the adjusted LIBOR rate of one month LIBOR
			plus 2.25% per annum with a floor of 4%.  As of September 30, 2009,
			the applicable interest rate was 4%.  All our assets (except rental
			fleet equipment) secure this note.
			
			$  11,517,440
			
			-Revolving credit facility of $10 million with BB&T secured by all
			assets except for rental fleet equipment with a variable interest
			rate of Libor plus 2.25% and no required monthly principal
			payments.  As of September 30, 2009, the applicable interest rate
			was 4%.  The maturity date under this agreement is January 1, 2012.
			
			4,877,098
			
			-Note payable to BB&T in the amount of $3 million secured by our
			rental fleet equipment with a fixed interest rate of 5.65%.  The
			repayment terms are principal and interest paid monthly commencing
			on November 7, 2008 with one final payment of all remaining
			principal and accrued interest due at maturity on May 7, 2013.
			
			2,661,032
			
			2,838,094Note payable to BB&T in the amount of $6.0 million secured by our
			shredder system assets with a fixed interest rate of 5.89%. The
			repayment terms are principal and interest paid monthly commencing
			on November 7, 2008 with one final payment of all remaining
			principal and accrued interest due at maturity on April 7, 2014.
			
			5,774,183
			
			5,000,000Note payable to BB&T in the amount of $609,900 secured by a crane
			with a fixed interest rate of 5.89%.  The repayment terms are
			principal and interest paid monthly beginning December 1, 2008 with
			one final payment of all remaining principal and accrued interest
			due at maturity in October 2013.
			
			567,292
			
			602,153Note payable to Paccar Financial Corp. in the amount of $163,655
			secured by two Kenworth trucks. Payments are $3,395.36 per month
			with an effective interest rate of 6.5%. The maturity date under
			this agreement is September 2011.
			
			122,912
			
			153,469Note payable to ILS for various assets including tractor trailers,
			trucks and containers. The repayment terms are $20,000 per month for
			60 months at a seven percent (7%) interest rate.  The maturity date
			under this agreement is August 2012.
			
			631,508
			
			774,16126,151,464
			
			9,367,877Less current maturities
			
			12,524,963
			
			857,863$  13,626,501
			
			$    8,510,014




The annual maturities
of long-term debt as of September 30, 2009 are as follows:



2010
			
			$  12,524,9632011
			
			1,109,9312012
			
			5,949,7182013
			
			2,834,396Thereafter
			
			3,732,456Total
			
			$  26,151,464






NOTE 5
-- SEGMENT INFORMATION



Our operations
include two primary segments:  Recycling and Waste Services.  In prior years,
our three primary reporting segments were ISA Recycling, CWS and WESSCO.  In the
first quarter of 2009, we decided to consolidate CWS and WESSCO into one
reporting segment because CWS revenues have declined so that this segment is no
longer material to our total revenues.  We named this combined segment Waste
Services because it more accurately reflects that business.  Waste Services
provides waste disposal services including contract negotiations with service
providers, centralized billing, invoice auditing, and centralized dispatching. 
Waste Services also sells, leases, and services waste handling and recycling
equipment.



The Recycling
segment generates its revenues based on buying and selling of ferrous,
non-ferrous, including stainless steel, and fiber scrap. Waste Services'
revenues consist of charges to customers for waste disposal services and
equipment sales and lease income.  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
			NINE MONTHS ENDED
			SEPTEMBER 30, 2009
			RECYCLING
			
			WASTE
			SERVICES
			
			OTHER
			
			SEGMENT
			TOTALSRecycling revenues
			$136,029,879
			
			$                 -
			
			$               -
			
			$136,029,879Equipment sales, serviceand leasing revenues
			-
			
			1,593,434
			
			-
			
			1,593,434Management fees
			-
			
			5,720,398
			
			-
			
			5,720,398Cost of goods sold
			(123,725,378)
			
			(4,969,014)
			
			-
			
			(128,694,392)Selling, general andadministrative expenses
			(4,488,417)
			
			(1,031,862)
			
			(2,235,741)
			
			(7,756,020)Segment profit (loss)
			$    7,816,084
			
			$  1,312,956
			
			$ (2,235,741)
			
			$   6,893,299Segment assets
			$  63,361,309
			
			$  3,115,724
			
			$  3,575,266
			
			$ 70,052,299




FOR THE
			NINE MONTHS ENDED
			SEPTEMBER 30, 2008
			RECYCLING
			
			WASTE SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$  73,936,140
			
			$                -
			
			$                 -
			
			$  73,936,140Equipment sales, serviceand leasing revenues
			-
			
			1,736,991
			
			-
			
			1,736,991Management fees
			-
			
			13,759,177
			
			-
			
			13,759,177Cost of goods sold
			(61,590,647)
			
			(13,500,501)
			
			-
			
			(75,091,148)Selling, general andadministrative expenses
			(4,009,324)
			
			(1,174,379)
			
			(2,517,984)
			
			(7,701,687)Segment profit (loss)
			$    8,336,169
			
			$     821,288
			
			$ (2,517,984)
			
			$    6,639,473Segment assets
			$  25,953,912
			
			$  4,166,162
			
			$    5,047,802
			
			$  35,167,876




FOR THE
			THREE MONTHS ENDED
			SEPTEMBER 30, 2009
			RECYCLING
			
			WASTE SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$  77,877,987
			
			$                -
			
			$                 -
			
			$  77,877,987Equipment sales, serviceand leasing revenues
			-
			
			538,791
			
			-
			
			538,791Management fees
			-
			
			1,552,696
			
			-
			
			1,552,696Cost of goods sold
			(72,294,051)
			
			(1,161,980)
			
			-
			
			(73,456,031)Selling, general andadministrative expenses
			(1,577,366)
			
			(321,661)
			
			(707,449)
			
			(2,606,476)Segment profit (loss)
			$    4,006,570
			
			$     607,846
			
			$    (707,449)
			
			$    3,906,967Segment assets
			$  63,361,309
			
			$  3,115,724
			
			$   3,575,266
			
			$  70,052,299




FOR THE
			THREE MONTHS ENDED
			SEPTEMBER 30, 2008
			RECYCLING
			
			WASTE SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$  23,392,074
			
			$                -
			
			$                 -
			
			$  23,392,074Equipment sales, serviceand leasing revenues
			-
			
			570,375
			
			-
			
			570,375Management fees
			-
			
			4,875,379
			
			-
			
			4,875,379Cost of goods sold
			(19,566,712)
			
			(4,808,272)
			
			-
			
			(24,374,984)Selling, general andadministrative expenses
			(1,339,619)
			
			(393,229)
			
			(789,580)
			
			(2,522,428)Segment profit (loss)
			$    2,485,743
			
			$     244,253
			
			$    (789,580)
			
			$    1,940,416Segment assets
			$  25,953,912
			
			$  4,166,162
			
			$   5,047,802
			
			$  35,167,876




NOTE 6 --
INVENTORIES



Our
inventories primarily consist of ferrous and non-ferrous, including stainless
steel, 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 $2,966,362
at September 30, 2009 was comprised of $958,909 in raw materials and $2,007,453
of finished goods.  Non-ferrous inventory of $2,296,825 at September 30, 2009
was comprised of $728,158 in raw materials and $1,568,667 of finished goods. 
Stainless steel inventory at September 30, 2009 was $15,335,381.  Replacement
parts inventory for the shredder at September 30, 2009 was $593,419.  Ferrous
inventory of $2,162,149 at December 31, 2008 was comprised of $418,035 in raw
materials and $1,744,114 of finished goods.  Non-ferrous inventory of $2,033,154
at December 31, 2008 was comprised of $362,065 in raw materials and $1,671,089
of finished goods.  We charged $3,135,501 in general and administrative
processing costs to cost of sales for the nine months ended September 30, 2009
and $3,098,870 for the year ended December 31, 2008.



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 September 30, 2009 and December 31, 2008 consist
of the following:



September 30, 2009(unaudited)
			
			December 31,2008Stainless steel alloys
			$  15,335,381
			
			$                  -Ferrous materials
			2,966,362
			
			2,162,149Non-ferrous materials
			2,296,825
			
			2,033,154Shredder replacement parts
			593,419
			
			-Waste equipment machinery
			102,725
			
			95,675Other
			75,079
			
			80,370Total inventories
			$  21,369,791
			
			$   4,371,348






NOTE 7 - LEASE COMMITMENTS



Operating Leases:



We lease our Louisville, Kentucky facility from a related party under an
operating lease expiring December 2012.  The rent was adjusted in December 2007
per the agreement to monthly payments of $48,500 through December 2012.  In
addition, we are also responsible for real estate taxes, insurance, utilities
and maintenance expense.



We also lease a management services operations facility and various pieces of
equipment in Dallas, Texas for which monthly payments of $969 are due through
September 2010.



We also lease other machinery and
equipment under operating leases which expire through June 2010.



Future minimum lease payments for operating leases as of September 30, 2009 are
as follows:





2009
			
			$     642,5432010
			
			636,0002011
			
			636,0002012
			
			159,000Future minimum lease payments
			
			$  2,073,543




Total rent expense for the nine months ended September 30, 2009 and 2008 was
$831,687 and $661,111 respectively.



Capital Leases:



We
lease various pieces of equipment which qualify as capital leases.  These lease
arrangements require monthly lease payments expiring at various dates through
June 2010.



The
following is a summary of assets held under capital leases which are included in
property and equipment:



2009
			
			2008Equipment
			$    366,172
			
			$    771,567Less accumulated
			depreciation
			104,280
			
			242,418$    261,892
			
			$    529,149




The present value of future net minimum capital lease payments at September 30,
2009 is $40,481, all current.





NOTE 8 -- PER SHARE DATA



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



Nine months ended September 30, 2009 compared to nine months
ended September 30, 2008:





2009
			
			2008Basic earnings per shareNet income
			$  3,737,487
			
			$  4,029,298Weighted average shares outstanding
			3,710,395
			
			3,602,703Basic earnings per share
			$           1.01
			
			$           1.12Diluted earnings per shareNet income
			$  3,737,487
			
			$  4,029,298Weighted average shares outstanding
			3,710,395
			
			3,602,703Add dilutive effect of assumed exercising of stock options
			3,134
			
			-Diluted weighted average shares outstanding
			3,713,529
			
			3,602,703Diluted earnings per share
			$          1.01
			
			$           1.12






Three months ended
September 30, 2009 compared to three months ended September 30, 2008:



2009
			
			2008Basic earnings per shareNet income
			$  2,161,214
			
			$  1,280,115Weighted average shares outstanding
			3,900,422
			
			3,593,966Basic earnings per share
			$           0.55
			
			$           0.36Diluted
			earnings per shareNet income
			$  2,161,214
			
			$  1,280,115Weighted average shares outstanding
			3,900,422
			
			3,593,966Add dilutive effect of assumed exercising of stock options
			9,301
			
			-Diluted weighted average shares outstanding
			3,909,723
			
			3,593,966Diluted earnings per share
			$          0.55
			
			$           0.36






NOTE 9
-- PURCHASE OF INVENTORY AND FIXED ASSETS  OF VENTURE METALS



On January
13, 2009 we entered into an inventory purchase agreement with Venture Metals,
LLC and its members, Steve Jones, Jeff Valentine and Carlos Corona, under which
we agreed to pay to Venture Metals $8,846,794 for inventory comprised of
stainless steel and high temperature alloys, which we verified as to weight. We
funded the purchase of the inventory through our line of credit with BB&T.  We
subsequently paid an additional $262,265 for inventory after the final
verification of weight.



Under the agreement, we had the
right to retain the use of the property located at 3409 Camp Ground Road,
Louisville, Kentucky, the site of the Venture Metals business that Venture
Metals leases from Luca Investments, LLC, an affiliate of Venture Metals, owned
50% each by Messrs. Jones and Valentine.  We had the right to use the facilities
located on those premises for a period not to exceed two years from the date of
the agreement for a monthly rental of $15,000.   Messrs. Jones, Valentine and
Corona are our employees.



On April
13, 2009, we exercised our option to purchase fixed assets under an installment
purchase agreement with Venture Metals, LLC, whereby Venture Metals sold all of
its fixed assets, located at 3409 Camp Ground Road, Louisville, Kentucky, to us
by virtue of an installment purchase agreement effective February 11, 2009. 
Steve Jones, Jeff Valentine and Carlos Corona are the sole members of Venture
Metals and are currently our employees with Steve Jones now serving as one of
our officers.  Under the notice of exercise of option to purchase fixed assets
we agreed to purchase the fixed assets on April 17, 2009 for the purchase price
of $1,498,885 less the aggregate amount of all rent we paid to Venture Metals
under the previous agreement.  The installment payment we owed to Venture Metals
was $15,000 per month commencing March 1, 2009 with a pro-rata amount paid for
the period from February 11, 2009 through February 28, 2009.  A further
description of the installment purchase agreement and related transactions is
contained in Items 1.01 and 2.01 of Form 8-K for the event dated February 11,
2009, as filed on February 18, 2009, with the Securities and Exchange Commission
by us.



At the time of the consummation
of the option to purchase fixed assets, the installment purchase agreement
terminated.  In connection with the exercise of the option to purchase, Venture
Metals had to satisfy outstanding obligations with respect to the fixed assets
owed to a number of creditors.  The fixed assets include equipment such as
cranes, loaders, scales, forklifts, computers, including computer software,
furniture and certain leasehold improvements to the property at 3409 Camp Ground
Road, Louisville, Kentucky.



We completed the acquisition of
the real property at 3409 Camp Ground Road, Louisville, Kentucky, from Luca
Investments, LLC, an affiliate of Venture Metals, on April 2, 2009.  Under the
agreement, we purchased the property and improvements thereon consisting of 5.67
acres with a 7,875 square foot building located thereon.  We paid $2,067,041 for
the property, comprised of $1,267,041 in cash and 200,000 shares of ISA common
stock priced at the per share NASDAQ last sale price of $4.00, as quoted on
NASDAQ at 10:30 a.m. (EDT) on April 2, 2009.  We determined the purchase price
for the real estate based on internal analyses as to the value of the property. 
BB&T provided credit to us under our $10,000,000 line of credit with BB&T
funding the cash portion of the purchase price.



NOTE 10
-- LONG TERM INCENTIVE PLAN



At our June 16, 2009 annual
shareholders meeting, shareholders approved ratification of a long term
incentive plan and approved the issuance of additional common shares of our
stock.  The plan  proposes to make available up to 800,000 shares of our common
stock for performance-based awards under the plan.  We may grant any of these
types of awards:  non-qualified and incentive stock options; stock appreciation
rights; and other stock awards including stock units, restricted stock units,
performance shares, performance units, and restricted stock.   The performance
goals that we may use for such awards will be based on any one or more of the
following performance measures: cash flow; earnings; earnings per share; market
value added or economic value added; profits; return on assets; return on
equity; return on investment; revenues; stock price; or total shareholder
return.



The plan is administered by
a committee selected by the Board, initially our Compensation Committee, and
consisting solely of two or more outside members of the Board.  The Committee
may grant one or more awards to our employees, including our officers, our
directors and consultants, and will determine the specific employees who will
receive awards under the plan and the type and amount of any such awards.  A
participant who receives shares of stock awarded under the plan must hold those
shares for six months before the participant may dispose of such shares.  The
Committee may settle an award under the plan in cash rather than stock.



As of July 1, 2009, we
awarded options to purchase 20,000 shares of our stock each to our three
independent directors for a total of 60,000 shares at a per share exercise price
of $6.35.



NOTE 11 -- REAL ESTATE PURCHASE



On September 10, 2009 we
completed the acquisition of all outstanding membership interests in 7124 Grade
Lane LLC and 7200 Grade Lane LLC, each a Kentucky limited liability company,
owned by Harry Kletter Family Limited Partnership, a Kentucky limited
partnership.  Mr. Kletter is the chairman and chief executive officer of ISA and
the general partner of Harry Kletter Family Limited Partnership.



7124 Grade Lane LLC and
7200 Grade Lane LLC own properties at 7124 Grade Lane and 7200 Grade Lane,
Louisville, Kentucky, respectively. Prior to the consummation of the acquisition
of the interests in the limited liability companies on September 10, 2009, Harry
Kletter Family Limited Partnership owned all the membership interests in each of
7124 Grade Lane LLC and 7200 Grade Lane LLC.  ISA acquired these membership
interests, and in effect the properties, due to their strategic location
adjacent to 7100 Grade Lane, Louisville, Kentucky where ISA has its principal
operations and headquarters and recently completed the construction of a new
shredder system and part of the installation rests on the property.



As described in each agreement and plan of share
exchange, one by and among the limited partnership, 7124 Grade Lane LLC and ISA
and the second among the limited partnership, 7200 Grade Lane LLC and ISA, ISA
exchanged in the aggregate 500,000 newly-issued, unregistered shares of its
$.005 par value common stock for all the outstanding membership interest in the
two limited liability companies.  These shares do not have any registration
rights.  With respect to the purchase of the membership interests in 7200 Grade
Lane LLC, ISA provided to the limited partnership 367,187 shares at $6.40 per
share for a purchase price of $2,349,996.80 and with respect to the purchase of
the membership interests in 7124 Grade Lane LLC, ISA provided to the limited
partnership 132,813 shares at $6.40 per share for a purchase price of
$850,003.20.  The transaction did not involve financing provided by any
financial institutions.



Lohan Realty Resources, Inc., a member of the Appraisal
Institute and located in Louisville, Kentucky, provided an appraisal for each
property to assist ISA in determining the purchase price for the membership
interests in the limited liability companies.  As of the date of the appraisals
on July 3, 2009, the property at 7124 Grade Lane had an "as is" estimated market
value of $850,000 while the property located at 7200 Grade Lane had an "as is"
estimated market value of $2,350,000.  The respective purchase prices paid in
the form of ISA shares to the limited partnership for the 7124 Grade Lane LLC
and 7200 Grade Lane LLC were $850,003.20 and $2,349,996.80, respectively, as
evidenced by the 132,813 shares and 367,187 shares of ISA common stock at the
per share price of $6.40.



The transaction received approval of the ISA audit
committee comprised of independent directors, the board of directors, without
the participation of Harry Kletter, the ISA chairman and chief executive officer
and also the general partner of the limited partnership, and a majority of the
outstanding shares of ISA common stock by written consent.  Because of the
relationship between Harry Kletter and ISA, NASDAQ rules required the approval
of the ISA stockholders.



Although the form of transaction involved the exchange of
ISA unregistered securities for interests in the limited liability companies,
the substance of the transaction was the purchase of two tracts of real estate
from the limited partnership.  Each limited liability company is a special
purpose entity formed solely to hold its respective real estate tract to provide
greater liability protection.  The only income generated from these tracts was
an immaterial amount of $6,000 a month through August 2011 from a lease of four
acres of the 7200 Grade Lane tract.  Effectively these limited liability
companies had no operating assets and were therefore not operating businesses.





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
unaudited condensed 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, 2008, as
filed with the Securities and Exchange Commission.



General



We are primarily focusing our attention now and in the future towards our
recycling business.  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.



In 2009, we expanded
into the stainless steel recycling market for super alloys and high temperature
metals by purchasing inventories and related equipment from Venture Metals, LLC
and hiring two of its key executives.  We buy, remelt, and sell stainless steel
and high-temperature alloys to steel mills like North American Stainless, our
primary customer.  The Venture Metals asset purchase is the latest in a series
of actions we have undertaken to position ourselves for strategic growth. The
multi-million-dollar shredder project, completed in June 2009, expands our
processing capacity, offers specialty grades of scrap and improves end-product
quality.  The shredder began operations on July 1, 2009.



Despite the loss of
two major customers in 2009, 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
approximately 600 customer locations throughout the United States and we utilize
an active database of over 6,500 vendors to provide timely, thorough and
cost-effective service to our customers.



Although our focus is
on the recycling industry, our goal is to remain dedicated to the management
services, and equipment industry as well, 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, New Albany, Indiana, and
Dallas, Texas.  We do not have operating locations outside the United States.



Liquidity and Capital Resources



As of September 30, 2009 we held cash and cash
equivalents of $962,301.



On June 30, 2009, we executed a promissory note, loan agreement and related
security documents with Branch Banking and Trust Company in the amount of
$5,000,000 to support our ongoing growth and as a first step in our planned and
forthcoming restructuring of our banking facilities.  Over the past seven years,
we have been acquiring real estate and have made substantial investments in our
real property infrastructure using operating cash.  We have acquired a valuable
portfolio of real estate and this is a first step in maximizing its value to
us.



Together with the loan
agreement we executed a promissory note, which matured September 28, 2009, at
which time the principal plus accrued interest thereon was to be paid in full. 
On October 15, 2009, we executed a note modification agreement, which extended
the maturity date to December 15, 2009.  The loan is a non-revolving credit
facility and provides that we may borrow from time to time through the maturity
date.  The loan bears interest at the one month LIBOR plus 3.25% per annum,
which shall be adjusted monthly on the first day of each month for each LIBOR
interest period.  The minimum rate of interest is 4.5%, which was the interest
rate as of September 30, 2009.  Accrued interest is payable monthly commencing
November 15, 2009 with the balance due at maturity on December 15, 2009.  We
have secured the loan with mortgages, related assignments of leases and rents
and environmental certificates against our properties or those of our
affiliates, ISA Real Estate, LLC, ISA Indiana Real Estate, LLC and 7021 Grade
Lane, LLC.  In addition we have cross-collateralized this loan with our other
indebtedness owed to BB&T.  As a result of this financing BB&T has reduced our
available amount under the BB&T Bankcard from $2.5 million to an amount not to
exceed $500,000 so long as this loan is outstanding.  In addition to the
cross-collateralization of these other financings with this note, if ISA
defaults on any note with BB&T, it is considered to have defaulted on all notes
with BB&T.  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 EBITA ratio.  Consequently, these covenants restrict our ability to
incur as much additional debt as we may desire for future growth.  At September
30, 2009, upon execution of the note modification agreement, we were in
compliance with all restrictive covenants related to our indebtedness owed to
BB&T.  As of September 30, 2009, the outstanding balance on this credit facility
was $5,000,000.



Management is
currently in discussions with its current lender and several other banks
regarding the modification of the current debt structure.  This restructuring is
expected to be completed prior to the December 15, 2009 maturity date of the
note described above and would ideally consolidate all of ISA's outstanding
debt.  Additionally, we are evaluating other possible financing alternatives
related to accounts receivable as part of our overall evaluation of the capital
structure.  While we believe this process will be completed by December 15,
2009, there is no assurance of that as we currently do not have any commitments
in place.



In addition to the $5,000,000 short term credit facility,
we have long term debt comprised of the following:





September 30, 2009(unaudited)
			
			December 31,2008Non-revolving line of credit
			$         11,517,440
			
			$                        -Revolving line of credit
			4,877,098
			
			-Notes payable
			9,756,926
			
			9,367,877Total debt
			$         26,151,464
			
			$         9,367,877




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:





Nine months ended
			September 30,2009
			
			2008Statements of Operations Data:Total Revenue
			..................................................................................
			100.0%
			
			100.0%Cost of goods
			sold............................................................................
			89.8%
			
			83.8%Selling, general and administrative expenses
			..................................
			5.4%
			
			8.8%Income before other
			income/expenses..............................................
			4.8%
			
			7.4%




Nine months ended September 30, 2009 compared to nine months ended September 30,
2008



Total
revenue increased $53,911,403 or 60.3% to $143,343,711 in 2009 compared to
$89,432,308 in 2008.  Recycling revenue increased $62,093,739 or 84.0% to
$136,029,879 in 2009 compared to $73,936,140 in 2008.  This is primarily due to
our acquisition of the Venture Metals stainless steel recycling business,
partially offset by a decrease in shipments of 8.3% in ferrous and 32.6% in
other nonferrous materials and an average decrease in price of commodities of
38.0%.  Management services revenue decreased $8,038,779 or 58.4% to $5,720,398
in 2009 compared to $13,759,177 in 2008 primarily due to the loss of major
customers Circuit City and Mervyn's, both of whom declared bankruptcy and
closed.  Equipment sales, service and leasing revenue decreased $143,557 or 8.3%
to $1,593,434 in 2009 compared to $1,736,991 in 2008.  This decrease is due to a
$70,190 decrease in equipment sales, a $55,778 decrease in service and repairs
revenue, a $16,152 decrease in baling wire revenue, and a $14,427 decrease in
other revenue, partially offset by a $16,770 increase in rental revenue.



Total cost
of goods sold increased $53,603,244 or 71.4% to $128,694,392 in 2009 compared to
$75,091,148 in 2008.  Recycling cost of goods sold increased $62,134,731 or
100.9% to $123,725,378 in 2009 compared to $61,590,647 in 2008.  This is
primarily due to our acquisition of the Venture Metals stainless steel recycling
business, partially offset by a 51.1% decrease in shipments of ferrous and 45.0%
decrease in shipments of other nonferrous materials, and to 38.3% lower
commodity purchase prices. Waste services cost of goods sold decreased
$8,531,487 or 63.2% to $4,969,014 in 2009 compared to $13,500,501 in 2008
primarily due to the loss of major customers Circuit City and Mervyn's due to
bankruptcy and due to a decrease of $58,006 in cost of equipment sales.



Selling, general and administrative expenses decreased $54,333 or 0.7% to
$7,756,020 in 2009 compared to $7,701,687 in 2008.  As a percentage of revenue,
selling, general and administrative expenses were 5.4% in 2009 compared to 8.6%
in 2008.  The primary drivers of the decrease in total expenses are decreases in
fuel expense of $410,716 and stock bonus of $284,900, offset by increases in
sales manager and labor costs of $536,772 and an increase of $111,117 in
licenses and fees, both attributable to our new stainless steel recycling
business.



Other income/(expense) decreased ($740,178) to other
expense of ($664,154) in 2009 compared to other income of $76,024 in 2008.  This
was primarily due to an increase in interest expense of $397,058 and an increase
in other expense of $330,337.  The increase in other expense is primarily due to an additional $65,597 paid in the All-American
legal settlement in the first quarter of 2009.



Also, in 2008, we recorded other income of $117,306 due
to an insurance reimbursement and a reduction in accounts payable of
$156,400.



Income tax provision decreased $ 194,541 to $2,491,658 in 2009 compared to
$2,686,199 in 2008.  The effective tax rate in 2009 and 2008 was 40.0% based on
federal and state statutory rates.



Three months ended September 30, 2009 compared to three months ended September
30, 2008



Total
revenue increased $51,131,646 or 177.3% to $79,969,474 in 2009 compared to
$28,837,828 in 2008.  Recycling revenue increased $54,485,913 or 232.9% to
$77,877,987 in 2009 compared to $23,392,074 in 2008.  This is primarily due to
our acquisition of the Venture Metals stainless steel recycling business and an
increase in shipments of 51.2% in ferrous, partially offset by a decrease in
shipments of 12.1% in other nonferrous materials and an average decrease in
price of commodities of 22.5%.  Management services revenue decreased $3,322,683
or 68.2% to $1,552,696 in 2009 compared to $4,875,379 in 2008 primarily due to
the loss of major customers Circuit City and Mervyn's, both of whom declared
bankruptcy and closed.  Equipment sales, service and leasing revenue decreased
$31,584 or 5.5% to $538,791 in 2009 compared to $570,375 in 2008.  This decrease
is due to a decrease in equipment sales and service and repairs revenue.



Total cost
of goods sold increased $49,081,047 or 201.4% to $73,456,031 in 2009 compared to
$24,374,984 in 2008.  Recycling cost of goods sold increased $52,727,339 or
269.5% to $72,294,051 in 2009 compared to $19,566,712 in 2008.  This is
primarily due to our acquisition of the Venture Metals stainless steel recycling
business and an increase of 80.8% in shipments of ferrous, partially offset by a
17.5% decrease in shipments of other nonferrous materials, and to 14.9% lower
commodity purchase prices.  Waste services cost of goods sold decreased
$3,646,292 or 75.8% to $1,161,980 in 2009 compared to $4,808,272 in 2008
primarily due to the loss of major customers
Circuit City and Mervyn's who declared bankruptcy and due to a decrease in the
cost of equipment sales.



Selling, general and administrative expenses increased $84,048 or 3.3% to
$2,606,476 in 2009 compared to $2,522,428 in 2008.  As a percentage of revenue,
selling, general and administrative expenses were 3.3% in 2009 compared to 8.7%
in 2008.  The primary drivers of the increase in total expense are increases in
sales manager and labor, advertising, commissions, vehicle repairs and
maintenance, and depreciation expenses, offset by the decreases in stock bonus
and fuel expenses.



Other income/(expense)
decreased ($420,393) to other expense of ($304,944) in 2009 compared to other
income of $115,449 in 2008 primarily due to a reduction in accounts payable of
$156,400 in 2008 and due to the increase in interest expense due to new debt in
2009.



Income tax provision increased $665,059 to $1,440,809 in 2009 compared to
$775,750 in 2008.  The effective tax rate in 2009 was 40.0% compared to 37.7% in
2008 based on federal and state statutory rates.



Financial condition
at September 30, 2009 compared to December 31, 2008



Cash
and cash equivalents decreased $141,541 to $962,301 as of September 30, 2009
compared to $1,103,842 as of December 31, 2008.



We used
net cash from operating activities of $3,256,465 for the nine months ended
September 30, 2009.  This was primarily due to increases in accounts receivable
and inventory, partially offset by the increase in accounts payable and other
current liabilities.  The increases in accounts receivable and accounts payable
were both due to our acquisition of the Venture Metals stainless steel business.



We used
net cash from investing activities of $18,607,575 for the nine months ended
September 30, 2009.  We used $10,607,944 for our acquisition of the inventory
and fixed assets of Venture Metals.  Additionally, we purchased recycling and
rental fleet equipment and shredder system equipment of $8,114,340.  The rental
fleet equipment consists of solid waste handling and recycling equipment such as
compactors, containers and balers. It is our intention to continue to pursue
this market.



Our net
cash from financing activities of $21,722,499 for the nine months ended
September 30, 2009 is primarily due to the advance of $25,202,887 on our new
lines of credit offset by payments on debt of $3,419,300.



Accounts
receivable trade increased $12,145,542 or 318.7% to $15,957,026 as of September
30, 2009 compared to $3,811,484 as of December 31, 2008.  This change is due to
our acquisition of the Venture Metals stainless steel business and their level
of accounts receivable from time to time.



Inventories consist principally of stainless steel, ferrous and nonferrous scrap
materials and waste equipment machinery held for resale.  We value inventory at
the lower of cost or market.  Inventory increased $16,998,443 or 388.9% to
$21,369,791 as of September 30, 2009 compared to $4,371,348 as of December 31,
2008.  The primary reason for the increase was the acquisition of  Venture
Metals and the stainless steel inventory that became a portion of our assets.



Inventory aging for
the period ended September 30, 2009 (Days Outstanding):



Description
			
			1-30
			
			31-60
			
			61-90
			
			Over 90
			
			TotalStainless steel alloys
			
			$14,972,606
			
			$             -
			
			$             -
			
			$     362,775
			
			$ 15,335,381Ferrous materials
			
			2,820,814
			
			94,350
			
			8,136
			
			43,062
			
			2,966,362Non-ferrous materials
			
			1,575,900
			
			300,856
			
			61,436
			
			358,633
			
			2,296,825Shredder replacement parts
			
			-
			
			-
			
			-
			
			593,419
			
			593,419Waste equipment machinery
			
			2,238
			
			-
			
			-
			
			100,487
			
			102,725Other
			
			75,079
			
			-
			
			-
			
			-
			
			75,079$19,446,637
			
			$  395,206
			
			$   69,572
			
			$  1,458,376
			
			$ 21,369,791




Inventory aging for
the year ended December 31, 2008 (Days Outstanding):



Description
			
			1-30
			
			31-60
			
			61-90
			
			Over 90
			
			TotalFerrous Materials
			
			$1,364,091
			
			$  376,684
			
			$  326,874
			
			$  94,500
			
			$2,162,149Non-ferrous materials
			
			990,843
			
			217,591
			
			294,992
			
			529,728
			
			2,033,154Waste equipment machinery
			
			95,675
			
			-
			
			-
			
			-
			
			95,675Other
			
			80,370
			
			-
			
			-
			
			-
			
			80,370$2,530,979
			
			$  594,275
			
			$ 621,866
			
			$624,228
			
			$4,371,348




Accounts
payable trade increased $9,290,956 or 251.0% to $12,992,851 as of September 30,
2009 compared to $3,701,895 as of December 31, 2008, primarily due to our
acquisition of the Venture Metals stainless steel recycling business and their
level of accounts payable from time to time.



Working
capital increased $1,262,957 to $4,251,829 as of September 30, 2009 compared to
$2,988,872 as of December 31, 2008.  The increase was primarily driven by the
$12.1 million increase in accounts receivable and the $17.0 million increase in
inventories, partially offset by the $16.7 million increase in current
maturities of long term debt, the $9.2 million increase in accounts payable, and
the $1.9 million in income taxes payable.



Contractual Obligations



The
following table provides information with respect to our known contractual
obligations for the quarter ended September 30, 2009.



Obligation Description (1)
			Total
			Less
			than 1 year
			1-3 years
			3-5 years
			More
			than 5 yearsLong-Term Debt Obligations
			$26,151,464
			$12,524,963
			$  9,894,045
			$ 3,732,456
			$           -Capital Lease Obligations (2)
			40,481
			40,481
			-
			-
			-Operating Lease Obligations (3)
			2,073,543
			642,543
			1,272,000
			159,000
			-Total
			$28,265,488
			$13,207,987
			$11,166,045
			$ 3,891,456
			$           -




(1)  Does not include the short term $5 million non-revolving credit
facility modified on October 15, 2009 and coming due December 15, 2009.



(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 June 2010.



(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 2012.  We have monthly rental payments of
$48,500 through December 2012.  In the event of a change of control, the monthly
payments become $62,500. We have subleased the Lexington property to an
unaffiliated third party for a term commencing March 1, 2007 and ending December
31, 2012 for $4,500 per month.   We currently lease this property from an
unrelated party for $4,500 per month; the lease terminates December 31, 2012. 
If for any reason the sub-lessee defaults, we remain liable for the remainder of
the lease payments through December 31, 2012.



We also lease
a management services operations facility and various pieces of equipment in
Dallas, Texas for which monthly payments of $969 are due through September 2010.



Long-term debt, including
the current portions thereof, increased $16,783,587 to $26,151,464 as of
September 30, 2009 compared to $9,367,877 as of December 31, 2008.



Impact
of Recently Issued Accounting Standards



In
December 2007, the Financial Accounting Standards Board (FASB) issued
authoritative guidance on business combinations that applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008, which for us is January 1, 2009.  The objective of this guidance is to
improve the relevance, representational faithfulness, and comparability of the
information that a reporting entity provides in its financial reports about a
business combination and its effects. This statement requires us as an acquirer
of the assets of Venture Metals to recognize the assets acquired, the
liabilities assumed, and any non-controlling interest in Venture Metals at the
acquisition date, measured at their fair values as of that date, with limited
exceptions specified in the statement.  Refer to Note 9 of our financial
statements for more detailed information about our acquisition of Venture
Metals.



In February 2007, the FASB
issued authoritative guidance on the fair value option for financial assets and
financial liabilities. This guidance provides companies with an option to report
selected financial assets and financial liabilities at fair value. Unrealized
gains and losses on items for which the fair value option has been elected are
reported in earnings at each subsequent reporting date. This guidance is
effective for fiscal years beginning after November 15, 2007, the year beginning
January 1, 2008 for us. While we continue to review the provisions of this
guidance, we have not yet identified any assets or liabilities for which we
currently believe we will elect the fair value reporting option.



In March 2008, the FASB issued
authoritative guidance on disclosures about derivative instruments and hedging
activities.  This guidance amends and expands the disclosure requirements in the
previously issued guidance on accounting for derivative instruments and hedging
activities.  The new guidance is effective for fiscal years and interim periods
beginning after November 15, 2008, the year beginning January 1, 2009 for us,
and we have included the required disclosures in Note 4 of our Condensed
Consolidated Financial Statements.



In April 2009, the FASB issued
authoritative guidance entitled "Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability has Significantly Decreased and
Identifying Transactions That Are Not Orderly" and "Recognition and Presentation
of Other-Than-Temporary Impairments".  These two documents were issued to
provide additional guidance about (1) measuring the fair value of financial
instruments when the markets become inactive and quoted prices may reflect
distressed transactions, and (2) recording impairment charges on investments in
debt instruments.  Additionally, the FASB issued authoritative guidance entitled
"Interim Disclosures about Fair Value of Financial Instruments" to require
disclosures of fair value of certain financial instruments in interim financial
statements.  We do not anticipate the adoption of this guidance will materially
impact us.  This guidance is effective for financial statements issued for
interim and annual reporting periods ending after June 15, 2009, the quarter
ending June 30, 2009 for us.



In May
2009, the FASB issued authoritative guidance on subsequent events.  It is
intended to establish general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued.  It requires the disclosure of the
date through which an entity has evaluated subsequent events and the basis for
that date--that is, whether that date represents the date the financial
statements were issued or were available to be issued.  This disclosure should
alert all users of financial statements that an entity has not evaluated
subsequent events after that date in the set of financial statements being
presented.  In particular, this Statement sets forth:



* The period after the
balance sheet date during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition or disclosure in
the financial statements;

* The circumstances under
which an entity should recognize events or transactions occurring after the
balance sheet date in its financial statements;

* The disclosures that an
entity should make about events or transactions that occurred after the balance
sheet date.



This Statement is effective for
interim and annual periods ending after June 15, 2009, the quarter ending June
30, 2009 for us.



In June
2009, the FASB issued the FASB Accounting Standards Codification (ASC). 
Effective this quarter, the ASC became the single source for all authoritative
generally accepted accounting principles (GAAP) recognized by the FASB and is
required to be applied to financial statements issued for interim and annual
periods ending after September 15, 2009, the quarter ending September 30, 2009
for us.  The ASC did not change GAAP and did not impact the Company's
consolidated financial statements.



Accounting Standards Issued Not Yet Adopted



In June 2009, the FASB
issued authoritative guidance on accounting for transfers of financial assets,
which is effective for reporting periods beginning after November 15, 2009. 
This new guidance limits the circumstances in which a financial asset may be
de-recognized when the transferor has not transferred the entire financial asset
or has continuing involvement with the transferred asset.  The concept of a
qualifying special-purpose entity, which had previously facilitated sale
accounting for certain asset transfers, is removed by this new guidance.  We
expect that the adoption of this new guidance will not have a material effect on
our financial position or results of operations.



In June 2009, the FASB
issued authoritative guidance on accounting for variable interest entities
(VIE), which is effective for reporting periods beginning after November 15,
2009 and changes the process for how an enterprise determines which party
consolidates a VIE, to a primarily qualitative analysis.  The party that
consolidates the VIE (the primary beneficiary) is defined as the party with (1)
the power to direct activities of the VIE that most significantly affect the
VIE's economic performance and (2) the obligation to absorb losses  of the VIE
or the right to receive benefits from the VIE.  Upon adoption, reporting
enterprises must reconsider their conclusions on whether an entity should be
consolidated and should a change result, the effect on net assets will be
recorded as a cumulative effect adjustment to retained earnings.  We expect that
the adoption of this new guidance will not have a material effect on our
financial position or results of operations.





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 commodity
price risk, mainly associated with variations in the market price for ferrous
and nonferrous metal, and other commodities. The timing and magnitude of
industry cycles are difficult to predict and are impacted by general economic
conditions. We respond to changes in recycled metal selling prices by adjusting
purchase prices on a timely basis and by turning rather than holding inventory
in expectation of higher prices.  However, financial results may be negatively
impacted where selling prices fall more quickly than purchase price adjustments
can be made or when levels of inventory have an anticipated net realizable value
that is below average cost.



We are exposed to interest rate
risk on our floating rate borrowings. On June 30, 2009, we executed a promissory
note, loan agreement and related security documents with Branch Banking and
Trust Company in the amount of $5,000,000 for the purpose of financing our
ongoing growth.  On October 15, 2009, we executed a note modification agreement
for this note, which extended the maturity date to December 15, 2009.  This
non-revolving credit facility bears interest at the month LIBOR plus 3.25% per
annum, which is to be adjusted monthly on the first day of each month for each
LIBOR interest period with a minimum interest rate of 4.5%.  The interest rate
as of September 30, 2009 was 4.5%.  This credit facility had $5,000,000 in
outstanding borrowings as of September 30, 2009.  We also maintain a $10.0 million senior revolving credit facility with the BB&T
which had $4,877,098 in outstanding borrowings as of September 30, 2009.  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 4.0% as of September 30, 2009.   On
February 11, 2009, we executed a promissory note with BB&T in the amount of
$12,000,000 which had $11,517,440 in outstanding borrowings as of September 30,
2009.  This note bears interest at the adjusted LIBOR rate of one month LIBOR
plus 2.25% per annum with a floor of 4%.  As of September 30, 2009, the
applicable interest rate was 4%.  Based on our
average anticipated borrowings under our credit agreements in fiscal 2009, a
hypothetical increase or decrease in the LIBOR rate by 1% would increase or
decrease interest expense on our variable borrowings by 1% of the outstanding
balance, with a corresponding change in cash flows.



Last year, we entered into three
interest rate swap agreements swapping variable rates for fixed rates. The first
swap agreement covers $5.8 million in debt and commenced October 15, 2008 and
matures on April 7, 2014. The second swap agreement covers approximately $2.7
million in debt and commenced October 15, 2008 and matures on May 7, 2013.  The
third swap agreement covers approximately $571,000 in debt and commenced October 22, 2008 and
matures on October 22, 2013.  The three swap agreements fix our interest rate at
approximately 5.8%.  At September 30, 2009, we recorded the estimated fair value
of the three swaps at approximately $648,000.  We entered into the swap
agreements for the purpose of hedging the interest rate market risk for the
respective notional amounts.



We are exposed to market risk
from changes in interest rates in the normal course of business. Our interest
income and expense are most sensitive to changes in the general level of U.S.
interest rates and the LIBOR rate. In order to manage this exposure, we use a
combination of debt instruments, including the use of derivatives in the form of
interest rate swap agreements. We do not enter into any derivatives for trading
purposes.  The use of the interest rate swap agreement is intended to convert
the variable rate to a fixed rate.



ITEM 4(T):    CONTROLS AND PROCEDURES



(a)        Disclosure controls and procedures.



ISA's management,
including ISA's principal executive officer and principal financial officer,
have evaluated the effectiveness of our "disclosure controls and procedures," as
such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange
Act of 1934.  Based upon their evaluation, our principal executive officer and
principal financial officer concluded that, as of September 30, 2009, ISA's
disclosure controls and procedures were effective for the purpose of ensuring
that the information required to be disclosed in the reports that ISA files
under the Exchange Act with the Securities and Exchange Commission  (1) is
recorded, processed, summarized and reported within the time periods specific in
the SEC's rules and forms, and (2) is accumulated and communicated to ISA's
management, including our principal executive and principal financial officers,
as appropriate to allow timely decisions regarding the required disclosure.



(b)     Internal controls over financial reporting.



Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of
the Exchange Act).  Our internal control over financial reporting is designed to
provide reasonable assurance to our management and Board of Directors regarding
the reliability of financial reporting and the preparation and fair presentation
of published financial statements for external purposes in accordance with
generally accepted accounting principles in the United States.



Our internal control
over financial reporting includes those policies and procedures that:



--       pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect our transactions and dispositions of our assets;



--       provide
reasonable assurance that our transactions are recorded as necessary to permit
preparation of our financial statements in accordance with GAAP, and that our
receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and



--       provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect
on our financial statements.



Because of its
inherent limitations, internal control over financial reporting cannot prevent
or detect every potential misstatement.  Therefore, even those systems
determined to be effective can provide only reasonable assurances with respect
to financial statement preparation and presentation.  Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may decline.



(c)     Changes to internal control over financial reporting



With the exception
noted below, there were no changes in ISA's internal control over financial
reporting during the three months ended September 30, 2009 that have materially
affected, or are reasonably likely to affect ISA's internal control over
financial reporting.



During the
nine months ended September 30, 2009, ISA concluded the acquisition of all the
assets of Venture Metals, LLC, in order to enter into the stainless steel and
alloys recycling business.  For this new business, ISA purchased a new recycling
system software package from a third party vendor and installed it in April 2009. 
ISA installed this
new software in the New Albany, Seymour, and Campground
Road recycling satellite locations on October 1, 2009.  ISA is in the
process of conducting an assessment of our new stainless steel recycling
business and recycling satellite locations' internal controls over financial
reporting for the period between the consummation dates and September 30, 2009,
the date of our management's assessment, however, the assessment is not yet
complete.





---



PART II -- OTHER INFORMATION



Item 1.    Legal Proceedings



On January 4, 2007,
Lennox Industries, Inc., a commercial heating and air-conditioning manufacturer,
filed suit against us in the Arkansas County, Arkansas Circuit Court in the case
styled Lennox Industries, Inc. v. Industrial Services of America, Inc., Case No.
CV-2007-004.  Because of settlement negotiations, Lennox did not serve us until
May 23, 2007.  Lennox alleges that we breached a 2001 contract with Lennox where
we agreed to act as agent for Lennox, by our failure to properly evaluate,
categorize, classify and value the production scrap and waste of Lennox, thereby
brokering such products at prices below market value.  Lennox also alleges
negligence and breach of fiduciary duty related to the same alleged failure. 
Lennox is taking the position that ISA had a duty to obtain a price that was
consistent with the materials being sold on their behalf and that it failed to
show a proper duty of care in its dealings with Lennox.   On July 9, 2008,
Lennox amended its Complaint to add a cause of action based on fraud and
misrepresentation (civil fraud).  The Lennox complaint does not state any
specific monetary damages.  We have filed an answer denying all claims.  The
litigation is in its discovery phase with a trial date currently set for
November 2009.   We currently believe that the claims have no merit.



We have no other
litigation at this time.



Item 1A. Risk Factors



We have had no
material changes from the risk factors reported in our Form 10-K for the year
ended December 31, 2008, as filed with the Securities and Exchange Commission on
September 30, 2009.



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



On November 15, 2005,
our Board of Directors authorized a program to repurchase up to 200,000 shares
of our common stock at current market prices.  During 2008, we repurchased
55,607 shares.  In 2007 we repurchased 40,000 shares, in 2006 we repurchased
5,509 shares and in 2005 we repurchased 10,000 shares.



Issuer Purchases of Equity Securities



Period
			Total Number
			Average Price
			Total Number of Shares
			Maximum Number ofof Shares
			Paid per Share
			Purchased as part of
			Shares that may yet bePurchased
			
			Publicly Announced
			Purchased Under thePlans or Programs
			Plans or ProgramsOct-05
			-Nov-05
			10,000
			$ 2.9762
			10,000
			190,000Dec-05
			-Jan-06
			5,509
			$ 2.9658
			15,509
			184,491Aug-07
			20,000
			$ 9.9229
			35,509
			164,491Dec-07
			20,000
			$ 7.7257
			55,509
			144,491Mar-08
			19,753
			$ 8.2823
			75,262
			124,738Jun-08
			9,854
			$ 11.4169
			85,116
			114,884Sept-08
			26,000
			$ 9.7902
			111,116
			88,884




Item 3.    Defaults upon Senior
Securities



None.



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



By written consent,
the following proposal was adopted by the margin indicated:



(a)  PROPOSAL 1: 
Approval of the purchase of the membership interests in 7124 Grade Lane LLC and
7200 Grade Lane LLC by ISA in exchange for, in the aggregate, 500,000
unregistered shares of ISA common stock issued to Harry Kletter Family Limited
Partnership.



Broker Non-VotesFor
			
			Against
			
			And Abstentions1,904,733
			
			-
			
			1,881,559




Item 5.    Other Information



None.



Item 6.    Exhibits



See exhibit index.



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SIGNATURES



Pursuant 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:  November 16, 2009
			/s/  Harry KletterChairman and Chief Executive Officer(Principal Executive and FinancialOfficer)Date:  November 16, 2009
			/s/ Alan L. SchroeringChief Financial Officer






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INDEX TO EXHIBITSExhibit Number
			
			Description of Exhibits10.1
			
			Note Modification Agreement31.1
			
			Rule 13a-14(a) Certification of Harry Kletter for the Form 10-Q for
			the quarter ended September 30, 2009.31.2
			
			Rule 13a-14(a) Certification of Alan Schroering for the Form 10-Q
			for the quarter ended September 30, 2009.32.1
			
			Section 1350 Certification of Harry Kletter and Alan Schroering for
			the Form 10-Q for the quarter ended September 30, 2009.






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