| 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 June 30, 2001                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 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 Employer |
| Incorporation 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 the        number of shares outstanding of each of the issuer's        classes of common stock, as of June 30, 2001: 1,698,300                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

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| INDUSTRIAL SERVICES OF AMERICA, INC. AND        SUBSIDIARY |
|------------------------------------------------------------|
|                                                       |
| INDEX                                                      |
|                                                       |   |   |
|                                                       |   |   |
|                                                       |   | Page No. |
| Part I                                                     | Financial        Information |   |
|                                                       |   |   |
|                                                       | Report of        Independent Accountants | 3 |
|                                                       |   |   |
|                                                       | Condensed        Consolidated Balance Sheets |   |
|                                                       |      June        30, 2001 and December 31, 2000 | 4 |
|                                                       |   |   |
|                                                       | Condensed        Consolidated Statements of |   |
|                                                       |      Income        Three months ended |   |
|                                                       |      June        30, 2001 and 2000 | 6 |
|                                                       |   |   |
|                                                       | Condensed        Consolidated Statements of |   |
|                                                       |      Income        Six months ended |   |
|                                                       |      June        30, 2001 and 2000 | 7 |
|                                                       |   |   |
|                                                       | Condensed        Consolidated Statements of |   |
|                                                       |      Cash        Flows Six months ended |   |
|                                                       |      June        30, 2001 and 2000 | 8 |
|                                                       |   |   |
|                                                       | Notes to        Condensed Consolidated |   |
|                                                       |      Financial        Statements | 9 |
|                                                       |   |   |
|                                                       | Management's        Discussion and Analysis |   |
|                                                       |      of        Financial Condition and Results |   |
|                                                       |      of        Operations | 11 |
|                                                       |   |   |
|                                                       |   |   |
| Part II                                                    | Other        Information | 14 |
|                                                       |   |   |
|                                                       |
|                                                       |
| 2                                                          |

 

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| REPORT OF INDEPENDENT ACCOUNTANTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Board of        Directors and Shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Industrial        Services of America, Inc. and Subsidiary                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Louisville,        Kentucky                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| We have        reviewed the condensed consolidated balance sheet of        Industrial Services of America, Inc. as of June 30, 2001,        the condensed consolidated statement of cash flows for        the six month period ended June 30, 2001 and 2000, and        the related condensed consolidated statements of income        for the three month and six month periods ended June 30,        2001 and 2000. These financial statements are the        responsibility of the Company's management.                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| We conducted        our reviews in accordance with standards established by        the AICPA. A review of interim financial information        consists principally of applying analytical procedures to        financial data and making inquiries of persons        responsible for financial and accounting matters. It is        substantially less in scope than an audit conducted in        accordance with generally accepted auditing standards,        the objective of which is the expression of an opinion        regarding the financial statements taken as a whole.        Accordingly, we do not express such an opinion. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Based on our        reviews, we are not aware of any material modifications        that should be made to the accompanying condensed        consolidated financial statements for them to be in        conformity with generally accepted accounting principles.                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Crowe, Chizek        and Company LLP |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Indianapolis,        Indiana                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| July 16, 2001                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

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| PART I        – FINANCIAL INFORMATION                          |
|---------------------------------------------------------------------|
|                                                                |
| ITEM 1:        CONSOLIDATED FINANCIAL STATEMENTS                    |
|                                                                |
| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY          |
| CONDENSED        CONSOLIDATED BALANCE SHEETS                        |
| (UNAUDITED)                                                         |
|                                                                |
| ASSETS                                                              |
|                                                                |   |   |
|                                                                | June        30,    | December        31, |
| Current assets                                                      | 2001      | 2000      |
|                                                                | Cash and cash        equivalents | $  1,605,287 | 1,395,882 |
|                                                                | Accounts receivable        – trade (after allowance for doubtful |   |   |
|                                                                |   accounts        of $41,840 and $100,000 in 2001 and 2000) | 9,905,532 | 8,739,174 |
|                                                                | Accounts receivable        - related party | - | 15,000 |
|                                                                | Employee loans | 25,665 | 30,577 |
|                                                                | Income tax refund        receivable | - | 54,300 |
|                                                                | Net investment in        sales type leases | 107,760 | 99,937 |
|                                                                | Inventories | 2,158,892 | 2,191,162 |
|                                                                | Deferred income        taxes | 71,355 | 52,400 |
|                                                                | Other |        185,371 |        261,604 |
|                                                                |           Total        current assets | 14,059,862 | 12,840,036 |
| Net property and        equipment                                   | 5,639,808 | 5,544,859 |
| Other assets                                                        |   |   |
|                                                                | Non-compete        agreements, net | 304,714 | 405,892 |
|                                                                | Intangibles (net of        accumulated amortization of $213,329 |   |   |
|                                                                |   and        $186,663 in 2001 and 2000) | 586,671 | 613,337 |
|                                                                | Net investment in        sales-type leases | 296,977 | 352,897 |
|                                                                | Other assets |        116,133 |          48,147 |
|                                                                |           Total        other assets |     1,304,495 |     1,420,273 |
|                                                                |   | $21,004,165 | $19,805,168 |
|                                                                |   |   |   |
| See accompanying        notes to consolidated financial statements. |
|                                                                |
|                                                                |
|                                                                |
|                                                                |
| 4                                                                   |

 

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| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY          |
|---------------------------------------------------------------------|
| CONDENSED        CONSOLIDATED BALANCE SHEETS                        |
| (UNAUDITED)                                                         |
|                                                                |
| LIABILITIES        AND STOCKHOLDERS' EQUITY                         |
|                                                                |   |   |
|                                                                | June        30,    | December        31, |
|                                                                | 2001      | 2000       |
| Current liabilities                                                 |   |   |
|                                                                | Note payable to        bank | $1,500,000  | 2,750,000  |
|                                                                | Current maturities        of long-term debt | 729,031  | 421,330  |
|                                                                | Accounts payable | 10,975,205  | 10,126,353  |
|                                                                | Income tax payable | 163,654  | -   |
|                                                                | Other current        liabilities |               348,674  |        254,127  |
|                                                                |      Total        current liabilities | 13,716,564  | 13,551,810  |
| Long-term        liabilities                                        |   |   |
|                                                                | Long-term debt | 2,815,618  | 1,694,493  |
|                                                                | Deferred income        taxes |        109,016  |        159,400  |
|                                                                | 2,924,634  | 1,853,893  |
| Shareholders'        equity                                         |   |   |
|                                                                | Common stock, $.01        par value: 10,000,000 shares authorized, |   |   |
|                                                                |   1,957,500        shares issued and 1,698,300 and 1,863,300 |   |   |
|                                                                |   shares        outstanding in 2001 and 2000 | 19,575  | 19,575  |
|                                                                | Additional paid-in        capital | 1,925,321  | 1,891,651  |
|                                                                | Retained earnings | 2,914,290  | 2,649,555  |
|                                                                | Treasury stock,        259,200 and 94,200 shares |   |   |
|                                                                |   at cost        in 2001 and 2000 |       (496,219) |       (161,316) |
|                                                                |     4,362,967  |     4,399,465  |
|                                                                | $21,004,165  | $19,805,168  |
|                                                                |
| See accompanying        notes to consolidated financial statements. |
|                                                                |
|                                                                |
|                                                                |
| 5                                                                   |

 

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| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY          |
|---------------------------------------------------------------------|
| CONDENSED        CONSOLIDATED STATEMENTS OF INCOME                  |
| THREE        MONTHS ENDED JUNE 30, 2001 AND 2000                    |
| (UNAUDITED)                                                         |
|                                                                |
|                                                                | 2001     | 2000     |
|                                                                |   |   |
| Revenue                                                             | $25,820,543  | $23,919,770 |
|                                                                |   |   |
| Cost of Goods Sold                                                  |  23,890,515  |  21,879,978 |
|                                                                |   |   |
| **Gross Profit**                                                    | 1,930,028  | 2,039,792 |
|                                                                |   |   |
| Selling, General        and Administrative Expenses                 |   1,614,352  |    1,836,626 |
|                                                                |   |   |
| **Income from        Operations**                                   | 315,676  | 203,166 |
|                                                                |   |   |
| Other Income        (Expense)                                       |      (61,394) |       27,140 |
|                                                                |   |   |
| **Income before        Taxes**                                      | 254,282  | 230,306 |
|                                                                |   |   |
| Provision for        Income Taxes                                   |     125,790  |       67,523 |
|                                                                |   |   |
| **Net Income**                                                      | $   128,492  | $    162,783 |
|                                                                |   |   |
| Earnings Per Share                                                  | $0.07  | $0.08 |
|                                                                |   |   |
| Earnings Per Share,        assuming dilution                        | $0.07  | $0.08 |
|                                                                |   |   |
| See accompanying        notes to consolidated financial statements. |
|                                                                |
|                                                                |
|                                                                |
|                                                                |
| 6                                                                   |

 

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| INDUSTRIAL SERVICES        OF AMERICA, INC. AND SUBSIDIARY          |
|---------------------------------------------------------------------|
| CONDENSED        CONSOLIDATED STATEMENTS OF INCOME                  |
| SIX MONTHS ENDED        JUNE 30, 2001 AND 2000                      |
| (UNAUDITED)                                                         |
|                                                                |
|                                                                |   | 2001      |   | 2000      |
|                                                                |   |   |   |   |
| Revenues                                                            |   | $49,072,396  |   | $43,747,543  |
|                                                                |   |   |   |   |
| Cost of Goods Sold                                                  |   | 45,150,213  |   | 39,907,064  |
|                                                                |   |   |   |   |
| **Gross Profit**                                                    |   | 3,922,183  |   | 3,840,479  |
|                                                                |   |   |   |   |
| Selling, General        and Administrative Expenses                 |   | 3,350,481  |   | 3,425,542  |
|                                                                |   |   |   |   |
| **Income from        Operations**                                   |   | 571,702  |   | 414,937  |
|                                                                |   |   |   |   |
| Other Income        (Expense)                                       |   | (129,737) |   | 9,541  |
|                                                                |   |   |   |   |
| **Income before        Taxes**                                      |   | 441,965  |   | 424,478  |
|                                                                |   |   |   |   |
| Provision for        Income Taxes                                   |   |     177,226  |   |     124,424  |
|                                                                |   |   |   |   |
| **Net Income**                                                      |   | $  264,739  |   | $   300,054  |
|                                                                |   |   |   |   |
| Earnings Per Share                                                  |   | $0.15  |   | $0.16  |
|                                                                |   |   |   |   |
| Earnings Per Share,        assuming dilution                        |   | $0.15  |   | $0.16  |
|                                                                |   |   |   |   |
| See accompanying        notes to consolidated financial statements. |
|                                                                |
|                                                                |
|                                                                |
|                                                                |
| 7                                                                   |

 

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| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY          |
|---------------------------------------------------------------------|
| CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS              |
| SIX MONTHS        ENDED JUNE 30, 2001 AND 2000                      |
| (UNAUDITED)                                                         |
|                                                                |   |   |   |
|                                                                |   | 2001    | 2000    |
| **Cash flows from        operating activities**                     |   |   |   |
|                                                                | Net income |   | $264,739  | $300,054  |
|                                                                | Adjustments to        reconcile net income to |   |   |   |
|                                                                |   net        cash from operating activities |   |   |   |
|                                                                |   | Stock options        granted for services |   | 33,670  | 40,404  |
|                                                                |   | Depreciation and        amortization |   | 808,257  | 729,150  |
|                                                                |   | Loss from sale of        property and equipment |   | 2,987  | 23,500  |
|                                                                |   | Provision for        doubtful accounts |   | 73,914  | 120,000  |
|                                                                |   | Deferred income        taxes |   | (69,339) | (167,300) |
|                                                                |   | Change in assets        and liabilities |   |   |   |
|                                                                |   |   | Receivables |   | (1,166,060) | (424,443) |
|                                                                |   |   | Inventories |   | 32,270  | (109,093) |
|                                                                |   |   | Other assets |   | 8,247  | (49,302) |
|                                                                |   |   | Accounts payable |   | 848,853  | (233,924) |
|                                                                |   |   | Other current        liabilities |   |    258,195  |      (37,665) |
|                                                                |   |   | Net cash from        operating activities |   | 1,095,733  | 191,381  |
|                                                                |   |   |   |
| **Cash flows from        investing activities**                     |   |   |   |
|                                                                | Proceeds from sale        of property and equipment |   | 6,500  | 7,500  |
|                                                                | Purchases of        property and equipment |   | (784,848) | (451,952) |
|                                                                | Purchases of        equipment under sales-type leases |   | -   | (287,874) |
|                                                                | Proceeds from sales        of sales-type leases |   |      48,097  |       27,097  |
|                                                                |   | Net cash from        investing activities |   | (730,251) | (705,229) |
|                                                                |   |   |   |
| **Cash flows from        financing activities**                     |   |   |   |
|                                                                | Proceeds from        long-term debt |   | 1,500,000  | -  |
|                                                                | Proceeds from        capital contribution |   | -  | 140,880  |
|                                                                | Payments on note        payable to bank |   | (1,250,000) | -  |
|                                                                | Payments on        long-term debt |   | (71,174) | (188,853) |
|                                                                | Purchases of        treasury stock |   |    (334,903) |                -  |
|                                                                |   | Net cash from        financing activities |   |    (156,077) |      (47,973) |
|                                                                |   |   |   |
| Net increase        (decrease) in cash                              |   | 209,405  | (561,821) |
|                                                                |   |   |   |
| Cash at beginning        of period                                  |   |   1,395,882  |    2,388,811  |
|                                                                |   |   |   |
| **Cash at end of        period**                                    |   | $1,605,287  | $1,826,990  |
|                                                                |   |   |   |
| See accompanying        notes to consolidated financial statements. |
|                                                                |
|                                                                |
|                                                                |
| 8                                                                   |

 

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| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 1.      Basis        of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| The accompanying        unaudited consolidated financial statements have been        prepared in accordance with generally accepted accounting        principles for interim financial reporting. They do not        include all information and footnotes required by        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 the        Registrant's financial position as of June 30, 2001 and        the results of its operations and changes in cash flows        for the periods ended June 30, 2001 and 2000. Results of        operations for the period ended June 30, 2001 are not        necessarily indicative of the results that may be        expected for the entire year. Additional information,        including the audited 2000 consolidated financial        statements and the Summary of Significant Accounting        Policies, is included in the Registrant's Annual Report        on Form 10-K for the year ended December 31, 2000 on file        with the Securities and Exchange Commission. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 2.      Segment        Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| The Company's 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 vendors,        centralized billing, invoice auditing, and centralized        dispatching. WESSCO sells, leases, and services waste        handling and recycling equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| The Company's 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 and non-ferrous scrap, CWS's revenues consist of        management fees charged to customers at a percentage of        the total service provided, and WESSCO sales and lease        income comprise the primary source of revenue for this        segment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| The Company evaluates        segment performance based on profit or loss before income        taxes and the evaluation process for each segment        includes only direct expenses omitting any selling,        general and administrative costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
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| 9                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

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|                                                      |                                                      |                                                                                                                                   | Waste                                                                  |                                       |
|-----------------------------------------------------------|-----------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|--------------------------------------------|
|                                                      |                                                      | Computerized                                                                                                            | Equipment                                                                                  |                                       |
| For the six months ending                                 | ISA          | Waste                                                                                     | Sales &                                                                      | Segment           |
| JUNE 30, 2001                                             | Recycling                        | Systems                                                                                             | Services                                                                              | Totals       |
|                                                      |                                                      |                                                                                                                                   |                                                                                                           |                                       |
| Recycling        revenues                                 | $10,434,237                                     | $                 -      | $               -    | $10,434,237                           |
| Equipment        sales, service                           |                                                      |                                                                                                                                   |                                                                                                           |                                       |
|    and        leasing revenues             | -                                          | -                                                                                                             | 1,184,063                                                                                            | 1,184,063                             |
| Management        revenue                                 | -                                          | 37,454,096                                                                                                         | -                                                                                               | 37,454,096                            |
| Cost of goods        sold                                 | (9,426,355)                                          | (35,231,736)                                                                                                            | (492,122)                                                                                                 | (45,150,213)                               |
|                                                      |                                                      |                                                                                                                                   |                                                                                                           |                                       |
| Segment        profit                                     | $1,007,882                                      | $ 2,222,360                                                                                                        | $ 691,941                                                                                            | $  3,922,183                |
|                                                      |                                                      |                                                                                                                                   |                                                                                                           |                                       |
|                                                      |                                                      |                                                                                                                                   |                                                                                                           |                                       |
| For the six months ending                                 |                                                      |                                                                                                                                   |                                                                                                           |                                       |
| JUNE 30, 2000                                             |                                                      |                                                                                                                                   |                                                                                                           |                                       |
|                                                      |                                                      |                                                                                                                                   |                                                                                                           |                                       |
| Recycling        revenues                                 | $13,043,170                                     | $                      -                | $               -    | $13,043,170                           |
| Equipment        sales, service                           |                                                      |                                                                                                                                   |                                                                                                           |                                       |
|      and        leasing revenues | -                                          | -                                                                                                             | 1,161,882                                                                                            | 1,161,882                             |
| Management        revenue                                 | -                                          | 29,542,491                                                                                                         | -                                                                                               | 29,542,491                            |
| Cost of goods        sold                                 | (11,573,323)                                         | (27,628,707)                                                                                                            | (705,034)                                                                                                 | (39,907,064)                               |
|                                                      |                                                      |                                                                                                                                   |                                                                                                           |                                       |
| Segment        profit                                     | $1,469,847                                      | $ 1,913,784                                                                                                        | $ 456,848                                                                                            | $  3,840,479                |

 

| 3.      Inventories |                         |                                  |
|---------------------------------------------------|------------------------------|---------------------------------------|
|                                              |                         |                                  |   |
| Inventories        consist of the following:      |                         |                                  |
|                                              |                         |                                  |   |
|                                              |                         | June 30,                    | December 31, |
|                                              |                         | 2001              | 2000       |
|                                              |                         |                                  |   |
|                                              | Equipment and        parts   | $    291,188      | $      77,039 |
|                                              | Ferrous        materials     | 1,259,170                             | 1,479,450 |
|                                              | Non-ferrous        materials |      608,534 |       634,673 |
|                                              |                         |                                  |   |
|                                              | Total        inventories     | $2,158,892                            | $ 2,191,162 |
|                                              |                         |                                  |   |
|                                              |
|                                              |
|                                              |
| 10                                                |

 

----

 

| ITEM 2: MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND        RESULTS OF OPERATIONS.                                                                                                                                                                                                                                                                                                                                                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Liquidity and Capital        Resources                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|       As        of June 30, 2001 the Registrant held cash and cash        equivalents of $1,605,287.                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|       The        Registrant derives its revenues from several sources,        including management services, equipment sales and        leasing and from its recycling operations. Management        services comprised approximately 76.3% and 67.5% of the        Registrant's total revenues for the six months ended June        30, 2001 and 2000.                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|       The        Registrant currently maintains a working capital line of        credit with the Mid-America Bank of Louisville and Trust        Company (the "Bank") in the amount of        $3,000,000. Outstanding principal under this credit        facility bears interest at the Bank's prime rate and the        line matures in June 2002. As of June 30, 2001, there was        $1,500,000 drawn against this line of credit. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|       The        Registrant secured a long-term debt facility of        $1,500,000 during the second quarter of 2001. The        Registrant also secured two additional lines of credit of        $250,000 each to be used primarily for purchasing new        rental equipment. The collateral for this debt is        primarily rental equipment, which has an original cost        value of $1,351,165 as of June 30, 2001.                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|       The        following table presents, for the periods indicated, the        percentage relationship which certain captioned items in        the Registrant's Statements of Income bear to total        revenues and other pertinent data:                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

|                                                | Six Months ended June 30, |
|-----------------------------------------------------|---------------------------|
|                                                | 2001            | 2000   |
| Statements of        Income Data:                   |                      |   |
| Total Revenue                                       | 100.0%                    | 100.0% |
| Cost of goods        sold                           | 92.0%                     | 91.2% |
| Selling,        general and administrative expenses | 6.8%                      | 7.8% |
| Income from        operations                       | 1.2%                      | 1.0% |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Six months ended June        30, 2001 compared to six months ended June 30, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|       Total        revenue increased $5,324,853 or 12.2% to $49,072,396 in        2001 compared to $43,747,543 in 2000. Management services        revenue increased $7,911,605 or 26.8% to $37,454,096 in        2001 compared to $29,542,491 in 2000. This is due to an        increase in the number of units managed. Recycling        revenue decreased $2,608,933 or 20.0% to $10,434,237 in        2001 compared to $13,043,170 in 2000. This is primarily        due to the decline of commodity prices of approximately        18% in the Ferrous market and 2% in the Non-Ferrous        market from the first six months of 2000 compared to the        first six months of 2001. Equipment, service and leasing        revenue increased $22,181 or 1.9% to $1,184,063 in 2001        compared to $1,161,882 in 2000. This small increase was        due to the continued effort to lease equipment for the        long-term benefit of revenue streams and customer        retention. Service and leasing revenues increased        $156,577 or 27.0% offset by a decrease in equipment sales        of $139,584 or 23.8%. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

 

----

 

|       Total        cost of goods sold increased $5,243,149 or 13.1% to        $45,150,213 in 2001 compared to $39,907,064 in 2000.        Management services cost of goods sold increased        $7,603,029 or 27.5% to $35,231,736 in 2001 compared to        $27,628,707 in 2000. Recycling cost of goods sold        decreased $2,146,968 or 18.6% to $9,426,355 in 2001        compared to $11,573,323 in 2000. Equipment, service and        leasing cost of goods sold decreased $212,912 or 30.2% to        $492,122 in 2001 compared to $705,034 in 2000. This        decrease was primarily due to the continued effort to        lease equipment as equipment sales involve higher cost of        goods sold.                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       Total        gross profit increased $81,704 or 2.1% to $3,922,183 in        2001 compared to $3,840,479 in 2000. Management services        gross profit increased $308,576 or 16.1% to $2,222,360 in        2001 compared to $1,913,784 in 2000. Recycling gross        profit decreased $461,965 or 31.4% to $1,007,882 in 2001        compared to $1,469,847 in 2000. Equipment, service and        leasing cost of goods sold increased $235,093 or 51.5% to        $691,941 in 2001 compared to $456,848 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       Selling,        general and administrative expenses decreased $75,061 or        2.2% to $3,350,481 in 2001 compared to $3,425,542 in        2000. One-time charges of $331,350 were taken in the        second quarter of 2000. Without this one-time charge,        selling, general and administrative expenses would have        increased $256,289 or 8.3% to $3,350,481 in 2001 compared        to $3,094,192 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       This        increase was primarily due to the addition of an        Information Technology department in the second quarter        of 2000. As a percentage of total revenue, selling,        general and administrative expenses were 6.8% in 2001        compared to 7.8% in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Three months ended        June 30, 2001 compared to three months ended June 30,        2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       Total        revenue increased $1,900,773 or 7.9% to $25,820,543 in        2001 compared to $23,919,770 in 2000. Management services        revenue increased $3,158,888 or 18.9% to $19,906,446 in        2001 compared to $16,747,558 in 2000. This is due to an        increase in the number of units managed. Recycling        revenue decreased $1,253,483 or 19.0% to $5,337,053 in        2001 compared to $6,590,536 in 2000. This is primarily        due to the decline of commodity prices of approximately        12% in the Ferrous market and 1% in the Non-Ferrous        market from the second quarter of 2000 compared to the        second quarter of 2001. Equipment, service and leasing        revenue decreased $4,632 or 0.8% to $577,044 in 2001        compared to $581,676 in 2000. This small increase was due        to the continued effort to lease equipment for the        long-term benefit of revenue streams and customer        retention. Service and leasing revenues increased $37,520        or 12.6% offset by a decrease in equipment sales of        $43,355 or 15.3%. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       Total        cost of goods sold increased $2,010,537 or 9.2% to        $23,890,515 in 2001 compared to $21,879,978 in 2000.        Management services cost of goods sold increased        $3,223,075 or 20.7% to $18,764,846 in 2001 compared to        $15,541,771 in 2000. Recycling cost of goods sold        decreased $1,133,875 or 18.8% to $4,883,632 in 2001        compared to $6,017,507 in 2000. Equipment, service and        leasing cost of goods sold decreased $78,663 or 24.5% to        $242,037 in 2001 compared to $320,700 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       Total        gross profit decreased $109,764 or 5.4% to $1,930,028 in        2001 compared to $2,039,792 in 2000. Management services        gross profit decreased $64,187 or 5.3% to $1,141,600        compared to $1,205,787 in 2000. Recycling gross profit        decreased $119,608 or 20.9% to $453,421 in 2001 compared        to $573,029 in 2000. Equipment, service and leasing cost        of goods sold increased $74,031 or 28.4% to $335,007 in        2001 compared to $260,976 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 12                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

 

----

 

|       Selling,        general and administrative expenses decreased $222,274 or        12.1% to $1,614,352 in 2001 compared to $1,836,626 in        2000. One-time charges of $331,350 were taken in the        second quarter of 2000. Without this one-time charge,        selling, general and administrative expenses would have        increased $109,076 or 7.2% to $1,614,352 in 2001 compared        to $1,505,276 in 2000. This increase was primarily due to        the addition of an Information Technology department in        the second quarter of 2000. As a percentage of total        revenue, selling, general and administrative expenses        were 6.3% in 2001 compared to 7.7% in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Financial Condition at        June 30, 2001 compared to December 31, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|       Accounts        receivable-trade after allowances for bad debt increased        $1,166,358 or 13.3% to $9,905,532 in 2001 compared to        $8,739,174 in 2000. This is due to an increase in volume.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|       Accounts        payable trade increased $848,852 or 8.4% to $10,975,205        in 2001 compared to $10,126,353 in 2000. This is due to        an increase in volume.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|       Working        capital increased $1,055,072 to $343,298 in 2001 compared        to a deficit of $711,774 in 2000. This is primarily due        to the securing of a long-term debt facility of        $1,500,000 during the second quarter of 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Impact of Recently        Issued Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|       The        FASB issued Statement of Financial Accounting Standards        No. 133 ("SFAS 133"), "Accounting for        Derivative Instruments and Hedging Activities," in        June 1998. SFAS 133 establishes accounting and reporting        standards for derivative instruments, including certain        derivative instruments embedded in other contracts, and        for hedging activities. It requires recognition of all        derivatives as either assets or liabilities on the        balance sheet and measurement of those instruments at        fair value. If certain conditions are met, a derivative        may be designed specifically as (a) a hedge of the        exposure to changes in the fair value of a recognized        asset or liability or an unrecognized firm commitment        referred to as a fair value hedge, (b) a hedge of the        exposure to variability in cash flows of a forecasted        transaction (a cash flow hedge), or (c) a hedge of the        foreign currency exposure of a net investment in a        foreign operation, an unrecognized firm commitment, an        available-for-sale security, or a forecasted transaction.        The statement has not had an impact on the Registrant's        financial position or results of operations. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Item        3:    Quantitative and Qualitative        Disclosures About Market Risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|         Not        Applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 13                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

----

 

PART II – OTHER INFORMATION

| Item 1. | Legal        Proceedings                                   |
|---------|------------------------------------------------------------|
|    | None                                                       |
|    |                                                       |
| Item 2. | Changes        in Securities and Use of Proceeds           |
|    | None                                                       |
|    |                                                       |
| Item 3. | Defaults        upon Senior Securities                     |
|    | None                                                       |
|    |                                                       |
| Item 4. | Submission        of Matters to a Vote of Security Holders |
|    |                                                       |
|    | (a)                                                        | At the Annual        Meeting of Shareholders held on May 24, 2001, the        following proposals were adopted by the margins        indicated: |
|    |                                                       |   |
|    | (b)                                                        | PROPOSAL 1:        Annual Election of Directors. Harry Kletter, the        Company's Chairman and Chief Executive Officer, Bruce A.        Cannon, Ted Cox, Jerrold R. Perchik and James E. Vining        were elected to one-year terms to the Board of Directors.        With the exception of Mr. Vining, the Nominating        Committee prior to the mailing of the Proxy Statement had        nominated the elected directors. David Lester, the other        nominee listed in the Proxy Statement, indicated that he        would not be available to serve on the Board of        Directors. Consequently, the Board of Directors nominated        Mr. Vining on May 24, 2001, prior to the annual meeting        of shareholders, to serve as the fifth director of the        Company. |
|    |                                                       |   |

|   |                      | **For**     | **Against** | **Broker Non-        Votes And**  ******Abstentions**  |
|--------|---------------------------|---------------------------------|-------------|-----------------------------------------------------------------------|
|   |                      |                            |        |                                                                  |
|   | Harry Kletter             | 1,630,742                       | 1,000  | 71,558                                                 |
|   | Bruce A.        Cannon    | 1,631,752                       |        | 71,548                                                 |
|   | Ted L. Cox                | 1,631,752                       |        | 71,548                                                 |
|   | David W.        Lester    | 609,151                         |        | 1,094,149                                              |
|   | Jerrold R.        Perchik | 1,631,752                       |        | 71,548                                                 |
|   | James E.        Vining    | 1,022,601                       |        | 680,699                                                |

|   |   |                                                                                                            |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|
|   | (c)    | PROPOSAL 2:        Confirmation of Crowe Chizek & Company LLP as the        Company's independent auditors. |
|   |   |                                                                                                            |

|   |   | **For**     | **Against** | **Broker Non-        Votes And**  ******Abstentions**  |
|--------|--------|---------------------------------|-------------|-----------------------------------------------------------------------|
|   |   |                            |        |                                                                  |
|   |   | 1,631,252                       |        | 72,048                                                 |
|   |
|   |
| 14     |

 

----

 

| Item 5. | Other        Information                |
|---------|-----------------------------------------|
|    |                                    |
|    | (a)                                     | Effective        July 2, 2001, Timothy W. Myers resigned from his position        as Chief Operating Officer with the Registrant. |
|    |                                    |   |
|    |                                    | The        Registrant promoted two individuals as follows: Robert        Cuzzort to Chief Operating Officer and Alan L. Schroering        to Chief Financial Officer. John O. Tietjen remains as a        Senior Vice President and Corporate Secretary of the        Registrant. |
|    |                                    |   |
| Item 6. | Exhibits        and Reports on Form 8-K |
|    |                                    |
|    | (a)                                     | Exhibits |
|    |                                    |   |
|    |                                    | Exhibit 10.27 | Promissory        Note dated May 31, 2001 from Registrant to Bank of        Louisville in the amount of $1,500,000. |
|    |                                    |   |   |
|    |                                    | Exhibit 10.28 | Promissory        Note dated May 31, 2001 from Registrant to Bank of        Louisville in the amount of $250,000. |
|    |                                    |   |   |
|    |                                    | Exhibit 10.29 | Promissory        Note dated May 31, 2001 from Registrant to Bank of        Louisville in the amount of $250,000. |
|    |                                    |   |   |
|    |
|    |
|    |
| 15      |

 

----

 

| 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: August        3, 2001                                                                                                                                                                                          | /s/ Harry        Kletter                                        |
|                                                                                                                                                                                                                 | Chairman and        Chief Executive Officer |
|                                                                                                                                                                                                                 | (Principal        Executive and Financial |
|                                                                                                                                                                                                                 |   Officer) |
|                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                 |
| 16                                                                                                                                                                                                                   |