FORM 10-QSECURITIES AND EXCHANGE COMMISSION
			WASHINGTON, DC  20549[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
			SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2008OR[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
			SECURITIES EXCHANGE ACT OF 1934
			For the Transition Period From _________ to ________Commission File Number 0-20979INDUSTRIAL SERVICES OF AMERICA, INC.(Exact Name of Registrant as specified in its Charter)




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




7100
			Grade Lane, PO Box 32428
			Louisville, Kentucky  40232
			(Address of principal executive offices)(502)
			368-1661
			(Registrant's Telephone Number, Including Area Code)Check whether the registrant (1) has filed all
			Reports required to be filed by Section 13 or 15(d) of the
			Securities Exchange Act of 1934 during the preceding 12 months (or
			for such shorter period that the registrant was required to file
			such reports), and (2) has been subject to such filing requirements
			for the past 90 days. Yes X   No ___Indicate
			by check mark whether the registrant is a large accelerated filer,
			an accelerated filer, a non-accelerated  filer, or a smaller
			reporting company.   See the definitions of "large accelerated
			filer," "accelerated filer" and "smaller reporting company"  in Rule
			12b-2 of the Exchange Act.(Check one):   Large accelerated filer                   Accelerated filer                            Non-accelerated filer                    Smaller reporting company XIndicate by check
			mark whether the registrant is a shell company (as defined in Rule
			12b-2 of the Exchange Act).  Yes ___  No _X__Indicate the number
			of shares outstanding of each of the issuer's classes of common
			stock, as of March 31, 2008:  3,601,146.




---



INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESINDEXPage No.Part I
			Financial InformationCondensed Consolidated Balance SheetsMarch 31, 2008 (Unaudited) and December 31,
			2007
			3Condensed Consolidated Statements ofOperations - Three Months EndedMarch 31, 2008 and 2007 (Unaudited)
			5Condensed Consolidated Statement of
			Shareholders' EquityThree months ended March 31, 2008 (Unaudited)
			6Condensed Consolidated Statements ofCash Flows - Three Months EndedMarch 31, 2008 and 2007 (Unaudited)
			7Notes to Condensed ConsolidatedFinancial Statements (Unaudited)
			8Management's Discussion and Analysisof Financial Condition and Resultsof Operations
			15Part II
			Other Information
			23




---



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




March 31,
			2008
			(Unaudited)
			
			December 31,
			2007Current assetsCash and cash equivalents
			$    1,162,018
			
			$   1,501,685Income tax receivable
			-
			
			100,737Accounts receivable - trade (after allowance
			
			    for doubtful accounts of $100,000
			    in 2008 and 2007)
			9,313,162
			
			6,764,851Net investment in sales-type leases
			57,978
			
			60,364Inventories
			3,836,330
			
			4,627,281Deferred income taxes
			141,636
			
			141,636Other
			349,064
			
			318,496Total current assets
			14,860,188
			
			13,515,050Net property and equipment
			9,363,783
			
			9,537,345Other AssetsGoodwill
			560,005
			
			560,005Net investment in sales-type leases
			112,971
			
			125,851Notes receivable -- related party
			195,125
			
			204,053Deposit for shredder system
			3,196,530
			
			2,131,020Other assets
			480,858
			
			211,1984,545,489
			
			3,232,127$ 28,769,460
			
			$ 26,284,522






See accompanying
notes to consolidated financial statements.

3.





---



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




March 31,
			2008(Unaudited)
			
			December 31,
			2007Current liabilitiesCurrent maturities of long term debt
			$     344,810
			
			$    338,913Current maturities of capital lease
			obligation
			102,422
			
			133,675Accounts payable
			4,703,312
			
			4,665,631Income tax payable
			623,630
			
			-Other current liabilities
			471,632
			
			436,791Total current liabilities
			6,245,806
			
			5,575,010Long-term liabilitiesLong-term debt
			9,305,337
			
			8,393,784Capital lease obligation
			81,207
			
			101,569Deferred income taxes
			194,721
			
			194,7219,581,265
			
			8,690,074Stockholders' equityCommon stock, $.005 par value, 10,000,000
			shares authorized,
			    4,295,000 shares issued in 2007 and 2006,
			    3,601,146 shares outstanding in 2008 and 3,620,899 in 2007
			21,475
			
			21,475Additional paid-in capital
			3,599,624
			
			3,599,624Retained earnings
			10,521,284
			
			9,434,733Treasury stock, 693,854,shares at average
			costin 2008 and 674,101 in 2007
			(1,199,994)
			
			(1,036,394)12,942,389
			
			12,019,438$
			28,769,460
			
			$
			26,284,522






See accompanying
notes to consolidated financial statements.

4.



---



INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSTHREE
			MONTHS ENDED MARCH 31, 2008 AND 2007(UNAUDITED)




2008
			
			2007Revenue from services
			$   4,872,542
			
			$   3,844,227Revenue from product sales
			21,210,853
			
			14,060,522Total Revenue
			26,083,395
			
			17,904,749Cost of goods sold for services
			4,626,363
			
			3,522,699Cost of goods sold for product sales
			17,762,532
			
			11,754,347Reduction of cost of goods sold
			-
			
			(35,278)Total Cost of goods sold
			22,388,895
			
			15,241,768Selling, general and administrative expenses
			1,809,605
			
			1,364,007Income before other income (expense)
			1,884,895
			
			1,298,974Other income (expense)Interest expense
			(93,566)
			
			(42,457)Interest income
			23,434
			
			28,973Loss on sale of assets
			(5,142)
			
			(5,775)Other income (expense), net
			1,297
			
			22,053(73,977)
			
			2,794Income before income taxes
			1,810,918
			
			1,301,768Income tax provision
			724,367
			
			508,688Net income
			$ 1,086,551
			
			$     793,080Basic earnings per share
			$           0.30
			
			$           0.22Diluted earnings per share
			$           0.30
			
			$           0.22Weighted shares outstanding:Basic
			3,617,872
			
			3,640,899Diluted
			3,617,872
			
			3,640,899






See accompanying
notes to consolidated financial statements.

5.



---



INDUSTRIAL SERVICES OF AMERICA, INC.
			AND SUBSIDIARIES
			CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
			THREE MONTHS ENDED MARCH 31, 2008(UNAUDITED)___________________________________________________________________________________________________________________________________AdditionalCommon Stock
			
			Paid-in
			
			Retained
			
			Treasury StockShares
			
			Amount
			
			Capital
			
			Earnings
			
			Shares
			
			Cost
			
			TotalBalance as of December 31, 2007
			
			4,295,000
			
			$21,475
			
			$3,599,624
			
			$9,434,733
			
			(674,101)
			
			$(1,036,394)
			
			$12,019,438Stock repurchase
			
			-
			
			-
			
			-
			
			-
			
			(19,753)
			
			(163,600)
			
			(163,600)Net income
			
			-
			
			-
			
			-
			
			1,086,551
			
			-
			
			-
			
			1,086,551Balance as of March 31, 2008
			
			4,295,000
			
			$21,475
			
			$3,599,624
			
			$10,521,284
			
			(693,854)
			
			$
			(1,199,994)
			
			$12,942,389






See accompanying
notes to consolidated financial statements.

6.



---



INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSTHREE
			MONTHS ENDED MARCH 31, 2008 AND 2007(UNAUDITED)




2008
			
			2007Cash flows from operating activitiesNet income
			$  1,086,551
			
			$    793,080Adjustments to reconcile net income to
			    net cash from operating activities:Depreciation and amortization
			519,336
			
			456,497Loss on sale of property and equipment
			5,142
			
			5,775Deferred income taxes
			-
			
			(78,743)Change in assets and liabilitiesReceivables
			(2,447,574)
			
			(2,090,607)Net investment in sales-type leases
			15,266
			
			11,352Inventories
			790,951
			
			273,786Other assets
			(300,228)
			
			(74,002)Accounts payable
			37,681
			
			339,218Other current liabilities
			658,471
			
			(343,406)Net cash from operating activities
			365,596
			
			(707,050)Cash flows from investing
			activitiesProceeds from sale of property and equipment
			16,639
			
			46,950Purchases of property and equipment
			(367,555)
			
			(369,268)Deposit for shredder system
			(1,065,510)Payments from related party
			8,928
			
			8,452Net cash from investing activities
			(1,407,498)
			
			(313,866)Cash flows from financing
			activitiesPurchases of common stock
			(163,600)
			
			-Payments on capital lease obligation
			(51,615)
			
			(58,203)Proceeds from long-term debt
			1,000,000
			
			2,750,000Payments on long-term debt
			(82,550)
			
			(1,797,284)Net cash from financing activities
			702,235
			
			894,513Net decrease in cash
			(339,667)
			
			(126,403)Cash at beginning of period
			1,501,685
			
			1,331,807Cash at end of period
			$ 1,162,018
			
			$ 1,205,404Supplemental disclosure of cash flow
			informationCash paid for interest
			$      93,566
			
			$      42,457Cash paid for taxes
			-
			
			950,554






See accompanying
notes to consolidated financial statements.

7.



---



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS



(Unaudited)



NOTE 1 -- BASIS OF PRESENTATION



The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with U. S.
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. 
Accordingly, they do not include all of the information and footnotes required
by U. S. generally accepted accounting principles for complete consolidated
financial statements.  The information furnished includes all adjustments, which
are, in the opinion of management, necessary to present fairly our financial
position as of March 31, 2008 and the results of our operations and changes in
our cash flow for the periods ended March 31, 2008 and 2007.  Results of
operations for the period ended March 31, 2008 are not necessarily indicative of
the results that may be expected for the entire year.  Additional information,
including the audited December 31, 2007 consolidated financial statements and
the Summary of Significant Accounting Policies, is included in our Annual Report
on Form 10-K for the year ended December 31, 2007 on file with the Securities
and Exchange Commission.



In September 2006, the FASB issued SFAS
No. 157, Fair Value Measurements, which defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosure about fair market value measurements.  This Statement
does not require any new fair value measurements, but provides guidance on how
to measure fair value by providing a fair value hierarchy used to classify the
source of the information.  For financial assets and liabilities, SFAS No. 157
is effective for us beginning January 1, 2008.  In February 2008, the FASB
deferred the effective date of SFAS No. 157 for all non-financial assets and
non-financial liabilities, except those as recognized or disclosed at fair value
in the financial statements on a recurring basis (at least annually) until
January 1, 2009.  Management believes the impact will not require material
modification related to our non-recurring fair value measurements and will be
substantially limited to expanded disclosures in the Notes to the Financial
Statements for notes that currently have components measured at fair market
value.



Effective January 1, 2008 we adopted SFAS
No. 157 for financial assets and liabilities measure at fair market value on a
recurring basis.  The partial adoption of SFAS No. 157 for financial assets and
liabilities did not have a material impact on our consolidated financial
position, results of operations or cash flows.  See Note 9 for information and
related disclosures.



NOTE 2 --
ESTIMATES



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



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



In December 2006 we executed a new revolving credit facility with Branch Banking
and Trust Company increasing the borrowing line from $5.0 million to $10.0
million to provide us with working capital to support the current needs of our
business.  This revolving credit facility has a three year term expiring
December 22, 2009, and provides for advances of up to eighty percent (80%) of
our eligible accounts receivable and up to forty percent (40%) of eligible
inventory, and up to one hundred (100%) of the net book value of our eligible
equipment less an outstanding indebtedness on the equipment.  The revolving
credit facility bears interest at the one month LIBOR rate, as published in the
Wall Street Journal, plus two and twenty-five one-hundredths percent (2.25%) per
annum which was 4.95% as of March 31, 2008, and is secured by all our assets
(except rental fleet equipment).  The balance of the credit facility at March
31, 2008 was $7,000,000.  The revolving credit facility contains certain
restrictive and financial covenants.  At March 31, 2008, we were in compliance
with all restrictive covenants and the entire amount of our credit facility less
our outstanding borrowings was available for borrowings.



We also have a $2.0 million loan
with Fifth Third Bank secured by our rental fleet equipment.  Indebtedness under
this loan agreement accrues interest at a fixed interest rate of 6.83%.  The
maturity date under this agreement is June 2011 with a ten-year amortization
schedule.  As of March 31, 2008 we had borrowed $1,740,610 and as of December
31, 2007 we had borrowed $1,779,585 against this loan.  The terms of the loan
agreement place certain restrictive covenants on us, including maintenance of a
specified tangible net worth, debt to net worth and EBITDA ratio.  Consequently,
these covenants restrict our ability to incur as much additional debt as we may
desire for future growth.  At March 31, 2008, we were in compliance with all
restrictive covenants.



On August 2, 2007, we entered
into an asset purchase agreement for $1,300,000 funded primarily by a note
payable to ILS, the sole member of which is Brian Donaghy, our president and
chief operating officer, whereby we pay $20,000 per month for 60 months for
various assets including tractor trailers, trucks and containers.  The note
payable reflects a seven percent (7%) interest payment on the outstanding
balance plus principal amortization.  We recorded a note payable of $1,010,040
with an outstanding balance at March 31, 2008 of $909,538.



NOTE 4 -- SEGMENT
INFORMATION



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



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



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







FOR THE
			THREE MONTHS ENDEDMARCH 31, 2008
			ISARECYCLING
			
			COMPUTERIZED
			WASTESYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$20,673,717
			
			$                 -
			
			$              -
			
			$              -
			
			$20,673,717Equipment sales, serviceand leasing revenues
			-
			
			-
			
			537,136
			
			-
			
			537,136Management fees
			-
			
			4,872,542
			
			-
			
			-
			
			4,872,542Cost of goods sold
			(17,710,873)
			
			(4,626,363)
			
			(51,659)
			
			-
			
			(22,388,895)Selling, general andadministrative expenses
			(693,085)
			
			(236,235)
			
			(263,053)
			
			(617,232)
			
			(1,809,605)Segment profit (loss)
			$  2,269,759
			
			$         9,944
			
			$   222,424
			
			$ (617,232)
			
			$   1,884,895Segment assets
			$21,969,931
			
			$  1,531,641
			
			$2,058,675
			
			$3,209,213
			
			$28,769,460






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




NOTE 5 -- INVENTORIES



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



Some commodities are in saleable
condition at acquisition.  We purchase these commodities in small amounts until
we have a truckload of material available for shipment.  Some commodities are
not in saleable condition at acquisition.  These commodities must be torched,
sheared or baled.  We do not have work-in-process inventory that needs to be
manufactured to become finished goods.  We include processing costs in inventory
for all commodities.  Ferrous inventory of $1,574,581 at March 31, 2008 was
comprised of $587,812 in raw materials and $986,769 of finished goods. 
Non-ferrous inventory of $2,177,579 at March 31, 2008 was comprised of $673,846
in raw materials and $1,503,733 of finished goods.  Ferrous inventory of
$1,848,445 at December 31, 2007 was comprised of $686,332 in raw materials and
$1,162,113 of finished goods.  Non-ferrous inventory of $2,715,703 at December
31, 2007 was comprised of $372,949 in raw materials and $2,342,754 of finished
goods.  We charged $750,114 in general and administrative processing costs to
cost of sales for the quarter ended March 31, 2008 and $2,671,089 for the year
ended December 31, 2007.



Inventory also includes all types of industrial waste
handling equipment and machinery held for resale such as compactors, balers, and
containers.   Other inventory includes cardboard and baling wire.  Inventories
as of March 31, 2008 and December 31, 2007 consist of the following:



March 31, 2008(unaudited)
			
			December 31,2007Ferrous materials
			$ 1,574,581
			
			$ 1,848,445Non-ferrous
			materials
			2,177,579
			
			2,715,703Waste equipment
			machinery
			56,584
			
			36,498Other
			27,586
			
			26,635Total
			inventories
			$ 3,836,330
			
			$ 4,627,281




NOTE 6 -- LEASE COMMITMENTS



Operating Leases:

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



We lease a facility in Dallas, Texas for management services operations.  The
agreement provided that we make monthly payments of $969 through September 2007.
 We also lease other machinery and equipment under operating leases which expire
through July 2009.



We lease a facility in
Lexington, Kentucky for $4,500 per month; the lease terminates December 31,
2012.  We have subleased this property for a term commencing March 1, 2007 and
ending December 31, 2012 for $4,500 per month.   If for any reason the sublessee
defaults, we remain liable for the remainder of the lease payments through
December 31, 2012.



On February 6, 2007, we leased
7.7 acres of real property, including a 38,000 square foot warehouse and a 400
square foot office, in Pineville, Louisiana for $5,250 per month for twenty-four
months beginning March 1, 2007 and ending February 28, 2009, with an option to
purchase the property for a purchase price of $575,000.  On January 18, 2008, we
sold our position in this property, including the lease and the option, for
$25,000.



Future minimum lease payments for operating leases as of March 31, 2008 are as
follows:



2008
			
			$     644,7212009
			
			636,0002010
			
			636,0002011
			
			636,0002012
			
			636,000Future minimum lease payments
			
			$  3,188,721




Total rent expense for the three months ended March 31, 2008 and 2007 was
$208,176 and $204,867, respectively.



Capital Leases:



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



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



2008
			
			2007Equipment
			
			$    771,567
			
			$     927,513Less accumulated depreciation
			
			201,141
			
			354,247$    570,426
			
			$     573,266




The following is a schedule of future annual minimum lease payments under the
capitalized lease arrangements, together with the present value of net minimum
lease payments at March 31, 2008.



2008
			
			$      102,5052009
			
			78,7322010
			
			2,474Total future minimum lease payments
			
			183,711Lessamount representing interest
			
			(82)Present value of net minimumlease payments
			
			183,629Less current portion
			
			(102,422)Capital Lease Obligations
			
			$       81,207




NOTE 7 -- PER SHARE DATA



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



2008
			
			2007Basic earnings per shareNet income
			$   1,086,551
			
			$     793,080Weighted average shares outstanding
			3,617,872
			
			3,640,899Basic earnings per share
			$             .30
			
			$             .22Diluted earnings per shareNet income
			$  1,086,551
			
			$    793,080Weighted average shares outstanding
			3,617,872
			
			3,640,899Add dilutive effect of assumed exercising of stock options
			-
			
			-Diluted weighted average sharesoutstanding
			3,617,872
			
			3,640,899Diluted earnings per share
			$             .30
			
			$             .22




NOTE 8 -- SHREDDER SYSTEM
COMMITMENT



The
Board of Directors, at its June 21, 2007 meeting, announced authorization to
proceed with the purchase of a shredder system and complimentary facility
improvements totaling five million dollars.  On July 30, 2007, the Company
entered into a contract with The Shredder Company located in Canutillo, Texas to
purchase a shredder system for $3,551,700.  To date, we have made deposit
payments totaling $3,196,530 classified as other assets.  We are financing
the purchase of the shredder system with our $10.0 million senior revolving
credit facility.  As of March 31, 2008, we have capitalized $84,056 of interest.  This project is scheduled to
be completed in 2008.



NOTE 9 -- FAIR VALUE
MEASUREMENTS



In the first quarter of 2008, we adopted SFAS No. 157, Fair Value
Measurements, for financial assets and liabilities.  This standard defines fair
value, provides guidance for measuring fair value and requires certain
disclosures.  This standard does not require any new fair market value
measurements, but rather applies to all other accounting pronouncements that
require or permit fair value measurements.  SFAS No. 157 discusses valuation
techniques, such as the market approach  (comparable market prices), the income
approach (present value of future income or cash flow), and the cost approach
(cost to replace the service capacity of an asset or replacement cost).  The
statement utilizes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels.  The
following is a brief description of those three levels:



Level 1  Observable inputs such
as quoted prices (unadjusted) in active markets for identical assets or
liabilities.



Level 2  Observable inputs other
than quoted prices for the asset or liability, either directly or indirectly. 
These include quoted prices for similar assets or liabilities in active markets
and quoted prices for identical or similar assets or liabilities in markets that
are not active.



Level 3  Unobservable inputs
that reflect our own assumptions.



We use the fair value
methodology outlined in SFAS 157 to value the assets and liabilities for cash
and debt.  All of our cash and debt are defined as Level 1.  In
accordance with SFAS 157, the following table represents our fair value
hierarchy for financial instruments at March 31, 2008:



Level
			1
			
			TotalAssetsCash and cash equivalents
			$ 1,162,018
			
			$ 1,162
			018LiabilitiesLong
			term debt
			$ (9,650,147)
			
			$ (9,650,147)






---



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



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



The following discussion and
analysis contains certain financial predictions, forecasts and projections which
constitute "forward-looking statements" within the meaning of the federal
securities laws.  Actual results could differ materially from those financial
predictions, forecasts and projections and there can be no assurance that we
will achieve such financial predictions, forecasts and projections.  Factors
that could affect financial predictions, forecasts and projections include the
fluctuations in the commodity price index and any conditions internal to our
major customers, including loss of their accounts and other factors as listed in
our Form 10-K for the year ended December 31, 2007, as filed with the Securities
and Exchange Commission.



General



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



We continue to
pursue a growth strategy in the waste management services arena by adding new
locations of existing customers as well as marketing our services to potential
customers.  Currently, we service 2,280 customer locations throughout the United
States and we utilize an active database of over 6,600 vendors to provide
timely, thorough and cost-effective service to our customers.



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



We have
operating locations in Louisville, Kentucky, Seymour, Indiana, New Albany,
Indiana  and Dallas, Texas.  We do not have operating locations outside the
United States.



Liquidity and Capital
Resources



As of March
31, 2008 we held cash and cash equivalents of $1,162,018.



We currently
maintain a $10.0 million senior revolving credit facility with the Branch
Banking and Trust Company.  This revolving credit facility has a three year
term, provides for advances of up to eighty percent (80%) of our eligible
accounts receivable and up to forty percent (40%) of eligible inventory, and up
to one hundred (100%) of our net book value of eligible equipment less an
outstanding indebtedness on the equipment.  The revolving credit facility bears
interest at the one month LIBOR rate, as published in the Wall Street Journal,
plus two and twenty-five one-hundredths percent (2.25%) per annum, 4.95% as of
March 31, 2008, and is secured by all our assets (except rental fleet
equipment).  As of March 31, 2008 we had borrowed $7,000,000 and as of December
31, 2007 we had borrowed $6,000,000 against this line of credit.  The revolving
credit facility contains certain restrictive and financial covenants.  At March
31, 2008, we were in compliance with all restrictive covenants.



We also have a
$2.0 million loan with Fifth Third Bank secured by our rental fleet equipment. 
Indebtedness under this loan agreement accrues interest at a fixed interest rate
of 6.83%.  The maturity date under this agreement is June 2011 with a ten-year
amortization schedule.  As of March 31, 2008 we had borrowed $1,740,610 and as
of December 31, 2007 we had borrowed $1,779,585 against this loan.  The terms of
the loan agreement place certain restrictive covenants on us, including
maintenance of a specified tangible net worth, debt to net worth and EBITDA
ratio.  Consequently, these covenants restrict our ability to incur as much
additional debt as we may desire for future growth.  At March 31, 2008, we were
in compliance with all restrictive covenants.



On August 2,
2007, we entered into an asset purchase agreement for $1,300,000 funded
primarily by a note payable to ILS, the sole member of which is Brian Donaghy,
our president and chief operating officer, whereby we pay $20,000 per month for
60 months for various assets including tractor trailers, trucks and containers. 
The note payable reflects a seven percent (7%) interest payment on the
outstanding balance plus principal amortization.  We also paid ILS $100,000 cash
as a portion of the purchase price at the time of execution of the asset
purchase agreement.  We recorded a note payable of $1,010,040 with an
outstanding balance at March 31, 2008 of $909,537.



During the
first quarter of 2008, we purchased $367,555 of property and equipment.  In the
recycling segment we spent $239,633 for a truck, open top trailers, baler, crane
engine and other operating equipment.  In the equipment sales, leasing and
service segment, we purchased $81,471 in rental equipment that we located at
customer sites.  This rental fleet equipment consists of solid waste handling
and recycling equipment such as compactors, pre-crushers, containers and balers.
It is our intention to continue to pursue this market.  We purchased office
equipment of $24,497 and made property improvements of $21,954.



We implemented
the use of a purchasing card with a credit limit of $6.0 million in the second
quarter of 2004.  We have included the balance due on the purchasing card as
part of accounts payable.  The outstanding balance on the purchasing card at
March 31, 2008 was $1,030,307 with a due date of April 28, 2008.  The card
accrues interest at prime plus 5.9% after the first twenty-five days of the
purchase; our intention is to pay off the full balance every month so as to not
incur finance charges.  To date we have not incurred any interest charges on
this purchasing card.  The card requires monthly minimum payments on any balance
outstanding at month end.  We receive rebates on an annual basis for all
purchases made with the card.



We expect that
existing cash flow from operations and available credit under our existing
credit facilities will be sufficient to meet our cash needs in 2008.



Results of Operations



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



Quarter ended March 31,2008
			
			2007Statements of Operations Data:Total Revenue
			..................................................................................
			100.0%
			
			100.0%Cost of goods
			sold............................................................................
			85.9%
			
			85.1%Selling, general and administrative expenses
			..................................
			6.9%
			
			7.6%Income before other
			expenses..........................................................
			7.2%
			
			7.3%




Three months ended March
31, 2008 compared to three months ended March 31, 2007



Total revenue
increased $8,178,646 or 45.7% to $26,083,395 in 2008 compared to $17,904,749 in
2007.  Recycling revenue increased $7,142,131 or 52.8% to $20,673,717 in 2008
compared to $13,531,586 in 2007.  This is primarily due to an increase of 25% in
shipment pricing and 8% in the volume of shipments.  Management services revenue
increased $1,028,315 or 26.7% to $4,872,542 in 2008 compared to $3,844,227 in
2007.  This is primarily due to an increase in the number of customer locations
managed.  Equipment, service and leasing revenue increased $8,200 or 1.6% to
$537,136 in 2008 compared to $528,936 in 2007.  This increase is due to an
increase in rental revenue.



Total cost of
goods sold increased $7,147,127 or 46.9% to $22,388,895 in 2008 compared to
$15,241,768 in 2007.  Recycling cost of goods sold increased $6,177,409 or 53.6%
to $17,710,873 in 2008 compared to $11,533,464 in 2007.  This is due to an
increase of 8% in the volume of shipments and an increase of 24% in recycling
purchase prices and 12% in the volume of purchases.  Management services cost of
goods sold increased $1,138,942 or 32.7% to $4,626,363 in 2008 compared to
$3,487,421 in 2007 primarily due to an increase in the number of customer
locations managed.  Equipment, service and leasing cost of goods sold decreased
$169,224 or 76.6% to $51,659 in 2008 compared to $220,883 in 2007.  The decrease
is primarily due to a decrease in equipment costs.



Selling,
general and administrative expenses increased $445,598 or 32.7% to $1,809,605 in
2008 compared to $1,364,007 in 2007.  As a percentage of revenue, selling,
general and administrative expenses were 6.9% in 2008 compared to 7.6% in 2007. 
The percentage of revenue increase is due primarily to ILS administrative
costs.



Other income/(expense) decreased
$76,771 to ($73,977) in 2008 compared to $2,794 in 2007 due primarily to an
increase of interest expense of $51,109 to $93,566 in 2008 compared to 442,457
in 2007.



The income tax provision
increased $215,679 to $724,367 in 2008 compared to $508,688 in 2007.  As a
percentage of income before income taxes, the income tax provision was 40.0% in
2008  compared to 39.1% in 2007.



Financial condition at March
31, 2008 compared to December 31, 2007

Cash and
cash equivalents decreased $339,667 to $1,162,018 as of March 31, 2008 compared
to $1,501,685 as of December 31, 2007.



We generated
net cash from operating activities of $365,596 for the quarter ended March 31,
2008.  Primarily this was due to net income of $1,086,551 in the first quarter
of 2008.



We used net
cash from investing activities of $1,407,498 for the quarter ending March 31,
2008.  We made a deposit of $1,065,510 for the
purchase of a shredder system.  Also, we purchased recycling and rental fleet
equipment of $367,555.  In the recycling segment we spent $239,633 for a truck,
open top trailers, baler, crane engine and other operating equipment.  In the
equipment sales, leasing and service segment, we purchased $81,471 in rental
equipment that we located at customer sites.  This rental fleet equipment
consists of solid waste handling and recycling equipment such as compactors,
pre-crushers, containers and balers. It is our intention to continue to pursue
this market.  We purchased office equipment of $24,497 and made property
improvements of $21,954.



Our net cash
from financing activities of $702,235 for the quarter ended March 31, 2008 is
primarily due to advances of $1,000,000 on our line of credit, offset by
payments on debt of $134,165 and our purchase of 19,753 shares of our common
stock for $163,600.



Accounts
receivable trade increased $2,548,311 or 37.7% to $9,313,162 as of March 31,
2008 compared to $6,764,851 as of December 31, 2007.  This is primarily due to
an increase of 25% in shipment pricing and 8% in the volume of shipments in the
recycling segment.



Inventories
consist principally of ferrous and nonferrous scrap materials and waste
equipment machinery held for resale.  We value inventory at the lower of cost or
market.  Inventory decreased $790,951 or 16.2% to $3,836,330 as of March 31,
2008 compared to $4,627,281 as of December 31, 2007.



Inventory aging for the quarter
ended March 31, 2008 (Days Outstanding):



Description
			
			1-30
			
			31-60
			
			61-90
			
			Over
			90
			
			TotalWaste equipment machinery
			
			$     56,584
			
			$              -
			
			$            -
			
			$            -
			
			$  
			 56,584Ferrous materials
			
			1,099,079
			
			285,338
			
			158,222
			
			31,942
			
			1,574,581Non-ferrous materials
			
			1,886,791
			
			132,434
			
			26,306
			
			132,048
			
			2,177,579Other
			
			27,586
			
			-
			
			-
			
			-
			
			27,586$3,070,040
			
			$
			417,772
			
			$
			184,528
			
			$163,990
			
			$3,836,330




Inventory aging for the year ended
December 31, 2007 (Days Outstanding):



Description
			
			1-30
			
			31-60
			
			61-90
			
			Over
			90
			
			TotalWaste equipment machinery
			
			$     36,498
			
			$               -
			
			$            -
			
			$           -
			
			$     36,498Ferrous Materials
			
			1,163,306
			
			566,774
			
			78,183
			
			40,182
			
			1,848,445Non-ferrous materials
			
			1,885,783
			
			553,049
			
			129,552
			
			147,319
			
			2,715,703Other
			
			26,635
			
			-
			
			-
			
			-
			
			26,635$3,112,222
			
			$1,119,823
			
			$
			207,735
			
			$187,501
			
			$4,627,281




Accounts
payable trade increased $37,681 or 0.8% to $4,703,312 as of March 31, 2008
compared to $4,665,631 as of December 31, 2007, primarily due to market
conditions.



Working capital
increased $674,342 to $8,614,382 as of March 31, 2008 compared to $7,940,040 as
of December 31, 2007.  The increase was primarily driven by the $2.5 million
increase in accounts receivable.



Contractual Obligations





The following table provides
information with respect to our known contractual obligations for the quarter
ended March 31, 2008.



Obligation Description
			Total
			Less
			than 1 year
			1-3 years
			3-5 years
			More
			than 5 yearsLong-Term Debt Obligations (1)
			$9,650,147
			$
			344,810
			$8,982,547
			$   322,790
			$0Capital Lease Obligations (2)
			183,629
			102,422
			81,207
			-
			0Operating Lease Obligations (3)
			3,188,721
			644,721
			1,272,000
			1,272,000
			0Total
			$13,022,497
			$1,091,953
			$10,335,754
			$1,594,790
			$0




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



(2)   We lease various pieces of equipment that qualify for capital lease
treatment.  These lease arrangements require monthly lease payments expiring at
various dates through June 2010.



(3)   We lease the Louisville, Kentucky facility from K&R, LLC, the sole member
of which is Harry Kletter, our chief executive officer, under an operating lease
expiring December 2012.  We have monthly rental payments of $48,500 through
December 2012.  In the event of a change of control, the monthly payments become
$62,500.  We have subleased the Lexington property to an unaffiliated third
party for a term commencing March 1, 2007 and ending December 31, 2012 for
$4,500 per month.  We currently lease this property from an unrelated party for
$4,500 per month; the lease terminates December 31, 2012.  If for any reason the
sub-lessee defaults, we remain liable for the remainder of the lease payments
through December 31, 2012.



We also lease a management
services operations facility and various pieces of equipment in Dallas, Texas
for which monthly payments of $2,750 are due through September 2008.



Long-term debt
increased $911,553 to $9,305,337 as of March 31, 2008 compared to $8,393,784 as
of December 31, 2007.



Impact of Recently Issued Accounting Standards



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



SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, although
earlier application is encouraged.  Additionally, prospective application of the
provisions of SFAS No. 157 is required as of the beginning of the fiscal year in
which it is initially applied, except when certain circumstances require
retrospective application. Our adoption of this standard at January 1, 2008 did
not have a material impact on our consolidated financial statements.



In February
2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets
and Financial Liabilities" ("SFAS 159"). SFAS 159 provides companies with an
option to report selected financial assets and financial liabilities at fair
value. Unrealized gains and losses on items for which the fair value option has
been elected are reported in earnings at each subsequent reporting date. SFAS
159 is effective for fiscal years beginning after November 15, 2007, the year
beginning January 1, 2008 for us. While we continue to review the provisions of
SFAS 159, we have not yet identified any assets or liabilities for which we
currently believe we will elect the fair value reporting option.



---



ITEM 3:     QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK.



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



We are exposed
to interest rate risk on our floating rate borrowings. As of March 31, 2008,
variable rate borrowings consisted of outstanding borrowings of $7.0 million
under our credit agreement with BB&T.  This revolving credit facility bears
interest at the one month LIBOR rate, as published in the Wall Street Journal,
plus two and twenty-five one-hundredths percent (2.25%) per annum which was
4.95% as of March 31, 2008. Any increase in this rate would lead to higher
interest expense. We do not have any interest rate swaps or caps in place, which
would mitigate our exposure to fluctuations in the interest rate on this
indebtedness. Based on our average anticipated borrowings under our credit
agreement in fiscal 2008, a hypothetical increase or decrease in the LIBOR rate
by 1% would increase or decrease interest expense on our variable borrowings by
approximately $70,000 per year, with a corresponding change in cash flows.



ITEM 4(T):   CONTROLS AND PROCEDURES



(a)   Disclosure
controls and procedures.



ISA's
management, including ISA's principal executive officer and principal financial
officer, have evaluated the effectiveness of our "disclosure controls and
procedures," as such term is defined in Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934.  Based upon their evaluation, our principal
executive officer and principal financial officer concluded that, as of March
31, 2008, ISA's disclosure controls and procedures were effective for the
purpose of ensuring that the information required to be disclosed in the reports
that ISA files under the Exchange Act with the Securities and Exchange
Commission  (1) is recorded, processed, summarized and reported within the time
periods specific in the SEC's rules and forms, and (2) is accumulated and
communicated to ISA's management, including our principal executive and
principal financial officers, as appropriate to allow timely decisions regarding
the required disclosure.



(b)   Internal
controls over financial reporting.



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



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



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



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



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



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



Our management
conducted an evaluation of the effectiveness of our internal control over
financial reporting, based on the framework and criteria established in Internal
Control -- Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission.  Based on this evaluation, our
management assessed the effectiveness of our internal control over financial
reporting for the quarter ended March  31, 2008, and concluded that such
internal control over financial reporting was effective as of March 31, 2008.



(c)   Changes to
internal control over financial reporting



There were no changes in ISA's
internal control over financial reporting during the three months ended March
31, 2008 that have materially affected, or are reasonably likely to affect ISA's
internal control over financial reporting.



---



PART II -- OTHER INFORMATION



Item 1.       Legal Proceedings



None



Item 1A.    Risk Factors



We
have had no material changes from the risk factors reported in our Form 10-K for
the year ended December 31, 2007, as filed with the Securities and Exchange
Commission on March 31, 2008.



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



On November 15,
2005, our Board of Directors authorized a new program to repurchase up to
200,000 shares of our common stock at current market prices.  During 2008, we
repurchased 19,753 shares.  In 2007 we repurchased 40,000 shares, in 2006 we
repurchased 5,509 shares and in 2005 we repurchased 10,000 shares.



Issuer
			Purchases of Equity SecuritiesPeriod
			Total Number
			Average Price
			Total Number of Shares
			Maximum Number ofof Shares
			Paid per Share
			Purchased as part of
			Shares that may yet bePurchased
			
			Publicly Announced
			Purchased Under thePlans or Programs
			Plans or ProgramsOct-05
			-Nov-05
			10,000
			$ 2.9762
			10,000
			190,000Dec-05
			-Jan-06
			5,509
			$ 2.9658
			15,509
			184,491Aug-07
			20,000
			$ 9.9229
			35,509
			164,491Dec-07
			20,000
			$ 7.7257
			55,509
			144,491Mar-08
			19,753
			$ 8.2823
			75,262
			124,738




Item 3.       Defaults upon Senior Securities



None



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



None



Item 5.       Other Information



None



Item 6.       Exhibits



See
exhibit index



---



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:  May 5, 2008
			/s/  Harry KletterChairman and Chief Executive Officer(Principal Executive and FinancialOfficer)Date:  May 5, 2008
			/s/ Alan L. SchroeringChief Financial Officer




---



INDEX TO EXHIBITSExhibit Number
			
			Description of Exhibits31.1
			
			Rule 13a-14(a) Certification of
			Harry Kletter for the Form 10-Q for the quarter ended March 31,
			2008.31.2
			
			Rule 13a-14(a) Certification of Alan Schroering
			for the Form 10-Q for the quarter ended March 31, 2008.32.1
			
			Section 1350 Certification of Harry Kletter and
			Alan Schroering for the Form 10-Q for the quarter ended March 31,
			2008




---

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