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 June 30, 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 June 30, 2008:  3,591,292.




---



INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESINDEXPage No.Part I
			Financial InformationCondensed Consolidated Balance SheetsJune 30, 2008 (Unaudited) and December 31,
			2007
			3Condensed Consolidated Statements ofOperations - Three Months EndedJune 30, 2008 and 2007 (Unaudited)
			5Condensed Consolidated Statements ofOperations - Six Months EndedJune 30, 2008 and 2007 (Unaudited)
			6Condensed Consolidated Statements of
			Shareholders' EquityJune 30, 2008 (Unaudited) and December 31,
			2007
			7Condensed Consolidated Statements ofCash Flows - Six Months EndedJune 30, 2008 and 2007 (Unaudited)
			8Notes to Condensed ConsolidatedFinancial Statements (Unaudited)
			9Management's Discussion and Analysisof Financial Condition and Resultsof Operations
			15Part II
			Other Information
			22




---



PART I --
FINANCIAL INFORMATION



ITEM 1: CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED
CONSOLIDATED BALANCE SHEETS



ASSETS







June 30,
			2008
			(Unaudited)
			
			December 31,
			2007Current assetsCash and cash equivalents
			$    1,121,977
			
			$   1,501,685Income tax receivable
			99,358
			
			100,737Accounts receivable - trade (after allowance
			
			    for doubtful accounts of $100,000 in 2008
			    and 2007)
			12,996,001
			
			6,764,851Net investment in sales-type leases
			54,695
			
			60,364Inventories
			4,973,988
			
			4,627,281Deferred income taxes
			141,636
			
			141,636Other
			182,692
			
			318,496Total current assets
			19,570,347
			
			13,515,050Shredder system construction in progress
			4,143,404
			
			-Net property and equipment
			9,505,409
			
			9,537,345Total property and equipment
			13,648,813
			
			9,537,345Other AssetsGoodwill
			560,005
			
			560,005Net investment in sales-type leases
			99,588
			
			125,851Notes receivable -- related party
			186,074
			
			204,053Deposit for shredder system
			-
			
			2,173,076Other assets
			96,183
			
			169,142941,850
			
			3,232,127$34,161,010
			
			$26,284,522








See accompanying notes to consolidated financial statements.



3.



---



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED
CONSOLIDATED BALANCE SHEETS

CONTINUED



LIABILITIES
AND STOCKHOLDERS' EQUITY





June 30,
			2007
			(Unaudited)
			
			December 31,
			2007Current liabilitiesCurrent maturities of long term debt
			$     185,307
			
			$     338,913Current maturities of capital lease obligation
			81,451
			
			133,675Accounts payable
			5,258,906
			
			4,665,631Dividends payable
			359,129
			
			-Income tax payable
			1,742,911
			
			-Other current liabilities
			964,461
			
			436,791Total current liabilities
			8,592,165
			
			5,575,010Long-term liabilitiesLong-term debt
			11,179,891
			
			8,393,784Capital lease obligation
			60,844
			
			101,569Deferred income taxes
			194,721
			
			194,72111,435,456
			
			8,690,074CommitmentsStockholders' equityCommon stock, $.005 par value, 10,000,000
			shares authorized,
			    4,295,000 shares issued in 2008 and 2007,
			    3,591,292 shares outstanding in 2008 and 3,620,899 in 2007
			21,475
			
			21,475Additional paid-in capital
			3,599,624
			
			3,599,624Retained earnings
			11,824,787
			
			9,434,733Treasury stock, 703,708 shares at average
			costin 2008 and 674,101 in 2007
			(1,312,497)
			
			(1,036,394)14,133,389
			
			12,019,438$34,161,010
			
			$
			26,284,522








See accompanying notes to consolidated financial statements.



4.



---



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS
ENDED JUNE 30, 2008 AND 2007

(UNAUDITED)



2008
			
			2007Revenue from services
			$  4,011,256
			
			$  3,648,276Revenue from product sales
			30,499,829
			
			15,879,820Total Revenue
			34,511,085
			
			19,528,096Cost of goods sold for services
			3,616,674
			
			3,405,183Cost of goods sold for product sales
			24,598,437
			
			13,174,595Reduction of cost of goods sold
			-
			
			(107,266)Total Cost of goods sold
			28,215,111
			
			16,472,512Selling, general and administrative expense
			3,481,812
			
			1,649,201Income before other income (expense)
			2,814,162
			
			1,406,383Other income (expense)Interest expense
			(135,003)
			
			(71,395)Interest income
			20,563
			
			32,791Gain/(loss) on sale of assets
			21,623
			
			(5,613)Other income
			127,369
			
			30534,552
			
			(43,912)Income before income taxes
			2,848,714
			
			1,362,471Income tax provision
			1,186,082
			
			541,172Net income
			$ 1,662,632
			
			$    821,299Basic earnings per share
			$          0.46
			
			$          0.22Diluted earnings per share
			$          0.46
			
			$          0.22Weighted shares outstanding:Basic
			3,596,368
			
			3,640,899Diluted
			3,596,368
			
			3,640,899








See accompanying notes to consolidated financial statements.



5.



---





INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

SIX MONTHS ENDED
JUNE 30, 2008 AND 2007

(UNAUDITED)



2008
			
			2007Revenue from services
			$ 
			8,883,798
			
			$  7,492,503Revenue from product sales
			51,710,682
			
			29,940,342Total Revenue
			60,594,480
			
			37,432,845Cost of goods sold for services
			8,243,037
			
			6,927,882Cost of goods sold for product sales
			42,360,969
			
			24,928,942Reduction of cost of goods sold
			-
			
			(142,544)Total Cost of goods sold
			50,604,006
			
			31,714,280Selling, general and administrative expense
			5,291,417
			
			3,013,208Income before other income (expense)
			4,699,057
			
			2,705,357Other income (expense)Interest expense
			(228,569)
			
			(113,852)Interest income
			43,997
			
			61,764Gain/(loss) on sale of assets
			16,481
			
			(11,388)Other income
			128,666
			
			22,358(39,425)
			
			(41,118)Income before income taxes
			4,659,632
			
			2,664,239Income tax provision
			1,910,449
			
			1,049,860Net income
			$  2,749,183
			
			$  1,614,379Basic earnings per share
			$           0.76
			
			$           0.44Diluted earnings per share
			$           0.76
			
			$           0.44Weighted shares outstanding:Basic
			3,607,120
			
			3,640,899Diluted
			3,607,120
			
			3,640,899








See accompanying notes to consolidated financial statements.



6.



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INDUSTRIAL
SERVICES OF AMERICA, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 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
			
			-
			
			-
			
			-
			
			-
			
			(29,607)
			
			(276,103)
			
			(276,103)Cash dividend declared
			
			-
			
			-
			
			-
			
			(359,129)
			
			-
			
			-
			
			(359,129)Net income
			
			-
			
			-
			
			-
			
			2,749,183
			
			-
			
			-
			
			2,749,183Balance as of June 30, 2008
			
			4,295,000
			
			$21,475
			
			$3,599,624
			
			$11,824,787
			
			(703,708)
			
			$
			(1,312,497)
			
			$
			14,133,389










See accompanying notes to consolidated financial statements.



7.



---



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED
JUNE 30, 2008 AND 2007

(UNAUDITED)



2008
			
			2007Cash flows from operating activitiesNet income
			$  2,749,183
			
			$  1,614,379Adjustments to reconcile net income to
			    net cash from operating activities:Depreciation and
			amortization
			1,041,000
			
			916,643Deferred income taxes
			-
			
			(78,743)(Gain)/loss on sale of property and
			equipment
			(16,481)
			
			11,388Change in assets and liabilitiesReceivables
			(6,231,150)
			
			(2,427,873)Net investment in sales-type leases
			31,932
			
			23,487Inventories
			(346,707)
			
			(435,181)Other assets
			210,141
			
			(141,379)Accounts payable
			593,275
			
			490,171Other current liabilities
			2,270,582
			
			(626,575)Net cash from operating activities
			301,775
			
			(653,683)Cash flows from investing
			activitiesProceeds from sale of property and equipment
			55,189
			
			46,950Purchases of property and equipment
			(1,047,772)
			
			(1,072,828)Purchases for shredder system construction in
			progress
			(1,970,328)
			
			-Payments from related party
			17,979
			
			17,020Net cash from investing activities
			(2,944,932)
			
			(1,008,858)Cash flows from financing
			activitiesPurchases of common stock
			(276,103)
			
			-Payments on capital lease obligation
			(92,949)
			
			(132,686)Proceeds from long-term debt
			6,513,703
			
			4,350,000Payments on long-term debt
			(3,881,202)
			
			(2,434,319)Net cash from financing activities
			2,263,449
			
			1,782,995Net increase/(decrease) in cash
			(379,708)
			
			120,454Cash at beginning of period
			1,501,685
			
			1,331,807Cash at end of period
			$  1,121,977
			
			$   1,452,261Supplemental disclosure of cash flow
			informationCash paid for interest
			$      228,569
			
			$      113,852Cash paid for taxes
			166,159
			
			1,854,343Supplemental disclosure of noncash investing
			and financing activities:Accrued dividends payable
			359,129
			
			364,090Equipment purchased under capital leases
			-
			
			190,200








See accompanying notes to consolidated financial statements.



8.



---



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 June 30, 2008 and the results of our operations and changes in
our cash flow for the periods ended June 30, 2008 and 2007.  Results of
operations for the period ended June 30, 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



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 expiring December 22, 2009,   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 percent (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, which
was 4.95% as of June 30, 2008, and is secured by all our assets (except rental
fleet equipment).  The balance of the credit facility at June 30, 2008 was
$4,027,002.  The revolving credit facility contains certain restrictive and
financial covenants.  At June 30, 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.



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 June 30, 2008 of $865,198.



On May 14, 2008, we executed a
new revolving credit facility with Branch Banking and Trust Company in the
amount of $3.0 million secured by our rental fleet equipment.  This note
replaces the $2.0 million rental fleet loan with Fifth Third Bank (as of June
30, 2008 we had paid off this note and as of December 31, 2007 we had borrowed
$1,779,585).  Indebtedness under this loan agreement accrues interest at the one
month Libor rate, as published in the Wall Street Journal, plus 1.625% per
annum.  The maturity date under this agreement is November 2013.  Fifty-nine
(59) monthly principal and interest payments of $30,966.76 commenced on June 7,
2008 with one final payment of all remaining principal and accrued interest due
on May 7, 2013.  The principal and interest payments of this facility are
calculated on the basis of a ten (10) year amortization, resulting in a
principal balance of approximately $1.7 million due at maturity.  As of June 30,
2008 we had borrowed $2,959,295 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 June 30, 2008, we were in compliance with all
restrictive covenants.



On May 14, 2008, we executed a
new revolving credit facility with Branch Banking and Trust Company in the
amount of $6.0 million to finance the purchase of our shredder system and
complimentary facility improvements.  The security for this facility is the
shredder and assets being purchased.  Our Board approved the acquisition and
installation of the shredder system and complimentary facility improvements on
June 21, 2007.  The revolving credit facility has a term beginning May 2008 and
expiring November 2013.  The facility bears interest at the one month Libor
rate, as published in the Wall Street Journal, plus 1.625% per annum.  The
facility provides for interest only monthly payments which commenced June 7,
2008 and continue through November 7, 2008.  Thereafter, the facility requires
us to make fifty-nine (59) monthly principal and interest payments of $61,923.07
commencing December 7, 2008 with one final payment of all remaining principal
and accrued interest due on November 7, 2013.  The principal and interest
payments of the facility are calculated on the basis of a ten (10) year
amortization, resulting in a principal balance of approximately $3.4 million
being due on before November 7, 2013, which we anticipate that we will
refinance.  As of June 30, 2008 we had borrowed $3,513,703 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 June 30, 2008, we
were in compliance with all restrictive covenants.



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
			SIX MONTHS ENDEDJUNE 30, 2008
			ISARECYCLING
			
			COMPUTERIZED 
			WASTESYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$  50,544,066
			
			$                  -
			
			$               -
			
			$                -
			
			$50,544,066Equipment sales, serviceand leasing revenues
			-
			
			-
			
			1,166,616
			
			-
			
			1,166,616Management fees
			-
			
			8,883,798
			
			-
			
			-
			
			8,883,798Cost of goods sold
			(41,936,168)
			
			(8,243,037)
			
			(424,801)
			
			-
			
			(50,604,006)Selling, general andadministrative expenses
			(2,781,864)
			
			(572,706)
			
			(206,905)
			
			(1,729,942)
			
			(5,291,417)Segment profit (loss)
			$    5,826,034
			
			$        68,055
			
			$    534,910
			
			$ (1,729,942)
			
			$  4,699,057Segment assets
			$  26,735,859
			
			$   1,827,185
			
			$ 2,334,237
			
			$  3,263,729
			
			$34,161,010






FOR THE
			SIX MONTHS ENDEDJUNE 30, 2007
			ISARECYCLING
			
			COMPUTERIZED 
			WASTESYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$  28,895,786
			
			$                  -
			
			$               -
			
			$                -
			
			$28,895,786Equipment sales, serviceand leasing revenues
			-
			
			-
			
			1,044,556
			
			-
			
			1,044,556Management fees
			-
			
			7,492,503
			
			-
			
			-
			
			7,492,503Cost of goods sold
			(24,498,867)
			
			(6,785,338)
			
			(430,075)
			
			-
			
			(31,714,280)Selling, general andadministrative expenses
			(991,421)
			
			(546,046)
			
			(352,844)
			
			(1,122,897)
			
			(3,013,208)Segment profit (loss)
			$    3,405,498
			
			$      161,119
			
			$     261,637
			
			$ (1,122,897)
			
			$  2,705,357Segment assets
			$  15,089,053
			
			$   1,707,170
			
			$  2,056,591
			
			$   3,869,253
			
			$22,722,067






FOR THE
			THREE MONTHS ENDEDJUNE 30, 2008
			ISARECYCLING
			
			COMPUTERIZED 
			WASTESYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$  29,870,349
			
			$                  -
			
			$                -
			
			$                -
			
			$29,870,349Equipment sales, serviceand leasing revenues
			-
			
			-
			
			629,480
			
			-
			
			629,480Management fees
			-
			
			4,011,256
			
			-
			
			-
			
			4,011,256Cost of goods sold
			(24,225,295)
			
			(3,616,674)
			
			(373,142)
			
			-
			
			(28,215,111)Selling, general andadministrative expenses
			(2,088,779)
			
			(336,471)
			
			56,148
			
			(1,112,710)
			
			(3,481,812)Segment profit (loss)
			$    3,556,278
			
			$        58,111
			
			$    312,486
			
			$(1,112,710)
			
			$  2,814,162Segment assets
			$  26,735,859
			
			$   1,827,185
			
			$ 2,334,237
			
			$  3,263,729
			
			$34,161,010






FOR THE
			THREE MONTHS ENDEDJUNE 30, 2007
			ISARECYCLING
			
			COMPUTERIZED
			WASTESYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &SERVICES
			
			OTHER
			
			SEGMENTTOTALSRecycling revenues
			$  15,364,200
			
			$                  -
			
			$                -
			
			$                -
			
			$15,364,200Equipment sales, serviceand leasing revenues
			-
			
			-
			
			515,620
			
			-
			
			515,620Management fees
			-
			
			3,648,276
			
			-
			
			-
			
			3,648,276Cost of goods sold
			(12,965,403)
			
			(3,297,917)
			
			(209,192)
			
			-
			
			(16,472,512)Selling, general andadministrative expenses
			(606,503)
			
			(263,115)
			
			(171,705)
			
			(607,878)
			
			(1,649,201)Segment profit (loss)
			$    1,792,294
			
			$        87,244
			
			$     134,723
			
			$  (607,878)
			
			$  1,406,383Segment assets
			$  15,089,053
			
			$   1,707,170
			
			$  2,056,591
			
			$  3,869,253
			
			$22,722,067




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 $2,416,209 at
June 30, 2008 was comprised of $1,333,311 in raw materials and $1,082,898 of
finished goods.  Non-ferrous inventory of $2,424,035 at June 30, 2008 was
comprised of $388,694 in raw materials and $2,035,341 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 $1,532,573 in general and
administrative processing costs to cost of sales for the quarter ended June 30,
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 June 30, 2008 and December 31, 2007 consist of
the following:



June 30, 2008(unaudited)
			
			December 31,2007Ferrous materials
			$ 2,416,209
			
			$ 1,848,445Non-ferrous
			materials
			2,424,035
			
			2,715,703Waste equipment
			machinery
			95,792
			
			36,498Other
			37,952
			
			26,635Total
			inventories
			$ 4,973,988
			
			$ 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 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.



We also lease other machinery and equipment under
operating leases which expire through July 2009.



Future minimum lease payments for operating leases as of June 30, 2008 are as
follows:



2008
			
			$     722,4642009
			
			636,4642010
			
			636,0002011
			
			636,0002012
			
			318,000Future minimum lease payments
			
			$  2,948,928




Total rent expense for the six months ended June 30, 2008 and 2007 was $448,989
and $424,789, 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
			
			$   1,239,353Less accumulated depreciation
			
			221,779
			
			388,253$    549,788
			
			$      851,100




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 June 30, 2008.



2008
			
			$    81,4512009
			
			60,844Total future minimum lease payments
			
			142,295Lessamount representing interest
			
			-Present value of net minimumlease payments
			
			142,295Less current portion
			
			(81,451)Capital Lease Obligations
			
			$   60,844




NOTE 7 -- PER SHARE DATA



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



Six months ended June 30, 2008 compared to six months ended
June 30, 2007:



2008
			
			2007Basic earnings per shareNet income
			$  2,749,183
			
			$  1,614,379Weighted average shares outstanding
			3,607,120
			
			3,640,899Basic earnings per share
			$             .76
			
			$             .44Diluted earnings per shareNet income
			$  2,749,183
			
			$  1,614,379Weighted average shares outstanding
			3,607,120
			
			3,640,899Add dilutive effect of assumed exercising of stock options
			-
			
			-Diluted weighted average sharesoutstanding
			3,607,120
			
			3,640,899Diluted earnings per share
			$             .76
			
			$             .44




Three months ended June 30, 2008 compared to three months ended
June 30, 2007:



2008
			
			2007Basic earnings per shareNet income
			$  1,662,632
			
			$     821,299Weighted average shares outstanding
			3,596,368
			
			3,640,899Basic earnings per share
			$             .46
			
			$             .22Diluted earnings per shareNet income
			$  1,662,632
			
			$     821,299Weighted average shares outstanding
			3,596,368
			
			3,640,899Add dilutive effect of assumed exercising of stock options
			-
			
			-Diluted weighted average sharesoutstanding
			3,596,368
			
			3,640,899Diluted earnings per share
			$             .46
			
			$             .22




NOTE 8 -- SHREDDER SYSTEM
COMMITMENT



The Company has
made a total commitment of ten million dollars to build a state-of-the-art
shredding and nonferrous recovery system.  The Board of Directors, at its June
21, 2007 meeting, announced authorization to proceed with the purchase of a
shredder system and complimentary facility improvement 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.
Subsequent to the initial approval, at its July 31, 2008 meeting, the Board
authorized an additional five million dollars of commitments that include the
purchase of nonferrous recovery system, modifications to the original contract
of the shredder system, additional facility improvements including second
entrance and scales, and installation costs.  Through June 30, 2008, we made
payments totaling $4,143,404 classified as construction in progress. 
Construction on the shredder began June 2008.  We are financing the purchase of
the shredder system with our revolving credit facilities with BB&T.  As of June
30, 2008, we had incurred capitalized interest of $123,854.  This project is
scheduled to be completed in the fourth quarter of 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 June 30, 2008:



Level 1
			
			TotalAssetsCash and cash equivalents
			$   
			1,121,977
			
			$   
			1,121 977LiabilitiesLong term debt
			$
			(11,365,198)
			
			$
			(11,365,198)




NOTE 10 -- STOCK AWARD



Mr. Brian Donaghy, our President and Chief Operating Officer is entitled to
receive 20,000 shares of ISA's common stock per year per the terms of his
employment agreement, provided certain conditions have been met, including that
Mr. Donaghy has completed a full year of employment and that our EBITDA exceeds
$4.5 million for the previous fiscal year.  During 2008, the conditions of the
agreement for the year 2008 were determined probable that they would be met.
 Accordingly, we were accruing the share based award over the requisite period.



At a regular scheduled Board meeting
on July 31, 2008, the directors approved the issuance of 10,000 shares of ISA's
common stock to Brian Donaghy.  The directors also approved the issuance of the
remaining 10,000 shares which will be paid equally in the third and fourth
quarter at dates to be specified by the Board.







---





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



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



The following discussion and
analysis contains certain financial predictions, forecasts and projections which
constitute "forward-looking statements" within the meaning of the federal
securities laws.  Actual results could differ materially from those financial
predictions, forecasts and projections and there can be no assurance that we
will achieve such financial predictions, forecasts and projections.  Factors
that could affect financial predictions, forecasts and projections include the
fluctuations in the commodity price index and any conditions internal to our
major customers, including loss of their accounts and other factors as listed in
our Form 10-K for the year ended December 31, 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 2,300 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, and Dallas, Texas and a new facility in
New Albany, Indiana.  We do not have operating locations outside the United
States.



Liquidity and Capital
Resources



As of June 30, 2008 we held
cash and cash equivalents of $1,121,977.



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 expiring December 22, 2009, 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 percent (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, which was 4.95% as of June 30, 2008, and
is secured by all our assets (except rental fleet equipment).  The balance of
the credit facility at June 30, 2008 was $4,027,002.  The revolving credit
facility contains certain restrictive and financial covenants.  At June 30,
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.



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 June 30, 2008 of $865,198.



On May 14, 2008, we executed a
new revolving credit facility with Branch Banking and Trust Company in the
amount of $3.0 million secured by our rental fleet equipment.  This note
replaces the $2.0 million rental fleet loan with Fifth Third Bank (as of June
30, 2008 we had paid off this note and as of December 31, 2007 we had borrowed
$1,779,585).  Indebtedness under this loan agreement accrues interest at the one
month Libor rate, as published in the Wall Street Journal, plus 1.625% per
annum.  The maturity date under this agreement is November 2013.  Fifty-nine
(59) monthly principal and interest payments of $30,966.76 commenced on June 7,
2008 with one final payment of all remaining principal and accrued interest due
on May 7, 2013.  The principal and interest payments of this facility are
calculated on the basis of a ten (10) year amortization, resulting in a
principal balance of approximately $1.7 million due at maturity.  As of June 30,
2008 we had borrowed $2,959,295 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 June 30, 2008, we were in compliance with all
restrictive covenants.



On May 14, 2008, we executed a
new revolving credit facility with Branch Banking and Trust Company in the
amount of $6.0 million to finance the purchase of our shredder system and
complementary facility improvements.  The security for this facility is the
shredder and assets being purchased.  Our Board approved the acquisition and
installation of the shredder system and complimentary facility improvements on
June 21, 2007.  The revolving credit facility has a term beginning May 2008 and
expiring November 2013.  The facility bears interest at the one month Libor
rate, as published in the Wall Street Journal, plus 1.625% per annum.  The
facility provides for interest only monthly payments, which commenced June 7,
2008, and continue through November 7, 2008.  Thereafter, the facility requires
us to make fifty-nine (59) monthly principal and interest payments of $61,923.07
commencing December 7, 2008 with one final payment of all remaining principal
and accrued interest due on November 7, 2013.  The principal and interest
payments of the facility are calculated on the basis of a ten (10) year
amortization, resulting in a principal balance of approximately $3.4 million
being due on before November 7, 2013, which we anticipate that we will
refinance.  As of June 30, 2008 we had borrowed $3,513,703 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 June 30, 2008, we
were in compliance with all restrictive covenants



During the first two quarters of
2008, we paid $1,047,772 for land, improvements, property and equipment.  We
paid $129,479 for buildings and improvements.  In the recycling segment we paid
$286,572 for cranes, shear rebuild, scales, trailers, and other operating
equipment.  In the equipment sales, leasing and service segment, we purchased
$411,325 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 $40,506 of office equipment and $179,890 in
vehicles.



We have a purchasing card with a
credit limit of $6.0 million.  We included the balance due on the purchasing
card as part of accounts payable.  The outstanding balance on the purchasing
card at June 30, 2008 was $825,523 with a due date of July 15, 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 during the remainder of 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:



Six months ended June 30,2008
			
			2007Statements of Operations Data:Total Revenue
			..................................................................................
			100.0%
			
			100.0%Cost of goods
			sold............................................................................
			83.5%
			
			84.7%Selling, general and administrative expenses
			......................................
			8.7%
			
			8.1%Income before other
			expenses...........................................................
			7.8%
			
			7.2%




Six months ended June 30,
2008 compared to six months ended June 30, 2007



Total revenue increased
$23,161,635 or 61.9% to $60,594,480 in 2008 compared to $37,432,845 in 2007. 
Recycling revenue increased $21,648,280 or 74.9% to $50,544,066 in 2008 compared
to $28,895,786 in 2007.  This is primarily due to a 38% increase in price
of commodities in the recycling market.  Management services revenue increased
$1,391,295 or 18.6% to $8,883,798 in 2008 compared to $7,492,503 in 2007
primarily due to an increase in the number of customer locations managed. 
Equipment sales, service and leasing revenue increased $122,060 or 11.7% to
$1,166,616 in 2008 compared to $1,044,556 in 2007.  This increase is due to an
increase in rental revenue.



Total cost of goods sold
increased $18,889,726 or 59.6% to $50,604,006 in 2008 compared to $31,714,280 in
2007.  Recycling cost of goods sold increased $17,437,301 or 71.1% to
$41,936,168 in 2008 compared to $24,498,867 in 2007.  This is primarily due to
35% higher commodity purchase prices in the recycling market.  Management
services cost of goods sold increased $1,457,699 or 21.5% to $8,243,037 in 2008
compared to $6,785,338 in 2007 primarily due to an increase in the number of
customer locations managed.  Additionally, we reduced cost of goods sold by $0
in 2008 and by $142,544 in 2007 due to a change in management's estimate related
to the liability associated with this operation which includes the contract
settlement with our former customers.  Equipment sales, service and leasing cost
of goods sold decreased $5,274 or 1% to $424,801 in 2008 compared to $430,075 in
2007.



Selling, general and
administrative expenses increased $2,278,209 or 75.6% to $5,291,417 in 2008
compared to $3,013,208 in 2007.  As a percentage of revenue, selling, general
and administrative expenses were 8.7% in 2008 compared to 8.1% in 2007.  The
primary driver of the increase in total expenses is ILS expenses of $1.3
million, accrued bonuses of $467,050, Sarbanes Oxley expense of $103,607 and
rising fuel expenditures.   We acquired ILS in August 2007.



Other expense decreased $1,693 to other
expense of $39,425 in 2008 compared to other expense of $41,118 in 2007.  This
was primarily due to an increase in interest expense of $114,717 partially
offset by other income of $117,306 due to an insurance reimbursement.



Income tax
provision increased $860,589 to $1,910,449 in 2008 compared to $1,049,860 in
2007.  The effective tax rate in 2008 was 41.0% compared to 39.4% in 2007 based
on federal and state statutory rates.



Three months ended June 30,
2008 compared to three months ended June 30, 2007



Total revenue increased
$14,982,989 or 76.7 % to $34,511,085 in 2008 compared to $19,528,096 in 2007. 
Recycling revenue increased $14,506,149 or 94% to $29,870,349 in 2008 compared
to $15,364,200 in 2007.  This is primarily due to a 27% increase in price of
commodities in the recycling market.  Management services revenue increased
$362,980 or 10% to $4,011,256 in 2008 compared to $3,648,276 in 2007 primarily
due to an increase in the number of customer locations managed.  Equipment
sales, service and leasing revenue increased $113,860 or 22% to $629,480 in 2008
compared to $515,620 in 2007.  This increase is due to an increase in rental
revenue.



Total cost of goods sold
increased $11,742,599 or 71.3% to $28,215,111 in 2008 compared to $16,472,512 in
2007.  Recycling cost of goods sold increased $11,259,892 or 87% to 24,225,295
in 2008 compared to $12,965,403 in 2007.  This is due to 23% higher commodity
purchase prices in the recycling market.  Management services cost of goods sold
increased $318,757 or 10% to $3,616,674 in 2008 compared to $3,297,917 in 2007
primarily due to an increase in the number of customer locations managed. 
Additionally, we reduced cost of goods sold by $107,266 in 2007 due to a change
in management's estimate related to the liability associated with this
operation, which includes the contract settlement with our former customers. 
Equipment sales, service and leasing cost of goods sold increased $163,950 to
$373,142 in 2008 compared to $209,192 in 2007.



Selling, general and
administrative expenses increased $1,832,611 or 111% to $3,481,812 in 2008
compared to $1,649,201 in 2007.  As a percentage of revenue, selling, general
and administrative expenses were 8.9% in 2008 compared to 8.1% in 2007.  The
primary driver of the increase in total expense is ILS expenses, Sarbanes Oxley
expenditures and fuel costs.  We acquired ILS in August 2007.



Other income increased $78,464
to other income of $34,552 in 2007 compared to other expense of ($43,912) in
2007 primarily due to an insurance reimbursement for repair of our roof.



Income tax
provision increased $644,910 to $1,186,082 in 2008 compared to $541,172 in
2007.  The effective tax rate in 2008 was 41% compared to 39.7% in 2007 based on
federal and state statutory rates.



Financial condition at June
30, 2008 compared to December 31, 2007



Cash and cash equivalents
decreased $379,708 to $1,121,977 as of June 30, 2008 compared to $1,501,685 as
of December 31, 2007.



We generated net cash from
operating activities of $301,775 for the six months ended June 30, 2008.



We used net cash from investing
activities of $2,944,932 for the six months ended June 30, 2008.  Primarily, we
purchased recycling and rental fleet equipment and shredder system equipment of
$3,018,100.  The rental fleet equipment consists of solid waste handling and
recycling equipment such as compactors, containers and balers. It is our
intention to continue to pursue this market.



Our net cash from financing
activities of $2,263,449 for the six months ended June 30, 2008 is primarily due
to the advance of $6,513,703 on our new lines of credit offset by payments on
debt of $3,881,202.



Accounts receivable trade
increased $6,231,150 or 92% to $12,996,001 as of June 30, 2008 compared to
$6,764,851 as of December 31, 2007.  This change is primarily due to an increase
in selling prices 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 increased
$346,707 or 7.5% to $4,973,988 as of June 30, 2008 compared to $4,627,281 as of
December 31, 2007.



Inventory aging for the period ended June 30, 2008 (Days
Outstanding):



Description
			
			1-30
			
			31-60
			
			61-90
			
			Over 90
			
			TotalWaste equipment machinery
			
			$     76,366
			
			$              -
			
			$            -
			
			$   19,426
			
			$     95,792Ferrous materials
			
			1,433,881
			
			780,705
			
			139,201
			
			64,422
			
			2,416,209Non-ferrous materials
			
			2,000,038
			
			172,481
			
			107,788
			
			143,728
			
			2,424,035Other
			
			37,952
			
			-
			
			-
			
			-
			
			37,952$3,548,237
			
			$  953,186
			
			$ 246,989
			
			$ 227,576
			
			$4,973,988




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
$593,275 or 12.7% to $5,258,906 as of June 30, 2008 compared to $4,665,631 as of
December 31, 2007, primarily due to market conditions.



Working capital increased
$3,038,142 to $10,978,182 as of June 30, 2008 compared to $7,940,040 as of
December 31, 2007.  The increase was primarily driven by the $6.2 million
increase in accounts receivable.



Contractual Obligations



The following table provides information
with respect to our known contractual obligations for the quarter ended June 30,
2008.



Obligation Description
			Total
			Less
			than 1 year
			1-3 years
			3-5 years
			More
			than 5 yearsLong-Term Debt Obligations (1)
			$11,365,198
			$185,307
			$8,733,231
			$2,446,660
			$0Capital Lease Obligations (2)
			142,295
			81,451
			60,844
			0
			0Operating Lease Obligations (3)
			2,948,928
			722,464
			1,272,464
			954,000
			0Total
			$14,456,421
			$ 
			989,222
			$10,066,539
			$3,400,660
			$0




(1)   In December 2006 we entered into 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 June 30, 2008, and is secured by
all our assets (except rental fleet equipment).  The balance of the credit
facility at June 30, 2008 was $4,027,002.  The revolving credit facility
contains certain restrictive and financial covenants.  At June 30, 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.



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 June 30, 2008 of $865,198.



On May 14, 2008, we executed a new revolving credit
facility with Branch Banking and Trust Company in the amount of $3.0 million
secured by our rental fleet equipment.  This note replaces the $2.0 million
rental fleet loan with Fifth Third Bank (as of June 30, 2008 we had paid off
this note and as of December 31, 2007 we had borrowed $1,779,585).  Indebtedness
under this loan agreement accrues interest at the one month Libor rate, as
published in the Wall Street Journal, plus 1.625% per annum.  The maturity date
under this agreement is November 2013 with a ten-year amortization schedule. 
Fifty-nine (59) monthly principal and interest payments of $30,966.76 will
commence on June 7, 2008 with one final payment of all remaining principal and
accrued interest due on May 7, 2013.  The principal and interest payments of
this facility are calculated on the basis of a ten (10) year amortization,
resulting in a principal balance of approximately $1.7 million due at maturity. 
As of June 30, 2008 we had borrowed $2,959,295 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 June 30, 2008, we were
in compliance with all restrictive covenants.



On May 14, 2008, we executed a new revolving credit
facility with Branch Banking and Trust Company in the amount of $6.0 million to
finance the purchase of our shredder system and complementary facility
improvements.  The security for this facility is the shredder and assets being
purchased.  Our Board approved the acquisition and installation of the shredder
system and complimentary facility improvements on June 21, 2007.  The revolving
credit facility has a term beginning May 2008 and expiring November 2013.  The
facility bears interest at the one month Libor rate, as published in the Wall
Street Journal, plus 1.625% per annum.  The facility provides for interest only
monthly payments commencing June 7, 2008, through November 7, 2008.  Thereafter,
the facility requires us to make fifty-nine (59) monthly principal and interest
payments of $61,923.07 commencing December 7, 2008 with one final payment of all
remaining principal and accrued interest due on November 7, 2013.  The principal
and interest payments of the facility are calculated on the basis of a ten (10)
year amortization, resulting in a principal balance of approximately $3.4
million being due on before November 7, 2013, which we anticipate that we will
refinance.  As of June 30, 2008 we had borrowed $3,513,703 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 June 30, 2008, we
were in compliance with all restrictive covenants.



(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 $2,786,107 to $11,179,891 as of
June 30, 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 June 30, 2008, variable rate
borrowings consisted of outstanding borrowings of $10.5 million under our credit
agreements with BB&T.  These revolving credit facilities bear interest at the
one month LIBOR rate, as published in the Wall Street Journal, plus two and
twenty-five one-hundredths percent (2.25%) or plus one and six hundred twenty
five one-thousandths percent (1.625%) per annum. 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 $105,000 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 June 30,
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 June 30, 2008, and concluded that such internal
control over financial reporting was effective as of June 30, 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 June 30,
2008 that have materially affected, or are reasonably likely to affect ISA's
internal control over financial reporting.



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PART II -- OTHER INFORMATION





Item 1.     Legal Proceedings



In May 2006,
All American Recycling ("AAR") and its owners, R.D. Burton and Donna Burton
filed a lawsuit in Jefferson County, Kentucky Circuit Court against us and K & R
Resources LLC (All American Recycling, Inc. and RD Burton and Donna Burton
vs. Industrial Services of America, Inc. et al. Jefferson Circuit Court,
Case No.  06C04701).  In May 2007 AAR amended its complaint to identify Harry
Kletter, Brian Donaghy, Ronald Kletter and Edward List as individual defendants
in this action. The causes of action alleged against us and the individual
defendants include breach of contract, misrepresentation, fraud, malicious,
willful and reckless conduct and trespass. The dispute arises from two
agreements that were entered into by the parties in December 2004 (in settlement
of a prior litigation between ISA and AAR).  One of the two agreements called
for certain "retail customers" to be referred to AAR.  AAR, in turn, agreed to
then sell all of its non-ferrous metals to us based on a certain agreed pricing
schedule.  AAR alleges that we breached the agreement by not referring such
retail customers to AAR and paid AAR on a basis other than the basis provided in
the agreement.  We claim that we paid AAR on the basis provided for in the
agreement and that AAR breached the agreement by selling its metals to third
party purchasers.  No specific amount of damages was set forth in the complaint,
however AAR is claiming it is owed in excess of $2MM.  Plaintiff filed a motion
for summary judgment against us on February 27, 2008 to which we responded on
March 21, 2008.  The court has yet to rule on this motion.  Currently, mediation
is scheduled in August 2008, with a trial date for early September, 2008.



In January of
2007 Lennox Industries commenced an action against ISA in Lennox Industries,
Inc.  vs.  Industrial Services of America, Inc. (Circuit Court of Arkansas
County CV-2007-004).  Lennox alleges that we mis-categorized certain materials
that we brokered on behalf of Lennox generating less for those materials than
they were worth thereby depriving Lennox of income that it might otherwise have
received.  Lennox alleges that we had a duty to obtain a price that was
consistent with the materials being sold on behalf of Lennox and that we failed
to exercise the proper duty of care in our dealings with Lennox.  On July 9,
2008, Lennox amended its complaint to add a cause of action based on fraud and
misrepresentation.  We believe Lennox's claims are without merit.  Lennox is
claiming damages in excess of one million dollars.  This matter is currently in
its discovery phase.



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 June 30, 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
Securities



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




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 June 26, 2008, the following proposals
were adopted by the margins indicated:



(b)       
PROPOSAL 1:  Annual Election of Directors.  The nominees for election as
directors were Harry Kletter, Roman Epelbaum, Orson Oliver, Albert Cozzi and
Richard  Ferguson.  The five director positions were filled based upon the five
receiving the most votes:



For
			Withheld
			Broker Non-Votes and AbstentionsHarry Kletter
			2,908,668
			14,989
			-Roman Epelbaum
			2,864,119
			59,538
			-Albert A. Cozzi
			2,900,262
			23,395
			-Richard E. Ferguson
			2,894,262
			29,395
			-Orson Oliver
			2,894,262
			29,395
			-




(c)       
PROPOSAL 2:  Ratification of Mountjoy & Bressler, LLP as our independent
auditors.



For
			Against
			Broker Non VotesAnd Abstentions2,865,117
			-
			58,540




Item 5.     Other Information



None.



Item 6.     Exhibits



See exhibit index.



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.



INDUSTRIAL SERVICES OF AMERICA, INC.Date:  August 4, 2008
			/s/  Harry KletterChairman and Chief Executive Officer(Principal Executive and FinancialOfficer)Date:  August 4, 2008
			/s/ Alan L. SchroeringChief Financial Officer




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INDEX TO EXHIBITSExhibitNumber
			
			Description of Exhibits31.1
			
			Rule 13a-14(a) Certification of
			Harry Kletter for the Form 10-Q for the quarter ended June 30, 2008.31.2
			
			Rule 13a-14(a) Certification of
			Alan Schroering for the Form 10-Q for the quarter ended June 30,
			2008.32.1
			
			Section 1350 Certification of
			Harry Kletter and Alan Schroering for the Form 10-Q for the quarter
			ended June 30, 2008.










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