| FORM 10-Q                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| SECURITIES        AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                                                                                                                                                           |
| WASHINGTON,        DC 20549                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| [X]  QUARTERLY        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                                                                                                                                                                                                                                                                                                                                                                       |
| SECURITIES        EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                                                                                                                                                              |
| For the        quarterly period ended September 30, 2001                                                                                                                                                                                                                                                                                                                                                                                            |
| OR                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| [   ]  TRANSITION        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE                                                                                                                                                                                                                                                                                                                                                     |
| SECURITIES        EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                                                                                                                                                              |
| For the        Transition Period From _________ to ________                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Commission        File Number 0-20979                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| INDUSTRIAL        SERVICES OF AMERICA, INC.                                                                                                                                                                                                                                                                                                                                                                                                         |
| (Exact        Name of Registrant as specified in its Charter)                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Florida(State or other jurisdiction of        Incorporation or Organization)                                                                                                                                                                                                                                                                                                                                                                        | 59-0712746(IRS Employer        Identification No.) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |
| 7100 Grade        Lane, PO Box 32428        Louisville, Kentucky 40232        (Address of principal executive offices)                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (502)        368-1661        (Registrant's Telephone Number, Including Area Code)                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Check whether the registrant        (1) has filed all Reports required to be filed by Section        13 or 15(d) of the Securities Exchange Act of 1934 during        the preceding 12 months (or for such shorter period that        the registrant was required to file such reports), and        (2) has been subject to such filing requirements for the        past 90 days. YES   X     NO        ___ |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Indicate the number of        shares outstanding of each of the issuer's classes of        common stock, as of September 30, 2001: 1,660,400                                                                                                                                                                                                                                                                                                        |

 

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

 

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| REPORT OF        INDEPENDENT ACCOUNTANTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Board of        Directors and Shareholders        Industrial Services of America, Inc. and Subsidiary        Louisville, Kentucky                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| We have reviewed the        condensed consolidated balance sheet of Industrial        Services of America, Inc. as of September 30, 2001, the        condensed consolidated statement of cash flows for the        nine month periods ended September 30, 2001 and 2000, and        the related condensed consolidated statements of        operations for the three month and nine month periods        ended September 30, 2001 and 2000. These financial        statements are the responsibility of the Company's        management.                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| We conducted our reviews in        accordance with standards established by the AICPA. A        review of interim financial information consists        principally of applying analytical procedures to        financial data and making inquiries of persons        responsible for financial and accounting matters. It is        substantially less in scope than an audit conducted in        accordance with generally accepted auditing standards,        the objective of which is the expression of an opinion        regarding the financial statements taken as a whole.        Accordingly, we do not express such an opinion. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Based on our reviews, we are        not aware of any material modifications that should be        made to the accompanying condensed consolidated financial        statements for them to be in conformity with generally        accepted accounting principles.                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Crowe, Chizek and Company        LLP |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Indianapolis, Indiana                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| October 26, 2001                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

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| **PART I        – FINANCIAL INFORMATION**                      |
|---------------------------------------------------------------------|
|                                                                |
| ITEM 1:        CONSOLIDATED FINANCIAL STATEMENTS                    |
|                                                                |
| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY          |
| CONDENSED        CONSOLIDATED BALANCE SHEETS                        |
| (UNAUDITED)                                                         |
|                                                                |
| ASSETS                                                              |
|                                                                |
|                                                                | September 30,2001 | December 31,2000 |
| Current        assets                                               |   |   |
|                                                                | Cash and cash        equivalents | $ 1,481,929 | 1,395,882 |
|                                                                | Accounts        receivable – trade (after allowance for doubtful |   |   |
|                                                                |    accounts        of $63,672 and $100,000 in 2001 and 2000) | 7,912,968 | 8,739,174 |
|                                                                | Accounts        receivable - related party | - | 15,000 |
|                                                                | Employee        loans | 17,035 | 30,577 |
|                                                                | Income tax        refund receivable | - | 54,300 |
|                                                                | Net        investment in sales type leases | 107,613 | 99,937 |
|                                                                | Inventories | 2,084,565 | 2,191,162 |
|                                                                | Deferred        income taxes | 71,355 | 52,400 |
|                                                                | Other | 50,711 | 261,604 |
|                                                                |      Total        current assets | 11,726,176 | 12,840,036 |
|                                                                |   |   |   |
| Net        property and equipment                                   | 6,243,272 | 5,544,859 |
|                                                                |   |   |   |
| Other        assets                                                 |   |   |
|                                                                | Non-compete        agreements, net | 254,125 | 405,892 |
|                                                                | Intangibles        (net of accumulated amortization of $226,662 and |   |   |
|                                                                |    $186,663        in 2001 and 2000) | 573,338 | 613,337 |
|                                                                | Net        investment in sales-type leases | 310,127 | 352,897 |
|                                                                | Other assets |        133,082 |         48,147 |
|                                                                |      Total        other assets |     1,270,672 |    1,420,273 |
|                                                                |   |   |   |
|                                                                |   | $ 19,240,120 | $19,805,168 |
|                                                                |   |   |   |
| See        accompanying notes to consolidated financial statements. |

 

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| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY                               |
|------------------------------------------------------------------------------------------|
| CONDENSED        CONSOLIDATED BALANCE SHEETS                                             |
| (UNAUDITED)                                                                              |
|                                                                                     |
| LIABILITIES        AND STOCKHOLDERS' EQUITY                                              |
|                                                                                     |
|                                                                                     | September 30,2001 | December 31,2000 |
| Current        liabilities                                                               |   |   |
|   Note        payable to bank                                                  | $2,750,000  | $2,000,000  |
|   Current        maturities of long-term debt                                  | 744,028  | 421,330  |
|   Accounts        payable                                                      | 9,291,872  | 10,126,353  |
|   Income        tax payable                                                    | 15,637  | -  |
|   Other        current liabilities                                             |        356,035  |        254,127  |
|       Total        current liabilities                     | 12,407,572  | 13,551,810  |
|                                                                                     |   |   |
| Long-term        liabilities                                                             |   |   |
|   Long-term        debt                                                        | 2,624,063  | 1,694,493  |
|   Deferred        income taxes                                                 |        109,016  |       159,400  |
|                                                                                     | 2,733,079  | 1,853,893  |
|                                                                                     |   |   |
| Shareholders'        equity                                                              |   |   |
|   Common        stock, $.01 par value: 10,000,000 shares authorized,           |   |   |
|      1,957,500        shares issued and 1,660,400 and 1,863,300 |   |   |
|      shares        outstanding in 2001 and 2000                 | 19,575  | 19,575  |
|   Additional        paid-in capital                                            | 1,925,321  | 1,891,651  |
|   Retained        earnings                                                     | 2,736,696  | 2,649,555  |
|   Treasury        stock, 297,100 and 94,200 shares                             |   |   |
|      at        cost in 2001 and 2000                            |      (582,123) |      (161,316) |
|                                                                                     |     4,099,469  |     4,399,465  |
|                                                                                     | $19,240,120  | $19,805,168  |
| See        accompanying notes to consolidated financial statements.                      |

 

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| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY          |
|---------------------------------------------------------------------|
| CONDENSED        CONSOLIDATED STATEMENTS OF OPERATIONS              |
| THREE        MONTHS ENDED SEPTEMBER 30, 2001 AND 2000               |
| (UNAUDITED)                                                         |
|                                                                |   |   |
|                                                                | 2001 | 2000 |
|                                                                |   |   |
| Revenue                                                             | $22,905,207  | $23,850,093  |
|                                                                |   |   |
| Cost of goods        sold                                           |  21,475,592  |  21,943,848  |
|                                                                |   |   |
| **Gross        profit**                                             | 1,429,615  | 1,906,245  |
|                                                                |   |   |
| Selling and        administrative expenses                          |    1,681,590  |    1,573,627  |
|                                                                |   |   |
| **Income        (loss) from operations**                            | (251,975) | 332,618  |
|                                                                |   |   |
| Other expense                                                       |       (44,755) |         (6,676) |
|                                                                |   |   |
| **Income        (loss) before income taxes**                        | (296,730) | 325,942  |
|                                                                |   |   |
| Income tax        provision (benefit)                               |     (119,132) |      170,136  |
|                                                                |   |   |
| **Net income        (loss)**                                        | $   (177,598) | $    155,806  |
|                                                                |   |   |
| Earnings per        share                                           | $         (0.10) | $          0.08  |
|                                                                |   |   |
| Earnings per        share, assuming dilution                        | $         (0.10) | $          0.08  |
|                                                                |   |   |
| See        accompanying notes to consolidated financial statements. |   |   |

 

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| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY          |
|---------------------------------------------------------------------|
| CONDENSED        CONSOLIDATED STATEMENTS OF OPERATIONS              |
| NINE        MONTHS ENDED SEPTEMBER 30, 2001 AND 2000                |
| (UNAUDITED)                                                         |
|                                                                |   |   |
|                                                                | **2001** | **2000** |
|                                                                |   |   |
| Revenues                                                            | $71,977,603  | $67,597,636  |
|                                                                |   |   |
| Cost of goods        sold                                           |  66,625,805  |  61,850,912  |
|                                                                |   |   |
| **Gross        profit**                                             | 5,351,798  | 5,746,724  |
|                                                                |   |   |
| Selling and        administrative expenses                          |    5,032,071  |    4,999,169  |
|                                                                |   |   |
| **Income        from operations**                                   | 319,727  | 747,555  |
|                                                                |   |   |
| Other income        (expense)                                       |     (174,492) |           2,865  |
|                                                                |   |   |
| **Income        before income taxes**                               | 145,235  | 750,420  |
|                                                                |   |   |
| Income tax        provision                                         |        58,094  |       294,560  |
|                                                                |   |   |
| **Net income**                                                      | $      87,141  | $     455,860  |
|                                                                |   |   |
| Earnings per        share                                           | $          0.05  | $           0.24  |
|                                                                |   |   |
| Earnings per        share, assuming dilution                        | $          0.05  | $           0.24  |
|                                                                |   |   |
| See        accompanying notes to consolidated financial statements. |   |   |

 

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| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY          |
|---------------------------------------------------------------------|
| CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS              |
| NINE        MONTHS ENDED SEPTEMBER 30, 2001 AND 2000                |
| (UNAUDITED)                                                         |
|                                                                |   |   |
|                                                                | 2001 | 2000 |
|                                                                |   |   |
| **Cash        flows from operating activities**                     |   |   |
|                                                                | Net        income | $      87,141  | $    455,860  |
|                                                                | Adjustments        to reconcile net income to |   |   |
|                                                                |   net        cash from operating activities |   |   |
|                                                                |   | Stock        options granted for services | 33,670  | 85,605  |
|                                                                |   | Depreciation        and amortization | 1,232,573  | 1,082,864  |
|                                                                |   | Loss        from sale of property and equipment | 521  | 34,867  |
|                                                                |   | Provision        for doubtful accounts | 98,319  | 167,545  |
|                                                                |   | Deferred        income taxes | (69,339) | (151,400) |
|                                                                |   | Changes        in assets and liabilities |   |   |
|                                                                |   |   | Receivables | 810,729  | (866,175) |
|                                                                |   |   | Inventories | 106,597  | 157,505  |
|                                                                |   |   | Other        assets | 125,958  | 18,456  |
|                                                                |   |   | Accounts        payable | (834,481) | (1,163,919) |
|                                                                |   |   | Other        current liabilities |       117,545  |         39,831  |
|                                                                |   |   |   | Net cash from        operating activities | 1,709,233  | (138,961) |
|                                                                |   |   |
| **Cash        flows from investing activities**                     |   |   |
|                                                                | Proceeds        from sale of property and equipment | 34,300  | 6,581  |
|                                                                | Purchases        of property and equipment | (1,774,041) | (1,273,956) |
|                                                                | Proceeds        from sales of sales-type leases |         35,094  |         42,155  |
|                                                                |   | Net        cash from investing activities | (1,704,647) | (1,225,220) |
|                                                                |   |   |
| **Cash        flows from financing activities**                     |   |   |
|                                                                | Net        proceeds (payments) from note payable to bank | (750,000) | 1,000,000  |
|                                                                | Proceeds        from long-term debt | 1,670,000  | -  |
|                                                                | Proceeds        from capital contribution | -  | 140,880  |
|                                                                | Payments        on long-term debt | (417,732) | (285,218) |
|                                                                | Purchases        of treasury stock |      (420,807) |       (29,741) |
|                                                                |   | Net        cash from financing activities |          81,461  |       825,921  |
|                                                                |   |   |
| Net        increase (decrease) in cash                              | 86,047  | (538,260) |
|                                                                |   |   |
| Cash        at beginning of period                                  |     1,395,882  |    2,388,811  |
|                                                                |   |   |
| **Cash        at end of period**                                    | $  1,481,929  | $ 1,850,551  |
|                                                                |   |   |
| See        accompanying notes to consolidated financial statements. |   |   |

 

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| INDUSTRIAL        SERVICES OF AMERICA, INC. AND SUBSIDIARY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| NOTES TO        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 1.                Basis        of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         The        accompanying unaudited consolidated financial statements        have been prepared in accordance with generally accepted        accounting principles for interim financial reporting.        They do not include all information and footnotes        required by generally accepted accounting principles for        complete consolidated financial statements. The        information furnished includes all adjustments, which        are, in the opinion of management, necessary to present        fairly the Registrant's financial position as of        September 30, 2001 and the results of its operations and        changes in cash flows for the periods ended September 30,        2001 and 2000. Results of operations for the period ended        September 30, 2001 are not necessarily indicative of the        results that may be expected for the entire year.        Additional information, including the audited 2000        consolidated financial statements and the Summary of        Significant Accounting Policies, is included in the        Registrant's Annual Report on Form 10-K for the year        ended December 31, 2000 on file with the Securities and        Exchange Commission. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Certain        prior year amounts have been reclassified to conform to        the current year presentation. The reclassifications had        no effect on net income or retained earnings as        previously reported.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 2.                Segment        Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         The        Company's operations include three primary segments: ISA        Recycling, Computerized Waste Systems (CWS), and Waste        Equipment Sales & Service (WESSCO). ISA recycling        provides products and services to meet the needs of its        customers related to ferrous, non-ferrous and fiber        recycling at two locations in the Midwest. CWS provides        waste disposal services including contract negotiations        with vendors, centralized billing, invoice auditing, and        centralized dispatching. WESSCO sells, leases, and        services waste handling and recycling equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         The        Company's three reportable segments are determined by the        products and services that each offers. The recycling        segment generates its revenues based on buying and        selling of ferrous and non-ferrous scrap, CWS's revenues        consist of management fees charged to customers for        services provided, and WESSCO sales and lease income        comprise the primary source of revenue for this segment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| **        **The        Company evaluates segment performance based on profit or        loss before income taxes and the evaluation process for        each segment includes only direct expenses omitting any        selling, general and administrative costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| For the nine months ending        September 30, 2001                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ISARecycling | Computerized        WasteSystems | Waste        Equipment        Sales &Services | SegmentTotals |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
| Recycling        revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $15,157,132  | $               -  | $             -  | $15,157,132  |
| Equipment sales,        service                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   |   |   |
|    and        leasing revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | -  | -  | 1,736,776  | 1,736,776  |
| Management        revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | -  | 55,083,695  | -  | 55,083,695  |
| Cost of goods        sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | (13,826,907) | (52,044,758) | (754,140) | (66,625,805) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
| Segment profit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $  1,330,225  | $  3,038,937  | $   982,636  | $  5,351,798  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
| For        the nine months endingSeptember****30, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
| Recycling        revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $18,796,431  | $                -  | $             -  | $18,796,431  |
| Equipment sales,        service and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |
|   leasing        revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | -  | -  | 1,776,041  | 1,776,041  |
| Management        revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | -  | 47,025,164  | -  | 47,025,164  |
| Cost of goods        sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | (16,793,327) | (43,992,261) | (1,065,324) | (61,850,912) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
| Segment profit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $  2,003,104  | $   3,032,903  | $        710,717  | $        5,746,724  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
| 3.        Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Inventories consist of the        following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | September 30,2001 |   | December 31,2000 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Equipment and        parts | $    174,012 |   | $      77,039 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Ferrous        materials | 1,406,715 |   | 1,479,450 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Non-ferrous        materials |     503,838 |   |     634,673 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |        Total        inventories | $        2,084,565 |   | $        2,191,162 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| ITEM 2: MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND        RESULTS OF OPERATIONS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Liquidity and Capital        Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         As        of September 30, 2001 the Registrant held cash and cash        equivalents of $1,481,929.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         The        Registrant derives its revenues from several sources,        including management services, equipment sales, services        and leasing and from its recycling operations. Management        services comprised approximately 76.5% and 69.6% of the        Registrant's total revenues for the nine months ended        September 30, 2001 and 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         The        Registrant currently maintains a working capital line of        credit with the Mid-America Bank of Louisville and Trust        Company (the "Bank") in the amount of        $3,000,000. Outstanding principal under this credit        facility bears interest at the Bank's prime rate and the        line matures in June 2002. As of September 30, 2001,        there was $2,000,000 drawn against this line of credit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         The        Registrant secured a long-term debt facility of        $1,500,000 during the second quarter of 2001. This        facility has a variable interest rate of prime. The        Registrant also secured two additional lines of credit of        $250,000 each to be used primarily for purchasing new        rental equipment. The collateral for this debt is        primarily rental equipment, which has an original cost        value of $1,482,918 as of September 30, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         The        following table presents, for the periods indicated, the        percentage relationship which certain captioned items in        the Registrant's Statements of Operations bear to total        revenues and other pertinent data:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Nine Months ended September 30, |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | 2001 |   | 2000 |   |
| Statements of        Operations Data:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |
| Total        Revenue........................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 100.0% |   | 100.0% |   |
| Cost of goods        sold................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 92.6% |   | 91.5% |   |
| Selling, general        and administrative expenses...........................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   | 7.0% |   | 7.4% |   |
| Income from        operations.........................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 0.4% |   | 1.1% |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Nine months ended        September 30, 2001 compared to nine months ended        September 30, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Total        revenue increased $4,379,967 or 6.5% to $71,977,603 in        2001 compared to $67,597,636 in 2000. Management services        revenue increased $8,058,531 or 17.1% to $55,083,695 in        2001 compared to $47,025,164 in 2000. This is due to an        increase in the number of units managed. Recycling        revenue decreased $3,639,299 or 19.4% to $15,157,132 in        2001 compared to $18,796,431 in 2000. This is primarily        due to the decline of commodity prices of approximately        22% in the Ferrous market and 4% in the Non-Ferrous        market from the first nine months of 2000 compared to the        first nine months of 2001. Equipment, service and leasing        revenue decreased $39,265 or 2.2% to $1,736,776 in 2001        compared to $1,776,041 in 2000. This small decrease was        due to the continued effort to lease equipment for the        long-term benefit of revenue streams and customer        retention. Service and leasing revenues increased        $168,779 or 18.7% offset by a decrease in equipment sales        of $196,655 or 22.5%.                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Total        cost of goods sold increased $4,774,893 or 7.7% to        $66,625,805 in 2001 compared to $61,850,912 in 2000.        Management services cost of goods sold increased        $8,052,497 or 18.3% to $52,044,758 in 2001 compared to        $43,992,261 in 2000. Recycling cost of goods sold        decreased $2,966,420 or 17.7% to $13,826,907 in 2001        compared to $16,793,327 in 2000. Equipment, service and        leasing cost of goods sold decreased $311,184 or 29.2% to        $754,140 in 2001 compared to $1,065,324 in 2000. This        decrease was primarily due to the continued effort to        lease equipment as equipment sales involve higher cost of        goods sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Total        gross profit decreased $394,926 or 6.9% to $5,351,798 in        2001 compared to $5,746,724 in 2000. Management services        gross profit increased $6,034 or 0.2% to $3,038,937 in        2001 compared to $3,032,903 in 2000. Recycling gross        profit decreased $672,879 or 33.6% to $1,330,225 in 2001        compared to $2,003,104 in 2000. Equipment, service and        leasing gross profit increased $271,919 or 38.3% to        $982,636 in 2001 compared to $710,717 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Selling,        general and administrative expenses increased $32,902 or        0.7% to $5,032,071 in 2001 compared to $4,999,169 in        2000. One-time charges of $331,350 were taken in the        second quarter of 2000. Without this one-time charge,        selling, general and administrative expenses would have        increased $364,252 or 7.8% to $5,032,071 in 2001 compared        to $4,667,819 in 2000. This increase was primarily due to        the addition of an Information Technology department in        the second quarter of 2000. As a percentage of total        revenue, selling, general and administrative expenses        were 7.0% in 2001 compared to 7.4% in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Other        expense increased $177,357 to $174,492 in 2001 compared        to $(2,865) in 2000. This is primarily due to interest        expenses associated with leasing equipment with an        original cost value of $1,482,918, a portable        shear/baler, hydraulic crane, roll-off truck, computer        hardware and internal software development.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Three months ended        September 30, 2001 compared to three months ended        September 30, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Total        revenue decreased $944,886 or 4.0% to $22,905,207 in 2001        compared to $23,850,093 in 2000. Management services        revenue increased $146,926 or 0.8% to $17,629,599 in 2001        compared to $17,482,673 in 2000. This is due to an        increase in the number of units managed. Recycling        revenue decreased $1,030,366 or 17.9% to $4,722,895 in        2001 compared to $5,753,261 in 2000. This is primarily        due to the decline of commodity prices of approximately        21% in the Ferrous market and 9% in the Non-Ferrous        market from the third quarter of 2000 compared to the        third quarter of 2001. Equipment, service and leasing        revenue decreased $61,446 or 10.0% to $552,713 in 2001        compared to $614,159 in 2000. This small decrease was due        to the continued effort to lease equipment for the        long-term benefit of revenue streams and customer        retention. Service and leasing revenues increased $12,202        or 3.8% offset by a decrease in equipment sales of        $57,071 or 19.9%.                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Total        cost of goods sold decreased $468,256 or 2.1% to        $21,475,592 in 2001 compared to $21,943,848 in 2000.        Management services cost of goods sold increased $449,468        or 2.7% to $16,813,022 in 2001 compared to $16,363,554 in        2000. Recycling cost of goods sold decreased $819,452 or        15.7% to $4,400,552 in 2001 compared to $5,220,004 in        2000. Equipment, service and leasing cost of goods sold        decreased $98,272 or 27.3% to $262,018 in 2001 compared        to $360,290 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Total        gross profit decreased $476,630 or 25.0% to $1,429,615 in        2001 compared to $1,906,245 in 2000. Management services        gross profit decreased $302,542 or 27.0% to $816,577        compared to $1,119,119 in 2000. Recycling gross profit        decreased $210,914 or 39.6% to $322,343 in 2001 compared        to $533,257 in 2000. Equipment, service and leasing gross        profit increased $36,826 or 14.5% to $290,695 in 2001        compared to $253,869 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Selling,        general and administrative expenses increased $107,963 or        6.9% to $1,681,590 in 2001 compared to $1,573,627 in        2000. This increase was primarily due to the addition of        an Information Technology department in the second        quarter of 2000. As a percentage of total revenue,        selling, general and administrative expenses were 7.3% in        2001 compared to 6.6% in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Other        expense increased $38,079 to $44,755 in 2001 compared to        $6,676 in 2000. This is primarily due to interest        expenses associated with leasing equipment with an        original cost value of $1,482,918, a portable        shear/baler, hydraulic crane, roll-off truck, computer        hardware and internal software development.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Financial Condition at        September 30, 2001 compared to December 31, 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Accounts        receivable-trade after allowances for bad debt decreased        $826,206 or 9.5% to $7,912,968 in 2001 compared to        $8,739,174 in 2000. This is due to a decrease in volume.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Accounts        payable trade decreased $834,481 or 8.2% to $9,291,872 in        2001 compared to $10,126,353 in 2000. This is due to a        decrease in volume.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Working        capital increased $30,378 to a deficit of $681,396 in        2001 compared to a deficit of $711,774 in 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Impact of Recently        Issued Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         The        FASB will issue Statement of Financial Accounting        Standards No. 142 ("SFAS 142"), "Goodwill        and Other Intangible Assets," in January 2002. SFAS        142 is being reviewed by management.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Item        3:    Quantitative and Qualitative        Disclosures About Market Risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|         Not        Applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

----

 

| PART II – OTHER INFORMATION |
|----------------------------------|
|                             |
| Item 1.                          | Legal        Proceedings |
|                             | None |
|                             |   |
| Item 2.                          | Changes        in Securities and Use of Proceeds |
|                             | None |
|                             |   |
| Item 3.                          | Defaults        upon Senior Securities |
|                             | None |
|                             |   |
| Item 4.                          | Submission        of Matters to a Vote of Security Holders |
|                             | None |
|                             |   |
| Item 5.                          | Other        Information |
|                             | (a) | Effective July 2, 2001, John        O. Tietjen resigned as a Senior Vice President and        Corporate Secretary of the Registrant |
|                             | (b) | Effective October 3, 2001,        Jerry Perchik resigned as a member of the Board of        Directors. He was also a member of the Audit Committee.        To date, the remaining Board members have not named        anyone to replace Mr. Perchik on either the Board of        Directors or the Audit Committee. |
|                             |   |
| Item 6.                          | Exhibits        and Reports on Form 8-K |
|                             | None |

 

 

| SIGNATURES                                                                                                                                                                                                           |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                 |
| Pursuant to        the requirements of the Securities Exchange Act of 1934,        the Registrant has duly caused this report to be signed        on its behalf by the undersigned thereunto duly        authorized. |
|                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                 | INDUSTRIAL        SERVICES OF AMERICA, INC. |
|                                                                                                                                                                                                                 |   |
|                                                                                                                                                                                                                 |   |
|                                                                                                                                                                                                                 |   |
| DATE:   November        12, 2001                                                                                                                                                                      |   /s/        Harry        Kletter                                             |
|                                                                                                                                                                                                                 | Chairman and        Chief Executive Officer |
|                                                                                                                                                                                                                 | (Principal        Executive and Financial |
|                                                                                                                                                                                                                 | Officer) |