FORM
			10-QSECURITIES AND EXCHANGE COMMISSION
			WASHINGTON, DC  20549[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
			SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended September 30, 2007OR[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
			SECURITIES EXCHANGE ACT OF 1934
			For the Transition Period From _________ to ________Commission File Number 0-20979INDUSTRIAL SERVICES OF AMERICA, INC.(Exact Name of Registrant as specified in its Charter)




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




7100 Grade Lane, PO Box 32428
			Louisville, Kentucky  40232
			(Address of principal executive offices)(502) 368-1661
			(Registrant's Telephone Number, Including Area Code)Check
			whether the registrant (1) has filed all Reports required to be
			filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
			during the preceding 12 months (or for such shorter period that the
			registrant was required to file such reports), and (2) has been
			subject to such filing requirements for the past 90 days. Yes X   No ___Indicate by check mark whether the registrant is a large accelerated
			filer, an accelerated filer, or a non-accelerated filer.  See
			definition of "accelerated filer and large accelerated filer" in
			Rule 12b-2 of the Exchange Act.  
			(Check one):  Large accelerated filer ___  Accelerated filer ___ 
			Non-accelerated filer _X__Indicate by check mark whether the registrant is a shell company (as
			defined in Rule 12b-2 of the Exchange Act).  Yes ___  No _X__Indicate the number of shares outstanding of each of the issuer's
			classes of common stock, as of September 30, 2007:  3,640,899.




---



INDUSTRIAL SERVICES OF AMERICA, INC. AND SUBSIDIARIESINDEXPage No.Part I
			Financial InformationCondensed Consolidated Balance SheetsSeptember 30, 2007 (Unaudited) and December 31, 2006
			3Condensed Consolidated Statements ofOperations - Three Months EndedSeptember 30, 2007 and 2006 (Unaudited)
			5Condensed Consolidated Statements ofOperations - Nine Months EndedSeptember 30, 2007 and 2006 (Unaudited)
			6Condensed Consolidated Statements of Shareholders' EquitySeptember 30, 2007 and December 31, 2006 (Unaudited)
			7Condensed Consolidated Statements ofCash
			Flows - Nine Months EndedSeptember 30, 2007 and 2006 (Unaudited)
			8Notes
			to Condensed ConsolidatedFinancial Statements (Unaudited)
			9Management's Discussion and Analysisof
			Financial Condition and Resultsof
			Operations
			17Part II
			Other
			Information
			25




---



Part I --
FINANCIAL INFORMATION



ITEM 1: Condensed
CONSOLIDATED FINANCIAL STATEMENTS.



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED
CONSOLIDATED BALANCE SHEETS



ASSETS





September 30,
			2007
			(Unaudited)
			
			December 31,
			2006Current assetsCash and cash equivalents
			$      749,759
			
			$   1,331,807Accounts receivable - trade (after allowance 
			    for doubtful accounts of $100,000 in 2007
			    and 2006)
			6,891,603
			
			5,026,441Net investment in sales-type leases
			62,034
			
			50,586Inventories
			4,438,181
			
			3,428,226Deferred income taxes
			150,819
			
			106,725Other
			267,588
			
			88,113Total current assets
			12,559,984
			
			10,031,898Net property and equipment
			9,608,545
			
			8,152,606Other AssetsGoodwill
			560,005
			
			560,005Net investment in sales-type leases
			138,247
			
			186,215Notes receivable -- related party
			212,860
			
			238,566Other assets (Note 10)
			1,225,388
			
			162,5272,136,500
			
			1,147,313$  24,305,029
			
			$ 19,331,817____________________See accompanying notes to consolidated financial
			statements.3.




---



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED
CONSOLIDATED BALANCE SHEETS

CONTINUED



LIABILITIES
AND STOCKHOLDERS' EQUITY



September 30,
			2007
			(Unaudited)
			
			December 31,
			2006Current liabilitiesCurrent maturities of long term debt
			$    333,118
			
			$     149,431Current maturities of capital lease obligation
			184,263
			
			228,533Accounts payable
			4,240,514
			
			4,545,057Income tax payable
			107,890
			
			1,185,717Other current liabilities
			564,880
			
			399,062Total current liabilities
			5,430,665
			
			6,507,800Long-term liabilitiesLong-term debt
			6,980,716
			
			2,790,460Capital lease obligation
			121,932
			
			67,853Deferred income taxes
			164,059
			
			219,3997,266,707
			
			3,077,712Commitments (Note 6)Stockholders' equityCommon stock, $.005 par value, 10,000,000 shares
			authorized,
			    4,295,000 shares issued in 2007 and 2006,
			    3,640,899 shares outstanding in 2007 and 2006
			21,575
			
			21,475Additional paid-in capital
			3,599,524
			
			3,194,816Retained earnings
			8,868,438
			
			7,234,990Treasury stock, 654,101 shares at average costin 2007 and 2006
			(881,880)
			
			(704,976)11,607,657
			
			9,746,305$ 24,305,029
			
			$19,331,817


____________________See accompanying notes to consolidated financial statements.4.




---



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS
ENDED SEPTEMBER 30, 2007 AND 2006

(UNAUDITED)





2007
			2006Revenue from services
			$  4,311,553
			$  4,094,753Revenue from product sales
			13,617,257
			11,236,482Total revenue
			17,928,810
			15,331,235Cost of goods sold for services
			3,841,742
			3,865,193Cost of goods sold for product sales
			11,980,863
			9,760,509Reduction of cost of goods sold
			(337,516)
			(150,000)Total cost of goods sold
			15,485,089
			13,475,702Selling, general and administrative expense
			1,791,116
			1,344,366Income before other income (expense)
			652,605
			511,167Other income (expense)Interest expense
			(91,096)
			(39,486)Interest income
			30,238
			38,293Gain/(loss) on sale of assets
			9,782
			(15,555)Other income
			193
			1,595(50,883)
			(15,153)Income before income taxes
			601,722
			496,014Income tax provision
			218,563
			56,446Net income
			$    
			383,159
			$     439,568Basic earnings per share
			$           0.11
			$           0.12Diluted earnings per share
			$  
			         0.11
			$           0.12Weighted shares outstanding:Basic
			3,640,899
			3,634,160Diluted
			3,640,899
			3,639,461




____________________See accompanying notes to consolidated financial statements.5.




---



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES

CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

NINE MONTHS ENDED
SEPTEMBER 30, 2007 AND 2006

(UNAUDITED)





2007
			
			2006Revenue from
			services
			$
			11,804,056
			
			$
			11,808,646Revenue from product sales
			43,557,599
			
			35,709,243Total revenue
			55,361,655
			
			47,517,889Cost of
			goods sold for services
			10,769,624
			
			11,036,806Cost of
			goods sold for product sales
			36,909,805
			
			30,579,195Reduction of
			cost of goods sold
			(480,060)
			
			(450,000)Total cost of goods sold
			47,199,369
			
			41,166,001Selling, general and administrative expense
			4,804,324
			
			4,144,503Income before other income (expense)
			3,357,962
			
			2,207,385Other income (expense)Interest
			expense
			(204,948)
			
			(136,455)Interest
			income
			92,002
			
			102,869Gain/(loss) on sale of assets
			(1,606)
			
			9,371Other income
			22,551
			
			11,649(92,001)
			
			(12,566)Income before income taxes
			3,265,961
			
			2,194,819Income tax provision
			1,268,423
			
			735,968Net income
			$  1,997,538
			
			$  1,458,851Basic earnings per share
			$           0.55
			
			$           0.41Diluted earnings per share
			$           0.55
			
			$           0.41Weighted shares outstanding:Basic
			3,640,899
			
			3,590,057Diluted
			3,640,899
			
			3,603,719




____________________See accompanying notes to consolidated financial statements.6.




---



|INDUSTRIAL
		SERVICES OF AMERICA, INC.
		AND SUBSIDIARIES
		CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
		NINE MONTHS ENDED SEPTEMBER 30, 2007
|--------------------------------------------------------------------------------------------------------------------------------------------------
|(UNAUDITED)                                                                                                                                       
|                                                                                                                                                  
|_________________________________________________________________________________________________________________________                         
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|                                                                                                                                                  
|Balance as of December 31, 2006                                                                                                                   
|                                                                                                                                                  
|Cash dividend                                                                                                                                     
|                                                                                                                                                  
|Repurchase of common stock                                                                                                                        
|                                                                                                                                                  
|Stock bonus                                                                                                                                       
|                                                                                                                                                  
|Tax benefits related to common stock options                                                                                                      
|                                                                                                                                                  
|Net income                                                                                                                                        
|                                                                                                                                                  
|Balance as of September 30, 2007                                                                                                                  



____________________See accompanying notes to consolidated financial statements.7.




---



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED
SEPTEMBER 30, 2007 AND 2006

(UNAUDITED)



2007
			
			2006Cash flows from operating activitiesNet income
			$  1,997,538
			
			$  1,458,851Adjustments to reconcile net income to
			    net cash from operating activities:Depreciation and amortization
			1,431,764
			
			1,302,973Deferred income taxes
			(99,434)
			
			(267,278)Tax benefits related to common stock options
			210,564
			
			-(Gain)/loss on sale of property and equipment
			1,606
			
			(9,371)Change in assets and liabilitiesReceivables
			(1,865,162)
			
			(1,475,752)Net investment in sales-type leases
			36,520
			
			55,135Inventories
			(1,009,955)
			
			(1,203,116)Other assets
			(176,826)
			
			(84,640)Accounts payable
			(304,543)
			
			(2,676,217)Other liabilities
			(912,009)
			
			155,076Net cash from operating activities
			(689,937)
			
			(2,744,339)Cash flows from investing activitiesProceeds from sale of property and equipment
			57,300
			
			35,600Purchases of property and equipment
			(1,716,680)
			
			(1,115,275)Deposit for shredder system
			(1,065,510)
			
			-Payments from related party
			25,706
			
			17,488Net cash from investing activities
			(2,699,184)
			
			(1,062,187)Cash flows from financing activitiesPurchases of common stock
			(198,460)
			
			(16,338)Issuance of common stock
			215,800
			
			111,653Payments on capital lease obligation
			(210,080)
			
			(108,651)Payment of cash dividend
			(364,090)
			
			-Proceeds from long-term debt
			6,350,000
			
			6,000,000Payments on long-term debt
			(2,986,097)
			
			(3,035,190)Net cash from financing activities
			2,807,073
			
			2,951,474Net decrease in cash and cash equivalents
			(582,048)
			
			(855,052)Cash at beginning of period
			1,331,807
			
			1,721,301Cash and cash equivalents at end of period
			$     749,759
			
			$     866,249Supplemental disclosure of
			cash flow informationCash paid for interest
			$       204,948
			
			$      133,241Cash paid for taxes
			2,235,377
			
			464,262Supplemental disclosure of
			noncash investing and financing activities:Equipment purchased under
			capital leases
			219,889
			
			120,395Equipment purchased through seller financing
			1,010,040
			
			-




____________________See accompanying notes to consolidated financial statements.8.




---



INDUSTRIAL
SERVICES OF AMERICA, INC. AND SUBSIDIARIES



NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(Unaudited)



NOTE 1 -- BASIS
OF PRESENTATION



The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U. S. generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X.  Accordingly, they do not include all of the
information and footnotes required by U. S. generally accepted accounting
principles for complete consolidated financial statements.  The information
furnished includes all adjustments, which are, in the opinion of management,
necessary to present fairly our financial position as of September 30, 2007 and
the results of our operations and changes in our cash flows for the periods
ended September 30, 2007 and 2006.  Results of operations for the period ended
September 30, 2007 are not necessarily indicative of the results that may be
expected for the entire year.  Additional information, including the audited
December 31, 2006 consolidated financial statements and the Summary of
Significant Accounting Policies, is included our Annual Report on Form 10-K for
the year ended December 31, 2006 on file with the Securities and Exchange
Commission.



NOTE 2 -- ESTIMATES



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



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



On December 22, 2006, we executed a new revolving credit facility with Branch
Banking and Trust Company increasing the borrowing line from $5.0 million to
$10.0 million to provide us with working capital to support the current needs of
our business.  This revolving credit facility has a three year term expiring
December 22, 2009, and provides for advances of up to eighty percent (80%) of
our eligible accounts receivable and up to forty percent (40%) of eligible
inventory, and up to one hundred percent (100%) of the net book value of our
eligible equipment less an outstanding indebtedness on the equipment.  The
revolving credit facility bears interest at the one month LIBOR rate, as
published in the Wall Street Journal, plus two and twenty-five one-hundredths
percent (2.25%) per annum which was 7.57% as of September 30, 2007, and is
secured by all our assets (except rental fleet equipment).  The balance of the
credit facility at September 30, 2007 was $4,500,000.  The revolving credit
facility contains certain restrictive and financial covenants.  At September 30,
2007, we were in compliance with all restrictive covenants and the entire amount
of our credit facility less our outstanding borrowings was available for
borrowings.



We also
have a note payable to Fifth Third Bank secured by our rental fleet equipment
with a fixed interest rate of 6.83% and monthly payments of $23,047.  The
maturity date under this agreement is June 2011 with a ten-year amortization
schedule.  The balance on the note was $1,817,902 at September 30, 2007 and
$1,929,016 at December 31, 2006.



NOTE 4 -- SEGMENT INFORMATION



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



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



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



FOR THE
			NINE MONTHS ENDED
			SEPTEMBER 30, 2007
			ISA
			RECYCLING
			
			COMPUTERIZED
			WASTE 
			SYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &
			SERVICES
			
			OTHER
			
			SEGMENT
			TOTALSRecycling revenues
			$  42,015,848
			
			$                  -
			
			$               -
			
			$               -
			
			$42,015,848Equipment sales, serviceand leasing revenues
			-
			
			-
			
			1,541,751
			
			-
			
			1,541,751Management fees
			-
			
			11,804,056
			
			-
			
			-
			
			11,804,056Cost of goods sold
			(36,280,146)
			
			(10,289,564)
			
			(629,659)
			
			-
			
			(47,199,369)Selling, general andadministrative expenses
			(1,393,658)
			
			(981,102)
			
			(520,397)
			
			(1,909,167)
			
			(4,804,324)Segment profit (loss)
			$    4,342,044
			
			$      533,390
			
			$   391,695
			
			$(1,909,167)
			
			$ 3,357,962FOR THE
			NINE MONTHS ENDED
			SEPTEMBER 30, 2006
			ISA
			RECYCLING
			
			COMPUTERIZED
			WASTE
			SYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &
			SERVICES
			
			OTHER
			
			SEGMENT
			TOTALSRecycling revenues
			$  34,339,091
			
			$                  -
			
			$               -
			
			$               -
			
			$ 34,339,091Equipment sales, serviceand leasing revenues
			-
			
			-
			
			1,370,152
			
			-
			
			1,370,152Management fees
			-
			
			11,808,646
			
			-
			
			-
			
			11,808,646Cost of goods sold
			(29,937,505)
			
			(10,586,806)
			
			(641,690)
			
			-
			
			(41,166,001)Selling, general andadministrative expenses
			(1,017,619)
			
			(1,106,109)
			
			(407,176)
			
			(1,613,599)
			
			(4,144,503)Segment profit (loss)
			$    3,383,967
			
			$      115,731
			
			$     321,286
			
			$ (1,613,599)
			
			$ 2,207,385Segment assets
			$  12,107,905
			
			$   2,009,541
			
			$ 2,216,955
			
			$  3,354,641
			
			$19,689,042FOR THE 
			THREE MONTHS ENDED
			SEPTEMBER 30, 2007
			ISA
			RECYCLING
			
			COMPUTERIZED 
			WASTE 
			SYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &
			SERVICES
			
			OTHER
			
			SEGMENT
			TOTALSRecycling revenues
			$ 13,120,062
			
			$               -
			
			$              -
			
			$               -
			
			$ 13,120,062Equipment sales, serviceand leasing revenues
			-
			
			-
			
			497,195
			
			-
			
			497,195Management fees
			-
			
			4,311,553
			
			-
			
			-
			
			4,311,553Cost of goods sold
			(11,781,279)
			
			(3,504,226)
			
			(199,584)
			
			-
			
			(15,485,089)Selling, general andadministrative expenses
			(402,237)
			
			(435,056)
			
			(167,553)
			
			(786,270)
			
			(1,791,116)Segment profit (loss)
			$       936,546
			
			$      372,271
			
			$   130,058
			
			$  (786,270)
			
			$    652,605Segment assets
			$  15,713,728
			
			$   3,293,727
			
			$2,224,422
			
			$ 3,073,152
			
			$24,305,029FOR THE
			THREE MONTHS ENDED
			SEPTEMBER 30, 2006
			ISA
			RECYCLING
			
			COMPUTERIZED
			WASTE 
			SYSTEMS
			
			WASTE 
			EQUIPMENT
			SALES &
			SERVICES
			
			OTHER
			
			SEGMENT
			TOTALSRecycling revenues
			$  10,772,707
			
			$                  -
			
			$               -
			
			$               -
			
			$10,772,707Equipment sales, serviceand leasing revenues
			-
			
			-
			
			463,775
			
			-
			
			463,775Management fees
			-
			
			4,094,753
			
			-
			
			-
			
			4,094,753Cost of goods sold
			(9,554,641)
			
			(3,715,193)
			
			(205,868)
			
			-
			
			(13,475,702)Selling, general andadministrative expenses
			(363,598)
			
			(337,530)
			
			(106,455)
			
			(536,783)
			
			(1,344,366)Segment profit (loss)
			$       854,468
			
			$         42,030
			
			$    151,452
			
			$  (536,783)
			
			$     511,167Segment assets
			$  12,107,905
			
			$    2,009,541
			
			$ 2,216,955
			
			$ 3,354,641
			
			$19,689,042




NOTE 5 --
INVENTORIES



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



Some commodities are in saleable condition at acquisition.  We purchase these
commodities in small amounts until we have a truckload of material available for
shipment.  Some commodities are not in saleable condition at acquisition.  These
commodities must be torched, sheared or baled.  We do not have work-in-process
inventory that needs to be manufactured to become finished goods.  We include
processing costs in inventory for all commodities.  Ferrous inventory of
$1,820,449 at September 30, 2007 was comprised of $950,008 in raw materials and
$870,441 of finished goods.  Non-ferrous inventory of $2,503,405 at September
30, 2007 was comprised of $846,740 in raw materials and $1,656,665 of finished
goods.  Ferrous inventory of $1,667,937 at December 31, 2006 was comprised of
$382,445 in raw materials and $1,285,492 of finished goods.  Non-ferrous
inventory of $1,678,655 at December 31, 2006 was comprised of $451,289 in raw
materials and $1,227,366 of finished goods.  We charged $2,008,203 in general
and administrative processing costs to cost of sales for the nine months ended
September 30, 2007 and $2,353,435 for the year ended December 31, 2006.



Inventory also includes all types of industrial waste handling equipment and
machinery held for resale such as compactors, balers, and containers.   Other
inventory includes cardboard and baling wire.  Inventories as of September 30,
2007 and December 31, 2006 consist of the following:



September 30,2007
			
			December 31,2006Ferrous materials
			$ 1,820,449
			
			$ 1,667,937Non-ferrous
			materials
			2,503,405
			
			1,678,655Waste equipment
			machinery
			84,036
			
			56,200Other
			30,291
			
			25,434Total
			inventories
			$
			4,438,181
			
			$
			3,428,226




NOTE 6 -- LEASE
COMMITMENTS



Operating Leases:

We lease our Louisville, Kentucky facility
from a related party under an operating lease expiring December 2007.  The rent
was adjusted in January 2003 per the agreement to monthly payments of $42,106
through December 2007.  In addition, we are also responsible for real estate
taxes, insurance, utilities and maintenance expense.



We lease a facility in Dallas, Texas for
management services operations.  The agreement provided that we make monthly
payments of $2,457 through September 2005.  The lease was renewed effective
October 1, 2005 for a period of two years with monthly payments of $2,525, and
renewed again October 1, 2007 for a period of one year with monthly payments of
$969.   We also lease other machinery and equipment under operating leases which
expire through July 2009.



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



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



Future minimum lease payments for operating
leases as of September 30, 2007 are as follows:



2007
			
			$      308,5002008
			
			108,8822009
			
			54,0002010
			
			54,0002011
			
			18,000Future minimum lease payments
			
			$     543,382




Total rent expense for the nine months ended September 30, 2007 and 2006 was
$637,741 and $585,237, respectively.



Capital Leases:



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



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



| |                                 |  | 2007             |  | 2006         
| | ------------------------------- |  | ---------------- |  | -------------
| |                                 |  |                  |  |              
| | Equipment                       |  | $    1,269,222   |  | $     861,730
| |                                 |  |                  |  |              
| | Less accumulated
		depreciation |  | 254,894          |  | 304,199      
| |                                 |  |                  |  |              
| |                                 |  | $  
		 1,014,328 |  | $     557,531



The following is a schedule of future annual minimum lease payments under the
capitalized lease arrangements, together with the present value of net minimum
lease payments at September 30, 2007.



2007
			
			$     184,2632008
			
			73,2962009
			
			70,8222010
			
			31,700Total future minimum lease payments
			
			360,081Less amount representing interest
			
			(53,887)Present value of net minimumlease payments
			
			306,195Less current portion
			
			(184,263)Capital Lease Obligations
			
			$     121,932




NOTE 7 -- CASH DIVIDEND



The Board of Directors, at our
May 15, 2007 annual meeting, declared a cash dividend payment of ten cents per
share for shareholders of record as of June 15, 2007 with a payment date of July
20, 2007.



NOTE 8 -- PER SHARE DATA



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



Nine months ended September
30, 2007 compared to nine months ended September 30, 2006:



|                                                             | 2007                | 2006             
|------------------------------------------------------------ | ------------------- | -----------------
|Basic earnings
		per share                                   |                     |                  
|Net income                                                   | $    1,997,538      | $  1,458,851     
|                                                             |                     |                  
|Weighted
		average shares outstanding                        | 3,640,899           | 3,590,057        
|                                                             |                     |                  
|Basic
		earnings per share                                   | $               .55 | $             .41
|                                                             |                     |                  
|Diluted earnings
		per share                                 |                     |                  
|Net income                                                   | $   1,997,538       | $  1,458,851     
|                                                             |                     |                  
|Weighted
		average shares outstanding                        | 3,640,899           | 3,590,057        
|Add dilutive
		effect of assumed exercising of stock options | -                   | 13,662           
|Diluted
		weighted average shares outstanding                | 3,640,899           | 3,603,719        
|Diluted
		earnings per share                                 | $              .55  | $             .41





Three months ended September 30, 2007 compared to three months ended
September 30, 2006:



2007
			2006Basic
			earnings per shareNet income
			$     383,159
			$     439,568Weighted
			average shares outstanding
			3,640,899
			3,634,160Basic
			earnings per share
			$             .11
			$             .12Diluted
			earnings per shareNet
			income
			$     383,159
			$     439,568Weighted
			average shares outstanding
			3,640,899
			3,634,160Add
			dilutive effect of assumed exercising of stock options
			-
			5,301Diluted
			weighted average shares outstanding
			3,640,899
			3,639,461Diluted earnings per share
			$             .11
			$             .12




NOTE 9 -- SIGNIFICANT EVENTS



On August 2, 2007, we named
Brian G. Donaghy, age 31, ISA President and Chief Operating Officer for an
initial term commencing on August 2, 2007 and ending on the termination date of
December 31, 2011.  Mr. Donaghy had served as our acting COO from January 1,
2007 until August 2, 2007.  From 2001 to present, Mr. Donaghy owned and operated
Industrial Logistic Services, LLC, a scrap metal and waste transportation
company that leases property from ISA.  From May 2004 to December 2006, Mr.
Donaghy assisted ISA as a consultant in its ferrous and non ferrous operations.



In connection with his
selection as President and Chief Operating Officer, ISA entered into an
executive employment agreement with him.  The executive employment agreement
stipulates that Mr. Donaghy will receive a base salary of $3,000 per week plus
benefits.  Mr. Donaghy will be entitled to participate in all medical and
hospitalization, group life insurance, retirement, and any and all other welfare
and fringe benefits.  We will provide Mr. Donaghy with a term life insurance
policy with a death benefit not to exceed $50,000.  We will also provide Mr.
Donaghy with a monthly car payment allowance the amount of which will not exceed
$1,000 per month, which will be used by Mr. Donaghy to acquire an automobile
selected by him with our concurrence.



Additionally, during the
initial term of the agreement, Mr. Donaghy will be entitled to receive 20,000
shares of ISA's common stock per year, provided that certain conditions have
been met, including that Mr. Donaghy has completed a full year of employment and
that our EBITDA exceeds $4.5 million for the previous fiscal year.  In no event
will Mr. Donaghy receive more than 100,000 shares of ISA's common stock under
this agreement.



On August 2, 2007, we entered
into an asset purchase agreement funded by a note payable to ILS whereby we pay
$20,000 per month for 60 months for various assets including tractor trailers,
trucks and containers.  The note payable reflects seven percent (7%) interest
payment on the outstanding balance plus principal amortization.  We also paid
ILS $100,000 cash as a signing bonus at the time of execution of the asset
purchase agreement.  We recorded a related party note payable of $1,010,040 with
an outstanding balance at September 30, 2007 of $820,076, which is included in
long-term debt caption on the consolidated balance sheet.



NOTE 10 -- SHREDDER SYSTEM
COMMITMENT



The Board of Directors, at its
June 21, 2007 meeting, announced authorization to proceed with the purchase of a
shredder system and complimentary facility improvements totaling five million
dollars.  On July 30, 2007, the Company entered into a contract with The
Shredder Company located in Canutillo, Texas to purchase a shredder system for
$3,551,700.  To date, we have made deposit payments totaling $1,065,510
classified as other assets.  We are financing the purchase of the shredder
system with our $10.0 million senior revolving credit facility. This project is
scheduled to be completed in 2008.



NOTE 11 -- CHANGE IN
ESTIMATE



As disclosed in our annual
report for the year ended December 31, 2006, management changed an estimate in
2006 relating to the cost of goods sold associated with the Computerized Waste
Systems (CWS) segment. As a result of this change in estimate, we recorded a
reduction in the cost of goods sold of $337,516 for the third quarter ending
September 30, 2007 and $480,060 for nine months ending September 30, 2007.  In
the third quarter of 2007, as a result of the reduction of $337,516, income
before other income (expense) increased $337,516, net income increased by
$214,930, and earnings per share increased $.059 per share.  For the first nine
months of 2007, as a result of the reduction of $480,060, income before other
income (expense) increased $480,060, net income increased by $293,616, and
earnings per share increased $.081 per share.





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



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



The following discussion and
analysis contains certain financial predictions, forecasts and projections which
constitute "forward-looking statements" within the meaning of the federal
securities laws.  Actual results could differ materially from those financial
predictions, forecasts and projections and there can be no assurance that we
will achieve such financial predictions, forecasts and projections.  Factors
that could affect financial predictions, forecasts and projections include the
fluctuations in the commodity price index and any conditions internal to our
major customers, including loss of their accounts and other factors as listed in
our Form 10-K for the year ended December 31, 2006, as filed with the Securities
and Exchange Commission.



General



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



We continue to pursue a growth
strategy in the waste management services arena by adding new locations of
existing customers as well as marketing our services to potential customers. 
Currently, we service 2,293 customer locations throughout the United States and
we utilize an active database of over 6,300 vendors to provide timely, thorough
and cost-effective service to our customers.



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



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



Liquidity and Capital
Resources



As of September 30, 2007 we
held cash and cash equivalents of $749,759.



We currently maintain a $10.0
million senior revolving credit facility with the Branch Banking and Trust
Company.  This revolving credit facility has a three year term, provides for
advances of up to eighty percent (80%) of our eligible accounts receivable and
up to forty percent (40%) of eligible inventory, and up to one hundred percent
(100%) of our net book value of eligible equipment less outstanding indebtedness
on the equipment.  The revolving credit facility bears interest at the one month
LIBOR rate, as published in the Wall Street Journal, plus two and twenty-five
one-hundredths percent (2.25%) per annum, 7.57% as of September 30, 2007, and is
secured by all our assets (except rental fleet equipment).  As of September 30,
2007 we had borrowed $4,500,000 and as of December 31, 2006 we had borrowed
$1,010,875 against this credit line.  The revolving credit facility contains
certain restrictive and financial covenants.  At September 30, 2007, we were in
compliance with all restrictive covenants.



We also have a $2.0 million loan
with Fifth Third Bank secured by our rental fleet equipment.  Indebtedness under
this loan agreement accrues interest at a fixed interest rate of 6.83%.  The
maturity date under this agreement is September 2011 with a ten-year
amortization schedule.  As of September 30, 2007 we had borrowed $1,817,902 and
as of December 31, 2006 we had borrowed $1,929,016 against this loan.  The terms
of the loan agreement place certain restrictive covenants on us, including
maintenance of a specified tangible net worth, debt to net worth and EBITDA
ratio.  Consequently, these covenants restrict our ability to incur as much
additional debt as we may desire for future growth.  At September 30, 2007, we
were in compliance with all restrictive covenants.



During the first three quarters
of 2007, we paid $1,716,680 cash and $1,229,929 funded via a combination of
capital leases and seller provided note payable for land, improvements, property
and equipment.  We paid $264,846 for property in New Albany, Indiana, located
across the Ohio River from Louisville, Kentucky, the site of our headquarters. 
We paid $501,348 for property improvements to our Louisville location.  In the
recycling segment we paid $1,014,336 for cranes, shear rebuild, scales,
trailers, and other operating equipment.  In the equipment sales, leasing and
service segment, we purchased $394,861 in rental equipment that we located at
customer sites.  This rental fleet equipment consists of solid waste handling
and recycling equipment such as compactors, pre-crushers, containers and balers.
It is our intention to continue to pursue this market.  We purchased $90,813 of
office equipment.



Also, the Board of Directors at
its June 21, 2007 meeting announced authorization to proceed with the purchase
of a TSC 80 SXS shredder system and complementary facility improvements totaling
five million dollars. The selection of the TSC 80 SXS shredding plant will allow
us to provide better quality scrap to our consumers, while at the same time
broadening the type of scrap that we can process.  Our intention is to process
many types of heavy grades of scrap that we presently process by shearing and to
make specialty shredder grades of material for specific consumers.  We plan to
finance the purchase of the shredder system using our $10 million senior
revolving credit facility or by attracting new capital.  The project is
scheduled for completion in 2008.



We have a purchasing card with a
credit limit of $6.0 million.  We included the balance due on the purchasing
card as part of accounts payable.  The outstanding balance on the purchasing
card at September 30, 2007 was $636,612 with a due date of October 27, 2007. 
The card accrues interest at prime plus 5.9% after the first twenty-five days of
the purchase; our intention is to pay off the full balance every month so as to
not incur finance charges.  To date we have not incurred any interest charges on
this purchasing card.  The card requires monthly minimum payments on any balance
outstanding at month end.  We receive rebates on an annual basis for all
purchases made with the card.



We expect that existing cash
flow from operations and available credit under our existing credit facilities
will be sufficient to meet our cash needs during the remainder of 2007.



Results of Operations



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



Nine months ended September 30,2007
			
			2006Statements of Operations Data:Total Revenue
			..................................................................................
			100.0%
			
			100.0%Cost of goods
			sold............................................................................
			85.2%
			
			86.6%Selling, general and administrative expenses
			......................................
			8.7%
			
			8.7%Income before other
			expenses...........................................................
			6.1%
			
			4.7%




Nine months ended September
30, 2007 compared to nine months ended September 30, 2006



Total revenue increased
$7,843,766 or 16.5% to $55,361,655 in 2007 compared to $47,517,889. in 2006. 
Recycling revenue increased $7,676,757 or 22.4% to $42,015,848 in 2007 compared
to $34,339,091 in 2006.  This is primarily due to a 14% increase in price of
commodities in the recycling market.  Management services revenue decreased
$4,590 or 0.1% to $11,804,056 in 2007 compared to $11,808,646 in 2006 due to new
customers.  Equipment sales, service and leasing revenue increased $171,599 or
12.5% to $1,541,751 in 2007 compared to $1,370,162 in 2006.  This increase is
due to an increase in rental revenue.



Total cost of goods sold
increased $6,033,368 or 14.7% to $47,199,369 in 2007 compared to $41,166,001 in
2006.  Recycling cost of goods sold increased $6,342,641 or 21.2% to $36,280,146
in 2007 compared to $29,937,505 in 2006.  This is primarily due to 25% higher
commodity purchase prices in the recycling market.  Management services cost of
goods sold decreased $297,242 or 2.8% to $10,289,564 in 2007 compared to
$10,586,806 in 2006 due to new customers.  Additionally, we reduced cost of
goods sold by $480,060 in 2007 and by $450,000 in 2006 due to a change in
management's estimate related to the liability associated with this operation
which includes the contract settlement with our former customers.  Equipment
sales, service and leasing cost of goods sold decreased $12,031 or 1.9% to
$629,659 in 2007 compared to $641,690 in 2006.



Selling, general and
administrative expenses increased $659,821 or 16.0% to $4,804,324 in 2007
compared to $4,144,503 in 2006.  As a percentage of revenue, selling, general
and administrative expenses were 8.7% in 2007 compared to 8.7% in 2006.  The
primary driver of the increase in total expenses is property repairs and
maintenance, which increased $215,308 due to repairs to the premises.



Other expense increased $79,435 to other expense of
$92,001 in 2007 compared to other expense of $12,566 in 2006.  This was
primarily due to an increase in loss on disposal of assets of $10,977 and an
increase in interest expense of $68,493.



Income tax provision increased
$532,455 to $1,268,423 in 2007 compared to $735,968 in 2006.  The effective tax
rate in 2007 was 39% compared to 34% in 2006 based on federal and state
statutory rates.  This increase in the overall effective tax rate for 2007 was
due to the 2006 recognition of a tax benefit of $270,000 for the exercise of
stock options by a consultant.





Three months ended September 30, 2007 compared to three months ended
September 30, 2006



Total revenue increased $2,597,575 or 17.0% to $17,928,810
in 2007 compared to $15,331,235 in 2006.  Recycling revenue increased $2,347,355
or 21.8% to $13,120,062 in 2007 compared to $10,772,707 in 2006.  This is
primarily due to a 28% increase in price of commodities in the recycling
market.  Management services revenue increased $216,800 or 5.3% to $4,311,553 in
2007 compared to $4,094,753 in 2006 due to new customers.  Equipment sales,
service and leasing revenue increased $33,420 or 7.2% to $497,195 in 2007
compared to $463,775 in 2006.  This increase is due to an increase in rental
revenue.



Total cost of goods sold increased $2,009,3875 or 15.0% to
$15,485,089 in 2007 compared to $13,475,702 in 2006.  Recycling cost of goods
sold increased $2,226,638 or 23.3% to $11,781,279 in 2007 compared to $9,554,641
in 2006.  This is due to 53% higher commodity purchase prices in the recycling
market.  Management services cost of goods sold decreased $210,967 or 5.7% to
$3,504,226 in 2007 compared to $3,715,193 in 2006 due to new customers. 
Additionally, we reduced cost of goods sold by $337,516 in 2007 and by $150,000
in 2006 due to a change in management's estimate related to the liability
associated with this operation which includes the contract settlement with our
former customers.  Equipment sales, service and leasing cost of goods sold
decreased $6,284 or 3.1% to $199,584 in 2007 compared to $205,868 in 2006.



Selling, general and
administrative expenses increased $446,750 or 33.3% to $1,791,116 in 2007
compared to $1,344,366 in 2006.  As a percentage of revenue, selling, general
and administrative expenses were 10.0% in 2007 compared to 8.8% in 2006.  The
primary driver of the increase in total expenses is the $215,800 stock bonus
paid to Brian Donaghy, our new president and chief operating officer, $56,200
increase in fuel and lubricants, $38,000 increase in truck driver labor, and
$33,200 increase in equipment repair and maintenance.



Other expense increased
$35,730 to $50,883 in 2007 compared to $15,153 in 2006 primarily due to a
$51,610 increase in interest expense.



Income tax provision increased
$162,117 to $218,563 in 2007 compared to a provision of $56,446 in 2006.  The
effective tax rate for the third quarter of 2007 was 36% compared to 11% in the
third quarter of 2006 based on federal and state statutory rates.  This increase
in the effective tax rate for 2007 was due to the 2006 recognition of a tax
benefit of $270,000 for the exercise of stock options by a consultant.



Financial condition at September 30, 2007 compared to
December 31, 2006

Cash and cash equivalents
decreased $582,048 to $749,759 as of September 30, 2007 compared to $1,331,807
as of December 31, 2006.



We used net cash from operating
activities of $689,937 for the nine months ended September 30, 2007.  Primarily
this was due to increases in accounts receivable and inventory of $1,865,162 and
$1,009,955, respectively, offset by net income of $1,997,538.



We used net cash from investing
activities of $2,699,184 for the nine months ended September 30, 2007.  We
purchased recycling and rental fleet equipment of $1,716,680.  The rental fleet
equipment consists of solid waste handling and recycling equipment such as
compactors, containers and balers. It is our intention to continue to pursue
this market.  We also made a deposit of $1.1 million for the purchase of a
shredder system.



Our net cash from financing
activities of $2,807,073 for the nine months ended September 30, 2007 is
primarily due to the advance of $6,350,000 on our line of credit offset by
payments on debt of $2,986,097 and payment of a cash dividend of $364,090.



Accounts receivable trade
increased $1,865,162 or 37.1% to $6,891,603 as of September 30, 2007 compared to
$5,026,441 as of December 31, 2006.  This change is primarily due to an increase
in selling prices in the Recycling segment.



Inventories consist principally
of ferrous and nonferrous scrap materials and waste equipment machinery held for
resale.  We value inventory at the lower of cost or market.  Inventory increased
$1,009,955 or 29.5% to $4,438,181 as of September 30, 2007 compared to
$3,428,226 as of December 31, 2006.



Inventory aging for the period
ended September 30, 2007 (Days Outstanding):



|Description               | 1-30            | 31-60          | 61-90          | Over 90   | Total      
|------------------------- | --------------- | -------------- | -------------- | --------- | -----------
|                          |                 |                |                |           |            
|Waste equipment machinery | $             - | $            - | $            - | $  84,036 | $    84,036
|Ferrous materials         | 1,027,292       | 425,627        | 367,530        | -         | 1,820,449  
|Non-ferrous materials     | 2,224,599       | 102,281        | 62,967         | 113,558   | 2,503,405  
|Other                     | 8,787           | -              | -              | 21,504    | 30,291     
|                          |                 |                |                |           |            
|                          | $3,260,678      | $ 527,908      | $ 430,497      | $219,098  | $4,438,181 



Inventory aging for the year ended December 31, 2006 (Days Outstanding):



|Description               | 1-30        | 31-60      | 61-90          | Over 90         | Total      
|------------------------- | ----------- | ---------- | -------------- | --------------- | -----------
|                          |             |            |                |                 |            
|Waste equipment machinery | $    33,720 | $   22,480 | $            - | $             - | $    56,200
|Ferrous Materials         | 864,489     | 448,842    | 166,509        | 188,097         | 1,667,937  
|Non-ferrous materials     | 1,467,679   | 41,840     | 42,989         | 126,147         | 1,678,655  
|Other                     | 25,434      | -          | -              | -               | 25,434     
|                          |             |            |                |                 |            
|                          | $2,391,322  | $ 513,162  | $ 209,498      | $ 314,244       | $3,428,226 



Accounts payable trade decreased
$304,543 or 6.7% to $4,240,514 as of September 30, 2007 compared to $4,545,057
as of December 31, 2006, primarily due to market conditions.



Working capital increased
$3,605,221 to $7,129,319 as of September 30, 2007 compared to $3,524,098 as of
December 31, 2006.  The increase was primarily driven by the $1.9 million
increase in accounts receivable and the $1.0 million increase in inventory.



Contractual Obligations



The following table provides information with respect to
our known contractual obligations for the quarter ended September 30, 2007.



Obligation Description
			Total
			Less
			
			than 1 year
			1-3
			years
			3-5
			years
			More
			
			than 5 yearsLong-Term Debt Obligations (1)
			$7,313,834
			$333,118
			$5,239,324
			$1,741,392
			$0Capital Lease Obligations (2)
			306,195
			184,263
			121,932
			0
			0Operating Lease Obligations (3)
			543,382
			308,500
			162,882
			72,000
			0Total
			$8,163,411
			$ 825,881
			$5,524,138
			$1,813,392
			$0




(1)        We
currently maintain a $10.0 million senior revolving credit facility with the
Branch Banking and Trust Company.  Indebtedness under this credit facility
accrues interest at the one month LIBOR rate, as published in the Wall Street
Journal, plus two and twenty-five one-hundredths percent (2.25%) per annum which
was 7.57% as of September 30, 2007.  The maturity date under this agreement
is December 2009.  We have collateralized the credit facility with all our
assets except our rental fleet.  In August 2007 we entered into an asset
purchase agreement with ILS whereby we pay $20,000 per month for 60 months
reflecting a seven (7%) interest payment on the outstanding balance plus
principal amortization.  The assets sold by ILS to us include tractor
trailers, trucks and containers.  The principal owner of ILS was our newly
elected president and chief operating officer, Mr. Brian Donaghy.



We
also have a $2.0 million loan agreement with Fifth Third Bank.  Indebtedness
under this loan agreement accrues interest at a fixed interest rate of 6.83%. 
The maturity date is September 2011 with a ten-year amortization schedule and is
collateralized by our rental fleet equipment.



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



(3)        We
lease the Louisville, Kentucky facility from K&R, LLC, the sole member of which
is Harry Kletter, our chief executive officer, under an operating lease expiring
December 2007.  We have monthly rental payments of $42,106 through
December 2007.  In the event of a change of control, the monthly payments become
$62,500.  We also lease a management services operations facility and various
pieces of equipment in Dallas, Texas for which monthly payments of $969 are due
through September 2008, at which time we may renew the lease for another year. 
We also lease security equipment for which monthly payments of $464 are due
through July 2009.  We lease property in Lexington, Kentucky for which monthly
payments of $2,250 are due through January 2012, and we lease property in
Louisiana for which monthly payments of  $5,250 are due through February 2009.



Impact of Recently Issued Accounting Standards



Effective December 31, 2006, we
adopted Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes" ("FIN 48"), an interpretation of
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." FIN 48 requires that a position taken or expected to be taken in
a tax return be recognized in the financial statements when it is more likely
than not (i.e., a likelihood of more than fifty percent) that the position would
be sustained upon examination by tax authorities. A recognized tax position is
then measured at the largest amount of benefit that is greater than fifty
percent likely of being realized upon ultimate settlement. Our adoption of FIN
48 required no change to our financial statements.



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



SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years, although earlier application is
encouraged.  Additionally, prospective application of the provisions of SFAS No.
157 is required as of the beginning of the fiscal year in which it is initially
applied, except when certain circumstances require retrospective application.



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



---





ITEM 3:  
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.



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



We are exposed to
interest rate risk on our floating rate borrowings. As of September 30, 2007,
variable rate borrowings consisted of outstanding borrowings of $3.0 million
under our credit agreement with BB&T.  This revolving credit facility bears
interest at the one month LIBOR rate, as published in the Wall Street Journal,
plus two and twenty-five one-hundredths percent (2.25%) per annum which was
7.57% as of September 30, 2007. Any increase in this rate would lead to higher
interest expense. We do not have any interest rate swaps or caps in place, which
would mitigate our exposure to fluctuations in the interest rate on this
indebtedness. Based on our average anticipated borrowings under our credit
agreement in fiscal 2007, a hypothetical increase or decrease in the LIBOR rate
by 1% would increase or decrease interest expense on our variable borrowings by
approximately $45,000 per year, with a corresponding change in cash flows.



We may also be
exposed to interest rate risk on our fixed rate borrowing with Fifth Third
Bank.  The maturity date under this agreement is June 2011 with a ten-year
amortization schedule.  The interest rate could change in July 2011.



ITEM 4:    CONTROLS AND PROCEDURES



(a)        Evaluation of disclosure controls and
procedures.



Based on the
evaluation of the ISA Chief Executive Officer and the ISA Chief Financial
Officer of our disclosure controls and procedures as of September 30, 2007, it
has been concluded that the disclosure controls and procedures are effective for
the purposes contemplated by Rules 13a-15(e) and 15d - 15(e) promulgated by the
Securities and Exchange Commission.



(b)        Changes in internal controls over financial
reporting.



There have been no
significant changes to ISA's internal controls or in other factors that have
materially affected, or are reasonably likely to materially affect, these
controls over financial reporting subsequent to September 30, 2007.



---



PART II -- OTHER INFORMATION





Item 1.     Legal Proceedings



On
January 4, 2007, Lennox Industries, Inc., a commercial heating and
air-conditioning manufacturer, filed suit against us in the Arkansas County,
Arkansas Circuit Court in the case styled Lennox Industries, Inc. v.
Industrial Services of America, Inc., Case No. CV-2007-004.  Because of
settlement negotiations, Lennox did not serve us until May 23, 2007.  Lennox
alleges that we breached a 2001 contract with Lennox where we agreed to act as
agent for Lennox, by our failure to properly evaluate, categorize, classify and
value the production scrap and waste of Lennox, thereby brokering such products
at prices below market value.  Lennox also alleges negligence and breach of
fiduciary duty related to the same alleged failure.  The Lennox complaint does
not state any specific monetary damages.  We have filed an answer denying all
claims and we currently believe that the claims have no merit.



Item 1A.  Risk Factors



We
have had no material changes from the risk factors reported in our Form 10-K for
the year ended December 31, 2006, as filed with the Securities and Exchange
Commission on March 27, 2007.



Item 2.     Unregistered Sales of Equity 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



None.



Item 6. Exhibits



See exhibit index.



---



SIGNATURESPursuant 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 14, 2007
			/s/  Harry KletterChairman and Chief Executive Officer(Principal Executive and FinancialOfficer)Date:  November 14, 2007
			/s/ Alan L. SchroeringChief Financial Officer




---



INDEX TO EXHIBITSExhibit Number
			
			Description of Exhibits31.1
			
			Rule 13a-14(a) Certification of
			Harry Kletter for the Form 10-Q for the quarter ended September 30,
			2007.31.2
			
			Rule 13a-14(a) Certification of Alan Schroering
			for the Form 10-Q for the quarter ended September 30, 2007.32.1
			
			Section 1350 Certification of Harry Kletter and
			Alan Schroering for the Form 10-Q for the quarter ended September
			30, 2007.




---

---