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FORM 10-QSECURITIES AND
        EXCHANGE COMMISSION
        WASHINGTON, DC 20549[X]   QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934
        For the quarterly period ended March 31, 2001OR[  ]   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
        (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 March 31, 2001: 1,720,300.




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INDUSTRIAL
        SERVICES OF AMERICA, INC. AND SUBSIDIARYINDEXPage No.Part I
        Financial InformationReport of Independent
        Accountants
        3Condensed Consolidated
        Balance SheetsMarch 31,
        2001 and December 31, 2000
        4Condensed Consolidated
        Statements ofOperations
        Three months endedMarch 31,
        2001 and 2000
        6Condensed Consolidated
        Statements ofCash Flows
        Three months endedMarch 31,
        2001 and 2000
        7Notes to Condensed
        ConsolidatedFinancial
        Statements
        8Management's Discussion and
        Analysisof
        Financial Condition and Resultsof
        Operations
        10Part II
        Other Information
        122




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REPORT OF
        INDEPENDENT ACCOUNTANTSBoard of Directors and
        Shareholders
        Industrial Services of America, Inc. and Subsidiary
        Louisville, KentuckyWe have reviewed the
        condensed consolidated balance sheet of Industrial
        Services of America, Inc. as of March 31, 2001, and the
        related condensed consolidated statements of income and
        cash flows for the quarters ended March 31, 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
        LLPIndianapolis, Indiana
        April 27, 20013




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Part I 
        FINANCIAL INFORMATIONITEM 1: CONSOLIDATED
        FINANCIAL STATEMENTSINDUSTRIAL SERVICES OF
        AMERICA, INC. AND SUBSIDIARYCONDENSED CONSOLIDATED
        BALANCE SHEETS(UNAUDITED)ASSETS


March 31,
        2001
        
        December 31,
        2000Current assetsCash and cash
        equivalents
        $ 980,660
        
        $ 1,395,882Accounts
        receivable - trade (afterallowance
        for doubtful accounts of$141,522
        and $100,000 in 2001 and2000)
        9,201,985
        
        8,739,174Accounts
        receivable - related party
        -
        
        15,000Employee loans
        27,857
        
        30,577Income tax
        refund receivable
        -
        
        54,300Net investment
        in sales-type leases
        103,764
        
        99,937Inventories
        2,216,717
        
        2,191,162Deferred income
        taxes
        71,355
        
        52,400Other
        240,478
        
        261,604Total
        current assets
        12,842,816
        
        12,840,036Net property and equipment
        5,562,727
        
        5,544,859Other AssetsNon-compete
        agreements, net
        355,303
        
        405,892Intangibles (net
        of accumulatedamortization
        of $199,997 and$186,664
        in 2001 and 2000)
        600,004
        
        613,337Net investment
        in sales-type leases
        325,469
        
        352,897Other Assets
        49,742
        
        48,1471,330,518
        
        1,420,273$
        19,736,061
        
        $
        19,805,168See accompanying notes to
        consolidated financial statements.4




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INDUSTRIAL SERVICES OF
        AMERICA, INC. AND SUBSIDIARYCONDENSED CONSOLIDATED
        BALANCE SHEETSCONTINUED(UNAUDITED)LIABILITIES AND
        STOCKHOLDERS' EQUITY


March 31,
        2001
        
        December 31,
        2000Current liabilitiesNote payable to
        bank
        $   2,750,000
        
        $   2,750,000Current
        maturities of long-term debt
        430,448
        
        421,330Accounts payable
        10,210,833
        
        10,126,353Income tax
        payable
        43,020
        
        -Other current
        liabilities
        342,180
        
        254,127Total
        current liabilities
        13,776,481
        
        13,551,810Long-term liabilitiesLong-term debt
        1,583,213
        
        1,694,493Deferred income
        taxes
        109,016
        
        159,4001,692,229
        
        1,853,893Stockholders' equityCommon stock,
        $.01 par value,10,000,000
        shares authorized 1,957,500shares
        issued, 1,720,300 and 1,863,300shares
        outstanding in 2001 and 2000
        19,575
        
        19,575Additional
        paid-in capital
        1,911,853
        
        1,891,651Retained
        earnings
        2,785,802
        
        2,649,555Treasury stock,
        237,200 and 94,200 sharesat
        cost in 2001 and 2000
        (449,879)
        
        (161,316)4,267,351
        
        4,399,465$
        19,736,061
        
        $
        19,805,168See accompanying notes to
        consolidated financial statements.5




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INDUSTRIAL SERVICES OF
        AMERICA, INC. AND SUBSIDIARYCONDENSED CONSOLIDATED
        STATEMENTS OF OPERATIONSTHREE MONTHS ENDED
        MARCH 31, 2001 AND 2000(UNAUDITED)


2001
        
        2000Revenue
        $
        23,251,853
        
        $
        19,827,773Cost of goods sold
        21,259,698
        
        18,027,086Gross profit
        1,992,155
        
        1,800,687Selling, general and
        administrative
        1,736,129
        
        1,588,916Income from operations
        256,026
        
        211,771Other expense
        (68,343)
        
        (17,599)Income before income
        taxes
        187,683
        
        194,172Provision for income taxes
        51,436
        
        56,901Net income
        $  
        136,247
        
        $  
        137,271Earnings per share
        $0.08
        
        $0.07Earnings per share, assuming
        dilution
        $0.08
        
        $0.07See accompanying notes to
        consolidated financial statements.6




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INDUSTRIAL SERVICES OF
        AMERICA, INC. AND SUBSIDIARYCONDENSED CONSOLIDATED
        STATEMENTS OF CASH FLOWSTHREE MONTHS ENDED
        MARCH 31, 2001 AND 2000(UNAUDITED)


2001
        
        2000Cash flows from operating
        activitiesNet income
        $
        136,247
        
        $
        137,271Adjustments to
        reconcile net income tonet
        cash from operating activities:Stock
        options granted for services
        20,202
        
        20,203Depreciation
        and amortization
        401,793
        
        371,171Provision
        for Doubtful Accounts
        47,523
        
        60,000Deferred
        Income Tax
        (69,339)
        
        (60,100)Gain
        on sale of property and equipment
        (2,122)
        
        -Change
        in assets and liabilitiesReceivables
        (492,614)
        
        250,038Inventories
        (25,555)
        
        (394,884)Other
        assets
        19,531
        
        (58,119)Accounts
        payable
        181,800
        
        (1,284,536)Other
        current liabilities
        88,053
        
        144,222Net
        cash from operating activities
        305,519
        
        (814,734)Cash flows from investing
        activitiesProceeds from
        sales-type leases
        23,601
        
        13,348Proceeds from
        sale of property and equipment
        6,500
        
        -Purchases of
        property and equipment
        (360,117)
        
        (95,275)Net
        cash from investing activities
        (330,016)
        
        (81,927)Cash flows from financing
        activitiesPurchase of
        common stock
        (288,563)
        
        -Payments on
        long-term debt
        (102,162)
        
        (93,818)Net
        cash from financing activities
        (390,725)
        
        (93,818)Net decrease in cash
        (415,222)
        
        (990,479)Cash at beginning of year
        1,395,882
        
        2,388,811Cash at end of period
        $   980,660
        
        $ 1,398,332See accompanying notes to
        consolidated financial statements.7




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INDUSTRIAL SERVICES OF
        AMERICA, INC. AND SUBSIDIARYNOTES TO CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTSNOTE 1  BASIS OF PRESENTATIONThe accompanying unaudited condensed
        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 March 31, 2001 and the results of its
        operations and changes in cash flow for the periods ended
        March 31, 2001 and 2000. Results of operations for the
        period ended March 31, 2001 are not necessarily
        indicative of the results that may be expected for the
        entire year. Additional information, including the
        audited December 31, 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.NOTE 2  SEGMENT INFORMATIONThe Company's operations include three
        primary segments: ISA Recycling, Computerized Waste
        Systems (CWS), and Waste Equipment Sales & Service
        (WESSCO). ISA recycling provides products and services to
        meet the needs of its customers related to ferrous,
        non-ferrous and fiber recycling at two locations in the
        Midwest. CWS provides waste disposal services including
        contract negotiations with vendors, centralized billing,
        invoice auditing, and centralized dispatching. WESSCO
        sells, leases, and services waste handling and recycling
        equipment.The Company's three reportable segments
        are determined by the products and services that each
        offers. The recycling segment generates its revenues
        based on buying and selling of ferrous and non-ferrous
        scrap, CWS's revenues consist of management fees charged
        to customers at a percentage of the total service
        provided, and WESSCO equipment 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.8




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March 31, 2001
        ISA
        Recycling
        
        Computerized 
        WasteSystems
        
        Waste 
        Equipment
        Sales &Services
        
        SegmentTotalsRecycling revenues
        $
        5,097,184
        
        $                 -
        
        $              -
        
        $
         5,097,184Equipment sales, serviceand
        leasing revenues
        
        
        -
        
        607,019
        
        607,019Management fees
        -
        
        17,547,650
        
        -
        
        17,547,650Cost of goods sold
        (4,542,723)
        
        (16,466,890)
        
        (250,085)
        
        (21,259,698)Segment profit
        $
           554,461
        
        $
         1,080,760
        
        $ 356,934
        
        $
         1,992,155


March 31, 2000
        ISA
        Recycling
        
        Computerized 
        WasteSystems
        
        Waste 
        Equipment
        Sales &Services
        
        SegmentTotalsRecycling revenues
        $
        6,452,634
        
        $                 -
        
        $        
        -
        
        $
        6,452,634Equipment sales, serviceand
        leasing revenues
        -
        
        
        
        580,206
        
        580,206Management fees
        -
        
        12,794,933
        
        -
        
        12,794,933Cost of goods sold
        (5,555,816)
        
        (12,086,936)
        
        (384,334)
        
        (18,027,086)Segment profit
        $    896,818
        
        $
           707,997
        
        $
        195,872
        
        $ 
        1,800,687




NOTE 3 - INVENTORIESInventories consist of the following:


March 31,2001
        
        December 31,2000Equipment and parts
        $    141,614
        
        $      77,039Ferrous materials
        1,410,550
        
        1,479,450Non-ferrous materials
        664,553
        
        634,673Total inventories
        $
        2,216,717
        
        $
        2,191,1629




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ITEM 2: MANAGEMENT'S DISCUSSION AND
        ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS.Liquidity and Capital ResourcesAs
        of March 31, 2001 the Registrant held cash and cash
        equivalents of $980,660.The
        Registrant derives its revenues from several sources,
        including management services, equipment sales and
        leasing and from its recycling operations. Management
        services comprised approximately 75.5% and 64.5% of the
        Registrant's total revenues for the quarters ended March
        31, 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. At March 31, 2001 there was
        $2,750,000 drawn against this line of credit.Results of OperationsThe
        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:


Quarter ended March
        31,2001
        
        2000Statements of
        Operations Data:Total Revenue
        ..................................................................................
        100.0%
        
        100.0%Cost of goods
        sold............................................................................
        91.4%
        
        90.9%Selling, general
        and administrative expenses
        ..................................
        7.5%
        
        8.0%Income from
        operations
        ...................................................................
        1.1%
        
        1.1%


Quarter ended March 31, 2001 compared
        to quarter ended March 31, 2000Total
        revenue increased $3,424,080 or 17.3% to $23,251,853 in
        2001 compared to $19,827,773 in 2000. Recycling revenue
        decreased $1,355,450 or 21.0% to $5,097,184 in 2001
        compared to $6,452,634 in 2000. This is primarily due to
        the decline of commodity prices of approximately 20% in
        the Ferrous market and 5% in the Non-Ferrous market from
        the first quarter of 2000 compared to the first quarter
        of 2001. Management services revenue increased $4,752,717
        or 37.1% to $17,547,650 in 2001 compared to $12,794,933
        in 2000. This is due to an increase in the number of
        units managed. Equipment, service and leasing revenue
        increased $26,813 or 4.6% to 607,019 in 2001 compared to
        $580,206 in 2000. This small increase was due to the
        continued effort to lease equipment for the long-term
        benefit of revenue streams and customer retention.
        Service and leasing revenues increased $119,057 or 42.4%
        offset by a decrease in equipment sales of $96,229 or
        31.9%.10




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Total
        cost of goods sold increased $3,232,612 or 17.9% to
        $21,259,698 in 2001 compared to $18,027,086 in 2000.
        Recycling cost of goods sold decreased $1,013,093 or
        18.2% to $4,542,723 in 2001 compared to $5,555,816 in
        2000. Management services cost of goods sold increased
        $4,379,954 or 36.2% to $16,466,890 in 2001 compared to
        $12,086,936 in 2000. Equipment, service and leasing cost
        of goods sold decreased $134,249 or 34.9% to $250,085 in
        2001 compared to $384,334 in 2000. This decrease was
        primarily due to the continued effort to lease equipment
        as equipment sales involve higher cost of goods sold.Total
        gross profit increased $191,468 or 10.6% to $1,992,155 in
        2001 compared to $1,800,687 in 2000. Recycling gross
        profit decreased $342,357 or 38.2% to $554,461 in 2001
        compared to $896,818 in 2000. Management services gross
        profit increased $372,763 or 52.7% to $1,080,760 in 2001
        compared to $707,997 in 2000. Equipment, service and
        leasing gross profit increased $161,062 or 82.2% to
        356,934 in 2001 compared to $195,872 in 2000.Selling,
        general and administrative expenses increased $147,213 or
        9.3% to $1,736,129 in 2001 compared to $1,588,916 in
        2000. This increase is primarily due to the addition of
        an Information Technology department in the second
        quarter of 2000.Financial condition at March 31, 2001
        compared to December 31, 2000Accounts
        receivable trade before allowances for doubtful accounts
        increased $504,333 or 5.7% to $9,343,507 in 2001 compared
        to $8,839,174 in 2000. This is due to an increase in
        total revenue of $3,424,080 or 17.3% to $23,251,853 in
        the first quarter of 2001 compared to $19,827,773 in the
        first quarter of 2000.Accounts
        payable trade increased $84,480 or 0.8% to $10,210,833 in
        2001 compared to $10,126,353 in 2000. This minor increase
        is an indication that the system enhancements implemented
        in the management services segment during the third
        quarter of 2000 continue to provide timely processing of
        vendor payments.Working
        capital decreased $221,891 or 31.1% to a deficit of
        $933,665 in 2001 compared to a deficit of $711,774 in
        2000. This is primarily due to the financing of fixed
        assets, which generate leasing revenue with short-term
        debt. It is the intention of the Registrant to secure a
        long-term debt facility during the second quarter of 2001
        to use as an equipment leasing line of credit rather than
        using the existing line of credit.Impact of Recently Issued
        Accounting StandardsThe
        FASB issued Statement of Financial Accounting Standards
        No. 133 ("SFAS 133"), "Accounting for
        Derivative Instruments and Hedging Activities," in
        June 1998. SFAS 133 establishes accounting and reporting
        standards for derivative instruments, including certain
        derivative instruments embedded in other contracts, and
        for hedging activities. It requires recognition of all
        derivatives as either assets or liabilities on the
        balance sheet and measurement of those instruments at
        fair value. If certain conditions are met, a derivative
        may be designed specifically as (a) a hedge of the
        exposure to changes in the fair value of a recognized
        asset or liability or an unrecognized firm commitment
        referred to as a fair value hedge, (b) a hedge of the
        exposure to variability in cash flows of a forecasted
        transaction (a cash flow hedge), or (c) a hedge of the
        foreign currency exposure of a net investment in a
        foreign operation, an unrecognized firm commitment, an
        available-for-sale security, or a forecasted transaction.
        The statement is not expected to have an impact on the
        Registrant's financial position or results of operations.ITEM 3:  QUANTITATIVE AND
        QUALITATIVE DISCLOSURES ABOUT MARKET RISK.Not
        applicable.11




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PART II
         OTHER INFORMATIONItem 1.
        Legal ProceedingsNoneItem 2.
        Changes in Securities and
        Use of ProceedsNoneItem 3.
        Defaults upon Senior
        SecuritiesNoneItem 4.
        Submission of Matters to
        a Vote of Security HoldersNoneItem 5.
        Other InformationNoneItem 6.
        Exhibits and Reports on
        Form 8-KNone12




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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: May 11, 2001
        /s/  Harry
        KletterChairman and Chief Executive
        Officer(Principal Executive and
        FinancialOfficer)13