U.S.
Securities and Exchange Commission
 Washington,
D.C. 20549
 
 
 
 FORM
10-Q
 
 
 [X]
              Quarterly
      Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934
      for the Quarterly Period Ended June 30,
2010
 
 [
       ]
              Transition
      Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934
      for the Transition Period from _______ to
  _______
 
 Commission
file number 333-142429
 
 
 INFORMATION
SYSTEMS ASSOCIATES, INC.
 (Exact
name of small business issuer as specified in its charter)
  
 FLORIDA
              65-0493217(State
      or other jurisdiction of
              (IRS
      Employer Identification No.)incorporation
      or organization)
 
 1151 W 30thStreet, Ste E Palm City, FL
34990
 (Address
of principal executive offices)
 
 (772)
403-2992
 (Issuer's
telephone number)
  
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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 shell company (as defined in rule
12b-2 of the exchange act). Yes [ ] No [X]
 
 Number of
shares of common stock outstanding as of June 30,
2010:     19,766,084
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
      accelerated filer
               ̈Non-accelerated
      filer
               ̈(Do
      not check if a smaller reporting company)Accelerated
      filer
               ̈Smaller
      reporting company
              þ
 
 CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
 
 The
discussion contained in this 10-Q under the Securities Exchange Act of 1934, as
amended, contains forward-looking statements that involve risks and
uncertainties.  The issuer's actual results could differ significantly
from those discussed herein.  These include statements about our
expectations, beliefs, intentions or strategies for the future, which we
indicate by words or phrases such as "anticipate," "expect," "intend," "plan,"
"will," "we believe," "the Company believes," "management believes" and similar
language, including those set forth in the discussions under "Notes to Financial
Statements" and "Management's Discussion and Analysis or Plan of Operation" as
well as those discussed elsewhere in this Form 10-Q.  We base our
forward-looking statements on information currently available to us, and we
assume no obligation to update them. Statements contained in this Form 10-Q that
are not historical facts are forward-looking statements that are subject to the
"safe harbor" created by the Private Securities Litigation Reform Act of
1995.
 
 1
 
 INFORMATION
SYSTEMS ASSOCIATES, INC.
 
 TABLE
OF CONTENTS
 PART I. FINANCIAL
      INFORMATIONITEM
                    PAGEITEM
      1. CONSOLIDATED FINANCIAL STATEMENTS
                    3ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATEDFINANCIAL
      CONDITION AND CONSOLIDATED RESULTS OF OPERATION
                    9ITEM
      3. QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                    15ITEM
      4. CONTROLS AND PROCEDURES
                    15PART II. OTHER
      INFORMATIONITEM
      1. LEGAL PROCEEDINGS
                    15ITEM
      1A. RISK FACTORS
                    15ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES ANDUSE
      OF PROCEEDS
                    15ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
                    15ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                    15ITEM
      5. OTHER INFORMATION
                    15ITEM
      6. EXHIBITS
                    16SIGNATURES
                    17
  2
  INFORMATION SYSTEMS ASSOCIATES,
      INC.BALANCE
      SHEETSASSETSJune
      30,
                
                
                December
      31,2010
                
                
                2009(Unaudited)
                
                
                (Audited)Current
      AssetsCash
      and cash equivalents
                
                $
                1,396
                
                
                $
                21,047Accounts
      receivable
                
                
                28,816
                
                
                
                34,809Prepaid
      consulting
                
                
                267,646
                
                
                
                190,500Prepaid
      expenses
                
                
                6,299
                
                
                
                7,689Total
      Current Assets
                
                
                304,157
                
                
                
                254,045Property
      and Equipment (net)
                
                
                90,052
                
                
                
                174,288Other
      AssetsInvestments
                
                
                -
                
                
                
                60,559TOTAL
      ASSETS
                
                $
                394,209
                
                
                $
                488,892LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesNote payable
      - line of credit
                
                $
                39,682
                
                
                $
                20,055Note
      payable  - insurance
                
                
                -
                
                
                
                3,276Accounts
      payable
                
                
                115,136
                
                
                
                66,910Accrued
      expenses and other liabilities
                
                
                12,171
                
                
                
                21,196Deferred
      revenue
                
                
                529
                
                
                
                1,879Total
      Current Liabilities
                
                
                167,518
                
                
                
                113,316Long-Term
      LiabilitiesLong-term
      debt
                
                
                32,500
                
                
                
                -Total
      Liabilities
                
                
                200,018
                
                
                
                113,316Stockholders'
      EquityCommon
      stock-$.001 par value, 50,000,000 sharesauthorized,
      19,766,084 and 18,266,084 issued andoutstanding
      for 2010 and 2009, respectively
                
                
                19,766
                
                
                
                18,266Additional
      paid in capital
                
                
                2,457,713
                
                
                
                2,179,213Accumulated
      deficit
                
                
                (2,252,095
                )
                
                
                (1,808,504
                )Accumulated
      other comprehensive (loss)
                
                
                (31,193
                )
                
                
                (13,399
                )Total
      Stockholders' Equity
                
                
                194,191
                
                
                
                375,576TOTAL
      LIABILITIES AND STOCKHOLDERS'EQUITY
                
                $
                394,209
                
                
                $
                488,892The
      accompanying unaudited notes are an integral part of these financial
      statements.
 
 3
 INFORMATION SYSTEM ASSOCIATES,
      INC.STATEMENTS
      OF OPERATIONSFOR
      THE THREE AND SIX MONTHS ENDED JUNE 30,(UNAUDITED)For
      the Three Months Ended
                
                
                For
      the Six Months EndedJune
      30,
                
                
                June
      30,2010
                
                
                2009
                
                
                2010
                
                
                2009Revenue
                
                $
                234,986
                
                
                $
                136,248
                
                
                $
                491,640
                
                
                $
                335,332Cost
      of Sales
                
                
                14,440
                
                
                
                33,520
                
                
                
                14,440
                
                
                
                35,045Gross
    Profit
                
                
                220,546
                
                
                
                102,728
                
                
                
                477,200
                
                
                
                300,287Operating
      ExpensesAdministrative
      and general
                
                
                124,537
                
                
                
                58,842
                
                
                
                291,948
                
                
                
                119,036Payroll
      and payroll taxes
                
                
                67,740
                
                
                
                51,344
                
                
                
                135,791
                
                
                
                102,771Professional
                
                
                246,085
                
                
                
                297,013
                
                
                
                476,928
                
                
                
                590,201Total
      Operating Expenses
                
                
                438,362
                
                
                
                407,199
                
                
                
                904,667
                
                
                
                812,008(Loss)
      Income Before Other Incomeand
      (Expense)
                
                
                (217,816
                )
                
                
                (304,471
                )
                
                
                (427,467
                )
                
                
                (511,721
                )Other
      Income (Expense)Interest
      Income
                
                
                -
                
                
                
                14
                
                
                
                -
                
                
                
                825Loss
      on sale of security
                
                
                (16,154
                )
                
                
                -
                
                
                
                (16,154
                )
                
                
                -Miscellaneous
      income
                
                
                -
                
                
                
                -
                
                
                
                30
                
                
                
                -Total
      other income (expense)
                
                
                (16,154
                )
                
                
                14
                
                
                
                (16,124
                )
                
                
                825Net
      (Loss)
                
                
                (233,970
                )
                
                
                (304,457
                )
                
                
                (443,591
                )
                
                
                (510,896
                )Other
      Comprehensive (Loss)Unrealized
      gain/(loss) on securities:Arising
      during the quarter
                
                
                (4,673
                )
                
                
                13,842
                
                
                
                (17,794
                )
                
                
                13,842Total
      other comprehensive (loss)
                
                
                (4,673
                )
                
                
                13,842
                
                
                
                (17,794
                )
                
                
                13,842Comprehensive
      (Loss)
                
                $
                (238,643
                )
                
                $
                (290,615
                )
                
                $
                (461,385
                )
                
                $
                (497,054
                )Basic
      and Fully Diluted Earnings (Loss) per Share:Basic
      and diluted
                
                $
                (0.01
                )
                
                $
                (0.02
                )
                
                $
                (0.02
                )
                
                $
                (0.03
                )Weighted
      average common sharesoutstanding
                
                
                18,532,751
                
                
                
                16,443,167
                
                
                
                18,532,751
                
                
                
                16,443,167The
      accompanying unaudited notes are an integral part of these financial
      statements.
 
 4
 INFORMATION SYSTEMS ASSOCIATES,
      INC.STATEMENTS
      OF CASH FLOWSFOR
      THE SIX MONTHS ENDED JUNE 30,(UNAUDITED)2010
                
                
                2009Cash
      Flows from Operating ActivitiesNet
      (Loss)
                
                $
                (443,591
                )
                
                $
                (510,896
                )Adjustments
      to reconcile net (loss)  tonet
      cash provided from operating activities:Depreciation
      and amortization
                
                
                84,902
                
                
                
                2,268Loss
      on sale of investment
                
                
                16,154
                
                
                
                -Common
      stock for services
                
                
                202,854
                
                
                
                403,688(Increase)
      decrease in:Accounts
      receivable
                
                
                5,993
                
                
                
                30,381Prepaid
      expenses
                
                
                1,390
                
                
                
                -Increase
      (decrease) in:Accounts
      payable
                
                
                48,226
                
                
                
                1,014Accrued
      expenses and other liabilities
                
                
                7,586
                
                
                
                3,388Deferred
      revenue
                
                
                (1,350
                )
                
                
                (1,000
                )Net
      Cash (Used in) Operating
                
                
                (77,836
                )
                
                
                (71,157
                )ActivitiesCash
      Flows from Investing ActivitiesComputer
      software development costs
                
                
                -
                
                
                
                (128,389
                )Purchase
      of property and equipment
                
                
                (666
                )
                
                
                (8,727
                )Proceeds
      from sale of investment
                
                
                10,000
                
                
                
                -Purchase
      of Investment
                
                
                -
                
                
                
                (73,958
                )Net
      Cash (Used In) Provided byInvesting
      Activities
                
                
                9,334
                
                
                
                (211,074
                )Cash
      Flows from Financing ActivitiesProceeds
      from note payable - line of credit
                
                
                19,627
                
                
                
                -Payments
      made on note payable - insurance
                
                
                (3,276
                )
                
                
                -Proceeds
      from issuance of stock
                
                
                -
                
                
                
                100,000Proceeds
      from note payable -shareholder
                
                
                32,500
                
                
                
                -Net
      Cash Provided by
                
                
                48,851
                
                
                
                100,000Financing
      ActivitiesNet
      Change in Cash and CashEquivalents
                
                
                (19,651
                )
                
                
                (182,231
                )Cash
      and Cash Equivalents atBeginning
      of period
                
                
                21,047
                
                
                
                204,768End
      of Period
                
                $
                1,396
                
                
                $
                22,537The
      accompanying unaudited notes are an integral part of these financial
      statements.
 5
 
 INFORMATION
SYSTEMS ASSOCIATES, INC.
 NOTES
TO FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
 (Unaudited)
 
 NOTE
1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
 
 Business
Activity
 
 Information
      Systems Associates, Inc. (Company) was incorporated under the laws of the
      State of Florida on May 31, 1994.  The Company provides services
      and software system design for the planning and implementation of Computer
      Aided Facilities Management (CAFM) based asset management
      tools.
 
 Results
      of operations for interim periods presented are not necessarily indicative
      of results of operations that might be expected for future interim periods
      or for the full fiscal year ending December 31,
  2010.
 
 Recent Accounting
      Pronouncements
 
 In
      February, 2010, the FASB issued an amendment to Accounting Standards
      Codification 855, “Subsequent Events”.  An entity is required to
      disclose the date through which subsequent events have been evaluated and
      the basis for that date. This created potential conflicts with issuers who
      also filed with the Securities and Exchange Commission.  An
      entity that is defined as an “SEC filer” is not required to disclose the
      date through which subsequent events have been evaluated. This amendment
      is effective for interim periods ending after June 30,
    2010.
 
 The
      Company does not believe the amendment to Topic 855 will have a
      significant impact on the Company’s financial
  statements.
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period.  Actual results could differ from those
estimates.
 
 Reclassifications
 
 Certain
reclassifications have been made to the prior period financial statements
presented to conform to 2010. Such reclassifications have no effect on reported
income.
  NOTE
2 – CASH AND CASH EQUIVALENT
 As
      of June 30, 2010
                
                
                As
      of December 31, 2009Wachovia
      Bank (FDIC insured to $250,000)
                
                $
                1,219
                
                
                $
                20,805Petty
      cash
                
                
                177
                
                
                
                242Total
      cash and cash equivalent
                
                $
                1,396
                
                
                $
                21,047
  NOTE
3 – PROPERTY AND EQUIPMENT
  Computer
      software (developed)
                
                $
                191,817
                
                
                $
                191,817Computer
      software (purchased)
                
                
                590
                
                
                
                590Web
      site development
                
                
                10,072
                
                
                
                10,072Furniture,
      fixtures, and equipment
                
                
                26,713
                
                
                
                26,047299,192
                
                
                
                228,526Less
      accumulated depreciation and amortization
                
                
                139,140
                
                
                
                54,238$
                90,052
                
                
                $
                174,288Depreciation
      and amortization expense
                
                $
                84,902
                
                
                $
                2,268
  NOTE
4 – COMPUTER SOFTWARE DEVELOPED
 In
2009, the Company completed development of an updated version of the “On Site
Physical Inventory” (OSPI) product.  Version 2 was available as of
December 1, 2009
 
 The
Company has capitalized the cost of the OSPI software using FASB Accounting
Standards Codifications 350-40 “Internal Use Software” as follows:
  As
      of June 30, 2010
                
                
                As
      of December 31, 2009Development
      costs
                
                $
                297,603
                
                
                $
                297,603Software
      license agreement – payments received
                
                
                (135,257)
                
                
                
                (135,257)Software
      license agreement – marketing costs
                
                
                29,471
                
                
                
                29,471191,817
                
                
                
                191,817Less:  accumulated
      depreciation and amortization
                
                
                124,173
                
                
                
                43,000$
                67,644
                
                
                $
                148,818
  NOTE
5 – INVESTMENT
 
 On
April 17, 2009, the Company entered into a strategic alliance agreement with
Rubicon Software Group, lpc (a company registered under the laws of England and
Wales). The Company will be Rubicon’s exclusive agent in the United States for
reselling Rubicon’s software and services. In return, Rubicon will be a software
development partner and provide consulting services to the Company.
  The
Company agreed to purchase 2,500,000 ordinary shares for pounds subscription
price of $.02 (two pence) a share. The total cost of the subscription was
$73,958. Within ninety days of the subscription date, the Company could purchase
an additional 2,500,000 shares at the same subscription price in British
pounds.  The ninety day period has lapsed with the Company not
purchasing any additional shares.
  Also, the Company
has the ability, over the next three years, of subscribing to a maximum
5,000,000 warrant shares. Each warranted share will be at a subscription price
of £.05 (five pence) per share and will be issued in offerings of 100,000
shares.  The number of subscripted shares will be based on gross
revenue received by Rubicon Software Group, lpc.
  6
 
 INFORMATION
SYSTEMS ASSOCIATES, INC.
 NOTES
TO FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
 (Unaudited)
 
 
 NOTE 5 – INVESTMENT(cont’d)
 
 On
April 30, 2010 the Company entered into an agreement whereby 2,500,000 shares of
stock held in Rubicon Software Group, lpc were sold to Rubicon.  In
remuneration for this stock the Company received $10,000 and was relieved from
paying $16,611 worth of outstanding invoices. In connection with this
transaction, the Company recorded a loss on sale of security of
$16,154.
 
 NOTE
6 – NET (LOSS) PER SHARE
 
 Basic
earning per share (EPS) is computed by dividing net (loss) by the weighted
average number of common shares outstanding.  The dilutive EPS adds
the dilutive effect of stock options and other stock
equivalents.  During the six months ended June 30, 2010, outstanding
options to purchase an aggregate of 15,000,000 shares of stock were excluded
from the computation of dilutive earnings per share because the inclusion would
have been anti-dilutive.
  NOTE
7 – INCOME TAXES
 
 Income
tax expense for the six months ended June 30, 2010 and 2009 are based on the
Company’s estimate of the effective tax rate expected to be applicable for the
full year.  The rate differs from the U.S. statutory rate primarily
due to state taxes.
 
 The
Company has the following net operating
 loss carryovers for federal income tax
purposes:
  Expiring
2026     82,899
 Expiring
2027   131,828
 Expiring
2028   236,311
 Expiring 2029  1,202,600
 $1,653,638
 
 
 NOTE
8 – SUPPLEMENTAL CASH FLOW INFORMATION
 
 Supplemental
      disclosures of cash flow information for the periods ended June 30, 2010
      and 2009 is summarized as follows:
  2010
                    2009Cash
      paid during the periods for interest andincome
      taxes:Income
      taxes
                    $               
      -
                    $
                        
      -Interest
                    $       
      1,119
                    $                    -
  Non-Cash
      Investing Activities:Balance
      of consulting services forcontributed
      capital
                  
                  $
                  470,500
                  
                  
                  $
                  518,438Consulting
      services prepaid for future months
                  
                  
                  (267,646)
                  
                  
                  
                  (114,750)Non-cash
      expense of consulting services forcontributed
      capital
                  
                  $
                  202,854
                  
                  
                  $
                  403,688Forgiveness
      of vendor invoices for stock held as
      investment
                  
                  $
                  16,611
                  
                  
                  $
                  -
  NOTE
9 – OPERATING LEASE
 
 The
Company leases it Palm City, Florida facility.  On March 2, 2009 the
lease was renewed for $1,200 per month.  The Company held an
additional option to renew the lease “at the market price.” This renewed lease
went into effect June 1, 2009. The rent expense as of June 30, 2010 and 2009 was
$7,668 and $8,946, respectively.
 
 NOTE
10 – NOTE PAYABLE – LINE OF CREDIT
 
 The
Company has a line of credit with Wachovia Bank N.A.  The line of
credit provides for borrowings up to $40,000.  The balance as of June
30, 2010 and December 31, 2009 was $39,682 and $20,055,
respectively.  The interest rate is the Prime Rate plus
3%.  The President of the Company is a personal guaranty on the line
of credit.
 
 NOTE
11 – NOTE PAYABLE - INSURANCE
 
 On
September 14, 2009 the Company incurred short term financing for the purchase of
insurance.  The note was for $9,735.  The interest rate on
the debt is 4.959% and the note was  repaid May 17, 2010.
 
 NOTE
12 – NOTE PAYABLE – SHAREHOLDER
  In
February, 2010, the Company obtained financing from a shareholder for working
capital purposes. The amount of $32,500 will be repaid in eighteen
months.  Interest accrues at a rate of 6% per annum.  There
is no penalty for early payment.
 
 7
 
 INFORMATION
SYSTEMS ASSOCIATES, INC.
 NOTES
TO FINANCIAL STATEMENTS
 FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
 (Unaudited)
 
 
 NOTE
13 – COMMON STOCK
 
 In
2008, the Company entered into an agreement with Derek J. Leach (“Leach”) to
purchase stock.  Under terms of the agreement, the Company issued
2,000,000 shares at .25 per share for total proceeds of $500,000. The purchases
are as follows:
 
 Date
                
                # of Shares
                
                
                Amount7/15/08
                
                
                400,000
                
                
                $
                100,00012/31/08
                
                
                600,000
                
                
                $
                150,0004/22/09
                
                
                400,000
                
                
                $
                100,00007/23/09
                
                
                600,000
                
                
                $
                150,0002,000,000
                
                
                $
                500,000
 
 NOTE
14 – SHARE BASED PAYMENTS FOR SERVICES
 
 On
May 1, 2010 the Company entered into an agreement to receive website design and
development, internet marketing and search engine optimization for one year. The
consultants received 100,000 shares of company common stock.  Shares
were valued at a current market price of $.20 per share.
  On
April 29, 2010 the Company entered into an agreement to receive assistance in
the development of new data center management technologies. The consultants will
also investigate a variety of associated topics regarding data center
management. This agreement will run for one year. The consultants received
1,000,000 shares of company common stock.  Shares were valued at a
current market price of $.20 per share.
  On
April 15, 2010 the Company entered into an agreement to receive marketing
strategies, digital media and social media strategies to expand the Company’s
investor base and improve shareholder communication. development for one year.
The consultants received 400,000 shares of company common
stock.  Shares were valued at a current market price of $.15 per
share.
  On
September 11, 2009, the Company entered into an agreement to receive a variety
of corporate consulting services. The contract will run for one year at a rate
of $2,000 per month. In addition, the consultants received a commencement bonus
of 300,000 shares of company common stock.  Shares were valued at
current market price.
  On
September 8, 2008, the Company entered into an agreement to receive consulting
services.  The consultants will provide 400 hours of service for
100,000 shares of common stock.  All services will be accounted for at
a rate of $250 an hour.  89.75 hours and 114.75 hours at a cost of $
28,688 and $22,438 were recorded as expense for the six months ended June 30,
2010 and 2009.
 
 On
September 12, 2008, the Company entered into agreements with three companies to
receive a variety of consulting services.  Each agreement has a term
of one year starting   August 1, 2008 and remuneration will be
$250,000 per annum.  Each subsequent year, the annual rate will
increase $12,500 while the agreement is in effect.  The Company had
the option of paying the consultants in cash or common stock.  The
Company decided to issue 1,000,000 shares of stock to the consulting firms as
payment for services.  The value of stock will be at $.25 per
share.  A pro-rata portion of these agreements of $65,625 and $125,000
has been expensed for the six months ended June 30, 2010 and 2009.
  On
May 25, 2010 a notice of non renewal, was sent to the one consulting company
that continued to provide services starting August 1, 2009 at an agreed to rate
of $262,500.  The Company issued 656,200 shares of common stock for
the service provided.
  On
July 7, 2009 a notice of non renewal was forwarded to the other two
companies.
  All
three consultants were issued a series of options as follows:
 
 1,000,000 share option to acquire shares at
$1.00 per share
 1,000,000 share option to acquire shares at $2.00
per share
 1,000,000 share option to acquire shares at $3.00
per share
 1,000,000 share option to acquire shares at $4.00
per share
 1,000,000 share option to acquire shares at $5.00
per share
  To
determine the valuation of the options, ASC 718-10 requires a valuation
technique to estimate the fair value of the options issued.  The
Black-Sholes Model incorporates the various characteristics for proper
valuation.  As of September 30, 2008, the valuation of the options was
determined to be $0.
 
 NOTE
15 – MAJOR CUSTOMERS
 
 One
major customer accounted for $469,250 of revenue while two major customers
accounted for $321,718 revenue for the six months ended June 30, 2010 and 2009,
respectively.  These amounts represent 96% of the Company’s revenue
for the six months ended June 30, 2010 and 2009, respectively.
  As
of June 30, 2010 and 2009, these customers accounted for 83% and 80% of accounts
receivable, respectively.
  NOTE
16 – SUBSEQUENT EVENTS
 
 We
evaluated subsequent events through the date and time our financial statements
were issued and have concluded that no subsequent events have occurred that
require recognition or disclosure in the financial
statements.
  8
 
 ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
 
 As used
herein the terms “we”, “us”, “our”, the “Registrant,” “ISA” and the “Company”
means, Information Systems Associates, Inc., a Florida corporation.
 
 GENERAL
DESCRIPTION OF BUSINESS
 
 BUSINESS
OVERVIEW
 
 We have
been in business since May of 1994.  During the first twelve (12)
years of operation, the primary focus of the business was to offer for sale,
through ISA’s Value Added Reseller Agreements in place in several of the
industry leaders, software products and services that allow companies to track
and manage assets, primarily in the realm of corporate real estate and corporate
IT network infrastructure including equipment maintained in corporate data
centers.  We refer to our product and services suite as asset
management solutions.  Our solutions can reduce sourcing, procurement
and tracking costs, improve tracking and monitoring of asset performance and
reduce operational downtime.
 
 In 1995,
we became a Business Partner (a/k/a Value Added Reseller) with Aperture
Technologies, Inc. of Stamford, CT.  (It should be noted that the term
“Business Partner” is somewhat misleading because in reality we are simply a
subcontractor for Aperture).  At that time, Aperture’s Network
Management tools (“System”), was one of the leading solutions in it
field.  For more than five years, Aperture Technologies, Inc. has
provided enterprise asset management solutions to customers in the United
States, Europe and Asia and Pacific Rim.  During this same timeframe,
we have offered Aperture’s enterprise asset management solutions to customers
and prospects in North America.
 
 The
typical Value Added Reseller Agreement allows the vendor’s partner/subcontractor
(in this case ISA) the ability to offer to its client’s and prospects a
Commercial Off the Shelf software solution to address a particular business
problem.  The primary focus of ISA’s business is working data center
operations, network management department and corporate real estate department
to identify and then implement a software solution which addresses their needs
based upon extensive research done prior to the selection and culminating in the
purchase by the client and implementation by ISA of the chosen
solution.
 
 All of
the products listed under our Value Added Reseller relationships (Vista, Vision
FM, the Facilities Manager, AutoCAD, and RACKWISE DCM) are products developed by
third parties.
 
 The
products obtained from third parties are done so through executed Value Added
Reseller Agreements.  Although each of the vendor’s agreements differs
to some degree, the basic understandings are the same.  Information
Systems Associates, Inc. is authorized by each of the vendors to offer the
vendor’s software as solutions to Information Systems Associates’
clients.  In return, Information Systems Associates Inc. receives a
commission on the sale of the software.  The percentage ranges between
twenty (20) and thirty (30) percent of the sale.  On occasion, the
Company provides pre-sales support services to the vendor’s
clients.  In addition, Information Systems Associates,
Inc.  is given the opportunity to implement the software solution and
provide training to its clients.  On an ongoing basis, ISA can and do
provide additional consulting services beyond those provided initially to the
client.
 
 The need
for a better way to capture corporate asset information became evident to ISA’s
management team.  After reviewing the methods and technology in use at
that time (1st
Quarter 2006) for the purpose of data collection, it was decided within ISA to
define a data collection process and subsequently to design and build a software
solution capable of delivering quality data (output) through the use of
programming techniques that incorporated many of the much needed features and
capabilities, especially real time data validation.  The result was
that by year end of 2007 OSPI(ON SITE PHYSICAL INVENTORYTM) was available for resale.
 
 Our
customer list includes a number of leading organizations, such as Northrop
Grumman Electronic Systems, Verizon, Huntington National Bank, T-Mobile USA,
Inc., Cardinal Health, Inc. and General Electric.
 
 Our
application products are also used by corporate Real Estate departments to
manage their real property lease obligations (as both tenant and landlord), to
determine their company’s use of corporate space and to develop plans for
relocations, mergers and acquisitions as it relates to the use of space (office,
manufacturing, warehousing).
 
 On April
17, 2009, we entered into a strategic alliance and became an investor with
Rubicon Software Group, plc.  This agreement will create an opening
into the European market as well as provide cost effective software
development.
 
 INDUSTRY
BACKGROUND AND OVERVIEW
 
 Asset
management software has existed for more than thirty years, initially through
computerized maintenance management systems, and more recently including more
comprehensive and robust enterprise asset management and enterprise resource
planning solutions.  The early computerized maintenance management
systems automated daily management of assets, while enterprise resource planning
solutions consolidate basic asset information with financial information at the
corporate level.  Enterprise asset management solutions encompass
elements of both, serving as the next evolution of computerized maintenance
management system solutions by bridging the gap between asset management and
corporate-level planning and tracking requirements.
 
 The key
value proposition for enterprise asset management solutions is that they can
provide a quick and quantifiable return on investment and return on
assets.  Cost and productivity improvements can immediately and
measurably benefit organizations, and thus are highly desirable to potential
customers, particularly in difficult economic times where the focus is
increasingly bottom line oriented.
 
 In
addition to enterprise asset management solutions, we offer facilities
solutions.  These are natural extensions to enterprise asset
management solutions, as organizations seek to extend asset management and
corporate-level planning and tracking onto other elements of the asset
lifecycle.  The reference to “facilities solutions” includes software
application products that are used by corporate Real Estate departments and to
software application products used by Data Center Management (Information
Technology) to track their computer assets from a financial perspective as well
as their usage and connectivity within the corporate IT (Information Technology)
network.
 
 9
 
 PRODUCTS
AND SERVICES
 
 Aperture’s
VISTA
 
 Historically,
IT organizations have operated as reactive cost centers that customized one-off
services for the demands of customers.  However, the influx of growing
complexities, continual changes and higher demands for “better, faster and
cheaper” has instigated a trend towards tighter IT management and
control.  The new “value-driven” approach, combined with pressures for
high availability and with increased SLA penalties have many IT executives
operating under a mantra of “avoid problems before they happen” or “no surprises
permitted.”
 
 The term
“SLA penalties” refers to Service Level Agreement performance
metrics.  In most sophisticated corporate operations, the end user is
guaranteed a specific degree of network and application
availability.  Usually items such as systems maintenance are taken
into consideration when guaranteeing this availability as are items like built
in redundancy (network circuits and the hardware used to deliver the
connectivity) as well as Disaster Recovery plans that would insure the end user
a specific level of availability (although typically less than that guaranteed
under normal operating conditions) in the event that a natural or other type of
disaster cause an interruption in corporate IT services.
  In order
to reduce operational risk and increase operational efficiency, it is essential
for IT organizations to define best practices and implement IT frameworks (for
example, the IT Infrastructure Library, ITIL) that create a more
service-oriented organization.  This includes standardizing and
automating IT processes from a disparate set of ad hoc tasks to a cohesive,
consolidated environment and developing a central repository of information to
create institutional memory for the IT organization.
 
 Many
organizations have assessed the various facts of the IT organization to improve
the logical environment.  However, one component which seems to be
overlooked quite frequently and that continuously operates within individual
silos is the overall physical infrastructure of the data center.
 
 Aperture
VISTA provides IT Management with the key information and intelligence to reduce
operational risk and improve efficiency in the data center.
 
 VisionFM
 
 Vision FM
includes a very flexible asset management system capable of tracking everything
from building components to office supplies.  The Facilities Manager
can define complex products such as systems furniture that include a
bill-of-materials or simple items such as keys and cell phones that can be
assigned directly to individuals.
 
 Once
products are defined then assets can be added by inserting symbols in AutoCAD or
by using VisionFM forms such as a purchase order.  Unique information
about each asset can be recorded including a barcode number, purchase date and
price.  The system then tracts the asset from purchase through to
disposition including depreciation, maintenance history, condition, warranties
and insurance.
 
 RACKWISE
DMC
 
 RACKWISE
DMCTM
services and products deliver key features to simplify and reduce the time
consumed designing, modeling and operating the physical infrastructure of your
datacenter.
 
 ·
              Graphical
      design and marketing of datacenters
 ·
              Auto-build
      visual documentation from imported bill of
  materials
 ·
              Advanced
      operations and reporting
 ·
              Modeling
      and impact analysis of datacenter
designs
 ·
              Space,
      power, cooling, and cable
management
 ·
              Generate
      detailed datacenter and rack
visualizations
 ·
              Ensure
      racks and the datacenter are within design
  limits
 ·
              Instantly
      find available datacenter resources
 ·
              Improve
      utilization of power and space
 ·
              Import
      and document the datacenter in
minutes
 
 Rubicon Software
Group
 
 Rubicon
Software works closely with organizations to develop customized software
solutions.
 
 10
 
 RELATED
SERVICES
 
 In
connection with our software offerings, we provide the following services to our
customers:
 
 Consulting
 
 A
significant number of our customers request our advice regarding their business
and technical processes, often in conjunction with a scoping exercise conducted
both before and after the execution of a contract.  This advice can
relate to development or streamline assorted business processes, such as
sourcing or procurement activities, assisting in the development of technical
specifications, and recommendations regarding internal workflow
activities.
 
 Customization and
Implementation
 
 Based
generally upon the up-front scoping activities, we are able to customize our
solutions as required to meet the customer’s particular needs.  This
process can vary in length depending on the degree of customization, the
resources applied by the customer and the customer’s business
requirements.  We work closely with our customers to ensure that
features and functionality meet their expectations.  We also provide
the professional services work required for the implementation of our customer
solutions, including loading of data, identification of business processes, and
integration to other systems applications.
 
 Training
 
 Upon
completion of implementation (and often during implementation), we train
customer personnel to utilize our Solutions through our administrative
tools.  Training can be conducted in one-on-one or group
situations.  We also conduct “train the trainer”
sessions.
 
 Maintenance and
Support
 
 We
provide regular software upgrades and ongoing support to our customers. On
December 1, 2009, we began offering version 2 of ON SITE PHYSICAL
INVENTORYTM.
 
 We
have been providing consulting, customization and implementation, training,
maintenance and support services to our customers since 1994.
 
 THIRD
PARTY OFFERINGS
 
 Other Partner
Relationships
 
 In
addition to the sale of our core solutions and services, we intend to enter into
marketing or co-marketing agreements with companies that offer services that are
complementary to our offerings.  We would market these complementary
services to our customers and prospects and can earn a referral fee if these
services are purchased.  In some cases our marketing partner will be
able to market our solutions to its customers and prospects and can earn a
referral fee.  At the present time, we have two marketing
partners.  They are Forsythe Solutions Group, Inc. and Total Site
Solutions, Inc.
 
 Forsythe
serves as a technology infrastructure solutions provider, helping organizations
across all industries, including Fortune 1000 companies, manage the cost and
risk of their information technology.  Forsythe’s data center services
help organizations navigate through some of the more infrequent aspects of
owning and operating a mission-critical environment—data center planning and
information technology relocation.  Our data collection solution ON SITE PHYSICAL
INVENTORYTM,and
the services offered by us in conjunction with ON SITE PHYSICAL
INVENTORYTM
are perfectly matched to the needs of Forsythe’s customer’s, for whom they
(Forsythe) are either planning a new data center, expanding an existing data
center or moving a data center to a new location. In the current environment of
corporate acquisitions and downsizing, the services offered by Forsythe and in
turn complimented by our offerings are well suited for these
purposes.  We have concluded two data collection opportunities with
Forsythe.
 
 Total
Site Solutions, Inc. (TSS) specializes in providing a single source solution for
companies requiring highly technical facility integration and precision project
execution for mission-critical facilities.  ISA’s data collection
solution ON SITE PHYSICAL
INVENTORYTM
and the services offered by us in conjunction with ON SITE PHYSICAL
INVENTORYTM
are perfectly matched to the needs of Total Site Solutions’
customers.  We have entered into an agreement with TSS and have begun
data collection services for two TSS clients.
 
 BUSINESS
CYCLES
 
 Since
many of our customers are large organizations or quasi-governmental entities, we
may experience increasingly longer sales and collection cycles.
 
 CUSTOMERS
 
 We
provide our solutions to customers in a variety of industries, including:
healthcare, public authorities, and financial services sectors.
 
 The
services provided vary depending upon the needs of the customer and the solution
concerned.  We collect service fees for implementation and training,
and support and maintenance fees.  The criteria used to select the
customers listed in the business section and other sections of the document are
based on their prominence within their industry, such as Northrop Grumman,
General Electric and Comcast Communications.  We do not list companies
based upon any specific amount of revenue derived or whether or not they are
currently active clients, but rather we have selected these clients based upon
the scope of the consulting engagement.  This approach provides us
with clients from various industries as this sometimes becomes crucial to a
prospect in their vendor selection process.
 
 We began
our relationship with General Electric in 2008.  We began by providing
data center audit services.  This was followed by providing data
collection services.  In September, 2008 GE purchased one of the first
licenses for OSPI and all the related handheld devices and support
services.
 
 SALES AND
MARKETING
 
 We market
our services primarily through referrals from companies with whom ISA has either
a reseller’s agreement in place, is authorized to provide consulting service to
their client’s, or both.
 
 Potential
customers are identified through direct contact, responses to requests for
information, attendance at trade shows and through industry
contacts.  We principally focus on professionals and ongoing lead
generation through our partner relationships and their VAR (Valued Added
Reseller) program referrals.
 
 We use
reference customers to assist us in our marketing efforts, both through direct
contact with potential customers and through site branding and case
studies.  We also rely on our co-marketing partners to assist in our
marketing efforts.
 
 Our
strategic alliance agreement with Rubicon will create an opportunity to begin
marketing, initially in the United Kingdom through current Rubicon clients and
then eventually throughout Europe.
 
 11
 
 TECHNOLOGY
PLATFORM
 
 As Valued
Added Resellers, Information Systems Associates, Inc. has sought out and
identified those solutions that are based upon proven technology platforms and
contain the desired functionality to meet or exceed its client’s
expectations.
 
 Our
partner’s technology platform are based on Microsoft core applications,
including the Windows operating system and a SQL server and/or Oracle relational
database, all residing on scaleable hardware.  The software is
constructed using HTML and XML framework and resides on N-tier architecture as
well as proprietary solutions.
 
 ISA is
the developer and at this time the exclusive marketer and distributor of ON SITE PHYSICAL
INVENTORYTM.  Our activities
as a VAR (Value Added Reseller) are best described as being authorized to resell
a partner’s software solution as well as being certified to implement the
solution on the client’s hardware and to deliver training in the use and
operation of the software application.
 
 RESEARCH
AND DEVELOPMENT
 
 Based on
the relative pricing and functionality of products available in the marketplace
today, we believe that the opportunity exists for ISA to develop software to
compete in a segment of the industry.  We believe that this segment is
defined as any technology infrastructure (a/k/a data centers) whose size (raised
floor area) is less than twenty-five thousand square feet in
size.  Therefore, we have focused our software development and
technology efforts on the development of our proprietary software
offerings.
 
 Our
initial software development and technology efforts will be aimed at the
defining the core functionality elements of our software application (ON SITE PHYSICAL
INVENTORYTM),
the features and functionality of the follow-up release, the development of new
software components, and the integration of superior third party technology into
our environment.  Production involves the development of reusable
applications to reduce programming time and costs for customer
implementations.
 
 The
strategic alliance agreement with Rubicon has allowed for the rewrite of ON SITE PHYSICAL
INVENTORYTM,
version 2, on budget and within the prescribed time frame. This relationship
will also provide more favorable pricing for future software
development.  ON SITE
PHYSICAL INVENTORYTM,
version 2 became available December 1, 2009
 
 COMPETITION
 
 The
market for each solution comprising our asset management suite is intensely
competitive.  Many of the companies we compete with have much greater
financial, technical, research and development resources than us.
 
 The
system integration consulting field is comprised of many categories of
specialties.  There are integrators who specialize in software
integration by industry (automotive, manufacturing, pharmaceutical, defense,
etc.) and therefore are not considered to be competitors.  Our primary
competitors in this space are the other Value Added Resellers representing the
same products as Information Systems Associates.  The relationship
with the vendor (software developers) is crucial in gaining an edge on the
competition.  This relationship is usually strengthened by such
factors as the client relationships that the Value Added Reseller already has in
place as well as the Value Added Resellers ability to successfully implement and
maintain the vendor’s solution to the vendor’s satisfaction.  We
believe that Information Systems Associates has developed strong relationships
with the solution vendors that it represents which in turn has and will continue
to provide Information Systems Associates with sales of its consulting service
offerings.  We at Information Systems Associates believe that the
foundation for this relationship is built upon trust.
 
 The data
collection services field has been in existence for many industries for
years.  The idea of hiring outside companies to conduct inventories of
corporate data centers is not new either.  There are many vendors in
this space today that are using techniques that employ the use of text based
list or a formatted spread sheet.  Information Systems Associates has
developed a data collection process for IT assets that employs real time data
validation combined bar code scanning which as best as can be determined is
unique in the industry.  The major importance of this approach is that
the data exported (extracted) from Information Systems Associates’ data
collection application has been validated and is available to be imported into
the client’s asset management solution.  This saves a significant
amount of time (could be days or even weeks) in researching errors that are
uncovered by the application at the time of the data import.
 
 To become
more competitive, we will need to make investments in new product development
and improve our market visibility and financial situation. A prime example of
this investment is ON SITE
PHYSICAL INVENTORYTM,
version 2 which will provide a cost efficient solution.
 
 Although
we offer a broad range of asset network and facilities management solutions as
Value Added Resellers, we face significant competition in each of the component
product areas from the following companies:
 
 § Enterprise asset management – related solutions –  ShowRack,
Nlyte, Visio
 Facilities
Management – related solutions – Archibus
 
 In
addition, we face competition from organizations that use in-house developers to
develop solutions for certain elements of the asset management.
 
 ISA
considers data collection and the software it has developed to perform these
services ON SITE PHYSICAL
INVENTORYTM
to be one of the two areas of focus for our business.  It is the
intent of ISA management to promote the software as the practical solution to
the specific problems encountered during the data collection process for IT
(Information Technology) assets.  The promotion of the product and
services will occur through marketing via industry trade show exhibition as well
as mailings to a targeted audience.
 
 ISA
competes for business based on the recommendations of the software vendors for
whose product solutions our data collection software is
compatible.  At the present time, ON SITE PHYSICAL
INVENTORYTM
is compatible with two vendor’s solution; VISTA600 by Aperture Technologies,
Inc. and RACKWISE DCM by Visual Network Design.  ISA believes that its
current pricing structure combined with the extensive number of data validation
processes included in its product make it very competitive.  In a
recent trade show at which we exhibited in San Francisco, ISA was the only
vendor offering a data collection solution.  The vast majority of data
collection services in existence are focused on the retail
industry.  Of the competitors that we have been able to identify, our
research has not produced any information that would lead us to believe that the
competitors can provide the same level of quality services that ISA is capable
of delivering with its software solution.
 
 Visual
Network Design does not assign exclusive geographical areas to Value Added
Resellers as this would limit the VAR’s potential as it relates to the sale of
software and services.  ISA in now being actively engaged by Visual
Network Design to deliver consulting services to its customers (solution
installation, data load and training) and plans to offer a “turnkey” service to
their clients in which ISA provides the IT asset data collection, RACKWISE DMC
software installation, data import (using the data collected previously) and
client training in the use of the RACKWISE DMC software.  ISA is
training an additional resource for this purpose and intends to make this
resource exclusive to Visual Network Design.  ISA and VND management
has had several discussions regarding the role that ISA will play in supporting
Visual Network Design’s deployment of RACKWISE DCM.
 
 12
 
 FORWARD
LOOKING STATEMENTS
 
 Certain
statements in this report, including statements of our expectations, intentions,
plans and beliefs, including those contained in or implied by “Management’s
Discussion and Analysis” and the Notes to Financial Statements, are
“forward-looking statements”, within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended (the “”Exchange Act”), that are
subject to certain events, risks and uncertainties that may be outside our
control.  The words “believe”, “expect”, “anticipate”, “Optimistic”,
“intend”’ “will”, and similar expressions identify forward-looking
statements.  Readers are cautioned not to place undue reliance on
these forward-looking statements which speak only as of the date on which they
are made.  We undertake no obligation to update or revise any
forward-looking statements.
 
 
 These
forward-looking statements include statements include statements of management’s
plans and objectives for our future operations and statements of future economic
performance, information regarding our expansion and possible results from
expansion, our expected growth, our capital budget and future capital
requirements, the availability of funds and our ability to meet future capital
needs, the realization of our deferred
tax assets, and the assumptions described in this report underlying such
forward-looking statements.
 Actual
results and developments could differ materially from those expressed in or
implied by such statements due to a number of factors, including, without
limitation, those described in the context of such forward-looking
statements.
 
 CRITICAL
ACCOUNTING POLICIES
 
 Revenue
recognition
 
 We
recognize revenue in accordance with ASC 605-10 “Revenue Recognition” and ASC
605-25 “Revenue Arrangements with Multiple Deliverables”.
 
 Consulting
services and training revenues are accounted for separately from subscription
and support revenues when these services have value to the customer on a
standalone basis and there is objective and reliable evidence of fair value of
each deliverable.  When accounted for separately, revenues are
achieved and accepted by the customer for fixed price contracts.  The
majority of our consulting service contracts are on a time and material
basis.  Training revenues are recognized after the services are
performed.  For revenue arrangements with multiple deliverables, we
allocate the total customer arrangement to the separate units of accounting
based on their relative fair values, as determined by the price of the
undelivered items when sold separately.
 
 In
determining whether the consulting services can be accounted for separately from
subscription and support revenues, we consider the following factors for each
consulting agreement:  availability of the consulting services from
other vendors, whether objective and reliable evidence for fair value exists for
the undelivered elements, the nature of the consulting services, the timing of
when the consulting contract was signed in comparison to the subscription
service start date, and the contractual dependence of the subscription service
on the customer’s satisfaction with the consulting work.  If a
consulting arrangement does not qualify for separate accounting, we recognize
the consulting revenue ratably over the remaining term of the subscription
contract.  Additionally, in these situations we defer the direct costs
of the consulting arrangement and amortize these costs over the same time period
as the consulting revenue is recognized.  We did not have any revenue
arrangements with multiple deliverables for the period ending June 30,
2010.
 
 Property, Plant, and
Equipment
 
 Property
and equipment is stated at cost.  Depreciation is provided by the
straight-line method over the estimated economic life of the property and
equipment (three to ten years).  When assets are sold or retired,
their costs and accumulated depreciation are eliminated from the accounts and
any gain or loss resulting from their disposal is included in the statement of
operations.
 
 We
recognize an impairment loss on property and equipment when evidence, such as
the sum of expected future cash flows (undiscounted and without interest
charges), indicates that future operations will not produce sufficient revenue
to cover the related future costs, including depreciation, and when the carrying
amount of the asset cannot be realized through sale.  Measurement of
the impairment loss is based on the fir value of the assets.
 
 Software Development
Costs
 
 The
Company accounts for costs incurred to develop computer software for internal
use in accordance with FASB Accounting Standards Codification 350-40
“Internal-Use Software”.  As required by ASC 350-40, we capitalize the
costs incurred during the application development state, which include costs to
design the software configuration and interfaces, coding, installation, and
testing.  Costs incurred during the preliminary project along with
post-implementation stages of internal use computer software are expensed as
incurred.  Capitalized development costs are amortized over a period
of three years.  Costs incurred to maintain existing product offerings
are expensed as incurred.  The capitalization and ongoing assessment
of recoverability of development
costs requires considerable judgment by management with respect to certain
external factors, including, but not limited to, technological and economic
feasibility, and estimated economic life.
 
 After the
development of the internal-use “ON SITE PHYSICAL
INVENTORYTM”
software (OSPI) was complete, we decided to market the
software.  Proceeds from the licenses of the computer software, net of
direct incremental costs of marketing, such as commissions, software
reproduction cost, warranty and service obligations, and installation cost, are
applied against the carrying cost of that software.  No profit will be
recognized until aggregate net proceeds from licenses and amortization have
reduced the carrying amount of the software to zero.  Subsequent
proceeds will be recognized in revenue as earned.
 
 On
December 1, 2009, the Company released Version 2 of the “ON SITE PHYSICAL
INVENTORYTM”
software (OSPI) for sale in the marketplace.  The Company accounts for
internally produced software with FASB Accounting Standard Codification 985-20
“Cost of Software To Be Sold, Leased, or Otherwise Marketed”.  Costs
were capitalized when the second version was established as technically feasible
and will be written off on a straight line method over the estimated useful
life.
 
 13
 
 RESULTS OF OPERATIONS FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
 
 The
following discussion should be read in conjunction with the financial statements
include in this report and is qualified in its entirety by the
foregoing.
 
 Revenues
 
 Gross
revenues were $234,986 and $491,140 for the three and six months ended June 30,
2010, respectively, compare to gross revenues of $136,248 and $335,332 for the
three and six months ended June 30, 2009.  The increase 2010 revenue
is due primarily to the increased sale of professional services, maintenance
contracts and time and materials arrangements primarily to two new customers. We
recognize professional services revenue, which includes installation, training,
consulting and engineering services, upon delivery of the services.
 
 Income / Loss from
Operations
 
 We had a
net loss of $233,970 and $443,591 from operations for the three and six months
ended June 30, 2010, respectively.  We had a net loss of $304,457 and
$510,896 from operations for the three and six months ended June 30, 2009,
respectively. We have begun the amortization of the Software Development Costs
in 2010 and taken on additional Consulting Expenses. This will add to Company
overhead in the near future. We have also needed to take on additional
administrative costs in order to position sales growth for the balance of 2010.
There can be no assurance that we will achieve or maintain profitability or that
our revenue growth can be sustained in the future.
 
 Expenses
 
 Operating
expenses for the three and six months ended June 30, 2010 and 2009 were $438,362
and $904,667, respectively.  Operating expenses for the three and six
months ended June 30, 2009 were $407,199 and $812,008, respectively The higher
operating expenses during 2010 were due primarily to Administrative and General
Expenses, which were $291,948 and $119,036 for the six months ended June 30,
2010 and 2009 respectively. This increase in Administrative and General Expenses
is primarily due to the increase in Travel and Entertainment of $72,996 and the
increase of Amortization of Software of $81,173.
 
 Income
Taxes
 
 There was
no income tax benefit or expense recorded for the six months ended June 30, 2010
and 2009.
 
 Impact of
Inflation
 
 We
believe that inflation has had a negligible effect on operations during the six
months ended June 30, 2010 and 2009.  We believe that we can offset
inflationary increases in the cost of revenue by increasing revenue and
improving operating efficiencies.
 
 Liquidity and Capital
Resources
 
 Cash
flows used in operations were $77,836 and $71,157 during the six months ended
June 30, 2010 and 2009. Cash flows used in operations during the six months
ended June 30, 2010 were primarily attributable to a net loss of $443,591, and
partially offset with an increase in accounts payable of $48,226 and issuance of
stock for services of $202,854. Cash flows used in operations during the
six months ended June 30, 2009 were primarily attributable to a net loss of
$510,896 and partially offset by the increase in accounts receivable of $30,381
and the issuance of stock for services of $403,688.
 
 Cash
flows provided by investing activities were $9,334 as compared to cash flows
used in investing activities of $211,074 during the six months ended June 30,
2010 and 2009, respectively. Cash flows provided by investing activities in 2010
were attributable primarily to the sale of an investment. Cash flows used in
investing activities in 2009 were attributable to $128,389 in costs incurred for
software development (OSPI, v2) and web page design and $73,958 used in the
purchase of an investment.
 
 Cash
flows provided by financing activities were $48,851 and $100,000 the six months
ended June 30, 2010 and 2009. Cash flows provided by financing activities were
attributable to additional borrowing on the line of credit and borrowing from a
shareholder. Cash flows provided for from financing activities for six months
ended June 30, 2009 were attributable to the issuance of common
stock.
 
 We had
cash on hand of $1,396 and net working capital of $143,375 as of June 30,
2010.  If the projected revenues fall short of needed capital we may
not be able to sustain our capital needs.  Our current level of
operations would require additional capital to sustain operations through year
2010.  Modifications to our business plans may require additional
capital for us to operate.  For example, if we want to offer a greater
number of products or increase our marketing efforts, we may need additional
capital.  Failure to raise capital may result in lower revenues and
market share for us.  In addition, there can be no assurance that
additional capital will be available to us when needed or available on terms
favorable to us.
 
 Demand
for the products and services will be dependent on, among other things, market
acceptance of our services, the computer software market in general, and general
economic conditions, which are cyclical in nature.  Inasmuch as a
major portion of our activities is the receipt of revenues from services
rendered, our business operations may be adversely affected by our competitors
and prolonged recession periods.
 
 Our
success will be dependent upon implementing our plan of operations and the risks
associated with our business plan.
 
 No
significant amount of our trade payables has been unpaid within the stated trade
term.  We are not subject to any unsatisfied judgments, liens or
settlement obligations.
 
 14
 
 ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 The
information to be reported under this item is not required of smaller reporting
companies.
 
 ITEM 4. CONTROLS AND
PROCEDURES
  DISCLOSURE CONTROLS AND
      PROCEDURESOur
      management, including our Principal Executive Officer and Principal
      Financial Officer, has evaluated the design, operation, and effectiveness
      of our disclosure controls and procedures pursuant to Rule 13a-15 under
      the Securities Exchange Act of 1934 (the “Exchange Act”).  There
      are inherent limitations to the effectiveness of any system of disclosure
      controls and procedures, including the possibility of human error and the
      circumvention or overriding of the controls and
      procedures.  Accordingly, even effective disclosure controls and
      procedures can only provide reasonable assurance of achieving their
      control objectives.  Based upon the evaluation performed by our
      management, including its Principal Executive Officer and Principal
      Financial Officer, it was determined that, as of the end of the period
      covered by this quarterly report, our disclosure controls and procedures
      were effective to provide reasonable assurance that information required
      to be disclosed in the reports filed or submitted pursuant to the Exchange
      Act is recorded, processed, summarized, and reported within the time
      periods specified in the rules and forms of the SEC, and that such
      information is accumulated and communicated to our management, including
      its Principal Executive Officer and Principal Financial Officer, or
      persons performing similar functions, as appropriate to allow timely
      decisions regarding disclosures
 
 Changes in Internal Control
Over  Financial Reporting
 
 Our
Principal Executive Officer and Principal Financial Officer have determined
that, during the period covered by this quarterly report, there were no changes
in our internal control over financial reporting that materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.  They have also concluded that there were no significant
changes in our internal controls after the date of the evaluation.
 
 PART
II. OTHER INFORMATION
 
 ITEM
1. LEGAL PROCEEDINGS
 
 From time
to time we are involved in legal proceedings arising in the ordinary course of
our business. On April 24, 2009, Phuture World, Inc. filed a complaint in the
case captioned Phuture World, Inc. v. Information Systems Associates, Inc. and
Joseph Coschera, Case No. 562009 CA 3086, 19th Judicial Circuit in and for St.
Lucie County Florida.  Phuture World alleges that the Company and its
President breached the terms of a certain software development contract, and it
seeks damages in excess of $15,000.  The plaintiff recently amended its
complaint to eliminate its claims against the President. The Company terminated
the software contract at issue in the case prior to the filing of the case, and
it no longer uses the services of Phuture World.  The Company is contesting
this lawsuit and believes that it has defenses to the claims made by Phuture
World and that the allegations made against the President, who acted at all time
on the Company's behalf in dealing with the plaintiff, are frivolous.  The
Company intends to vigorously defend itself and believes that it has damage
claims of its own that it intends to pursue against Phuture World for Phuture
World's failure to provide the software required under the contract between
Phuture World and the Company.  The Company believes that the outcome of
this lawsuit will not have a material adverse effect on our financial condition,
cash flows or results of operations.
 
 ITEM
1A. RISK FACTORS
 
 Information
regarding risk factors appears in Part I, “Item 2.  Management’s
Discussion and Analysis of Financial Condition and Results of Operations” under
the captions “General Description of Business” and “Cautionary Note Regarding
Forward-Looking Statements” contained in this Quarterly Report on Form 10-Q and
in “Item 1A. RISK FACTORS” of our 2009 Annual Report on Form
10-K.  There have been no material changes from the risk factors
previously disclosed in our 2009 Annual Report on Form 10-K.
 
 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.
  15
  ITEM 6. EXHIBITS
 
 Exhibit
      No.
              
              Description31.1
              
              Certification of Chief
      Executive Officer31.2
              
              Certification of Chief
      Financial Officer32.1
              
              Statement required by 18
      U.S.C. Section 1350, as adopted pursuant to section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
              
              Statement required by 18
      U.S.C. Section 1350, as adopted pursuant to section 906 of the
      Sarbanes-Oxley Act of 2002.
 
 Reports on Form 8-K
filed
 
 None
 
 16
 
 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, there
unto duly authorized.
 Information
      Systems Associates, Inc.Date:
      August 13, 2010
              By:
              /s/ Joseph P.
  CoscheraJoseph
      P. Coschera
                Chief
      Executive OfficerDate:
      August 13, 2010
              By:
              /s/ Michael R. HullMichael
      R. Hull
                Chief
      Financial Officer