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 September 30,
  2009
 
 [
       ]
              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 September 30,
2009:     17,966,084
 
 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.
 
 Table of Contents
 
 TABLE
      OF CONTENTSPART
      I. FINANCIAL INFORMATIONITEM
      1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                1ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
                9ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
                13ITEM
      4. CONTROLS AND PROCEDURES
                  
                  ITEM
      4T. CONTROLS AND PROCEDURES
                13
                  
                  13PART
      II. OTHER INFORMATIONITEM
      1. LEGAL PROCEEDINGS
                14ITEM
      1A. RISK FACTORS
                14ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
                14ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
                14ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                14ITEM
      5. OTHER INFORMATION
                14ITEM
      6. EXHIBITS
                14SIGNATURES
                15
 
 
 
  
 
 
 INFORMATION
      SYSTEMS ASSOCIATES, INC.BALANCE SHEETSASSETSSeptember
      30,
                
                
                December
      31,2009
                
                
                2008(Unaudited)
                
                
                (Audited)Current
      AssetsCash
      and cash equivalents
                
                $
                54,240
                
                
                $
                204,768Accounts
      receivable
                
                
                141,756
                
                
                
                94,121Prepaid
      consulting
                
                
                263,750
                
                
                
                518,438Prepaid
      expenses
                
                
                9,921
                
                
                
                -Total
      Current Assets
                
                
                469,667
                
                
                
                817,327Property
      and Equipment (net)
                
                
                154,978
                
                
                
                21,168Other
      AssetsInvestments,
      at cost
                
                
                73,958
                
                
                
                -TOTAL
      ASSETS
                
                $
                698,603
                
                
                $
                838,495LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                
                $
                19,793
                
                
                $
                10,326Accrued
      expenses
                
                
                12,290
                
                
                
                21,399Notes
      payable
                
                
                5,242
                
                
                
                -Other
      liabilities
                
                
                700
                
                
                
                600Deferred
      revenue
                
                
                -
                
                
                
                1,500Total
      Current Liabilities
                
                
                38,025
                
                
                
                33,825Stockholders'
      EquityCommon
      stock-$.001 par value, 50,000,000 sharesauthorized,
      17,966,084 and 16,309,834issued
      and outstanding for 2009 and 2008respectively
                
                
                17,966
                
                
                
                16,310Additional
      paid in capital
                
                
                2,098,513
                
                
                
                1,587,669Retained
      (deficit)
                
                
                (1,455,901
                )
                
                
                (799,309
                )Total
      Stockholders' Equity
                
                
                660,578
                
                
                
                804,670TOTAL
      LIABILITIES AND STOCKHOLDERS'EQUITY
                
                $
                698,603
                
                
                $
                838,495The
      accompanying notes are an integral part of these unaudited financial
      statements.
  1
 Table of Contents
  INFORMATION
      SYSTEM ASSOCIATES, INC.STATEMENTS
      OF OPERATION(UNAUDITED)For
      the Three Months Ended
                
                
                For
      the Nine Months EndedSeptember
      30,
                
                
                September
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Revenue
                
                $
                271,533
                
                
                $
                333,210
                
                
                $
                606,865
                
                
                $
                1,062,499Cost
      of Sales
                
                
                625
                
                
                
                7,413
                
                
                
                35,670
                
                
                
                33,938Gross
    Profit
                
                
                270,908
                
                
                
                325,797
                
                
                
                571,195
                
                
                
                1,028,561Operating
      ExpensesAdministrative
      and general
                
                
                88,615
                
                
                
                231,937
                
                
                
                206,942
                
                
                
                470,910Payroll
      and payroll taxes
                
                
                52,790
                
                
                
                44,544
                
                
                
                156,269
                
                
                
                122,363Professional
                
                
                275,201
                
                
                
                367,817
                
                
                
                865,403
                
                
                
                727,087Total
      Operating Expenses
                
                
                416,606
                
                
                
                644,298
                
                
                
                1,228,614
                
                
                
                1,320,360(Loss)
      Before Other Incomeand
      (Expense)
                
                
                (145,698
                )
                
                
                (318,501
                )
                
                
                (657,419
                )
                
                
                (291,799
                )Other
      Income (Expense)Interest
      income
                
                
                2
                
                
                
                -
                
                
                
                827
                
                
                
                -Consulting
      fees
                
                
                -
                
                
                
                (4,942
                )
                
                
                -
                
                
                
                (9,239
                )Total
      other income (expense)
                
                
                2
                
                
                
                (4,942
                )
                
                
                827
                
                
                
                (9,239
                )(Loss)
      Income BeforeIncome
      Taxes
                
                
                (145,696
                )
                
                
                (323,443
                )
                
                
                (656,592
                )
                
                
                (301,038
                )Provision
      for Income Taxes
                
                
                -
                
                
                
                (4,415
                )
                
                
                -
                
                
                
                -Net
      (Loss)
                
                
                (145,696
                )
                
                
                (319,028
                )
                
                
                (656,592
                )
                
                
                (301,038
                )Other
      Comprehensive Income (Loss)Unrealized
      gain (loss) on securities:Arising
      during the year
                
                
                (12,600
                )
                
                
                -
                
                
                
                1,242
                
                
                
                -Reclassification
      to net income
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Total
      other comprehensive income
                
                
                (12,600
                )
                
                
                -
                
                
                
                1,242
                
                
                
                -Comprehensive
      Income (Loss)
                
                $
                (158,296
                )
                
                $
                (319,028
                )
                
                $
                (655,350
                )
                
                $
                (301,038
                )Basic
      and Fully Diluted Earnings (Loss) per Share:Basic
      and diluted
                
                
                (0.01
                )
                
                
                (0.03
                )
                
                
                (0.04
                )
                
                
                (0.03
                )Weighted
      average common sharesoutstanding
                
                
                16,811,222
                
                
                
                12,570,501
                
                
                
                17,594,001
                
                
                
                11,792,724The
      accompanying notes are an integral part of these unaudited financial
      statements.
  2
 Table of Contents
  INFORMATION
      SYSTEMS ASSOCIATES, INC.
                  STATEMENTS
      OF CASH FLOWS
                  FOR THE NINE
      MONTHS ENDED SEPTEMBER 30,(UNAUDITED)2009
                
                
                2008Cash
      Flows from Operating ActivitiesNet
      (Loss)
                
                $
                (656,592
                )
                
                $
                (301,038
                )Adjustments
      to reconcile net (loss) to netcash
      provided from operating activities:Depreciation
      and amortization
                
                
                3,728
                
                
                
                36,584Common
      stock for services
                
                
                517,188
                
                
                
                250,500(Increase)
      decrease in:Accounts
      receivable
                
                
                (47,635
                )
                
                
                (137,100
                )Prepaid
      consulting
                
                
                -
                
                
                
                1,798Prepaid
      expenses
                
                
                (9,921
                )
                
                
                -Deposits
                
                
                -
                
                
                
                1,500Increase
      (decrease) in:Accounts
      payable
                
                
                9,467
                
                
                
                13,863Accrued
      expenses
                
                
                (9,109
                )
                
                
                1,825Other
      liabilities
                
                
                100
                
                
                
                600Deferred
      revenue
                
                
                (1,500
                )
                
                
                -Net
      Cash (Used in) OperatingActivities
                
                
                (194,274
                )
                
                
                (131,468
                )Cash
      Flows from Investing ActivitiesComputer
      software development costs
                
                
                (128,389
                )
                
                
                (18,041
                )Software
      license agreement - payments received
                
                
                -
                
                
                
                106,010Purchase
      of property and equipment
                
                
                (9,149
                )
                
                
                (9,498
                )Purchase
      of investment
                
                
                (73,958
                )
                
                
                -Net
      Cash (Used In) Provided byInvesting
      Activities
                
                
                (211,496
                )
                
                
                78,471Cash
      Flows from Financing ActivitiesProceeds
      from issuance of stock
                
                
                250,000
                
                
                
                100,000Borrowings
      from note payable
                
                
                9,615
                
                
                
                -Payments
      made on note payable
                
                
                (4,373
                )
                
                
                -Payments
      made on line of credit
                
                
                -
                
                
                
                (9,030
                )Net
      Cash Provided byFinancing
      Activities
                
                
                255,242
                
                
                
                90,970Net
      Change in Cash and CashEquivalents
                
                
                (150,528
                )
                
                
                37,973Cash
      and Cash Equivalents atBeginning
      of period
                
                
                204,768
                
                
                
                13,326End
      of Period
                
                $
                54,240
                
                
                $
                51,299The
      accompanying notes are an integral part of these unaudited financial
      statements.
   3
 Table of Contents
   INFORMATION
      SYSTEMS ASSOCIATES, INC.STATEMENTS
      OF STOCKHOLDERS' EQUITY
                  FOR THE NINE
      MONTHS ENDED SEPTEMBER 30, 2009(UNAUDITED)AdditionalCommon Stock
                
                
                Preferred Stock
                
                
                Paid in
                
                
                RetainedShares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Capital
                
                
                (Deficit)Balance,
      January 1,
                
                
                16,309,834
                
                
                $
                16,310
                
                
                
                -
                
                
                $
                -
                
                
                $
                1,587,669
                
                
                $
                (799,309
                )Proceeds
      from issuance of stock - for cash
                
                
                1,000,000
                
                
                
                1,000
                
                
                
                -
                
                
                
                -
                
                
                
                249,000
                
                
                
                -Proceeds
      from issuance of stock - for services
                
                
                656,250
                
                
                
                656
                
                
                
                
                
                
                
                
                
                
                
                261,844
                
                
                
                -Net
      (loss)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (656,592
                )Balance, September
      30,
                
                
                17,966,084
                
                
                $
                17,966
                
                
                
                -
                
                
                $
                -
                
                
                $
                2,098,513
                
                
                $
                (1,455,901
                )The
      accompanying notes are an integral part of these unaudited financial
      statements.
  4
 Table of Contents
   INFORMATION
SYSTEMS ASSOCIATES, INC.
 NOTES
TO UNAUDITED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 
 
 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 ended December 31,
  2008.
 
 Recent
Accounting Literature
 
 FASB Accounting
Standards Codification
 
 (Accounting Standards Update (“ASU”)
2009-01)
 
 In
June 2009, FASB approved the FASB Accounting Standards Codification (“the
Codification”) as the single source of authoritative nongovernmental GAAP. All
existing accounting standard documents, such as FASB, American Institute of
Certified Public Accountants, Emerging Issues Task Force and other related
literature, excluding guidance from the Securities and Exchange Commission
(“SEC”), have been superseded by the Codification. All other non-grandfathered,
non-SEC accounting literature not included in the Codification has become
nonauthoritative. The Codification did not change GAAP, but instead introduced a
new structure that combines all authoritative standards into a comprehensive,
topically organized online database. The Codification is effective for interim
or annual periods ending after September 15, 2009, and impacts the
Company’s financial statements as all future references to authoritative
accounting literature will be referenced in accordance with the Codification.
There have been no changes to the content of the Company’s financial statements
or disclosures as a result of implementing the Codification during the quarter
ended September 30, 2009.
 
 As a
result of the Company’s implementation of the Codification during the quarter
ended September 30, 2009, previous references to new accounting standards and
literature are no longer applicable. In the current quarter financial
statements, the Company will provide reference to both new and old guidance to
assist in understanding the impacts of recently adopted accounting literature,
particularly for guidance adopted since the beginning of the current fiscal year
but prior to the Codification.
 
 Subsequent
Events
 
 (Included in Accounting Standards
Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165
“Subsequent Events”)
 
 SFAS
No. 165 established general standards of accounting for and disclosure of
events that occur after the balance sheet date, but before the financial
statements are issued or available to be issued (“subsequent events”). An entity
is required to disclose the date through which subsequent events have been
evaluated and the basis for that date. For public entities, this is the date the
financial statements are issued. SFAS No. 165 does not apply to subsequent
events or transactions that are within the scope of other GAAP and did not
result in significant changes in the subsequent events reported by the Company.
SFAS No. 165 became effective for interim or annual periods ending after
June 15, 2009 and did not impact the Company’s financial statements. The
Company evaluated for subsequent events through the issuance date of the
Company’s financial statements. No recognized or non-recognized subsequent
events were noted.
 
 Determination of
the Useful Life of Intangible Assets
 
 (Included in ASC 350 “Intangibles —
Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the
Useful Lives of Intangible Assets”)
 
 FSP SFAS
No. 142-3 amended the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under previously issued goodwill and intangible
assets topics. This change was intended to improve the consistency between the
useful life of a recognized intangible asset and the period of expected cash
flows used to measure the fair value of the asset under topics related to
business combinations and other GAAP. The requirement for determining useful
lives must be applied prospectively to intangible assets acquired after the
effective date and the disclosure requirements must be applied prospectively to
all intangible assets recognized as of, and subsequent to, the effective date.
FSP SFAS No. 142-3 became effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact the
Company’s financial statements.
 
 Noncontrolling
Interests
 
 (Included in ASC 810
“Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB
No. 51”)
 
 SFAS
No. 160 changed the accounting and reporting for minority interests such
that they will be recharacterized as noncontrolling interests and classified as
a component of equity. SFAS No. 160 became effective for fiscal years
beginning after December 15, 2008 with early application prohibited. The
Company implemented SFAS No. 160 at the start of fiscal 2009 and no longer
records an intangible asset when the purchase price of a noncontrolling interest
exceeds the book value at the time of buyout. Any excess or shortfall for
buyouts of noncontrolling interests in mature restaurants is recognized as an
adjustment to additional paid-in capital in stockholders’ equity. Any shortfall
resulting from the early buyout of noncontrolling interests will continue to be
recognized as a benefit in partner investment expense up to the initial amount
recognized at the time of buy-in. Additionally, operating losses can be
allocated to noncontrolling interests even when such allocation results in a
deficit balance (i.e. book value can go negative).
 
 5
 Table of Contents
 
 INFORMATION
SYSTEMS ASSOCIATES, INC.
 NOTES
TO UNAUDITED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 
 
 NOTE 1 – STATEMENT OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
 
 Noncontrolling
Interests (continued)
 
 The
Company presents noncontrolling interests (previously shown as minority
interest) as a component of equity on its consolidated balance sheets. Minority
interest expense is no longer separately reported as a reduction to net income
on the consolidated income statement, but is instead shown below net income
under the heading “net income attributable to noncontrolling interests.” The
adoption of SFAS No. 160 did not have any other material impact on the
Company’s financial statements.
 
 Consolidation of
Variable Interest Entities — Amended
 
 (To be included in ASC 810
“Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No.
46(R)”)
 
 SFAS
No. 167 amends FASB Interpretation No. 46(R) “Consolidation of
Variable Interest Entities regarding certain guidance for determining whether an
entity is a variable interest entity and modifies the methods allowed for
determining the primary beneficiary of a variable interest entity. The
amendments include: (1) the elimination of the exemption for qualifying
special purpose entities, (2) a new approach for determining who should
consolidate a variable-interest entity, and (3) changes to when it is
necessary to reassess who should consolidate a variable-interest entity. SFAS
No. 167 is effective for the first annual reporting period beginning after
November 15, 2009, with earlier adoption prohibited. The Company will adopt
SFAS No. 167 in fiscal 2010 and does not anticipate any material 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.
 
 Comprehensive
Income
 
 Comprehensive
income is the total of (1) net income (loss) plus (2) all other changes in the
net assets arising from non-owner sources, which are referred to as
comprehensive income.  The Company has presented a statement of income
which includes other comprehensive income.
 
 NOTE
      2 – CASH AND CASH EQUIVALENT
 
 At
      times throughout the year the Company may maintain certain bank accounts
      in excess of the FDIC insured limits. At September 30, 2009 and December
      31, 2008, the amounts on deposit at institutions were:
 September
      30, 2009     December
      31, 2008
 
 Wachovia
      Bank (FDIC insured to $250, 000
 and
      $100,000 for 2009 and 2008,
      respectively)                               
       $  54,240
                $204,768
 
 NOTE
      3- PROPERTY AND EQUIPMENTSeptember
      30, 2009
                  
                  
                  December
      31, 2008Computer
      software (developed)
                  
                  $
                  161,003
                  
                  
                  $
                  32,614Computer
      software (purchased)
                  
                  
                  590
                  
                  
                  
                  590Web
      site development
                  
                  
                  5,016
                  
                  
                  
                  -Furniture,
      fixtures, and equipment
                  
                  
                  27,225
                  
                  
                  
                  23,093193,834
                  
                  
                  
                  56,297Less:
      accumulated depreciation and amortization
                  
                  
                  (38,856)
                  
                  
                  
                  (35,129)$
                  154,978
                  
                  
                  $
                  21,168
   Depreciation and amortization expense
for the nine months ended September 30, 2009 and2008 was $3,728 and
$36,584, respectively.
 
 NOTE
      4 – COMPUTER SOFTWARE DEVELOPED
 
 In 2009,
the Company began development of an updated version of the “On Site Physical
Inventory” (OSPI) product.  During the year ended December 31, 2007,
the Company completed the development of the initial version of, “On Site
Physical Inventory” (OSPI).  The OSPI software was developed to be
used by the Company for collecting data for information technology assets
installed in data centers.
 
 After
implementing the use of the OSPI software, the Company decided to market the
software and entered into a software license agreement with Aperture
Technologies, Inc.
 
 The
Company has capitalized the cost of the OSPI software using FASB Accounting
Standards Codifications 350-40 “Internal Use Software” (formerly Statement of
Position (SOP) 98-1, “Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use”) as follows:
  September
      30, 2009
                  
                  
                  December
      31, 2008Development
      costs
                  
                  $
                  266,789
                  
                  
                  $
                  138,400Software
      license agreement- payments received
                  
                  
                  (135,257)
                  
                  
                  
                  (135,257)Software
      license agreement- marketing costs
                  
                  
                  29,471
                  
                  
                  
                  29,471161,003
                  
                  
                  
                  32,614Less:
      accumulated depreciation and amortization
                  
                  
                  (29,471)
                  
                  
                  
                  (29,471)$
                  131,532
                  
                  
                  $
                  3,143
 
 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.
 
 6
 Table of Contents
  INFORMATION
SYSTEMS ASSOCIATES, INC.
 NOTES
TO UNAUDITED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 
 
 NOTE 5 – INVESTMENT
(continued)
 
 The
Company has agreed to purchase 2,500,000 ordinary shares for a subscription
price of $.02 (two pence) a share. The total cost of the subscription was
$50,000 or $73,958, USD. 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.
 
 Securities
investments not classified as either held-to-maturity or trading securities are
classified as available-for-sale securities.  Available-for-sale
securities are recorded at fair value in investments and other assets on the
balance sheet, with the change in fair value during the period excluded from
earnings and recorded net of taxes as a component of other comprehensive
income.
 
 Available
–for-sale securities were as follows:
 September,
      30 2009
                  
                  
                  December
      31, 2008Cost
                  
                  
                  Market
                  
                  
                  Unrealized
      Gain (loss)
                  
                  
                  Cost
                  
                  
                  Market
                  
                  
                  Unrealized
      Gain (loss)Type
      of securities:Common
      stock
                  
                  $
                  73,968
                  
                  
                  $
                  75,210
                  
                  
                  $
                  1,242
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Total
                  
                  $
                  73,968
                  
                  
                  $
                  75,210
                  
                  
                  $
                  1,242
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
   NOTE
6 – FAIR VALUE MEASUREMENTS
 
 In 2009,
the Company implemented FASB Accounting Standards Codification 850 “Fair Value
Measurements and Disclosures” (formerly SFAS 157, “Fair Value Measurements”),
relative to its financial assets and liabilities that are recognized or
disclosed at fair value in the financial statements at least
annually.
 
 In
determining the fair value of investments held by the Company, the Level 1
valuation technique of “Quoted Market Price in Active Market” was implemented as
the Company was able to obtain a quote from the London Stock Exchange as of
September 30, 2009.
 
 As of
September 30, 2009 the Company’s investments that are carried at fair value on a
recurring basis include the following:
  Fair Value Measurements UsingTotal
                
                
                Quoted
      Prices in Active Markets
                  (Level 1)
                
                
                Significant
      Other Observable Inputs
                  (Level 2)
                
                
                Significant Unobservable
      Inputs
                  (Level 3)Available
      –for-sale securities
                
                $
                75,210
                
                
                $
                75,210
                
                
                $
                -
                
                
                $
                -
 
 
 
 NOTE
7 – NET (LOSS) PER SHARE
 
 Basic
earnings per share (EPS) are 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 nine months ended September 30, 2009,
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
8 – INCOME TAXES
  2009
                  
                  
                  2008Provision
      for income tax (credit) consists of:Current
      accrual
                  
                  $
                  -
                  
                  
                  $
                  -Cumulative
      change in deferred income tax
                  
                  $
                  -
                  
                  
                  
                  4,415$
                  -
                  
                  
                  $
                  4,415Income
      tax receivable consists of the following:Federal
      claim for refund
                  
                  $
                  -
                  
                  
                  $
                  637
   
 
 The Company has the following net
operating
 loss carryovers for income
tax purposes:
  Expiring
2025                                                         
$       204
 Expiring
2026                                                             
82,899
 Expiring
2027                                                           
131,828
 Expiring
2028                                                          
236,311
 $451,242
 
 NOTE
9 – SUPPLEMENTAL CASH FLOW INFORMATION
  Supplemental
      disclosures of cash flow information for the periods ended September 30,
      2009 and 2008 are summarized as follows:
                  
                  2009
                  
                  
                  2008Cash
      paid during the periods for interest andIncome
      taxes:Income
      taxes
                  
                  $
                  -
                  
                  
                  $
                  -Interest
                  
                  $
                  -
                  
                  
                  $
                  1,343Non-Cash
      Investing Activities:Balance
      of consulting services forcontributed
      capital
                  
                  $
                  518,438
                  
                  
                  $
                  -Additional
      consulting services forcontributed
      capital
                  
                  
                  262,500
                  
                  
                  
                  975,000Consulting
      services prepaid for future months
                  
                  
                  (263,750
                  )
                  
                  
                  (724,500
                  )Non-cash
      expense of consulting services for contributed capital
                  
                  $
                  517,188
                  
                  
                  $
                  250,500
   NOTE
10 – OPERATING LEASE
 
 The
Company leases it Palm City, Florida facility.  The lease requires
monthly payments of $1,400.  The lease commenced on June 1, 2007 and
expired on May 31, 2008.  This lease was renewed for an additional
year, concluding May 31, 2009.
 
 7
 Table of Contents
 
 
 
 INFORMATION
SYSTEMS ASSOCIATES, INC.
 NOTES
TO UNAUDITED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 
 
 NOTE 10 – OPERATING LEASE
(continued)
 
 On March
2, 2009 the lease was renewed for $1,200 per month.  The Company holds
an additional option to renew the lease “at the market price.” This renewed
lease goes into effect June 1, 2009.  The rent expense as of September
30, 2009 and 2008 was $12,780 and $13,952, respectively.
 
 NOTE
11 – 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
September 30, 2009 and 2008 was $0.  The interest rate is the Prime
Rate plus 3%.  The President of the Company is a personal guarantor on
the line of credit.
 
 NOTE
12 – NOTE PAYABLE
 
 The
Company has 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 will be repaid May 31, 2010. The outstanding balance as
of September 30, 2009 is $ 5,242.
 
 NOTE
13 – COMMON STOCK
 
 In 2008,
the Company entered into an agreement with Derek J. Leach (“Leach”) to purchase
common stock.  Under terms of the agreement, the Company will issue
2,000,000 shares at $0.25 per share for total proceeds of $500,000 over a period
of five months.  The Company had waived the five month
period.  The purchases of stock 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 July
31, 2008, the Company formalized an agreement in place since January 1, 2008, to
receive a variety of consultant services for 500,000 shares of the Company’s
common stock.  The stock was valued at a prevailing market rate of
$0.25 per share.  The agreement was concluded on September 1, 2008 and
stock was issued.
 
 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 has
the option of paying the consultants in cash or common stock.  The
Company has decided to issue 1,000,000 shares of stock to the consulting firms
as payment for services.  The value of stock will be at $0.25 per
share.  A pro-rata portion of this agreement of $481,250 and $125,000
has been expensed for the nine months ended September 30, 2009 and 2008,
respectively.
 
 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, FASB Accounting Standards Codification
718, “Compensation – Stock Compensation” (formerly FASB 123(R)) 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.
 
 Following
is a summary of the status of options outstanding as of September 30, 2009 and
2008 respectively:
  For
      the Nine Months Ended September 30, 2009
                
                
                For
      the Nine Months Ended September 30, 2008Shares
                
                
                Weighted
      Average Exercise Price
                
                
                Shares
                
                
                Weighted
      Average Exercise PriceOutstanding
      at beginning of year
                
                
                15,000,000
                
                
                $
                3.00
                
                
                
                -
                
                
                $
                -Granted
                
                
                -
                
                
                
                -
                
                
                
                15,000,000
                
                
                
                3.00Exercised
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Forfeited
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Expired
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Outstanding
      at end of period
                
                
                15,000,000
                
                
                $
                3.00
                
                
                
                15,000,000
                
                
                $
                3.00Exercisable
      at end of period
                
                
                15,000,000
                
                
                $
                3.00
                
                
                
                15,000,000
                
                
                $
                3.00OutstandingWeighted
      average remaining contractual term
                
                
                
                
                
                
                2.00
                
                
                
                
                
                
                
                3.00Aggregated
      intrinisic value
                
                
                
                
                
                
                -
                
                
                
                
                
                
                
                -Weighted
      average grant date fair value
                
                
                
                
                
                
                -
                
                
                
                
                
                
                
                -ExercisableWeighted
      average remaining contractual term
                
                
                
                
                
                
                2.00
                
                
                
                
                
                
                
                3.00Aggregated
      intrinisic value
                
                
                
                
                
                
                -
                
                
                
                
                
                
                
                -
 
  
 On July
7, 2009 a  notice of non renewal was forwarded to two of three
companies, but one remaining company will continue providing services starting
August 1, 2009 at an agreed to rate of $262,500.
 
 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.  29.0 hours at a cost of $7,250 were recorded
as expense for the three months ended September 30, 2009.  143.75 and
2 hours at a cost of $35,938 and $500 were recorded as expense for the nine
months ended September 30, 2009 and 2008.
 
 NOTE
15 – MAJOR CUSTOMERS
 
 Two major
customers accounted for $565,584 and $602,726 of revenue for the nine months
ended September 30, 2009 and 2008, respectively.  These amounts
represent 91% and 83% of the Company’s revenue for the nine months ended
September 30, 2009 and 2008, respectively.
 
 As of
September 30, 2009 and 2008, these customers accounted for 66% and 84% of
accounts receivable, respectively.
 8
 Table of Contents
  
 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 10 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 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 receives a commission on the sale of the
software.  The percentage ranges between twenty (20) and thirty (30)
percent of the sale.  On occasion, Information Systems Associates
provide pre-sales support services to the vendor’s clients.  In
addition, Information Systems Associates is given the opportunity to implement
the software solution and provide training to its clients.  On an
ongoing basis, Information Systems Associates can and does 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 OSPITM(ON SITE PHYSICAL INVENTORYTM) was available for resale.
 Our
customer list includes a number of leading organizations, such as Northrop
Grumman Electronic Systems, Charles Schwab, Bank of America, Comcast
Communications 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
 Table of Contents
 
 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.
 
 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 of 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.
 
 We have
been providing consulting, customization and implementation, training,
maintenance and support services to our customers since 1994.
 
 We will
soon be offering version 2 of ON SITE PHYSICAL
INVENTORYTM.
 
 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.
 
 10
 Table of Contents
 
 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.
 
 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.  In the third quarter of 2009, we began BETA testing
ON SITE PHYSICAL
INVENTORYTM,
version 2.
 
 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 – Visual Network Design, Inc.,
      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; VISTA500 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.
 
 11
 Table of Contents
 
 RESULTS OF OPERATIONS FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 
 The
following discussion should be read in conjunction with the financial statements
included in this report and is qualified in its entirety by the
foregoing.
 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 FASB Accounting Standards Codification
605-25, “Revenue Recognition” (formerly SEC Staff Accounting Bulletin No. 104,
“Revenue Recognition” and Emerging Issues Task Force, or EITF, Issue No. 00-21,
“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 September 30,
2009.
 
 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
 
 We
account for costs incurred to develop computer software for internal use in
accordance with FASB Accounting Standards Codifications 350-40 “Internal Use
Software” (formerly Statement of Position (SOP) 98-1, “Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use”) As required FASB
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.
 
 Revenues
 
 Gross
revenues were $271,533 and $606,865 for the three and nine months ended
September 30, 2009, respectively, compared to gross revenues of $333,210 and
$1,062,499, respectively, for the three and nine months ended September 30,
2008.  The decrease is primarily due to the economy.  In the
current economic environment, current clients are finding it difficult to
maintain previous levels of business.  Also, in order to attract new
clients in 2009, the Company has had to reduce the amounts it charges for data
discovery by 15 percent.  Management feels this is a trend that will
continue through 2009.  Finally, a project with a new client,
originally set to begin in 2009, has been delayed as the client’s security team
continues its validation process.
 
 Our
strategic alliance agreement with Rubicon in the long-term should create new
revenue streams by giving us access to the European market and allowing the
timely offering of ON
SITE PHYSICAL
INVENTORYTM,
version 2.
 
 Income /
Loss
 
 We had
net losses of $145,696 and $656,592 for the three and nine months ended
September 30, 2009, respectively, compared to net losses of $319,028 and
$301,038, respectively, for the three and nine months ended September 30,
2008.  The reduction in the net loss for the three months ended
September 30, 2009 was the result of the Company reducing administrative and
general expenses by $143,322 and reducing professional fees by
$92,616.  These reductions were partially offset the decline in
revenues.  The increase in the net loss for the nine months ended
September 30, 2009 was primarily the result of a decline in revenues of $455,634
and an increase in professional fees of $138,316, which resulted from our
entering into several consulting agreements in September 2008.  We
expect long term benefits from these agreements.  There can be no
assurance that we will achieve or maintain profitability or that we can achieve
and sustain revenue growth in the future.
  12
 Table of Contents
 
 Expenses
 
 Operating
expenses for the three and nine months ended September 30, 2009 were $416,606
and $1,228,614, respectively, compared to the operating expenses of $644,298 and
$1,320,360, respectively, for the same period ended September 30, 2008,
Operating expenses for the three months ended September 30, 2009 decreased
$227,692 as a result of decreases in administrative and general expenses of
$143,322 and professional fees of $92,616.  Operating expenses for the
nine months ended September 30, 2009 decreased as a result of a decrease in
administrative and general expenses of $263,968 which were partially offset by
increases in payroll and payroll taxes and professional fees of $33,906 and
$138,316, respectively.
 
 Income
Taxes
 
 There was
no income tax benefit or expense recorded for the three and nine months ended
September 30, 2009.  There was an income tax benefit of $4,415 and $0
recorded for the three and nine months ended September 30, 2008.
 
 Impact of
Inflation
 
 We
believe that inflation has had a negligible effect on operations during the nine
months ended September 30, 2009 and 2008.  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 $194,274 during the nine months ended September
30, 2009, compared to cash flows of $131,468 used in operations during the same
period ended September 30, 2008.  Cash flows used in operations during
the nine months ended September 30, 2009 were primarily attributable to a net
loss of $656,592 and partially offset by the issuance of stock for services of
$517,188.  Cash flows used in operations during the nine months ended
September 30, 2008 were primarily attributable to a net loss of $301,038 the
increase in accounts receivable by $137,100 and partially offset by the issuance
of stock for services of $250,500.
 
 Cash
flows used in investing activities were $211,496 during the nine months ended
September 30, 2009, compared to cash flows of $78,471 provided by investing
activities for the same period ended September 30, 2008. 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 common stock in Rubicon Software Group, plc.   Cash
flows provided by investing activities in 2008 were attributable to $106,010 in
payments received on a software license agreement, offset by the marketing cost
of software licenses agreement of $18,041, and purchase of property and
equipment of $9,497.
 
 Cash
flows provided for from financing activities were $255,242 for nine months ended
September 30, 2009 and attributed to proceeds from the issuance of common stock
and incurring of a note payable.  Cash flows provided for from
financing activities for nine months ended September 30, 2008 were $90,970 and
was attributable to proceeds from the issuance of common stock less repayment of
a line of credit.
 
 We had
cash on hand of $54,240 and net working capital of $431,642 as of September 30,
2009.  Currently, we have enough cash to fund our operations for the
next year.  This is based on current cash flows from financing
activities and projected revenues.  Although it is possible, if the
projected revenues fall short of needed capital we may not be able to sustain
our capital needs.  We had the ability to pay three consulting
agreements with capital.  This has favorably impacted our working
capital situation.  If there is any shortfall in working capital we
will then need to obtain additional capital through equity or debt financing to
sustain operations for an additional year.  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.
 
 ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 The
information to be reported under this item is not required of smaller reporting
companies.
 
 ITEM4.  CONTROLS AND
PROCEDURES
 
 The
information to be reported under this item is not required of smaller reporting
companies.
 
 ITEM 4T. 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.
 
 13
 Table of Contents
   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 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 2008 Annual Report on Form
10-K.  There have been no material changes from the risk factors
previously disclosed in our 2008 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.
  ITEM 6. EXHIBITS
 
 Exhibit
      No.
              
              Description31.1
              
              Certification of Chief
      Executive Officer(Section 302)31.2
              
              Certification of Principal Financial Officer (Section
      302)32.1
              
              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
 
 (1)
              On
      April 21, 2009, we filed a current report on Form 8-K to announce a
      Consulting Agreement with Rubicon Software Group, plc.
 
 14
 Table of Contents
 
 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:
      November 6, 2009
              By:
              /s/ Joseph P.
  CoscheraJoseph
      P. Coschera
                President
      and CEOInformation
      Systems Associates, Inc.Date:
      November 6, 2009
              By:
              /s/ Michael R. HullMichael
      R. Hull
                Chief
      Financial Officer