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,
  2008
 
 [
       ]
              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
SW 30th
Street, Suite E, Palm City FL 33490
 (Address
of principal executive offices)
 
 (772)
286-3682
 (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 October 31,
2008:     15,303,834
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
      accelerated filer
               ̈Non-accelerated
      filer
               ̈(Do
      not check if a smaller reporting company)Accelerated
      filer
               ̈Smaller
      reporting company
              þ
  CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
  The
discussion contained in this 10-Q under the Securities Exchange Act of 1934, as
amended, contains forward-looking statements that involve risks and
uncertainties. The issuer's actual results could differ significantly from those
discussed herein. These include statements about our expectations, beliefs,
intentions or strategies for the future, which we indicate by words or phrases
such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the
Company believes," "management believes" and similar language, including those
set forth in the discussions under "Notes to Financial Statements" and
"Management's Discussion and Analysis or Plan of Operation" as well as those
discussed elsewhere in this Form 10-Q. We base our forward-looking statements on
information currently available to us, and we assume no obligation to update
them. Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements that are subject to the "safe harbor" created by the
Private Securities Litigation Reform Act of 1995.
  
  1
 
 INFORMATION
SYSTEMS ASSOCIATES, INC.
  TABLE OF CONTENTS
 
 PART
1.   FINANCIAL INFORMATION
 
 ITEM
1.     FINANCIAL
STATEMENTS
 
 BALANCE
SHEETS                                                                                                                                                                    
3
 
 STATEMENTS
OF
INCOME                                                                                                                                                       
4
 
 STATEMENTS
OF CASH
FLOWS                                                                                                                                             
 5
  NOTES
TO FINANCIAL
STATEMENTS                                                                                                                                 
   6
 
 ITEM
2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF
OPERATION            
   8
 
 ITEM
3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET
RISK                                                                      
13
 
 ITEM
4.     CONTROLS AND
PROCEDURES                                                                                                                                                  
13
 
 PART
II.   OTHER INFORMATION
 
 ITEM
1.     LEGAL
PROCEEDINGS                                                                                                                                                                  14
 
 ITEM
1A.   RISK
FACTORS                                                                                                                                                                              14
 
 ITEM
2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF
PROCEEDS                                                                           14
 
 ITEM
3.     DEFAULTS UPON SENIOR
SECURITIES                                                                                                                                      14
 
 ITEM
4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS                                                                                           14
 
 ITEM
5.     OTHER
INFORMATION                                                                                                                                                                  14
  ITEM
6.     EXHIBITS AND REPORTS ON FORM
8-K                                                                                                                                     
14
 
 SIGNATURES                                                                                                                                                                                                    
15
 
 INDEX TO
EXHIBITS                                                                                                                                                                                  
      16
 
 2
 Table of Contents
  INFORMATION
      SYSTEMS ASSOCIATES, INC.BALANCE
      SHEETSSEPTEMBER
      30, 2008 AND DECEMBER 31, 2007ASSETSSeptember
      30,
                
                
                December
      31,2008
                
                
                2007(Unaudited)
                
                
                (Audited)Current
      AssetsCash
      and cash equivalents
                
                $
                51,299
                
                
                $
                13,326Accounts
      receivable
                
                
                251,275
                
                
                
                114,175Prepaid
      consulting
                
                
                724,500
                
                
                
                1,798Income
      tax claim receivable
                
                
                637
                
                
                
                637Deferred
      income tax credit
                
                
                -
                
                
                
                37,154Total
      Current Assets
                
                
                1,027,711
                
                
                
                167,090Property
      and Equipment (net)
                
                
                22,805
                
                
                
                139,360Other
      AssetsDeferred
      income tax credit
                
                
                37,154
                
                
                
                -TOTAL
      ASSETS
                
                $
                1,087,670
                
                
                $
                306,450LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesNote payable
      - line of credit
                
                $
                -
                
                
                $
                9,030Accounts
      payable
                
                
                101,929
                
                
                
                88,066Accrued
      payroll taxes
                
                
                4,301
                
                
                
                2,476Other
      liabilities
                
                
                1,700
                
                
                
                1,100Total
      Current Liabilities
                
                
                107,930
                
                
                
                100,672Stockholders'
      EquityCommon
      stock-$.001 par value, 50,000,000 sharesauthorized,
      12,303,834 and 11,403,834 issuedand
      outstanding for 2008 and 2007, respectively
                
                
                15,304
                
                
                
                11,404Additional
      paid in capital
                
                
                1,437,197
                
                
                
                366,097Retained
      (deficit)
                
                
                (472,761
                )
                
                
                (171,723
                )Total
      Stockholders' Equity
                
                
                979,740
                
                
                
                205,778TOTAL
      LIABILITIES AND STOCKHOLDERS'EQUITY
                
                $
                1,087,670
                
                
                $
                306,450
  3
 Table of Contents
  INFORMATION
      SYSTEM ASSOCIATES, INC.STATEMENTS
      OF INCOMEFOR
      THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,(UNAUDITED)For
      the Three Months Ended
                
                
                For
      the Nine Months EndedSeptember
      30,
                
                
                September
      30,2008
                
                
                2007
                
                
                2008
                
                
                2007Revenue
                
                $
                333,210
                
                
                $
                93,863
                
                
                $
                1,062,499
                
                
                $
                245,813Cost
      of Sales
                
                
                7,413
                
                
                
                -
                
                
                
                33,938
                
                
                
                -Gross
    Profit
                
                
                325,797
                
                
                
                93,863
                
                
                
                1,028,561
                
                
                
                245,813Operating
      ExpensesAdministrative
      and general
                
                
                231,937
                
                
                
                39,024
                
                
                
                470,910
                
                
                
                105,454Payroll
      and payroll taxes
                
                
                44,544
                
                
                
                28,309
                
                
                
                122,363
                
                
                
                60,252Professional
                
                
                367,817
                
                
                
                49,787
                
                
                
                727,087
                
                
                
                140,006Total
      Operating Expenses
                
                
                644,298
                
                
                
                117,120
                
                
                
                1,320,360
                
                
                
                305,712(Loss)
      Before Other Incomeand
      (Expense)
                
                
                (318,501
                )
                
                
                (23,257
                )
                
                
                (291,799
                )
                
                
                (59,899
                )Other
      Income (Expense)Consulting
      fees
                
                
                (4,942
                )
                
                
                (3,578
                )
                
                
                (9,239
                )
                
                
                (18,630
                )(Loss)
      From Continuing OperationsBefore
      Income Taxes
                
                
                (323,443
                )
                
                
                (26,835
                )
                
                
                (301,038
                )
                
                
                (78,529
                )Provision
      for Income Taxes
                
                
                (4,415
                )
                
                
                (5,000
                )
                
                
                -
                
                
                
                (14,970
                )Net
      (Loss) from ContinuingOperations
                
                
                (319,028
                )
                
                
                (21,835
                )
                
                
                (301,038
                )
                
                
                (63,559
                )Discontinued
      Operations(Loss)
      from discontinued operations
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (9,501
                )Provision
      for income taxes
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,830
                )Net
      (Loss) from DiscontinuingOperations
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (7,671
                )Net
      (Loss)
                
                $
                (319,028
                )
                
                $
                (21,835
                )
                
                $
                (301,038
                )
                
                $
                (71,230
                )Basic
      and Fully Diluted (Loss) per Share:Continued
      operations
                
                
                (0.03
                )
                
                
                -
                
                
                
                (0.03
                )
                
                
                (0.01
                )Discontinued
      operations
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Total
                
                
                (0.03
                )
                
                
                -
                
                
                
                (0.03
                )
                
                
                (0.01
                )Weighted
      average common sharesoutstanding
                
                
                12,570,501
                
                
                
                11,403,834
                
                
                
                11,792,724
                
                
                
                11,403,834
  4
 Table of Contents
 INFORMATION
      SYSTEMS ASSOCIATES, INC.STATEMENTS
      OF CASH FLOWSFOR
      THE NINE MONTHS ENDED SEPTEMBER 30,(UNAUDITED)2008
                
                
                2007Cash
      Flows from Operating ActivitiesNet
      (Loss)
                
                $
                (301,038
                )
                
                $
                (71,230
                )Adjustments
      to reconcile net (loss) to netcash
      provided from operating activities:Depreciation
      and amortization
                
                
                36,584
                
                
                
                1,498Cumulative
      change in deferred income tax
                
                
                -
                
                
                
                (16,800
                )Common
      stock for services
                
                
                250,500
                
                
                
                -(Increase)
      decrease in:Accounts
      receivable
                
                
                (137,100
                )
                
                
                (12,679
                )Prepaid
      consulting
                
                
                1,798
                
                
                
                18,631Income
      tax claim receivable
                
                
                -
                
                
                
                168Deposits
                
                
                1,500
                
                
                
                (1,500
                )Increase
      (decrease) in:Accounts
      payable
                
                
                13,863
                
                
                
                24,024Accrued
      payroll taxes
                
                
                1,825
                
                
                
                2,037Accrued
      payroll
                
                
                -
                
                
                
                (6,042
                )Other
      liabilities
                
                
                600
                
                
                
                2,100Net
      Cash (Used in) OperatingActivities
                
                
                (131,468
                )
                
                
                (59,793
                )Cash
      Flows from Investing ActivitiesComputer
      software devleopment costs
                
                
                (18,041
                )
                
                
                (85,494
                )Software
      license agreement - payments received
                
                
                106,010
                
                
                
                -Purchase
      of property and equipment
                
                
                (9,498
                )
                
                
                (3,454
                )Net
      Cash Provided by (Used In)Investing
      Activities
                
                
                78,471
                
                
                
                (88,948
                )Cash
      Flows from Financing ActivitiesProceeds
      from issuance of stock
                
                
                100,000
                
                
                
                -Payments
      made on line of credit
                
                
                (9,030
                )
                
                
                -Net
      Cash Provided byFinancing
      Activities
                
                
                90,970
                
                
                
                -Net
      Change in Cash and CashEquivalents
                
                
                37,973
                
                
                
                (148,741
                )Cash
      and Cash Equivalents atBeginning
      of period
                
                
                13,326
                
                
                
                178,775End
      of Period
                
                $
                51,299
                
                
                $
                30,034
  5
 Table of Contents
 INFORMATION
SYSTEMS ASSOCIATES, INC.
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008 AND 2007
  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.  The Company also provided services through its insurance
      sales business (discontinued as of March 31,
  2007).
 
 Results
      of operations for interim periods presented are not necessarily indicative
      of results of operations that might be expected for future interim periods
      or for the full fiscal year ending December 31,
  2008.
 
 Recent Accounting
      Pronouncements
 
 In
      May 2008, the FASB released SFAS No. 162, “The Hierarchy of Generally
      Accepted Accounting Principles.”  SFAS No. 162 identifies the
      sources of accounting principles and the framework for selecting the
      principles used in the preparation of financial statements of
      nongovernmental entities that are presented in conformity with generally
      accepted accounting principles in the United States of
      America.  SFAS No. 162 will be effective 60 days following the
      SEC’s approval of the PCAOB amendments to AU Section 411, “The Meaning of
      Present Fairly in Conformity With Generally Accepted Accounting
      Principles.”  The Company does not believe SFAS No. 162 will
      have a significant impact on the Company’s financial
      statements.
 
 Reclassifications
 
 Certain
reclassifications have been made to the prior period financial statements
presented to conform to 2008.
 
 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.
 
 
 NOTE
      2 – CASH AND CASH EQUIVALENT
  2008
                2007
 Wachovia
      Bank (FDIC insured to
      $100,000.00)                                                        
      $51,299         $  30,034
  NOTE
      3 – PROPERTY AND EQUIPMENT
  2008
                  2007Computer
      software (developed for internal use)
                  $3,143
                  $129,557Computer
      software (purchased)
                  1,307
                  1,307Furniture,
      fixtures, and equipment
                  34,197
                  20,20438,647
                  151,068Less
      accumulated depreciation and amortization
                  15,842
                  12,419$22,805
                  $138,649Depreciation
      and amortization expense
                  $36,584
                  $ 1,498
  NOTE
      4 – COMPUTER SOFTWARE DEVELOPED FOR INTERNAL
USE
 
 During
the year ended December 31, 2007, the Company completed the development of the
internal use software, “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.  The Company
began using the OSPI software in October 2007 while providing consultation
services for managing the physical infrastructure of 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 Statement of
Position (SOP) 98-1, “Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use” as follows:
  2008
                2007
  Development
costs                                                                                           $138,400       
$129,557
 Software
license agreement – payments
received                                                
(119,552)                
-
 Software
license agreement – marketing
costs                                                     29,471-
 48,319            
129,557
 Less:  accumulated depreciation and
amortization45,176-
 $    3,143     
  $129,557
  NOTE
5 – NET (LOSS) PER SHARE
 
 Basic
earning per share (EPS) is computed by dividing net (loss) by the weighted
average number of common shares outstanding, and the dilutive EPS adds the
dilutive effect of stock options and other stock equivalents.  During
the three and nine months ended   September 30, 2008, 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.
 
 6
 Table of Contents
  INFORMATION
SYSTEMS ASSOCIATES, INC.
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008 AND 2007
  NOTE
6 – INCOME TAXES
  2008
                  
                  
                  2007Provision
      for income tax (credit) consists of:Current
      accrual
                  
                  $
                  -
                  
                  
                  $
                  -Cumulative
      change in deferred income tax
                  
                  -
                  
                  
                  
                  (16,800
                  )$
                  -
                  
                  
                  $
                  (16,800Income
      tax receivable consists of the following:Federal
      claim for refund
                  
                  $
                  637The
      Company has the following net operatingloss
      carryovers for income tax purposes:Expiring
      2020
                  
                  $
                  204Expiring
      2021
                  
                  
                  82,899Expiring
      2022
                  
                  
                  133,233$
                  216,336
  NOTE
7 – SUPPLEMENTAL CASH FLOW INFORMATION
 
 Supplemental
      disclosures of cash flow information for the periods ended September 30,
      2008 and 2007 is summarized as
follows:
   2008
                  
                  
                  2007Cash
      paid during the periods for interest andincome
      taxes:Income
      taxes
                  
                  $
                  -
                  
                  
                  $
                  -Interest
                  
                  $
                  1,343
                  
                  
                  $
                  1,723Non-Cash
      Investing Activities:Acquisition
      of consulting services forcontributed
      capital
                  
                  $
                  975,000
                  
                  
                  $
                  -Consulting
      services prepaid for future months
                  
                  
                  (724,500
                  )
                  
                  
                  -Non-cash
      expense of consulting services forcontributed
      capital
                  
                  $
                  250,500
                  
                  
                  $
                  -
  NOTE
8 – 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.  The lease was renewed on June 1, 2008 for
$1,500 per month.  The Company holds an additional option to renew the
lease “at the market price.”
 
 The
following is a schedule of the remaining lease payments by year under the
lease:
 
 2008
                
                $
                4,500
 2009
                
                $
                7,500
  NOTE
9 – NOTE PAYABLE
 
 The
Company has a line of credit with Wachovia Bank N.A.  The line of
credit provides for borrowing up to $40,000.  The balance as of
September 30, 2008 is $0.  The interest rate is the Prime Rate plus
3%.  The President of the Company is a personal guaranty on the line
of credit.
 
 NOTE
10 – COMMON STOCK
 
 On July
15, 2008, the Company received a subscription in the amount of $100,000 for
400,000 shares of the Company’s common stock from Derek J. Leach (“Leach”)
pursuant to an Offshore Stock Purchase Agreement.  Under terms of the
agreement, the Company will issue 2,000,000 shares at .25 per share for total
proceeds of $400,000 over a period of five months.
 
 NOTE
11 – 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
$.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 $.25 per
share.  A pro-rata portion of this agreement of $125,000 has been
expensed for the nine months ended September 30, 2008.
 
 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 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.
 
 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.  Two hours of cost or $500 was recorded as
expense for the nine months ended September 30, 2008.
  NOTE
12 – MAJOR CUSTOMERS
 
 One major
customer accounted for $829,170 and $140,847 of revenue for the nine months
ended September 30, 2008 and 2007 respectively.  These amounts
represent 78% and 57% of the Company’s revenue for the nine months ended
September 30, 2008 and 2007 respectively.
 
 As of
September 30, 2008 and 2007, this customer accounted for 60% and 37% of accounts
receivable, respectively.
  7
 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 maintain in corporate data
centers.  We refer to our product and services suite as asset
management solutions.  Our solutions can reduce sourcing, procurement
and tracking costs, improve tracking and monitoring of asset performance and
reduce operational downtime.
 
 In 1995,
we became a Business Partner (a/k/a Value Added Reseller) with Aperture
Technologies, Inc. of Stamford, CT.  (It should be noted that the term
“Business Partner” is somewhat misleading because in reality we are simply a
subcontractor for Aperture).  At that time, Aperture’s Network
Management tools (“System”), was one of the leading solutions in it
field.  For more than five years, Aperture Technologies, Inc. has
provided enterprise asset management solutions to customers in the United
States, Europe and Asia and Pacific Rim.  During this same timeframe,
we have offered Aperture’s enterprise asset management solutions to customers
and prospects in North America.
 
 The
typical Value Added Reseller Agreement allows the vendor’s partner/subcontractor
(in this case ISA) the ability to offer to its client’s and prospects a
Commercial Off the Shelf software solution to address a particular business
problem.  The primary focus of ISA’s business is working data center
operations, network management department and corporate real estate department
to identify and then implement a software solution which addresses their needs
based upon extensive research done prior to the selection and culminating in the
purchase by the client and implementation by ISA of the chosen
solution.
 
 All of
the products listed under our Value Added Reseller relationships (Vista, Obtain
24/7, 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 their (the
vendor’s software 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.
 
 Our
customer list includes a number of leading organizations, such as Northrop
Grumman Electronic Systems, National Counsel on Compensation Insurance (NCCI),
Blue Cross Blue Shield of Florida, Comcast Communications and General
Electric.
 
 Information
Systems Associates, Inc. sells software products and services that allow our
customers to track and manage assets, primarily in asset intensive
industries.  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.
 
 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, to develop plans for
relocations, mergers and acquisitions as it relates to the use of space (office,
manufacturing, warehousing).
 
 8
 Table of Contents
  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 to
manage their real property lease obligations (as both tenant and landlord), to
determine their company’s use of corporate space, to develop plans for
relocations, mergers, and acquisitions as it relates to the use of space
(office, manufacturing, warehousing).  This term can also apply to
software application products used by Data Center Management (Information
Technology) to track their computer assets from both a financial perspective as
well as their usage and connectivity within the corporate IT (Information
Technology) network.
 
 PRODUCTS
AND SERVICES
 
 Aperture’s
VISTA
 
 Historically,
IT organizations have operated as reactive cost centers that customized one-off
services as 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
or 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 is the essential solution to revolutionize your data center
operations.  It provides a structured process to consolidate and
standardize operations within the data center, mitigate operational risk, and
apply key best practices (i.e., configuration and change management processes)
to better control operations in the data center.
 
 Aperture
VISTA specifically provides IT Management with the key information and
intelligence to reduce operational risk and improve efficiency in the data
center.  Aperture VISTA enables organizations to achieve significant
improvements in the following areas:
 
 -
              Improve
      impact analysis, minimize errors and reduce staff requirements associated
      with changes
 -
              Enable
      proactive infrastructure capacity
planning
 -
              Facilitate
      the planning and execution of consolidation or relocation
      projects
 -
              Provide
      alerts for key performance indicators and threshold
    conditions
 -
              Enforce
      adherence to redundancy requirements and design guidelines to ensure
      availability and business
continuity
 -
              Reduce
      mean-time-to-repair for outages
 -
              Ensure
      compliance with standard or regulated
processes
 -
              Speed
      time-to-market for new application
deployments
 
 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.
  The
result is an accurate accounting of corporate assets, their location,
department, condition and value.
 
 Features:
 
 -
              Track
      equipment, furniture and telecom assets in use and in
      inventory.
 -
              Assign
      assets to locations, employees and cost
centers.
 -
              Report
      on condition, depreciation, warranties and maintenance
      histories.
 -
              Inventory
      analysis, including leased vs. owned
assets.
 -
              Track
      assets as individual components or create an asset made up of many
      individual components by recording a bill-of-materials (i.e.
      workstation).
 -
              Establish
      product standards
 -
              Create
      purchase orders and track cost, approval and
  supplier.
 -
              Receive
      goods and specify installed
location.
 -
              Track
      warranties, insurance policies and asset leases, including duration and
      payments.
 -
              Create
      multiple stock locations including non-fixed locations such as maintenance
      trucks.
 -
              Track
      parts in stock, establish recommended stock levels and reorder parts for
      stock.  Work orders reserve and use parts in
    stock.
 
 Benefits:
 
 -
              Track
      the lifecycle of assets from purchase, to relocation to
      disposition.
 -
              Report
      on assets by location, department and
employee.
 -
              Review
      expiring insurance policies, warranties and
  leases.
 -
              Review
      an assets maintenance history including on-demand and preventative
      maintenance work.
 -
              Manage
      parts inventories including allocated parts and
  reordering.
 -
              Compare
      actual furniture to typical furniture by room
  type.
 -
              Keep
      asset locations up to date in AutoCAD drawings or by issuing move
      orders.
 
 RACKWISETM
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 & Marketing of
Datacenters
 -
              Auto-Build
      Visual Documentation From Imported Bill of
  Materials
 -
              Advanced
      Operations & 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,
      & Document the Datacenter in
Minutes
 
 9
 Table of Contents
  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.
  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 offerings
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
Inventory and the services offered by us in conjunction with On Site Physical
Inventory 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 Inventory and the services offered by us in conjunction with On
Site Physical Inventory are perfectly matched to the needs of Total Site
Solutions’ customer’s. We have entered into an agreement with TSS and have begun
data collection services for two TSS clients.
 
 Business
Cycles
  Since
many of our customers are large organizations or quasi-governmental entities, we
may experience increasingly longer sales and collection cycles.
  CUSTOMERS
 
 We
provide our solutions to customers in a variety of industries, including:
healthcare, public authorities, and financial services sectors.
  The
services provided vary depending upon the needs of the customer and the solution
concerned. We collect service fees for implementation and training, and support
and maintenance fees.
  The
criteria used to select the customers listed in the business section and other
sections of the document are based on their prominence within their industry.
For instance, Northrop Grumman, General Electric and Comcast Communications are
well known in their respective industries.  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.
 
 Each
engagement with Northrop Grumman is a separate contract and is initiated through
a series of actions on the part of both Northrop Grumman and ISA. No long term
agreement exists between the two parties. A maintenance contract exists between
the two parties for the period ending December 31, 2008. As funds are exhausted
or additional software or services are required by Northrop Grumman, they
(Northrop Grumman) would issue and RFQ (Request For Quotation) to ISA, and ISA
in turn would submit a Statement of Work in response to the RFQ. If accepted,
Northrop Grumman’s Purchasing Department would then issue a Purchase Order to
ISA for the specific deliverables listed in the Statement of Work. Given the
nature of Northrop Grumman’s business (defense contractor) as well as the terms
and conditions under which they issue purchase orders, it may not be appropriate
to list Northrop Grumman by name in any filing. Such listing would have to be
confirmed with Northrop Grumman.
 
 To date,
the following services have been provided to Northrop Grumman under the
above.
 
 1.
              Updated
      and customized data entry forms included in the standard VisionFM
      product2.
              Added
      new forms and workflow processes3.
              Created
      a training video whose target audience is the end user submitting Work
      Orders and Move Requests4.
              Other
      minor modifications to the VisionFM
solution.
  10
 Table of Contents
  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.
 
 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) who 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 Inventory), 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. Productization involves the
development of reusable applications to reduce programming time and costs for
customer implementations.
  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 does 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 vendor’s 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.
 
 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 Inventory” to be one of the two area 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 Inventory 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 the
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
software installation, data import (using the data collected previously) and
client training in the use of the Rackwise 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, 2008 AND 2007
 
 The
following discussion should be read in conjunction with the financial statements
include in this report and is qualified in its entirety by the
foregoing.
 
 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 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,
2008.
 
 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 Statement of Position (SOP) 98-1, “Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use”.  As
required by SOP 98-1, 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 Inventory” 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 carry8ng amount of the software
to zero.  Subsequent proceeds will be recognized in revenue as
earned.
 
 Revenues
  Gross
revenues were $333,210 and $1,062,489 for the three and nine months ended
September 30, 2008, respectively, compared to gross revenues of $93,863 and
$245,813 for the three and nine months ended September 30, 2007. The increase in
current period was due primarily to the increased sale of professional services,
maintenance contracts and time and materials arrangements. We recognize
professional services revenue, which includes installation, training, consulting
and engineering services, upon delivery of the services. If the professional
service project includes independent milestones, revenue is recognized as
milestones are met and upon acceptance from the customer. As part of our ongoing
operations to provide services to our customers, incidental expenses, if
reimbursable under the terms of the contracts, are billed to
customers. These expenses are recorded as both revenues and direct cost of
services. We expect revenues to increase during 2008 as our moves toward
developing our business plan.
 
 Income /
Loss
  We had a
net loss of $319, 028 and $301,038 from continuing operations for the three and
nine months ended September 30, 2008, respectively, compared to net loss of
$21,835 and $71, 730 from continued operations for the three and nine months
ended September 30, 2007, respectively.  There are two major reasons
for the loss in the quarter.  ISA entered into several consulting
agreements that had an immediate impact on activity for the quarter by
increasing operating expenses.  We expect long term benefits for these
expenditures. Secondly, accounting regulations require income generated for
licensing of OSPI to be offset against capitalized cost prior to any revenue
recognition.  This has happened and any future licensing agreements
can be recognized as revenue.  The loss in 2007 was due to much lower
sales as we started developing our business plan. We expected to be breakeven at
least through the fiscal year 2008, partly attributable to the increase in
projected revenues offset by the fair value of expected services to be received.
In addition, there can be no assurance that we will achieve or maintain
profitability or that our revenue growth can be sustained in the
future.
 
 12
 Table of Contents
  Expenses
  Operating
expenses for the three and nine months ended September 30, 2008 were $644,298
and $1,320,360, respectively, compared to the operating expenses of $117,120 and
$305,712 for the same periods ended September 30, 2007, respectively. The high
operating expenses during 2008 were due primarily to administrative and general
expenses, which were $231,937 and $470,910 for the three and nine months ended
September 30, 2008, respectively, and professional consulting expenses for
services in connection with technology consulting and advisory services, which
were $367,817 and $727,087 for the three and nine months ended September 30,
2008, respectively.
  Income
Taxes
  We
received income tax benefits of $5,000 and $14,970 for the three and nine months
ended September 30, 2007.
  Impact of
Inflation
  We
believe that inflation has had a negligible effect on operations during the
three and nine months ended September 30, 2008 and 2007. 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 $131,468 during the nine months ended September
30, 2008, compared to cash flows of $59,793 used in operations during the same
period ended September 30, 2007. 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 operations in
2007 were primarily attributable to a net loss of $71,230, the decrease in
accounts receivable by $12,679, offset by a decrease in prepayment by $18,631
and increase in accounts payable of $24,024.
  Cash
flows provided by investing activities were $78,471 during the nine months ended
September 30, 2008, compared to cash flows of $88,948 used in investing
activities for the same period ended September 30, 2007. 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 used in investing activities in 2007 were due solely to the cost of
software development.
  Cash
flows provided by financing activities were $90,970 for the nine months ended
September 30, 2008, due primarily proceeds from sale of stock offset by payments
to a line of credit with Wachovia Bank NA. The line of credit provides for
borrowing up to $40,000. We borrowed $29,494 on the credit line and repaid
$38,524 during the nine months ended September 30, 2008. We had no cash flows
from financing activities during the nine months ended September 30,
2007.
 
 Overall,
we have funded our cash needs from inception through September 30, 2008 with a
series of debt and equity transactions.
  We had
cash on hand of $51,299 and a working capital of $169,781 as of September 30,
2008. 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
have the ability to pay three consulting agreements with capital or
cash.  This would favorably impact our working capital situation. If
this does not reverse short fall in working capital we will then need to obtain
additional capital through equity or debt financing to sustain operations for an
additional year. Our current level of operations would require capital of
approximately $75,000 to sustain operations through year 2008 and the years
thereafter. 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.
  Neither
Mr. Coschera, nor any other person or entity is liable for, surety or otherwise
provides a guarantee for our debt financing from outside resources.
  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.
  ITEM
4T. CONTROLS AND PROCEDURES.
  DISCLOSURE CONTROLS AND
      PROCEDURES
  Our
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
  We are
not aware of any pending or threatened legal proceedings, in which we are
involved. In addition, we are not aware of any pending or threatened legal
proceedings in which entities affiliated with our officers, directors or
beneficial owners are involved.
  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 2007 Annual Report on Form 10-KSB. There
have been no material changes from the risk factors previously disclosed in our
2007 Annual Report on Form 10-KSB.
 
 ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  On July,
15, 2008, we received a subscription in the amount of $100,000 for 400,000
shares of our common stock from Derek J. Leach (“Leach”), pursuant to an
Offshore Stock Purchase Agreement. Under terms of the agreement we will issue
2,000,000 shares at .25 per share for total proceeds of $400,000 over a period
of five months.
 
 On August
1, 2008 we concluded a contract to receive consulting services from William
Gerhauser (“Gerhauser”) for 500,000 share of our common stock pursuant to a
Material Defined Agreement.  Under the terms of the agreement we will
issue 500,000 shares at .25 per share for a total of $125,000.
 
 On
September 12, 2008 we entered into material defined agreements with Green
Enterprises SAL, Old Firm Energy Corporation and Bespoke Advisory Services, LLC
to receive consulting services for common stock. Under terms of the agreement we
will issue to each company 1,000,000 shares at .25 per share for a total of
$250, 000 to each company or a total of $750,000 for all three
agreements.
 
 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 AND REPORTS ON FORM 8-K
  (1)
              Exhibits:
      Exhibits required to be attached by Item 601 of Regulation S-B are listed
      in the Index to Exhibits beginning on page 8 of this Form 10-Q, which is
      incorporated herein by reference.
  Reports on Form 8-K
filed
  (1)
              On
      July 21, 2008, we filed a current report on Form 8-K to announce an
      Offshore Stock Purchase Agreement with Derek J. Leach.
 
 (2)
      On September 17, 2008, we filed a current report on firm 8-K to
      announce  Consulting agreements with Green Enterprises SAL,
      Old Firm Energy Corporation, Bespoke Advisory Services, LLC and William
      Gerhauser.
 
 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:
      October 31, 2008
              By:
              /s/ Joseph P.
      CoscheraJoseph
      P. Coschera
                President
  15
 Table of Contents
  INDEX
TO EXHIBITS
  Exhibit
      No.
              
              Description31.1
              
              Certification of Chief
      Executive Officer and Chief Financial
Officer32.1
              
              Statement required by 18
      U.S.C. Section 1350, as adopted pursuant to section 906 of the
      Sarbanes-Oxley Act of 2002.