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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

[ x ]
        ANNUAL REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT
        OF 1934For Fiscal
        Year Ended December 31, 2000[   ]
        TRANSITION
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT
        OF 1934For the
        transition period from __________ to ____________


Commission File No.: 0-20979
_____________________

INDUSTRIAL SERVICES OF
AMERICA, INC.(Exact name of registrant as specified in its charter)

Florida
        59-0172746(State or other jurisdiction of
        (I.R.S. Employerincorporation or organization)
        Identification No.)


7100 Grade Lane
P.O. Box 32428
Louisville, Kentucky 40232
(502) 368-1661
(Address, including zip code, and telephone number,
including area code, or registrant's principal executive offices)

Securities registered pursuant
to Section 12(b) of the Act: None

Securities registered pursuant
to Section 12(g) of the Act:

Common Stock, $.01 par value
(Title of class)

Indicate by
check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X  No

Indicate by
check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.

Aggregate
market value of the 868,546 shares of voting Common Stock held by
non-affiliates of the registrant at the closing sales price on
March 13, 2001: $1,954,229.

Number of
shares of Common Stock outstanding as of the close of business on
March 13, 2001: 1,820,300.

_____________________

DOCUMENT INCORPORATED BY
REFERENCE

Portions of the registrant's definitive Proxy
Statement for the 2001 Annual Meeting of Shareholders are
incorporated by reference into Part III of this report.

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PART I

Item
1.       Business.

General

Industrial
Services of America, Inc. (the "Registrant") is a
management services company specializing in solid waste
management, as well as ferrous, non-ferrous and fiber recycling.
The management division of the Registrant is engaged in the
business of commercial, retail and industrial waste management
and waste handling. The Registrant also has an operating division
engaged in equipment sales and leasing activities. The ferrous
division's major products include recycling of steel and iron
products, whereas the non-ferrous division recycles copper,
aluminum and brass. The fiber recycling consists mainly of
high-grade papers and corrugated cardboard. The Registrant is
able to offer a "total package" concept to commercial,
retail and industrial clients to cover their waste management
needs. Combining waste reduction, waste materials diversion and
waste equipment technology, the Registrant creates waste programs
tailored to each client's individual needs. The Registrant
believes that it offers a more complete line of products and
services than its competitors and is better able to coordinate
these services on a regional and nationwide basis. By offering
competitively priced waste handling equipment from a number of
different manufacturers, the Registrant is able to tailor
equipment packages for individual client needs. The waste
management services offered by the Registrant include locating
and contracting with a hauling company at a reasonable cost at
each participating location for the retail chain customers of the
Registrant that are a part of the management program offered by
the Registrant. Because the Registrant is not a "waste
transporter," it is able to maintain a neutral position with
the customers and the hauling companies. The Registrant has
designed and developed proprietary computer software that
provides the Registrant's personnel with relevant information on
each of the client's locations, as well as pertinent information
on disposal rates and costs of equipment, including installation
and shipping. This software has allowed the Registrant to build a
database for serving customers nationwide as well as Canada and
Puerto Rico. The Registrant is able to estimate cost savings to
potential customers by reviewing their current waste hauling
invoices either regionally or nationwide. The Registrant is also
capable of generating customized billing statements to
accommodate customer needs.

The
Registrant plans to grow by expanding its marketing base and by
seeking future joint ventures and acquisitions of companies in
the management services portion of the business. The Registrant
continues to target retail and industrial customers throughout
North America for the purpose of increasing its clientele in this
sector. Although the number of locations for each industrial
customer will generally be less than that of large retail chains,
solid waste output for each location of industrial clients is
generally greater than that of retail clients. The Registrant
believes that the corresponding greater need for appropriate
equipment results in the increased possibility of large equipment
orders. Further, the Registrant believes it can provide savings
for each industrial location.

The
Registrant believes that opportunities for its continued growth
are enhanced by the increasingly stringent regulatory and
political constraints being placed on the waste hauling and
disposal industries. These more stringent federal, state and
local regulations drive prices higher throughout the industry.
With ever-increasing costs, solid waste disposal is becoming one
of the larger expense items for retail and industrial customers,
and perhaps one of the most difficult to control. The Registrant
believes these increased costs will enhance the value of its
services. Through the retention of the Registrant's services,
customers can "outsource" their in-house waste needs to
an experienced independent entity capable of lowering and
containing waste disposal costs. The Registrant is able to
provide customized reports detailing clients' recycling revenues
as well as waste disposal expense.

Registrant Background

The
Registrant was incorporated in October 1953 in Florida under the
name Alson Manufacturing, Inc. ("Alson"). From the date
of incorporation through January 5, 1975, the Registrant was
involved in the design and manufacture of various forms of
electrical products. In 1979, the Board of Directors and the
shareholders of the Registrant commenced liquidation of all the
tangible assets of Alson. On October 27, 1983, Harry Kletter, the
Chairman of the Board and Chief Executive Officer of the
Registrant, acquired 419,500 shares of Common Stock of the
Registrant. The existing directors resigned and five new
directors were elected.

2

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On July 1,
1984, the Registrant began a solid waste handling and disposal
equipment sales organization under the name Waste Equipment Sales
and Services Company ("WESSCO"). On January 1, 1985,
the Registrant merged with Computerized Waste Systems, Inc.
("CWS"), a Massachusetts corporation. CWS was a
corporation specializing in offering solid waste management
consultations for large multi-location companies involved in the
retail, restaurant and industrial sectors. At the time of the
merger, CWS was concentrating on large retail chains, but has
changed its emphasis to include commercial and industrial
clients. This strategy created an additional target market for
the Registrant. Subsequent to the merger with CWS, the Registrant
moved the CWS headquarters from Springfield, Massachusetts to
Louisville, Kentucky. At the time of the merger, much of the
client base and marketing efforts were concentrated in the
Northeast. With the move to Louisville, the Registrant began to
expand its marketing efforts, which are now both nationwide and
in Canada.

The
Registrant's divisions operate closely with each other in terms
of present customer care and proposals for new customers. WESSCO
has expanded its product line and presently offers a variety of
equipment, which would be necessary for an efficient waste
handling and/or recycling system for an individual user. The
prices WESSCO can offer are competitive with most dealers since
it purchases equipment at dealer cost without paying dealer
overhead. The WESSCO program is attractive to customers planning
expansion programs. Some of these customers have designated
WESSCO as their exclusive waste equipment supplier and
consultant. By working with the customer from the time the
initial building plans are developed, WESSCO has input into the
design, development and implementation of the waste handling
system.

CWS has
developed a network of over 2,300 vendors throughout the United
States and Canada, which include hauling companies, recycling
companies and equipment manufacturing and maintenance companies.
Through this network, the Registrant is able to provide pricing
estimates for potential customers in a timely fashion. CWS
customer representatives have access to this information through
the computer software designed and developed to accommodate the
daily needs of the Registrant. Through this information retrieval
system, customer representatives can review the accuracy of
customer concerns from recent billings to hauling rates to the
average monthly cost of service.

The
Registrant also processes, sells and brokers a broad range of
materials for recycling. These materials include ferrous and
non-ferrous metals, corrugated containers, high-grade paper and
plastic. The Registrant offers document destruction and transport
of recyclable materials to the Registrant's facility for regional
clients. This division also brokers recycled commodities for CWS
customers.

The
Registrant derives a significant portion of its revenues from two
primary customers (Home Depot and Office Depot) accounting for
approximately 48%, 64% and 63% of 2000, 1999 and 1998 total
revenues, respectively. The Registrant is taking affirmative
action to counter its dependence on any one customer. The
potential negative effect of losing any single customer has been
reduced by the Registrant's expansion of its customer base.
However, the loss of all or a substantial portion of the business
from these two primary customers could have a material adverse
effect on the Registrant.

In addition
to its other services, the Registrant provides management
services relating to recycling and waste stream analysis. The
main advantage to offering these types of management services is
that the individual projects are priced on a substantial prepaid
individual basis. This method of pricing allows the Registrant to
collect an up-front fee with the opportunity to "sell"
the customer traditional services after the evaluation and/or any
subsequent implementation is complete. By offering management and
evaluation services, the Registrant is able to pursue additional
customers.

Industry Background

The
Registrant is involved in the management of non-hazardous solid
waste and recyclables for retail, commercial and industrial
customers. As such, the industry is actually driven by the
multi-billion dollar solid waste collection and disposal
industry. The size of this industry has increased for the past
several years and should continue to increase, as landfill space
becomes scarcer. Although society (and industry) has developed an
increased awareness of the environmental issues and recycling has
increased, waste production also continues to increase. Because
of environmental concerns, new regulations and cost factors, it
has become difficult to obtain the necessary permits to build any
new landfills. Management of the Registrant believes that with
the consolidation taking place in the waste industry, it will
become increasingly difficult for a customer to receive a fair
price. The Registrant should therefore be in a position to be
called upon to represent the best interest of that customer; this
fact can only enhance the Registrant's business.

3

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The rising
costs associated with solid waste disposal have created
additional opportunities for the Registrant. Because waste
disposal has begun to be an increasingly larger percentage of the
total monthly expenditures incurred by commercial establishments,
the Registrant believes that the services offered by the
Registrant will be in greater demand. Many commercial
establishments that have paid little attention to the costs
associated with waste disposal in the past are now looking for
ways to reduce expenses in this area. The Registrant offers
commercial establishments its expertise to lower waste disposal
bills and initiate recycling programs to generate additional
revenues and/or reduce costs and materials bound for ultimate
disposal.

In addition
to increasing landfill costs, regulatory measures and more
stringent control of material bound for disposal ("flow
control") are making the management of solid waste an
increasingly difficult problem. The United States Environmental
Protection Agency (the "EPA") is expected to continue
the present trend of restricting the amount of
"potentially" recyclable material bound for landfills.
Many states have passed, or are contemplating measures, which
would require commercial establishments to recycle a minimum
percentage of their waste stream and would restrict the
percentage of recyclable materials in any commercial load of
solid waste material. Many states have already passed restrictive
regulations requiring a plan for the reduction of waste or the
segregation of recyclable materials from the waste stream at the
source. Management of the Registrant believes that these
restrictions may create additional marketing opportunities as
waste disposal needs within commercial establishments become more
specialized. Some large commercial establishments have hired
in-house staff to handle the solid waste management and recycling
responsibilities, but have found that without adequate resources
and staff support, in-house handling of these responsibilities
may not be an effective alternative. The Registrant offers these
establishments a possible solution to this increasing burden.

Technology Solutions

On March 8,
2000 the Registrant announced that it had engaged a third party
provider of technology solutions. This consulting firm helps its
clients plan, build and manage application software solutions.
Working with the staff of the Registrant, this consulting firm
developed a plan to rewrite the internal software programs.

On May 11,
2000 the Registrant announced the formation of a new operating
division named iR2 to capitalize on business opportunities and
deliver information technology solutions to the waste and
recycling industry. The objective of this internal systems
development group is to enhance the internally used software to
streamline transaction processing in its business segments and
increase capacity to handle new business opportunities. The
Registrant hired eight individuals with varying technological
skills to accomplish this mission. The iR2 division redesigned
the CWS transaction processing computer system into an enhanced
Microsoft Sequel formatted software, adding an interactive voice
response telephony system, upgraded servers, designed an online
bidding program, updated the website and increased the invoicing
and billing capabilities. This division began to generate revenue
in the fourth quarter of 2001 by offering software and hardware
consulting services in several markets but focusing within the
waste and recycling industry.

On March
10, 2000 the Registrant announced that it would sell waste
management products and services through Ariba network commerce
services. This integration provides the opportunity for joint
Ariba and Registrant customers to gain cost savings, efficiency
and convenience in purchasing waste management products and
services. The Registrant has qualified for the Ariba ReadyTMProgram, a new Ariba initiative for ensuring the quality
and integrity of transactions between buyers, market makers, and
suppliers accessing the Ariba Commerce Services NetworkTM
 . This status allows the Registrant to use the Ariba ReadyTMlogo in marketing materials and participate in Ariba
business programs and other related opportunities.

4

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K&R Lease; K&R Consulting Agreement

On February
16, 1998 the Registrant's Board of Directors ratified and
formalized an existing relationship in connection with (i) the
leasing by the Registrant of its facilities from K&R and (ii)
the provision of consulting services from K&R to the
Registrant. K&R is an affiliate of the Registrant.

Lease
Agreement. The Lease Agreement (the "K&R
Lease"), effective as of January 1, 1998, between K&R,
as landlord, and the Registrant, as lessee, covers approximately
20.5 acres of land and the improvements thereon, which are
located at 7100 Grade Lane in Louisville, Kentucky (the
"Leased Premises"). The principal improvements consist
of an approximately 22,750 square foot building used as the
Corporate Office, an approximately 8,286 square foot building
used for CWS offices, an approximately 13,995 square foot used as
the paper recycling plant, an approximately 12,000 square foot
building used for metals recycling plant, and an approximately
51,760 square foot building used as the recycling offices and
warehouse space, with the remaining 15,575 square feet of space
contained in five (5) buildings ranging in size from
approximately 8,000 to 256 square feet. The initial term of the
K&R Lease is for ten years with two five-year option periods
(the "Option Periods") available thereafter. The base
rent for the first five years is $450,000 per annum, payable at
the beginning of each month in an amount equal to $37,500 (the
"Fixed Minimum Rent"). The Fixed Minimum Rent adjusts
each five years, including each of the Option Periods, in
accordance with the Consumer Price Index. The Fixed Minimum Rent
also increases to $750,000 per annum, in an amount equal to
$62,500 per month in the event of a change in control of the
Registrant. The Registrant is also required to pay, as additional
rent, all real estate taxes, insurance, utilities, maintenance
and repairs, replacements (including replacement of roofs if
necessary) and other expenses. The K&R Lease provides for
indemnification of K&R by the Registrant for all damages
arising out of the Registrant's use or condition of the Leased
Premises excepting therefrom K&R's negligence.

K&R
Consulting Agreement.The K&R Consulting
Agreement remains in effect until December 31, 2007, with
automatic annual renewals thereafter unless one party provides
written notice to the other party of its intent not to renew at
least six months in advance of the next renewal date. K&R
shall provide strategic planning and mergers and acquisitions
(the "K&R Consulting Activities"). The Registrant
shall be responsible for all of K&R's expenses and pay
services to K&R $240,000 in equal monthly installments of
$20,000 in connection with the K&R Consulting Activities.

The K&R
Consulting Agreement terminates upon a non-defaulting party
providing written notice to the other party of its intent to
terminate. The recipient of the notice has 10 days to cure
monetary defaults and 30 days to cure non-monetary defaults. Upon
termination, K&R agrees not to engage, directly or
indirectly, in the business conducted by, or hire employees from,
the Registrant for a period of five years and within 100 miles of
any operation of the Registrant. The Registrant's principal
shareholder and Chief Executive Officer is compensated through
consulting fees pursuant to the K&R Consulting Agreement.

Fitzpatrick Purchase Agreement; Lease
Agreement

Effective
June 1, 1998 but executed as of July 31, 1998, ISA Indiana, Inc.
(the "Subsidiary"), an Indiana corporation and
wholly-owned subsidiary of the Registrant; R. J. Fitzpatrick
Smelters, Inc. (the "Seller"); and R. J. Fitzpatrick
and Cheryl Fitzpatrick (collectively the "Guarantors");
entered into an Asset Purchase Agreement (the "Fitzpatrick
Purchase Agreement") whereby the Subsidiary acquired all of
the business, property, rights and assets of the Seller and
assumed certain of the liabilities of the Seller as set forth in
the Fitzpatrick Purchase Agreement. Under the Fitzpatrick
Purchase Agreement, the Subsidiary entered into a real property
Lease Agreement (the "Fitzpatrick Lease"), effective
June 1, 1998, from the Guarantors and the Seller for ten
successive terms of ten years each at a rental of $13,000 per
month during the original term (as adjusted in accordance with
the Consumer Price Index for each renewal term) with an option to
purchase for $1,600,000 the real property (including an adjoining
20 acre tract less 3 acres to be retained by the Seller and
Guarantors). The location of the business is on an approximate
14-acre tract at U.S. 50 and Jennings County Road 900 West, North
Vernon, Jennings County, Indiana, approximately 65 miles north of
Louisville, Kentucky. The business of the Seller is a metal
salvage and metal handling operation and is comprised of five
buildings, the total square footage of which is approximately
71,400 feet. The principal improvement is a one-story concrete
warehouse/foundry/office approximating 25,500 square feet. The
remaining buildings are steel-framed buildings constituting
warehouses, garages and office space. The Fitzpatrick Lease
provides for the right of the Subsidiary to terminate at any time
after May 31, 2003, for a termination payment of $156,000.

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Consulting Agreements; Lassak Agreement and
JCA/Lassak Agreement

On June 2,
1998, the Registrant entered into an agreement (the "Lassak
Agreement") with Andrew M. Lassak ("Lassak") to
perform financial advisory services for the Registrant for a
period of up to five years. The Company grants to Lassak and/or
his designee for the financial advisory services rendered under
the Lassak Agreement options to purchase from 25,000 up to a
maximum of 250,000 shares of the Company's Common Stock (the
"Common Stock") on the basis of 25,000 shares for each
$10,000,000 in additional capitalization of the Company measured
from June 2, 1998 that vests upon maintenance for three (3)
consecutive months after achieving the increase in each
$10,000,000 in capitalization for which each 25,000 shares of
Common Stock subject to options are granted. During 2000, the
Registrant did not issue any options to purchase Common Stock to
Lassak under the Lassak Agreement. The Registrant mailed a notice
in March 2001 to Lassak terminating the Lassak Agreement
effective June 2, 2001.

On June 2,
1998, the Registrant entered into an agreement (the
"JCA/Lassak Agreement") with Joseph Charles &
Associates, Inc. ("JCA") and Lassak. The term of the
JCA/Lassak Agreement is for a period of up to five (5) years. The
Registrant agrees to grant to JCA and Lassak options to purchase
the Registrant's Common Stock on the basis of 65% of the shares
of Common Stock subject to options being granted to Lassak and
35% to JCA, at (a) $6.00 per share for the first 150,000 shares
that vest, and (b) $8.00 per share for the remaining 35,000
shares that vest. The number of shares of the Common Stock that
vest is determined based upon a five year schedule. The
Registrant mailed a notice in March 2001 to Lassak and JCA
terminating the JCA/Lassak Agreement effective June 2, 2001.

Competition

On a
commercial/industrial waste management level, the Registrant has
competition from a variety of sources. Much of it is from
companies that concentrate their efforts on a regional level.
Management of the Registrant believes that with the proprietary
database of regional and national pricing, the Registrant will
maintain its edge on a national basis.

There has
been increased competition from national hauling companies. The
large national hauling companies often attempt to handle an
entire chain of locations for a "national chain"
client. This scenario poses a potential conflict of interest
since these hauling companies can attain greater profitability
from increases in hauling and disposal revenues. In addition to
having an interest in higher hauling and disposal rates, the
national hauling companies do not have operations in every
community and do not, to the knowledge of management, have some
of the billing and computer capabilities which the Registrant is
able to offer. Additionally, management has encountered evidence
of some reluctance from independent hauling companies to work
with national hauling companies.

There is
also competition from some equipment manufacturers. These
companies have their primary interest in selling or leasing
equipment and offer management services in order to secure these
sales or leases. There is a cost involved in "using"
the equipment and the money saved must justify the amount spent
on this equipment.

The metal
recycling business is highly competitive and is subject to
significant changes in economic and market conditions. Certain of
the Registrant's competitors have greater financial, marketing
and other resources. There can be no assurance that the
Registrant will be able to obtain its desired market share based
on the competitive nature of this industry.

An
important difference between the Registrant and the majority of
its competition is the Registrant's management
"process". The systematic approach attempts to provide
consistent results for the customer. At the implementation stage,
the Registrant actively "bids out" every location that
a new customer requests. The Registrant repeats this bidding
process at any time that a client receives notice of an
undocumented price increase or at regular intervals as indicated
in the contractual relationship. At subsequent stages, the
Registrant will evaluate a customer's solid waste program and
give suggested alternatives for improvement.

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The
Registrant has developed a network of maintenance and hauling
companies throughout the country and due to the volume of
business awarded to them by the Registrant, often these companies
will offer discounted hauling and maintenance rates to the
Registrant. However, the Registrant is not "affiliated"
with any particular company or vendor in the hauling and/or
maintenance industries, but rather deals with those companies and
vendors that can supply quality service at a favorable price. In
addition to the volume of business handled by some of these
"vendors", the vendors understand that as long as the
accounts are well serviced, they will be invited to bid on future
accounts.

Few, if
any, of the Registrant's competitors have a national network of
vendors similar to the one the Registrant has developed over its
years of operation. The major hauling companies are limited in
the scope of services, which they can provide to
commercial/industrial accounts. Although the major hauling
companies have operating companies in most major and
intermediate-sized cities, they do not have nationwide geographic
coverage. Therefore, for large commercial/industrial clients,
they must obtain bids from local hauling companies that may
perceive them to be future competitors. The Registrant has
positioned itself to negotiate with the haulers, while servicing
its clients on a nationwide basis.

Most of the
direct competition is from small regional companies that bid on
regional accounts or national accounts on a regional basis. Few
of the Registrant's competitors appear to be equipped to handle
large national accounts nor do they seem to have the inclination
to expand their geographic coverage. There are numerous national
companies in closely related businesses, including national
hauling companies that have substantially greater financial
resources than does the Registrant. Should any of these companies
decide to compete directly with the Registrant, it could have a
material adverse effect on the business of the Registrant.

Employees

The
Registrant has approximately one hundred fifty-five (155)
full-time employees as follows: Recycling 98, Management Services
35, Sales/Leasing 8 and Administration/Information Technology 14.
No employee is a member of a union with a contract with the
Registrant.

Effect of State and Federal Environmental
Regulations

Any
environmental regulatory liability relating to the Registrant's
operations is generally borne by the customers with whom the
Registrant contracts and the third party vendors in their
capacity as transporters. As a matter of Registrant's policy, the
Registrant uses its best efforts to secure indemnification for
environmental liability from its customers and third party
vendors. Although management of the Registrant believes that for
the most part its business does not subject it to potential
environmental liability, the Registrant continues to use best
efforts to be in compliance with federal, state and local
environmental laws, including but not limited to its
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Hazardous Materials Transportation
Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Clean Air Act, as amended, and the Clean Water Act.
Such compliance in 2000 or 1999 did not constitute a material
expense to the Registrant.

The
collection and disposal of solid waste and rendering of related
environmental services are subject to federal, state and local
requirements which regulate health, safety, the environment,
zoning and land-use. Federal, state and local regulations vary,
but generally govern disposal activities and the location and use
of facilities and also impose restrictions to prohibit or
minimize air and water pollution. In addition, governmental
authorities have the power to enforce compliance with these
regulations and to obtain injunctions or impose fines in the case
of violations, including criminal penalties. These regulations
are administered by the EPA and various other federal, state and
local environmental, health and safety agencies and authorities,
including the Occupational Safety and Health Administration of
the U.S. Department of Labor.

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The
Registrant strives to conduct its operations in compliance with
applicable laws and regulations. While such amounts expended in
the past or anticipated to be expended in the future have not had
and are not expected to have a material adverse effect on the
Registrant's financial condition or operations, the possibility
remains that technological, regulatory or enforcement
developments, the results of environmental studies or other
factors could materially alter this expectation.

Each state
in which the Registrant operates has its own laws and regulations
governing solid waste disposal, water and air pollution and, in
most cases, releases and cleanup of hazardous substances and
liability for such matters. Several states have enacted laws that
will require counties to adopt comprehensive plans to reduce,
through waste planning, composting, recycling, or other programs,
the volume of solid waste landfills. These laws have recently
been promulgated in several states. Legislative and regulatory
measures to mandate or encourage waste reduction at the source
and waste recycling, also are under consideration by Congress and
the EPA.

Finally,
various states have enacted, or are considering enacting, laws
that restrict the disposal within the state of solid or hazardous
wastes generated outside the state. While laws that overtly
discriminate against out of state waste have been found to be
unconstitutional, some laws that are less overtly discriminatory
have been upheld in court. Challenges to other such laws are
pending. The outcome of pending litigation and the likelihood
that other such laws will be passed and will survive
constitutional challenge are uncertain. In addition, Congress is
currently considering legislation authorizing states to adopt
such restrictions.



Item
2.        Properties.

The
Registrant leases its corporate offices and processing property
and buildings in Louisville, Kentucky for $37,500 per month from
K&R pursuant to the K&R Lease. See ITEM 1. BUSINESS.
"K&R Lease; K&R Consulting Agreement."

The
Subsidiary has entered into the Fitzpatrick Lease effective June
1, 1998, for ten successive terms of ten years each at a rental
of $13,000 per month during the original term (as adjusted in
accordance with the Consumer Price Index for each renewal term)
with an option to purchase for $1,600,000. See ITEM 1. BUSINESS.
"Fitzpatrick Purchase Agreement; Lease Agreement."



Item
3.        Legal
Proceedings.

There are
no material proceedings pending by, or against the Registrant or
affecting any of its properties.



Item
4.        Submission of
Matters to a Vote of Security Holders.

Not
applicable.

8

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Item
4a.        Executive
Officers of the Registrant.

Name
        Served as an
        ExecutiveOfficer Since
        Age
        Position with the 
        Registrant and OtherPrincipal OccupationsHarry Kletter
        1983
        74
        Chairman of
        the Board and Chief Executive Officer of the Registrant
        from May 2, 2000 to present. Chairman of the Board and
        Chief Visionary Officer of the Registrant from February
        3, 2000 to May 2, 2000. Mr. Kletter has served as
        Chairman of the Board and Chief Executive Officer from
        July 31, 1992 to February 3, 2000, President of the
        Registrant from July 31, 1992 to December 1997, from
        January 1990 to July 1991, and from October 1983 to
        January 1988; Mr. Kletter is also Chairman and sole
        shareholder of K&R Corporation.Timothy W.
        Myers
        1998
        49
        Vice
        President of Operations and Chief Operating Officer of
        the Registrant from May 2000 to present. Vice President
        of Operations from July 1998 to May 2000; Senior Vice
        President and Chief Operating Officer of the Registrant
        from 1996 until July 1998; President of K&R from 1996
        to July 1998. Mr. Myers has served in various operational
        capacities with the Registrant and K&R since 1973.John O.
        Tietjen
        1999
        52
        Senior Vice
        President and Chief Financial Officer of the Registrant
        since March 1, 1999; from September 1993 to February
        1999, Vice President of Finance at Greater Louisville,
        Inc. (and its predecessor). Mr. Tietjen served previously
        as Corporate Controller for OpenConnect Systems, Inc. and
        for 15 years prior to his employment with OpenConnect
        Systems, Inc., he served in various positions with
        Glidden Paint Company; Mr. Tietjen holds a B.A. in
        Business Administration/Economics from Muskingum College
        and an M.B.A. from Baldwin-Wallace College.Charles J.
        Hulsman
        1995
        43
        Vice-President
        of CWS since May 2000; from December 1991 to May 2000,
        Manager of CWS, and a sales representative of WESSCO, a
        division of the Registrant, prior to that date.Sean M.
        Garber
        1996 to 2000
        34
        Served as
        President, Treasurer and Director of the Registrant from
        February 1998 to May 2000; Interim President from
        December 1997 to February 1998; Chief Operating Officer
        and Director of the Registrant from November 1997 to May
        2000; Vice President of Recycling of the Registrant from
        November 1996 to December 1997.


Mr. Garber
had determined that it was in his best interest to leave the
employment of the Registrant in order to pursue other business
interests but is available to consult with the Registrant on an
as-needed basis and at mutually agreed times and dates. Mr.
Garber's employment with the Registrant terminated on May 1,
2000.

None of the
above officers is related to one another. With respect to certain
arrangements with certain officers of the Registrant relating to
executive compensation, see section entitled "Executive
Compensation - Certain Transactions" in the Registrant's
Proxy Statement for the 2001 Annual Meeting of Shareholders as
incorporated herein by reference at Item 11.

9

---

Item
5.        Market for
Registrant's Common Equity and Related Stockholder Matters.

Effective
August 29, 1996, the $.01 par value common stock of the
Registrant became listed on the Small Cap Market (the "Small
Cap Market") of the Nasdaq Stock Market under the symbol
"IDSA". Prior to August 29, 1996, the Registrant's
common stock traded on the Over the Counter Bulletin Board
("OTCBB") operated by the National Association of
Securities Dealers, Inc. ("NASD").

|Quarter
        Ended |  | 2000  |       | 1999 |       | 1998 
|--------------------- |  | ----- | ----- | ---- | ----- | -----
|                      |  | High  | Low   |      | High  | Low  
|March 31              |  | $4.06 | $1.75 |      | $2.63 | $1.88
|June 30               |  | $2.50 | $1.50 |      | $5.38 | $2.50
|September 30          |  | $3.50 | $1.25 |      | $4.19 | $2.00
|December 31           |  | $3.00 | $2.06 |      | $2.50 | $1.50

There were
approximately 397 shareholders of record as of March 13, 2001.

The
Registrant has never declared a cash dividend on its Common
Stock. Until August 8, 2000 the Registrant had always had a
policy intending that the retention of earnings would be used to
help finance the Registrant's expansion programs. On August 8,
2000 the Board of Directors of the Registrant approved a change
in the dividend policy whereby dividends can be declared subject
to Board approval. The Board of Directors has the discretionary
power to declare dividends within the constraints of its loan
agreement with the Bank of Louisville, which at December 31, 2000
limits the amount of the dividends that can be declared to
approximately $380,000.

On August
8, 2000, the Board of Directors of the Registrant also approved
the repurchase of shares of its common stock. The stock
repurchase program allows for the purchase of up to 200,000
shares of common stock at current market prices. In the fiscal
year 2000, the Registrant repurchased 66,300 shares at an average
share price of $2.31.

10

---

Item
6.        Selected
Financial Data.

Selected Financial Data2000
        
        1999
        
        1998
        
        1997
        
        1996(Amounts
        in Thousands, Except Per Share Data)Year
        ended December 31:Total
        revenue
        $  89,241
        
        $  77,498
        
        $  65,205
        
        $  45,212
        
        $  34,277Income
        (loss) from operations
        878
        
        827
        
        (543)
        
        215
        
        742Earningsper
        common share:Basic
        $     0.26
        
        $     0.17
        
        $    (0.26)
        
        $    0.07
        
        $       0.25Assuming
        dilution
        $     0.26
        
        $     0.16
        
        $    (0.26)
        
        $    0.07
        
        $       0.24Cash
        dividends declaredPer
        common share
        -
        
        -
        
        -
        
        -
        
        -At
        year end:Total
        assets
        $  19,805
        
        $  20,515
        
        $  18,288
        
        $ 13,893
        
        $     9,439Long-term
        notes payable
        $    1,694
        
        $    2,105
        
        $    2,613
        
        $      760
        
        $            5




Item
7.        Management's
Discussion and Analysis of Financial Condition and Results of
Operation.

The following discussion and analysis should
be read in conjunction with the information set forth under Item
6, "Selected Financial Data" and the consolidated
financial statements of the Registrant and the accompanying notes
thereto included elsewhere in this report.

The following discussion and analysis
contains certain financial predictions, forecasts and projections
which constitute "forward-looking statements" within
the meaning of the federal securities laws. Actual results could
differ materially from those financial predictions, forecasts and
projections and there can be no assurance that such financial
predictions, forecasts and projections will be achieved. Factors
that could affect financial predictions, forecasts and
projections include the fluctuations in the commodity price index
and any conditions internal to the major customers of the
Registrant, including loss of their accounts.

General

The
Registrant continued to pursue a growth strategy in the waste
management services arena servicing over 5,600 customer locations
throughout the United States and Canada and building a base of
approximately 2,300 vendors. This strategy will allow for
diversity of business opportunities so that the Registrant is not
as dependent upon the operating results of the recycling
division. This diversity has helped to stabilize revenues and
gross profit during a period of time when commodity prices
fluctuate and affect the ferrous and non-ferrous markets. Much of
management's focus and attention now and in the future is
directed towards the growth of the management services business
segment through expansion in the existing markets and through an
acquisition strategy. The Registrant is also focused on
technology enhancements that can be provided to the new and
existing customer base to further solidify customer
relationships. Additionally, the Registrant is exploring
strategic alliances and relationships that will enable it to
effectively execute its growth and acquisition strategy.

11

---

It is
management's plan to expand in the management services segment in
2001. At the same time, the Registrant will be seeking more
operational cost control, increased efficiency in the information
technology area and emphasize sales and marketing efforts.

Management
continues to maintain and grow the recycling business within its
existing structure and is not actively seeking any further
acquisitions or mergers. It is the plan of management to maximize
profits through the reduction of surplus inventory and fixed
assets.

Liquidity and Capital Resources

As of
December 31, 2000, the Registrant held cash and cash equivalents
of $1,395,882.

The
Registrant currently maintains a working capital line of credit
with Bank of Louisville (BOL) in the amount of $3,000,000.
Indebtedness under this credit facility accrues interest at BOL's
prime rate as promulgated from time to time. The maturity date
under this agreement is June 30, 2002. The Credit Line is
collateralized by eligible accounts receivable of the Registrant.
As of December 31, 2000, $2,750,000 was borrowed against the line
of credit compared to no borrowings against the line at December
31, 1999.

During
2000, the Registrant committed approximately $1,392,592 in fixed
asset additions. In the recycling segment approximately $650,000
was committed for the down payments of a portable shear/baler and
hydraulic crane, purchase of a new roll-off truck, purchase of
several forklift trucks, and the rebuild of the main scale, a
crane and the conveyor on the cardboard line. In the equipment
sales, leasing and service segment, approximately $334,000 was
capitalized as rental equipment to be located at customer sites.
In the technology area, the Registrant capitalized the cost of
internal personnel in the amount of $165,000 used to develop
software to rewrite internal programs and the Registrant expended
$239,000 to upgrade hubs, routers, servers, workstations and the
telephone system.

Existing
cash flow from operations and available credit under the existing
credit line are sufficient to meet the Registrant's cash needs in
2001, but will not enable the Registrant to pursue its
acquisition strategy. The Registrant is currently exploring
alternatives to generate cash to execute its growth and
acquisition strategy.

Results of Operations

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

|Year
        ended December 31,                                                |  | 2000   | 1999   | 1998  
|------------------------------------------------------------------------------ |  | ------ | ------ | ------
|                                                                               |  |        |        |       
|Statements
        of Operations Data:                                         |  |        |        |       
|Total
        Revenue .......................................................  |  | 100.0% | 100.0% | 100.0%
|Cost of Goods
        Sold ...............................................     |  | 92.1%  | 91.7%  | 94.2% 
|Selling,
        General and Administrative                                    |  |        |        |       
|Expenses
        ............................................................. |  | 6.9%   | 7.2%   | 6.6%  
|Income (Loss)
        from Operations ............................             |  | 1.0%   | 1.1%   | (0.8)%

12

---

Year Ended December 31, 2000 Compared to
Year Ended December 31, 1999

The revenue
in 2000 was $89,241,473 representing an increase of $11,743,654
or 15.2% compared to 1999. The management services business grew
16.9% to $63,751,872 by increasing the same account and new
account business serviced to over 4,200 accounts nationwide.
Recycling revenues grew 14.4% to $22,903,751. The major products
include the recycling of copper, aluminum and brass, referred to
herein as non-ferrous scrap. Non-ferrous scrap revenue increased
30.9% from 1999 to 2000 on 18.9% more pounds shipped. The ferrous
recycling business increased its revenues by 3.2% while tons
shipped decreased by 8.5%. Revenue in the sales, service and
leasing segment declined 12.5% or $368,525 from 1999 to 2000 due
to two large equipment sales agreements in the fourth quarter of
1999 that were not replicated in the year 2000.

The 2000
cost of goods sold was $82,188,059 increasing $11,098,128 or
15.6% compared to 1999 on revenue growth of 15.2%. The cost of
goods sold in the recycling segment increased 22.6% from 1999 to
2000 on revenue growth of 14.4% due to increased shipments and
purchase prices. Cost of goods sold in the management services
segment increased 15.4% or $7,648,283 compared to a revenue
increase of $9,225,560 or 16.9% from 1999 to 2000. Cost of sales
in the equipment sales, leasing and service segment declined
24.6% compared to the sales decrease of 12.5% from 1999 to 2000.
The mix of rental equipment versus sales of equipment increased
during 2000 causing the actual cost of sales as a percentage to
sales to decrease from 74.2% to 63.9% compared to 1999.

The gross
margin was $7,053,414 in 2000 representing an increase of
$645,526 over 1999, or as a percentage of revenue, a 0.4%
decrease. A slight increase in the gross margin as a percentage
of revenue from 5.9% to 7.5% was realized in the management
services area comparing 2000 to 1999. The recycling division
experienced a decrease in gross margins as a percentage to sales
from 12.0% in 1999 to 5.7% in 2000 due to product mix and
commodity price fluctuations. Management is continually trying to
improve gross margins by reducing the costs of its purchases and
increasing the prices of its services and products. As a
percentage of sales, margins in the equipment sales, service and
leasing segment increased from 25.8% in 1999 to 36.1% in 2000.
The gross margin contribution from this business segment
increased $171,051 in 2000 compared to 1999 on reduced revenue,
$2,585,850 in 2000 versus $2,954,375 in 1999.

The
selling, general and administrative expenses increased $594,836
from 1999 or 10.7%. As a percentage to revenue, expenses
decreased from 7.2% in 1999 to 6.9% in 2000. Approximately
one-half, or $300,000 of this increase was due to the one-time
and non-recurring charges incurred in the second quarter of 2000
for separation agreements, restructuring charges and associated
professional/legal fees. Without these charges, selling, general
and administrative expenses would have been 6.6% as a percentage
to revenue in 2000 or a 5.3% increase over 1999. During 2000 the
Registrant incurred approximately $162,000 in personnel costs and
start-up costs for the iR2 division. The Registrant could not
capitalize these costs in connection with the redesign and
rewrite of the software systems. The Registrant also incurred
additional personnel costs for a partial year to hire a
salesperson in the equipment sales, leasing and service segment.
Personnel costs in the management services segment increased by
$130,000 in 2000 compared to 1999 with the addition of a
controller for a partial year and increased staffing due to
volume increases. Management believes that its staffing in the
management services segment combined with the redesigned system
positions the Registrant to handle sizeable volumes of new
business.

Net profit
after taxes increased from $321,335 in 1999 to $505,847 in 2000,
which represents a 57.4% increase. Earnings per share, assuming
dilution, increased from $.16 in 1999 to $.26 in 2000.

Financial Condition at December 31, 2000
Compared to December 31, 1999

Trade
accounts receivable decreased $8,690 to $8,739,174 at December
31, 2000 from December 31, 1999. Average days outstanding in 2000
were 35.9 days versus 41.2 days in 1999. This decrease reflects
management's focus on improving working capital through the
collection of accounts receivable.

13

---

Inventory
increased $5,168 from $2,185,994 to $2,191,162 representing a
0.2% increase. Inventory levels both ferrous and non-ferrous at
Indiana, Inc. remained relatively the same in 2000 as compared to
1999. Ferrous inventory at December 31, 2000 was $278,582 higher
than December 31, 1999. Management decided to limit shipments of
ferrous items during the fourth quarter of 2000 due to the
decline in the price index and not being able to obtain the
desired gross margin levels. Non-ferrous inventory was $263,806
lower at December 31, 2000 versus December 31, 1999 as management
focused on turning inventory faster.

Accounts
payable trade decreased $3,596,525 from December 31, 1999 to
$10,126,353 as of December 31, 2000. This decrease is a direct
reflection of the system enhancements that were implemented in
the management services segment of the business. The Registrant
now has the ability to process vendor payments on a more timely
basis which has also enhanced customer service and customer
goodwill.

As of
December 31, 2000, the Registrant had a working capital deficit
of $711,774, which represents an increase of $49,748 from 1999.
The working capital deficit at December 31, 1999 was $761,522.
Total current assets decreased $573,002 due primarily to the
decrease in cash of $992,929. Total current liabilities decreased
$875,710 from December 31, 1999 to December 31, 2000 due to an
increase in borrowings of $2,750,000 against the Registrant's
line of credit and a decrease in trade accounts payable by
$3,596,525.

Year Ended December 31, 1999 Compared to
Year Ended December 31, 1998

The revenue
in 1999 was $77,497,819 representing an increase of $12,292,839
or 18.9% compared to 1998. The management services business grew
23.6% to $54,526,312 by increasing the same account and new
account business serviced to over 4,200 accounts nationwide.
Recycling revenues grew 4.4% to $20,017,132. The major products
include recycling of copper, aluminum and brass, referred to
herein as non-ferrous scrap. The ferrous recycling business
increased its revenues by 6.6% through an increase in direct
sales to mills and more aggressive purchasing practices.

The 1999
total cost of goods sold was $71,089,931 increasing $9,632,041 or
15.7% compared to 1998. The cost of goods sold in management
services increased by 22.5% versus a decrease in recycling cost
of goods sold of 3.3%. The increase in management services cost
of sales mirrored the sales increase within one (1) percentage
point. The cost of goods sold in the recycling operation
decreased 3.3% on a revenue increase of 4.4%. Commodity prices
stabilized in 1999 after a severe decline in the fourth quarter
of 1998. Cost of goods sold in the equipment sales/leasing
business increased 58.6% on revenue growth of 53.0%

The gross
margin was $6,407,888 representing an increase of $2,660,798 or,
as a percentage to revenue, a 2.5% increase. A slight increase in
gross margin as a percentage to revenue from 5.1% to 5.9% was
realized in the management services segment. The recycling
division experienced an increase in gross margin as a percentage
to revenue of 7.0%. At the end of 1998 the Registrant suffered a
significant devaluation adjustment to inventory due to decreases
in commodity market values. Prices stabilized throughout 1999 and
the Registrant was able to widen the margins with its pricing
structure and the ability to sell to new accounts.

The
selling, general and administrative expenses increased $1,290,137
from 1998 or as a percentage to revenue from 6.7% in 1998 to 7.2%
in 1999. Bad debt expense increased approximately $212,000 or as
a percentage to revenue from 1.5% to 4.0% due mainly to a clean
up of the accounts receivable files and the write-off of two
hedging accounts. Depreciation and amortization expenses
increased approximately $211,000 from 1998 due mainly to the full
year of expenses in 1999 versus one-half year expenses in 1998
from the Fitzpatrick acquisition, which closed in mid 1998.
Insurance expenses increased by approximately $87,000 due to
increases in premiums, especially Director and Officer, medical
and liability. Insurance premiums based upon revenue levels
increased due to the 18.9% increase in revenue levels. Fuel costs
increased $63,000 due primarily to the full year of shipments
from the Fitzpatrick location, as well as, increased movement of
inventory between ISA Indiana, Inc. and ISA, Inc. in Louisville.

14

---

An
additional expense of $140,880 had an adverse impact on operating
results in 1999 due to a transaction between the Registrant and
K&R that was later rescinded. The Registrant on behalf of
K&R, paid $290,880 to satisfy a note payable that is secured
by property owned by K&R. The audit discovered a
miscommunication related to the transaction between the
Registrant and K&R, which was presented to the Audit
Committee. Upon further investigation, the Audit Committee
recommended to the full Board a rescission of the transaction. In
place of the rescinded transaction, the Registrant Board and
K&R approved the setoff of a $150,000 obligation owed by the
Registrant to K&R for the purchase of equipment against the
$290,880 transaction funded by the Registrant on behalf of
K&R. The net result was that K&R repaid the Registrant in
May, 2000 the $140,880 (adjusted for interest) which was treated
as additional paid-in-capital to complete the rescission of the
payment made by the Registrant on behalf of K&R. The
Registrant recorded the $140,880 as management consulting expense
in 1999.

Financial Condition at December 31, 1999
Compared to December 31, 1998

Trade
accounts receivable increased $1,276,201 to $8,750,674 at
December 31, 1999. This represents a 17.1% increase while overall
revenue increased 18.9%. Average days outstanding in 1999 were
41.2 days versus 41.8 days in 1998. This slight decrease reflects
management focus on improving working capital through the
collection of accounts receivable.

Inventory
decreased $329,358 from $2,515,352 to $2,185,994 representing a
13.1% decrease. The equipment and parts inventory decreased from
$761,780 to $86,647 or an 88.6% decrease. This decrease was due
to the capitalization of the 1000 Ton shear taken out of
inventory and reclassed as a fixed asset to support increased
activity in 1999 in the recycling area. Non-ferrous materials
inventory increased 44.3 % as new supplier accounts have
materialized and the ferrous materials inventory increased 6.2%
or $69,823 as the Registrant continues to ship increasing numbers
of truckloads of ferrous products to a major foundry.

Accounts
payable trade increased $3,976,342 from December 31, 1998 to
$13,722,878 as of December 31, 1999. This increase was due to
higher volumes in operations including increases to same account
and new account business.

As of
December 31, 1999, the Registrant's working capital was a deficit
of $761,522, which represents a $101,525 increase from 1998. The
total current assets increased $2,125,884 due to the $1,276,201
increase in accounts receivable, and the increase in cash of
$1,374,743 was offset by the decrease in inventory of $329,358.
The total current liabilities increased $2,227,409 affected
primarily by total accounts payable increases of $3,976,342 and
the reduction of short-term bank borrowings of $1,850,000.

Inflation and Prevailing Economic Conditions

To date,
inflation has not and is not expected to have a significant
impact on the Registrant's operation in the near term. The
Registrant has no long-term fixed-price contracts and the
Registrant believes it will be able to pass through most cost
increases resulting from inflation to its customers. The
Registrant is susceptible to the cyclical nature of the commodity
business. In response to these economic conditions, the
Registrant has focused on the management consulting area of the
business and is working to liquidate inventories while efforts
are made to enhance gross margins.

Impact of Recently Issued Accounting
Standards

The FASB
issued Statement of Financial Accounting Standards No. 133
("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities," in June 1998. SFAS 133
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires
recognition of all derivatives as either assets or liabilities on
the balance sheet and measurement of those instruments at fair
value. If certain conditions are met, a derivative may be
designed specifically as (a) a hedge of the exposure to changes
in the fair value of a recognized asset or liability or an
unrecognized firm commitment referred to as a fair value hedge,
(b) a hedge of the exposure to variability in cash flows of a
forecasted transaction (a cash flow hedge), or (c) a hedge of the
foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale
security, or a forecasted transaction. The statement is not
expected to have an impact on the Registrant's financial position
or results of operations.

15

---

Item
7A.        Quantitative
and Qualitative Disclosures About Market Risk.

Not
Applicable.



Item
8.        Consolidated
Financial Statements and Supplementary Data.

The
consolidated financial statements of the Registrant required to
be included in this Item 8 are set forth in Item 14 of this
report. The quarterly results of operations are included in the
Notes to Consolidated Financial Statements under Item 14.



Item
9.        Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure.

Not
Applicable



16

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PART III

Item
10.        Directors and
Executive Officers of the Registrant.*

The
information in Item 4a. in this report is incorporated herein by
reference.



Item
11.        Executive
Compensation *



Item
12.        Security
Ownership of Certain Beneficial Owners and Management.*



Item
13.        Certain
Relationships and Related Transactions.*

_____________________

|* | The
        information required by Items 10, 11, 12 and 13 is or
        will be set forth in the definitive proxy statement
        relating to the 2001 Annual Meeting of Shareholders of
        the Registrant which is to be filed with the Securities
        and Exchange Commission pursuant to Regulation 14A under
        the Securities Exchange Act of 1934, as amended. Such
        definitive proxy statement relates to an annual meeting
        of shareholders and the portions therefrom required to be
        set forth in this Form 10-K by Items 10, 11, 12 and 13
        are incorporated herein by reference pursuant to General
        Instruction G(3) to Form 10-K.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

17

---

PART IV

Item
14.        Exhibits,
Consolidated Financial Statement Schedules, and Reports on Form
8-K.

(a)(1)       The
following consolidated financial statements of Industrial
Services of America, Inc. are filed as a part of this report:

|       |                                                                      | Page
|------ | -------------------------------------------------------------------- | ----
|       |                                                                      |     
|       | Report of
        Independent Auditors                               | F-1 
|       | Consolidated
        Balance Sheets as of December 31, 2000 and 1999 | F-2 
|       | Consolidated
        Statements of Operations for the years          |     
|       | ended
        December 31, 2000, 1999 and 1998                       | F-3 
|       | Consolidated
        Statements of Shareholders' Equity for the      |     
|       | years
        ended December 31, 2000, 1999 and 1998                 | F-4 
|       | Consolidated
        Statements of Cash Flows for the years          |     
|       | ended
        December 31, 2000, 1999 and 1998                       | F-5 
|       | Notes to
        Consolidated Financial Statements                   | F-6 
|       |                                                                      |     
|(a)(2) | Consolidated
        Financial Statement Schedules.                  |     
|       | Schedule
        II--Valuation and Qualifying Accounts for the       |     
|       | Year
        ended December 31, 2000                                 | F-20





(a)(3)       List
of Exhibits.

Exhibits
filed with, or incorporated by reference herein, this report are
identified in the Index to Exhibits appearing in this report. The
Management Agreement and the Consulting Agreement required to be
filed as exhibits to this Form 10-K pursuant to Item 14(c) are
noted by an asterisk (*) in the Index to Exhibits.

(b)       Reports
on Form 8-K.

None.

(c)
      Exhibits.

The
exhibits listed on the Index to Exhibits are filed as a part of
this report.

(d)
      Consolidated Financial
Statement Schedules.

Schedule
II--Valuation and Qualifying Accounts for the year ended December
31, 2000 is incorporated by reference at page F-20 of the
Consolidated Financial Statements of the Registrant.



18

---

SIGNATURES

Pursuant to
the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.

INDUSTRIAL
        SERVICES OF AMERICA, INC.Dated: March
        30, 2001
        
        By :/s/
        Harry
        KletterHarry
        Kletter, Chairman of the Boardand
        Chief Executive Officer


Pursuant to
the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates
indicated:

|Signature                               |  | Title                                                            | Date          
|--------------------------------------- |  | ---------------------------------------------------------------- | --------------
|                                        |  |                                                                  |               
|/s/  Harry
        Kletter              |  | Chairman of
        the Board and Chief                          | March 30, 2001
|Harry Kletter                           |  | Executive
        Officer (Principal Executive 
        Officer) |               
|                                        |  |                                                                  |               
|/s/  Timothy
        W.
        Myers   |  | President of
        Recycling and Chief                         | March 30, 2001
|Timothy W.
        Myers                |  | Operating
        Officer                                        |               
|                                        |  |                                                                  |               
|                                        |  |                                                                  |               
|/s/  John
        O.
        Tietjen    |  | Chief
        Financial Officer                                  | March 30, 2001
|John O.
        Tietjen                 |  | (Principal
        Financial Officer and                         |               
|                                        |  | Principal
        Accounting Officer)                            |               
|                                        |  |                                                                  |               
|/s/  Jerrold
        R.
        Perchik |  | Director                                                         | March 30, 2001
|Jerrold R.
        Perchik              |  |                                                                  |               
|                                        |  |                                                                  |               
|/s/  Ted
        L.
        Cox         |  | Director                                                         | March 30, 2001
|Ted L. Cox                              |  |                                                                  |               
|                                        |  |                                                                  |               
|/s/  David
        W.
        Lester    |  | Director                                                         | March 30, 2001
|David W.
        Lester                 |  |                                                                  |               
|                                        |  |                                                                  |               
|/s/  Bruce
        A.
        Cannon    |  | Director                                                         | March 30, 2001
|Bruce A.
        Cannon                 |  |                                                                  |               
|                                        |  |                                                                  |               
|/s/  Alan
        Schroering            |  | Director                                                         | March 30, 2001
|Alan
        Schroering                 |  |                                                                  |               
|                                        |  |                                                                  |               
|/s/  Robert
        A.
        Otis     |  | Director                                                         | March 30, 2001
|Robert A.
        Otis                  |  |                                                                  |               

19

---

INDEX TO EXHIBITS

ExhibitNumber
        
        Description of Exhibits3.1
        **
        Certificate
        of Incorporation of the Registrant is incorporated by
        reference to Exhibit 3.1 of the Registrant's report of
        Form 10-KSB for the year ended December 31, 1995.3.2
        **
        Bylaws of the
        Registrant are incorporated by reference to Exhibit 3.2
        of the Registrant's report on Form 10-KSB for the year
        ended December 31, 1995.10.1
        **
        Independent
        Consulting Services Agreement -- Maxwell, dated as of
        March 31, 1995, and executed on June 25, 1996, by and
        between the Registrant and Douglas I. Maxwell, III
        ("Maxwell"), is incorporated by reference to
        Exhibit 4(a) of Registration Statement on Form S-8 of the
        Registration, filed on June 26, 1996 (File No.
        333-06915).10.2
        **
        Confidential
        Information and Non-Competition Agreement Independent
        Contractor -- Maxwell, dated as of March 31, 1995, and
        executed on June 26, 1996, by and between the Registrant
        and Maxwell, is incorporated by reference to Exhibit 10.1
        of Registration Statement on Form S-8 of the Registrant,
        filed on June 26, 1996 (File No. 333-06915).10.3
        **
        Stock Option
        Agreement -- Maxwell, dated as of March 31, 1995, and
        executed on June 26, 1996, by and between the Registrant
        and Maxwell, is incorporated by reference to Exhibit 4(b)
        of Registration Statement on Form S-8 of the Registrant,
        filed on June 26, 1996 (File No. 333-06915).10.4
        **
        Independent
        Consulting Services Agreement -- Sullivan, dated as of
        March 31, 1995, and executed on June 26, 1996, by and
        between the Registrant and Neil C. Sullivan
        ("Sullivan"), is incorporated by reference to
        Exhibit 4(a) of Registration Statement on Form S-8 of the
        Registrant, filed on June 26, 1996 (File No. 333-06909).10.5
        **
        Confidential
        Information and Non-Competition Agreement Independent
        Contractor -- Sullivan, dated as of March 31, 1995, and
        executed on June 26, 1996, by and between the Registrant
        and Sullivan, is incorporated by reference to Exhibit
        10.1 of Registration Statement on Form S-8 of the
        Registrant, filed on June 26, 1996 (File No. 333-06909).10.6
        **
        Stock Option
        Agreement -- Sullivan dated as of March 31, 1995, and
        executed on June 26, 1996, by and between the Registrant
        and Sullivan, is incorporated by reference to Exhibit
        4(b) of Registration Statement on Form S-8 of the
        Registrant, filed on June 26, 1996 (File No. 333-06909).10.7
        **
        Acquisition
        of Assets Agreement -- TMG known as "The Metal
        Center" dated as of July 1, 1997, by and between the
        Registrant and The Metal Center set forth in an Asset
        Purchase Agreement, is incorporated by reference, as the
        sole Exhibit on Form 8-K of the Registrant, filed July
        15, 1997 (File No. 0-20979).10.8
        **
        Assignment of
        Contracts -- MGM Assignment dated September 4, 1997, by
        and between the Registrant and MGM Services, Inc. is
        incorporated by reference to Exhibit 10.11 of the
        Registrant's report on Form 10-K for the year ended
        December 31, 1997.10.9
        **
        Employment
        Agreement -- Garber dated as of October 15, 1997, by and
        between the Registrant and Garber is incorporated by
        reference to Exhibit 10.12 of the Registrant's report on
        Form 10-K for the year ended December 31, 1997.2010.10
        **
        Lease
        Agreement -- K&R Lease dated January 1, 1998, by and
        between the Registrant and K&R, is incorporated by
        reference herein, to Exhibit 10.10 on Form 8-K of the
        Registrant, filed March 3, 1998 (File No. 0-20979).*10.11
        **
        Consulting
        Agreement -- K&R Consulting Agreement dated as of
        January 2, 1998, by and between the Registrant and
        K&R, is incorporated by reference herein, to Exhibit
        10.11 on Form 8-K of the Registrant, filed March 3, 1998
        (File No. 0-20979).*10.12
        **
        Amendment to
        Employment Agreement -- Garber dated as of February 5,
        1998, by and between the Registrant and Garber, amending
        original agreement dated October 15, 1997 is incorporated
        by reference to Exhibit 10.15 of the Registrant's report
        on Form 10-K for the year ended December 31, 1997.10.13
        **
        Stock Option
        Agreement, effective as of October 31, 1997, by and
        between the Registrant and Glenn Bierman is incorporated
        by reference herein to Exhibit 10.13 of the Registrant's
        report on Form 10-K for the year ended December 31, 1999,
        as filed on April 14, 1999.10.14
        **
        Stock Option
        Agreement, effective as of October 27, 1997, by and
        between the Registrant and Sean Garber is incorporated by
        reference herein to Exhibit 10.14 of the Registrant's
        report on Form 10-K for the year ended December 31, 1999,
        as filed on April 14, 1999.10.15
        **
        Stock Option
        Agreement, effective as of October 31, 1997, by and
        between the Registrant and Sean Garber is incorporated by
        reference herein to Exhibit 10.15 of the Registrant's
        report on Form 10-K for the year ended December 31, 1999,
        as filed on April 14, 1999.10.16
        **
        Amendment No.
        1 to Option Agreement, effective as of February 5, 1998,
        by and between the Registrant and Sean Garber is
        incorporated by reference herein to Exhibit 10.16 of the
        Registrant's report on Form 10-K for the year ended
        December 31, 1999, as filed on April 14, 1999.10.17
        **
        Stock Option
        Agreement, effective as of February 16, 1998, by and
        between the Registrant and Harry Kletter is incorporated
        by reference herein to Exhibit 10.17 of the Registrant's
        report on Form 10-K for the year ended December 31, 1999,
        as filed on April 14, 1999.10.18
        **
        Consulting
        Agreement - Lassak, dated as of June 2, 1998, by and
        between the Registrant and Andrew M. Lassak is
        incorporated by reference herein to Exhibit 10.18 of the
        Registrant's report on Form 10-K for the year ended
        December 31, 1999, as filed on April 14, 1999.10.19
        **
        Consulting
        Agreement -- JCA/AML, dated as of June 2, 1998, by and
        among the Registrant, Joseph Charles & Associates,
        Inc. and Andrew M. Lassak is incorporated by reference
        herein to Exhibit 10.19 of the Registrant's report on
        Form 10-K for the year ended December 31, 1999, as filed
        on April 14, 1999.10.20
        **
        Asset
        Purchase Agreement, effective as of June 1, 1998, by and
        among the Registrant, ISA Indiana, Inc., R.J. Fitzpatrick
        Smelters, Inc., and R.K. Fitzpatrick and Cheryl
        Fitzpatrick is incorporated by reference herein to
        Exhibit 10.20 of the Registrant's report on Form 10-K for
        the year ended December 31, 1999, as filed on April 14,
        1999.10.21
        **
        Lease
        Agreement, effective June 1, 1998, by and between R.K.
        Fitzpatrick and Cheryl Fitzpatrick, R.J. Fitzpatrick
        Smelters, Inc., and ISA Indiana, Inc. is incorporated by
        reference herein to Exhibit 10.21 of the Registrant's
        report on Form 10-K for the year ended December 31, 1999,
        as filed on April 14, 1999.2110.22
        **
        Environmental
        Indemnity Agreement, effective as of June 1, 1998, by and
        between R.K. Fitzpatrick and Cheryl Fitzpatrick, R.J.
        Fitzpatrick Smelters, Inc., and ISA Indiana, Inc. is
        incorporated by reference herein to Exhibit 10.22 of the
        Registrant's report on Form 10-K for the year ended
        December 31, 1999, as filed on April 14, 1999.10.23
        
        Promissory
        Note dated May 8, 1997, from Registrant to Bank of
        Louisville in the original principal amount of
        $2,000,000.00.10.24
        
        Loan
        Agreement dated November 30, 2000, by and between the
        Registrant and Bank of Louisville.10.25
        
        Change in
        Terms Agreement dated November 30, 2000, by and between
        the Registrant and Bank of Louisville.10.26
        
        Change in
        Terms Agreement dated March 26, 2001, by and between the
        Registrant and Bank of Louisville.11
        
        Statement of
        Computation of Earnings Per Share (See Note 11 to Notes
        to Consolidated Financial Statements).


*Denotes a management contract of the
Registrant required to be filed as an exhibit pursuant to Item
601(10)(iii) of Regulation S-K under the Securities Act of 1933,
as amended.

**Previously filed.



22

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
Louisville, Kentucky
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998

CONTENTS



REPORT
        OF INDEPENDENT AUDITORS
        ..........................................................................................
        
        1FINANCIAL
        STATEMENTSCONSOLIDATED
        BALANCE SHEETS
        ......................................................................................
        
        2CONSOLIDATED
        STATEMENTS OF OPERATIONS
        .............................................................
        
        3CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS' EQUITY
        ......................................
        
        4CONSOLIDATED
        STATEMENTS OF CASH FLOWS
        ............................................................
        
        5NOTES TO
        CONSOLIDATED FINANCIAL STATEMENTS
        .................................................
        
        6SUPPLEMENTARY
        INFORMATIONVALUATION AND
        QUALIFYING ACCOUNTS
        .....................................................................
        
        20


---

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Industrial Services of America, Inc. and Subsidiary
Louisville, Kentucky

We have audited the accompanying consolidated balance sheets of
Industrial Services of America, Inc. and Subsidiary as of
December 31, 2000 and 1999, and the related consolidated
statements of operations, shareholders' equity and cash flows for
the years ended December 31, 2000, 1999 and 1998. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.

We conducted our audits in accordance with general accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Industrial Services of America, Inc. and Subsidiary
at December 31, 2000 and 1999, and the results of its
operations and its cash flows for the years ended December 31,
2000, 1999 and 1998 in conformity with generally accepted
accounting principles.

Our audit of the foregoing consolidated financial statements also
included the schedule listed under item 14(a)(2). In our opinion,
such schedule presents fairly the information required to be set
forth therein.

| | Crowe, Chizek and Company
        LLP
| | -------------------------------------

Indianapolis, Indiana
February 9, 200

1.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999

2000
        
        1999ASSETSCurrent
        assetsCash
        
        $ 1,395,882
        
        $2,388,811Accounts
        receivable - trade (after allowance for doubtful
            accounts of $100,000 and $190,000
        in 2000 and
            1999) (Notes 2 and 3)
        
        8,739,174
        
        8,747,864Accounts
        receivable - related party (Note 6)
        
        15,000
        
        11,028Employee
        loans
        
        30,577
        
        2,810Income
        tax refund receivable
        
        54,300
        
        -Net
        investment in sales-type leases (Note 5)
        
        99,937
        
        96,864Inventories
        (Notes 1, 2 and 3)
        
        2,191,162
        
        2,185,994Deferred
        income taxes (Note 4)
        
        52,400
        
        89,300Other
        
        261,604
        
        143,327Total
        current assets
        
        12,840,036
        
        13,665,998Net
        property and equipment (Notes 1, 2 and 3)
        
        5,544,859
        
        5,409,046Other
        assetsNon-compete
        agreements, net (Note 8)
        
        405,892
        
        608,248Intangibles
        (net of accumulated amortization of $186,664and
        $133,333 in 2000 and 1999)
        
        613,337
        
        666,668Net
        investment in sales-type leases (Note 5)
        
        352,897
        
        121,676Other
        assets
        
        48,147
        
        43,8591,420,273
        
        1,440,451$19,805,168
        
        $20,515,495LIABILITIES
        AND SHAREHOLDERS' EQUITYCurrent
        liabilitiesNote
        payable to bank (Note 2)
        
        $2,750,000
        
        $            -Current
        maturities of long-term debt (Note 3)
        
        421,330
        
        397,502Accounts
        payable
        
        10,126,353
        
        13,722,878Income tax payableOther current liabilities
        
        -
        
        131,867254,127
        
        175,273Total
        current liabilities
        
        13,551,810
        
        14,427,520Long-term
        liabilitiesLong-term
        debt (Note 3)
        
        1,694,493
        
        2,104,929Deferred
        income taxes (Note 4)
        
        159,400
        
        157,8001,853,893
        
        2,262,729Shareholders'
        equityCommon
        stock, $.01 par value: 10,000,000 shares
            authorized, 1,957,500 shares
        issued and 1,863,300
            and 1,929,600 shares outstanding
        in 2000 and 1999
        
        19,575
        
        19,575Additional
        paid-in capital
        
        1,891,651
        
        1,669,963Retained
        earnings
        
        2,649,555
        
        2,143,708Treasury
        stock, 94,200 and 27,900 shares at cost in
            2000 and 1999
        
        (161,316)
        
        (8,000)4,399,465
        
        3,825,246$19,805,168
        
        $20,515,495


See accompanying notes to consolidated financial statements.

2.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2000, 1999 and 1998

2000
        1999
        1998Revenue
        
        $89,241,473
        $77,497,819
        $65,204,980Cost
        of goods sold
        82,188,059
        71,089,931
        61,457,890Gross
        profit
        
        7,053,414
        6,407,888
        3,747,090Selling,
        general and administrative
        6,175,341
        5,580,505
        4,290,368Income
        (loss) from operations
        878,073
        827,383
        (543,278)Other
        income (expense)Interest
        expense
        (242,701)
        (257,147)
        (215,144)Interest
        income
        189,010
        88,697
        67,993Gain
        (loss) on sale of assets
        (2,059)
        (6,359)
        (367)Other
        expense
        (7,498)
        (73,614)
        (5,650)(63,248)
        (248,423)
        (153,168)Income
        (loss) before income taxes
        814,825
        578,960
        (696,446)Income
        tax (provision) benefit (Note 4)
        (308,978)
        (257,625)
        189,427Net
        income (loss)
        $     505,847
        $     321,335
        $   (507,019)Earnings
        (loss) per share
        $             .26
        $             .17
        $           (.26)Earnings
        (loss) per share, assuming dilution
        $             .26
        $             .16
        $           (.26)


See accompanying notes to consolidated financial statements.

3.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 2000, 1999 and 1998

|                                                    |                      | Additional
              Paid-in
              Capital | Retained
               Earnings |            |       
|--------------------------------------------------- | -------------------- | ------------------------------------------------------ | -------------------------------- | ---------- | ------
|                                                    | Common
        Stock | Treasury
        Stock                                 |                                 
|                                                    | Shares               | Amount                                                 | Shares                           | Cost       | Total 
|Balance as
        of January 1, 1998               | 1,957,500            | $19,575                                                | $1,548,750                       | $2,329,392 | 27,900
|                                                    |                      |                                                        |                                  |            |       
|Fair value of
        stock options issued for      |                      |                                                        |                                  |            |       
|consulting
        services provided to the Company | -                    | -                                                      | 40,405                           | -          | -     
|                                                    |                      |                                                        |                                  |            |       
|Net loss                                            | -                    | -                                                      | -                                | (507,019)  | -     
|                                                    |                      |                                                        |                                  |            |       
|Balance as
        of December 31, 1998             | 1,957,500            | 19,575                                                 | 1,589,155                        | 1,822,373  | 27,900
|                                                    |                      |                                                        |                                  |            |       
|Fair value of
        stock options issued for      |                      |                                                        |                                  |            |       
|consulting
        services provided to the Company | -                    | -                                                      | 80,808                           | -          | -     
|                                                    |                      |                                                        |                                  |            |       
|Net income                                          | -                    | -                                                      | -                                | 321,335    | -     
|                                                    |                      |                                                        |                                  |            |       
|Balance as
        of December 31, 1999             | 1,957,500            | 19,575                                                 | 1,669,963                        | 2,143,708  | 27,900
|                                                    |                      |                                                        |                                  |            |       
|Repurchase of
        common stock                  | -                    | -                                                      | -                                | -          | 66,300
|                                                    |                      |                                                        |                                  |            |       
|Fair value of
        stock options issued for      |                      |                                                        |                                  |            |       
|consulting
        services provided to the Company | -                    | -                                                      | 80,808                           | -          | -     
|                                                    |                      |                                                        |                                  |            |       
|Capital
        contribution                        | -                    | -                                                      | 140,880                          | -          | -     
|                                                    |                      |                                                        |                                  |            |       
|Net income                                          | -                    | -                                                      | -                                | 505,847    | -     
|                                                    |                      |                                                        |                                  |            |       
|Balance as
        of December 31, 2000             | 1,957,500            | $19,575                                                | $1,891,651                       | $2,649,555 | 94,200

See accompanying notes to consolidated financial statements.

4.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2000, 1999 and 1998



|                                                         | 2000                                                                                       | 1999                                                         | 1998                             
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------------------------ | ---------------------------------
|Cash flows
        from operating activities            
|                                                         | Net
        income (loss)                                                                  | $505,847                                                     | $321,335                         
|                                                         | Adjustments to reconcile net income (loss) to
          net cash from operating activities |                                                              |                                  
|                                                         |                                                                                            |                                                              |                                  
|                                                         |                                                                                            | Stock
        options granted for services                   | 80,808                           
|                                                         |                                                                                            | Depreciation and amortizationProvision for doubtful accounts | 1,439,145                        
|                                                         |                                                                                            | 180,413                                                      | 312,872                          
|                                                         |                                                                                            | Deferred
        income taxes                                | 38,500                           
|                                                         |                                                                                            | Loss
        on sale of property and equipment               | 2,059                            
|                                                         |                                                                                            | Change
        in assets and liabilities                     |                                  
|                                                         |                                                                                            |                                                              | Receivables                      
|                                                         |                                                                                            |                                                              | Inventories                      
|                                                         |                                                                                            |                                                              | Other
        current assets     
|                                                         |                                                                                            |                                                              | Payables                         
|                                                         |                                                                                            |                                                              | Other
        current liabilities
|                                                         |                                                                                            |                                                              |                                  
|                                                         |                                                                                            |                                                              |                                  
|Cash
        flows from investing activities             |                                                                                            |                                                              |                                  
|                                                         | Proceeds
        from sale of property and equipment                                       | 71,262                                                       | 213,438                          
|                                                         | Purchases
        of equipment under sales-type leases                                     | (234,294)                                                    | (183,270)                        
|                                                         | Purchases
        of property and equipment                                                | (1,392,592)                                                  | (1,726,778)                      
|                                                         | Other                                                                                      | -                                                            | -                                
|                                                         |                                                                                            | Net
        cash from investing activities                   | (1,555,624)                      
|                                                         |                                                                                            |                                                              |                                  
|Cash
        flows from financing activities             |                                                                                            |                                                              |                                  
|                                                         | Net
        borrowings (payments) on note payable to bank                                  | 2,750,000                                                    | (1,850,000)                      
|                                                         | Proceeds
        from issuance of long-term debt                                           | -                                                            | -                                
|                                                         | Proceeds
        from capital contribution                                                 | 140,880                                                      | -                                
|                                                         | Payments
        on long-term debt                                                         | (386,608)                                                    | (570,742)                        
|                                                         | Purchase
        of common stock                                                           | (153,316)                                                    | -                                
|                                                         |                                                                                            | Net
        cash from financing activities                   | 2,350,956                        
|                                                         |                                                                                            |                                                              |                                  
|Net
        change in cash                               | (992,929)                                                                                  | 1,374,743                                                    | 518,234                          
|                                                         |                                                                                            |                                                              |                                  
|Cash
        at beginning of year                        | 2,388,811                                                                                  | 1,014,068                                                    | 495,834                          
|                                                         |                                                                                            |                                                              |                                  
|Cash
        at end of year                              | $1,395,882                                                                                 | $2,388,811                                                   | $1,014,068                       
|Supplemental
        disclosure of cash flow information |                                                                                            |                                                              |                                  
|                                                         | Cash
        paid for interest                                                             | $242,147                                                     | $257,147                         
|                                                         | Cash
        refunded for taxes                                                            | (53,988)                                                     | (65,726)                         

See accompanying notes to consolidated
financial statements.

5.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business: Industrial Services of America,
Inc. (the Company) provides products and services to meet the
waste management needs of its customers related to ferrous,
non-ferrous and corrugated scrap recycling, management services
and waste equipment sales and rental. Management services
represent contracts with retail, commercial and industrial
businesses to handle their waste disposal needs, primarily by
subcontracting with commercial waste hauling and disposal
companies. The Company's customers are located throughout the
United States and Canada. The Company's wholly-owned subsidiary,
ISA Indiana, Inc., provides services related to ferrous,
non-ferrous and fiber scrap recycling.

Revenue Recognition: The Company records revenue for
its recycling and equipment sales divisions upon delivery of the
related materials and equipment to the customer.

The Company's management services segment provides its
customers evaluation, management, monitoring, auditing and cost
reduction of its customer's non-hazardous solid waste removal
activities. The Company recognizes revenue related to the
management aspects of these services as the services are
delivered. The segment also manages the specific waste hauling
needs of its customers which includes subcontracting with waste
haulers throughout the United States and Canada. Revenue related
to this activity is recorded on a gross basis because the Company
is ultimately responsible for service delivery, has discretion
over the selection of the specific service provided and the
amounts to be charged, and is directly obligated to the
subcontractor for the services provided.

Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and its wholly
owned subsidiary, ISA Indiana, Inc. Upon consolidation, all
intercompany accounts, transactions and profits have been
eliminated.

Common Control: The Company conducts significant levels
of business (see Note 6) with K&R Corporation, Inc. (K&R)
which is owned by the Company's principal shareholder. Because
these entities are under common control, operating results or
financial position of the Company may be materially different
from those that would have been obtained if the entities were
autonomous.

Estimates: In preparing the consolidated financial
statements in conformity with generally accepted accounting
principles, management must make estimates and assumptions. These
estimates and assumptions affect the amounts reported for assets,
liabilities, revenues and expenses, as well as affecting the
disclosures provided. Future results could differ from the
current estimates.

(Continued)

6.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Inventories: Inventories consist principally of waste
equipment machinery and parts, and scrap materials held for
resale and are stated at the lower of cost (first-in, first-out
method) or market. Inventories as of December 31, 2000 and 1999
consist of the following:

2000
        
        1999Equipment and parts
        
        $     77,039
        
        $     86,647Ferrous materials
        
        1,479,450
        
        1,200,868Non-ferrous materials
        
        634,673
        
        898,479$2,191,162
        
        $2,185,994


Property and Equipment: Property and equipment are
stated at cost and depreciated on a straight-line basis over the
estimated useful lives of the related property.

Property and equipment as of December 31, 2000 and 1999
consist of the following:

Life
        2000
        1999Equipment and vehicles
        3-10 years
        $6,410,382
        $6,528,354Office equipment
        3-5 years
        657,325
        553,709Rental equipment
        5 years
        1,727,070
        1,462,805Leasehold improvements
        10-20 years
        409,811
        392,051Construction in progress
        
        742,814
        126,2879,947,402
        9,063,206Accumulated depreciation and
          amortization
        
        4,402,543
        3,654,160$5,544,859
        $5,409,046


Depreciation expense for the years ended December 31, 2000,
1999 and 1998 was $1,183,458, $1,161,511 and $968,937.

Intangible Assets: The excess of cost over fair value
of assets acquired is being amortized over a period of 15 years
using the straight-line method. Non-compete agreements are being
amortized using the straight-line method over the benefit period
of 5 years.

(Continued)

7.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Income Taxes: The Company records income tax expense
based on the amount of taxes due on its tax returns plus deferred
taxes computed based on the expected future tax consequences of
temporary differences between the carrying amounts and tax basis
of assets and liabilities, using enacted tax rates. A valuation
allowance is recorded, if necessary, to reduce deferred tax
assets to the amount considered more likely than not to be
realized.

Statement of Cash Flows: The statement of cash flows
has been prepared using a definition of cash that includes
deposits with original maturities of three months or less.

Earnings Per Share: Amounts reported as Earnings Per
Share for each of the three years ended December 31, 2000 reflect
the earnings available to common shareholders for the year
divided by the weighted average number of common shares
outstanding during the year. The weighted average common shares
outstanding for the year ended December 31, 2000, was 1,917,633
and for each of the years ended December 1999 and 1998 were
1,929,600.

Stock-Based Compensation and Transactions: Expense for
employee compensation under stock option plans is reported only
if options are granted below the market price at the grant date.
Pro forma disclosures of net income and earnings per share are
provided as if the fair value method of Financial Accounting
Standard No. 123 was used for stock-based compensation.

Fair Values of Financial Instruments: Fair value of
financial instruments are estimated using relevant market
information and other assumptions. Fair value estimates involve
uncertainties and matters of significant judgment regarding
interest rates, prepayments and other factors. Changes in
assumptions or market conditions could significantly affect the
estimates. As of December 31, 2000 and 1999, the estimated fair
value of financial instruments approximated book value.



NOTE 2  NOTE PAYABLE TO BANK

At December 31, 2000 and 1999, the Company had a $3,000,000
operating line of credit collateralized by all Company assets.
Interest is payable monthly on the outstanding principal balance
at the Bank's prime rate (9.5% at December 31, 2000). The note
matures in June 2002.

(Continued)

8.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 3  LONG-TERM DEBT

Long-term debt as of December 31, 2000 and 1999 consists of
the following:

| |                                                                                                                                                                                                                                                                                                               |  | 2000       | 1999      
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | ----------
| | Note payable to a bank in
        monthly installments of $20,017 including interest at
        8.58% through July 2003; secured by virtually all company
        assets and a personal guarantee of the principal
        shareholder.                                                                       |  | $1,312,413 | $1,432,385
| | Note payable to a bank in
        monthly installments of $18,520 including interest at
        bank's prime interest rate (9.5% at December 31, 2000)
        through August 2003; secured by virtually all company
        assets and a personal guarantee of the principal
        shareholder.            |  | 520,527    | 689,750   
| | Note payable to R.J.
        Fitzpatrick for covenant not to compete payable in
        monthly installments of $10,500 including interest at
        8.5% through June 2003; secured by virtually all company
        assets, which is subordinate to the bank's security
        agreement disclosed above. |  | 282,883    | 380,296   
| |                                                                                                                                                                                                                                                                                                               |  | 2,115,823  | 2,502,431 
| | Current maturities                                                                                                                                                                                                                                                                                            |  | 421,330    | 397,502   
| |                                                                                                                                                                                                                                                                                                               |  | $1,694,493 | $2,104,929

The long-term debt requires annual principal payments as
follows:

| | 2001 | $  421,330
| | ---- | ----------
| | 2002 | 459,170   
| | 2003 | 1,235,323 

(Continued)

9.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 4  INCOME TAXES

The provision for income taxes consists of the following for
the years ended December 31, 2000, 1999 and 1998:

| |         |          |          | 2000     |          | 1999     |           | 1998               
| | ------- | -------- | -------- | -------- | -------- | -------- | --------- | -------------------
| | Federal |          |          |          |          |         
| |         | Current  | $159,349 |          | $212,485 |          | $21,213  
| |         | Deferred | 32,725   |          | 29,300   |          | (219,280)
| |         |          |          | 192,074  |          | 241,785  |           | (198,067)          
| |         |          |          |          |          |          |           |                    
| | State   |          |          |          |          |         
| |         | Current  | 111,129  |          | (23,360) |          | 28,860   
| |         | Deferred | 5,775    |          | 39,200   |          | (20,220) 
| |         |          |          | 116,904  |          | 15,840   |           | 8,640              
| |         |          |          |          |          |          |           |                    
| |         |          |          | $308,978 |          | $257,625 |           | $
        (189,427)

A reconciliation of income taxes at the statutory rate to the
Company's effective rate is as follows:

| |                                                                                   | 2000     |  | 1999     |  | 1998      
| | --------------------------------------------------------------------------------- | -------- |  | -------- |  | ----------
| |                                                                                   |          |  |          |  |           
| | Federal income tax (benefit)
        at statutory rate                            | $277,041 |  | $196,846 |  | $(236,792)
| |                                                                                   |          |  |          |  |           
| | State and local income
        taxes, net of 
          federal income tax affect | 32,267   |  | 34,738   |  | 5,700     
| | Valuation allowance                                                               | -        |  | (7,900)  |  | 7,900     
| | Other differences, net                                                            | (330)    |  | 33,941   |  | 33,765    
| |                                                                                   | $308,978 |  | $257,625 |  | $(189,427)

(Continued)

10.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 4  INCOME TAXES(Continued)

Significant components of the Company's deferred tax
liabilities and assets as of December 31, 2000 and 1999 are as
follows:

| |                                  | 2000                                       |                              | 1999    
| | -------------------------------- | ------------------------------------------ | ---------------------------- | --------
| | Deferred tax
        liabilities |                                            |                              |         
| |                                  | Tax depreciation
        in excess of book | $553,100                     |         
| | Deferred tax
        assets      |                                            |                              |         
| |                                  | Property taxes                             | 2,700                        |         
| |                                  | Allowance for
        doubtful accounts    | 41,700                       |         
| |                                  | Book
        amortization in excess of tax | 168,600                      |         
| |                                  | Stock options                              | 144,400                      |         
| |                                  | Alternative
        minimum tax credits    | 46,400                       |         
| |                                  | Inventory
        capitalization           | 8,500                        |         
| |                                  | State income
        taxes                 | 33,800                       |         
| |                                  |                                            |                              | 446,100 
| |                                  |                                            | Net deferred tax liabilities | $107,000



NOTE 5  SALES-TYPE LEASES

The Company is the lessor of equipment under sales-type lease
agreements having terms of three to five years, with the lessees
having the option to acquire the equipment at the termination of
the leases. All costs associated with this equipment are the
responsibility of the lessees.

Future lease payments receivable under sales-type leases at
December 31, 2000 are as follows:

2001
        
        $168,6212002
        
        156,9212003
        
        126,9382004
        
        89,2382005
        
        29,746Minimum lease payments
        receivable
        571,464Less unearned income
        (118,630)Net investment in sales-type
        leases
        452,834Less current portion
        99,937$352,897


(Continued)

11.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 6  RELATED PARTY TRANSACTIONS

The Company enters into various transactions with related
parties including the Company's principal shareholder and an
affiliated company wholly-owned by the Company's principal
shareholder (K&R). A summary of these transactions is as
follows:

|                                   |                     | 2000 |          | 1999 |          | 1998
|---------------------------------- | ------------------- | ---- | -------- | ---- | -------- | ----
|Balance sheet
        accounts:    |                     |      |          |      |          |     
|                                   | Accounts receivable |      | $15,000  |      | $11,028  |     
|Income
        statement activity: |                     |      |          |      |          |     
|                                   | Rent expense        |      | $450,000 |      | $450,000 |     
|                                   | Consulting fees     |      | $240,000 |      | $380,880 |     

The Company's Chairman is compensated through consulting fees
shown above, under a consulting agreement with K&R.

In January 1998, the Company entered into an agreement with
K&R for consulting services related to the scrap metal and
paper recycling operations and related equipment sales and
services. The agreement is for a 10-year period and requires
payments of $240,000 annually. During 1999, the Company advanced
K&R approximately $140,000 which has been recorded by the
Company as additional consulting fees. During 2000, this advance
was repaid to the Company and has been recorded as a capital
contribution.



NOTE 7  EMPLOYEE RETIREMENT PLAN

The Company maintains a defined contribution retirement plan
under Section 401(k) of the Internal Revenue Code which covers
substantially all employees. Eligible employees may contribute a
maximum of 15% of their annual salary. Under the plan, the
Company matches 10% of each employee's voluntary contributions.
The Company's contributions to the plan for 2000, 1999 and 1998
were $15,440, $6,296 and $11,126.

(Continued)

12.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 8  ACQUISITIONS

On June 1, 1998, the Company entered an agreement with R.J.
Fitzpatrick's Smelters (RJF) to purchase the business operations
of RJF for $900,000, which approximated fair market value.
Non-compete agreements of $511,782 represent the portion of the
purchase price allocated to the agreement whereby the principal
of RJF agreed not to compete with the Company for a period of
five years. The cost is being amortized on the straight-line
method over the term of the arrangement. The amount charged to
expense in 2000, 1999 and 1998 was $202,356, $202,356, and
$51,178. The results of operations are included in the statement
of operations from the date of acquisition. The pro forma
disclosures required by APB No. 16 are not material.



NOTE 9  STOCK OPTION PLANS

During the years ended December 31, 2000, 1999 and 1998 the
Company extended options to purchase shares of the Company's
common stock to several of the Company's Officers and Outside
Directors. The Company applies APB Opinion 25 in accounting for
its employees' stock option agreements. Compensation costs are
not recognized unless the exercise price of the options is below
of the market value on the date of grant. As a result,
compensation cost charged to operations in 1999, and 1998 totaled
$56,901, and $71,875. There was no compensation charged to
operations in 2000 related to these options.

The Company has an employee stock option plan under which the
Company may grant options for up to 400,000 shares of common
stock, which are reserved by the board of directors. The exercise
price of each option is equal to the market price of the
Company's stock on the date of grant. The maximum term of the
option is five years.

Had compensation costs been recorded on the employee stock
options on the basis of fair market value pursuant to FASB
Statement No. 123, net income and earnings per share would have
been reduced as follows:

| |                                  |             | 2000 |              | 1999 |              | 1998
| | -------------------------------- | ----------- | ---- | ------------ | ---- | ------------ | ----
| | Net income
        (loss)        |             |      |              |      |              |     
| |                                  | As reported |      | $505,847     |      | $321,335     |     
| |                                  | Pro forma   |      | $407,792     |      | $261,222     |     
| | Basic
        Earnings Per Share |             |      |              |      |              |     
| |                                  | As reported |      | $        .26 |      | $        .17 |     
| |                                  | Pro forma   |      | $        .21 |      | $        .14 |     

(Continued)

13.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 9  STOCK OPTION PLANS (Continued)

2000
        
        1999
        
        1998Diluted
        Earnings Per ShareAs reported
        
        $     .26
        
        $     .16
        
        $    
        (.26)Pro forma
        
        $     .21
        
        $     .13
        
        $    
        (.28)


The above pro forma information is based on an estimated fair
value of these stock options as of the date of grant using a
Black-Scholes option pricing method with the following weighted
average assumptions for 2000, 1999 and 1998: risk free interest
rate ranging from 6.0% to 4.0%, dividend yield of 0%, volatility
factor of the expected market price of the Company's common stock
ranging from .48 to .68, and a weighted average expected life of
the options ranging from 3 to 4 years.

Following is a summary of stock option activity and number of
shares reserved for outstanding options for the years ended
December 31, 2000, 1999 and 1998:

Number
        ofShares
        
        Weighted
        Average
        Option
        PricePer Share
        
        Option
        Price PerShare
        
        Maximum
        Term of
        OptionsGranted
        
        Weighted
        Average
        Grant Date
        Fair Valueof OptionsBalance as of
        January 1, 1998
        245,000
        
        $4.59
        
        $1.00
        to $5.00
        
        2 to 10
        years
        
        $5.19Granted
        
        185,000
        
        $6.38
        
        $6.00
        to $8.00
        
        2 to 5
        years
        
        $2.19Balance as of
        December 31, 1998
        430,000
        
        $5.36
        
        $1.00
        to $8.00
        
        2 to 10
        years
        
        $3.90Granted
        
        75,000
        
        $2.43
        
        $2.25
        to $2.50
        
        10 years
        
        $2.25Expired
        
        (120,000)
        
        $5.00
        
        $5.00
        
        5 to 10
        years
        
        -Balance as of
        December 31, 1999
        385,000
        
        $4.35
        
        $1.00
        to $8.00
        
        2 to 10
        years
        
        $5.41Granted
        
        100,000
        
        $2.50
        
        $2.50
        
        2 to 10
        years
        
        $ .68Balance as of
        December 31, 2000
        485,000


(Continued)

14.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 9  STOCK OPTION PLANS (Continued)

As of December 31, 2000, the 485,000 options outstanding have
exercise prices between $1.00 to $8.00 and a weighted-average
remaining contractual life of 3.9 years.



NOTE 10  LEASE COMMITMENTS

The Company leases its Louisville, Kentucky facility from a
related party (see Note 6) under an operating lease expiring
December 2007. This agreement provides for monthly payments of
$37,500 through December 2007.

The Company leases real estate in Seymour, Indiana under an
operating lease expiring June 2008. This agreement provides for
monthly payments of $13,000.

Future minimum lease payments for operating leases as of
December 31, 2000 are as follows:

| | 2001       |                            | $   606,000
| | ---------- | -------------------------- | -----------
| | 2002       |                            | 606,000    
| | 2003       |                            | 606,000    
| | 2004       |                            | 606,000    
| | 2005       |                            | 606,000    
| | Thereafter |                            | 1,212,000  
| |            | Net minimum lease payments | $4,242,000 

Total rent expense for the years ending December 31,
2000, 1999 and 1998 was $740,017, $700,598 and $605,021.



(Continued)

15.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 11  SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND

FINANCING ACTIVITIES

The following noncash investing and financing activities
occurred during the years ended December 31, 2000, 1999 and 1998.

| |                                                                                   |   | 2000 |   | 1999 |   | 1998   
| | --------------------------------------------------------------------------------- | - | ---- | - | ---- | - | -------
| |                                                                                   |   |      |   |      |   |        
| | Acquisition of equipment
        from K&R by issuing 
          note payable      | $ | -    | $ | -    | $ | 250,000
| |                                                                                   |   |      |   |      |   |        
| | Acquisition of RJ
        Fitzpatrick Smelters by issuing 
          note payable |   | -    |   | -    |   | 511,782



NOTE 12  PER SHARE DATA

The following illustrates the computation for earnings per
share and earnings per share assuming dilution.

|                                             |                                                   | 2000                                         |            | 1999          |            | 1998         
|-------------------------------------------- | ------------------------------------------------- | -------------------------------------------- | ---------- | ------------- | ---------- | -------------
|Earnings per
        share                   |                                                   |                                              |            |               |            |              
|                                             | Net income
        (loss)                         |                                              | $  505,847 |               | $  321,335 |              
|                                             | Weighted average
        shares outstanding       |                                              | 1,917,633  |               | 1,929,600  |              
|                                             |                                                   | Basic earnings per share                     |            | $         .26 |            | $         .17
|                                             |                                                   |                                              |            |               |            |              
|Earnings per
        share assuming dilution |                                                   |                                              |            |               |            |              
|                                             | Net income
        (loss)                         |                                              | $  505,847 |               | $  321,335 |              
|                                             | Weighted average
        shares outstanding       |                                              | 1,917,633  |               | 1,929,600  |              
|                                             | Add dilutive
        effect of assumed exercising |                                              |            |               |            |              
|                                             | of stock options                                  |                                              | 15,465     |               | 28,697     |              
|                                             | Diluted average
        shares outstanding        |                                              | 1,933,098  |               | 1,958,297  |              
|                                             |                                                   | Earnings per share assuming
        dilution |            | $         .26 |            | $         .16

(Continued)

16.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998

NOTE 13  SEGMENT INFORMATION

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

The Company's three reportable segments are determined by the
products and services that each offers. The recycling segment
generates its revenues based on buying and selling of ferrous,
non-ferrous and fiber scrap; CWS's revenues consist of charges to
customers for waste disposal services; and WESSCO sales and lease
income comprise the primary source of revenue for this segment.

The accounting policies of the three segments are the same as
those described in the summary of significant accounting policies
(Note 1). The Company evaluates segment performance based on
gross profit or loss and the evaluation process for each segment
includes only direct expenses omitting any selling, general and
administrative costs and income taxes.

Revenue from two CWS customers in 2000, 1999 and 1998
represents approximately 48%, 64% and 65% of CWS revenues. At
December 31, 2000 and 1999, amounts due from these customers
included in CWS accounts receivable were $4,414,142 and
$3,999,495.

2000
        
        ISA Recycling
        
        Computerized
              Waste       Systems
        
        Waste
              Equipment
               Sales &       Services
        
        Other
        
        Segment      TotalsRecycling revenues
        
        $22,903,751
        
        $                   -
        
        $                -
        
        $        -
        
        $22,903,751Equipment sales, servicesand leasing
        revenues
        
        -
        
        -
        
        2,585,850
        
        -
        
        2,585,850Management fees
        
        -
        
        63,751,872
        
        -
        
        -
        
        63,751,872Cost of goods sold
        
        (21,597,047)
        
        (58,939,875)
        
        (1,651,137)
        
        -
        
        (82,188,059)Segment profit
        
        $1,306,704
        
        $  4,811,997
        
        $  934,713
        
        $        -
        
        $7,053,414


(Continued)

17.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998



NOTE 13  SEGMENT INFORMATION (Continued)

2000
        
        ISA Recycling
        
        Computerized
               Waste
                Systems
        
        Waste
            Equipment      Sales &
              Services
        
        Other
        
        Segment     TotalsCash
        
        $      283,400
        
        $   730,262
        
        $             -
        
        $382,220
        
        $1,395,882Accounts receivable
        
        3,709,496
        
        4,969,754
        
        -
        
        59,924
        
        8,739,174Inventory
        
        2,114,123
        
        -
        
        77,039
        
        -
        
        2,191,162Net property andequipment
        
        4,930,998
        
        -
        
        613,861
        
        -
        
        5,544,859Non-competeagreements, net
        
        405,892
        
        -
        
        -
        
        -
        
        405,892Intangibles
        
        613,337
        
        -
        
        -
        
        -
        
        613,337Other assets
        
        2,037
        
        46,110
        
        -
        
        866,715
        
        914,862Segment assets
        
        $12,059,283
        
        $5,746,126
        
        $690,900
        
        $1,308,859
        
        $19,805,1681999Recycling revenues
        
        $20,017,132
        
        $                -
        
        $             -
        
        $              -
        
        $20,017,132Equipment sales, servicesand leasing
        revenues
        
        -
        
        -
        
        2,954,375
        
        -
        
        2,954,375Management fees
        
        -
        
        54,526,312
        
        -
        
        -
        
        54,526,312Cost of goods sold
        
        (17,607,626)
        
        (51,291,592)
        
        (2,190,713)
        
        -
        
        (71,089,931)Segment profit
        
        $2,409,506
        
        $3,234,720
        
        $ 763,662
        
        $              -
        
        $  6,407,888Cash
        
        $242,511
        
        $329,277
        
        $             -
        
        $1,817,023
        
        $  2,388,811Accounts receivable
        
        4,017,325
        
        4,641,590
        
        -
        
        88,949
        
        8,747,864Inventory
        
        2,099,347
        
        -
        
        86,647
        
        -
        
        2,185,994Net property andequipment
        
        4,929,310
        
        16,667
        
        463,069
        
        -
        
        5,409,046Non-competeagreements, net
        
        608,248
        
        -
        
        -
        
        -
        
        608,248Intangibles
        
        666,668
        
        -
        
        -
        
        -
        
        666,668Other assets
        
        4,584
        
        39,275
        
        -
        
        465,005
        
        508,864Segment assets
        
        $12,567,993
        
        $  5,026,809
        
        $ 549,716
        
        $2,370,977
        
        $20,515,495


(Continued)

18.

---

INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998

NOTE 13  SEGMENT INFORMATION (Continued)

1998
        
        ISA Recycling
        
        Computerized
             Waste      Systems
        
        Waste
             Equipment     Sales &
             Services
        
        Other
        
        Segment    TotalsRecycling revenues
        
        $19,167,893
        
        $                  -
        
        $                -
        
        $        -
        
        $19,167,893Equipment sales, servicesand leasing
        revenues
        
        -
        
        -
        
        1,930,869
        
        -
        
        1,930,869Management fees
        
        -
        
        44,106,218
        
        -
        
        -
        
        44,106,218Cost of goods sold
        
        (18,204,999)
        
        (41,871,945)
        
        (1,380,946)
        
        -
        
        (61,457,890)Segment profit
        
        $     962,894
        
        $  2,234,273
        
        $   549,923
        
        $        -
        
        $  3,747,090




19.

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SUPPLEMENTARY INFORMATION





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INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2000 and 1999



Balance at
             Beginning      of Year
        
        Charged
        to
           Costs and    Expenses
        
        Charged
             to Other
             Accounts
        
        Deductions
        
        Balance
           at End   of YearDescriptionAllowance for doubtfulaccounts 2000 (deductedfrom accounts receivable)
        
        $190,000
        
        $132,867
        
        $47,546
        
        $(270,413)
        
        $100,000Allowance for doubtfulaccounts 1999 (deductedfrom accounts receivable)
        
        $116,000
        
        $312,872
        
        $27,327
        
        $(266,199)
        
        $190,000




20.

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