UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, DC  20549FORM 10-K[
			x ]
			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
			THE SECURITIESEXCHANGE ACT OF 1934For Fiscal Year Ended December 31, 2006[   ]
			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
			59-0712746(State or other jurisdiction of
			incorporation or organization)
			(I.R.S. Employer
			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, of registrant's principal executive offices)Securities registered pursuant to Section 12(b) of the Act:  NoneSecurities registered pursuant to Section 12(g) of the Act:Common Stock, $.005 par value
			(Title of class)Indicate by check mark if the registrant is a well-seasoned
			issuer, as defined in Rule 405 of the Securities Act.Yes    No  XIndicate by check mark if the registrant is not required to
			file reports pursuant to Section 13 or Section 15(d) of the Act. 
			Yes   No  XIndicate 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  NoIndicate 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.
			   [   ]Indicate by check mark whether the registrant is a large
			accelerated filer, an accelerated filer, or a non-accelerated
			filer.   See definition of "accelerated filer and large accelerated
			filer" in Rule 12b-2 of the Exchange Act.(Check one):  Large accelerated filer   Accelerated
			filer    Non-accelerated filerXIndicate by check mark whether the registrant is a shell
			company (as defined in Rule 12b-2 of the Exchange Act).   Yes   No  XAggregate market value of the 1,861,574 shares of voting
			Common Stock held by non-affiliates of the registrant at the closing
			sales price on June 30, 2006:  $10,704,050.Number of shares of Common Stock, $.005 par value,
			outstanding as of the close of business on March 22, 2007: 
			3,640,899._____________________DOCUMENT INCORPORATED BY REFERENCEPortions of the registrant's definitive Proxy Statement for the 2007
			Annual Meeting of Shareholders are incorporated by reference into
			Item 10 through Item 14 of Part III of this report.


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PART I  Item
	1.    Business.  General  Industrial
	Services of America, Inc. (herein "ISA," the "Company," "we," "us," "our,"
	or other similar terms), is a Louisville, Kentucky-based logistic management
	services company that offers total package waste and recycling management
	services to commercial, industrial and logistic customers nationwide, as
	well as providing recycling and scrap processing and waste handling
	equipment sales and service.   Available
	Information  We make
	available, free of charge, through our website www.isa-inc.com, our annual
	reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
	Form 8-K, proxy statements, and amendments to those reports as soon as
	reasonably practicable after we have electronically filed with the
	Securities and Exchange Commission. We also make available on our website
	our audit committee charter, our Business Ethics Policy and Code of Conduct
	and our Code of Ethics for the CEO, CFO and senior financial officers.
	Please note that our Internet address is included in this annual report on
	Form 10-K as an inactive textual reference only. Information contained on
	our website is not incorporated by reference into this annual report on Form
	10-K and should not be considered a part of this report.  Our
	principal products and services are ferrous and non-ferrous scrap metals,
	management services, and waste equipment sales, rental and service.  Our
	goal is to remain dedicated to the recycling, management services, and
	equipment industry while sustaining steady growth at an acceptable profit,
	adding to our net worth, and providing positive returns for our
	stockholders.  Recycling
	Operations -- ISA Recycling  Since
	October 2005, we have focused much of our attention on our recycling
	business segment.  We sell processed ferrous and non-ferrous scrap material
	to end-users such as steel mini-mills, integrated steel makers and foundries
	and refineries.  We purchase ferrous and non-ferrous scrap material
	primarily from industrial and commercial generators of steel, iron,
	aluminum, copper, stainless steel and other metals as well as from other
	scrap dealers who deliver these materials directly to our facilities. We
	process these materials by sorting, shearing, cutting and/or baling. We also
	continue to focus on initiating growth in our management services business
	segment and our waste and recycling equipment sales, service and leasing
	division.  Ferrous
	Operations  Ferrous
	Scrap Purchasing - We purchase ferrous scrap from two primary sources: (i)
	industrial and commercial generators of steel and iron; and (ii) scrap
	dealers, peddlers, and other generators and collectors who sell us steel and
	iron scrap, known as obsolete scrap. Market demand and the composition,
	quality, size and weight of the materials are the primary factors that
	determine prices paid to these material providers.  Ferrous
	Scrap Processing - We prepare ferrous scrap material for resale through
	a variety of methods including sorting, shearing, cutting and bailing.  We
	produce a number of differently sized, shaped and grade products depending
	upon customer specifications and market demand.  Sorting
	- After purchasing ferrous scrap material, we inspect it to determine how we
	should process it to maximize profitability. In some instances, we may sort
	scrap material and sell it without further processing. We separate scrap
	material for further processing according to its size, composition and grade
	by using conveyor systems, front-end loaders, crane-mounted electromagnets
	and claw-like grapples.  Shearing or Cutting - Pieces of oversized ferrous scrap material, such
	as obsolete steel girders and used pipe, which are too large for other
	processing are cut with hand torches, crane-mounted alligator shears or
	stationary guillotine shears.  Baling
	- We process light-gauge ferrous materials such as clips, sheet iron and
	by-products from industrial and commercial processes, such as stampings,
	clippings and excess trimmings, by baling these materials into large,
	uniform blocks. We use cranes and conveyors to feed the material into a
	hydraulic press, which compresses the material into uniform blocks.  Ferrous
	Scrap Sales - We sell processed ferrous scrap material to end-users such
	as steel mini-mills, integrated steel makers and foundries, and brokers who
	aggregate materials for other large users. Most customers purchase processed
	ferrous scrap material through negotiated spot sales contracts, which
	establish the quantity purchased for the month and the pricing. The price we
	charge for ferrous scrap materials depends upon market supply and demand, as
	well as quality and grade of the scrap material.  Non-Ferrous
	Operations  Non-Ferrous Scrap Purchasing - We purchase non-ferrous scrap from two
	primary sources: (i) industrial and commercial non-ferrous scrap material
	providers who generate or sell waste aluminum, copper, stainless steel,
	other nickel-bearing metals, brass and other metals; and (ii) peddlers,
	scrap dealers, generators and collectors who deliver directly to our
	facilities material that they collect from a variety of sources. We also
	collect non-ferrous scrap from sources other than those that are delivered
	directly to our processing facilities by placing retrieval boxes at these
	sources. The boxes are subsequently transported to our processing
	facilities.  Non-Ferrous Scrap Processing - We prepare non-ferrous scrap metals,
	principally aluminum, copper, brass and stainless steel to sell by sorting,
	shearing, cutting or baling.  Sorting
	- Our sorting operations separate and identify non-ferrous scrap by using
	front-end loaders, grinders, hand torches and spectrometers. Our ability to
	identify metallurgical composition maximizes margins and profitability.  We
	sort non-ferrous scrap material for further processing according to type,
	grade, size and chemical composition. Throughout the sorting process, we
	determine whether the material requires further processing before we sell
	it.  Shearing or Cutting - Pieces of oversized non-ferrous scrap material,
	which are too large for other processing methods, are cut with alligator
	shears.  Baling
	- We process non-ferrous metals such as aluminum cans, sheet and siding by
	baling these materials into large uniform blocks. We use front-end loaders
	and conveyors to feed the material into a hydraulic press, which compresses
	the material into uniform blocks.  Non-Ferrous Scrap Sales - We sell processed non-ferrous scrap material
	to end-users such as foundries, aluminum sheet and ingot manufacturers,
	copper refineries and smelters, and brass and bronze ingot manufacturers.
	Prices for the majority of non-ferrous scrap materials change based upon the
	daily publication of spot and futures prices on COMEX or the London Metals
	Exchange.  Management
	Services Operations -- Computerized Waste Systems (CWS)  Our
	management services operations are in the business of commercial, retail and
	industrial waste and recycling management services.  CWS offers a "total
	package" concept to commercial, retail and industrial customers for their
	waste and recycling management needs.  Combining waste reduction and
	diversion, and waste equipment technology, CWS creates waste and recycling
	programs tailored to each customer's needs.  The services we offer include
	locating and contracting with a hauling company and recycler at a reasonable
	cost for each participating location.  CWS does not own waste-transporting
	trucks or landfills.  We do not operate or partner with any of the national
	hauling or recycling companies, and none of these companies own us. We are
	able to maintain a neutral position for the benefit of our customers.  We
	have designed and developed proprietary computer software that provides our
	personnel with relevant information on each customer's locations, as well as
	pertinent information on service providers, disposal rates, costs of
	equipment, including installation and shipping, disposal rates and recycling
	prices.  This software has allowed us to build a database for serving our
	customers that have locations nationwide as well as Canada and Mexico.  This
	software enables us to generate detailed monthly customized billing reports,
	and price tracking to accommodate our customers' needs.  Our
	management services division provides our customers evaluation, management,
	monitoring, auditing and cost reduction of non-hazardous solid waste removal
	and recycling activities.  CWS has developed a network of over 2,300
	hauling, landfill, recycling and equipment manufacturing and maintenance
	service providers throughout the United States and Canada.  Through this
	network, we are able to provide pricing estimates for current and potential
	customers. CWS customer service representatives have access to this
	information through the computer software designed and developed to enhance
	the value offered to our customers. Through this information retrieval
	system and database, customer service representatives can review the
	accuracy of recent billings for hauling, landfill and recycling rates.  Prior to
	the expiration of the Home Depot contract on October 30, 2005, we derived a
	significant portion of our revenues from Home Depot, accounting for
	approximately 56% of 2005 and 51% of 2004 total revenues.  The impact to our
	gross profit was limited to 24% in 2005 and 23% in 2004.  Waste and
	Recycling Equipment Sales and Services Operations-WESSCO-Waste and Sales
	Service Company  Our waste
	equipment sales and services operation, WESSCO, is in the business of
	commercial and industrial waste and recycling handling equipment sales,
	rental and maintenance.  By offering competitively priced waste and
	recycling handling equipment from a number of different manufacturers, we
	are able to tailor equipment packages for individual customer needs. We do
	not manufacture any equipment, but we do refurbish, recondition and add
	options when necessary.  We sell, rent and repair all types of industrial
	and commercial waste and recycling handling equipment such as compactors,
	balers and containers.  "Total Package"
	Concept  We record
	revenues and costs in the period of delivery.  Our management services
	division has third party service providers providing same day service for
	all waste removal and recycling services for our customers.  Our recycling
	division purchases ferrous and nonferrous materials, cardboard and paper on
	a daily basis.  We record these purchases in the period received.  We record
	revenue and cost in the period of delivery.  The products or services have
	value to the customer on a standalone basis.  These services make up the
	"total package" concept.  Company
	Background  ISA was
	incorporated in October 1953 in Florida under the name Alson Manufacturing,
	Inc.  From the date of incorporation through January 5, 1975, Alson designed
	and manufactured various forms of electrical products.  In 1979, the Board
	of Directors and the shareholders of Alson commenced liquidation of all the
	tangible assets of Alson.  On October 27, 1983, Harry Kletter, our Chairman
	of the Board and Chief Executive Officer, acquired 419,500 shares of ISA
	Common Stock.  The existing directors resigned and five new directors were
	elected.  On July 1,
	1984, we began a solid waste handling and disposal equipment sales
	organization under the name Waste Equipment Sales and Services Company,
	which we refer to as WESSCO.  On January 1, 1985, we merged with
	Computerized Waste Systems, Inc., 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 customers.  This strategy created an additional target market for
	us.   Subsequent to the merger with CWS, we moved the CWS headquarters from
	Springfield, Massachusetts to Louisville, Kentucky.  At the time of the
	merger, much of the customer base and marketing efforts were concentrated in
	the Northeast.  With the move to Louisville, we began to expand its
	marketing efforts, which are now nationwide as well as Canada.  On July 1,
	1997, we acquired the assets of a non-ferrous scrap metal recycling facility
	located at 7100 Grade Lane, Louisville, Kentucky, thus expanding our
	recycling product lines.  In January
	1998, we acquired the business of a ferrous scrap and corrugated paper
	recycling facility located at 7100 Grade Lane, Louisville, Kentucky.  This
	acquisition was the beginning of our ferrous scrap metal, non-ferrous scrap
	metal and corrugated paper processing segment known as ISA Recycling.  On June 1,
	1998, we acquired all of the business, property, rights and assets of a
	ferrous and non-ferrous scrap metal recycling facility located in North
	Vernon, Indiana.  On July 8, 2002, we acquired a five-acre tract at 1565
	East 4th Street, Seymour Indiana.  In the fourth quarter of 2002, we moved
	our metal recycling facilities from North Vernon, Indiana to Seymour,
	Indiana.  On
	February 15, 2005 we added a location in Lexington, Kentucky.  We are using
	this property as a transfer station for ferrous and nonferrous material. 
	There are no processing operations at this facility.  We have discontinued
	operations in this facility during the first quarter of 2007 and are now
	subleasing the property to an unaffiliated third party.  Industry
	Background  Our operations primarily involve the collection and
	processing of ferrous and non-ferrous scrap metals. We collect industrial
	scrap metal and obsolete scrap metal, process it into reusable forms and
	supply the recycled scrap metals to our customers.  We manage
	non-hazardous solid waste and recyclables for retail, commercial and
	industrial customers.  As such, the multi-billion dollar solid waste
	collection and disposal business drives the industry. The size of this
	industry has increased for the past several years and should continue to
	increase as landfill space decreases.  Although society and industry have
	developed an increased awareness of 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 believes that with the consolidation taking place in the waste
	industry, it will become increasingly difficult for a customer to receive a
	fair price.  We are, therefore, in a position to represent the best interest
	of the customer; this fact can only enhance our business.  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 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 that
	would require industrial and commercial companies to recycle a minimum
	percentage of their waste stream and restrict the percentage of recyclable
	materials in any commercial load of 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.  ISA management believes that these restrictions may create
	additional marketing opportunities as waste disposal needs become more
	specialized.  Some large industrial and commercial companies 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.  We offer these establishments a solution to this increasing
	burden.  Competition  On a
	commercial/industrial waste management level, we have competition from a
	variety of sources.  Much of it is from companies that concentrate their
	efforts on a regional level. We believe that with the proprietary database
	of regional and national pricing, we will maintain our edge on a national
	basis.  There has
	been increased competition from national hauling and recycling companies. 
	The large national hauling and recycling companies often attempt to handle
	all locations for a "national chain" customer.  This scenario poses a
	potential conflict of interest since these hauling companies and recyclers
	can attain greater profitability from increases in hauling and disposal
	revenues and fluctuations in recycling prices.  In addition to having an
	interest in higher hauling and disposal rates, the national hauling
	companies do not have operations in every community.  Additionally, we have
	encountered evidence of some reluctance from independent hauling and
	recycling companies to work with national hauling and recycling companies
	for locations not serviced by these national companies.  There is
	also competition from some equipment manufacturers.  The primary interest of
	these companies is selling, leasing and renting equipment and offering
	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 ISA competitors have
	greater financial, marketing and physical resources.  There can be no
	assurance that we will be able to obtain our desired market share based on
	the competitive nature of this industry.  An
	important difference between us and the majority of our competition is our
	management process.  Our systematic approach attempts to provide consistent
	results for the customer.  At the implementation stage, we actively bid out
	every location that a new customer requests.  We repeat this bidding process
	any time a customer receives notice of an undocumented price increase or at
	regular intervals as indicated in the contract.  At subsequent stages, we
	will evaluate a customer's solid waste and recycling program and provide
	alternatives for improvement.  We have
	developed a network of maintenance, hauling, disposal, equipment and
	recycling companies throughout the country and in Canada, and due to the
	volume of business we have awarded to them, these companies will often offer
	us discounted hauling, disposal and maintenance rates and increased
	recycling prices.  However, no company or service provider in the hauling,
	disposal, recycling, equipment and/or maintenance industries owns or
	controls us.  We deal with those companies and service providers that can
	supply quality service and products at a favorable price and understand that
	as long as we serve our customers well, we and our service providers will
	have the opportunity to bid on future accounts.  Few, if
	any, of our competitors have a national network of service providers similar
	to the one we have developed over our years of operation.  Although the
	major hauling and recycling companies have operating companies in most major
	and intermediate-sized cities, they do not have nationwide geographic
	coverage.  Therefore, for large commercial and industrial clients, they must
	obtain bids from local hauling, disposal and recycling companies that may
	perceive them to be future competitors.  We have positioned ourselves to
	negotiate with the haulers, landfill operators and recyclers while servicing
	our customers on a nationwide basis.  Employees  As of
	December 31, 2006, ISA had one hundred and two (102) full-time employees as
	follows: recycling 69, management services 16, sales/leasing 4 and
	administration/information technology 13.  None of our employees is a member
	of a union.  Effect of State
	and Federal Environmental Regulations  Any
	environmental regulatory liability relating to our operations is generally
	borne by the customers with whom we contract and the service providers in
	their capacity as transporters, disposers and recyclers.  Our policy is to
	use our best efforts to secure indemnification for environmental liability
	from our customers and service providers.  Although we believe that our
	business does not subject us to potential environmental liability, we
	continue to use our best efforts to be in compliance with federal, state and
	local environmental laws, including but not limited to the 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 has not historically constituted a
	material expense to us.  The
	collection and disposal of solid waste and rendering of related
	environmental services as well as recycling operations and issues 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 hauling, disposal and recycling
	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.  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 administer those regulations.  We strive
	to conduct our operations in compliance with applicable laws and
	regulations.  While such amounts expended in the past or that we anticipate
	spending in the future have not had and are not expected to have a material
	adverse effect on our 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 we operate 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. Several states have recently enacted
	these laws.  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 courts have declared unconstitutional laws that overtly
	discriminate against out of state waste, courts have upheld some laws that
	are less overtly discriminatory.  Challenges to other such laws are
	pending.  The outcome of pending litigation and the likelihood that
	jurisdictions will adopt other such laws that will survive constitutional
	challenge are uncertain.  ITEM
	1A.   Risk Factors  Risk Factors  This
	Annual Report on Form 10-K includes "forward-looking statements" within the
	meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
	including, in particular, certain statements about our plans, strategies and
	prospects. Although we believe that our plans, intentions and expectations
	reflected in or suggested by such forward-looking statements are reasonable,
	we cannot assure you that such plans, intentions or expectations will be
	achieved. Important factors that could cause our actual results to differ
	materially from our forward-looking statements include those set forth in
	this Risk Factors section. All forward-looking statements attributable to us
	or any persons acting on our behalf are expressly qualified in their
	entirety by the cautionary statements set forth below. Unless the context
	requires otherwise, all references to the "company," "we," "us" or "our"
	include Industrial Services of America, Inc. and subsidiaries.  If any of
	the following risks, or other risks not presently known to us or that we
	currently believe to not be significant, develop into actual events, then
	our business, financial condition, results of operations, cash flows or
	prospects could be materially adversely affected.  Risks
	Related to Our Operations  Our business
	has increasing involvement in ferrous, non-ferrous and fiber recycling.
	Currently, the prices of metals are high, but changes in demand, including
	foreign demand, regulation, economic slowdowns or increased competition
	could result in a reduction of our revenue and consequent decrease in our
	common stock price.  Many
	companies offer or are engaged in the development of products or the
	provisions of services that may be or are competitive with our current
	products or services, although we do not believe any competition offers the
	unique mixture of the services and products we provide in the waste
	management area. Many entities have substantially greater financial,
	technical, manufacturing, marketing, distribution and other resources than
	we possess.  In addition, the industry is constantly changing as a result of
	consolidation that may create additional competitive pressures in our
	business environment.  An increase in
	the price of fuel may adversely affect our business.  Our
	operations are dependent upon fuel, which we generally purchase in the open
	market on a daily basis. Direct fuel costs include the cost of fuel and
	other petroleum-based products used to operate our fleet of cranes and heavy
	equipment. We are also susceptible to increases in indirect fuel costs which
	include fuel surcharges from vendors.  During 2004, 2005 and 2006, we
	experienced increases in the cost of fuel and other petroleum-based
	products.  A portion of these increases we passed on to our customers.
	However, because of the competitive nature of the industry, there can be no
	assurance that we will be able to pass on current or future increases in
	fuel prices to our customers. Due to political instability in oil-producing
	countries, fuel prices may continue to increase in 2007. A significant
	increase in fuel costs could adversely affect our business.  We could incur
	substantial costs in order to comply with, or to address any violations
	under, environmental laws that could significantly increase our operating
	expenses and reduce our operating income.  Our
	operations are subject to various environmental statutes and regulations,
	including laws and regulations addressing materials used in the processing
	of our products. In addition, certain of our operations are subject to
	federal, state and local environmental laws and regulations that impose
	limitations on the discharge of pollutants into the air and water and
	establish standards for the treatment, storage and disposal of solid and
	hazardous wastes. Failure to maintain or achieve compliance with these laws
	and regulations or with the permits required for our operations could result
	in substantial operating costs and capital expenditures, in addition to
	fines and civil or criminal sanctions, third party claims for property
	damage or personal injury, cleanup costs or temporary or permanent
	discontinuance of operations. Certain of our facilities have been in
	operation for many years and, over time, we and other predecessor operators
	of these facilities have generated, used, handled and disposed of hazardous
	and other regulated wastes. Environmental liabilities could exist, including
	cleanup obligations at these facilities or at off-site locations where
	materials from our operations were disposed of, which could result in future
	expenditures that cannot be currently quantified and which could reduce our
	profits.  Our financial
	statements are based upon estimates and assumptions that may differ from
	actual results.  We have
	prepared our financial statements in accordance with U.S. generally accepted
	accounting principles and necessarily include amounts based on estimates and
	assumptions we made.  Actual results could differ from these amounts.
	Significant items subject to such estimates and assumptions include the
	carrying value of long-lived assets, valuation allowances for accounts
	receivable, liabilities for potential litigation, claims and assessments,
	and liabilities for environmental remediation and deferred taxes.  We depend on
	our senior management team and the loss of any member could prevent us from
	implementing our business strategy.  Our
	success is dependent on the management and leadership skills of our senior
	management team. We have not entered into employment agreements with any of
	our senior management personnel. The loss of any members of our management
	team or the failure to attract and retain additional qualified personnel
	could prevent us from implementing our business strategy and continuing to
	grow our business at a rate necessary to maintain future profitability.  Seasonal
	changes may adversely affect our business and operations.  Our
	operations may be adversely affected by periods of inclement weather which
	could decrease the collection and shipment volume of recycling materials.  Risks
	Related to Our Common Stock  Future sales of
	our common stock could depress our market price and diminish the value of
	your investment.  Future
	sales of shares of our common stock could adversely affect the prevailing
	market price of our common stock. If our existing shareholders sell a large
	number of shares, or if we issue a large number of shares, the market price
	of our common stock could significantly decline. Moreover, the perception in
	the public market that our existing shareholders and in particular members
	of the Kletter family might sell shares of common stock could depress the
	market for our common stock.  The market
	price for our common stock may be volatile.  In recent
	periods, there has been volatility in the market price for our common stock.
	In addition, the market price of our common stock could fluctuate
	substantially in the future in response to a number of factors, including
	the following:  -
				our quarterly operating results or the
				operating results of our companies in the waste management or
				ferrous, non-ferrous and fiber recycling industry;-
				changes in general conditions in the economy,
				the financial markets or the ferrous, non-ferrous and fiber
				recycling industry;-
				loss of significant customers, as was the
				case with the loss of Home Depot; and-
				increases in materials and other costs.
  In
	addition, in recent years the stock market has experienced extreme price and
	volume fluctuations. This volatility has had a significant effect on the
	market prices of securities issued by many companies for reasons unrelated
	to their operating performance. These broad market fluctuations may
	materially adversely affect our stock price, regardless of our operating
	results.   Item
	2.    Properties.  Related Parties Agreements -- K&R  On
	February 16, 1998 our Board of Directors ratified and formalized an existing
	relationship in connection with (i) our leasing of facilities from K&R, LLC
	and (ii) the provision of consulting services from K&R to us.  K&R is our
	affiliate because our Chief Executive Officer is our principal shareholder
	and he owns 100% of K&R.  Lease Agreement.  This K&R lease, effective as of January 1, 1998,
	covers approximately 20.5 acres of land and the improvements thereon, which
	are located at 7100 Grade Lane in Louisville, Kentucky.  The principal
	improvements consist of the following:  -
				an approximately 22,750 square foot
				building used as the corporate and CWS offices;-
				an approximately 8,286 square foot building
				used for sales/leasing and information technology offices;-
				an approximately 13,995 square foot building
				used as the paper recycling plant;-
				an approximately 12,000 square foot building
				used for the metals recycling plant;-
				an approximately 51,760 square foot building
				used as the recycling offices and warehouse space;-
				and the remaining 15,575 square feet of space
				contained in five (5) buildings ranging in size from
				approximately 256 to 8,000 square feet.
  The
	initial term of the K&R lease is for ten years with two five-year option
	periods available thereafter.  The base rent for the first five years was
	$450,000 per annum.  The rent for the second five years, beginning January
	1, 2003, became $505,272 per annum, payable at the beginning of each month
	in an amount equal to $42,106.  This fixed minimum rent adjusts each five
	years, including for 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 our change in
	control.  We must 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 our
	indemnification of K&R for all damages arising out of our use of or the
	condition of the leased premises excepting from K&R's negligence.  In 2004,
	we paid for repairs totaling $302,160 that we made to the buildings and
	property that we lease from K&R, located at 7100 Grade Lane, Louisville,
	Kentucky.  K&R executed an unsecured promissory note, dated March 25, 2005
	but effective December 31, 2004, to us for the principal sum of $302,160. 
	K&R makes payments on the promissory note of principal and interest in
	ninety-six (96) monthly installments of $3,897.66. The rate of interest is
	five and one-half percent (5.5%) per annum.  Failure of K&R to make any
	payment when due under this note within fifteen (15) days of its due date
	shall constitute a default.  After the fifteen day period, the note shall
	bear interest at a rate equal to fifteen percent (15%) per annum and we have
	the right to exercise our remedies to collect full payment of the note.  In an
	addendum to the K&R lease as of January 1, 2005, the rent was increased
	$4,000 as a result of the improvements made to the property in 2004.  For
	years 2005 and 2006, our payments to K&R of $4,000 for additional rent and
	the payment from K&R of $3,897.66 for the promissory note were offset.  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 for mergers and acquisitions.  We are
	responsible for all of K&R's expenses and pay 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 our employees for a
	period of five years and within 100 miles of any of our operations.  We
	compensate our principal shareholder and Chief Executive Officer through
	consulting fees paid pursuant to the K&R consulting agreement.  Lease and
	Sublease Agreements -- Lexington  We have
	subleased the Lexington property to an unaffiliated third party for a term
	commencing March 1, 2007 and ending December 31, 2012 for $4,500 per month.
	 We currently lease this property from an unrelated party for $4,500 per
	month; the lease terminates December 31, 2012.  If for any reason the
	sublessee defaults, we remain liable for the remainder of the lease payments
	through December 31, 2012.  Lease Agreement
	-- Pineville, Louisiana  On
	February 6, 2007, we leased 7.7 acres of real property, including a 38,000
	square foot warehouse and a 400 square foot office, in Pineville, Louisiana
	for $5,250 per month for twenty-four months beginning March 1, 2007 and
	ending February 28, 2009, with an option to purchase the property for a
	purchase price of $575,000.  Item
	3.    Legal Proceedings.  Effective
	as of May 5, 2006, we entered into an agreement with Andrew M. Lassak to
	settle Mr. Lassak's claims against us in Lassak v. Industrial Services of
	America, Inc., et al, No. 04-423-CA (Fla. 19th Cir. Ct. filed June 2,
	2004).  Lassak's demands and claims included rights to purchase 240,500
	shares of our common stock for $1.25 per share, rights to purchase 149,500
	shares of our common stock for $3.00 per share, and demand and piggyback
	registration rights as well as cashless exercise rights with respect to such
	options. Since the inception of the suit, we had disputed Lassak's claims
	and had denied any liability for Lassak's claims and demands. Pursuant to
	the settlement agreement, we allowed Lassak to exercise a reduced number of
	the options he was seeking -- 40,000 at an exercise price of $1.25 per share.
	Lassak tendered to us the full exercise price for the 40,000 options and we
	filed a registration statement for the underlying shares with the Securities
	and Exchange Commission on May 24, 2006. The registration was declared
	effective by the Securities and Exchange Commission on June 12, 2006. We
	then delivered 40,000 registered shares to Lassak, thereby satisfying all
	our requirements under the settlement agreement and effectively concluding
	this matter.  Item
	4.     Submission of Matters to a Vote of Security Holders.  None.  Item
				4a.    ISA Executive Officers.Name
				Served as an
				Executive
				Officer From
				Age
				Position with the 
				Registrant and Other
				Principal OccupationsHarry Kletter
				1983
				80
				ISA Chairman
				of the Board and Chief Executive Officer from May 2, 2000 to
				present.  ISA Chairman of the Board and Chief Visionary Officer
				from February 3, 2000 to May 2, 2000.  Mr. Kletter served as
				Chairman of the Board and Chief Executive Officer from July 31,
				1992 to February 3, 2000, President of ISA 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, LLC.Alan L. Schroering
				2000
				42
				ISA Chief Financial Officer since May, 2001.  Mr. Schroering
				served as an ISA board member from June 2000 to May 2001. Mr.
				Schroering has served as Treasurer from October 2001 to
				present.  Mr. Schroering served in several accounting positions
				with National Processing Company from April 1998 to May 2000. 
				Mr. Schroering served previously in several accounting positions
				with ISA from November 1984 to March 1998.Ed List
				June 2005 - December 2006
				61
				ISA Chief Operating Officer from June 1, 2004 to December 31,
				2006.  He served previously as Vice President/Senior Accounts
				Manager CWS for ISA from May 2000 to June 2004.Bob Cuzzort
				January 2006 - June 2006
				58
				ISA Executive Vice President, Corporate Operations from January
				2005 to June 22, 2006.  ISA Chief Operating Officer from July
				2001 to April 2003.  Director of Human Resources from March 2001
				to April 2003.  He served previously in charge of special
				projects for ISA from October 2000 to March 2001.  Mr. Cuzzort
				served as general manager of Bassett Furniture Direct from March
				1998 to August 2000.  He served in several management positions
				with Haverty Furniture Company, Inc. from January 1970 to
				February 1998.Michael P.
				Shannonhouse
				April 2005 -
				August 2006
				30
				ISA Secretary
				from April 16, 2004 through August 10, 2006. Served as acting
				ISA Secretary from October 20, 2003 to April 16, 2004, and ISA
				Director of Legal Affairs from October 20, 2003 to August 10,
				2006. Prior to accepting his position with ISA, Mr. Shannonhouse
				worked as a law clerk in private practice from 2002 to 2003. 
				Mr. Shannonhouse is employed with Atherton & Associates, a law
				firm in Louisville, Kentucky, and performs legal services for us
				through this firm.  Mr. Shannonhouse is acting as a recording
				secretary for the ISA Board meeting minutes.None of
				the above officers is related to any other except that Mr. List
				is the son-in-law of Mr. Kletter.  With respect to certain
				arrangements with certain officers of ISA relating to executive
				compensation, see section entitled "Executive Compensation -
				Certain Transactions" in ISA's Proxy Statement for the 2007
				Annual Meeting of Shareholders as incorporated herein by
				reference at Item 11.
    PART II  Item 5.     Market
	for ISA's Common Equity, Related Stockholder Matters and Issuer Purchases of
	Equity Securities.  Effective
	August 29, 1996, the $.01 par value ISA common stock 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, our common stock traded on the
	Over the Counter Bulletin Board operated by the National Association of
	Securities Dealers, Inc.   High and low sales price of the common stock
	price is summarized as follows:  Quarter Ended
			
			2006
			
			2005
			
			2004High
			Low
			
			High
			Low
			
			High
			LowMarch 31
			
			$ 5.20
			$3.22
			
			$ 7.50
			$5.94
			
			$23.75
			$2.06June 30
			
			$ 8.00
			$4.82
			
			$ 6.10
			$3.70
			
			$21.50
			$9.91September 30
			
			$ 6.31
			$5.58
			
			$ 6.60
			$3.69
			
			$14.89
			$5.68December 31
			
			$ 6.72
			$5.26
			
			$ 3.70
			$2.85
			
			$13.36
			$7.60
  There were
	approximately 383 shareholders of record as of December 31, 2006.  On
	February 26, 2004, we approved a two for one stock split distributed on
	March 30, 2004 to shareholders of record on March 16, 2004.  The stock split
	required retroactive restatement of all historical share and per share data.  Until
	August 8, 2000, we had always had a policy intending that we would retain
	earnings to help finance our expansion programs.  On August 8, 2000, our
	Board of Directors approved a change in the dividend policy whereby our
	Board of Directors could declare dividends, which we did declare and pay on
	one occasion in the amount of $.10 per share on September 21, 2004.  Our
	Board of Directors has the discretionary power to declare dividends within
	the constraints of our loan agreement with the Branch Banking and Trust
	Company.  On
	November 15, 2005, our Board of Directors authorized a new program to
	repurchase up to 200,000 shares of our common stock at current market
	prices.  In 2006 we repurchased 5,509 shares and in 2005 we repurchased
	10,000 shares.  We repurchased 673,400 shares of our common stock in a prior
	stock repurchase program that began in August 2000.  Issuer Purchases of Equity SecuritiesPeriod
			Total Number
			Average Price
			Total Number of Shares
			Maximum Number ofof Shares
			Paid per Share
			Purchased as part of
			Shares that may yet bePurchased
			
			Publicly Announced
			Purchased Under thePlans or Programs
			Plans or ProgramsOct-05
			-Nov-05
			10,000
			$ 2.9762
			10,000
			190,000Dec-05
			-Jan-06
			5,509
			$2.9658
			15,509
			184,491
  The following performance graph compares the
	performance of ISA's Common Stock to the Standard & Poors 500 and to a peer
	group for the period commencing December 2001.  Since there is no nationally
	recognized industry index consisting of consultants in the business of
	retail and industrial waste management sales and service of waste handling
	equipment to be used as a peer group index, ISA constructed its own peer
	group.  This peer group is comprised of four companies which represent the
	other public companies in the industry -- Casella Waste Systems, Inc.,
	Republic Services, Inc., Waste Connections, Inc., and Waste Holdings, Inc. 
	The returns of each member of the peer group are weighted according to each
	member's stock market capitalization as of the beginning of the period
	measured.  The graph assumes that the value of the investment in ISA's
	Common Stock and each index was $100 at December 2001 and that all dividends
	were reinvested.    Copyright  2007 Standard
			& Poor's, a division of The McGraw-Hill Companies, Inc. All rights
			reserved.www.researchdatagroup.com/S&P.htm12/01
			12/02
			12/03
			12/04
			12/05
			12/06Industrial Services Of
			America, Inc.
			
			100.00
			95.69
			206.22
			762.23
			300.24
			528.08S & P 500
			
			100.00
			77.90
			100.24
			111.15
			116.61
			135.03Peer Group
			
			100.00
			105.59
			125.92
			165.05
			180.23
			206.95
    Item
	6.    Selected Financial Data.  Selected Financial Data 2006
			
			2005
			
			2004
			
			2003
			
			2002(Amounts in Thousands, Except Per Share Data)Year ended December 31:Total revenue
			$   62,082
			
			$  117,382
			
			$  139,588
			
			$ 118,494
			
			$ 101,279Net income (loss)
			2,188
			
			1,102
			
			1,497
			
			668
			
			(164)Earnings (loss)per common share:Basic
			$        0.61
			
			$       0.31
			
			$       0.43
			
			$       0.21
			
			$    (0.05)Diluted
			$        0.61
			
			$       0.31
			
			$       0.42
			
			$       0.21
			
			$    (0.05)Cash dividends declaredper common share *
			$            -
			
			$           -
			
			$       0.10
			
			$           -
			
			$           -At year end:Total assets
			$    19,332
			
			$   17,884
			
			$    21,079
			
			$   19,988
			
			$  18,913Long-term debt and capital leaseobligations, net of current maturities
			$      2,858
			
			$        153
			
			$      1,272
			
			$     3,748
			
			$    3,748
 * adjusted for
	two-for-one stock split effective February 26, 2004  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 our
	consolidated financial statements  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 we will achieve such
	financial predictions, forecasts and projections.  Please see Item 1A, "Risk
	Factors" for items that could affect our financial predictions, forecasts
	and projections.  General  We are
	focusing our attention now and in the future towards our recycling business
	segment.  We sell processed ferrous and non-ferrous scrap material to
	end-users such as steel mini-mills, integrated steel makers, foundries and
	refineries.  We purchase ferrous and non-ferrous scrap material primarily
	from industrial and commercial generators of steel, iron, aluminum, copper,
	stainless steel and other metals as well as from other scrap dealers who
	deliver these materials directly to our facilities. We process these
	materials by sorting, shearing, cutting and/or baling. We will also continue
	to focus on initiating growth in our management services business segment
	and our waste and recycling equipment sales, service and leasing division.  We
	continue to pursue a growth strategy in the waste management services arena
	by adding new locations of existing customers as well as marketing our
	services to potential customers.  Currently, we service 1,721 customer
	locations throughout the United States and we utilize an active database of
	over 6,100 vendors to provide timely, thorough and cost-effective service to
	our customers.  Our goal
	is to remain dedicated to the recycling, management services, and equipment
	industry while sustaining steady growth at an acceptable profit, adding to
	our net worth, and providing positive returns for stockholders.  We intend
	to increase efficiencies and productivity in our core business while
	remaining alert for possible acquisitions, strategic partnerships, mergers
	and joint-ventures that would enhance our profitability.  We have
	operating locations in Louisville and Lexington, Kentucky, and Seymour,
	Indiana.  We plan to close the Lexington location in the first quarter of
	2007.  We do not have operating locations outside the United States.  Liquidity and Capital Resources  As of
	December 31, 2006, we held cash and cash equivalents of $1,331,807.  On
	December 22, 2006, ISA executed a new revolving credit facility with BB&T
	increasing the borrowing line from $5.0 million to $10.0 million to provide
	ISA with working capital to support the current needs of our business.  This
	revolving credit facility has a three year term, provides for advances of up
	to eighty percent (80%) of ISA's eligible accounts receivable and up to the 
	forty percent (40%) of eligible inventory, and up to one hundred (100%) of
	ISA's net book value of eligible equipment less an outstanding indebtedness
	on the equipment.  The revolving credit facility bears interest at the one
	month Libor rate, as published in the Wall Street Journal, plus two and
	twenty-five one-hundredths percent (2.25%) per annum, 7.57% as of December
	31, 2006, and is secured by all ISA assets (except rental fleet equipment). 
	The revolving credit facility contains certain restrictive and financial
	covenants.  At December 31, 2006, ISA was in compliance with all restrictive
	covenants.  We also
	have a $2.0 million loan with Fifth Third Bank secured by our rental fleet
	equipment.  Indebtedness under this loan agreement accrues interest at a
	fixed interest rate of 6.83%.  The maturity date under this agreement is
	June 2011 with a ten-year amortization schedule.  As of December 31, 2006 we
	had borrowed $1,929,016 and as of December 31, 2005, there were no
	borrowings against this loan.  The terms of the loan agreement place certain
	restrictive covenants on us, including maintenance of a specified tangible
	net worth, debt to net worth and EBITDA ratio.  Consequently, these
	covenants restrict our ability to incur as much additional debt as we may
	desire for future growth.  At December 31, 2006, we were in compliance with
	all restrictive covenants.  During
	2006, we purchased $2,352,509 of property and equipment, including $186,178
	in equipment under a capital lease.  In the recycling segment we spent
	$1,334,583 for an automobile crusher, a forklift, a loader, a Mack truck, a
	front scale, open top containers, crane improvements, and upgrades to our
	radiation detection system.  In the equipment sales, leasing and service
	segment, we purchased $902,120 in rental equipment that we located at
	customer sites.  This rental fleet equipment consists of solid waste
	handling and recycling equipment such as compactors, containers and balers.
	It is our intention to continue to pursue this market.  We purchased office
	equipment of $78,251 and spent $37,555 on buildings and improvements.  We
	implemented the use of a purchasing card with a credit limit of $6.0 million
	in the second quarter of 2004.  We have included the balance due on the
	purchasing card as part of accounts payable.  The outstanding balance on the
	purchasing card at December 31, 2006 was $687,437 with a due date of January
	27, 2007; the entire balance was paid before the due date.  The card accrues
	interest at prime plus 5.9% after the first twenty-five days of the
	purchase; our intention is to pay off the full balance every month so as to
	not incur finance charges.  To date we have not incurred any interest
	charges on this purchasing card.  The card requires monthly minimum payments
	on any balance outstanding at month end.  We receive rebates on an annual
	basis for all purchases made with the card.  We expect
	that existing cash flow from operations and available credit under our
	existing credit facilities, including the purchasing card, will be
	sufficient to meet our cash needs in 2007.  Critical
	Accounting Policies  In
	preparing financial statements in conformity with accounting principles
	generally accepted in the United States, we make estimates and assumptions
	that affect the reported amounts of assets and liabilities and disclosures
	of contingent assets and liabilities at the date of the financial
	statements, as well as the reported amounts of revenues and expenses during
	the reporting period.  We believe that we consistently apply judgments and
	estimates and that such consistent application results in financial
	statements and accompanying notes that fairly represent all periods
	presented.  However, any errors in these judgments and estimates may have a
	material impact on our statement of operations and financial condition. 
	Critical accounting policies, as defined by the Securities and Exchange
	Commission, are those that are most important to the portrayal of our
	financial condition and results of operations and require our most difficult
	and subjective judgments and estimates of matters that are inherently
	uncertain.  Revenue
	recognition  We
	recognize revenues from processed ferrous and non-ferrous scrap metal sales
	when title passes to the customer.  We recognize revenues from services as
	the service is performed.  We accrue sales adjustments related to price and
	weight differences and allowances for uncollectible receivables against
	revenues as incurred.  Accounts
	receivable and allowance for doubtful accounts receivable  Accounts
	receivable consist primarily of amounts due from customers from product and
	brokered sales. The allowance for doubtful accounts receivable totaled
	$100,000 and $50,000 at December 31, 2006 and 2005, respectively.  Our
	determination of the allowance for doubtful accounts receivable includes a
	number of factors, including the age of the balance, past experience with
	the customer account, changes in collection patterns and general industry
	conditions.  Potential
	credit losses from our significant customers could adversely affect our
	results of operations or financial condition.  General weakness in the steel
	and metals sectors during the period from 1998 to 2001 previously led to
	bankruptcy filings by many of our customers, which caused us to recognize
	additional allowances for doubtful accounts receivable. While we believe our
	allowance for doubtful accounts is adequate, changes in economic conditions
	or any weakness in the steel and metals industries could adversely impact
	our future earnings.  Inventory  Our
	inventories primarily consist of ferrous and non-ferrous scrap metals and we
	value at the lower of average purchased cost or market. We determine
	quantities of inventories based on our inventory systems, which are subject
	to periodic physical verification using estimation techniques including
	observation, weighing and other industry methods. Prices of commodities we
	own may be volatile.  We are exposed to risks associated with fluctuations
	in the market price for both ferrous and non-ferrous metals, which are at
	times volatile. We attempt to mitigate this risk by seeking to rapidly turn
	our inventories.  Property and
	Equipment  We carry
	the value of land on our books at cost.  We report premises and equipment at
	cost less accumulated depreciation and amortization.  We charge depreciation
	and amortization for financial reporting purposes to operating expense using
	the straight-line method over the estimated useful lives of the assets. 
	Estimated useful lives are up to 40 years for buildings and leasehold
	improvements, 1 to 10 years for office and operating equipment, and 5 years
	for rental equipment.  Our determination of estimated useful life includes
	past experience and normal deterioration.  We include maintenance and
	repairs in selling, general and administrative expenses.  We include gains
	and losses on disposition of premises and equipment in gain (loss) on sale
	of assets.  Valuation of long-lived assets and goodwill  We
	regularly review the carrying value of certain long-lived assets for
	impairment whenever events or changes in circumstances indicate that the
	carrying amount may not be realizable. If an evaluation is required, we
	compare the estimated future undiscounted cash flows associated with the
	asset to the asset's carrying amount to determine if an impairment of such
	asset is necessary. The effect of any impairment would be to expense the
	difference between the fair value of such asset and its carrying value.
	During the year ended December 31, 2006, we determined no impairment
	existed.  Effective
	January 1, 2002, we adopted Statement of Financial Accounting Standards ("SFAS")
	No. 142, "Goodwill and Other Intangible Assets," which requires that we
	review goodwill at least annually for impairment based on the fair value
	method. At December 31, 2006, we determined, based on current industry and
	other market information, that no impairment existed.  Income Taxes  We account
	for income taxes under the asset and liability method.  We recognize
	deferred tax assets and liabilities for the future tax consequences
	attributable to differences between the financial statement carrying amounts
	of existing assets and liabilities and their respective tax bases and
	operating loss and tax credit carryforwards. We measure deferred tax assets
	and liabilities using enacted tax rates expected to apply to taxable income
	in the years in which we expect to recover or settle those temporary
	differences. We recognize the effect on deferred tax assets and liabilities
	of a change in tax rates in income in the period that includes the enactment
	date.  Results of Operations  The
	following table presents, for the years indicated, the percentage
	relationship that certain captioned items in our Consolidated Statements of
	Operations bear to total revenues and other pertinent data:   Year ended December 31,
			
			2006
			2005
			2004Consolidated Statements of Operations Data:Total
			revenue .............................................
			
			100.0%
			100.0%
			100.0%Total cost of goods
			sold.............................
			
			85.4%
			93.5%
			94.1%Selling, general and
			administrativeExpenses
			......................................................
			
			9.0%
			5.0%
			4.0%Income before other income (expense).......
			
			5.6%
			1.5%
			1.9%
  Year Ended
	December 31, 2006 Compared to Year Ended December 31, 2005  Total
	revenue decreased $55,299,811 or 47.1% to $62,082,048 in 2006 compared to
	$117,381,859 in 2005.  Management services revenue decreased $67,888,697 or
	84.2% to $12,712,073 in 2006 compared to $84,451,367 in 2005.  This change
	is primarily to due to the loss of Home Depot as a customer in October
	2005.  Recycling revenue increased $15,014,085 or 50.1% to $44,967,023 in
	2006 compared to $29,952,938 in 2005.  This change is due to an increase of
	19% in the volume of shipments and an increase of 36% in average cost per
	ton.  Equipment, service and leasing revenue decreased $1,249,770 or 42.0%
	to $1,727,784 in 2006 compared to $2,977,554 in 2005.  This decrease is
	primarily due to decreases in equipment sales and service revenue, offset by
	growth in equipment rental revenue.  Total cost of goods sold decreased $56,780,120 or 51.7% to $52,996,441 in
	2006 compared to $109,776,561 in 2005.  Management services cost of
	goods sold decreased $66,616,456 or 82.6% to $13,984,314 in 2006 compared to
	$80,600,770 in 2005.  This change is primarily due to the loss of Home
	Depot as a customer.  Additionally, we reduced cost of goods sold by
	$1,272,241 in 2006 due to a change in management's estimate related to the
	liability associated with this operation which includes the contract
	settlement with our former customers.  Recycling cost of goods sold increased $12,177,245 or
	44.7% to $39,448,957 in 2006 compared to $27,271,712 in 2005 due to an
	increase in the volume of shipments as well as an increase in the volume of
	purchases of 8% and an increase in average cost per ton of 55.6%. 
	Equipment, service and leasing cost of goods sold decreased $1,068,668 or
	56.1% to $835,411 in 2006 compared to $1,904,079 in 2005.  This decrease is
	primarily due to the decrease in equipment sales.  Selling,
	general and administrative expenses decreased $206,646 or 3.6% to $5,609,959
	in 2006 compared to $5,816,605 in 2005.  The decrease in SG&A is due to a
	decrease in labor and related benefits ($306,000) offset by an increase in
	bad debt expense ($93,464).  -Labor
	and related benefits decreased $306,000 due to the loss of Home Depot as a
	customer. -Bad debt
	expense increased $93,464 primarily due to the write-off of All County &
	Delta Management in 2006.  As a
	percentage of total revenue, selling, general and administrative expenses
	were 9.0% in 2006 compared to 5.0% in 2005.  Interest
	expense increased $138,706 or 187% to $212,722 in 2006 compared to $74,016
	in 2005 due to an increase in long term debt in 2006 compared to a payoff of
	debt during 2005.  Other income was $32,930 in 2006 compared to other income
	of $3,424 in 2005.  This increase of $29,506 is primarily due to bankruptcy
	recoveries.  Significant components of other income (expense) are as follows:  Fiscal Year Ended
			December 31Description
			2006
			2005Bankruptcy recoveries
			$  22,787
			$  12,061Interest on K&R note
			6,845
			(11,782)Other
			3,298
			3,145Total other income
			(expense), net
			$  32,930
			$    3,424
  Income tax provision increased $585,496 to $1,325,929
	in 2006 compared to $740,433 in 2005.  The effective tax rate in 2006 was
	37.7 % compared to approximately 40.2% in 2005 based on federal and state
	statutory rates.  The provision for income taxes increased 4.2% to 37.7% for
	the year ended December 31, 2006 compared to 33.5% for the nine months ended
	September 30, 2006.  The provision for income taxes increased 4.2% to
	37.7% for the year ended December 31, 2007 compared to 33.5% for the nine
	months ended September 30, 2006.  The parties agreed mutually to decrease the taxable
	base of the common stock awarded to Andrew M. Lassak on June 15, 2006. 
	Based on the increase in profit in the fourth quarter of 2006, the impact of
	the tax benefit of the common stock had less impact on the income tax
	provision for the year ended December 31, 2006 compared to the income tax
	provision for the nine months ended September 30, 2006.  Financial
	Condition at December 31, 2006 compared to December 31, 2005  Cash and
	cash equivalents decreased $389,494 to $1,331,807 as of December 31, 2006
	compared to $1,721,301 as of December 31, 2005.  Net cash
	from operating activities decreased $5,075,653 to net cash used of
	($1,216,923) as of December 31, 2006 compared to $3,858,730 as of December
	31, 2005.  This decrease was directly related to the decrease in accounts
	payable of  $3.7 million which is primarily due to the loss of Home Depot as
	a customer in October 2005.  We used
	net cash from investing activities of $2,058,807 for the year ending
	December 31, 2006 compared to $1,678,318 for the same period in 2005.  The
	difference of $380,489 was primarily due to $348,446 more in property and
	equipment purchases in 2006 than in 2005.  Net cash
	from financing activities increased $4,475,037 to $2,886,236 for the year
	ending December 31, 2006 compared to net cash used of ($1,588,801) for the
	same period in 2005.  Proceeds from long term debt totaled $10,710,875 in
	2006, and payments on long-term debt were $7,770,984 in 2006 and $1,000,000
	in 2005.  On
	December 22, 2006, we executed a new revolving credit facility with BB&T
	increasing the borrowing line from $5.0 million to $10.0 million to provide
	us with working capital to support the current needs of our business.  This
	revolving credit facility has a three year term expiring December 22, 2009,
	and provides for advances of up to eighty percent (80%) of ISA's eligible
	accounts receivable and up to the  forty percent (40%) of eligible
	inventory, and up to one hundred (100%) of ISA's net book value of eligible
	equipment less an outstanding indebtedness on the equipment.  The revolving
	credit facility bears interest at the one month Libor rate, as published in
	the Wall Street Journal, plus two and twenty-five one-hundredths percent
	(2.25%) per annum, and is secured by all our assets (except rental fleet
	equipment).  As of December 31, 2006 we had borrowed $1,010,875 and as of
	December 31, 2005, there were no borrowings against the credit facility. 
	The revolving credit facility contains certain restrictive and financial
	covenants.  At December 31, 2006, we were in compliance with all restrictive
	covenants.  We also
	have a $2.0 million loan with Fifth Third Bank secured by our rental fleet
	equipment.  Indebtedness under this loan agreement accrues interest at a
	fixed interest rate of 6.83%.  The maturity date under this agreement is
	June 2011 with a ten-year amortization schedule.   As of December 31, 2006
	we had borrowed $1,929,016 and as of December 31, 2005, there were no
	borrowings against this loan.  The terms of the loan agreement place certain
	restrictive covenants on us, including maintenance of a specified tangible
	net worth, debt to net worth and EBITDA ratio.  Consequently, these
	covenants restrict our ability to incur as much additional debt as we may
	desire for future growth.  At December 31, 2006, we were in compliance with
	all restrictive covenants.  We
	implemented the use of a purchasing card with a credit limit of $6.0 million
	in the second quarter of 2004.  We include the balance due on the purchasing
	card as part of accounts payable.  The outstanding balance on the purchasing
	card at December 31, 2006 was $687,437.  We believe
	our principal sources of liquidity from available funds on hand, cash
	generated from operations and the availability of borrowing under our senior
	revolving credit facility and purchasing card will be sufficient to fund
	operations in fiscal year 2007. Our primary sources of funds are our ability
	to generate cash from operations and the availability of borrowing under our
	senior revolving credit facility to meet our liquidity obligations, which
	could be affected by factors such as a decline in demand for our products,
	loss of key contract customers such as occurred with Home Depot in 2005, our
	ability to generate profits and other unforeseen circumstances. The
	availability of our revolving credit facility,is contingent on complying
	with certain debt covenants.  We do not expect the covenants to limit or
	restrict our ability to borrow on the facility in fiscal year 2007.  Trade
	accounts receivable after allowances for doubtful accounts increased
	$523,596 or 11.6% to $5,026,441 as of December 31, 2006.  The primary reason
	for the increase in trade accounts receivable after allowances for doubtful
	accounts is an increase in the volume of shipments and an increase in the
	selling prices in the recycling segment.  Recycling
	accounts receivable increased $1,307,628 or 50.4% to $3,903,681 as of
	December 31, 2006 compared to $2,596,053 as of December 31, 2005.  This
	change is primarily due to an increase in the volume of shipments and an
	increase in the selling prices in the recycling segment.  On average, volume
	of ferrous shipments in gross tons increased 15% as of December 31, 2006
	compared to December 31, 2005.  On average, sales prices increased $20 per
	gross ton or 8.9% to $244 as of December 31, 2006 compared to $224 as of
	December 31, 2005.  On average, volume of nonferrous shipments in pounds
	increased 13% as of December 31, 2006 compared to December 31, 2005.  On
	average, sales prices increased 57.0% as of December 31, 2006 compared to
	December 31, 2005.  CWS
	accounts receivable decreased $704,467 or 39.3% to $1,089,080 as of December
	31, 2006 compared to $1,793,547 as of December 31, 2005.  This change is
	primarily due to the loss of Home Depot as a customer.  WESSCO
	accounts receivable decreased $85,431 or 100% to $0 as of December 31, 2006
	compared to $85,431 as of December 31, 2005.  This change is primarily due
	to a decrease in equipment sales.  Inventories consist principally of ferrous and nonferrous scrap materials
	and waste equipment machinery held for resale.  We value inventory at the
	lower of cost or market.  Inventory increased $939,617 or 37.8% to
	$3,428,226 as of December 31, 2006 compared to $2,488,609 as of December 31,
	2005.  Inventories as of December 31, 2006 and December 31, 2005 consist of
	the following:  December 31,2006
			
			December 31,2005Ferrous
			$  1,667,937
			
			$  1,380,050Non-Ferrous
			1,678,655
			
			961,085Waste equipment machinery
			56,200
			
			120,922Other
			25,434
			
			26,552Total inventories
			$  3,428,226
			
			$ 2,488,609
  For the
	year ended December 31, 2006, we shipped 76,331 gross tons of ferrous
	material.  During the same period, we purchased 72,475 gross tons of ferrous
	material.  For the year ended December 31, 2005, we shipped 66,155 gross
	tons of ferrous material.  During the same period, we purchased 66,947 gross
	tons of ferrous material.  We did not write down ferrous inventory in 2006. 
	As of December 31, 2005, ferrous inventory consisted of 7,750 gross tons at
	a unit cost of $178.07 per gross ton.  As of December 31, 2006, ferrous
	inventory consisted of 9,400 gross tons at a unit cost of $177.44 per gross
	ton.  For the year ended December 31, 2006, the purchase price plus
	processing costs of ferrous material averaged $157.25 per gross ton compared
	to $136.31 per gross ton in 2005.  For the
	year ended December 31, 2006, we shipped 22,258,977 pounds of nonferrous
	material. During the same period, we purchased 20,362,645 pounds of
	nonferrous material.  For the year ended December 31, 2005, we shipped
	19,622,793 pounds of nonferrous material. During the same period, we
	purchased 18,660,006 pounds of nonferrous material.  We did not write down
	nonferrous inventory in 2006.  As of December 31, 2006, nonferrous inventory
	consisted of 1,601,554 pounds with a unit cost of $0.960 per pound.  As of
	December 31, 2005, nonferrous inventory consisted of 1,569,770 pounds at a
	unit cost of $0.612 per pound.  For the year ended December 31, 2006, the
	purchase price plus processing costs of non-ferrous material has averaged
	$0.960 per pound compared to $0.608 per pound in 2005.   Year
			Inventory Type
			Gross Tons
			Unit Cost
			Amount2005
			Ferrous
			7,750
			$178.07
			$1,380,0502006
			Ferrous
			9,400
			177.44
			1,667,937Year
			Inventory Type
			Pounds
			Unit Cost
			Amount2005
			Nonferrous
			1,569,770
			$0.61
			$   961,0852006
			Nonferrous
			1,748,600
			0.96
			1,678,655
  Inventory Aging for the
			year ended December 31, 2006 (Days Outstanding)Description
			1-30
			31-60
			61-90
			Over 90
			TotalEquipment & parts
			$      33,720
			$    22,480
			$            -
			$             -
			$      56,200Ferrous Materials
			864,489
			448,842
			166,509
			188,097
			1,667,937Non-ferrous materials
			1,467,679
			41,840
			42,989
			126,147
			1,678,655Other
			25,434
			-
			-
			-
			25,434$ 2,391,322
			$  513,162
			$ 209,498
			$  314,244
			$ 3,428,226
  Inventory aging for the
			year ended December 31, 2005 (Days Outstanding):Description
			1-30
			31-60
			61-90
			Over 90
			TotalEquipment & parts
			$      29,437
			$    22,400
			$           -
			$    69,085
			$   120,922Ferrous Materials
			731,924
			353,962
			182,650
			111,514
			1,380,050Non-ferrous materials
			737,190
			108,394
			53,300
			62,201
			961,085Other
			26,552
			-
			-
			-
			26,552$ 1,525,103
			$ 484,756
			$ 235,950
			$ 242,800
			$2,488,609
  Accounts
	payable trade decreased $3,737,224 or 45.1% to $4,545,057 as of December 31,
	2006 compared to $8,282,281 as of December 31, 2005.  Recycling accounts
	payable increased $202,592 or 18.5% to $1,298,537 as of December 31, 2006
	compared to $1,095,945 as of December 31, 2005.  This increase is primarily
	due to the increase in volume of commodity purchases at respective year-ends
	and increased commodity purchase prices of ferrous and nonferrous
	materials.  Our accounts payable payment policy in the recycling segment is
	consistent between years.  CWS
	accounts payable decreased $3,886,325 or 56.7% to $2,969,252 as of December
	31, 2006 compared to $6,855,577 as of December 31, 2005.  This change is
	primarily due to the loss of Home Depot as a customer.  WESSCO
	accounts payable decreased $51,159 or 20.0% to $205,168 as of December 31,
	2006 compared to $256,327 as of December 31, 2005.  This change is due to a
	decrease in equipment sales.  Working
	capital increased $4,415,407 to $3,524,0982 as of December 31, 2006 compared
	to a deficit of $861,309 as of December 31, 2005.  Net income of $2,188,579,
	depreciation of $1,745,905, and pay down of accounts payable of $3,737,224
	were positive contributors to working capital in 2006.  During 2006, we used
	these positive working capital contributors to purchase property and
	equipment of $2,166,331.  Contractual
	Obligations  The
	following table provides information with respect to our known contractual
	obligations for the year ended December 31, 2006.  Payments due by
	period  Obligation Description
			Total
			Less
			than 1 year
			1-3 years
			3-5 years
			More
			than 5 yearsCapital Lease Obligations (1)
			296,386
			228,533
			67,853
			0
			0Operating Lease Obligations (2)
			738,418
			612,245
			122,798
			3,375
			0Total
			$1,034,804
			$840,778
			$190,651
			$ 3,375
			$0
  (1)      We lease
	various pieces of equipment that qualify for capital lease treatment.  These
	lease arrangements require monthly lease payments expiring at various dates
	through May 2008.  (2)     We lease
	the Louisville, Kentucky facility from a related party under an operating
	lease expiring December 2007.  We have monthly rental payments of $42,106
	through December 2007.  In the event of a change of control, the monthly
	payments become $62,500.  See Item 1. Business -- Related Parties Agreements.  We also
	lease a management services operations facility and various pieces of
	equipment in Dallas, Texas for which monthly payments of $2,525 are due
	through September 2007.  We have subleased the Lexington property to an
	unaffiliated third party for a term commencing March 1, 2007 and ending
	December 31, 2012 for $4,500 per month.  We currently lease this property
	from an unaffiliated third party for $4,500 per month; the lease terminates
	December 31, 2012.  If for any reason the sublessee defaults, we remain
	liable for the remainder of the lease payments through December 31, 2012.  On
	February 6, 2007, we leased 7.7 acres of real property, including a 38,000
	square foot warehouse and a 400 square foot office, in Pineville, Louisiana
	for $5,250 per month for twenty-four months beginning March 1, 2007 and
	ending February 28, 2009, with an option to purchase the property for a
	purchase price of $575,000.  Year Ended
	December 31, 2005 Compared to Year Ended December 31, 2004  Total
	revenue decreased $22,206,217 or 15.9% to $117,381,859 in 2005 compared to
	$139,588,076 in 2004.  Management services revenue decreased $8,823,712 or
	9.5% to $84,451,367 in 2005 compared to $93,275,079 in 2004.  This change is
	primarily to due to the loss of Home Depot as a customer in October 2005. 
	Recycling revenue decreased $13,309,875 or 30.8% to $29,952,938 in 2005
	compared to $43,262,813 in 2004.  This change is due to a decrease of 31% in
	the volume of shipments (the volume of shipments in 2004 was abnormally
	high).  Equipment, service and leasing revenue decreased $72,630 or 2.4% to
	$2,977,554 in 2005 compared to $3,050,184 in 2004.  This decrease is
	primarily due to decreases in cardboard and rental equipment sales offset by
	growth in equipment sales attributable to a larger sales staff.  Total cost
	of goods sold decreased $21,609,599 or 16.4% to $109,776,561 in 2005
	compared to $131,386,160 in 2004.  Management services cost of goods sold
	decreased $8,843,157 or 9.9% to $80,600,770 in 2005 compared to $89,443,927
	in 2004.  This change is primarily due to the loss of Home Depot as a
	customer.  Recycling cost of goods sold decreased $12,857,324 or 32.0% to
	$27,271,712 in 2005 compared to $40,129,036 in 2004 due to a decrease in the
	volume of shipments as well as a decrease in the volume of purchases of
	30%.    Equipment, service and leasing cost of goods sold increased $90,882
	or 5.0% to $1,904,079 in 2005 compared to $1,813,197 in 2004.  This increase
	is primarily due to the growth in equipment sales attributable to the
	expansion of the sales staff.  Selling,
	general and administrative expenses increased $252,582 or 4.5% to $5,816,605
	in 2005 compared to $5,564,023 in 2004.  The increase in SG&A is due to
	increases in depreciation ($93,000), accounting ($45,000), insurance
	($44,000), legal ($35,000), labor ($26,000) and repairs and other expenses
	($72,000), offset by a decrease in operating supplies ($63,000) expense.  -
			Depreciation increased $93,000 due to a large purchase of containers
			in September 2004.  We are using these containers in Florida
			and New Orleans, primarily for cleanup due to the hurricanes.-
			Accounting expenses increased $45,000 due to consultations with our
			independent accountants on periodic SEC reviews, Sarbanes-Oxley
			compliance and increased tax work.-
			Insurance increased $44,000 because of increases in general
			liability insurance and directors and officers insurance.-
			Labor and consulting expenses increased $26,000 due to the addition
			of sales, accounting and administrative employees, and due to an
			increase in health insurance costs.-
			Legal expenses increased $35,000 primarily due to expenses related
			to the Lassak
	case.-
			Equipment repairs and maintenance increased $72,000 due to increased
			repairs and maintenance in the equipment, service and leasing
			segment.  We have $877,751 more in rental equipment than we did
			in the fourth quarter of 2004.  Additionally, the price of
			steel, used for fabrication, has increased since last year.-
			Operating supplies decreased $63,000 because of a decrease in
			repairs on equipment in the recycling segment due to a lower volume
			of material that needed to be processed.  As a
	percentage of total revenue, selling, general and administrative expenses
	were 5.0% in 2005 compared to 4.0% in 2004.  Interest
	expense decreased $117,570 or 61.4% to $74,016 in 2005 compared to $191,586
	in 2004 due to payoff of debt during 2005.  Other income was $3,424 in 2005
	compared to other income of $21,832 in 2004.  This decrease of $18,408 is
	primarily due to 2004 income of $13,300 derived from Canadian exchange
	rates.  Significant components of other income (expense) are as follows:  Fiscal Year Ended
			December 31Description
			2005
			2004Exchange rates
			$ (11,782)
			$ 13,300Bankruptcy recoveries
			12,061
			10,946Other
			3,145
			(2,414)Total other income
			(expense), net
			$     3,424
			$ 21,832
  Income tax
	provision decreased $271,568 to $740,433 in 2005 compared to $1,012,001 in
	2004.  The effective tax rate in 2005 and 2004 was approximately 40% based
	on the federal and state statutory rates.  Financial Condition at December 31, 2005 compared to December
	31, 2004  Cash and
	cash equivalents increased $591,611 to $1,721,301 as of December 31, 2005
	compared to $1,129,690 as of December 31, 2004.  Net cash
	from operating activities decreased $1,591,620 to $3,858,730 as of December
	31, 2005 compared to $5,450,350 as of December 31, 2004.  This decrease was
	directly related to the decrease in accounts payable of $3,800,395 which is
	primarily due to the loss of Home Depot in October 2005.  We used
	net cash for investing activities of $1,678,318 for the year ending December
	31, 2005 compared to $2,144,045 for the same period in 2004.  The difference
	was primarily due to an advance we made to a related party of $302,160 in
	2004, as compared to our receipt of payments on this note receivable
	totaling $37,770 in 2005.  We used
	net cash for financing activities of $1,588,801 for the year ending December
	31, 2005 compared to $2,839,387 for the same period in 2004.  Payments on
	long-term debt were $1,000,000 in 2005 compared to $2,762,908 in 2004.  The
	payments in 2004 included an advance principal payment of maturities of
	long-term debt due in 2005 of $180,000.  We retired the remaining long-term
	debt of $1,000,000 in 2005.  We paid
	our first dividend of $353,547 in 2004.  We will continue to monitor our
	cash position and may pay dividends in the future.  We received proceeds of
	$436,141 from the exercise of common stock options in 2004.  This strong
	cash flow from the exercise of common stock options will not continue in the
	future based on only 20,000 options remaining outstanding, all with an
	exercise price of $1.25 as of December 31, 2005.  We did not plan to grant
	new stock options in the  immediate future.  On January
	14, 2005, we replaced our previous $3.8 million senior revolving credit
	facility with a new $5 million senior revolving credit facility that expires
	in January 2008. At December 31, 2005, we did not have any short-term
	borrowings outstanding.  The credit facility requires us to comply with
	certain debt covenants.  We were in compliance with these covenants at
	December 31, 2005.  We
	implemented the use of a purchasing card with a credit limit of $6.0 million
	in the second quarter of 2004.  We include the balance due on the purchasing
	card as part of accounts payable.  The outstanding balance on the purchasing
	card at December 31, 2005 was $1,465,860.  Trade
	accounts receivable after allowances for doubtful accounts decreased
	$4,074,483 or 47.5% to $4,502,845 as of December 31, 2005.  The primary
	reason for the decrease in trade accounts receivable after allowances for
	doubtful accounts is the loss of  Home Depot as a customer.  Recycling
	accounts receivable decreased $188,806 or 6.8% to $2,596,053 as of December
	31, 2005 compared to $2,784,859 as of December 31, 2004.  Aggressive
	collection methods had a direct impact on decreasing accounts receivable in
	the recycling segment, as well as decreases in the volume of shipments and
	sale prices.  On average, volume of ferrous shipments in gross tons
	decreased 31% as of December 31, 2005 compared to December 31, 2004.  On
	average, sales prices decreased $34 per gross ton or 13% to $224 as of
	December 31, 2005 compared to $258 as of December 31, 2004.  On average,
	volume of nonferrous shipments in pounds decreased 22.7% as of December 31,
	2005 compared to December 31, 2004.  On average, sales prices increased 6.2%
	as of December 31, 2005 compared to December 31, 2004.  CWS
	accounts receivable decreased $3,786,957 or 67.9% to $1,793,547 as of
	December 31, 2005 compared to $5,580,504 as of December 31, 2004.  This
	change is primarily due to the loss of Home Depot as a customer.  WESSCO
	accounts receivable decreased $103,069 or 54.7% to $85,431 as of December
	31, 2005 compared to $188,500 as of December 31, 2004.  This change is
	primarily due to decreases in cardboard and rental equipment sales.  Inventories consisted principally of ferrous and nonferrous scrap materials
	and waste equipment machinery held for resale.  We valued inventory at the
	lower of cost or market.  Inventory increased $336,235 or 15.6% to
	$2,488,609 as of December 31, 2005 compared to $2,152,374 as of December 31,
	2004.  Inventories as of December 31, 2005 and December 31, 2004 consisted
	of the following:  December 31,2005
			
			December 31,2004Ferrous
			$  1,380,050
			
			$  1,140,905Non-Ferrous
			961,085
			
			870,038Waste equipment machinery
			120,922
			
			118,249Other
			26,552
			
			23,182Total inventories
			$  2,488,609
			
			$ 2,152,374
  For the
	year ended December 31, 2005, we shipped 66,155 gross tons of ferrous
	material.  During the same period, we purchased 66,947 gross tons of ferrous
	material.  For the year ended December 31, 2004, we shipped 95,444 gross
	tons of ferrous material.  During the same period, we purchased 94,552 gross
	tons of ferrous material.  For the year ended December 31, 2004, we wrote
	down ferrous inventory by 3,131 gross tons.  The remaining ferrous inventory
	was not impaired.   We included the ferrous inventory charges of $721,382 in
	cost of sales in 2004.  We took these ferrous inventory charges to adjust
	inventory for the accumulation of water, dirt, and other materials that had
	no value.  These materials existed
	in almost every load and we needed to make periodic adjustments to correct
	the amount of inventory available for sale.  We instituted new methods of
	purchasing to reduce the possibility of these types of write-downs in the
	future.  We did not write down ferrous inventory in 2005. As of December 31,
	2004, ferrous inventory consisted of 5,763 gross tons with a unit cost of
	$197.97 per gross ton.  As of December 31, 2005, ferrous inventory consisted
	of 7,750 gross tons at a unit cost of $178.07 per gross ton.  For the year
	ended December 31, 2005, the purchase price plus processing costs of ferrous
	material averaged $136.31 per gross ton compared to $230.40 per gross ton in
	2004.  For the
	year ended December 31, 2005, we shipped 19,622,793 pounds of nonferrous
	material. During the same period, we purchased 18,660,006 pounds of
	nonferrous material.  For the year ended December 31, 2004, we shipped
	26,497,088 pounds of nonferrous material. During the same period, we
	purchased 27,216,918 pounds of nonferrous material.  For the year ended
	December 31, 2004, we wrote down nonferrous inventory by 13,438 pounds.  The
	remaining nonferrous inventory was not impaired.  We included the nonferrous
	inventory charges of $8,641 in cost of sales in 2004.  We took these
	nonferrous inventory charges to adjust inventory for the accumulation of
	water, dirt, and other materials that had no value.  These materials existed
	in almost every load and we needed to make periodic adjustments to correct
	the amount of inventory available for sale.  We improved our training
	methods and instituted new methods of purchasing to reduce the possibility
	of these types of write-downs in the future. We did not write down
	nonferrous inventory in 2005.  As of December 31, 2004, nonferrous inventory
	consisted of 1,364,863 pounds with a unit cost of $0.637 per pound.  As of
	December 31, 2005, nonferrous inventory consisted of 1,569,770 pounds at a
	unit cost of $0.612 per pound.  For the year ended December 31, 2005, the
	purchase price plus processing costs of non-ferrous material averaged $0.608
	per pound compared to $0.643 per pound in 2004.  Year
			Inventory Type
			Gross Tons
			Unit Cost
			Amount2004
			Ferrous
			5,763
			$197.97
			$1,140,9052005
			Ferrous
			7,750
			$178.07
			$1,380,050Year
			Inventory Type
			Pounds
			Unit Cost
			Amount2004
			Nonferrous
			1,364,863
			$0.64
			$ 870,0382005
			Nonferrous
			1,569,770
			$0.61
			$ 961,085
  Inventory aging for the
			year ended December 31, 2005 (Days Outstanding):Description
			1-30
			31-60
			61-90
			Over 90
			TotalEquipment & parts
			$      29,437
			$    22,400
			$           -
			$    69,085
			$   120,922Ferrous Materials
			731,924
			353,962
			182,650
			111,514
			1,380,050Non-ferrous materials
			737,190
			108,394
			53,300
			62,201
			961,085Other
			26,552
			-
			-
			-
			26,552$ 1,525,103
			$ 484,756
			$ 235,950
			$ 242,800
			$2,488,609
  Inventory Aging for the
			year ended December 31, 2004 (Days Outstanding)Description
			1-30
			31-60
			61-90
			Over 90
			TotalEquipment & parts
			$             -
			$    93,111
			$            -
			$  25,138
			$     118,249Ferrous Materials
			616,089
			387,907
			136,909
			-
			1,140,905Non-ferrous materials
			726,302
			124,157
			12,664
			6,915
			870,038Other
			23,182
			-
			-
			-
			23,182$ 1,365,573
			$  605,175
			$ 149,573
			$  32,053
			$ 2,152,374
  Accounts
	payable trade decreased $3,800,395 or 31.5% to $8,282,281 as of December 31,
	2005 compared to $12,082,676 as of December 31, 2004.  Recycling accounts
	payable decreased $438,030 or 28.6% to $1,095,945 as of December 31, 2005
	compared to $1,533,975 as of December 31, 2004.  This decrease was primarily
	due to the decrease in volume of commodity purchases at respective year-ends
	and decreased commodity purchase prices of ferrous materials.  Our accounts
	payable payment policy in the recycling segment was consistent between
	years.  CWS
	accounts payable decreased $3,569,331 or 34.2% to $6,855,577 as of December
	31, 2005 compared to $10,424,908 as of December 31, 2004.  This change was
	primarily due to the loss of Home Depot as a customer.  WESSCO
	accounts payable increased $132,534 or 107.1% to $256,327 as of December 31,
	2005 compared to $123,793 as of December 31, 2004.  This change was due to
	an increase in equipment sales, which was the result of an expansion of the
	sales staff.  Working
	capital increased $73,657 to a deficit of $861,309 as of December 31, 2005
	compared to a deficit of $934,966 as of December 31, 2004.  Net income of
	$1,101,597, depreciation of $1,709,668 and tax benefits related to common
	stock options exercised of $451,377 were positive contributors to working
	capital in 2005.  During 2005, we used these positive working capital
	contributors to make advance principal payments on debt of $1,000,000 and
	purchase property and equipment of $1,817,885.  Inflation and
	Prevailing Economic Conditions  To date,
	inflation has not and is not expected to have a significant impact on our
	operation in the near term.  We have no long-term fixed-price contracts and
	we believe we will be able to pass through most cost increases resulting
	from inflation to our customers. We are susceptible to the cyclical nature
	of the commodity business.  In response to these economic conditions, we
	have focused on the management consulting area of the business and are
	working to liquidate inventories while we make efforts to enhance gross
	margins.  Impact of Recently
	Issued Accounting Standards  SFAS No.
	154, Accounting Changes and Error Corrections, replaces APB Opinion No. 20,
	Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes
	in Interim Financial Statements, and changes the requirements for the
	accounting for and reporting of a change in accounting principle. SFAS No.
	154 applies to all voluntary changes in accounting principle. It also
	applies to changes required by an accounting pronouncement in the unusual
	instance that the pronouncement does not include specific transition
	provisions. SFAS No. 154 requires retrospective application to prior
	periods' financial statements of changes in accounting principle, unless it
	is impracticable to determine either the period-specific effects or the
	cumulative effect of the change.  SFAS No. 154 was issued May 2005 and is
	effective for accounting changes and corrections of errors made in fiscal
	years beginning after December 15, 2005.  We do not expect this standard to
	significantly impact our financial statements.  The
	Financial Accounting Standards Board has published SFAS No. 157, Fair Value
	Measurements, to eliminate the diversity in practice that exists due to the
	different definitions of fair value and the limited guidance for applying
	those definitions in GAAP that are dispersed among the many accounting
	pronouncements that require fair value measurements.  SFAS No. 157 defines
	fair value as the price that would be received to sell an asset or paid to
	transfer a liability in an orderly transaction between market participants
	at the measurement date (an exit price). SFAS No. 157 also stipulates that,
	as a market-based measurement, fair value measurement should be determined
	based on the assumptions that market participants would use in pricing the
	asset or liability, and establishes a fair value hierarchy that
	distinguishes between (a) market participant assumptions developed based on
	market data obtained from sources independent of the reporting entity
	(observable inputs) and (b) the reporting entity's own assumptions about
	market participant assumptions developed based on the best information
	available in the circumstances (unobservable inputs).  SFAS No.
	157 is effective for financial statements issued for fiscal years beginning
	after November 15, 2007, and interim periods within those fiscal years,
	although earlier application is encouraged.  Additionally, prospective
	application of the provisions of SFAS No. 157 is required as of the
	beginning of the fiscal year in which it is initially applied, except when
	certain circumstances require retrospective application.  Interpretation No. 48, Accounting for Uncertainty in Income Taxes -- an
	interpretation of FASB Statement No. 109 (issued June 2006), clarifies the
	accounting for uncertainty in income taxes recognized in an enterprise's
	financial statements in accordance with FASB Statement No. 109, Accounting
	for Income Taxes. This Interpretation prescribes a recognition threshold and
	measurement attribute for the financial statement recognition and
	measurement of a tax position taken or expected to be taken in a tax return.
	This Interpretation also provides guidance on derecognition, classification,
	interest and penalties, accounting in interim periods, disclosure, and
	transition.  This Interpretation is effective for fiscal years beginning
	after December 15, 2006.  The adoption of this standard on January 1, 2007
	did not have an impact on our consolidated financial statements.  Item
	7A.    Quantitative and Qualitative Disclosures About Market Risk.  Fluctuating commodity prices affect market risk in our recycling segment. 
	We mitigate this risk by selling our product on a monthly contract basis. 
	Each month we negotiate selling prices for all commodities.  Based on these
	monthly agreements, we determine purchase prices based on a margin needed to
	cover processing and administrative expenses.  We are
	exposed to interest rate risk on our floating rate borrowings. As of
	December 31, 2006, variable rate borrowings consisted of outstanding
	borrowings of $1,010,875 under our credit agreement. Borrowings on our
	credit agreement bear interest at the prime rate less 1/8. Any increase in
	prime rate would lead to higher interest expense. We do not have any
	interest rate swaps or caps in place, which would mitigate our exposure to
	fluctuations in the interest rate on this indebtedness. Based on our average
	anticipated borrowings under our credit agreement in fiscal 2007, a
	hypothetical increase or decrease in the prime rate by 1% would increase or
	decrease interest expense on our variable borrowings by approximately
	$10,000 per year, with a corresponding change in cash flows.  Item
	8.    Consolidated Financial Statements and Supplementary Data.  Our
	consolidated financial statements required to be included in this Item 8 are
	set forth in Item 15 of this report.  Item 9.    Changes
	in and Disagreements with Accountants on Accounting and Financial
	Disclosure.  None  Item
	9A.    Controls and Procedures.  (a)   Evaluation
	of disclosure controls and procedures.  Based on the
	evaluation of the ISA Chief Executive Officer and the ISA Chief Financial
	Officer of our disclosure controls and procedures as of December 31, 2006,
	it has been concluded that the disclosure controls and procedures are
	effective for the purposes contemplated by Rules 13a-15(e) and 15d - 15(e)
	promulgated by the Securities and Exchange Commission.  (b)   Changes in
	internal controls over financial reporting.  There have been no
	significant changes to ISA's internal controls or in other factors that have
	materially affected, or are reasonably likely to materially affect, these
	controls over financial reporting subsequent to December 31, 2006.  Item 9B.    Other
	Information.  None    PART III  Item 10.    ISA
	Directors and Executive Officers.  *  Item
	11.    Executive Compensation  *  Item
	12.    Security Ownership of Certain Beneficial Owners, Management and
	Related Stockholder Matters.  *  Item
	13.    Certain Relationships and Related Transactions.  *  Item
	14.    Principal Accountant Fees and Services. *  *      The
	information required by Items 10, 11, 12, 13 and 14 is or will be set forth
	in the definitive proxy statement relating to the 2007 Annual Meeting of
	Shareholders of ISA which is to be filed with the Securities and Exchange
	Commission pursuant to Regulation 14A within 120 days after ISA's year end
	for the year covered by this report 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, 13 and 14 are incorporated herein by
	reference pursuant to General Instruction G(3) to Form 10-K.    PART IV  Item
	15.    Exhibits and Consolidated Financial Statement Schedules.  (a)(1)       The following consolidated financial statements of Industrial
	Services of America, Inc. are filed as a part of this report: PageReport of Independent
			Registered Public Accounting Firms
			F-1Consolidated Balance
			Sheets as of December 31, 2006 and 2005
			F-3Consolidated Statements
			of Income for the yearsended December 31,
			2006, 2005 and 2004
			F-4Consolidated Statements
			of Shareholders' Equity for the years endedDecember 31, 2006,
			2005 and 2004
			F-5Consolidated Statements
			of Cash Flows for the years ended December 31, 2006, 2005 and 2004
			F-6Notes to Consolidated
			Financial Statements
			F-7
  (a)(2)       Consolidated Financial Statement Schedules.  Schedule II--Valuation
			and Qualifying Accounts for the
			  years ended December 31, 2006, 2005 and 2004
			F-28
  (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)           Exhibits.  The
	exhibits listed on the Index to Exhibits are filed as a part of this report.  (c)           Consolidated Financial Statement Schedules.  Schedule
	II--Valuation and Qualifying Accounts for the year ended December 31, 2006,
	2005 and 2004 are incorporated by reference at page F-29 of the ISA
	Consolidated Financial Statements.     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 27,
	2007                                                        By : /s/ Harry Kletter Harry Kletter, Chairman of the Board and 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 27, 2007Harry Kletter
			
			Executive Officer
			(Principal Executive 
			Officer)/s/  Alan L.
			Schroering
			
			Chief Financial Officer
			March 27, 2007Alan L. Schroering
			
			(Principal Financial
			Officer andPrincipal Accounting
			Officer)/s/  David W.
			Lester
			
			Director
			March 27, 2007David W. Lester/s/  Orson
			Oliver
			
			Director
			March 27, 2007Orson Oliver/s/  Roman
			Epelbaum
			
			Director
			March 27, 2007Roman Epelbaum/s/  Albert Cozzi
			
			Director
			March 27, 2007Albert Cozzi/s/  Craig Feltner
			
			Director
			March 27, 2007Craig Feltner/s/  Richard
			Ferguson
			
			Director
			March 27, 2007Richard Ferguson
    INDEX TO
	EXHIBITS  Exhibit 
				Number
				
				Description of Exhibits3.1
			**
			Certificate of
			Incorporation of ISA is incorporated by reference to Exhibit 3.1 of
			ISA's report of Form 10-KSB for the year ended December 31, 1995.3.2
			**
			Bylaws of ISA are
			incorporated by reference to Exhibit 3.2 of ISA's report on Form
			10-KSB for the year ended December 31, 1995.10.1
			**
			Independent Consulting
			Services Agreement, dated as of March 31, 1995, and executed on June
			25, 1996, by and between ISA and Douglas I. Maxwell, III
			("Maxwell"), is incorporated by reference to Exhibit 4(a) of ISA
			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, dated as of
			March 31, 1995, and executed on June 26, 1996, by and between ISA
			and Maxwell, is incorporated by reference to Exhibit 10.1 of
			Registration Statement on Form S-8 of ISA, filed on June 26, 1996
			(File No. 333-06915).10.3
			**
			Stock Option Agreement,
			dated as of March 31, 1995, and executed on June 26, 1996, by and
			between ISA and Maxwell, is incorporated by reference to Exhibit
			4(b) of Registration Statement on Form S-8 of ISA, filed on June 26,
			1996 (File No. 333-06915).10.4
			**
			Independent Consulting
			Services Agreement, dated as of March 31, 1995, and executed on June
			26, 1996, by and between ISA and Neil C. Sullivan ("Sullivan"), is
			incorporated by reference to Exhibit 4(a) of Registration Statement
			on Form S-8 of ISA, filed on June 26, 1996 (File No. 333-06909).10.5
			**
			Confidential Information
			and Non-Competition Agreement Independent Contractor, dated as of
			March 31, 1995, and executed on June 26, 1996, by and between ISA
			and Sullivan, is incorporated by reference to Exhibit 10.1 of
			Registration Statement on Form S-8 of ISA, filed on June 26, 1996
			(File No. 333-06909).10.6
			**
			Stock Option Agreement,
			dated as of March 31, 1995, and executed on June 26, 1996, by and
			between ISA and Sullivan, is incorporated by reference to Exhibit
			4(b) of Registration Statement on Form S-8 of ISA, filed on June 26,
			1996 (File No. 333-06909).10.7
			**
			Acquisition of Assets
			Agreement, dated as of July 1, 1997, by and between ISA and The
			Metal Center set forth in an Asset Purchase Agreement, is
			incorporated by reference, as the sole Exhibit on Form 8-K of ISA,
			filed July 15, 1997 (File No. 0-20979).10.8
			**
			Assignment of Contracts,
			dated September 4, 1997, by and between ISA and MGM Services, Inc.
			is incorporated by reference to Exhibit 10.11 of ISA's report on
			Form 10-K for the year ended December 31, 1997.10.9
			**
			Employment Agreement,
			dated as of October 15, 1997, by and between ISA and Garber is
			incorporated by reference to Exhibit 10.12 of ISA's report on Form
			10-K for the year ended December 31, 1997.10.10
			**
			Lease Agreement, dated
			January 1, 1998, by and between ISA and K&R, is incorporated by
			reference herein, to Exhibit 10.10 on Form 8-K of ISA, filed March
			3, 1998 (File No. 0-20979).*10.11
			**
			Consulting Agreement,
			dated as of January 2, 1998, by and between ISA and K&R, is
			incorporated by reference herein, to Exhibit 10.11 on Form 8-K of
			ISA, filed March 3, 1998 (File No. 0-20979).*10.12
			**
			Amendment to Employment
			Agreement, dated as of February 5, 1998, by and between ISA and
			Garber, amending original agreement dated October 15, 1997 is
			incorporated by reference to Exhibit 10.15 of ISA'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 ISA and Glenn
			Bierman is incorporated by reference herein to Exhibit 10.13 of
			ISA's report on Form 10-K for the year ended December 31, 1999, as
			filed on April 14, 2000.10.14
			**
			Stock Option Agreement,
			effective as of October 27, 1997, by and between ISA and Sean Garber
			is incorporated by reference herein to Exhibit 10.14 of ISA's report
			on Form 10-K for the year ended December 31, 1999, as filed on April
			14, 2000.10.15
			**
			Stock Option Agreement,
			effective as of October 31, 1997, by and between ISA and Sean Garber
			is incorporated by reference herein to Exhibit 10.15 of ISA's report
			on Form 10-K for the year ended December 31, 1999, as filed on April
			14, 2000.10.16
			**
			Amendment No. 1 to Option
			Agreement, effective as of February 5, 1998, by and between ISA and
			Sean Garber is incorporated by reference herein to Exhibit 10.16 of
			ISA's report on Form 10-K for the year ended December 31, 1999, as
			filed on April 14, 2000.10.17
			**
			Stock Option Agreement,
			effective as of February 16, 1998, by and between ISA and Harry
			Kletter is incorporated by reference herein to Exhibit 10.17 of
			ISA's report on Form 10-K for the year ended December 31, 1999, as
			filed on April 14, 2000.10.18
			**
			Consulting Agreement,
			dated as of June 2, 1998, by and between ISA and Andrew M. Lassak is
			incorporated by reference herein to Exhibit 10.18 of ISA's report on
			Form 10-K for the year ended December 31, 1999, as filed on April
			14, 2000.10.19
			**
			Consulting Agreement,
			dated as of June 2, 1998, by and among ISA, Joseph Charles &
			Associates, Inc. and Andrew M. Lassak is incorporated by reference
			herein to Exhibit 10.19 of ISA's report on Form 10-K for the year
			ended December 31, 1999, as filed on April 14, 2000.10.20
			**
			Asset Purchase Agreement,
			effective as of June 1, 1998, by and among ISA, 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
			ISA's report on Form 10-K for the year ended December 31, 1999, as
			filed on April 14, 2000.10.21
			**
			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 ISA's report
			on Form 10-K for the year ended December 31, 1999, as filed on April
			14, 2000.10.22
			**
			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 ISA's report on Form 10-K for the year ended December 31,
			1999, as filed on April 14, 2000.10.23
			**
			Promissory Note dated May
			8, 1997, from Registrant to Bank of Louisville in the original
			principal amount of $2,000,000.00 is incorporated by reference
			herein to Exhibit 10.23 of ISA's report on Form 10-K for the year
			ended December 31, 2000, as filed on March 30, 2001.10.24
			**
			Loan Agreement dated
			November 30, 2000, by and between ISA and Bank of Louisville is
			incorporated by reference herein to Exhibit 10.24 of ISA's report on
			Form 10-K for the year ended December 31, 2000, as filed on March
			30, 2001.10.25
			**
			Change in Terms Agreement
			dated November 30, 2000, by and between ISA and Bank of Louisville
			is incorporated by reference herein to Exhibit 10.25 of ISA's report
			on Form 10-K for the year ended December 31, 2000, as filed on March
			30, 2001.10.26
			**
			Change in Terms Agreement
			dated March 26, 2001, by and between ISA and Bank of Louisville is
			incorporated by reference herein to Exhibit 10.26 of ISA's report on
			Form 10-K for the year ended December 31, 2000, as filed on March
			30, 2001.10.27
			**
			Penske Lease and Purchase
			Agreement effective July 8, 2004, for three years at a rental of
			$3,000 per month with an option to purchase for $425,000.10.28
			**
			Stock Option Agreement,
			dated June 11, 1996, by and between ISA and R. Jerry Falkner, is
			incorporated by reference to Exhibit 10.3 of ISA's report on Form
			10-K for the year ended December 31, 1996.10.29
			**
			Stock Option Agreement,
			dated March 1, 2000, by and between ISA and Andrew M. Lassak and
			related letter agreement dated November 3, 1999 is incorporated by
			reference herein to Exhibit 10.29 of ISA's report on Form 10-K for
			the year ended December 31, 2004, as filed on March 4, 2005.10.30
			**
			Contract of Purchase,
			dated March 24, 2005, by and between the Southern States
			Cooperative, Incorporated and the Harry Kletter Family Limited
			Partnership (HKFLP), as assigned by assignment of contract of
			purchase, dated April 24, 2005 from HKFLP to ISA Real Estate, LLC is
			incorporated by reference herein to Exhibit 10.30 of ISA's report on
			Form 10-K for the year ended December 31, 2004, as filed on March 4,
			2005.10.31
			**
			Lease, dated April 30,
			2005, from ISA Real Estate, LLC to Southern States Cooperative,
			Incorporated is incorporated by reference herein to Exhibit 10.31 of
			ISA's report on Form 10-K for the year ended December 31, 2004, as
			filed on March 4, 2005.10.32
			**
			Promissory Note for K&R,
			LLC in favor of ISA in the principal amount of $302,160, dated March
			25, 2006, and effective December 31, 2005, is incorporated by
			reference herein to Exhibit 10.32 of ISA's report on From 10-K for
			the year ended December 31, 2005, as filed on March 31, 2006.10.33
			
			Loan and
			Security Agreement dated June
			30, 2006, by and between ISA and Fifth Third Bank.10.34
			
			Promissory Note dated
			June 30, 2006, from ISA to Fifth Third Bank.10.35
			
			Revolving Credit Facility
			Agreement dated December 22, 2006, by and between ISA and BB&T.10.36
			
			Promissory Note dated
			December 22, 2006, from ISA to BB&T.10.37
			
			Lease dated as of
			February 6, 2007, by and between Parks Wood Products, as Lessor, and
			ISA Real Estate, LLC, as Lessee.10.38
			
			Sub-Lease dated as of
			February 28, 2007, by and between ISA, as Sublessor, and Cohen
			Brothers of Lexington, Inc., as Sublessee.11
			
			Statement of Computation
			of Earnings Per Share (See Note 9 to Notes to Consolidated Financial
			Statements).16
			
			Letter from Crowe Chizek
			and Company, LLC dated April 28, 2005, regarding change in
			certifying accountant is incorporated by reference herein to Exhibit
			16 of ISA's report on Form 8-K/A, as filed on April 28, 2005.31.1
			
			Rule 13a-14(a)
			Certification of Harry Kletter for the Form 10-K for the year ended
			December 31, 2006.31.2
			
			Rule 13a-14(a)
			Certification of Alan Schroering for the Form 10-K for the year
			ended December 31, 2006.32.1
			
			Section 1350
			Certification of Harry Kletter and Alan Schroering for the Form 10-K
			for the year ended December 31, 2006.*Denotes a management
			contract of ISA 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.


INDUSTRIAL SERVICES OF
			AMERICA, INC.AND SUBSIDIARIESCONSOLIDATED FINANCIAL
			STATEMENTSDecember 31, 2006, 2005
			and 2004


INDUSTRIAL SERVICES OF AMERICA, INC.
			AND SUBSIDIARIES
			Louisville, KentuckyCONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006, 2005 and 2004CONTENTSREPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
			FIRMS ............
			1FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS
			3CONSOLIDATED STATEMENTS OF INCOME
			4CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
			EQUITY
			5CONSOLIDATED STATEMENTS OF CASH FLOWS
			6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			7SUPPLEMENTARY INFORMATIONVALUATION AND QUALIFYING ACCOUNTS
			28


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    Board of Directors and Shareholders Industrial Services of America, Inc. and Subsidiaries Louisville, Kentucky   We have audited the accompanying consolidated balance sheets of
	Industrial Services of America, Inc. and Subsidiaries as of December 31,
	2006 and 2005 and the related consolidated statements of operations,
	shareholders' equity and cash flows for the years then ended.  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 audit.  We conducted our audits in accordance with the standards of the Public
	Company Accounting Oversight Board (United States).  Those standards require
	that we plan and perform the audit to obtain reasonable assurance about
	whether the financial statements are free of material misstatement.  An
	audit includes examining, on a test basis, evidence supporting the amounts
	and disclosures in the financial statements.  An audit also includes
	assessing the accounting principles used and significant estimates made by
	management, as well as evaluating the overall 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 Subsidiaries as of December 31,
	2006 and 2005, and the results of its operations and its cash flows for the
	years then ended, in conformity with U. S. generally accepted accounting
	principles.  Also, in our opinion, the related consolidated financial
	statements schedule, when considered in relation to the basic consolidated
	financial statements taken as a whole, presents fairly, in all material
	respects, the information set forth therein.    Mountjoy & Bressler, LLP Louisville, Kentucky March 19, 2007    ____________________________________________________________________________________  1.    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    Board of Directors and Shareholders Industrial Services of America, Inc. and Subsidiaries Louisville, Kentucky   We have audited the accompanying consolidated statements of operations,
	shareholders' equity and cash flows of Industrial Services of America, Inc.
	and Subsidiaries for the year ended December 31, 2004.  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 audit in accordance with the standards of the Public
	Company Accounting Oversight Board (United States).  Those standards require
	that we plan and perform the audit to obtain reasonable assurance about
	whether the financial statements are free of material misstatement.  An
	audit includes examining, on a test basis, evidence supporting the amounts
	and disclosures in the financial statements.  An audit also includes
	assessing the accounting principles used and significant estimates made by
	management, as well as evaluating the overall financial statement
	presentation.  We believe that our audit provides a reasonable basis for our
	opinion.  In our opinion, the consolidated financial statements referred to above
	present fairly, in all material respects, Industrial Services of America,
	Inc. and Subsidiaries' results of its operations and its cash flows for the
	year ended December 31, 2004, in conformity with U. S. generally accepted
	accounting principles.  Also, in our opinion, the related consolidated
	financial statements schedule, when considered in relation to the basic
	consolidated financial statements taken as a whole, presents fairly, in all
	material respects, the information set forth therein.    Crowe Chizek and Company, LLC Louisville, Kentucky January 28, 2005, except for Notes 3 and 6, as to which the date is March 25, 2005   ____________________________________________________________________________________  2.


INDUSTRIAL SERVICES OF AMERICA, INC.
			AND SUBSIDIARIES
			CONSOLIDATED BALANCE SHEETS
			December 31, 2006 and 2005_________________________________________________________________________________________________2006
			
			2005ASSETSCurrent assetsCash
			$      1,331,807
			
			$    1,721,301Accounts receivable - trade (after allowance for
			doubtfulaccounts of $100,000 in 2006 and $50,000 in 2005)
			(Note 1)
			5,026,441
			
			4,502,845Net investment in sales-type leases (Note 5)
			50,586
			
			65,797Inventories (Note 1)
			3,428,226
			
			2,488,609Deferred income taxes (Note 4)
			106,725
			
			78,385Other
			88,113
			
			120,012Total current assets
			10,031,898
			
			8,976,949Net property and equipment (Note 1)
			8,152,606
			
			7,604,712Other assetsNet investment in sales-type leases (Note 5)
			186,215
			
			236,801Notes receivable - related party (Note 6)
			238,566
			
			264,390Goodwill  (Note 1)
			560,005
			
			560,005Other assets
			162,527
			
			241,6151,147,313
			
			1,302,811$   19,331,817
			
			$ 17,884,472LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilitiesCurrent maturities of long term debt  (Note 3)
			$        149,431
			
			-Current maturities of capital lease obligations
			(Note 8)
			228,533
			
			$       118,945Accounts payable
			4,545,057
			
			8,282,281Income tax payable
			1,185,717
			
			109,129Other current liabilities
			399,062
			
			1,357,903Total current liabilities
			6,507,800
			
			9,868,258Long-term liabilitiesLong-term debt (Note 3)
			2,790,460
			
			-Capital lease obligations (Note 8)
			67,853
			
			152,889Deferred income taxes (Note 4)
			219,399
			
			413,5703,077,712
			
			566,459Commitments (Note 8)Shareholders' equityCommon stock, $.005 par value: 10,000,000 shares
			authorized,4,295,000 and 4,255,000 shares issued in 2006 and
			2005,3,640,899 and 3,566,408 shares outstanding in 2006
			and 2005,respectively
			21,475
			
			21,275Additional paid-in capital
			3,194,816
			
			3,113,819Retained earnings
			7,234,990
			
			5,046,411Treasury stock at cost, 654,101 and 688,592 shares
			in 2006 and 2005
			(704,976)
			
			(731,750)9,746,305
			
			7,449,755$  19,331,817
			
			$  17,884,472
  See accompanying notes to consolidated financial statements. ____________________________________________________________________________________  3.    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			CONSOLIDATED STATEMENTS OF OPERATIONS
			Years ended December 31, 2006, 2005 and 2004____________________________________________________________________________________________2006
			
			2005
			
			2004Revenue from services
			$  15,387,241
			
			$  84,451,367
			
			$  93,275,079Revenue from product sales
			46,694,807
			
			32,930,492
			
			46,312,997Total Revenue
			62,082,048
			
			117,381,859
			
			139,588,076Cost of goods sold for services
			13,984,314
			
			80,600,770
			
			89,443,927Cost of goods sold for product sales
			40,284,368
			
			29,175,791
			
			41,942,233Reduction of cost of goods sold
			(1,272,241)
			
			-
			
			-Total Cost of goods sold
			52,996,441
			
			109,776,561
			
			131,386,160Selling, general and administrative
			5,609,959
			
			5,816,605
			
			5,564,023Income before other income (expense)
			3,475,648
			
			1,788,693
			
			2,637,893Other income (expense)Interest expense
			(212,722)
			
			(74,016)
			
			(191,586)Interest income
			195,662
			
			126,578
			
			56,783Gain (loss) on sale of assets
			22,990
			
			(2,649)
			
			(15,727)Other income (expense), net
			32,930
			
			3,424
			
			21,83238,860
			
			53,337
			
			(128,698)Income before income taxes
			3,514,508
			
			1,842,030
			
			2,509,195Income tax provision (Note 4)
			1,325,929
			
			740,433
			
			1,012,001Net income
			$    2,188,579
			
			$    1,101,597
			
			$    1,497,194Basic earnings per share
			$                .61
			
			$               .31
			
			$               .43Diluted earnings per share
			$                .61
			
			$               .31
			
			$               .42
  See accompanying notes to consolidated financial
	statements.  ____________________________________________________________________________________  4.


INDUSTRIAL SERVICES OF AMERICA, INC.
			AND SUBSIDIARIES
			CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
			Years ended December 31, 2006, 2005 and 2004______________________________________________________________________________________________________________________________________________AdditionalCommon Stock
			
			Paid-in
			
			Retained
			
			Treasury StockShares
			
			Amount
			
			Capital
			
			Earnings
			
			Shares
			
			Cost
			
			TotalBalance as of January 1, 2004
			
			3,935,000
			
			$   19,675
			
			$
			1,950,221
			
			$
			2,801,167
			
			(729,200)
			
			$ 
			(753,897)
			
			$
			4,017,166Exercise of stock options and related tax benefits
			
			320,000
			
			1,600
			
			647,985
			
			-
			
			-
			
			-
			
			649,585Treasury stock distribution to employees
			
			-
			
			-
			
			58,685
			
			-
			
			49,668
			
			50,936
			
			109,621Cash dividend
			
			-
			
			-
			
			-
			
			(353,547)
			
			-
			
			-
			
			(353,547)Net income
			
			-
			
			-
			
			-
			
			1,497,194
			
			-
			
			-
			
			1,497,194Balance as of December 31, 2004
			
			4,255,000
			
			21,275
			
			2,656,891
			
			3,944,814
			
			(679,532)
			
			(702,961)
			
			5,920,019Treasury stock distribution to employees
			
			-
			
			-
			
			5,551
			
			-
			
			940
			
			973
			
			6,524Repurchase of common stock
			
			-
			
			-
			
			-
			
			-
			
			(10,000)
			
			(29,762)
			
			(29,762)Tax benefits related to common stock options
			
			-
			
			-
			
			451,377
			
			-
			
			-
			
			-
			
			451,377Net income
			
			-
			
			-
			
			-
			
			1,101,597
			
			-
			
			-
			
			1,101,597Balance as of December 31, 2005
			
			4,255,000
			
			21,275
			
			3,113,819
			
			5,046,411
			
			(688,592)
			
			(731,750)
			
			7,449,755Treasury stock purchase
			
			-
			
			-
			
			-
			
			-
			
			(5,509)
			
			(16,338)
			
			(16,338)Exercise of stock options and related tax benefits
			
			40,000
			
			200
			
			80,997
			
			-
			
			40,000
			
			43,112
			
			124,309Net income
			
			-
			
			-
			
			-
			
			2,188,579
			
			-
			
			-
			
			2,188,579Balance as of December 31, 2006
			
			4,295,000
			
			$ 
			21,475
			
			$  3,194,816
			
			$  7,234,990
			
			(654,101)
			
			$ 
			(704,976)
			
			$
			9,746,305  __________________________________________________________________________________________________________________________________  5.


INDUSTRIAL SERVICES OF AMERICA, INC.
			AND SUBSIDIARIES
			CONSOLIDATED STATEMENTS OF CASH FLOWS
			Years ended December 31, 2006, 2005 and 2004________________________________________________________________________________________________2006
			
			2005
			
			2004Cash flows from operating activitiesNet income
			
			$    2,188,579
			
			$  1,101,597
			
			$  1,497,194Adjustments to reconcile net income to netcash from operating activitiesDepreciation and amortization
			
			1,745,905
			
			1,709,668
			
			1,538,161Stock distribution to employees
			
			-
			
			6,524
			
			109,621Deferred income taxes
			
			(222,511)
			
			(213,538)
			
			335,023Tax benefit of stock options exercised
			
			-
			
			451,377
			
			213,444Provision for doubtful accounts
			
			50,000
			
			(25,000)
			
			-(Gain) loss on sale of property and equipment
			
			(22,990)
			
			2,649
			
			15,727Change in assets and liabilitiesReceivables
			
			(573,596)
			
			4,099,483
			
			472,524Net investment in sales-type leases
			
			65,797
			
			(94,360)
			
			79,754Inventories
			
			(939,617)
			
			(336,235)
			
			(445,279)Other assets
			
			110,987
			
			102,797
			
			(167,573)Accounts payable
			
			(3,737,224)
			
			(3,800,395)
			
			1,580,173Other current liabilities
			
			117,747
			
			854,163
			
			221,581Net cash from operating activities
			
			(1,216,923)
			
			3,858,730
			
			5,450,350Cash flows from investing activitiesProceeds from sale of property and equipment
			
			81,700
			
			101,797
			
			3,188Purchases of property and equipment
			
			(2,166,331)
			
			(1,817,885)
			
			(1,845,073)Payments from/(advances to) related party
			
			25,824
			
			37,770
			
			(302,160)Net cash from investing activities
			
			(2,058,807)
			
			(1,678,318)
			
			(2,144,045)Cash flows from financing activitiesPayments on capital lease obligation
			
			(161,626)
			
			(559,039)
			
			(159,073)Proceeds from long-term debt
			
			10,710,875
			
			-
			
			-Payments on long-term debt
			
			(7,770,984)
			
			(1,000,000)
			
			(2,762,908)Proceeds from exercise of common stock options
			
			124,309
			
			-
			
			436,141Payment of cash dividend
			
			-
			
			-
			
			(353,547)Purchases of common stock
			
			(16,338)
			
			(29,762)
			
			-Net cash from financing activities
			
			2,886,236
			
			(1,588,801)
			
			(2,839,387)Net change in cash
			
			(389,494)
			
			591,611
			
			466,918Cash at beginning of year
			
			1,721,301
			
			1,129,690
			
			662,772Cash at end of year
			
			$  1,331,807
			
			$ 1,721,301
			
			$  1,129,690Supplemental disclosure of cash flow informationCash paid for interest
			
			$     212,722
			
			$     74,016
			
			$     191,586Cash paid for taxes
			
			604,652
			
			173,140
			
			710,384Supplemental disclosure of noncash investing and financing
			activities:Equipment purchased under capital leases
			
			186,178
			
			-
			
			-
  ____________________________________________________________________________________  6.


INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 1 - SUMMARY OF SIGNIFICANT
			ACCOUNTING POLICIESNature of Business:  The recycling
			division of Industrial Services of America, Inc. and its
			subsidiaries (ISA) purchases and sells ferrous and nonferrous
			materials and fiber scrap on a daily basis at our two wholly owned
			subsidiaries, ISA Recycling, LLC (located in Louisville, Kentucky)
			and ISA Indiana, Inc. (serving southern Indiana).  ISA also 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.  Our management services division represents contracts with
			retail, commercial and industrial businesses to handle their waste
			disposal needs, primarily by subcontracting with commercial waste
			hauling and disposal companies.  Our customers and subcontractors
			are located throughout the United States, Canada and Mexico.  ISA's
			waste equipment sales and services division (WESSCO) installs or
			repairs equipment and rental equipment on a same day basis.  Each of
			our segments bills separately for its products or services. 
			Generally, services and products are not bundled for sale to
			individual customers.  The products or services have value to the
			customer on a standalone basis.Revenue Recognition:  ISA records
			revenue for its recycling and equipment sales divisions upon
			delivery of the related materials and equipment to the customer.  We
			provide installation and training on all equipment and we charge
			these costs to the customer, recording revenue in the period we
			provide the service.  We are the middleman in the sale of the
			equipment and not a manufacturer.  Any warranty is the
			responsibility of the manufacturer and therefore we make no
			estimates for warranty obligations.  Allowances for equipment
			returns are made on a case-by-case   basis.  Historically, returns
			of equipment have not been material.Our management services division
			provides our customers evaluation, management, monitoring, auditing
			and cost reduction of our customers' non-hazardous solid waste
			removal activities.  We recognize revenue related to the management
			aspects of these services when we deliver the services. We record
			revenue related to this activity on a gross basis because we are
			ultimately responsible for service delivery, have discretion over
			the selection of the specific service provided and the amounts to be
			charged, and are directly obligated to the subcontractor for the
			services provided.  We are an independent contractor.  If we
			discover that third party service providers have not performed,
			either by auditing of the service provider invoices or
			communications from our customers, we then resolve the service
			delivery dispute directly with the third party service supplier._____________________________________________________________________________________(Continued)7.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)In
			our management services division, the customer contacts us for
			service.  We determine the type of waste removal service required to
			meet the customer's needs, and we use our discretion to choose from
			a selection of approved third party service suppliers.  Upon our
			authorization, the third party service supplier uses its own
			trucking to remove waste materials from the customer's location.  We
			pay the third party service suppliers on several different payment
			terms after we have received payment from the customers who are
			billed monthly.  We recognize revenue after assessing the
			satisfactory performance of the service by the third party service
			supplier.  Assessment includes our review of landfill weight tickets
			provided by the third party service supplier documenting completion
			of the contracted service.We record sales-type leases at the
			net present value of future minimum lease payments.  Interest income
			related to the lease is recognized over the life of the lease.  At
			the inception of the lease, any difference between the net present
			value of future cash flows and the basis of the leased asset
			(carrying value plus initial direct costs, less present value of any
			residual) is recorded as a gain or loss.Accounts Receivable and Allowance
			for Doubtful Accounts:  Accounts receivable consist primarily of
			amounts due from customers from product and brokered sales. The
			allowance for doubtful accounts totaled $100,000 and $50,000 at
			December 31, 2006 and 2005, respectively.  Our determination of the
			allowance for doubtful accounts includes a number of factors,
			including the age of the balance, past experience with the customer
			account, changes in collection patterns and general industry
			conditions.  Interest is not normally charged on receivables. 
			Potential credit losses from our significant customers could
			adversely affect our results of operations or financial condition. 
			While we believe our allowance for doubtful accounts is adequate,
			changes in economic conditions or any weakness in the steel and
			metals industry could adversely impact our future earnings.  We
			charge off losses to the allowance when we deem further collection
			efforts will not provide additional recoveries.Major Customer:  We used to derive
			a significant portion of our revenues from one primary customer, The
			Home Depot, accounting for approximately 56% and 51% of 2005 and
			2004 total revenues, respectively, and approximately 24% and 23% of
			2005 and 2004 total gross profit, respectively.  The revenue from
			this former customer represented approximately 77% and 76% of CWS
			revenues in 2005 and 2004, respectively.  At December 31, 2005,
			amounts due from this former customer were $293,936.  We currently
			have no significant customer concentration.Principles of Consolidation:  The
			consolidated financial statements include the accounts of the
			Company and its wholly owned subsidiaries, ISA Indiana, Inc. and ISA
			Recycling, LLC.  Upon consolidation, all intercompany accounts,
			transactions and profits have been eliminated._____________________________________________________________________________________(Continued)8.
    INDUSTRIAL SERVICES OF
			AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 1 - SUMMARY OF SIGNIFICANT
			ACCOUNTING POLICIES (Continued)Common Control:  The Company
			conducts significant levels of business (see Note 6) with K&R, LLC
			(K&R), which is owned by the Company's principal shareholder. 
			Because these entities are under common control, operating results
			or the 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 accounting
			principles generally accepted in the United States of America,
			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.Inventories:  Our inventories primarily consist of ferrous and
			non-ferrous scrap metals and are valued at the lower of average
			purchased cost or market. Quantities of inventories are determined
			based on our inventory systems and are subject to periodic physical
			verification using estimation techniques including observation,
			weighing and other industry methods. We would recognize inventory
			impairment when the market value, based upon current market pricing,
			falls below recorded value or when the estimated volume is less than
			the recorded volume of the inventory.  We would record the loss in
			cost of goods sold in the period during which we identified the
			loss.Some commodities are in saleable
			condition at acquisition.  We purchase these commodities in small
			amounts until we have a truckload of material available for
			shipment.  Some commodities are not in saleable condition at
			acquisition.  These commodities must be torched, sheared or baled. 
			We do not have work-in-process inventory that needs to be
			manufactured to become finished goods.  We include processing costs
			in inventory for all commodities by gross ton.  Processing costs in
			ferrous inventory totaled $387,751 at December 31, 2006 and $242,295
			at December 31, 2005.  Processing costs in non-ferrous inventory
			totaled $86,101 at December 31, 2006 and $71,595 at December 31,
			2005.   Ferrous inventory of $1,667,937 at December 31, 2006 was
			comprised of $382,445 in raw materials and $1,285,492 of finished
			goods.  Ferrous inventory of $1,380,050 at December 31, 2005 was
			comprised of $402,041 in raw materials and $978,009 of finished
			goods.  Non-ferrous inventory of $1,678,655 at December 31, 2006 was
			comprised of $451,289 in raw materials and $1,227,366 of finished
			goods.  Non-ferrous inventory of $961,085 at December 31, 2005 was
			comprised of $196,508 in raw materials and $764,577 of finished
			goods.  We charged $2,353,435 in general and administrative
			processing costs to COS for the year ended December 31, 2006 and
			$2,015,733 for the year ended December 31, 2005._____________________________________________________________________________________(Continued)9.
 INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Inventory also includes all types of industrial waste handling
			equipment and machinery held for resale such as compactors, balers,
			and containers.  Other inventory includes cardboard and baling
			wire.  Inventories as of December 31, 2006 and 2005 consist of the
			following:
  2006
			2005Ferrous materials
			$ 1,667,937
			$ 1,380,050Non-Ferrous materials
			1,678,655
			961,085Waste Equipment Machinery
			56,200
			120,922Other
			25,434
			26,552$ 3,428,226
			$ 2,488,609
  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.  Assets under capital lease
			obligations are amortized over the term of the capital lease.Property and equipment as of December 31, 2006 and 2005 consist of
			the following:
  Life
			
			
			2006
			
			2005Land
			
			
			
			$ 1,581,550
			
			$ 1,581,550Equipment and vehicles
			1-10 years
			
			
			9,759,509
			
			8,535,479Office equipment
			1-7 years
			
			
			1,600,034
			
			1,521,783Rental equipment
			3-5 years
			
			
			4,238,555
			
			3,376,443Building and leasehold improvements
			5-40 years
			
			
			2,329,886
			
			2,292,33119,509,534
			
			17,307,586Less accumulated depreciation andamortization
			
			
			
			11,356,928
			
			9,702,874$ 8,152,606
			
			$ 7,604,712
  Depreciation expense for the years
			ended December 31, 2006, 2005 and 2004 was $1,745,905, $1,709,668
			and $1,538,161.   Of the $1,745,905 depreciation expense recognized
			in 2006, $1,325,035 was recorded in cost of sales, and $420,870 was
			recorded in general and administrative expense._____________________________________________________________________________________(Continued)10.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)A
			typical term of our rental equipment leases is five years.  The
			revenue stream is based on monthly usage and recognized in the month
			of usage.  We record purchased rental equipment, including all
			installation and freight charges, as a fixed asset.  We are
			typically responsible for all repairs and maintenance expenses on
			rental equipment.  Based on existing agreements, future operating
			lease revenue from rental equipment for each of the next five years
			is estimated to be:
  2007
			$1,586,2852008
			1,350,7002009
			1,200,6202010
			786,4682011
			293,990$5,218,063
  Goodwill and Other Intangible Assets:  Goodwill and certain
			intangible assets are no longer amortized but are assessed at least
			annually for impairment with any such impairment recognized in the
			period identified.  We perform our annual goodwill impairment test
			internally at December 31 and at the level of the recycling
			reporting unit to which all the goodwill is related.  We determine
			whether to impair goodwill by comparing the fair value of the
			recycling reporting unit as a whole (the present value of expected
			cash flows) to its carrying value including goodwill.  Since the
			recycling reporting unit's fair value exceeds its carrying value, no
			further computations are required.Income Taxes:  Income taxes are accounted for under the asset and
			liability method.  Deferred tax assets and liabilities are
			recognized for the future tax consequences attributable to
			differences between the financial statement carrying amounts of
			existing assets and liabilities and their respective tax bases and
			operating loss and tax credit carryforwards. Deferred tax assets and
			liabilities are measured using enacted tax rates expected to apply
			to taxable income in the years in which those temporary differences
			are expected to be recovered or settled.  The effect on deferred tax
			assets and liabilities of a change in tax rates is recognized in
			income in the period that includes the enactment date.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._____________________________________________________________________________________(Continued)11.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Earnings Per Share:  Basic earnings per share is computed by
			dividing net income by the weighted average number of common shares
			outstanding during the year.  Diluted earnings per share is computed
			by dividing net income by the weighted average number of common
			shares outstanding plus the dilutive effect of stock options.Stock Option Plans:  During the year ended December 31, 2004 we
			granted options to purchase shares of our common stock to several of
			our officers and outside directors.  We applied APB Opinion No. 25
			in accounting for our employees' stock option agreements.  There was
			no compensation charged to operations in 2006, 2005, and 2004
			related to these options.We
			have an employee stock option plan under which we may grant options
			for up to 400,000 shares of common stock, which are reserved by the
			board of directors for issuance of stock options.  The exercise
			price of each option is equal to the market price of our stock on
			the date of grant.  The maximum term of the option is five years.On
			January 1, 2006, we adopted SFAS No. 123R (Revised 2004),
			Share-Based Payment, using the modified prospective method.  The
			impact of adopting SFAS 123R on our consolidated results of
			operations depends on the level of future option grants and the fair
			value of the options granted at such future dates, as well as the
			vesting periods provided by such awards.  Existing outstanding
			options did not result in additional compensation expense upon
			adoption of SFAS 123R since all outstanding options were fully
			vested.
  2006
			
			2005
			
			2004Net income (loss)Net income, as reported
			
			$  2,188,579
			
			$ 1,101,597
			
			$ 1,497,194Basic earnings (loss) per shareAs reported
			
			$          .61
			
			$            .31
			
			$            .43Diluted earnings (loss) per shareAs reported
			
			$          .61
			
			$            .31
			
			$            .42
  _____________________________________________________________________________________(Continued)12.
    INDUSTRIAL SERVICES OF
			AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Following is a summary of stock option activity and number of shares
			reserved for outstanding options for the years ended December 31,
			2006, 2005 and 2004:
  Maximum
			
			WeightedWeighted
			
			
			
			Remaining
			
			AverageAverage
			
			Exercise
			
			Term of
			
			Grant DateNumber of
			
			Exercise Price
			
			Price Per
			
			Options
			
			Fair ValueShares
			
			Per Share
			
			Share
			
			Granted
			
			of OptionsBalance as of January 1, 2004
			591,000
			
			$1.75
			
			$1.25
			
			1 to 5
			
			$1.12to $3.00
			
			yearsExercised
			(320,000)
			
			$1.41
			
			$1.41
			
			-
			
			-Expired
			(231,000)
			
			$2.31
			
			$1.25
			
			-
			
			-to $3.00Balance as of December 31, 2004
			40,000
			
			$1.25
			
			$1.25
			
			1 to 3
			
			$1.21yearsExpired
			(20,000)
			
			$1.25
			
			$1.25
			
			-
			
			-Balance as of December 31, 2005
			20,000
			
			$1.25
			
			$1.25
			
			1 to 3
			
			$1.21YearsExercised
			(20,000)
			
			$1.25
			
			$1.25
			
			-
			
			-Balance as of December 31, 2006
			-
			
			-
			
			-
			
			-
			
			-
  _____________________________________________________________________________________(Continued)13.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)SFAS No. 123 (Revised 2005), Share-Based Payment, applies to awards
			granted or modified by ISA after July 1, 2005.  Compensation cost is
			also to be recorded for prior option grants that vest after that
			date.  The effect of adopting SFAS 123R on ISA's consolidated
			results of operations depends on the level of future option grants
			and the fair value of the options granted at such future dates, as
			well as the vesting periods provided by such awards and, therefore,
			cannot currently be estimated.  There is no significant effect on
			ISA's consolidated financial position since total stockholders'
			equity is not impacted.Effective as of May 5, 2006, we entered into an agreement with
			Andrew M. Lassak to settle Mr. Lassak's claims against us in Lassak
			v. Industrial Services of America, Inc., et al, No. 04-423-CA (Fla.
			19th Cir. Ct. filed June 2, 2004).  Lassak's demands and claims
			included rights to purchase 240,500 shares of our common stock for
			$1.25 per share, rights to purchase 149,500 shares of our common
			stock for $3.00 per share, and demand and piggyback registration
			rights as well as cashless exercise rights with respect to such
			options. Since the inception of the suit, we have disputed Lassak's
			claims and have denied any liability for Lassak's claims and
			demands.  Pursuant to the settlement agreement, we allowed Lassak to
			exercise a reduced number of the options he was seeking - 40,000 at
			an exercise price of $1.25 per share. Lassak tendered to us the full
			exercise price for the 40,000 options and we filed a registration
			statement for the underlying shares with the Securities and Exchange
			Commission on May 24, 2006. The registration was declared effective
			by the Securities and Exchange Commission on June 12, 2006. We then
			delivered 40,000 registered shares to Lassak, thereby satisfying all
			our requirements under the settlement agreement and effectively
			concluding this matter.  The estimated fair value of these options
			is approximately $270,000.  Additional expense of $34,309 associated
			with the value of the options was recognized in the third quarter of
			2006 and the remaining $235,691 was recognized in prior years
			1998-2001.Fair Values of Financial Instruments:  We estimate the fair value of
			our financial instruments 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 these estimates.    As of
			December 31, 2006 and 2005, the estimated fair value of our
			financial instruments approximated book value.  The fair value of
			our debt approximates its carrying value because the majority of our
			debt bears a floating rate of interest based on the prime rate. 
			There is no readily available market by which to determine fair
			market value of our fixed term debt; however, based on existing
			interest rates and prevailing rates as of each year end, we have
			determined that the fair value of our fixed rate debt approximates
			book value._____________________________________________________________________________________(Continued)14.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Impact of Recently Issued Accounting Standards:SFAS No. 154, Accounting Changes and Error Corrections, replaces APB
			Opinion No. 20, Accounting Changes, and FASB Statement No. 3,
			Reporting Accounting Changes in Interim Financial Statements, and
			changes the requirements for the accounting for and reporting of a
			change in accounting principle. SFAS No. 154 applies to all
			voluntary changes in accounting principle. It also applies to
			changes required by an accounting pronouncement in the unusual
			instance that the pronouncement does not include specific transition
			provisions. SFAS No. 154 requires retrospective application to prior
			periods' financial statements of changes in accounting principle,
			unless it is impracticable to determine either the period-specific
			effects or the cumulative effect of the change.  SFAS No. 154 was
			issued May 2005 and is effective for accounting changes and
			corrections of errors made in fiscal years beginning after December
			15, 2005.  We do not expect this standard to significantly impact
			our financial statements.SFAS No. 157, Fair Value Measurements, defines fair value as the
			price that would be received to sell an asset or paid to transfer a
			liability in an orderly transaction between market participants at
			the measurement date (an exit price). SFAS No. 157 also stipulates
			that, as a market-based measurement, fair value measurement should
			be determined based on the assumptions that market participants
			would use in pricing the asset or liability, and establishes a fair
			value hierarchy that distinguishes between (a) market participant
			assumptions developed based on market data obtained from sources
			independent of the reporting entity (observable inputs) and (b) the
			reporting entity's own assumptions about market participant
			assumptions developed based on the best information available in the
			circumstances (unobservable inputs).  SFAS No. 157 is effective for
			financial statements issued for fiscal years beginning after
			November 15, 2007, and interim periods within those fiscal years,
			although earlier application is encouraged.  We do not expect this
			standard to significantly impact our financial statements.Interpretation No. 48, Accounting for Uncertainty in Income Taxes--an
			interpretation of FASB Statement No. 109 (issued June 2006),
			clarifies the accounting for uncertainty in income taxes recognized
			in an enterprise's financial statements in accordance with FASB
			Statement No. 109, Accounting for Income Taxes. This Interpretation
			prescribes a recognition threshold and measurement attribute for the
			financial statement recognition and measurement of a tax position
			taken or expected to be taken in a tax return. This Interpretation
			also provides guidance on derecognition, classification, interest
			and penalties, accounting in interim periods, disclosure, and
			transition.  This Interpretation is effective for fiscal years
			beginning after December 15, 2006.  The adoption of this standard on
			January 1, 2007 did not have an impact on our consolidated financial
			statements._____________________________________________________________________________________(Continued)15.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 2 - NOTE PAYABLE TO BANKOn
			December 22, 2006, ISA executed a new revolving credit facility with
			BB&T increasing the borrowing line from $5.0 million to $10.0
			million to provide ISA with working capital to support the current
			needs of our business.  This revolving credit facility has a three
			year term expiring December 22, 2009, and provides for advances of
			up to eighty percent (80%) of ISA's eligible accounts receivable and
			up to the  forty percent (40%) of eligible inventory, and up to one
			hundred (100%) of ISA's net book value of eligible equipment less an
			outstanding indebtedness on the equipment.  The revolving credit
			facility bears interest at the one month Libor rate, as published in
			the Wall Street Journal, plus two and twenty-five one-hundredths
			percent (2.25%) per annum which was 7.57% as of December 31, 2006,
			and is secured by all ISA assets (except rental fleet equipment). 
			The revolving credit facility contains certain restrictive and
			financial covenants.  At December 31, 2006, ISA was in compliance
			with all restrictive covenants.NOTE 3 - LONG-TERM DEBTLong-term debt as of December 31, 2006 and 2005 consists of the
			following:
  2006
			
			2005Note payable to a
			bank secured by our rental fleet equipment with a fixed interest
			rate of 6.83% and monthly payments of $23,047.  The maturity date
			under this agreement is June 2011 with a ten-year amortization
			schedule.
			
			$  1,929,016
			
			$                   -Revolving credit
			facility with a bank secured by all assets except for rental fleet
			equipment with a variable interest rate of Libor plus 2.25% and no
			required monthly principal payments.  The maturity date under this
			agreement is December 2009.
			
			1,010,875
			
			-2,939,891
			
			-Less current
			maturities
			
			149,431
			
			-$2,790,460
			
			$                   -
  The annual maturities of long-term debt as of December 31, 2004 are as
	follows:
  2007
			$     149,4312008
			159,9622009
			1,182,1112010
			183,3052011
			and thereafter
			1,265,082Total
			$ 2,939,891  _____________________________________________________________________________________(Continued)16.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 4 -- INCOME
			TAXESThe income tax
			provision (benefit) consists of the following for the years ended
			December 31, 2006, 2005 and 2004:
  2006
			
			2005
			
			2004FederalCurrent
			$  1,178,483
			
			$   780,181
			
			$    448,275Deferred
			(174,958)
			
			(203,543)
			
			343,9161,003,525
			
			576,638
			
			792,191StateCurrent
			369,957
			
			173,790
			
			228,703Deferred
			(47,553)
			
			(9,995)
			
			(8,893)322,404
			
			163,795
			
			219,810$  1,325,929
			
			$   740,433
			
			$1,012,001
  A
			reconciliation of income taxes at the statutory rate to the reported
			provision is as follows:
  2006
			
			2005
			
			2004Federal income tax at statutory rate
			$1,194,933
			
			$ 629,083
			
			$    853,127State and local income taxes, net offederal income tax effect
			212,787
			
			106,257
			
			145,074Permanent differences
			(43,702)
			
			-
			
			-Other differences, net
			(38,089)
			
			5,093
			
			13,800$1,325,929
			
			$ 740,433
			
			$ 1,012,001
  The
			permanent differences of $(43,702) and the other differences, net of
			$(38,089) are due to a decreased taxable base of the common stock
			awarded to Andrew J. Lassak in the second quarter of 2006.  This
			decrease was mutually agreed upon in the fourth quarter of 2006._____________________________________________________________________________________(Continued)17.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 4 - INCOME
			TAXES (Continued)Significant
			components of the Company's deferred tax liabilities and assets as
			of December 31, 2006 and 2005 are as follows:
  2006
			
			2005Deferred tax liabilitiesTax depreciation in excess of book
			$    278,929
			
			$     529,530Tax amortization in excess of book
			114,666
			
			89,598Gross deferred tax liabilities
			393,595
			
			619,128Deferred tax assetsProperty taxes
			39,495
			
			44,025Allowance for doubtful accounts
			43,000
			
			24,206Book amortization in excess of tax
			174,196
			
			205,558Inventory capitalization
			13,887
			
			10,154Other
			10,343
			
			-Gross deferred tax assets
			280,921
			
			283,943Net deferred tax liabilities
			$ (112,674)
			
			$   (335,185)
  NOTE
				5 - SALES-TYPE LEASESThe 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, 2006 are as
				follows:
  2007
			$
			94,0202008
			84,9202009
			66,7202010
			50,040Minimum lease payments receivable
			295,700Less unearned income
			(58,899)Net investment in sales-type leases
			236,801Less current portion
			(50,586)$  186,215
  _____________________________________________________________________________________(Continued)18.
    INDUSTRIAL
				SERVICES OF AMERICA, INC.
				AND SUBSIDIARIES
				NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
				December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 6 - RELATED PARTY
				TRANSACTIONSThe Company enters into
				various transactions with related parties including the
				Company's principal shareholder and an affiliated company owned
				by the Company's principal shareholder (K&R).  A summary of
				these transactions is as follows:
  2006
			
			2005
			
			2004Balance sheet accounts:Accounts receivable
			$              -
			
			$              -
			
			$              -Notes receivable
			$  238,566
			
			$   264,390
			
			$   302,160Deposits (included in other long-term assets)
			$    62,106
			
			$     62,106
			
			$     62,106Income statement activity:Rent expense
			$   505,272
			
			$   505,272
			
			$   505,272Consulting fees
			$   240,000
			
			$   240,000
			
			$   240,000
  ISA leases its
				corporate offices, processing property and buildings in
				Louisville, Kentucky for $42,106 per month from K&R pursuant to
				the K&R Lease.  Deposits include one month of rent in advance in
				the amount of $42,106.  In 2004, we paid for repairs totaling
				$302,160 that we made to the buildings and property that we
				lease from K&R, located at 7100 Grade Lane, Louisville,
				Kentucky.  K&R executed an unsecured promissory note, dated
				March 25, 2005, but effective December 31, 2004, to us for the
				principal sum of $302,160.  K&R makes payments on the promissory
				note of principal and interest in ninety-six (96) monthly
				installments of $3,897.66.  Failure of K&R to make any payment
				when due under this note within fifteen (15) days of its due
				date shall constitute a default.  After the fifteen day period,
				the note shall bear interest at a rate equal to fifteen percent
				(15%) per annum and we have the right to exercise our remedies
				to collect full payment of the note.In an addendum
				to the K&R lease as of January 1, 2005, the rent was increased
				$4,000 as a result of the improvements made to the property in
				2004.  For years 2005 and 2006, the payments to K&R by the
				Company of $4,000 for additional rent and the payment from K&R
				to the Company of $3,897.66 for the promissory note were offset.
  _____________________________________________________________________________________(Continued)19.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 6 - RELATED
			PARTY TRANSACTIONS (Continued)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 remains in
			effect until December 31, 2007, with automatic renewals thereafter
			unless one party provides written notice to theother party of its
			intent not to renew at least six months in advance of the next
			renewal date.  The agreement requires that we make annual payments
			to K&R of $240,000 in equal monthly installments of $20,000. 
			Deposits include one month of consulting services in advance in the
			amount of $20,000.  ISA's Chairman is compensated through these
			consulting fees .NOTE 7 - EMPLOYEE RETIREMENT PLANThe 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 25% of each employee's voluntary contribution up to 6% of
			their gross salary.  The expense under the plan for 2006, 2005 and
			2004 was $33,438, $31,996 and $28,950, respectively.NOTE 8 - LEASE COMMITMENTSOperating Leases:The Company
			leases its Louisville, Kentucky facility from a related party (see
			Note 6) under an operating lease expiring December 2007.  The rent
			was adjusted in January 2003 per the agreement to monthly payments
			of $42,106 through December 2007.  In addition, the Company is also
			responsible for real estate taxes, insurance, utilities and
			maintenance expense.The Company
			leases a facility in Dallas, Texas for management services
			operations.  The  agreement provided that monthly payments of $2,457
			were paid through September 2005.  The lease was renewed effective
			October 1, 2005 for a period of two years with monthly payments of
			$2,525.   The Company also leases other machinery and equipment
			under operating leases which expire through February 2009.We lease a facility in Lexington, Kentucky for $4,500 per month; the
			lease terminates December 31, 2012.  We have subleased this property
			for a term commencing March 1, 2007 and ending December 31, 2012 for
			$4,500 per month.   If for any reason the sublessee defaults, we
			remain liable for the remainder of the lease payments through
			December 31, 2012.On February 6, 2007, we leased 7.7 acres of real property, including
			a 38,000 square foot warehouse and a 400 square foot office, in
			Pineville, Louisiana for $5,250 per month for twenty-four months
			beginning March 1, 2007 and ending February 28, 2009, with an option
			to purchase the property for a purchase price of $575,000.______________________________________________________________________________________(Continued)20.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 8 -- LEASE
			COMMITMENTS (Continued)Future minimum
			lease payments for operating leases as of December 31, 2006 are as
			follows:
  2007
				
				$      612,2462008
				
				80,5542009
				
				42,2432010
				
				3,375Future minimum lease payments
				
				$      738,418
    Total rent
			expense for the years ended December 31, 2006, 2005 and 2004 was
			$784,954, $809,270 and $773,139, respectively.Capital Leases:The Company leases various pieces of equipment which
			qualify as capital leases.  These lease arrangements require monthly
			lease payments expiring at various dates through November 2009.The following is a summary of assets held under
			capital leases which are included in property and equipment:
  2006
			
			2005Equipment
			
			$     757,513
			
			$     571,335Less accumulated depreciation
			
			168,904
			
			159,525$     588,609
			
			$     411,810
  The following is
			a schedule of future annual minimum lease payments under the
			capitalized lease arrangements, together with the present value of
			net minimum lease payments at December 31, 2006.
  2007
				
				$    233,9922008
				
				60,7862009
				
				7,475Total future minimum lease
				payments
				
				302,253Lessamount representing
				interest
				
				(5,867)Present value of net minimumlease payments
				
				296,386Less current portion
				
				(228,533)Capital Lease Obligations
				
				$      67,853
  _____________________________________________________________________________________(Continued)21.
    INDUSTRIAL SERVICES OF
			AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 9 - PER
			SHARE DATAThe computation for basic and diluted earnings per share is as
			follows:  2006
			
			2005
			
			2004Basic earnings per shareNet income
			$    2,188,579
			
			$    1,101,597
			
			$    1,497,194Weighted average shares outstanding
			3,602,872
			
			3,575,202
			
			3,473,887Basic earnings per share
			$               .61
			
			$              .31
			
			$               .43Diluted earnings per shareNet income
			$     2,188,579
			
			$    1,101,597
			
			$    1,497,194Weighted average shares outstanding
			3,602,872
			
			3,575,202
			
			3,473,887Add dilutive effect of assumed exercising
			  of stock options
			10,218
			
			18,608
			
			118,912Diluted average shares outstanding
			3,613,090
			
			3,593,810
			
			3,592,799Diluted earnings per share
			$               .61
			
			$              .31
			
			$              .42  NOTE 10 - SEGMENT INFORMATIONThe Company's operations include
			three primary segments:  ISA Recycling, Computerized Waste Systems
			(CWS), and Waste Equipment Sales & Service (WESSCO).  ISA Recycling
			provides products and services to meet the needs of its customers
			related to ferrous, non-ferrous and fiber recycling at two locations
			in the Midwest.  CWS provides waste disposal services including
			contract negotiations with service providers, 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 components of the column
			labeled "other" are selling, general and administrative expenses
			that are not directly related to the three primary segments.The accounting policies of the
			three segments are the same as those described in the summary of
			significant accounting policies (Note 1).  We evaluate segment
			performance based on gross profit or loss and the evaluation process
			for each segment includes only direct expenses and selling, general
			and administrative costs, omitting any other income and expense and
			income taxes.
  _____________________________________________________________________________________(Continued)22.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 10 - SEGMENT INFORMATION
			(Continued)
  SegmentISA Recycling
			
			CWS
			
			WESSCO
			
			Other
			
			Totals2006Recycling revenues
			
			$  44,967,023
			
			$                 -
			
			$                  -
			
			$                 -
			
			$    44,967,023Equipment sales,
			servicesand leasing
			revenues
			
			-
			
			-
			
			1,727,784
			
			-
			
			1,727,784Management fees
			
			-
			
			15,387,241
			
			-
			
			-
			
			15,387,241Cost of goods sold
			
			(39,448,957)
			
			(12,712,073)
			
			(835,411)
			
			-
			
			(52,996,441)Selling, general andadministrative
			expenses
			
			(1,431,251)
			
			(1,479,302)
			
			(542,433)
			
			(2,156,973)
			
			(5,609,959)Segment profit (loss)
			
			$      4,086,815
			
			$    1,195,866
			
			$      349,940
			
			$  (2,156,973)
			
			$       3,475,648
  SegmentISA Recycling
			
			CWS
			
			WESSCO
			
			Other
			
			Totals2006Cash
			
			$        136,803
			
			$       16,254
			
			$                 -
			
			$    1,178,750
			
			$     1,331,807Accounts receivable
			
			3,903,681
			
			1,089,080
			
			-
			
			33,680
			
			5,026,441Inventories
			
			3,357,832
			
			-
			
			70,394
			
			-
			
			3,428,226Net property andequipment
			
			3,971,773
			
			156,756
			
			1,997,911
			
			2,026,166
			
			8,152,606Goodwill
			
			560,005
			
			-
			
			-
			
			-
			
			560,005Other assets
			
			96,848
			
			10,637
			
			75,397
			
			649,850
			
			832,732Segment assets
			
			$    12,026,942
			
			$    1,272,727
			
			$    2,143,702
			
			$       3,888,446
			
			$   19,331,817
  SegmentISA Recycling
			
			CWS
			
			WESSCO
			
			Other
			
			Totals2005Recycling revenues
			
			$  29,952,938
			
			$                 -
			
			$                  -
			
			$                 -
			
			$    29,952,938Equipment sales,
			servicesand leasing
			revenues
			
			-
			
			-
			
			2,977,554
			
			-
			
			2,977,554Management fees
			
			-
			
			84,451,367
			
			-
			
			-
			
			84,451,367Cost of goods sold
			
			(27,271,712)
			
			(80,600,770)
			
			(1,904,079)
			
			-
			
			(109,776,561)Selling, general andadministrative
			expenses
			
			(987,930)
			
			(2,051,475)
			
			(612,180)
			
			(2,165,020)
			
			(5,816,605)Segment profit (loss)
			
			$      1,693,296
			
			$    1,799,122
			
			$      461,295
			
			$  (2,165,020)
			
			$       1,788,693
  _____________________________________________________________________________________(Continued)23.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________
  SegmentISA Recycling
			
			CWS
			
			WESSCO
			
			Other
			
			Totals2005Cash
			
			$        332,351
			
			$       111,738
			
			$              500
			
			$    1,276,712
			
			$     1,721,301Accounts receivable
			
			2,596,053
			
			1,793,547
			
			85,431
			
			27,814
			
			4,502,845Inventories
			
			2,352,375
			
			-
			
			136,234
			
			-
			
			2,488,609Net property andequipment
			
			3,282,130
			
			310,769
			
			1,788,285
			
			2,223,528
			
			7,604,712Goodwill
			
			560,005
			
			-
			
			-
			
			-
			
			560,005Other assets
			
			132,346
			
			25,845
			
			85,164
			
			763,645
			
			1,007,000Segment assets
			
			$    9,255,260
			
			$    2,241,899
			
			$      2,095,614
			
			$       4,291,699
			
			$   17,884,472
  SegmentISA Recycling
				
				CWS
				
				WESSCO
				
				Other
				
				Totals2004Recycling revenues
				
				$   43,262,813
				
				$                 -
				
				$                -
				
				$                 -
				
				$  43,262,813Equipment sales, servicesand leasing revenues
				
				-
				
				-
				
				3,050,184
				
				-
				
				3,050,184Management fees
				
				-
				
				93,275,079
				
				-
				
				-
				
				93,275,079Cost of goods sold
				
				(40,129,036)
				
				(89,443,927)
				
				(1,813,197)
				
				-
				
				(131,386,160)Selling, general andadministrative expenses
				
				(846,631)
				
				(1,862,000)
				
				(588,882)
				
				(2,266,510)
				
				(5,564,023)Segment profit (loss)
				
				$     2,287,146
				
				$  1,969,152
				
				$     648,105
				
				$ (2,266,510)
				
				$    2,637,893
  _____________________________________________________________________________________(Continued)24.
    INDUSTRIAL SERVICES OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 11-- CONTINGENCY/LITIGATION
			SETTLEMENTOn June 2, 2004, Andrew M.
			Lassak filed a Complaint against us in the City of Stuart, Martin
			County, Florida.  In the complaint, Lassak alleged that we breached
			our contracts with him by failing and refusing to release and
			register 390,000 shares of stock. He claims he was entitled to
			"piggyback" registration rights relating to the Form S-3
			Registration Statement that we filed for the benefit of Falkner as
			well as "demand" registration rights. He sought specific performance
			of the contracts and damages that occurred by ISA not releasing and
			registering the underlying shares relating to his options sooner.On August 6, 2004 we filed a
			Motion to Dismiss or in the Alternative Motion for More Definite
			Statement. At a hearing before the Court on September 20, 2004, the
			judge granted our Motion without prejudice, allowing Lassak to amend
			the Complaint. Lassak filed an Amended Complaint on December 27,
			2004, which restated his previous claims and made a number of new
			claims including claims of federal and state securities fraud. The
			Amended Complaint also named Harry Kletter individually as a
			defendant.  In June 2005, Lassak filed a Second Amended Complaint
			which is substantially similar to the first Amended Complaint.  We
			filed an Answer and Affirmative Defenses to the Second Amended
			Complaint as well as a Motion to Dismiss on behalf of Harry Kletter
			that remains pending.Effective as of May 5, 2006,
			we entered into an agreement with Mr. Lassak to settle Mr. Lassak's
			claims against us in Lassak v. Industrial Services of America, Inc.,
			et al, No. 04-423-CA (Fla. 19th Cir. Ct. filed June 2, 2004). 
			Lassak's demands and claims included rights to purchase 240,500
			shares of our common stock for $1.25 per share, rights to purchase
			149,500 shares of our common stock for $3.00 per share, and demand
			and piggyback registration rights as well as cashless exercise
			rights with respect to such options. Since the inception of the
			suit, we have disputed Lassak's claims and have denied any liability
			for Lassak's claims and demands. Pursuant to the settlement
			agreement, we allowed Lassak to exercise a reduced number of the
			options he was seeking -- 40,000 at an exercise price of $1.25 per
			share. Lassak tendered to us the full exercise price for the 40,000
			options and we filed a registration statement for the underlying
			shares with the Securities and Exchange Commission on May 24, 2006.
			The registration was declared effective by the Securities and
			Exchange Commission on June 12, 2006. We then delivered 40,000
			registered shares to Lassak, thereby satisfying all our requirements
			under the settlement agreement and effectively concluding this
			matter.  The estimated fair value of these options is approximately
			$270,000.  We recognized additional expense of $34,309 associated
			with the value of the options in the third quarter of 2006 and we
			had recognized the remaining $235,691 in prior years 1998-2001._________________________________________________________________________________________(Continued)25.
    INDUSTRIAL SERVICES
			OF AMERICA, INC.
			AND SUBSIDIARIES
			NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
			December 31, 2006, 2005 and 2004____________________________________________________________________________________NOTE 12 -- SELECTED QUARTERLY
			FINANCIAL DATA (UNAUDITED)
  1st
			2nd
			3rd
			4th
			Year2006Revenue
			$14,484,020
			$17,702,634
			$ 15,331,235
			$14,564,159
			$ 62,082,048Income before otherincome (expense)
			688,693
			1,007,525
			511,167
			1,268,263
			3,475,648Net income
			416,526
			602,757
			439,568
			729,728
			2,188,579Basic earnings per
			share
			0.12
			0.17
			0.12
			0.20
			0.61Diluted earnings per
			share
			0.12
			0.17
			0.12
			0.20
			0.611st
			2nd
			3rd
			4th
			Year2005Revenue
			$29,674,470
			$33,399,907
			$ 34,579,729
			$19,727,753
			$117,381,859Income before otherincome (expense)
			257,610
			52,887
			546,168
			632,028
			1,788,693Net income
			149,088
			211,679
			325,294
			415,536
			1,101,597Basic earnings per
			share
			0.04
			0.06
			0.09
			0.12
			0.31Diluted earnings per
			share
			0.04
			0.06
			0.09
			0.12
			0.311st
			2nd
			3rd
			4th
			Year2004Revenue
			$34,764,205
			$34,054,273
			$ 38,223,906
			$32,545,692
			$139,588,076Income before otherincome (expense)
			803,300
			613,084
			798,076
			423,433
			2,637,893Net income
			449,284
			363,693*
			429,584
			254,633
			1,497,194Basic earnings per
			share
			0.14
			0.10*
			0.12
			0.07
			0.43Diluted earnings per
			share
			0.13
			0.10*
			0.12
			0.07
			0.42
  * In the second quarter 2004, the
			net income amount of $363,693 (with basic and diluted earnings per
			share of $0.10) shown above is $127,300 less (with basic and diluted
			earnings per share of $0.04) than the net income amount of $490,933
			(with basic and diluted earnings per share of $0.14) previously
			reported in the second quarter report on Form 10-Q.In the second quarter of 2004, a
			permanent tax benefit related to the exercise of non-employee
			options was inadvertently recorded as a reduction to income tax
			expense.  After further review, we have determined that the tax
			benefit should instead be reported as an increase to additional paid
			in capital._________________________________________________________________________________________26.




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SUPPLEMENTARY INFORMATION


INDUSTRIAL SERVICES OF
		AMERICA, INC.
		AND SUBSIDIARIES
		SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
		Years ended December 31, 2006, 2005 and 2004__________________________________________________________________________________________Balance at
		
		Additions Charged toBeginning
		
		Costs and
		
		
		
		Balance atof Period
		
		Expenses
		
		Deductions *
		
		End of PeriodDescriptionAllowance for doubtfulaccounts 2006 (deductedfrom accounts
		receivable)
		
		$     50,000
		
		$      50,000
		
		$                 -
		
		$      100,000Allowance for doubtfulaccounts 2005 (deductedfrom accounts
		receivable)
		
		$     75,000
		
		$                -
		
		$      (25,000)
		
		$        50,000Allowance for doubtfulaccounts 2004 (deductedfrom accounts
		receivable)
		
		$     60,000
		
		$      37,937
		
		$      (22,937)
		
		$        75,000*  uncollected amounts
		written off, net of recoveries




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