UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K
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ü
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
 ACT OF 1934
For the fiscal year ended: December 31, 2009
Or
   
 
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
 ACT OF 1934
For the transition period from: _____________ to _____________

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Information Systems Associates, Inc.
 
(Exact name of registrant as specified in its charter)

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Florida
333-142429
65-0493217
(State or Other Jurisdiction
(Commission
(I.R.S. Employer
of Incorporation or Organization)
File Number)
Identification No.)

1151 SW 30th Street, Suite E, Palm City, Florida 34990
 (Address of Principal Executive Office) (Zip Code)
 
(772) 403-2992
 (Registrant’s telephone number, including area code)
 
N/A
(Former name or former address, if changed since last report)
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Securities registered pursuant to Section 12(b) of the Act:
     
Title of each class
 
Name of each exchange on which registered
None
 
Not Applicable
     
Securities registered pursuant to Section 12(g) of the Act:
     
Common Stock, $0.001 Par Value
 
(Title of Class)
 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
   
 Yes
ü
 No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
   
 Yes
ü
 No
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
ü
 Yes
 
 No
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) 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, a non-accelerated filer, or a smaller reporting company.
   
Large accelerated filer
     
Accelerated filer
   
Non-accelerated filer
     
Smaller reporting company
ü
 
   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
 
 Yes
ü
 No
   
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.  Market Value of approximately            $1,704,000 based on June 30, 2009 closing price of $0.40 per share.
 
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  18,266,084 as of December 31, 2009.
 
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by
a court.
 
 Yes
 
 No
 
DOCUMENTS INCORPORATED BY REFERENCE
 
 
 


 
 
1

 
PART I

ITEM 1.   DECRIPTION OF BUSINESS

As used herein the terms “we”, “us”, “our”, the “Registrant,” “ISA” and the “Company” means, Information Systems Associates, Inc., a Florida corporation.

BUSINESS OVERVIEW

We have been in business since May of 1994.  During the first twelve (12) years of operation, the primary focus of the business was to offer for sale, through ISA’s Value Added Reseller Agreements in place in several of the industry leaders, software products and services that allow companies to track and manage assets, primarily in the realm of corporate real estate and corporate IT network infrastructure including equipment maintained in corporate data centers.  We refer to our product and services suite as asset management solutions.  Our solutions can reduce sourcing, procurement and tracking costs, improve tracking and monitoring of asset performance and reduce operational downtime.

In 1995, we became a Business Partner (a/k/a Value Added Reseller) with Aperture Technologies, Inc. of Stamford, CT.  (It should be noted that the term “Business Partner” is somewhat misleading because in reality we are simply a subcontractor for Aperture).  At that time, Aperture’s Network Management tools (“System”), was one of the leading solutions in it field.  For more than five years, Aperture Technologies, Inc. has provided enterprise asset management solutions to customers in the United States, Europe and Asia and Pacific Rim.  During this same timeframe, we have offered Aperture’s enterprise asset management solutions to customers and prospects in North America.

The typical Value Added Reseller Agreement allows the vendor’s partner/subcontractor (in this case ISA) the ability to offer to its client’s and prospects a Commercial Off the Shelf software solution to address a particular business problem.  The primary focus of ISA’s business is working data center operations, network management department and corporate real estate department to identify and then implement a software solution which addresses their needs based upon extensive research done prior to the selection and culminating in the purchase by the client and implementation by ISA of the chosen solution.

All of the products listed under our Value Added Reseller relationships (Vista, Vision FM, the Facilities Manager, AutoCAD, and RACKWISE DCM) are products developed by third parties.

The products obtained from third parties are done so through executed Value Added Reseller Agreements.  Although each of the vendor’s agreements differs to some degree, the basic understandings are the same.  Information Systems Associates is authorized by each of the vendors to offer the vendor’s software as solutions to Information Systems Associates’ clients.  In return, Information Systems Associates receives a commission on the sale of the software.  The percentage ranges between twenty (20) and thirty (30) percent of the sale.  On occasion, Information Systems Associates provide pre-sales support services to the vendor’s clients.  In addition, Information Systems Associates is given the opportunity to implement the software solution and provide training to its clients.  On an ongoing basis, Information Systems Associates can and does provide additional consulting services beyond those provided initially to the client.

The need for a better way to capture corporate asset information became evident to ISA’s management team.  After reviewing the methods and technology in use at that time (1st Quarter 2006) for the purpose of data collection, it was decided within ISA to define a data collection process and subsequently to design and build a software solution capable of delivering quality data (output) through the use of programming techniques that incorporated many of the much needed features and capabilities, especially real time data validation.  The result was that by year end of 2007 OSPI (ON SITE PHYSICAL INVENTORYTM ) was available for resale.
 
Our customer list includes a number of leading organizations, such as Northrop Grumman Electronic Systems, Charles Schwab, Bank of America, Comcast Communications and General Electric.

Our application products are also used by corporate Real Estate departments to manage their real property lease obligations (as both tenant and landlord), to determine their company’s use of corporate space and to develop plans for relocations, mergers and acquisitions as it relates to the use of space (office, manufacturing, warehousing).

On April 17, 2009, we entered into a strategic alliance and became an investor with Rubicon Software Group, plc.  This agreement will create an opening into the European market as well as provide cost effective software development.

INDUSTRY BACKGROUND AND OVERVIEW

Asset management software has existed for more than thirty years, initially through computerized maintenance management systems, and more recently including more comprehensive and robust enterprise asset management and enterprise resource planning solutions.  The early computerized maintenance management systems automated daily management of assets, while enterprise resource planning solutions consolidate basic asset information with financial information at the corporate level.  Enterprise asset management solutions encompass elements of both, serving as the next evolution of computerized maintenance management system solutions by bridging the gap between asset management and corporate-level planning and tracking requirements.

The key value proposition for enterprise asset management solutions is that they can provide a quick and quantifiable return on investment and return on assets.  Cost and productivity improvements can immediately and measurably benefit organizations, and thus are highly desirable to potential customers, particularly in difficult economic times where the focus is increasingly bottom line oriented.

In addition to enterprise asset management solutions, we offer facilities solutions.  These are natural extensions to enterprise asset management solutions, as organizations seek to extend asset management and corporate-level planning and tracking onto other elements of the asset lifecycle.  The reference to “facilities solutions” includes software application products that are used by corporate Real Estate departments and to software application products used by Data Center Management (Information Technology) to track their computer assets from a financial perspective as well as their usage and connectivity within the corporate IT (Information Technology) network.

2

 
PRODUCTS AND SERVICES

Aperture’s VISTA

Historically, IT organizations have operated as reactive cost centers that customized one-off services for the demands of customers.  However, the influx of growing complexities, continual changes and higher demands for “better, faster and cheaper” has instigated a trend towards tighter IT management and control.  The new “value-driven” approach, combined with pressures for high availability and with increased SLA penalties have many IT executives operating under a mantra of “avoid problems before they happen” or “no surprises permitted.”

The term “SLA penalties” refers to Service Level Agreement performance metrics.  In most sophisticated corporate operations, the end user is guaranteed a specific degree of network and application availability.  Usually items such as systems maintenance are taken into consideration when guaranteeing this availability as are items like built in redundancy (network circuits and the hardware used to deliver the connectivity) as well as Disaster Recovery plans that would insure the end user a specific level of availability (although typically less than that guaranteed under normal operating conditions) in the event that a natural or other type of disaster cause an interruption in corporate IT services.
 
In order to reduce operational risk and increase operational efficiency, it is essential for IT organizations to define best practices and implement IT frameworks (for example, the IT Infrastructure Library, ITIL) that create a more service-oriented organization.  This includes standardizing and automating IT processes from a disparate set of ad hoc tasks to a cohesive, consolidated environment and developing a central repository of information to create institutional memory for the IT organization.

Many organizations have assessed the various facts of the IT organization to improve the logical environment.  However, one component which seems to be overlooked quite frequently and that continuously operates within individual silos is the overall physical infrastructure of the data center.

Aperture VISTA provides IT Management with the key information and intelligence to reduce operational risk and improve efficiency in the data center.

VisionFM

Vision FM includes a very flexible asset management system capable of tracking everything from building components to office supplies.  The Facilities Manager can define complex products such as systems furniture that include a bill-of-materials or simple items such as keys and cell phones that can be assigned directly to individuals.

Once products are defined then assets can be added by inserting symbols in AutoCAD or by using VisionFM forms such as a purchase order.  Unique information about each asset can be recorded including a barcode number, purchase date and price.  The system then tracts the asset from purchase through to disposition including depreciation, maintenance history, condition, warranties and insurance.

RACKWISE DMC

RACKWISE DMCTM services and products deliver key features to simplify and reduce the time consumed designing, modeling and operating the physical infrastructure of your datacenter.

·  
Graphical design and marketing of datacenters
·  
Auto-build visual documentation from imported bill of materials
·  
Advanced operations and reporting
·  
Modeling and impact analysis of datacenter designs
·  
Space, power, cooling, and cable management
·  
Generate detailed datacenter and rack visualizations
·  
Ensure racks and the datacenter are within design limits
·  
Instantly find available datacenter resources
·  
Improve utilization of power and space
·  
Import and document the datacenter in minutes

Rubicon Software Group

Rubicon Software works closely with organizations to develop customized software solutions.

RELATED SERVICES

In connection with our software offerings, we provide the following services to our customers:
Consulting

A significant number of our customers request our advice regarding their business and technical processes, often in conjunction with a scoping exercise conducted both before and after the execution of a contract.  This advice can relate to develop or streamline assorted business processes, such as sourcing or procurement activities, assisting in the development of technical specifications, and recommendations regarding internal workflow activities.

Customization and Implementation

Based generally upon the up-front scoping activities, we are able to customize our solutions as required to meet the customer’s particular needs.  This process can vary in length depending on the degree of customization, the resources applied by the customer and the customer’s business requirements.  We work closely with our customers to ensure that features and functionality meet their expectations.  We also provide the professional services work required for the implementation of our customer solutions, including loading of data, identification of business processes, and integration to other systems applications.

Training

Upon completion of implementation (and often during implementation), we train customer personnel to utilize our Solutions through our administrative tools.  Training can be conducted in one-on-one or group situations.  We also conduct “train the trainer” sessions.

Maintenance and Support

We provide regular software upgrades and ongoing support to our customers. On December 1, 2009, we began offering version 2 of ON SITE PHYSICAL INVENTORYTM.
 
We have been providing consulting, customization and implementation, training, maintenance and support services to our customers since 1994.
 
THIRD PARTY OFFERINGS

Other Partner Relationships
 
In addition to the sale of our core solutions and services, we intend to enter into marketing or co-marketing agreements with companies that offer services that are complementary to our offerings.  We would market these complementary services to our customers and prospects and can earn a referral fee if these services are purchased.  In some cases our marketing partner will be able to market our solutions to its customers and prospects and can earn a referral fee.  At the present time, we have two marketing partners.  They are Forsythe Solutions Group, Inc. and Total Site Solutions, Inc.

Forsythe serves as a technology infrastructure solutions provider, helping organizations across all industries, including Fortune 1000 companies, manage the cost and risk of their information technology.  Forsythe’s data center services help organizations navigate through some of the more infrequent aspects of owning and operating a mission-critical environment—data center planning and information technology relocation.  Our data collection solution ON SITE PHYSICAL INVENTORYTM, and the services offered by us in conjunction with ON SITE PHYSICAL INVENTORYTM are perfectly matched to the needs of Forsythe’s customer’s, for whom they (Forsythe) are either planning a new data center, expanding an existing data center or moving a data center to a new location. In the current environment of corporate acquisitions and downsizing, the services offered by Forsythe and in turn complimented by our offerings are well suited for these purposes.  We have concluded two data collection opportunities with Forsythe.
 
Total Site Solutions, Inc. (TSS) specializes in providing a single source solution for companies requiring highly technical facility integration and precision project execution for mission-critical facilities.  ISA’s data collection solution ON SITE PHYSICAL INVENTORYTM and the services offered by us in conjunction with ON SITE PHYSICAL INVENTORYTM are perfectly matched to the needs of Total Site Solutions’ customers.  We have entered into an agreement with TSS and have begun data collection services for two TSS clients.

3

 
BUSINESS CYCLES
 
Since many of our customers are large organizations or quasi-governmental entities, we may experience increasingly longer sales and collection cycles.
 
CUSTOMERS

We provide our solutions to customers in a variety of industries, including: healthcare, public authorities, and financial services sectors.
 
The services provided vary depending upon the needs of the customer and the solution concerned.  We collect service fees for implementation and training, and support and maintenance fees.  The criteria used to select the customers listed in the business section and other sections of the document are based on their prominence within their industry, such as Northrop Grumman, General Electric and Comcast Communications.  We do not list companies based upon any specific amount of revenue derived or whether or not they are currently active clients, but rather we have selected these clients based upon the scope of the consulting engagement.  This approach provides us with clients from various industries as this sometimes becomes crucial to a prospect in their vendor selection process.

We began our relationship with General Electric in 2008 by providing data center audit services.  This was followed by providing data collection services.  In September, 2008 GE purchased one of the first licenses for OSPI and all the related handheld devices and support services.

Revenue for select clients during fiscal year 2009:

Customer
Solutions(s)
Revenue % of Overall
Comcast
Aperture VISTA
3.09%
NCCI
VisionFM
8.62%
Emerson
Aperture VISTA
3.76%

Revenue for select clients acting as a sub-contractor for Aperture during fiscal year 2008:

Customer
Solutions(s)
Revenue % of Overall
Verizon
Aperture VISTA
  18.01%
Regions Bank
Aperture VISTA
    6.02%
Northern Trust
Aperture VISTA
    4.94%
State of Minnesota
Aperture VISTA
    4.38%
Rogers Communication
Aperture VISTA
     3.83%

SALES AND MARKETING
 
We market our services primarily through referrals from companies with whom ISA has either a reseller’s agreement in place, is authorized to provide consulting service to their client’s, or both.
 
Potential customers are identified through direct contact, responses to requests for information, attendance at trade shows and through industry contacts.  We principally focus on professionals and ongoing lead generation through our partner relationships and their VAR (Valued Added Reseller) program referrals.

We use reference customers to assist us in our marketing efforts, both through direct contact with potential customers and through site branding and case studies.  We also rely on our co-marketing partners to assist in our marketing efforts.

Our strategic alliance agreement with Rubicon will create an opportunity to begin marketing, initially in the United Kingdom through current Rubicon clients and then eventually throughout Europe.

TECHNOLOGY PLATFORM
 
As Valued Added Resellers, Information Systems Associates, Inc. has sought out and identified those solutions that are based upon proven technology platforms and contain the desired functionality to meet or exceed its client’s expectations.
 
Our partner’s technology platform are based on Microsoft core applications, including the Windows operating system and a SQL server and/or Oracle relational database, all residing on scaleable hardware.  The software is constructed using HTML and XML framework and resides on N-tier architecture as well as proprietary solutions.

ISA is the developer and at this time the exclusive marketer and distributor of ON SITE PHYSICAL INVENTORY.  Our activities as a VAR (Value Added Reseller) are best described as being authorized to resell a partner’s software solution as well as being certified to implement the solution on the client’s hardware and to deliver training in the use and operation of the software application.
 
RESEARCH AND DEVELOPMENT
 
Based on the relative pricing and functionality of products available in the marketplace today, we believe that the opportunity exists for ISA to develop software to compete in a segment of the industry.  We believe that this segment is defined as any technology infrastructure (a/k/a data centers) whose size (raised floor area) is less than twenty-five thousand square feet in size.  Therefore, we have focused our software development and technology efforts on the development of our proprietary software offerings.
  
Our initial software development and technology efforts will be aimed at defining the core functionality elements of our software application (ON SITE PHYSICAL INVENTORYTM), the features and functionality of the follow-up release, the development of new software components, and the integration of superior third party technology into our environment.  Production involves the development of reusable applications to reduce programming time and costs for customer implementations.

The strategic alliance agreement with Rubicon has allowed for the rewrite of ON SITE PHYSICAL INVENTORYTM, version 2, on budget and within the prescribed time frame. This relationship will also provide more favorable pricing for future software development.  ON SITE PHYSICAL INVENTORYTM, version 2 became available December 1, 2009.

4

 
COMPETITION

The market for each solution comprising our asset management suite is intensely competitive.  Many of the companies we compete with have much greater financial, technical, research and development resources than us.
 
The system integration consulting field is comprised of many categories of specialties.  There are integrators who specialize in software integration by industry (automotive, manufacturing, pharmaceutical, defense, etc.) and therefore are not considered to be competitors.  Our primary competitors in this space are the other Value Added Resellers representing the same products as Information Systems Associates.  The relationship with the vendor (software developers) is crucial in gaining an edge on the competition.  This relationship is usually strengthened by such factors as the client relationships that the Value Added Reseller already has in place as well as the Value Added Resellers ability to successfully implement and maintain the vendor’s solution to the vendor’s satisfaction.  We believe that Information Systems Associates has developed strong relationships with the solution vendors that it represents which in turn has and will continue to provide Information Systems Associates with sales of its consulting service offerings.  We at Information Systems Associates believe that the foundation for this relationship is built upon trust.

The data collection services field has been in existence for many industries for years.  The idea of hiring outside companies to conduct inventories of corporate data centers is not new either.  There are many vendors in this space today that are using techniques that employ the use of text based list or a formatted spread sheet.  Information Systems Associates has developed a data collection process for IT assets that employs real time data validation combined bar code scanning which as best as can be determined is unique in the industry.  The major importance of this approach is that the data exported (extracted) from Information Systems Associates’ data collection application has been validated and is available to be imported into the client’s asset management solution.  This saves a significant amount of time (could be days or even weeks) in researching errors that are uncovered by the application at the time of the data import.

To become more competitive, we will need to make investments in new product development and improve our market visibility and financial situation. A prime example of this investment is ON SITE PHYSICAL INVENTORYTM, version 2 which will provide a cost efficient solution.

Although we offer a broad range of asset network and facilities management solutions as Value Added Resellers, we face significant competition in each of the component product areas from the following companies:

§  
Enterprise asset management – related solutions – ShowRack, Nlyte, Visio
§   Facilities Management – related solutions – Archibus

In addition, we face competition from organizations that use in-house developers to develop solutions for certain elements of the asset management.

ISA considers data collection and the software it has developed to perform these services ON SITE PHYSICAL INVENTORYTM to be one of the two areas of focus for our business.  It is the intent of ISA management to promote the software as the practical solution to the specific problems encountered during the data collection process for IT (Information Technology) assets.  The promotion of the product and services will occur through marketing via industry trade show exhibition as well as mailings to a targeted audience.

ISA competes for business based on the recommendations of the software vendors for whose product solutions our data collection software is compatible.  At the present time, ON SITE PHYSICAL INVENTORYTM is compatible with two vendor’s solution; VISTA600 by Aperture Technologies, Inc. and RACKWISE DCM by Visual Network Design.  ISA believes that its current pricing structure combined with the extensive number of data validation processes included in its product make it very competitive.  In a recent trade show at which we exhibited in San Francisco, ISA was the only vendor offering a data collection solution.  The vast majority of data collection services in existence are focused on the retail industry.  Of the competitors that we have been able to identify, our research has not produced any information that would lead us to believe that the competitors can provide the same level of quality services that ISA is capable of delivering with its software solution.
 
Visual Network Design does not assign exclusive geographical areas to Value Added Resellers as this would limit the VAR’s potential as it relates to the sale of software and services.  ISA in now being actively engaged by Visual Network Design to deliver consulting services to its customers (solution installation, data load and training) and plans to offer a “turnkey” service to their clients in which ISA provides the IT asset data collection, RACKWISE DMC software installation, data import (using the data collected previously) and client training in the use of the RACKWISE DMC software.  ISA is training an additional resource for this purpose and intends to make this resource exclusive to Visual Network Design.  ISA and VND management has had several discussions regarding the role that ISA will play in supporting Visual Network Design’s deployment of RACKWISE DCM.

PLAN OF OPERATION

Our major activity is around the sale of asset management software and services related to the software. We have recently:
 
 · Received a Copyright for ON SITE PHYSICAL INVENTORYTM
 · Received a Trademark for ON SITE PHYSICAL INVENTORYTM
 · Retained a Patent Attorney, Louis J. Brunoforte, who has conducted a search in both the United States and Trademark Office databases.  His opinion is that that our invention defines patentable subject matter. As such, we have retained Mr. Brunoforte and have begun (submitted to his offices) all required documents describing our processes and software.
 
Based on the discussions we have had with prospective clients, the potential gross revenue from our Data Collection services alone could be more substantial that it is currently.  We feel this is a conservative estimate of growth as the limiting factor will be our ability to hire and train qualified individuals. Initially, we are going to subcontract most of the work until such time as the revenue pipeline starts to build.

We have also been retained by Comcast Communications.  We believe that the relationship we have established at that company has positioned us to be their primary CAFM vendor and will allow us to bid on  additional contracts (services) later this year and next year as well.

Over the long term our business strategy is to expand our customer base, particularly in the healthcare, public authorities, and financial services sectors, through superior software functionality and through the industry expertise of our employees.  In particular, our strategy is comprised of the following key components:

Expand Joint Venture with Visual Network Design, Inc. and Increase Our Customer Base
 
Working alongside Visual Network Design, Inc., we anticipate an increase in services revenue due largely to the fact that our core service competencies are in alignment with the needs of Visual Network Design, Inc.’s customer base.  We have executed a Technical Services Agreement by which ISA is identified on each services quotation submitted by Visual Network Design, Inc. to its prospective clients.  We are currently in discussions with Visual Network Design, Inc. management to expand our relationship.  ISA is being considered by Visual Network Design, Inc. to be the exclusive provider of data collection services for Visual Network Design’s customers. Visual Network Design Inc. has also indicated its desire to utilize ISA’s technical services to support their software solution (RACKWISE DCM) at their client locations which would include the installation, implementation and training of their clients in the proper use and maintenance of the RACKWISE DCM solution.  With regards to whether or not ISA is identified on services quotations by Visual Network Design, Inc. along with other Value Added Resellers, it’s our understanding that Visual Network Design, Inc. utilizes a specific Value Added Reseller for services required in Europe.  ISA has offered to provide services to Visual Network Design, Inc's customers in Europe but at this time it is understood by ISA that this would only happen when and if Visual Network Design, Inc’s Value Added Reseller servicing Europe was not capable of handling the workload.  ISA has provided Visual Network Design, Inc. with a quotation for data collection services for its overseas customers.
 
Strengthen our position as an enterprise asset management solution integrator and improve our visibility among target sectors. Information Systems Associates, Inc. has earned the reputation of a capable solution integrator.  While we have expanded our customer base, Information Systems Associates, Inc. is committed to solidifying our position as an enterprise asset management company, particularly among healthcare, public authorities, and financial services sectors.
 
Maintain and Enhance Our Technology
 
Based on the relative pricing and functionality of our product and service offerings as compared with those of our competitors, we consider our service offerings to be competitive, however it is critical that we continue to maintain and enhance our approach to delivering technology solutions.  It is our understanding that the current pricing for the services we provide is in some cases significantly less than that charged by the other solution vendors as it relates to our systems integration consulting services.  Relative to data collection we believe that based on information received from prospects to which we have spoken that our data collection services are approximately 20% of the project implementation cost to the customer. In addition, because our solution is provided “ready to use” the time (cost) to implement the solution is also decreased which is a direct savings for the client.
 
Enter Into and Maximize Alliances
 
We have marketing and other relationships with Visual Network Design, Inc., Knowledge Flow Corporation and Vision Facilities Management LTD.  We believe that these and future relationships will help provide us with access to important industry participants and will help increase our brand awareness.
 
Seek Acquisitions and Strategic Investments
 
We plan to expand by seeking technologies, products, and services that complement our existing business.  If appropriate opportunities are available, we may acquire businesses, technologies or products or enter into strategic relationships that may further diversify revenue sources and product offerings, expand our customer base or enhance our technology platform.

5

 
ITEM 1A.   RISK FACTORS

The following is a summary of material risks and uncertainties which we face in our business.

Our Limited Operating History and Lack of Revenues Makes Evaluating Our Business and Prospects Difficult

While our competitors have operated software development companies for a significant period of time, we have only had limited operations and revenues since our inception in May of 1994.  As a result, we have a limited operating history upon which you can evaluate us and our prospects. In addition, we show a loss of $1,009,195, $626,108 and $53,633 for the years ended December 31, 2009, 2008 and 2007, respectively.

We Do Not Expect To Pay Dividends On Our Common Stock.

To date, we have not paid any dividends on our common stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any payment of future dividends and the amounts thereof will depend upon our earnings, financial requirements and other factors deemed relevant by our board of directors.
 
Now That Our Common Stock Has Become Tradable On The Over-The-Counter Bulletin Board, Sales Of Our Common Stock By Our Principal Shareholder Could Affect The Level Of Public Interest In Our Common Stock As Well As Depress Its Price.

Now that our common stock has become tradable on the Over the Counter Bulletin Board, prospective purchasers will be able to purchase our common stock in the open market.  The Selling Security Holders will be able to sell the shares covered by this prospectus on the open market.  In addition, because our principal stockholder, Joseph Coschera, owns approximately 34% of our common stock he may dispose of a substantial percentage of his stock after a one-year holding period subject to the limitations of Rule 144 under the Securities Act of 1933, as amended. In general, these limitations impose a maximum sale requirement equal to the greater of an amount during the preceding three months of 1% of our outstanding shares or an amount equal to the average weekly reported volume of trading in our common stock on all national securities exchanges and/or reported through the automated quotation system of a registered securities association during the four calendar weeks preceding the filing of a Rule 144 notice.  In addition, there are other requirements imposed by Rule 144, including manner of sale and other requirements.  If substantial amounts of any of these shares are sold either on the open market or pursuant to Rule 144, there may be downward price pressures on our common stock price, causing the market price of our common stock to decrease in value.  In addition, this selling activity could:

·  
Decrease the level of public interest in our common stock;
·  
Inhibit buying activity that might otherwise help support the market price of our common stock; and
·  
Prevent possible upward price movements in our common stock.

We May Be Unable To Obtain The Additional Funding Needed To Enable Us To Operate Profitably In The Future.
 
We have no credit facility or other committed sources of capital sufficient to fund our business plan.  We may be unable to establish credit arrangements on satisfactory terms.  If capital resources are insufficient to meet our future capital requirements, we may have to raise funds to continue development of our operations.  To the extent that additional capital is raised through the sale of equity and/or convertible debt securities, the issuance of such securities could result in dilution to our shareholders and/or increased debt service commitments.  If adequate funds are not available, we may be unable to sufficiently develop our operations to become profitable.
 
Our Principal Stockholder Controls Our Board Of Directors And Thereby Controls Our Business Affairs In Which Case You Will Have Little Or No Participation In Our Business Affairs.
 
Currently, our President, CEO and Director, Mr. Joseph P. Coschera owns 34% of the outstanding shares of Information Systems Associates.  Mr. Coschera controls the Board of Directors and therefore controls our business affairs.  In addition, Joseph Coschera, by virtue of his 34% share ownership percentage, will have significant influence over all matters requiring approval by our stockholders without the approval of minority stockholders.  In addition, he will be able to elect all of the members of our Board of Directors, which will allow him to significantly control our affairs and management.  Accordingly, you will be limited in your ability to affect change in how we conduct our business.
 
If We Lose The Services Of Our President, Our Business May Be Impaired.
 
Our success is heavily dependent upon the continued and active participation of our president, Joseph P Coschera.  Mr. Coschera has years of experience in the financial and assent management software business. The loss of Mr. Coschera’s services could have a severely detrimental effect upon the success and development of our business.  We do not maintain "key person" life insurance on Mr. Coschera.  There can be no assurance that we will be able to recruit or retain other qualified personnel, should it be necessary to do so.
 
Our Common Stock Is A “Penny Stock”, And Compliance With Requirements For Dealing In Penny Stocks May Make It Difficult For Holders Of Our Common Stock To Resell Their Shares.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.”  Penny stocks generally are equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on NASDAQ, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system.  Prior to a transaction in a penny stock, a broker-dealer is required to:

·  
deliver a standardized risk disclosure document prepared by the SEC;
·  
provide the customer with current bid and offer quotation for the penny stock;
·  
explain the compensation of the broker-dealer and its salesperson in the transaction;
·  
provide monthly account statements showing the market value of each penny stock held in the customer’s account;
·  
make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s approval; and
·  
provide a written agreement for the transaction.

These requirements may have the effect of reducing the level of trading activity in the secondary market for our stock.  Because our shares are subject to the penny stock rules, you may find it more difficult to sell your shares.
 
6

 
Potential Fluctuations In Our Financial Results Make Financial Forecasting Difficult.
 
·  
General economic conditions as well as economic conditions specific to our industry;
·  
Our operating results have varied on a quarterly basis in the past and may fluctuate significantly as a result of a variety of factors, many of which are outside our control. Factors that may affect our quarterly operating results include:
o  
long sales cycles, which characterize our industry
o  
implementation delays, which can affect payment and recognition of revenue;
o  
any decision by us to reduce prices for our solutions in response to price reductions by competitors
o  
the amount and timing of operating costs and capital expenditures relating to monitoring or expanding our business, operations and infrastructure
o  
the timing of, and our ability to integrate, any future acquisition, technologies or products or any strategic investments or relationships into which we may enter

Due to these factors, our quarterly revenues and operating results are difficult to forecast.  We believe that period-to-period comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance.  In addition, it is likely that in one or more future quarters, our operating results will fall below the expectations of securities analysts and investors.  In such event, the trading price of our common shares would almost certainly be materially adversely affected.

The Markets In Which We Operate Are Highly Competitive.

The market for asset lifecycle management solutions is rapidly evolving and intensely competitive.  We face significant competition in each segment of our business (sourcing, procurement, enterprise asset management and asset disposition).  We expect that competition will further intensify as new companies enter the different segments of our market and larger existing companies expand their product lines.  If the global economy continues to lag, we could face increased competition, particularly in the form of lower prices.

Many of our competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we.  We cannot assure you that we will be able to compete with them effectively.  If we fail to do so, it would have a material adverse effect on our business, financial condition, cash flows and results of operations.
 
Significant Delays In Product Development Would Harm Our Reputation And Result In Loss Of Revenue.
 
If we experience significant product development delays, our position in the market would be harmed, and our revenues could be substantially reduced, which would adversely affect our operating results.  As a result of the complexities inherent in our software, major new product enhancements and new products often require long development and test periods before they are released.  On occasion, we have experienced delays in the scheduled release date of new or enhanced products, and we may experience delays in the future.  Delays may occur for many reasons, including an inability to hire a sufficient number of developers, discovery of bugs and errors or a failure of our current or future products to conform to industry requirements.  Any such delay, or the failure of new products or enhancements in achieving market acceptance, could materially impact our business and reputation and result in a decrease in our revenues.
 
We May Have To Expend Significant Resources To Keep Pace With Rapid Technological Change.
 
Our industry is characterized by rapid technological change, changes in user and customer requirements, frequent new service or product introductions embodying new technologies and the emergence of new industry standards and practices.  Any of these could hamper our ability to compete or render our proprietary technology obsolete.  Our future success will depend, in part, on our ability to:
 
·  
develop new proprietary technology that addresses the increasingly sophisticated and varied needs of our existing and prospective customers
·  
anticipate and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis
·  
continually improve the performance, features and reliability of our products in response to evolving market demands
·  
license leading technologies

We may be required to make substantial expenditures to accomplish the foregoing or to modify or adapt our services or infrastructure.

Our Business Could Be Substantially Harmed If We Have To Correct Or Delay The Release Of Products Due To Software Bugs Or Errors.

We sell complex software products.  Our software products may contain undetected errors or bugs when first introduced or as new versions are released.  Our software products may also contain undetected viruses. Further, software we license from third parties and incorporate into our products may contain errors, bugs or viruses.  Errors, bugs and viruses may result in any of the following:

·  
adverse customer reactions
·  
negative publicity regarding our business and our products
·  
harm to our reputation
·  
loss of or delay in market acceptance
·  
loss of revenue or required product changes
·  
diversion of development resources and increased development expenses
·  
increased service and warranty costs
·  
legal action by our customers
·  
increased insurance costs
 
 
7

 
Systems Defects, Failures Or Breaches Of Security Could Cause A Significant Disruption To Our Business, Damage Our Reputation And Expose Us To Liability.

We host certain websites and sub-sites for our customers.  Our systems are vulnerable to a number of factors that may cause interruptions in our ability to enable or host solutions for third parties, including, among others:

·  
damage from human error, tampering and vandalism
·  
breaches of security
·  
fire and power losses
·  
telecommunication failures and capacity limitations
·  
software or hardware defects

Despite the precautions we have taken and plan to take, the occurrence of any of these events or other unanticipated problems could result in service interruptions, which could damage our reputation, and subject us to loss of business and significant repair costs.  Certain of our contracts require that we pay penalties or permit a customer to terminate the contract if we are unable to maintain minimum performance levels. Although we continue to take steps to enhance the security of our systems and ensure that appropriate back-up systems are in place, our systems are not now, nor will they ever be, fully secure.
 
If We Are Unable To Successfully Protect Our Intellectual Property Or Obtain Certain Licenses, Our Competitive Position May Be Weakened.
 
Our performance and ability to compete are dependent in part on our technology.  We rely on a combination of patent, copyright, trademark and trade secret laws as well as confidentiality agreements and technical measures, to establish and protect our rights in the technology we develop.  We cannot guarantee that any patents issued to us will afford meaningful protection for our technology.  Competitors may develop similar technologies which do not conflict with our patents.  Others may challenge our patents and, as a result, our patents could be narrowed or invalidated.

Our software is protected by common law copyright laws, as opposed to registration under copyright statutes. Common law protection may be narrower than that which we could obtain under registered copyrights.  As a result, we may experience difficulty in enforcing our copyrights against certain third parties.  The source code for our proprietary software is protected as a trade secret.  As part of our confidentiality protection procedures, we generally enter into agreements with our employees and consultants and limit access to, and distribution of, our software, documentation and other proprietary information.  We cannot assure you that the steps we take will prevent misappropriation of our technology or that agreements entered into for that purpose will be enforceable. In order to protect our intellectual property, it may be necessary for us to sue one or more third parties.  While this has not been necessary to date, there is no guarantee that we will not be required to do so in future to protect our rights.  The laws of other countries may afford us little or no protection for our intellectual property.  We also rely on a variety of technology that we license from third parties, including our database and Internet server software, which is used to perform key functions.  These third-party technology licenses may not continue to be available to us on commercially reasonable terms, or at all.  If we are unable to maintain these licenses or obtain upgrades to these licenses, we could be delayed in completing or prevented from offering some products or services.

Others Could Claim That We Infringe On Their Intellectual Property Rights, Which May Result In Costly And Time-Consuming Litigation.

Our success will also depend partly on our ability to operate without infringing upon the proprietary rights of others, as well as our ability to prevent others from infringing on our proprietary rights.  We may be required at times to take legal action in order to protect our proprietary rights.  Also, from time to time, we may receive notice from third parties claiming that we infringe their patent or other proprietary rights.
We believe that infringement claims will increase in the technology sector as competition intensifies.  Despite our best efforts, we may be sued for infringing on the patent or other proprietary rights of others.  Such litigation is costly, and even if we prevail, the cost of such litigation could harm us.  If we do not prevail or cannot fund a complete defense, in addition to any damages we might have to pay, we could be required to stop the infringing activity or obtain a license.  We cannot be certain that any required license would be available to us on acceptable terms, or at all.  If we fail to obtain a license, or if the terms of a license are burdensome to us, this could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Our Product Strategy Is Partially Dependent Upon The Continued Acceptance And Use Of The Internet As A Medium Of Commerce.

Our success depends in part on the continued growth of the Internet and reliance on and use of the Internet by businesses.  Because use of the Internet as a source of information, products and services is a relatively recent phenomenon, it is difficult to predict whether the number of users drawn to the Internet will continue to increase and whether the market for commercial use of the Internet will continue to develop and expand.

The Internet may not be commercially viable for a number of reasons, including potentially inadequate development of the necessary network infrastructure, delayed development of enabling technologies and inadequate performance improvements.  In addition, the Internet’s viability as a commercial marketplace could be adversely affected by delays in the development of services or due to increased government regulation. Moreover, concern about the security of transactions conducted on the Internet and the privacy of users may also inhibit the growth of commerce on the Internet. If the use of the Internet does not continue to grow or grows more slowly than expected, or if the infrastructure for the Internet does not effectively support growth that may occur, our business would be materially and adversely affected.
 
Our Business Is Sensitive To The Overall Economic Environment. Any Slowdown In Information Technology Spending Budgets Could Harm Our Operating Results.
 
Any significant downturn in our customers' markets or in general economic conditions that results in reduced information technology spending budgets would likely result in a decreased demand for our products and services, longer selling cycles and lower prices, any of which may harm our business.
 
Although We Have Not Yet Issued Any Preference Shares, If Issued, Our Preference Shares Could Prevent Or Delay A Takeover That Some Or A Majority Of Shareholders Consider Favorable.
 
Our Board of Directors, without any further vote of our shareholders, may issue preference shares and determine the price, preferences, rights and restrictions of those shares.  The rights of the holders of common shares will be subject to, and may be adversely affected by, the rights of the holders of any series of preference shares that may be issued in the future.  That means, for example, that we can issue preference shares with more voting rights, higher dividend payments or more favorable rights upon distribution than those for our common shares.  If we issue certain types of preference shares in the future, it may also be more difficult for a third party to acquire a majority of our outstanding voting shares and such issuance may, in certain circumstances, deter or delay mergers, tender offers or other possible transactions that may be favored by some or a majority of our shareholders.
 
EMPLOYEES
 
We have three employees, Joseph P. Coschera, Loire Lucas and Shirley Walker. Joseph P. Coschera is a full-time employee and Loire Lucas and Shirley Walker are part time employees.
 
REPORTS TO SECURITY HOLDERS
 
We are not required to deliver an annual report to security holders and will not voluntarily deliver a copy of the annual report to security holders.  If we should choose to create an annual report, it will contain audited financial statements.  We intend to file all of our required information with the SEC.  We plan to file our Forms 10-K, 10-Q, and all other forms that are or may become applicable with the SEC.
 
The public may read and copy any materials that are filed by us with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.  The Public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The statements and forms filed by us with the SEC have been filed electronically and are available for viewing or copy on the SEC maintained Internet site that contains reports, proxy and information statements, as well as other information regarding issuers that file electronically with the SEC.  The Internet address for this site can be found at http://www.sec.gov.

8

 
ITEM 2.   PROPERTIES

We do not own any real property nor do we have any contracts or options to acquire any real property in the future.  Presently, we are renting an office located at Suite E, 1151 SW 30th Street, Palm City FL 34990.  We occupy 1,208 square feet.  This space is adequate for our present and our planned future operations.  We pay approximately $1,278.00 per month in rent for use of this space.

We also own computer equipment and office furniture for our business.  We own several computers, handhelds, storage drives, and network devices which we use to conduct business.  These devices are used in the development of our software products.  We also own standard office furniture including desks, chairs, and other personal property relating to our industry.  All of this equipment is in good condition.  The net book value of property and equipment is $25,741
 
ITEM 3.   LEGAL PROCEEEDINGS
 
From time to time we are involved in legal proceedings arising in the ordinary course of our business. On April 24, 2009, Phuture World, Inc. filed a complaint in the case captioned Phuture World, Inc. v. Information Systems Associates, Inc. and Joseph Coschera, Case No. 562009 CA 3086, 19th Judicial Circuit in and for St. Lucie County Florida.  Phuture World alleges that the Company and its President breached the terms of a certain software development contract, and it seeks damages in excess of $15,000.  The Company terminated the software contract at issue in the case prior to the filing of the case, and it no longer uses the services of Phuture World.  The Company is contesting this lawsuit and believes that it has defenses to the claims made by Phuture World and that the allegations made against the President, who acted at all time on the Company's behalf in dealing with the plaintiff, are frivolous.  The Company intends to vigorously defend itself and believes that it has damage claims of its own that it intends to pursue against Phuture World for Phuture World's failure to provide the software required under the contract between Phuture World and the Company.  The Company believes that the outcome of this lawsuit will not have a material adverse effect on our financial condition, cash flows or results of operations. 

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
None.

PART II

ITEM 5.   MARKET FOR COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET INFORMATION

Our shares of common stock are quoted on the Over-The-Counter Bulletin Board.  The Over-The-Counter Bulletin Board is a quotation medium for subscribing members only. Only market makers can apply to quote securities on the Over-The-Counter Bulletin Board.  We cannot guarantee that we will obtain a market maker or such a quotation.  Although we will seek a market maker for our securities, our management has no agreements, understandings or other arrangements with market makers to begin making a market for our shares.  There is no limited trading activity in our securities, and there can be no assurance that a regular trading market for our common stock will ever be developed, or if developed, will be sustained.
 
A shareholder in all likelihood, therefore, will not be able to resell their securities should he or she desire to do when eligible for public resale.  Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops.  We have no plans, proposals, arrangements or understandings with any person with regard to the development of a trading market in any of our securities.

AGREEMENTS TO REGISTER

Not applicable.

STOCKHOLDERS

As of December 31, 2009 there were 43 stockholders of record of our common stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon effectiveness of the registration statement effective on January 24, 2008, only the 5,193,834 shares of common stock sold in this offering will be freely tradable without restrictions under the Securities Act of 1933. The shares held by our affiliates will be restricted by the resale limitations under Rule 144 under the Securities Act of 1933.

In general, under Rule 144 as currently in effect, any of our affiliates and any person or persons whose sales are aggregated who has beneficially owned his or her restricted shares for at least one year, may be entitled to sell in the open market within any three-month period a number of shares of common stock that does not exceed the greater of (i) 1% of the then outstanding shares of our common stock, or (ii) the average weekly trading volume in the common stock during the four calendar weeks preceding such sale. Sales under Rule 144 are also affected by limitations on manner of sale, notice requirements, and availability of current public information about us. Non-affiliates, who have held their restricted shares for one year, may be entitled to sell their shares under Rule 144 without regard to any of the above limitations, provided they have not been affiliates for the three months preceding such sale.

Further, Rule 144A as currently in effect, in general, permits unlimited resale of restricted securities of any issuer provided that the purchaser is an institution that owns and invests on a discretionary basis at least $100 million in securities or is a registered broker-dealer that owns and invests $10 million in securities. Rule 144A allows our existing stockholders to sell their shares of common stock to such institutions and registered broker-dealers without regard to any volume or other restrictions. Unlike under Rule 144, restricted securities sold under Rule 144A to non-affiliates do not lose their status as restricted securities.

The availability for sale of substantial amounts of common stock under Rule 144 could adversely affect prevailing market prices for our securities.

DIVIDENDS

We have not declared any cash dividends on our common stock since our inception and do not anticipate paying such dividends in the foreseeable future.  We plan to retain any future earnings for use in our business. Any decisions as to future payment of dividends will depend on our earnings and financial position and such other factors, as the Board of Directors deems relevant.

DIVIDEND POLICY

All shares of common stock are entitled to participate proportionally in dividends if our Board of Directors declares dividends out of the funds legally available.  These dividends may be paid in cash, property or additional shares of common stock.  We have not paid any dividends since our inception and presently anticipate that all earnings, if any, will be retained for development of our business.  Any future dividends will be at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, and other factors.
 
Our shares are "Penny Stocks" within the Meaning of the Securities Exchange Act of 1934.

Our Shares are "penny stocks" within the definition of that term as contained in the Securities Exchange Act of 1934, generally equity securities with a price of less than $5.00.  Our shares will then be subject to rules that impose sales practice and disclosure requirements on certain broker-dealers who engage in certain transactions involving a penny stock.

Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or "accredited investor" must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.  Generally, an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 individually or $300,000 together with his or her spouse is considered an accredited investor.  In addition, unless the broker-dealer or the transaction is otherwise exempt, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market.  A broker-dealer is also required to disclose commissions payable to the broker-dealer and the Registered Representative and current bid and offer quotations for the securities.  In addition a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account, the account’s value and information regarding the limited market in penny stocks.  As a result of these regulations, the ability of broker-dealers to sell our stock may affect the ability of Selling Security Holders or other holders to sell their shares in the secondary market.  In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.

These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.  These additional sales practice and disclosure requirements could impede the sale of Information Systems Associate's securities, if our securities become publicly traded.  In addition, the liquidity for Information Systems Associate's securities may be adversely affected, with concomitant adverse affects on the price of Information Systems Associate's securities.  Our shares may someday be subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.
 
9

 
ITEM 6.   SELECTED FINANCIAL DATA

Not required for smaller reporting companies.

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion should be read in conjunction with the financial statements included in this report and is qualified in its entirety by the foregoing.
 
FORWARD LOOKING STATEMENTS

Certain statements in this report, including statements of our expectations, intentions, plans and beliefs, including those contained in or implied by "Management's Discussion and Analysis" and the Notes to Consolidated Financial Statements, are "forward -looking statements", within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are subject to certain events, risks and uncertainties that may be outside our control.  The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”, “will”, and similar expressions identify forward-looking statements.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update or revise any forward-looking statements.  These forward-looking statements include statements of management's plans and objectives for our future operations and statements of future economic performance, information regarding our expansion and possible results from expansion, our expected growth, our capital budget and future capital requirements, the availability of funds and our ability to meet future capital needs, the realization of our deferred tax assets, and the assumptions described in this report underlying such forward-looking statements.  Actual results and developments could differ materially from those expressed in or implied by such statements due to a number of factors, including, without limitation, those described in the context of such forward-looking statements, our expansion and acquisition strategy, our ability to achieve operating efficiencies, our dependence on network infrastructure, capacity, telecommunications carriers and other suppliers, industry pricing and technology trends, evolving industry standards, domestic and international regulatory matters, general economic and business conditions, the strength and financial resources of our competitors, our ability to find and retain skilled personnel, the political and economic climate in which we conduct operations and the risk factors described from time to time in our other documents and reports filed with the Securities and Exchange Commission (the "Commission"). Additional factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to: 1) our ability to successfully develop, manufacture and deliver our products on a timely basis and in the prescribed condition; 2) our ability to compete effectively with other companies in the same industry; 3) our ability to raise sufficient capital in order to effectuate our business plan; and 4) our ability to retain our key executives.

OUR COMPANY

We were incorporated in Florida on May 31, 1994 to engage in the business of developing software for the financial and asset management industries.  We are currently engaged and plan to continue in the sale of asset management software for both corporate real estate and corporate information technology networks.  Our executive offices are currently located 1151 SW 30th Street, Suite E, Palm City, FL 34990.  Our telephone number is (772) 403-2992. Information Systems Associates, Inc. is a "Solution Provider" positioned to develop and deliver comprehensive asset management systems for both real estate and data center assets.  Our application products are also used by corporate Real Estate departments to manage their real property lease obligations (as both tenant and landlord), to determine their company’s use of corporate space, to develop plans for relocations, mergers and acquisitions as it relates to the use of space (office, manufacturing, warehousing).  Utilizing the latest Computer Aided Facilities Management (CAFM) Technology solutions generally available provides the end-user with enhanced application usability.  We offer project assessment and development, process review and recommendations as well as project management and training services necessary to successfully achieve your objectives.

Our company delivers turnkey software and service solutions that give financial institutions and large corporations control of their corporate assets.  Our asset solutions address Data Center equipment inventory, Space Utilization, Power and Connectivity management, Office Space and Occupancy, Office Equipment and Furniture, and Real Estate Portfolio Management.

In conjunction with our CAFM solutions, ISA now offers state of the art asset data collection services focusing on the enterprise IT infrastructure.  The data collection service is based on our solution ON SITE PHYSICAL INVENTORYTM.
 
RESULTS OF OPERATIONS

Because this is only a financial summary, it does not contain all the financial information that may be important to you. It should be read in conjunction with the consolidated financial statements and related notes presented in a later section.

The following tables set forth certain operating information in dollars and as a percentage of net sales:
 
   
For the Years Ended December 31,
   
   
2009
 
2008
     
                     
   
 Amount
 
% of Net Sales
 
 Amount
 
% of Net Sales
 
Increase (Decrease)
 
Revenue
 $    780,244
 
100.00%
 
 $ 1,225,461
 
100.00%
 
 $(445,217)
 
Cost of sales
        37,567
 
4.81%
 
        44,689
 
3.65%
 
       (7,122)
 
Gross profit
      742,677
 
95.19%
 
    1,180,772
 
96.35%
 
   (438,095)
 
Operating expenses
    1,751,433
 
224.47%
 
    1,769,356
 
144.38%
 
     (17,923)
 
Loss before other income (expenses)
  (1,008,756)
 
-129.29%
 
     (588,584)
 
-48.03%
 
   (420,172)
 
Other income (expenses), net
           (439)
 
-0.06%
 
             267
 
0.02%
 
          (706)
 
Income (loss) before income taxes
  (1,009,195)
 
-129.34%
 
     (588,317)
 
-48.01%
 
   (420,878)
 
Provision for income taxes
               -
 
0.00%
 
        37,791
 
3.08%
 
     (37,791)
 
Net loss
$  (1,009,195)
 
-129.34%
 
$     (626,108)
 
-51.09%
 
$   (383,087)
 
 
 
Year ended December 31, 2009 compared to December 31, 2008

Gross revenues were $780,244 and $1,225,461 for the years ended December 31 2009 and 2008, respectively.  The decrease in current period was due primarily to the decreased sale of professional services, maintenance contracts and time and materials arrangements.  We recognize professional services revenue, which includes installation, training, consulting and engineering services, upon delivery of the services. If the professional service project includes independent milestones, revenue is recognized as milestones are met and upon acceptance from the customer.  As part of our ongoing operations to provide services to our customers, incidental expenses, if reimbursable under the terms of the contracts, are billed to customers.  These expenses are recorded as both revenues and direct cost of services.  We expect revenues to increase during 2010 as we implement our business plan.
 
Gross profit was $742,677 and $1,180,772 for the years ended December 31 2009 and 2008, respectively, while gross margin percentage for the same period was 95.19% and 96.35%.  The primary cost for 2009 was software, while the primary cost for 2008 were handheld units.

Operating expenses for the years December 31, 2009 and 2008 were $1,751,433 and $1,769,356, respectively.  Increases in Payroll and Professional Fees were offset by decreases in Administrative and General Expenses. Two new positions were added to Payroll in 2009

We recognized an income tax expense of $37,791 for the year ended December 31, 2008.

We had a net loss of $1,009,195 and $626,108 from continuing operations for the years ended December 31, 2009 and 2008, respectively.  There are two major reasons for the loss in the year.  ISA entered into several consulting agreements that had an immediate impact on activity for the year by increasing operating expenses.  We expect long term benefits for these expenditures.  Secondly, the Company realized a significant decrease in the sale of professional services.

10

 
STATEMENT OF FINANCIAL CONDITION
 
   
As of December 31,
 
   
2009
   
2008
 
             
Available cash
  $ 21,047     $ 204,768  
Total current assets
  $ 254,045     $ 817,327  
Property and equipment, net
  $ 174,288     $ 21,168  
Investments
  $ 60,559     $ -  
Total assets
  $ 488,892     $ 838,495  
Current liabilities
  $ 113,316     $ 33,825  
Stockholders’ equity
  $ 375,576     $ 804,670  
Total liabilities and stockholders’ equity
  $ 488,892     $ 838,495  
 
December 31 2009 compared to December 31, 2008

Available cash was $21,047 and $204,768 as of December 31, 2009 and 2008, respectively.  The decrease is primarily due to decreases in sales of professional services in 2009.

Total current assets were $488,892 and $838,495 as of December 31, 2009 and 2008 respectively.  The decrease is primarily due to the recognition of expense from Prepaid Consulting.  The original contracts concluded in 2009.

Property and equipment were $174,288 and $21,168 as of December 31, 2009 and 2008 respectively. The increase is due primarily to the capitalization of software development costs for version 2 of ON SITE PHYSICAL INVENTORYTM

Current liabilities were $113,316 and $33,825 as of December 31, 2009 and 2008 respectively. This amount has increased as the company had several large expenses booked at year end.

IMPACT OF INFLATION

We believe that inflation has had a negligible effect on operations during the years ended December 31, 2009 and 2008.  We believe that we can offset inflationary increases in the cost of revenue by increasing revenue and improving operating efficiencies.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows used in operations were $183,645 and $145,204 for the years ended December 31, 2009 and 2008, respectively.  Cash flows used in operations in 2009 were primarily attributable to a net loss of $1,009,195.  This was partially offset by common stock issued for services of $671,438 in prepaid consulting, a decrease in accounts receivable of $59,312 and an increase in accounts payable of 82,626.   Cash flows used in operations in 2008 were primarily attributable to a net loss of $626,108.  There was an increase of $458,360 in prepaid consulting and a decrease in accounts payable of $77,740.
 
Cash flows provided/ (used) in investing activities were ($173,407) and $95,676 for the years ended December 31, 2009 and 2008, respectively.  Cash flows used in investing activities in 2009 were from the cost of developing software for resale. Cash flows provided by investing activities in 2008 were attributable to payments received for software license agreement, less marketing cost and the purchases of property and equipment.
 
Cash flows provided by financing activities were $173,331 and $240,970 for the years ended December 31, 2009 and 2008, respectively.  Cash flows provided by financing activities for 2009 were attributable to the sale of stock and additional borrowing. Cash flows provided by financing activities in 2008 were funded from the additional sale of stock.
 
Overall, we have funded our cash needs from inception through December 31, 2009 and 2008 with a series of debt and equity transactions.

We had cash on hand of $21,047 and a working capital of $140,729 as of December 31, 2009.  If the projected revenues fall short of needed capital we may not be able to sustain our capital needs.  We will then need to obtain additional capital through equity or debt financing to sustain operations for an additional year.  Our current level of operations would require capital of approximately $300,000 to sustain operations through year 2010.  Modifications to our business plans may require additional capital for us to operate.  For example, if we want to offer a greater number of products or increase our marketing efforts, we may need additional capital.  Failure to raise capital may result in lower revenues and market share for us.  In addition, there can be no assurance that additional capital will be available to us when needed or available on terms favorable to us.
 
Mr. Coschera is a personal guarantor on a line of credit to provide additional working capital to the Company. As of December 31, 2009 there was borrowings against the line of credit in the amount of $20,055.  No other person or entity is liable for, surety or otherwise provides a guarantee for our debt financing from outside resources.  Demand for the products and services will be dependent on, among other things, market acceptance of our services, the computer software market in general, and general economic conditions, which are cyclical in nature.  In as much as a major portion of our activities is the receipt of revenues from services rendered, our business operations may be adversely affected by our competitors and prolonged recession periods.
 
Our success will be dependent upon implementing our plan of operations and the risks associated with our business plan.

No significant amount of our trade payables has been unpaid within the stated trade term.  We are not subject to any unsatisfied judgments, liens or settlement obligations.

OFF BALANCE SHEET ARRANGEMENTS

We have no-off balance sheet contractual arrangements, as that term is defined in Item 303(a)(4) of Regulation S-K.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and judgments. We believe that the determination of the carrying value of our inventories and long-lived assets, the valuation allowance of deferred tax assets and valuation of share-based payment compensation are the most critical areas where management’s judgments and estimates most affect our reported results. While we believe our estimates are reasonable, misinterpretation of the conditions that affect the valuation of these assets could result in actual results varying from reported results, which are based on our estimates, assumptions and judgments as of the balance sheet date.

11

 
Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, "Revenue Recognition" and FASB Accounting Standards Codification 605-25, “Revenue  Recognition Multiple-element Arrangements” (formerly EITF, Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables").
 
Consulting services and training revenues are accounted for separately from subscription and support revenues when these services have value to the customer on a standalone basis and there is objective and reliable evidence of fair value of each deliverable.  When accounted for separately, revenues are achieved and accepted by the customer for fixed price contracts.  The majority of our consulting service contracts are on a time and material basis.  Training revenues are recognized after the services are performed.  For revenue arrangements with multiple deliverables, we allocate the total customer arrangement to the separate units of accounting based on their relative fair values, as determined by the price of the undelivered items when sold separately.

In determining whether the consulting services can be accounted for separately from subscription and support revenues, we consider the following factors for each consulting agreement: availability of the consulting services from other vendors, whether objective and reliable evidence for fair value exists for the undelivered elements, the nature of the consulting services, the timing of when the consulting contract was signed in comparison to the subscription service start date, and the contractual dependence of the subscription service on the customer’s satisfaction with the consulting work.  If a consulting arrangement does not qualify for separate accounting, we recognize the consulting revenue ratably over the remaining term of the subscription contract.  Additionally, in these situations, we defer the direct costs of the consulting arrangement and amortize these costs over the same time period as the consulting revenue is recognized.  We did not have any revenue arrangements with multiple deliverables for the period ending December 31, 2009.

Property, Plant, and Equipment

Property and equipment is stated at cost.  Depreciation is provided by the straight-line method over the estimated economic life of the property and equipment (three to ten years).  When assets are sold or retired, their costs and accumulated depreciation are eliminated from the accounts and any gain or loss resulting from their disposal is included in the statement of operations.

We recognize an impairment loss on property and equipment when evidence, such as the sum of expected future cash flows (undiscounted and without interest charges), indicates that future operations will not produce sufficient revenue to cover the related future costs, including depreciation, and when the carrying amount of the asset cannot be realized through sale.  Measurement of the impairment loss is based on the fair value of the assets.

Software Development Costs

The Company accounts for costs incurred to develop computer software for internal use in accordance with FASB Accounting Standards Codification 350-40 “Internal-Use Software” (formerly Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”) ".  As required by ASC 350-40, we capitalize the costs incurred during the application development state, which include costs to design the software configuration and interfaces, coding, installation, and testing.  Costs incurred during the preliminary project along with post-implementation stages of internal use computer software are expensed as incurred.  Capitalized development costs are amortized over a period of three years.  Costs incurred to maintain existing product offerings are expensed as incurred.  The capitalization and ongoing assessment of recoverability of development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life.

After the development of the internal-use ON SITE PHYSICAL INVENTORYTM software (OSPI) was complete, we decided to market the software.  Proceeds from the licenses of the computer software, net of direct incremental costs of marketing, such as commissions, software reproduction cost, warranty and service obligations, and installation cost, are applied against the carrying cost of that software.  No profit will be recognized until aggregate net proceeds from licenses and amortization have reduced the carrying amount of the software to zero.  Subsequent proceeds will be recognized in revenue as earned.
On December 1, 2009, the Company released Version 2 of the “On Site Physical Inventory” software (OSPI) for sale in the marketplace.  The Company accounts for internally produced software with FASB Accounting Standard Codification 985-20 “Cost of Software To Be Sold, Leased, or Otherwise Marketed” (formally SFAS 86,”Accounting for the Costs of Computer software to be Sold, Leased or Otherwise Marketed).  Costs were capitalized when the second version was established as technically feasible and will be written off on a straight line method over the estimated useful life.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the year ended December 31, 2009.

Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events” established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the financial statements are issued. ASC No. 855 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. ASC No. 855 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s financial statements. No recognized or non-recognized subsequent events were noted.

ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51” changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling interests and classified as a component of equity. ASC No. 810 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. The Company implemented ASC No. 810 at the start of fiscal 2009.

The Company presents noncontrolling interests (previously shown as minority interest) as a component of equity on its consolidated balance sheets. Minority interest expense is no longer separately reported as a reduction to net income on the consolidated income statement, but is instead shown below net income under the heading “net income attributable to noncontrolling interests.” The adoption of ASC No. 810 did not have any other material impact on the Company’s financial statements.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS – NOT YET ADOPTED

ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)” amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities” regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. ASC No. 810 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited. The Company will adopt ASC No. 810 in fiscal 2010 and does not anticipate any material impact on the Company’s financial statements.
 
ASC 105-10 “Generally Accepted Accounting Principles”, SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States of America.  SFAS No. 162 will be effective 60 days following the SEC’s approval of the PCAOB amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.”  The Company does not believe SFAS No. 162 will have a significant impact on the Company’s financial statements.
 
ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 
We are exposed to market risks, including changes in interest rates. The interest payable under our credit facility, under which we had $20,055 at December 31, 2009, is based on a specified bank’s prime interest rate and, therefore, is affected by changes in market interest rates. Historically, the effects of movements in the market interest rates have been immaterial to our operating results, as we have not borrowed to any significant degree.

12


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
   
Page
   
         
Report of Independent Registered Public Accounting Firm   
 
14
   
Balance Sheet  
 
15
   
Statements of Operations
 
16
   
Statements of Stockholders’ Equity
 
17
   
Statements of Cash Flows
 
18
   
Notes to  Financial Statements  
 
19 to 26
   
         
 
13



 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
To the Board of Directors and
 
 
Stockholders of Information Systems Associates, Inc.
 
 
We have audited the accompanying balance sheets of Information Systems Associates, Inc. as of December 31, 2009 and 2008, and the related statements of operations, stockholders’ equity and comprehensive (loss), and cash flows for each of the years in the two-year period ended December 31, 2009. Information Systems Associates Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
 
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. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial statements referred to above present fairly, in all material respects, the financial position of Information Systems Associates, Inc. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 18, the Company has incurred significant losses.  The Company’s viability is dependent upon its ability to obtain future financing and the success of its future operations.  These factors raise substantial doubt as to the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 /s/Lake & Associates CPA’s LLC
Lake & Associates CPA’s LLC
Boca Raton, Florida
March 9, 2010

14

 
INFORMATION SYSTEMS ASSOCIATES, INC.
BALANCE SHEETS
DECEMBER 31,
             
ASSETS
 
             
   
2009
   
2008
 
Current Assets
           
  Cash and cash equivalents
  $ 21,047     $ 204,768  
  Accounts receivable
    34,809       94,121  
  Prepaid consulting
    190,500       518,438  
  Prepaid expenses
    7,689       -  
                 
      Total Current Assets
    254,045       817,327  
                 
Property and Equipment (net)
    174,288       21,168  
                 
Other Assets
               
  Investments
    60,559       -  
                 
      TOTAL ASSETS
  $ 488,892     $ 838,495  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
                 
Current Liabilities
               
  Note payable - line of credit
  $ 20,055     $ -  
  Note payable  - insurance
    3,276       -  
  Accounts payable
    66,910       10,326  
  Accrued expenses and other laibilities
    21,196       21,999  
  Deferred revenue
    1,879       1,500  
                 
      Total Current Liabilities
    113,316       33,825  
                 
Stockholders' Equity
               
  Common stock-$.001 par value, 50,000,000 shares
               
     authorized, 18,266,084 and 16,309,834 issued
               
     and outstanding for 2009 and 2008, respectively
    18,266       16,310  
  Additional paid in capital
    2,179,213       1,587,669  
  Accumulated deficit
    (1,808,504 )     (799,309 )
  Accumulated other comprehensive
               
     income (loss)
    (13,399 )     -  
      Total Stockholders' Equity
    375,576       804,670  
                 
      TOTAL LIABILITIES AND STOCKHOLDERS'
               
        EQUITY
  $ 488,892     $ 838,495  
                 
                 
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
 

15

 
INFORMATION SYSTEM ASSOCIATES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
             
   
2009
   
2008
 
             
Revenue
  $ 780,244     $ 1,225,461  
                 
Cost of Sales
    37,567       44,689  
                 
     Gross Profit
    742,677       1,180,772  
                 
Operating Expenses
               
  Administrative and general
    308,437       427,164  
  Payroll and payroll taxes
    224,206       161,448  
  Professional
    1,218,790       1,180,744  
      Total Operating Expenses
    1,751,433       1,769,356  
                 
     (Loss) Before Other Income
               
       and (Expense)
    (1,008,756 )     (588,584 )
                 
Other Income (Expense)
               
  Interest income, net
    191       267  
  Loss on sale of assets
    (630 )     -  
      Total Other Income (Expense)
    (439 )     267  
                 
     (Loss) From Operations Before
               
      Income Taxes
    (1,009,195 )     (588,317 )
                 
Provision for Income Taxes
    -       37,791  
                 
                 
    Net (Loss)
    (1,009,195 )     (626,108 )
                 
Other Comprehensive (Loss)
               
   Unrealized (loss) on securities:
               
      Arising during the year
    (13,399 )     -  
                 
      Total other comprehensive (loss)
    (13,399 )     -  
                 
      Comprehensive (Loss)
  $ (1,022,594 )   $ (626,108 )
                 
                 
                 
                 
                 
Basic and Fully Diluted (Loss) per Share:
               
  Basic and fully diluted
  $ (0.06 )   $ (0.05 )
    Weighted average common shares
               
     outstanding
    17,187,439       12,818,168  
                 
                 
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
 

16

 
 
INFORMATION SYSTEMS ASSOCIATES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31,
                                                 
                                                 
                           
Additional Paid In Capital
         
Accumulated Other Comprehensive Income Loss)
       
   
Common Stock
   
Preferred Stock
   
Accumulated
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Deficit
   
Total
 
                                                 
Balance, January 1,  2008
    11,409,834     $ 11,410       -     $ -     $ 367,569     $ (173,201 )   $ -     $ 205,778  
                                                                 
 Issuance of stock for services
    3,900,000       3,900       -       -       971,100       -       -       975,000  
                                                                 
 Proceeds from issuance of stock
    1,000,000       1,000       -       -       249,000       -       -       250,000  
                                                                 
Net (loss)
    -       -       -       -       -       (626,108 )     -       (626,108 )
                                                                 
Balance, December 31, 2008
    16,309,834     $ 16,310       -     $ -     $ 1,587,669     $ (799,309 )   $ -     $ 804,670  
                                                                 
                                                                 
 Balance, January 1,  2009
    16,309,834     $ 16,310       -     $ -     $ 1,587,669     $ (799,309 )   $ -     $ 804,670  
                                                                 
 Issuance of stock for services
    956,250       956       -       -       342,544       -       -       343,500  
                                                                 
 Proceeds from issuance of stock
    1,000,000       1,000       -       -       249,000       -       -       250,000  
                                                                 
 Net (loss)
    -       -       -       -       -       (1,009,195 )     -       (1,009,195 )
                                                                 
 Comprehensive Income:
                                                               
    Unrealized loss on investment
    -       -       -       -       -       -       (13,399 )     (13,399 )
                                                                 
 Balance, December 31,  2009
    18,266,084     $ 18,266       -     $ -     $ 2,179,213     $ (1,808,504 )   $ (13,399 )   $ 375,576  
                                                                 

 
 
17

 
INFORMATION SYSTEMS ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
             
   
2009
   
2008
 
             
Cash Flows from Operating Activities
           
Net (Loss)
  $ (1,009,195 )   $ (626,108 )
Adjustments to reconcile net (loss) to net
               
 cash provided from operating activities:
               
   Depreciation and amortization
    19,657       22,208  
   Cumulative change in deferred income tax
    -       37,154  
   Common stock for services
    671,438       458,360  
  (Loss) on abandonment of fixed assets
    630       308  
                 
 (Increase) decrease in:
               
    Accounts receivable
    59,312       20,054  
    Prepaid expenses
    (7,689 )     -  
    Income tax claim receivable
    -       637  
  Increase (decrease) in:
               
   Accounts payable
    82,626       (77,740 )
   Accrued expenses and other laibilities
    (803 )     18,423  
   Deferred revenue
    379       1,500  
                 
        Net Cash (Used in) Operating
               
         Activities
    (183,645 )     (145,204 )
                 
Cash Flows from Investing Activities
               
Computer software devleopment costs
    (159,203 )     -  
Software license agreement - payments received
    -       123,215  
Software license agreement - marketing costs
    -       (18,041 )
Purchase of property and equipment
    (14,204 )     (9,498 )
                 
        Net Cash (Used In)
               
         Investing Activities
    (173,407 )     95,676  
                 
Cash Flows from Financing Activities
               
Proceeds from line of credit
    20,055       -  
Payments made on line of credit
    -       (9,030 )
Borrowings from note payable
    9,615       -  
Payments made on note payable
    (6,339 )     -  
Proceeds from issuance of stock
    150,000       250,000  
                 
        Net Cash Provided by
               
         Financing Activities
    173,331       240,970  
                 
        Net Change in Cash and Cash
               
         Equivalents
    (183,721 )     191,442  
                 
        Cash and Cash Equivalents at
               
         Beginning of period
    204,768       13,326  
                 
          End of Period
  $ 21,047     $ 204,768  
                 
                 
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
 
 
18

 
INFORMATION SYSTEMS ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008


NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

 
Information Systems Associates, Inc. (Company) was incorporated under the laws of the state of Florida on May 31, 1994.  The Company provides services and software system design for the planning and implementation of Data Center Management Information Systems (DCMIS) based asset management tools.

 
Cash and Cash Equivalent  

 
For the purposes of the Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be a cash equivalent.

 
Concentrations of Credit Risk

 
The Company grants credit to its customers during the normal course of business.  The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral from its customers.

At times throughout the year the Company may maintain certain bank accounts in excess of the FDIC insured limits.  At December 31, 2009 and 2008, amounts on deposit at institutions did not exceed FDIC insured limits.

 
Revenue Recognition

The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 104, "Revenue Recognition" and FASB Accounting Standards Codification 605-25, “Revenue  Recognition Multiple-element Arrangements” (formerly EITF, Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables").

Consulting services and training revenues are accounted for separately from subscription and support revenues when these services have value to the customer on a standalone basis and there is objective and reliable evidence of fair value of each deliverable. When accounted for separately, revenues are recognized as the services are rendered for time and material contracts, and when the milestones are achieved and accepted by the customer for fixed price contracts.  The majority of the Company’s consulting service contracts are on a time and material basis.  Training revenues are recognized after the services are performed.  For revenue arrangements with multiple deliverables, we allocate the total customer arrangement to the separate units of accounting based on their relative fair values, as determined by the price of the undelivered items when sold separately.
 
Revenue Recognition (cont’d)

In determining whether the consulting services can be accounted for separately from subscription and support revenues, we consider the following factors for each consulting agreement: availability of the consulting services from other vendors, whether objective and reliable evidence for fair value exists for the undelivered elements, the nature of the consulting services, the timing of when the consulting contract was signed in comparison to the subscription service start date, and the contractual dependence of the subscription service on the customer's satisfaction with the consulting work.  If a consulting arrangement does not qualify for separate accounting, we recognize the consulting revenue ratably over the remaining term of the subscription contract.  Additionally, in these situations we defer the direct costs of the consulting arrangement and amortize those costs over the same time period as the consulting revenue is recognized.  We did not have any revenue arrangements with multiple deliverables for the periods ending December 31, 2009 and 2008.

Comprehensive Income (Loss)

The Company adopted FASB Accounting Standards Codification 220 “Comprehensive Income (formerly SFAS No. 130, "Reporting Comprehensive Income”), which establishes standards for the reporting and display of comprehensive income and its components in the financial statements.

Comprehensive income (loss) is the total of (1) net income (loss) plus (2) all other changes in the net assets arising from non-owner sources, which are referred to as comprehensive income.  The Company has presented statements of income which includes other comprehensive income or loss.
 
Income Taxes  
 
 
Income taxes are provided in accordance FASB Accounting Standards Codification 740 “Income Taxes” (formerly SFAS No. 109, "Accounting for Income Taxes).  A deferred tax asset or liability is recorded for all temporary differences between financial and tax and net operating loss carry forwards.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or the entire deferred tax asset will not be realized.  Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.    

Fair Value of Financial Instruments  

The carrying amounts reported in the balance sheet for cash, accounts receivable and payables and loans payable approximate fair value based on the short-term maturity of these instruments.  The carrying value of the Company’s long-term debt approximated its fair value based on the current market conditions for similar debt instruments.    


19


INFORMATION SYSTEMS ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008


NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Accounts Receivable  

Accounts receivable are stated at estimated net realizable value.  Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. In determining the collections on the account, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate allowances.
 
               Property and Equipment  

Property and equipment is stated at cost.  Depreciation is provided by the straight-line method over the estimated economic life of the property and equipment (three to ten years).  When assets are sold or retired, their costs and accumulated deprecation are eliminated from the accounts and any gain or loss resulting from their disposal is included in the statement of operations.  

The Company recognizes an impairment loss on property and equipment when evidence, such as the sum of expected future cash flows (undiscounted and without interest charges), indicates that future operations will not produce sufficient revenue to cover the related future costs, including depreciation, and when the carrying amount of the asset cannot be realized through sale.  Measurement of the impairment loss is based on the fair value of the assets.

Impairment of Long-Lived Assets

The Company evaluated the recoverability of its property, equipment, and other assets in accordance with FASB Accounting Standards Codification 360 “Property, Plant and Equipment” (formerly SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”), which requires recognition of impairment of long-lived assets in the event the net book value of such assets exceed the estimated future undiscounted cash flows attributable to such assets or the business to which such intangible assets relate.    

Software Development Costs
 
The Company accounts for costs incurred to develop computer software for internal use in accordance with FASB Accounting Standards Codification 350-40 “Internal-Use Software” (formerly Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”) ".  As required by ASC 350-40, the Company capitalizes the costs incurred during the application development stage, which include costs to design the software configuration and interfaces, coding, installation, and testing.  Costs incurred during the preliminary project along with post-implementation stages of internal use computer software are expensed as incurred. Capitalized development costs are amortized over a period of one to three years.  Costs incurred to maintain existing product offerings are expensed as incurred.  The capitalization and ongoing assessment of recoverability of development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life.  
 
Software Development Costs

After the development of the internal-use "On Site Physical Inventory” software (OSPI) was complete, the Company decided to market the software.  Proceeds from the licenses of the computer software, net of direct incremental costs of marketing, such as commissions, software reproduction costs, warranty and service obligations, and installation costs, are applied against the carrying cost of that software.  No profit will be recognized until aggregate net proceeds from licenses and amortization have reduced the carrying amount of the software to zero.  Subsequent proceeds will be recognized in revenue as earned.

On December 31, 2009, the Company released Version 2 of the “On Site Physical Inventory” software (OSPI) for sale in the marketplace.  The Company accounts for internally produced software with FASB Accounting Standard Codification 985-20 “Cost of Software To Be Sold, Leased, or Otherwise Marketed” (formally SFAS 86,”Accounting for the Costs of Computer software to be Sold, Leased or Otherwise Marketed).  Costs were capitalized when the second version was established as technically feasible and will be written off on a straight line method over the estimated useful life.

Share-Based Payments 

The Company accounts for payments of goods and services with stock with FASB Accounting Standards Codification 719 “Compensation-Stock Compensation” (formerly SFAS No. 123 (R), “Share-Based Payments”, which establishes standards for transactions in which an entity exchanges its equity instruments for goods and services.

This standard requires a public entity to measure the cost of employee services using an option-pricing model, such as the Black-Scholes Model, received in exchange for an award of equity instruments based on the grant-date fair value of the award.  Shares of common stock issued for services rendered by a third party are recorded at the fair market value of the shares issued or services rendered, whichever is more readily determinable.

Dividends 

The Company has not yet adopted any policy regarding payment of dividends.  No dividends have been paid or declared since inception.    

Advertising Expenses 

Advertising costs are expensed as incurred.  For the years ended December 31, 2009 and 2008 advertising expenses totaled $983 and $557, respectively.  


20


INFORMATION SYSTEMS ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008


NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Earnings (Loss) Per Share 

The Company reports earnings (loss) per share in accordance with FASB Accounting Standards Codification 260 “Earnings per Share” (formerly SFAS 128, “Earnings per Share”). This statement requires dual presentation of basic and diluted earnings (loss) with a reconciliation of the numerator and denominator of the loss per share computations.  Basic earnings per share amounts are based on the weighted average shares of common outstanding.  If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share.  Accordingly, this presentation has been adopted for the periods presented.  There were no adjustments required to net income for the period presented in the computation of diluted earnings per share.  There were no common stock equivalents (CSE) necessary for the computation of diluted loss per share.  

Recent Accounting Literature

FASB Accounting Standards Codification

(Accounting Standards Update (“ASU”) 2009-01)

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the year ended December 31, 2009.

As a result of the Company’s implementation of the Codification during the year ended December 31, 2009, previous references to new accounting standards and literature are no longer applicable. In the current financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)
 
SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the financial statements are issued. ASC No. 855 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. ASC No. 855 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s financial statements. No recognized or non-recognized subsequent events were noted.

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

ASC No. 350 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. ASC No. 350 became effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of ASC No. 350 did not impact the Company’s financial statements.

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

ASC No. 810 changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling interests and classified as a component of equity. ASC No. 810 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. The Company implemented ASC No. 810 at the start of fiscal 2009.
 
21


INFORMATION SYSTEMS ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008


NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Noncontrolling Interests (cont’d)

The Company presents noncontrolling interests (previously shown as minority interest) as a component of equity on its consolidated balance sheets. Minority interest expense is no longer separately reported as a reduction to net income on the consolidated income statement, but is instead shown below net income under the heading “net income attributable to noncontrolling interests.” The adoption of ASC No. 810 did not have any other material impact on the Company’s financial statements.

Consolidation of Variable Interest Entities — Amended

(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

ASC No. 810 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities” regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. ASC No. 810 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited. The Company will adopt ASC No. 810 in 2010 and does not anticipate any material impact on the Company’s financial statements.

The Hierarchy of Generally Accepted Accounting Principles

(To be included in ASC 105-10 “Generally Accepted Accounting Principles”, SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”)

ASC No. 105-10 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States of America.  ASC No. 105-10 will be effective 60 days following the SEC’s approval of the PCAOB amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.”  The Company does not believe ASC No. 105-10 will have a significant impact on the Company’s financial statements.

 
Reclassifications

Certain reclassifications have been made to the prior period financial statements presented to conform to 2009. Such reclassifications had no effect on reported income.
 
Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 
NOTE 2 – CASH AND CASH EQUIVALENT
   
2009
   
2008
 
Wachovia Bank (FDIC insured to $250,000.00)
  $ 20,805     $ 204,768  
Petty cash
     242        -  
Total cash and cash equivalent
  $ 21,047     $ 204,768  

 
NOTE 3 – PROPERTY AND EQUIPMENT
   
2009
   
2008
 
Computer software (developed for internal use)
  $ 191,817     $ 32,614  
Computer software (purchased)
    590       590  
Web site development
    10,072       -  
Furniture, fixtures, and equipment
     26,047       23,093  
      228,526       56,297  
Less accumulated depreciation and amortization
     54,238       35,129  
Property and equipment (net)
  $ 174,288     $ 21,168  
                 
Depreciation and amortization expense
  $ 19,657     $ 22,208  

 
NOTE 4 – COMPUTER SOFTWARE DEVELOPED FOR INTERNAL USE

In 2009, the Company completed development of an updated version of the “On Site Physical Inventory” (OSPI) product.  Version 2 was available as of December 1, 2009. During the year ended December 31, 2007, the Company completed the development of the initial version of, “On Site Physical Inventory” (OSPI).  The OSPI software was developed to be used by the Company for collecting data for information technology assets installed in data centers.

After implementing the use of the OSPI software, the Company decided to market the software and entered into a software license agreement with Aperture Technologies, Inc.

The Company has capitalized the cost of the OSPI software using FASB Accounting Standards Codifications 350-40 “Internal Use Software” (formerly Statement of Position (SOP) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”) as follows:
 
   
2009
   
2008
 
Development costs
  $ 297,603     $ 138,400  
Software license agreement – payments received
    (135,257 )     (135,257 )
Software license agreement – marketing costs
    29,471        29,471  
      191,817       32,614  
Less:  accumulated depreciation and amortization
     43,000        29,471  
    $ 148,818     $ 3,143  

 
22

 
INFORMATION SYSTEMS ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008


NOTE 5 – INVESTMENT

On April 17, 2009, the Company entered into a strategic alliance agreement with Rubicon Software Group, lpc (a company registered under the laws of England and Wales). The Company will be Rubicon’s exclusive agent in the United States for reselling Rubicon’s software and services. In return, Rubicon will be a software development partner and provide consulting services to the Company.

The Company agreed to purchase 2,500,000 ordinary shares for a subscription price of $.02 (two pence) a share. The total cost of the subscription was $50,000 or $73,958, USD. Within ninety days of the subscription date, the Company could purchase an additional 2,500,000 shares at the same subscription price in British pounds.  The ninety day period has lapsed with the Company not purchasing any additional shares.

Also, the Company has the ability, over the next three years, of subscribing to a maximum 5,000,000 warrant shares. Each warranted share will be at a subscription price of £.05 (five pence) per share and will be issued in offerings of 100,000 shares.  The number of subscripted shares will be based on gross revenue received by Rubicon Software Group, lpc.

Securities investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities.  Available-for-sale securities are recorded at fair value in investments and other assets on the balance sheet, with the change in fair value during the period excluded from earnings and recorded net of taxes as a component of other comprehensive income.

Available –for-sale securities were as follows:
 
 
  December 31, 2009     December 31, 2008
Type of securities: Cost  Market 
 
 
 
Unrealized
Gain/Loss)
   
Cost 
 
Market 
Unrealized
Gain/Loss)
Common stock
$73,958
$ 60,559  ($13,399)     $       -   $      -  $      - 
Total $73,968  $ 60,559  ($ 13,399)     $       -   $       - $       -
 
 
 
 
NOTE 6 – FAIR VALUE MEASUREMENTS

In 2009, the Company implemented FASB Accounting Standards Codification 850 “Fair Value Measurements and Disclosures” (formerly SFAS 157, “Fair Value Measurements”), relative to its financial assets and liabilities that are recognized or disclosed at fair value in the financial statements at least annually.

In determining the fair value of investments held by the Company, the Level 1 valuation technique of “Quoted Market Price in Active Market” was implemented as the Company was able to obtain a quote from the London Stock Exchange as of December 31, 2009.
As of December 31, 2009 the Company’s investments that are carried at fair value on a recurring basis include the following:
 
         
Fair Value Measurements Using
 
   
 
 
 
Total
   
Quoted Prices in Active Markets
(Level 1)
   
Significant Other Observable Inputs
(Level 2)
   
Significant Unobservable Inputs
(Level 3)
 
                         
Available –for-sale securities
  $ 60,559     $ 60,559     $ -     $ -  

NOTE 7 – NET (LOSS) PER SHARE

Basic earning per share (EPS) is computed by dividing net (loss) by the weighted average number of common shares outstanding, and the dilutive EPS adds the dilutive effect of stock options and other stock equivalents.  For the years ended December 31, 2009 and 2008, outstanding options to purchase an aggregate of 15,000,000 shares of stock were excluded from the computation of dilutive earnings per share because the inclusion would have been anti-dilutive.

NOTE 8 – INCOME TAXES

The provision for income taxes for the year ended December 31, 2008 was $37,791 as the Company increased its valuation allowance for taxes.

Deferred tax assets reflect the net tax effects of net operating losses and tax credit carryforwards and temporary differences between the carrying amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets are as follows:

   
2009
   
2008
 
Net operating losses
  $ 325,247     $ 88,742  
Common stock for services
    21,520       65,235  
Capital loss carryover
    1,181       1,181  
Contributions
     251        251  
 
    348,199       155,409  
 Less:  deferred tax liabilities
     (5,521 )      (6,072 )
 
    342,678       149,337  
 Valuation allowance
    (342,678 )     (149,337 )
 Net tax asset
  $ -     $ -  

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

   
2009
   
2008
 
Computed tax at the expected statutory rate
    15.00 %     15.00 %
State income tax – net of federal tax benefit
     4.78 %      4.78 %
 Income tax expense – effective rate
    19.78 %     19.78 %
 
 
23

 
INFORMATION SYSTEMS ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008


NOTE 8 – INCOME TAXES (cont’d)

Realization of the deferred tax asset is dependent on future earnings, if any, the timing of which is uncertain.  Accordingly, the Company’s net deferred tax asset has been fully offset by a valuation allowance.

 
2009
2008
The Company has the following net operating
   
  loss carryovers for income tax purposes:
   
       Expiring 2026
$ 82,899
$ 82,899
       Expiring 2027
     131,828
 131,828
       Expiring 2028
      236,311
236,311
       Expiring 2029
  1,202,060
              -
 
$1,653,098
  $451,038
 

For tax year 2008, the Company has applied for a change in accounting method with the Internal Revenue Service to report under the accrual method of accounting rather than report under the cash-basis method.

This change in accounting method will require the Company to recognize additional taxable income of $100,456.  The Internal Revenue Services allows for this income to be recognized pro rata over four years. To that end, the Company will recognize $25,114 of income in each year through December 31, 2011.

NOTE 9 – SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the periods ended December 31, 2009 and 2008 is summarized as follows:
 
 
   
2009
   
2008
 
Cash paid during the periods for interest and
           
  income taxes:
           
      Income taxes
  $ -     $ -  
      Interest
  $ 175     $ 2,628  
                 
Non-Cash Investing Activities:
               
Balance of consulting services for contributed capital
  $ 518,438     $ 1,798  
  Acquisition of consulting services for
               
    contributed capital
    343,500       975,000  
  Consulting services prepaid for future months
    (190,500 )     (518,438 )
  Non-cash expense of consulting services for
               
    contributed capital
  $ 671,438     $ 458,360  

  Sale of common stock
  $ 100.000       -  
    Reduction to accounts payable
    (26,042 )     -  
    Investment
    (73,958 )     -  
    Net change in cash proceeds
  $ -     $ -  



24

 
INFORMATION SYSTEMS ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008


NOTE 10 – EMPLOYEE BENEFITS

The Company has a SIMPLE Plan (Plan) to provide retirement and incidental benefits for its employees.  Employees may contribute from 1% to 15% of their annual compensation to the Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Service. The Company matches employee contributions dollar for dollar up to the IRS maximum.  All matching contributions vest immediately.  Such contributions to the Plan are allocated among eligible participants in the proportion of their salaries to the total salaries of all participants. Company matching contributions to the Plan for the periods ended December 31, 2009 and 2008 totaled $4,200 and $3,600, respectively.  

The Company has a medical reimbursement plan that reimburses officers for all out of pocket medical expenses not covered by the Company provided insurance plan.  Company expenses under the medical reimbursement plan for the periods ended December 31, 2009 and 2008 totaled $21,782 and $17,631, respectively.

NOTE 11 – OPERATING LEASE

The Company leases its corporate offices.  The lease requires monthly payments of $1,400.  The lease commenced on June 1, 2007 and expired on May 31, 2008.  This lease was renewed for an additional year, concluding May 31, 2009.

On March 2, 2009 the lease was renewed for $1,200 per month.  The Company holds an additional option to renew the lease “at the market price.” This renewed lease went into effect June 1, 2009.  The rent expense as of December 31, 2009 and 2008 was $16,614 and $18,773, respectively.

NOTE 12 – NOTE PAYABLE - LINE OF CREDIT

The Company has a line of credit with Wachovia Bank N.A.  The line of credit provides for borrowings up to $40,000.  The balances as of December 31, 2009 and 2008 were $20,055 and $0, respectively.  The interest rate is the Prime Rate plus 3%.  The President of the Company is a personal guarantor on the line of credit.

NOTE 13 – NOTE PAYABLE - INSURANCE

The Company has incurred short term financing for the purchase of insurance.  The note was for $9,735.  The interest rate on the debt is 4.959% and will be repaid through May 31, 2010. The outstanding balance as of December 31, 2009 is $ 3,276.
 
NOTE 14 – COMMON STOCK

In 2008, the Company entered into an agreement with Derek J. Leach (“Leach”) to purchase common stock.  Under terms of the agreement, the Company will issue 2,000,000 shares at $.25 per share for total proceeds of $500,000 over a period of five months.  The Company had waived the five month period.  The purchases of stock are as follows:

Date
 
# of Shares
   
Amount
 
             
7/15/08
    400,000     $ 100,000  
12/31/08
    600,000     $ 150,000  
4/22/09
    400,000     $ 100,000  
07/23/09
    600,000     $ 150,000  
      2,000,000     $ 500,000  
 
NOTE 15 – SHARE BASED PAYMENTS FOR SERVICES

On September 11, 2009, the Company entered into an agreement to receive a variety of corporate consulting services. The contract will run for one year at a rate of $2,000 per month. In addition, the consultants will receive a commencement bonus of 300,000 shares of company common stock.  Shares were valued at current market price. Expenses of $89,000 were recorded for the year ended December 31, 2009.

On September 8, 2008, the Company entered into an agreement to receive consulting services.  The consultants will provide 400 hours of service for 400,000 shares of common stock.  All services will be accounted for at a rate of $250 an hour.  174.25 hours and 76.25 hours at a cost of $43,563 and $19,063 respectively, were recorded as expense for the years ended December 31, 2009 and 2008.

On July 31, 2008, the Company formalized an agreement in place since January 1, 2008, to receive a variety of consultant services for 500,000 shares of the Company’s common stock.  The stock was valued at a prevailing market rate of $.25 per share.  The agreement was concluded on September 1, 2008 and stock was issued.

On September 12, 2008, the Company entered into agreements with three companies to receive a variety of consulting services.  Each agreement has a term of one year starting   August 1, 2008 and remuneration will be $250,000 per annum.  Each subsequent year, the annual rate will increase $12,500 while the agreement is in effect.  The Company has the option of paying the consultants in cash or common stock.  The Company has decided to issue 1,000,000 shares of stock to the consulting firms as payment for services.  The value of stock will be at $.25 per share.  A pro-rata portion of this agreement of $437,500 and $312,500 has been expensed for the years ended December 31, 2009 and 2008, respectively.

On July 7, 2009 a  notice of non renewal was forwarded to two of three companies, but one remaining company will continue providing services starting August 1, 2009 at an agreed to rate of $262,500.  The Company issued 656,200 shares of common stock for the service provided. Through December 32, 2009, $109,375 has been expensed.

25

 
INFORMATION SYSTEMS ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008

NOTE 15 – SHARE BASED PAYMENTS FOR SERVICES (cont’d)

All three consultants were issued a series of options as follows:

1,000,000 share option to acquire shares at $1.00 per share
1,000,000 share option to acquire shares at $2.00 per share
1,000,000 share option to acquire shares at $3.00 per share
1,000,000 share option to acquire shares at $4.00 per share
1,000,000 share option to acquire shares at $5.00 per share

To determine the valuation of the options, FASB Accounting Standards Codification 718, “Compensation – Stock Compensation” (formerly FASB 123(R)) requires a valuation technique to estimate the fair value of the options issued.  The Black-Sholes Model incorporates the various characteristics for proper valuation.  As of September 30, 2008, the valuation of the options was determined to be $0.

All issued options expire three years from the date of exercise.

Following is a summary of the status of options outstanding as of December 31, 2009 and 2008 respectively:

   
For the Year Ended December31, 2009
   
For the Year Ended December31, 2008
 
                         
   
Shares
   
Weighted Average Exercise Price
   
Shares
   
Weighted Average Exercise Price
 
Outstanding at beginning of year
    15,000,000     $ 3.00       -     $ -  
Granted
    -       -       15,000,000       3.00  
Exercised
    -       -       -       -  
Forfeited
    -       -       -       -  
Expired
    -       -       -       -  
Outstanding at end of period
    15,000,000     $ 3.00       15,000,000     $ 3.00  
Exercisable at end of period
    15,000,000     $ 3.00       15,000,000     $ 3.00  
Outstanding
                               
Weighted average remaining contractual term
            1.59               2.59  
Aggregated intrinsic value
            -               -  
Weighted average grant date fair value
            -               -  
Exercisable
                               
Weighted average remaining contractual term
            1.59               2.59  
Aggregated intrinsic value
            -               -  

 
NOTE 16 – MAJOR CUSTOMERS

One major customer accounted for $634,357 and $963,158 of revenue for the years ended December 31, 2009 and 2008 respectively.  These amounts represent 81% and 79% of the Company’s revenue for the years ended December 31, 2009 and 2008 respectively.

As of December 31, 2009 and 2008, this customer accounted for 41% and 73% of accounts receivable, respectively.


NOTE 17 – SUBSEQUENT EVENTS

We evaluated subsequent events through the date and time our financial statements were issued on March 9, 2010.  The Company drew $19,000 on its line of credit through March 9, 2010.


NOTE 18 – GOING CONCERN

As reflected in the accompanying financial statements, the Company had a net operating loss for the year ended December 31, 2009 of $1,009,195.  The total accumulated deficit as of December 31, 2009 was $1,808,504.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to further implement its business plan and raise capital.  The financial statements do not included any adjustments that might be necessary if the Company is unable to continue as a going concern.

 
26

 
ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.   CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and reported within the specified time periods.  Our Chief Executive Officer and Chief Financial Officer (collectively, the “Certifying Officers”) are responsible for maintaining our disclosure controls and procedures.  The controls and procedures established by us are designed to provide reasonable assurance that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

As of the end of the period covered by this report, the Certifying Officers evaluated the effectiveness of our disclosure controls and procedures.  Based on the evaluation, the Certifying Officers concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to management, including the Certifying Officers, as appropriate, to allow timely decisions regarding required disclosure.
 
The Certifying Officers have also concluded, based on their evaluation of our controls and procedures that as of December 31, 2009, our internal controls over financial reporting are effective and provide a reasonable assurance of achieving their objective.
 
The Certifying Officers have also concluded that there was no change in our internal controls over financial reporting identified in connection with the evaluation that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
PART III
 
ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 
DIRECTORS AND EXECUTIVE OFFICERS

Article III, of our Bylaws provides that the first Board of Directors and all subsequent Boards of the Corporation shall consist of (Joseph P Coschera), unless and until otherwise determined by vote of a majority of the entire Board of Directors.  Our officers are appointed by the Board of Directors and serve at the pleasure of the Board.  We have entered into employment agreements with our executive officers (Joseph P. Coschera and Loire A. Lucas). The term of each of the agreements is five (5) years renewable at the end of each period by mutual agreement.
 
          Name
Age
           Position
     
Joseph Coschera
61
President and Director
Loire Lucas
51
Vice President and Director
Michael R. Hull       56    Chief Financial Officer

Joseph Coschera

Joseph Coschera is the founder and President of Information Systems Associates, Inc. which he opened in the summer of 1992 for business.  Prior to forming ISA Joe held the position of Vice President with JPMorgan Chase.  Joe’s career at JPMC spanned 18 years rising from the position of Systems Engineer to Manager of Facilities and Hardware Planning for the Retail Banking Division.  Joe’s responsibilities were extremely diverse and included space planning for the Division’s staff, facilities and hardware planning for several mega data centers and the network operation centers.  In addition, he managed the Planning and Implementation Group whose responsibilities included the planning, acquisition and deployment of the technology infrastructure throughout the bank’s branch banking network.  Joe served as both a team member and project manager during his tenure.  He managed such projects as the deployment of state of the art banking technology (ATMs and Platform Automation) to more than 200 branches on three different occasions as well as data center mergers and build-outs.  Joe was recognized for his contributions related to the relocation and consolidation of several large data processing centers.  It was that experience that Joe utilized as the foundation for ISA’s service offerings.

Currently Joe is leading ISA’s development efforts as well as new business development and business partner relationships.  Joe is also serving as Chief Financial Officer and Principal Accounting Officer for ISA.  Joseph Coschera's financial experience came as a result of his previously holding a position as Vice President with JPMorgan Chase, which spanned 18 years rising from the position of Systems Engineer to Manager of Facilities and Hardware Planning for the Retail Banking Division.  Joe’s responsibilities were extremely diverse and included direct interaction with financial departments.  As part of managing the deployment of state of the art banking technology (ATMs and Platform Automation) to more than 200 branches, Joe had extensive interaction with the financial systems departments in order to perform his tasks better.  He has kept up to date with the Sarbanes-Oxley Act of 2002 via the Internet.  He has also reviewed PCAOB guidance from its web site and has read the portion of the SEC web site that deals with the Office of Chief Accountant.  He surrounds himself with CPA's and reads 10-Q's and 10-K's from other companies.  He also reads PPC checklists which mandate the exact detail disclosure requirements that will be expected of him once the company is fully reporting.
 
Loire Lucas

Loire Lucas began her career with the NCR Corporation upon graduation from Florida Atlantic University in 1982 where she received her Bachelors of Applied Science.  As a Systems Engineer, she worked on banking clients projects in Europe and Africa.  Upon her return from Africa, she continued to work at corporate headquarters in Dayton, Ohio.  Following her headquarters position, Loire transferred to NCR’s New York Sales office where she worked with major financial institutions managing their banking platform migration to state of the art hardware and software platforms.
 
Michael R. Hull
 
Michael R. Hull became our Chief Financial Officer in September 2009.  Since January 2010, he has been Managing Director of Accounting Outsource Solutions LLC, which provides CFO and related services to businesses, including Information Systems Associates. Mr. Hull is not an employee and Accounting Outsource Solutions provides our financial reporting functions through Mr. Hull on a part-time basis. From January 2008 through December 2009, Mr. Hull was the Managing Director - CFO Services for WSR Consulting, Inc. in Palm City, Florida.  From December 2006 through November 2007, Mr. Hull was Chief Financial Officer of BabyUniverse, Inc. in Jupiter, Florida. From December 2004 to December 2006 Mr. Hull was a consultant with Resources Global Professionals in Fort Lauderdale, Florida. Prior to December 2004 Mr. Hull spent eight years as CFO of BCT International, Inc. in Fort Lauderdale and eleven years in public accounting with the South Florida audit practice of Price Waterhouse.
 
Other than those persons mentioned above, we have one other employee, Shirley Walker who provides accounting services to ISA.

Family Relationships

Loire Lucas is married to Joe Coschera
 
27

 
ARTICLES AND BYLAWS

Article III, of our Bylaws provides that the first Board of Directors and all subsequent Boards of the Corporation shall consist of (Joseph P Coschera), unless and until otherwise determined by vote of a majority of the entire Board of Directors.  The Board of Directors or shareholders all have the power, in the interim between annual and special meetings of the shareholders, to increase or decrease the number of Directors of the Corporation. A Director need not be a shareholder of the Corporation unless the Certificate of Incorporation of the Corporation or the Bylaws so require.  The first Board of Directors shall hold office until the first annual meeting of shareholders and until their successors have been duly elected and qualified or until there is a decrease in the number of Directors.  Thereinafter, Directors will be elected at the annual meeting of shareholders and shall hold office until the annual meeting of the shareholders next succeeding his election, unless their terms are staggered in the Articles of incorporation of the Corporation (so long as at least one-fourth in number of the Directors of the Corporation are elected at each annual shareholders’ meeting) or these Bylaws, or until his prior death, resignation or removal.  Any Director may resign at any time upon written notice of such resignation to the Corporation.

LEGAL PROCEEDINGS

No officer, director, or persons nominated for such positions and no promoter or significant employee of our Company has been involved in legal proceedings that would be material to an evaluation of our management.

AUDIT COMMITTEE

We do not have a separately designated standing audit committee.  Pursuant to Section 3(a)(58)(B) of the Exchange Act, the entire Board of Directors acts as an audit committee for the purpose of overseeing the accounting and financial reporting processes, and audits of our financial statements.  The Commission recently adopted new regulations relating to audit committee composition and functions, including disclosure requirements relating to the presence of an "audit committee financial expert" serving on its audit committee. In connection with these new requirements, our Board of Directors examined the Commission's definition of "audit committee financial expert" and concluded that we do not currently have a person that qualifies as such an expert.  We have had minimal operations for the past two (2) years.  Presently, there are only four (4) directors serving on our Board, and we are not in a position at this time to attract, retain and compensate additional directors in order to acquire a director who qualifies as an "audit committee financial expert", but we intend to retain an additional director who will qualify as such an expert, as soon as reasonably practicable. While neither of our current directors meets the qualifications of an "audit committee financial expert", each of our directors, by virtue of his past employment experience, has considerable knowledge of financial statements, finance, and accounting, and has significant employment experience involving financial oversight responsibilities.  Accordingly, we believe that our current directors capably fulfill the duties and responsibilities of an audit committee in the absence of such an expert.
 
CODE OF ETHICS

We have adopted a code of ethic (the "Code of Ethics") that applies to our principal chief executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  A draft of the Code of Ethics is in Exhibit 14.1 hereto.  The Code of Ethics is being designed with the intent to deter wrongdoing, and to promote the following:

·  
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships
·  
Full, fair, accurate, timely and understandable disclosure in reports and documents that a small business issuer files with, or submits to, the Commission and in other public communications made by the small business issuer
·  
Compliance with applicable governmental laws, rules and regulations
·  
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code
·  
Accountability for adherence to the code

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Under Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than 10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act, are required to report the ownership of such common stock, options, and stock appreciation rights (other than certain cash-only rights) and any changes in that ownership with the Commission.  Specific due dates for these reports have been established, and we are required to report, in this Form 10-K, any failure to comply therewith during the fiscal year ended December 2009.  We believe that all of these filing requirements were satisfied by our executive officers, directors and by the beneficial owners of more than 10% of our common stock. In making this statement, we have relied solely on copies of any reporting forms received by it, and upon any written representations received from reporting persons that no Form 5 (Annual Statement of Changes in Beneficial Ownership) was required to be filed under applicable rules of the Commission.

ITEM 11.   EXECUTIVE COMPENSATION

The following table sets forth certain information regarding the annual and long-term compensation for services in all capacities to us for the prior fiscal years ended December 31, 2009 and 2008, of those persons who were either the chief executive officer during the last completed fiscal year or any other compensated executive officers as of the end of the last completed fiscal year.
  
EXECUTIVE COMPENSATION
Summary Compensation Table
 
Name and Principal
Position
 
 
 
Year
 
 
 
Salary
   
 
 
Bonus
   
 
Stock Award
   
 
Option Award
   
Non-Equity Incentive Plan Compensation