UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





þQUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the
quarterly period ended: June
30, 2010





or





oTRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the
transition period from
                to





Commission
File Number: 000-03125





MEDCLEAN
TECHNOLOGIES, INC.


(Exact
Name of registrant as specified in its charter)


Delaware
            
            21-0661726(State
      or other Jurisdiction of
            
            (I.R.S.
      Employerincorporation
      or organization)
            
            Identification
      Number)





3
Trowbridge Drive


Bethel,
Connecticut 06801


(Address
of principal executive offices)





(203)
798-1080


(Registrant’s
telephone number, including area code)




Copies
to:




Joseph M.
Lucosky, Esq.


195 Rt. 9
South, 2nd floor


Manalapan,
NJ 07726


Tel No.:
(732) 409-1212


Fax No.:
(732) 577-1188





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes o   No
o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act:


o
            Large
      Accelerated Filer
            
            o
            Accelerated
      Filero
            Non-Accelerated
      Filer
            
            þ
            Smaller
      Reporting Company





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    Yes o   No
þ





As
of August 19, 2010, there were 726,564,141 shares outstanding of the
registrant’s common stock.









TABLE OF CONTENTS





PagePART
      I—FINANCIAL INFORMATIONItem
      1. Financial Statements
                3Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                4Item
      3. Quantitative and Qualitative disclosures about Market
    Risk
                7Item
      4. Controls and Procedures
                8PART
      II—OTHER INFORMATIONItem
      1. Legal Proceedings
                8Item1A.
      Risk Factors
                9Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                9Item
      3. Defaults Upon Senior Securities
                9Item
      4. (Removed and Reserved)
                9Item
      5. Other Information
                9Item
      6. Exhibits
                9Signatures
                10




2




PART
I—FINANCIAL INFORMATION





Item
1. Financial Statements





INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS





PAGECONDENSED
      CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2010 (UNAUDITED) AND DECEMBER
      31, 2009
                F-1UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX
      MONTHS ENDED JUNE 30, 2010 AND 2009
                F-2UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
      JUNE 30, 2010 AND 2009
                F-3NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                F-4




3




MEDCLEAN
TECHNOLOGIES, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS





June 30,
                    
                    
                    December 31,2010
                    
                    
                    2009(unaudited)ASSETSCurrent
      assetsCash
                    
                    $
                    215,559
                    
                    
                    $
                    534,425Accounts
      receivable, net of $24,693 allowance
                    
                    
                    507,590
                    
                    
                    
                    144,117Revenues
      in excess of billings
                    
                    
                    7,679
                    
                    
                    
                    7,679Inventory
                    
                    
                    771,643
                    
                    
                    
                    815,634Prepaid
      expenses
                    
                    
                    56,208
                    
                    
                    
                    32,646Total
      current assets:
                    
                    
                    1,558,679
                    
                    
                    
                    1,534,501Property,
      plant and equipment, net
                    
                    
                    170,668
                    
                    
                    
                    212,801Other
      assets:Notes
      receivable
                    
                    
                    731,222
                    
                    
                    
                    -Deposits
                    
                    
                    32,808
                    
                    
                    
                    32,808Total
      assets
                    
                    $
                    2,493,377
                    
                    
                    
                    1,780,110LIABILITIES
      AND STOCKHOLDERS' (DEFICIT) EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                    
                    $
                    472,044
                    
                    
                    $
                    253,742Payroll
      liabilities
                    
                    
                    416,878
                    
                    
                    
                    401,408Deferred
      revenue
                    
                    
                    100,735
                    
                    
                    
                    236,500Billings
      in excess of revenue
                    
                    
                    1,021,673
                    
                    
                    
                    657,673Notes
      payable
                    
                    
                    220,497
                    
                    
                    
                    214,647Total
      current liabilities:
                    
                    
                    2,231,827
                    
                    
                    
                    1,763,970Long
      term debt:Convertible
      notes, net of debt discount of $964,598
                    
                    
                    307,402
                    
                    
                    
                    -Total
      liabilities
                    
                    
                    2,539,229
                    
                    
                    
                    1,763,970Stockholders'
      (deficit) equityPreferred
      stock, $0.0001 par value, 60,000,000 shares authorized, none issued
      outstandingCommon
      stock, $0.0001 par value; 3,500,000,000 shares authorized; 708,612,530 and
      675,478,445 shares issued and outstanding as of June 30, 2010 and December
      31, 2009, respectively
                    
                    
                    70,861
                    
                    
                    
                    67,548Additional
      paid in capital
                    
                    
                    28,013,314
                    
                    
                    
                    25,411,906Accumulated
      deficit
                    
                    
                    (28,130,027
                    )
                    
                    
                    (25,463,314
                    )Total
      stockholders' (deficit) equity:
                    
                    
                    (45,852
                    )
                    
                    
                    16,140Total
      liabilities and stockholders' (deficit) equity
                    
                    $
                    2,493,377
                    
                    
                    $
                    1,780,110





See the
accompanying notes to these unaudited condensed consolidated financial
statements





F-1




MEDCLEAN
TECHNOLOGIES, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited)





Three months ended June 30,
                    
                    
                    Six months ended June 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009RevenuesSales
      and service revenues
                    
                    $
                    131,758
                    
                    
                    $
                    354,755
                    
                    
                    $
                    400,625
                    
                    
                    $
                    772,182Cost
      of sales
                    
                    
                    71,674
                    
                    
                    
                    225,965
                    
                    
                    
                    237,127
                    
                    
                    
                    499,037Gross
      profit
                    
                    
                    60,084
                    
                    
                    
                    128,790
                    
                    
                    
                    163,498
                    
                    
                    
                    273,145Operating
      expensesSalaries
      and wages
                    
                    
                    570,422
                    
                    
                    
                    1,995,716
                    
                    
                    
                    1,762,731
                    
                    
                    
                    3,063,579General
      and administrative expenses
                    
                    
                    537,178
                    
                    
                    
                    332,018
                    
                    
                    
                    1,008,343
                    
                    
                    
                    821,536Depreciation
                    
                    
                    22,577
                    
                    
                    
                    21,050
                    
                    
                    
                    44,930
                    
                    
                    
                    44,159Total
      operating expenses
                    
                    
                    1,130,177
                    
                    
                    
                    2,348,784
                    
                    
                    
                    2,816,004
                    
                    
                    
                    3,929,274Loss
      from operations
                    
                    
                    (1,070,093
                    )
                    
                    
                    (2,219,994
                    )
                    
                    
                    (2,652,506
                    )
                    
                    
                    (3,656,129
                    )Other
      income and expensesInterest
      income
                    
                    
                    31,292
                    
                    
                    
                    38
                    
                    
                    
                    31,526
                    
                    
                    
                    944Interest
      expense
                    
                    
                    (42,808
                    )
                    
                    
                    (448,203
                    )
                    
                    
                    (45,733
                    )
                    
                    
                    (896,700
                    )Net
      Loss before income taxes
                    
                    
                    (1,081,609
                    )
                    
                    
                    (2,668,159
                    )
                    
                    
                    (2,666,713
                    )
                    
                    
                    (4,551,885
                    )Provision
      for income taxes (benefit)
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      Loss
                    
                    $
                    (1,081,609
                    )
                    
                    $
                    (2,668,159
                    )
                    
                    $
                    (2,666,713
                    )
                    
                    $
                    (4,551,885
                    )Loss
      per common share, basic and fully diluted
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.01
                    )Weighted
      average common shares outstanding, basic and fully diluted
                    
                    
                    703,752,904
                    
                    
                    
                    561,542,968
                    
                    
                    
                    693,837,432
                    
                    
                    
                    561,542,968





See the
accompanying notes to these unaudited condensed consolidated financial
statements





F-2




MEDCLEAN
TECHNOLOGIES, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)


Six months ended June 30,2010
                      
                      
                      2009Cash
      flows from operating activities:Net
      loss
                      
                      $
                      (2,666,713
                      )
                      
                      $
                      (4,551,885
                      )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDepreciation
                      
                      
                      47,702
                      
                      
                      
                      44,159Amortization
      of add on interest, net
                      
                      
                      (27,737
                      )
                      
                      
                      -Amortization
      of debt discount
                      
                      
                      36,398
                      
                      
                      
                      -Fair
      value of common stock, options and warrants issued for services
      rendered
                      
                      
                      1,541,079
                      
                      
                      
                      3,278,155(Increase)
      decrease in:Accounts
      receivable
                      
                      
                      (363,473
                      )
                      
                      
                      21,705Inventory
                      
                      
                      43,991
                      
                      
                      
                      (421,564
                      )Prepaid
      expenses
                      
                      
                      (23,562
                      )
                      
                      
                      (59,617
                      )Increase
      (decrease) in:Accounts
      payable
                      
                      
                      224,152
                      
                      
                      
                      (549,459
                      )Payroll
      liabilities
                      
                      
                      15,470
                      
                      
                      
                      -Deferred
      revenue
                      
                      
                      (135,765
                      )
                      
                      
                      5,784Billings
      in excess of revenue
                      
                      
                      364,000
                      
                      
                      
                      886,249Deposits
      payable
                      
                      
                      -
                      
                      
                      
                      (386,428
                      )Net
      cash used in operating activities
                      
                      
                      (944,458
                      )
                      
                      
                      (1,732,901
                      )Cash
      flows from investing activities:Purchase
      of equipment
                      
                      
                      (5,569
                      )
                      
                      
                      (23,309
                      )Net
      cash used in investing activities
                      
                      
                      (5,569
                      )
                      
                      
                      (23,309
                      )Cash
      flows from financing activities:Proceeds
      from exercise of warrants
                      
                      
                      131,161
                      
                      
                      
                      -Proceeds
      from convertible notes payable
                      
                      
                      500,000
                      
                      
                      
                      -Net
      cash provided by financing activities
                      
                      
                      631,161
                      
                      
                      
                      -(Decrease)
      increase in cash and cash equivalents
                      
                      
                      (318,866
                      )
                      
                      
                      (1,756,210
                      )Cash
      and cash equivalents, beginning of period
                      
                      
                      534,425
                      
                      
                      
                      1,922,401Cash
      and cash equivalents, end of period
                      
                      $
                      215,559
                      
                      
                      $
                      166,191Supplemental
      disclosures of cash flow information:Cash
      paid during the period for:Interest
                      
                      $
                      -
                      
                      
                      $
                      883Taxes
                      
                      $
                      -
                      
                      
                      $
                      -Supplemental
      disclosures of non-cash investing and financing
activities:Equity
      based compensation
                      
                      $
                      1,541,079
                      
                      
                      $
                      3,278,155





See the
accompanying notes to these condensed consolidated financial
statements




F-3




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





A summary
of the significant accounting policies applied in the presentation of the
accompanying financial statements is as follows:





General





The
accompanying unaudited condensed consolidated financial statements of MedClean
Technologies, Inc. and subsidiaries, (“MedClean” or the “Company” or “MCLN”),
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.





In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been
included.  Accordingly, the results from operations for the six-month
period ended June 30, 2010, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2010.  The unaudited
condensed consolidated financial statements should be read in conjunction with
the consolidated December 31, 2009 financial statements and footnotes thereto
included in the Company's Form 10-K filed with the SEC on March 3,
2010.





The
consolidated financial statements as December 31, 2009 have been derived from
the audited consolidated financial statements at that date but do not include
all disclosures required by the accounting principles generally accepted in the
United States of America.





Business and Basis of
Presentation





On
January 2, 2009, the Company merged its wholly owned subsidiary, Aduromed
Corporation into Aduromed Industries Inc. and changed its corporate name from
Aduromed Industries, Inc. to MedClean Technologies, Inc.





MedClean
is in the business of providing solutions for managing medical waste on site
including designing; selling, installing and servicing on site (i.e. “in-situ”) turnkey systems to
treat regulated medical waste. The Company provides these systems to hospitals
and other medical facilities as efficient, safe, cost effective and legally
compliant solutions to incineration, off site hauling of untreated waste and
other alternative treatment technologies and methodologies. The MedClean Series
System is offered in three configurations: Containerized System, Mobile System
and the Fixed System (our traditional fixed installation).





Accounts
Receivable




The
Company assesses the realization of its receivables by performing ongoing credit
evaluations of its customers’ financial condition. Through these evaluations,
the Company may become aware of a situation where a customer may not be able to
meet its financial obligations due to deterioration of its financial viability,
credit ratings or bankruptcy. The Company’s reserve requirements are based on
the best facts available to the Company and are reevaluated and adjusted as
additional information is received. The Company’s reserves are also based on
amounts determined by using percentages applied to certain aged receivable
categories. These percentages are determined by a variety of factors including,
but not limited to, current economic trends, historical payment and bad debt
write-off experience. Allowance for doubtful accounts for accounts and notes
receivable was $24,693 and 15,589 as of June 30, 2010 and December 31, 2009,
respectfully.




F-4




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Revenue
recognition





The
Company recognizes revenues upon completion of the system installation and
customer acceptance.  Clients will be invoiced upon the following
milestones, contract signing, delivery of components, and the completion and
acceptance of installation and start-up.





Contract
costs include all direct material and labor costs and those indirect costs
related to contract performance. Selling, general and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes in
job performance, job conditions, and estimated profitability may result in
revisions to costs and income, which are recognized in the period in which the
revisions are determined. Changes in estimated job profitability resulting from
job performance, job conditions, contract penalty provisions, claims, change
orders, and settlements, are accounted for as changes in estimates in the
current period.





The
Company provides a one year warranty on the systems it installs. The Company
also obtains a one year warranty on the system components from the component
manufacturer, thereby mitigating potential warranty costs. Accordingly, the
Company has accrued no reserve for warranty. On the installed base after the
warranty term has expired, the Company offers a maintenance agreement of one or
more years to the customer. The Customer is billed for, and pays for the
maintenance agreement in advance. Revenues from such maintenance agreements are
recognized ratably over the lives of the maintenance agreements, with the excess
of the amount collected over the amount recognized as deferred revenue. At June
30, 2010 and December 31, 2009 the Company had $100,735 and $236,500 in deferred
revenue from maintenance agreements.





Revenues
from the sale of our mobile unit, accessories, repairs and replacement parts are
recognized when shipped to the customer in accordance with a valid contract or
order agreement. The contract or order agreement specifies delivery terms and
pricing, and is considered to reasonably assure collection from the
customer.





Revenues
and cost from multi-year rental contracts on our mobile unit will be recognized
ratably over the life of the rental contract.





Cash and Cash
Equivalents





The
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.





The
Company maintains cash deposits with financial institutions, which from time to
time may exceed federally insured limits.  The Company has not
experienced any losses and believes it is not exposed to any significant credit
risk from cash. At June 30, 2010 and December 31, 2009, the Company has cash
balances on deposit in one account with a financial institution in excess of the
federally insured limits.





Estimates





The
preparation of the accompanying 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, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting periods. Actual results could differ from those
estimates.




F-5




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Reclassification





Certain
reclassifications have been made to prior periods’ data to conform to the
current year’s presentation. These reclassifications had no effect on reported
income or losses.





Segment
information





Accounting
Standards Codification (“ASC”) establishes standards for reporting information
regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim financial
reports issued to stockholders. ASC also establishes standards for related
disclosures about products and services and geographic areas. Operating segments
are identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision-making group, in making decisions how to allocate
resources and assess performance. The Company applies the management approach to
the identification of our reportable operating segment as provided in accordance
with ASC. The information disclosed herein materially represents all of the
financial information related to the Company’s principal operating
segment.




Control by principal
stockholders





The
directors, executive officers, participants and their affiliates or related
parties, own beneficially and in the aggregate, the majority of the voting power
of the outstanding shares of the common stock of the Company. Accordingly, the
directors, executive officers and their affiliates, if they voted their shares
uniformly, would have the ability to control the approval of most corporate
actions, including increasing the authorized capital stock of the Company and
the dissolution, merger or sale of the Company's assets.





Dependence on principal
customer





For 2010
and going forward, the Company does not anticipate that the loss of any one
customer will have a significant adverse impact on our business.





Fair
Values





In the
first quarter of fiscal year 2008, the Company adopted Accounting Standards
Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC
820-10”).  ASC 820-10 defines fair value, establishes a framework for
measuring fair value, and enhances fair value measurement disclosure. ASC 820-10
delays, until the first quarter of fiscal year 2009, the effective date for ASC
820-10 for all non-financial assets and non-financial liabilities, except those
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The adoption of ASC 820-10 did not have a
material impact on the Company’s financial position or operations. Refer to
Footnote 10 for further discussion regarding fair valuation.





Stock based
compensation





The
Company has adopted ASC subtopic 718-10, which requires all share-based payments
to employees, including grants of employee stock options, to be recognized in
the income statement based on their fair values.





F-6




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





As more
fully described in Note 9 below, the Company granted equity based compensation
over the years to employees of the Company under its equity
plans.  The Company granted non-qualified stock options to purchase
22,500,000 and -0- shares of common stock during the six-month period ended June
30, 2010 and 2009, respectively, to employees and directors of the
Company.





Fair Value of Financial
Instruments





ASC
subtopic 825-10 requires disclosure of the fair value of certain financial
instruments. The carrying value of cash and cash equivalents, accounts payable
and short-term borrowings, as reflected in the balance sheets, approximate fair
value because of the short-term maturity of these instruments.





Inventory





The
Company maintains an inventory, which consists primarily of component parts,
spare parts and disposable goods.  The average cost method is utilized
in valuing the inventory, and is stated at the lower of cost or
market.  The following table summarizes these assets as of June 30,
2010 and December 31, 2009:





June 30,2010
                    
                    
                    December 31,2009Component
      & spare parts
                    
                    $
                    747,867
                    
                    
                    $
                    767,325Consumables
                    
                    
                    23,776
                    
                    
                    
                    30,980Advance
      payments
                    
                    
                    
                    
                    
                    
                    17,329Total
      inventory
                    
                    $
                    771,643
                    
                    
                    $
                    815,634





Property, plant and
equipment





The
Company has property, plant and equipment that consist of automobiles, computers
and related accessories, and office furniture.  The depreciation is
calculated using the straight line method over the life of the
property.  All property has a useful life of 3 to 10
years.  The following table summarizes these assets as of June 30,
2010 and December 31, 2009:





June 30,2010
                        
                        
                        December 31,2009Office
      Furniture
                        
                        $
                        170,094
                        
                        
                        $
                        164,525Computers
      and Accessories
                        
                        
                        208,802
                        
                        
                        
                        208,801Leasehold
      Improvements
                        
                        
                        135,380
                        
                        
                        
                        135,380514,276
                        
                        
                        
                        508,706Accumulated
      Depreciation
                        
                        
                        343,608
                        
                        
                        
                        295,905$
                        170,668
                        
                        
                        $
                        212,801





During
the three and six-month periods ended June 30, 2010, depreciation expense
charged to operations was $23,739 and $47,702, respectively, of which $1,386 and
$2,772 was included as part of cost of goods sold, respectively.





F-7




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Earnings (loss) per common
share





The net
earnings (loss) per common share are computed by dividing the net loss for the
period by the weighted average number of shares outstanding for the period.
Shares issued upon conversion of convertible debt, outstanding warrants and
options for the six-month  periods ending June 30, 2010 and 2009
amounting to 809,344,538 and 49,201,769 respectively were not included in the
calculation for net loss per common share because it would be antidilutive or
exceeded the average market price of the Company’s common stock for
period.





The
numerator and denominator used in the basic and diluted earnings (loss) per
share of common stock computations are presented in the following
table:





Six months ended June 30,
                    
                    
                    Three months ended June 30,2010
                    
                    
                    2009
                    
                    
                    2010
                    
                    
                    2009NUMERATOR
      FOR BASIC AND DILUTED EPS (LPS)Net
      loss per statement of operations
                    
                    $
                    (2,666,713
                    )
                    
                    $
                    (4,551,885
                    )
                    
                    $
                    (1,081,609
                    )
                    
                    $
                    (2,668,159
                    )DENOMINATOR
      FOR BASIC AND DILUTED EPS (LPS)Weighted
      average shares of common stock outstanding
                    
                    
                    693,837,432
                    
                    
                    
                    561,542,968
                    
                    
                    
                    703,752,904
                    
                    
                    
                    561,542,968Basic
      and diluted EPS (LPS)
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.00





Recent Accounting
Pronouncements




In May
2010, the FASB (Financial Accounting Standards Board) issued Accounting
Standards Update 2010-19 (ASU 2010-19), Foreign Currency (Topic 830):
Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The
amendments in this Update are effective as of the announcement date of March 18,
2010. The Company does not expect the provisions of ASU 2010-19 to have a
material effect on the financial position, results of operations or cash flows
of the Company.





In April
2010, the FASB (Financial Accounting Standards Board) issued Accounting
Standards Update 2010-17 (ASU 2010-17), Revenue Recognition-Milestone Method
(Topic 605): Milestone Method of Revenue Recognition. The amendments in this
Update are effective on a prospective basis for milestones achieved in fiscal
years, and interim periods within those years, beginning on or after June 15,
2010. Early adoption is permitted. If a vendor elects early adoption and the
period of adoption is not the beginning of the entity’s fiscal year, the entity
should apply the amendments retrospectively from the beginning of the year of
adoption. The Company does not expect the provisions of ASU 2010-17 to have a
material effect on the financial position, results of operations or cash flows
of the Company.




F-8




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Recent Accounting
Pronouncements (continued)





In
February 2010, the FASB issued Accounting Standards Update 2010-09 (ASU
2010-09), "Subsequent Events (Topic 855)."  The amendments remove the
requirements for an SEC filer to disclose a date, in both issued and revised
financial statements, through which subsequent events have been
reviewed.  Revised financial statements include financial statements
revised as a result of either correction of an error or retrospective
application of U.S. GAAP.  ASU 2010-09 is effective for interim or
annual financial periods ending after June 15, 2010.  The Company does
not expect the provisions of ASU 2010-09 to have a material effect on the
financial position, results of operations or cash flows of the
Company





There
were various other updates recently issued, most of which represented technical
corrections to the accounting literature or application to specific industries
and are not expected to a have a material impact on the Company's consolidated
financial position, results of operations or cash flows.





NOTE
2 - GOING CONCERN MATTERS





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern, which contemplates the realization
of assets and satisfaction of liabilities and commitments in the normal course
of business. The Company has incurred substantial recurring losses, which raises
substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.




The
Company has available cash and cash equivalents of approximately
$215,559 at June 30, 2010 which it intends to utilize for working capital
purposes and to continue developing its business. To supplement its cash
resources, the Company has secured alternative financing arrangements with two
investment entities. While the acquisition of cash through these programs is
related to company performance, we believe we will have access to the necessary
funds for us to execute our business plan.  However, we continue to incur
significant operating losses which will result in the reduction of our cash
position.  We cannot assure that we will be able to continue to obtain
funding through the alternative financing arrangements and the lack thereof
would have a material adverse impact on our business. Moreover, any equity
funding could be substantially dilutive to existing stockholders. The
aforementioned factors raise doubt about our ability to continue as a going
concern. In the event the Company is unable to continue as a going concern it
may pursue a number of different options, including, but not limited to, filing
for protection under the federal bankruptcy code.





F-9




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
3 – CONTRACTS IN PROCESS





The
Company entered into construction type contracts to furnish and install its
systems in hospitals. There were four outstanding contracts at June 30, 2010 and
December 31, 2009.  The following table summarizes these outstanding
contracts:




Contract
                                                                            
                                                                            Revenue
                                                                            
                                                                            
                                                                            Amounts
                                                                            
                                                                            
                                                                            Revenues in
                                                                            
                                                                            
                                                                            Billings in excessAmount
                                                                            
                                                                            Recognized
                                                                            
                                                                            
                                                                            Billed
                                                                            
                                                                            
                                                                            excess of Billings
                                                                            
                                                                            
                                                                            of RevenuesOutstanding
      contracts at June 30, 2010:$
                                                                            1,327,930
                                                                            
                                                                            $
                                                                            949,221
                                                                            
                                                                            
                                                                            $
                                                                            1,327,930
                                                                            
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            378,709231,257
                                                                            
                                                                            
                                                                            29,347
                                                                            
                                                                            
                                                                            
                                                                            21,668
                                                                            
                                                                            
                                                                            
                                                                            7,679
                                                                            
                                                                            
                                                                            
                                                                            -287,029
                                                                            
                                                                            
                                                                            163,939
                                                                            
                                                                            
                                                                            
                                                                            215,271
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            51,332282,948
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            188,632
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            188,632750,000
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            375,000
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            375,00028,000
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            28,000
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            28,000$
                                                                            2,907,164
                                                                            
                                                                            
                                                                            1,142,507
                                                                            (1)
                                                                            
                                                                            $
                                                                            2,156,501
                                                                            
                                                                            
                                                                            $
                                                                            7,679
                                                                            
                                                                            
                                                                            $
                                                                            1,021,673Outstanding
      contracts at December 31, 2009:$
                                                                            1,327,930
                                                                            
                                                                            $
                                                                            949,221
                                                                            
                                                                            
                                                                            $
                                                                            1,327,930
                                                                            
                                                                            
                                                                            $
                                                                            -
                                                                            
                                                                            
                                                                            $
                                                                            378,709231,257
                                                                            
                                                                            
                                                                            29,347
                                                                            
                                                                            
                                                                            
                                                                            21,668
                                                                            
                                                                            
                                                                            
                                                                            7,679
                                                                            
                                                                            
                                                                            
                                                                            -287,029
                                                                            
                                                                            
                                                                            163,939
                                                                            
                                                                            
                                                                            
                                                                            215,271
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            51,332282,948
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            188,632
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            188,63278,000
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            39,000
                                                                            
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            39,000$
                                                                            2,207,164
                                                                            
                                                                            $
                                                                            1,142,507
                                                                            
                                                                            
                                                                            $
                                                                            1,792,501
                                                                            
                                                                            
                                                                            $
                                                                            7,679
                                                                            
                                                                            
                                                                            $
                                                                            657,673


(1)   Revenue recognized in prior years on
outstanding contracts.





NOTE
4 – NOTES RECEIVABLE





In
connection with the issuance of convertible promissory notes as described in
Note 6 below, the Company received an aggregate of $1,272,000 in secured notes
receivable with add on interest of 6% and are due three years from the date of
issuance.  During the three months ended June 30, 2010, the Company
received an aggregate of $500,000 as payments.  The balance receivable
as of June 30, 2010 is $731,222, net of unearned interest.





NOTE
5 – NOTES PAYABLE-SHORT TERM





The
Company’s outstanding unsecured note bears a 12% interest rate and matured on
December 15, 2003. Both parties have entered a verbal agreement to extend the
maturity date on this note indefinitely. No accrued interest has been paid on
this note to date. As of June 30, 2010 and December 31, 2009 the balance due was
$220,497 and $214,647 respectively.





F-10




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
6 – CONVERTIBLE NOTES





On April
1, 2010, the Company issued a $600,000 Convertible Promissory Note that matures
March 31, 2013. The Promissory Note bear a onetime interest charge at a rate of
6% per annum and will be convertible into Company’s common stock at any time at
a conversion rate of the highest of a) 70% of the lowest closing price in the 20
trading days previous to the conversion or b) par value of the Company’s common
stock.





In
accordance with Accounting Standards Codification subtopic 470-20, Debt With
Conversions and Other Options (“ASC 470-20”), the Company recognized an embedded
beneficial conversion feature present in the Convertible Promissory Note. The
Company allocated a portion of the proceeds equal to the intrinsic value of that
feature to additional paid-in capital. The Company recognized and measured an
aggregate of $332,481 of the proceeds, which is equal to the intrinsic value of
the embedded beneficial conversion feature, to additional paid-in capital and a
discount against the Convertible Note. The debt discount attributed to the
beneficial conversion feature is charged operations as interest expense ratably
over the term of the note.




For the
six months ended June 30, 2010, the Company amortized the debt discount and
charged $27,631 to interest expense.




As of
June 30, 2010, $450,000 of the above proceeds has been received related note
receivable (see Note 4).




On June
14, 2010, the Company issued a $600,000 Convertible Promissory Note that matures
June 13, 2013. The Promissory Note bear a onetime interest charge at a rate of
6% per annum and will be convertible into Company’s common stock at any time at
a conversion rate of the highest of a) 70% of the lowest closing price in the 20
trading days previous to the conversion or b) par value of the Company’s common
stock.





In
accordance with Accounting Standards Codification subtopic 470-20, Debt With
Conversions and Other Options (“ASC 470-20”), the Company recognized an embedded
beneficial conversion feature present in the Convertible Promissory Note. The
Company allocated a portion of the proceeds equal to the intrinsic value of that
feature to additional paid-in capital. The Company recognized and measured an
aggregate of $600,000 of the proceeds, which is equal to the intrinsic value of
the embedded beneficial conversion feature, to additional paid-in capital and a
discount against the Convertible Note. The debt discount attributed to the
beneficial conversion feature is charged to operations as interest expense
ratably over the term of the note.




For the
six months ended June 30, 2010, the Company amortized the debt discount and
charged $8,767 to interest expense.




As of
June 30, 2010, $50,000 of the above proceeds has been received related note
receivable (see Note 4).




NOTE
7 – CAPITAL STOCK





The
Company is authorized to issue 3,500,000,000 shares of common stock, with a
$0.0001 par value per share as of April 22, 2009 as approved by the majority of
the Company stockholders. Prior to the April 22, 2009 share increase, the
Company was authorized to issue 1,400,000,000 shares of common stock with a
$0.0001 par value per share. In addition, the Company is authorized to issue
60,000,000 shares of preferred stock with a $0.0001 par value per
share.





As of
June 30, 2010 and December 31, 2009, the Company has 708,612,530 and 675,478,445
shares of common stock and no preferred stock issued and outstanding,
respectively.




F-11




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
7 – CAPITAL STOCK (continued)





During
the six month period ended June 30, 2010, the Company issued an aggregate of
9,800,000 shares of its common stock in exchange for services
rendered.  The valuations of common stock issued for services were
based on the value of the services rendered, which did not differ materially
from the fair value of the common stock during the period the services were
rendered.





NOTE
8 – WARRANTS AND OPTIONS





Warrants




The
following table summarizes the changes in warrants outstanding and related
prices for the shares of the Company’s common stock at June 30,
2010:





Exercise Price
                                
                                Number
                                  Outstanding
                                
                                
                                Warrants
                                  Outstanding
                                  Weighted
                                  Average
                                  Remaining
                                  Contractual Life
                                  (years)
                                
                                
                                Weighted
                                  Average
                                  Exercise price
                                
                                
                                Number
                                  Exercisable
                                
                                
                                Warrants
                                  Exercisable
                                  Weighted
                                  Average
                                  Exercise Price$
                                0.0040
                                
                                
                                28,000,000
                                
                                
                                
                                3.08
                                
                                
                                $
                                0.0040
                                
                                
                                
                                28,000,000
                                
                                
                                $
                                0.00400.0075
                                
                                
                                75,069,071
                                
                                
                                
                                3.09
                                
                                
                                
                                0.0075
                                
                                
                                
                                75,069,071
                                
                                
                                
                                0.00750.0250
                                
                                
                                28,000,000
                                
                                
                                
                                3.09
                                
                                
                                
                                0.0250
                                
                                
                                
                                28,000,000
                                
                                
                                
                                0.02500.0900
                                
                                
                                600,000
                                
                                
                                
                                2.71
                                
                                
                                
                                0.0900
                                
                                
                                
                                600,000
                                
                                
                                
                                0.09000.2400
                                
                                
                                100,000
                                
                                
                                
                                1.99
                                
                                
                                
                                0.2400
                                
                                
                                
                                100,000
                                
                                
                                
                                0.24000.3788
                                
                                
                                2,204,386
                                
                                
                                
                                0.56
                                
                                
                                
                                0.3788
                                
                                
                                
                                2,204,386
                                
                                
                                
                                0.37880.5571
                                
                                
                                1,436,000
                                
                                
                                
                                0.08
                                
                                
                                
                                0.5571
                                
                                
                                
                                1,436,000
                                
                                
                                
                                0.5571Total
                                
                                
                                135,409,457
                                
                                
                                
                                3.02
                                
                                
                                $
                                0.0172
                                
                                
                                
                                135,409,457
                                
                                
                                $
                                0.0172





Transactions
involving the Company’s warrant issuance are summarized as
follows:





Number of
                        Shares
                      
                      
                      Weighted
                        Average
                        Price Per
                        ShareOutstanding
      at December 31, 2008
                      
                      
                      414,576,110
                      
                      
                      $
                      0.0265Granted
                      
                      
                      167,419,113Exercised
                      
                      
                      (90,260,439
                      )Canceled
      or expired
                      
                      
                      (334,838,226
                      )Outstanding
      at December 31, 2009
                      
                      
                      156,896,558
                      
                      
                      
                      0.0212Granted
                      
                      
                      -Exercised
                      
                      
                      (21,487,101
                      )
                      
                      
                      (0.0064
                      )Canceled
      or expired
                      
                      
                      -Outstanding
      at June 30, 2010
                      
                      
                      135,409,457
                      
                      
                      $
                      0.0172




F-12




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
8 – WARRANTS AND OPTIONS (continued)





During
the six month period ended June 30, 2010, the Company issued an aggregate of
20,643,435 shares of common stock in exchange for the exercise of 21,487,101
warrants.  The exercise prices ranged from $0.004 to $0.0075 resulting
in proceeds of $122,377. 5,433,966 warrants were exercised on a cashless
basis.





Stock
options





The
following table summarizes the changes in options outstanding and the related
prices for the shares of the Company’s common stock issued to employees and
directors of the Company at June 30, 2010:





Options Outstanding
                                                                        
                                                                        
                                                                        
                                                                        Options ExercisableExercise Prices
                                                                        
                                                                        Number
                                                                          Outstanding
                                                                        
                                                                        Weighted Average
                                                                          Remaining
                                                                          Contractual Life
                                                                          (Years)
                                                                        
                                                                        Weighted
                                                                          Average
                                                                          Exercise Price
                                                                        
                                                                        Number
                                                                          Exercisable
                                                                        
                                                                        Weighted
                                                                          Average
                                                                          Exercise Price$
                                                                        0.00400
                                                                        
                                                                        
                                                                        540,547,634
                                                                        
                                                                        3.88
                                                                        
                                                                        $
                                                                        0.00400
                                                                        
                                                                        521,301,867
                                                                        
                                                                        $
                                                                        0.004000.00844
                                                                        
                                                                        
                                                                        80,883,534
                                                                        
                                                                        5.36
                                                                        
                                                                        $
                                                                        0.00844
                                                                        
                                                                        26,961,178
                                                                        
                                                                        
                                                                        0.008440.02800
                                                                        
                                                                        
                                                                        22,500,000
                                                                        
                                                                        4.54
                                                                        
                                                                        
                                                                        0.02800
                                                                        
                                                                        22,500,000
                                                                        
                                                                        
                                                                        0.028Total
                                                                        
                                                                        
                                                                        643,931,168
                                                                        
                                                                        4.09
                                                                        
                                                                        $
                                                                        0.00539
                                                                        
                                                                        570,763,045
                                                                        
                                                                        $
                                                                        0.00513




Transactions
involving stock options issued to employees are summarized as
follows:




Weighted
                                  AverageNumber of
                                
                                
                                PriceShares
                                
                                
                                Per ShareOutstanding
      at December 31, 2008:
                                
                                
                                78,358,950
                                
                                
                                $
                                0.072Granted
                                
                                
                                551,883,534
                                
                                
                                
                                0.00467Exercised
                                
                                
                                —Canceled
      or expired
                                
                                
                                (5,515,666
                                )Outstanding
      at December 31, 2009:
                                
                                
                                624,726,818
                                
                                
                                $
                                0.004Granted
                                
                                
                                22,500,000
                                
                                
                                
                                0.028Exercised
                                
                                
                                (2,690,650
                                )
                                
                                
                                (0.004
                                )Canceled
      or expired
                                
                                
                                (605,000
                                )
                                
                                
                                (0.004
                                )Outstanding
      at June 30, 2010:
                                
                                
                                643,931,168
                                
                                
                                $
                                0.00539





On
January 14, 2010, the Company granted options to purchase 22,500,000 shares of
the Company’s common stock to directors. The option grants as approved by the
Compensation Committee were fully vested when issued and the exercise price is
$0.028 per share for five years.





The fair
value for these awards was estimated using the Black-Scholes option pricing
model with the following weighted average assumptions, assuming no expected
dividends:





F-13




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
8 – WARRANTS AND OPTIONS (continued)





Expected
      life (years)
                  
                  
                  5Expected
      volatility
                  
                  
                  363.22
                  %Risk-free
      interest rate
                  
                  
                  2.51
                  %Dividend
      yield
                  
                  
                  —
                  %




The
aggregate fair value of vesting options of $1,378,499 was charged to current
period operations for the six months ended June 30, 2010.





NOTE
9 — FAIR VALUE





ASC
825-10 defines fair value as the price that would be received from selling an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value
measurements for assets and liabilities required or permitted to be recorded at
fair value, the Company considers the principal or most advantageous market in
which it would transact and considers assumptions that market participants would
use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value
hierarchy that requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. ASC 825-10
establishes three levels of inputs that may be used to measure fair
value:





Level 1 -
Quoted prices in active markets for identical assets or
liabilities.





Level 2 -
Observable inputs other than Level 1 prices such as quoted prices for similar
assets or liabilities; quoted prices in markets with insufficient volume or
infrequent transactions (less active markets); or model-derived valuations in
which all significant inputs are observable or can be derived principally from
or corroborated by observable market data for substantially the full term of the
assets or liabilities.





Level 3 -
Unobservable inputs to the valuation methodology that are significant to the
measurement of fair value of assets or liabilities.




To the
extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more
judgment. In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value
measurement is disclosed is determined based on the lowest level input that is
significant to the fair value measurement.





Items
recorded or measured at fair value on a recurring basis in the accompanying
consolidated financial statements consisted of the following items as of
June 30, 2010:





June 30, 2010CarryingFinancial instruments
                      
                      Amount
                      
                      
                      Fair ValueCash
      and cash equivalents
                      
                      $
                      215,559
                      
                      
                      $
                      215,559Accounts
      receivable, net
                      
                      
                      507,590
                      
                      
                      
                      507,590Accounts
      payable and accrued liabilities
                      
                      
                      (472,044
                      )
                      
                      
                      (472,044
                      )$
                      251,105
                      
                      
                      $
                      251,105




F-14




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


JUNE
30, 2010





NOTE
9 — FAIR VALUE (continued)





For cash
and cash equivalents, accounts receivable, and accounts payable, the carrying
amount approximates fair value because of the relative short maturity of those
instruments.





The
Company adopted the provisions of ASC 825-10 prospectively effective as of the
beginning of Fiscal 2008.  For financial assets and liabilities
included within the scope of ASC 825-10, the Company was required to adopt the
provisions of ASC 825-10 prospectively as of the beginning of Fiscal
2009.  The adoption of ASC 825-10 did not have a material impact on
our consolidated financial position or results of operations.





NOTE
10 – SUBSEQUENT EVENTS





Subsequent
events have been evaluated through the date that the financial statements were
issued.





F-15




Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.





Forward
Looking Statements





This
quarterly report on Form 10-Q and other reports filed by the Company from time
to time with the United States Securities and Exchange Commission (the “SEC”)
contain or may contain forward-looking statements (collectively the “Filings”)
and information that are based upon beliefs of, and information currently
available to, the Company’s management as well as estimates and assumptions made
by Company’s management. Readers are cautioned not to place undue reliance on
these forward-looking statements, which are only predictions and speak only as
of the date hereof. When used in the filings, the words “anticipate”, “believe”,
“estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms
and similar expressions as they relate to the Company or the Company’s
management identify forward-looking statements. Such statements reflect the
current view of the Company with respect to future events and are subject to
risks, uncertainties, assumptions, and other factors, including the risks
contained in the “Risk Factors” section of the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2009 filed with the SEC, relating to
the Company’s industry, the Company’s operations and results of operations, and
any businesses that the Company may acquire. Should one or more of these risks
or uncertainties materialize, or should the underlying assumptions prove
incorrect, actual results may differ significantly from those anticipated,
believed, estimated, expected, intended, or planned.





Although
the Company believes that the expectations reflected in the forward-looking
statements are reasonable, the Company cannot guarantee future results, levels
of activity, performance, or achievements. Except as required by applicable law,
including the securities laws of the United States, the Company does not intend
to update any of the forward-looking statements to conform these statements to
actual results.




Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”). These accounting principles
require us to make certain estimates, judgments and assumptions. We believe that
the estimates, judgments and assumptions upon which we rely are reasonable based
upon information available to us at the time that these estimates, judgments and
assumptions are made. These estimates, judgments and assumptions can affect the
reported amounts of assets and liabilities as of the date of the financial
statements as well as the reported amounts of revenues and expenses during the
periods presented. Our financial statements would be affected to the extent
there are material differences between these estimates and actual results. In
many cases, the accounting treatment of a particular transaction is specifically
dictated by GAAP and does not require management’s judgment in its application.
There are also areas in which management’s judgment in selecting any available
alternative would not produce a materially different result.  The
following discussion should be read in conjunction with our consolidated
financial statements and notes thereto appearing elsewhere in this
report.





Results
of Operations





Three
Months Ended June 30, 2010 Compared to Three Months Ended June 30,
2009





Net
Revenue





Total
revenue for the quarter ended June 30, 2010 was $131,758 compared with $354,755
for the same period in 2009, a decrease of $222,997 or 63%.





Revenues
derived from the sale of consumables, component parts, service billings and
amortization of maintenance contracts decreased by $222,997 or 63% in the
current quarter to $131,758. We did not have revenues during the quarters ended
June 30, 2010 and 2009 attributable to contract revenues.  The
decrease in service billings was a result of fewer service calls required due to
equipment failure.  Service billings will continue to fluctuate period
to period based upon equipment failure, whether through operator error or wear
and tear, and pre-scheduled service activities such as equipment
relocation.  Service revenue attributable to contract revenues is
recognized at the time of performance and not at the time of contract
execution.




4




Gross
Profit




The gross
profit for the three months ended June 30, 2010, was $60,084 (45.6% of total
revenue) compared with a gross profit of $128,790 (36.3% of total revenue) for
the same three month period of 2009.





In this
period, our gross profit margins increased from 36.3% to 45.6%, or a 25.6%
increase.   By carefully managing the business we have been able
to ensure that we are invoicing for all services performed and therefore, we
have been able to increase our gross profit percentage from the comparable
period, last year.





The
components of costs of revenues for products include direct materials,
depreciation, shipping and rigging costs and contract labor primarily used to
install, repair and maintain our equipment.




Operating
Expenses




Total
operating expenses for the three months ended June 30, 2010, was $1,130,177
compared with $2,348,784 for the same three month period in 2009, a decrease of
$1,218,607. In the three months ended June 30, 2009, we recognized non-cash
equity based compensation to service providers and employees of $1,738,636 as
compared to $458,749 recorded as equity based compensation for the three months
ended June 30, 2010.




Interest
and Other Income





Interest
and other income for the three month period ended June 30, 2010, was $31,292
compared to $38 for the same period in 2009.  The increase is due to
the interest earned on our notes receivable entered into in the current
quarter.





Interest
expense





Interest
expense and amortization for the three month period ended June 30, 2010, was
$42,808 compared with $448,203 in the same three month period of 2009. During
the three months ended June 30, 2009, we recognized non-cash amortization
expense amounting to $444,984, compared to $36,398 in the same three month
period of 2010.




Net
Income (loss)




Net loss
for the three month period ended June 30, 2010, was $1,081,609, compared to
$2,668,159 for the same period in 2009.





Six
Months Ended June 30, 2010 Compared to Six Months Ended June 30,
2009





Net
Revenue





Total
revenue for the six months ended June 30, 2010 was $400,625 compared with
$772,182 for the same period in 2009, a decrease of $371,557 or
48.1%.





5




Revenues
derived from the sale of consumables, component parts, service billings and
amortization of maintenance contracts decreased by $371,557 or 48.1% in the
current quarter to $400,625. We did not have revenues during the quarters ended
June 30, 2010 and 2009 attributable to contract revenues.





Gross
Profit




The gross
profit for the six months ended June 30, 2010, was $163,498 (40.8% of total
revenue) compared with a gross profit of $273,145 (35.4% of total revenue) for
the same three month period of 2009.





In this
period, our gross profit margins increased from 35.4% to 40.8%, or a 13.2%
increase.   By carefully managing the business we have been able
to ensure that we are invoicing for all services performed and therefore, we
have been able to increase our gross profit percentage from the comparable
period, last year.





The
components of costs of revenues for products include direct materials,
depreciation, shipping and rigging costs and contract labor primarily used to
install, repair and maintain our equipment.




Operating
Expenses




Total
operating expenses for the six months ended June 30, 2010, was $2,816,004
compared with $3,929,274 for the same three month period in 2009, a decrease of
$1,113,270. In the six months ended June 30, 2009, we recognized non-cash equity
based compensation to service providers and employees of $3,278,155 as compared
to $1,541,079 recorded as equity based compensation for the three months ended
June 30, 2010.




Interest
and Other Income





Interest
and other income for the six month period ended June 30, 2010, was $31,526
compared to $944 for the same period in 2009.  The increase is due to
the interest earned on our notes receivable entered into in the current
quarter.





Interest
expense





Interest
expense and amortization for the six month period ended June 30, 2010, was
$45,733 compared with $896,700 in the same three month period of 2009. During
the six months ended June 30, 2009, we recognized non-cash amortization expense
amounting to $889,967, compared to $36,398 in the same three month period of
2010.




Net
Income (loss)




Net loss
for the six month period ended June 30, 2010, was $2,666,713, compared to
$4,551,885 for the same period in 2009.





6





Liquidity
and Capital Resources





The
Company’s cash on hand and working capital as of June 30, 2010, and December 31,
2009, are as follows:




June 30,
                  
                  
                  December 31,2010
                  
                  
                  2009Cash
      on hand
                  
                  $
                  215,559
                  
                  
                  $
                  534,425Working
      capital (deficit)
                  
                  $
                  (673,148
                  )
                  
                  $
                  (229,469
                  )




The
Company purchased $5,569 in new fixed assets during the six month period ended
June 30, 2010. Under current conditions, the Company anticipates purchasing
approximately $10,000 in additional fixed assets in 2010. Net cash used in
operating activities totaled $944,458 for the six months ended June 30,
2010.





Our
accounts receivable balance may have dramatic swings from one period to
another depending upon the timing and the amount of milestone billings
included in the balance at the end of any accounting period. There are
three milestone billings representing a percentage of the contract value
for each installment and our payment terms are “upon receipt.” Receivable
balances are typically paid within 15 days of the invoice date. Billings
for maintenance contracts and consumables are due within 45 days and are
more numerous but much smaller in value than milestone billings. We review
our outstanding receivable balances on a regular basis to ensure that the
allowance for bad debt is adequate.   Due to the varying nature in the
timing and amounts of the receivable balances as noted above, the change in
the allowance for doubtful account will not necessarily correlate with the
increase or decrease in the accounts receivable balance. The accounts receivable
balance as of June 30, 2010, was $507,590 net of an allowance of $24,693, an
increase of $363,473 from year ended December 31, 2009.





Our
inventory balance may have dramatic swings from one period to another
depending upon the expected installation date of our MedClean systems and our
accounts payable balances can have similar swings depending on payment
terms and any volume purchases or discounts we may take advantage of from
time to time. During the six months ended June 30, 2010, the Company decreased
its inventory on hand by $43,991 to $771,643.





During
the six months ended June 30, 2010, we issued an aggregate of $1,200,000 in
exchange for notes receivable, of which, we have collected a total of $500,000
to assist us in meeting our cash needs.





To
supplement its cash resources, the Company has been pursuing a number of
alternative financing arrangements with various investment entities. We are
currently looking to secure additional working capital to provide the necessary
funds for us to execute our business plan through various sources, including
bank facilities, bridge loans and equity offerings. However, we continue to
incur significant operating losses and the resultant reduction of our cash
position.  We cannot assure that we will be able to obtain additional
funding, and the lack thereof would have a material adverse impact on our
business.  Moreover, any equity funding could be substantially
dilutive to existing stockholders. The aforementioned factors raise substantial
doubt about our ability to continue as a going concern. In the event the Company
is unable to continue as a going concern it may pursue a number of different
options, including, but not limited to, filing for protection under the federal
bankruptcy code.





Item
3. Quantitative and Qualitative Disclosures about Market Risk.





We do not
hold any derivative instruments and do not engage in any hedging
activities.





7




Item
4. Controls and Procedures





(a) Evaluation of Disclosure Controls
and Procedures.Our Chief Executive Officer and Chief Financial Officer
evaluated the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this report. Based on that evaluation, our Chief
Executive and Chief Financial Officer concluded that our disclosure controls and
procedures as of the end of the period covered by this report were effective
such that the information required to be disclosed by us in reports filed under
the Exchange Act is (i) recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms and (ii) accumulated and
communicated to our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding disclosure. A controls system
cannot provide absolute assurance, however, that the objectives of the controls
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected.





Our Chief
Executive Officer and Chief Financial Officer are responsible for
establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their control
objectives. Furthermore, smaller reporting companies face additional
limitations.  Smaller reporting companies employ fewer individuals and find
it difficult to properly segregate duties.  Often, one or two individuals
control every aspect of the Company's operation and are in a position to
override any system of internal control.  Additionally, smaller reporting
companies tend to utilize general accounting software packages that lack a
rigorous set of software controls.





Our Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of the
Company's internal control over financial reporting as of June 30, 2010. In
making this assessment, our Chief Executive Officer and Chief Financial
Officer used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control - Integrated
Framework.  Based on this evaluation, Our Chief Executive Officer and Chief
Financial Officer concluded that, as of June 30, 2010, our internal control over
financial reporting was effective.




(b) Changes in Internal Control over
Financial Reporting.There were no changes in our internal control
over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act, during our most recently completed fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.





PART
II—OTHER INFORMATION





Item
1. Legal Proceedings.





We are
currently not involved in any litigation that we believe could have a material
adverse effect on our financial condition or results of operations. There is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our common stock, any
of our subsidiaries or of our companies or our subsidiaries’ officers or
directors in their capacities as such, in which an adverse decision could have a
material adverse effect.




8




Item
1A. Risk Factors.





There
have been no material changes from the risk factors previously disclosed in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009
filed with the SEC on March 3, 2010.








Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.





There
were no unregistered sales of the Company’s equity securities during the quarter
ended June 30, 2010 that were not otherwise disclosed on a Form
8-K.





Item
3. Defaults upon Senior Securities.





There has
been no default in the payment of principal, interest, sinking or purchase fund
installment, or any other material default not cured within 30 days, with
respect to any indebtedness of the Company.





Item
4. (Removed and Reserved).





Item
5. Other Information.





None.





Item
6. Exhibits.





ExhibitNo.
              
              Description31.1*
              
              Certification
      by the Principal Executive Officer of Registrant pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule
      15d-14(a)).31.2*
              
              Certification
      by the Principal Financial Officer of Registrant pursuant to Section 302
      of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule
      15d-14(a)).32.1*
              
              Certification
      by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2*
              
              Certification
      by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.


* Filed
herewith




9




SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





MEDCLEAN
      TECHNOLOGIES, INC.Date:
      August XX, 2010
                            By:
      /s/ David
      LakyName:
      David LakyTitle:
      Chief Executive Officer and Principal
  ExecutiveOfficerDate:
      August XX, 2010
                            By:
      /s/ Cheryl K.
      SadowskiName:
      Cheryl K. SadowskiTitle:
      Chief Financial Officer and Principal
  FinancialOfficer





10