UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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





For the
quarterly period ended: September 30,
2010




or





 ̈
TRANSITION 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)




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 x   No
 ̈





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  ̈   No
 ̈





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:





 ̈
                Large
      Accelerated Filer
                 ̈
                Accelerated
      Filer ̈
                Non-Accelerated
      Filer
                x
                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  ̈   No
x





As
of November 12, 2010, there were 809,743,450 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
                7PART
      II—OTHER INFORMATIONItem
      1. Legal Proceedings
                9Item1A.
      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 SEPTEMBER 30, 2010 (UNAUDITED) AND
      DECEMBER 31, 2009
                  F-1UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE
      MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
                  F-2UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
      SEPTEMBER 30, 2010 AND 2009
                  F-3NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  F-4





3







MEDCLEAN
      TECHNOLOGIES, INC.CONDENSED
      CONSOLIDATED BALANCE SHEETS  September
      30,
                                
                                
                                December
      31,2010
                                
                                
                                2009(unaudited)ASSETSCurrent
      assetsCash
                                
                                $
                                112,529
                                
                                
                                $
                                534,425Accounts
      receivable, net of $24,693 allowance
                                
                                
                                493,506
                                
                                
                                
                                144,117Revenues
      in excess of billings
                                
                                
                                7,679
                                
                                
                                
                                7,679Inventory
                                
                                
                                793,145
                                
                                
                                
                                815,634Prepaid
      expenses
                                
                                
                                81,478
                                
                                
                                
                                32,646Total
      current assets:
                                
                                
                                1,488,337
                                
                                
                                
                                1,534,501Property,
      plant and equipment, net
                                
                                
                                146,841
                                
                                
                                
                                212,801Other
      assets:Deposits
                                
                                
                                32,808
                                
                                
                                
                                32,808Total
      assets
                                
                                $
                                1,667,986
                                
                                
                                
                                1,780,110LIABILITIES
      AND STOCKHOLDERS' (DEFICIT) EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
                                
                                $
                                560,037
                                
                                
                                $
                                253,742Payroll
      liabilities
                                
                                
                                396,336
                                
                                
                                
                                401,408Deferred
      revenue
                                
                                
                                82,814
                                
                                
                                
                                236,500Billings
      in excess of revenue
                                
                                
                                805,041
                                
                                
                                
                                657,673Notes
      payable
                                
                                
                                223,422
                                
                                
                                
                                214,647Total
      current liabilities:
                                
                                
                                2,067,650
                                
                                
                                
                                1,763,970Long
      term debt:Convertible
      notes, net of debt discount of $309,373
                                
                                
                                190,627
                                
                                
                                
                                -Total
      liabilities
                                
                                
                                2,258,277
                                
                                
                                
                                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; 764,496,874 and
      675,478,445 shares issued and outstanding as of September 30, 2010 and
      December 31, 2009, respectively
                                
                                
                                76,450
                                
                                
                                
                                67,548Additional
      paid in capital
                                
                                
                                28,219,888
                                
                                
                                
                                25,411,906Accumulated
      deficit
                                
                                
                                (28,886,629
                                )
                                
                                
                                (25,463,314
                                )Total
      stockholders' (deficit) equity:
                                
                                
                                (590,291
                                )
                                
                                
                                16,140Total
      liabilities and stockholders' (deficit) equity
                                
                                $
                                1,667,986
                                
                                
                                $
                                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 September 30,
                          
                          
                          Nine
      months ended September 30,2010
                          
                          
                          2009
                          
                          
                          2010
                          
                          
                          2009RevenuesContract
      revenue earned
                          
                          $
                          -
                          
                          
                          $
                          1,229,361
                          
                          
                          $
                          -
                          
                          
                          $
                          1,229,361Sales
      and service revenues
                          
                          
                          306,825
                          
                          
                          
                          326,931
                          
                          
                          
                          707,450
                          
                          
                          
                          1,099,113Total
      revenues
                          
                          
                          306,825
                          
                          
                          
                          1,556,292
                          
                          
                          
                          707,450
                          
                          
                          
                          2,328,474Cost
      of sales
                          
                          
                          53,084
                          
                          
                          
                          642,043
                          
                          
                          
                          290,211
                          
                          
                          
                          1,141,080Gross
      profit
                          
                          
                          253,741
                          
                          
                          
                          914,249
                          
                          
                          
                          417,239
                          
                          
                          
                          1,187,394Operating
      expensesSalaries
      and wages
                          
                          
                          550,832
                          
                          
                          
                          250,768
                          
                          
                          
                          2,313,563
                          
                          
                          
                          3,314,347General
      and administrative expenses
                          
                          
                          398,943
                          
                          
                          
                          299,811
                          
                          
                          
                          1,407,286
                          
                          
                          
                          1,121,347Depreciation
                          
                          
                          22,523
                          
                          
                          
                          20,998
                          
                          
                          
                          67,453
                          
                          
                          
                          65,157Total
      operating expenses
                          
                          
                          972,298
                          
                          
                          
                          571,577
                          
                          
                          
                          3,788,302
                          
                          
                          
                          4,500,851(Loss)
      income from operations
                          
                          
                          (718,557
                          )
                          
                          
                          342,672
                          
                          
                          
                          (3,371,063
                          )
                          
                          
                          (3,313,457
                          )Other
      income and expensesInterest
      and other income
                          
                          
                          41
                          
                          
                          
                          -
                          
                          
                          
                          345
                          
                          
                          
                          944Interest
      expense
                          
                          
                          (35,165
                          )
                          
                          
                          (3,366
                          )
                          
                          
                          (52,597
                          )
                          
                          
                          (900,066
                          )Net
      (Loss) Income before income taxes
                          
                          
                          (753,682
                          )
                          
                          
                          339,306
                          
                          
                          
                          (3,423,315
                          )
                          
                          
                          (4,212,579
                          )Provision
      for income taxes (benefit)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Net
      (Loss) Income
                          
                          $
                          (753,682
                          )
                          
                          $
                          339,306
                          
                          
                          $
                          (3,423,315
                          )
                          
                          $
                          (4,212,579
                          )(Loss)
      income per common share, basic
                          
                          $
                          (0.00
                          )
                          
                          $
                          0.00
                          
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.01
                          )(Loss)
      income per common share, basic
                          
                          $
                          (0.00
                          )
                          
                          $
                          0.00
                          
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.01
                          )Weighted
      average common shares outstanding, basic
                          
                          
                          727,746,491
                          
                          
                          
                          561,542,968
                          
                          
                          
                          705,264,662
                          
                          
                          
                          561,542,968Weighted
      average common shares outstanding, fully diluted
                          
                          
                          727,746,491
                          
                          
                          
                          561,542,968
                          
                          
                          
                          705,264,662
                          
                          
                          
                          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)  Nine
      months ended September 30,2010
                          
                          
                          2009Cash
      flows from operating activities:Net
      loss
                          
                          $
                          (3,423,315
                          )
                          
                          $
                          (4,212,579
                          )Adjustments
      to reconcile net loss to net cash used in operating
    activitiesDepreciation
                          
                          
                          71,529
                          
                          
                          
                          65,157Amortization
      of debt discount
                          
                          
                          43,822
                          
                          
                          
                          -Fair
      value of common stock, options and warrants issued for services
      rendered
                          
                          
                          1,943,064
                          
                          
                          
                          3,313,579(Increase)
      decrease in:Accounts
      receivable
                          
                          
                          (349,389
                          )
                          
                          
                          (89,525
                          )Inventory
                          
                          
                          22,489
                          
                          
                          
                          47,813Prepaid
      expenses
                          
                          
                          (48,832
                          )
                          
                          
                          (17,792
                          )Increase
      (decrease) in:Accounts
      payable
                          
                          
                          315,070
                          
                          
                          
                          (549,604
                          )Payroll
      liabilities
                          
                          
                          (5,072
                          )
                          
                          
                          -Deferred
      revenue
                          
                          
                          (153,686
                          )
                          
                          
                          93,957Billings
      in excess of revenue
                          
                          
                          147,368
                          
                          
                          
                          (1,966
                          )Deposits
      payable
                          
                          
                          -
                          
                          
                          
                          (298,908
                          )Net
      cash used in operating activities
                          
                          
                          (1,436,952
                          )
                          
                          
                          (1,649,868
                          )Cash
      flows from investing activities:Purchase
      of equipment
                          
                          
                          (5,569
                          )
                          
                          
                          (23,308
                          )Net
      cash used in investing activities
                          
                          
                          (5,569
                          )
                          
                          
                          (23,308
                          )Cash
      flows from financing activities:Proceeds
      from issuance of put agreements
                          
                          
                          300,000
                          
                          
                          
                          -Proceeds
      from exercise of warrants
                          
                          
                          220,625
                          
                          
                          
                          -Proceeds
      from issuance of convertible notes
                          
                          
                          500,000
                          
                          
                          
                          -Net
      cash provided by financing activities
                          
                          
                          1,020,625
                          
                          
                          
                          -(Decrease)
      increase in cash and cash equivalents
                          
                          
                          (421,896
                          )
                          
                          
                          (1,673,176
                          )Cash
      and cash equivalents, beginning of period
                          
                          
                          534,425
                          
                          
                          
                          1,922,401Cash
      and cash equivalents, end of period
                          
                          $
                          112,529
                          
                          
                          $
                          249,225Supplemental
      disclosures of cash flow information:Cash
      paid during the period for:Interest
                          
                          $
                          1,198
                          
                          
                          $
                          1,324Taxes
                          
                          $
                          -
                          
                          
                          $
                          -






See the
accompanying notes to these condensed consolidated financial
statements


F-3




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
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 nine-month
period ended September 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 U.S.
Securities and Exchange Commission (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 September 30, 2010 and December 31,
2009, respectfully.





F-4





MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
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
September 30, 2010 and December 31, 2009 the Company had $82,814 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 September 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


SEPTEMBER
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


SEPTEMBER
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 471,000,000 shares of common stock during the nine-month period
ended September 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 September
30, 2010 and December 31, 2009:





September 30,
                  2010
                
                
                December 31,
                  2009Component
      & spare parts
                
                $
                756,444
                
                
                $
                767,325Consumables
                
                
                36,701
                
                
                
                30,980Advance
      payments
                
                
                
                
                
                17,329Total
      inventory
                
                $
                793,145
                
                
                $
                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 September
30, 2010 and December 31, 2009:





September 30,
                  2010
                
                
                December 31,
                  2009Office
      Furniture
                
                $
                170,095
                
                
                $
                164,525Computers
      and Accessories
                
                
                208,801
                
                
                
                208,801Leasehold
      Improvements
                
                
                135,380
                
                
                
                135,380Total
      property, plant and equipment
                
                
                514,276
                
                
                
                508,706Accumulated
      Depreciation
                
                
                367,435
                
                
                
                295,905$
                146,841
                
                
                $
                212,801





During
the three and nine-month periods ended September 30, 2010, depreciation expense
charged to operations was $23,827 and $71,529, respectively, of which $1,304 and
$4,076 was included as part of cost of goods sold, respectively.




F-7





MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
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 nine-month  periods ending September 30, 2010 and 2009
amounting to 887,342,295 and 619,096,836 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:





Nine months ended September 30,
                            
                            
                            Three months ended September 30,2010
                            
                            
                            2009
                            
                            
                            2010
                            
                            
                            2009NUMERATOR
      FOR BASIC AND DILUTED EPS (LPS)Net
      loss (income) per statement of operations
                            
                            $
                            (3,423,315
                            )
                            
                            $
                            (4,212,579
                            )
                            
                            $
                            (753,681
                            )
                            
                            $
                            (339,306
                            )DENOMINATOR
      FOR BASIC AND DILUTED EPS (LPS)Weighted
      average shares of common stock outstanding-Basic
                            
                            
                            705,264,662
                            
                            
                            
                            561,542,968
                            
                            
                            
                            727,746,491
                            
                            
                            
                            561,542,968Basic
      EPS (LPS)
                            
                            $
                            (0.01
                            )
                            
                            $
                            (0.00
                            )
                            
                            $
                            (0.00
                            )
                            
                            $
                            (0.00
                            )Weighted
      average shares of common stock outstanding-Fully diluted
                            
                            705,264,662
                            
                            
                            561,542,968
                            
                            
                            727,746,491
                            
                            
                            
                            561,542,968Fully
      diluted EPS (LPS)
                            
                            $
                            (0.01
                            )
                            
                            $
                            (0.00
                            )
                            
                            $
                            (0.00
                            )
                            
                            $
                            (0.00
                            )





Recent Accounting
Pronouncements




Accounting
Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”)
requires disclosure of the fair value of certain financial instruments. The
carrying amount reported in the consolidated condensed balance sheets for
accounts receivables, accounts payable and accrued expenses and put liability
approximates fair value because of the immediate or short-term maturity of these
financial instruments. The carrying amount reported in the accompanying
condensed consolidated balance sheets for line of credit approximates fair value
because the actual interest rates do not significantly differ from current rates
offered for instruments with similar characteristics.




We use
fair value measurements to record fair value adjustments to certain assets and
to determine fair value disclosures. Cash, short term investment, warrants and
reset derivatives are recorded at fair value on a recurring basis. In accordance
with Accounting Standards Codification Topic 820,Fair Value Measurements and
Disclosures (“ASC 820”), we group our assets at fair value in three
levels, based on the markets in which the assets are traded and the reliability
of the assumptions used to determine fair value.





F-8




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Recent Accounting
Pronouncements (continued)





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.





In March
2010, the FASB issued new accounting guidance, under ASC Topic 605 on Revenue
Recognition.  This standard provides that the milestone method
is a valid application of the proportional performance model for revenue
recognition if the milestones are substantive and there is substantive
uncertainty about whether the milestones will be
achieved.  Determining whether a milestone is substantive requires
judgment that should be made at the inception of the arrangement.  To
meet the definition of a substantive milestone, the consideration earned by
achieving the milestone (1) would have to be commensurate with either the level
of effort required to achieve the milestone or the enhancement in the value of
the item delivered, (2) would have to relate solely to past performance, and (3)
should be reasonable relative to all deliverables and payment terms in the
arrangement.  No bifurcation of an individual milestone is allowed and
there can be more than one milestone in an arrangement.  The standard
is effective for interim and annual periods beginning on or after June 15,
2010.  The Company is currently evaluating the impact the adoption of
this guidance will have on its financial statements.





In
February 2010, the FASB issued ASU No. 2010-09, which updates the
guidance in ASC 855, Subsequent Events, such that
companies that file with the SEC will no longer be required to indicate the date
through which they have analyzed subsequent events. This updated guidance became
effective immediately upon issuance and was adopted as of the first quarter of
2010.





In
January 2010 the FASB issued Update No. 2010-06 Fair Value Measurements and
Disclosures—Improving Disclosures about Fair Value Measurements
(“2010-06”). 2010-06 requires new disclosures regarding significant transfers
between Level 1 and Level 2 fair value measurements, and disclosures regarding
purchases, sales, issuances and settlements, on a gross basis, for Level 3 fair
value measurements. 2010-06 also calls for further disaggregation of all assets
and liabilities based on line items shown in the statement of financial
position. This amendment is effective for fiscal years beginning after December
15, 2010 and interim periods within those fiscal years. The Company is currently
evaluating whether adoption of this standard will have a material impact on its
financial position, results of operations or cash flows.





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.





F-9




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





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
$112,529 at September 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.





NOTE
3 – CONTRACTS IN PROCESS





The
Company entered into construction type contracts to furnish and install its
systems in hospitals. There were five outstanding contracts at September 30,
2010 and four outstanding contracts at 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 September 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
                          
                          
                          
                          -
                          
                          
                          
                          51,332750,000
                          
                          
                          
                          -
                          
                          
                          
                          375,000
                          
                          
                          
                          -
                          
                          
                          
                          375,000445,200
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -$
                          3,041,416
                          
                          
                          
                          1,142,507
                          (1)
                          
                          $
                          1,939,869
                          
                          
                          $
                          7,679
                          
                          
                          $
                          805,041
                          (2)Outstanding
      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.





F-10




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010








NOTE 4
– 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 September 30, 2010 and December 31, 2009 the balance
due was $214,647 and $214,647 respectively.





NOTE 5
– LINE OF CREDIT





On August
5, 2010, the Company and Southridge Partners II, LP (“Southridge”)
entered into an Equity Credit Agreement (the “Equity Credit Agreement”).
Pursuant to the Agreement, Southridge has agreed to provide the Company with up
to $15,000,000 of funding during the 36-month period following the date a
registration statement of the Company’s common stock is declared effective by
the SEC (the “Equity Line”).  During this 36-month period, commencing
on the date on which the SEC first declares effective our registration
statement, the Company may request a draw down under the Equity Line by which
the Company would sell shares of its common stock to Southridge, which is
obligated to purchase the shares under the Equity Line Agreement. For each share
of our common stock purchased under the Equity Credit Agreement, Southridge will
pay ninety-five percent (95%) of the average of two lowest closing bid price of
any two applicable trading days, consecutive or inconsecutive, during the five
(5) trading day period (the “Valuation Period”) commencing the date a put notice
(the “Put Notice”) is delivered to Southridge in a manner provided by the Equity
Credit Agreement.  Subject to certain limitations and floor price
reductions, the Company may, at its sole discretion, issue a Put Notice to
Southridge and Southridge will then be irrevocably bound to acquire such
shares.





During
the nine months ended September 30, 2010, the Company “put” 32,145,841 shares of
common stock for $300,000.





NOTE 6
– CONVERTIBLE NOTES





On April
1, 2010, the Company issued a $600,000 Convertible Promissory Note that matures
March 31, 2013 in exchange for a promissory note receivable. The Promissory Note
bears 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.
 
 For
presentation purposes, the Company offset the unpaid promissory note receivable
against the carrying value of the Convertible Promissory Note.
 
 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 reporting carrying value of 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 $303,195 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
nine months ended September 30, 2010, the Company amortized the debt discount
and charged $39,529 to interest expense.




F-11





MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





NOTE 6
– CONVERTIBLE NOTES (continued)





As of
September 30, 2010, $450,000 has been has been received on the related note
receivable.
 
 On June
14, 2010, the Company issued a $600,000 Convertible Promissory Note that matures
June 13, 2013 in exchange for a promissory note receivable. The Promissory Note
bears 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.
 
 For
presentation purposes, the Company offset the unpaid promissory note receivable
against the carrying value of the Convertible Promissory Note.
 
 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 reporting carrying value of 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 $50,000 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
nine months ended September 30, 2010, the Company amortized the debt discount
and charged $4,292 to interest expense.
  As of
September 30, 2010, $50,000 has been received on the related note
receivable.




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
September 30, 2010 and December 31, 2009, the Company has 764,496,874 and
675,478,445 shares of common stock and no preferred stock issued and
outstanding, respectively.




During
the nine month period ended September 30, 2010, the Company issued an aggregate
of 16,000,000 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.




F-12





MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





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 September 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
                        
                        
                        
                        2.83
                        
                        
                        $
                        0.0040
                        
                        
                        
                        28,000,000
                        
                        
                        $
                        0.00400.0075
                        
                        
                        
                        69,530,571
                        
                        
                        
                        2.84
                        
                        
                        
                        0.0075
                        
                        
                        
                        69,530,571
                        
                        
                        
                        0.00750.0250
                        
                        
                        
                        28,000,000
                        
                        
                        
                        2.84
                        
                        
                        
                        0.0250
                        
                        
                        
                        28,000,000
                        
                        
                        
                        0.02500.0900
                        
                        
                        
                        600,000
                        
                        
                        
                        2.46
                        
                        
                        
                        0.0900
                        
                        
                        
                        600,000
                        
                        
                        
                        0.09000.2400
                        
                        
                        
                        100,000
                        
                        
                        
                        1.74
                        
                        
                        
                        0.2400
                        
                        
                        
                        100,000
                        
                        
                        
                        0.24000.3788
                        
                        
                        
                        2,204,386
                        
                        
                        
                        0.31
                        
                        
                        
                        0.3788
                        
                        
                        
                        2,204,386
                        
                        
                        
                        0.3788Total
                        
                        
                        
                        128,434,957
                        
                        
                        
                        2.77
                        
                        
                        $
                        0.0172
                        
                        
                        
                        128,434,957
                        
                        
                        $
                        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
                
                
                (27,025,601
                )
                
                
                (0.0064
                )Canceled
      or expired
                
                
                (1,436,000
                )
                
                
                (0.08
                )Outstanding
      at September 30, 2010
                
                
                128,434,957
                
                
                $
                0.0172




During
the nine month period ended September 30, 2010, the Company issued an aggregate
of 26,181,935 shares of common stock in exchange for the exercise of 27,025,601
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.





F-13




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





NOTE 8
– WARRANTS AND OPTIONS (continued)





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 September 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
                        
                        
                        
                        528,547,634
                        
                        
                        
                        3.63
                        
                        
                        $
                        0.00400
                        
                        
                        
                        513,926,867
                        
                        
                        $
                        0.004000.00844
                        
                        
                        
                        80,883,534
                        
                        
                        
                        5.11
                        
                        
                        $
                        0.00844
                        
                        
                        
                        26,961,178
                        
                        
                        
                        0.008440.02800
                        
                        
                        
                        22,500,000
                        
                        
                        
                        4.29
                        
                        
                        
                        0.02800
                        
                        
                        
                        22,500,000
                        
                        
                        
                        0.028Total
                        
                        
                        
                        631,931,168
                        
                        
                        
                        384
                        
                        
                        $
                        0.00539
                        
                        
                        
                        563,388,045
                        
                        
                        $
                        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
                      
                      
                      (14,690,650
                      )
                      
                      
                      (0.004
                      )Canceled
      or expired
                      
                      
                      (605,000
                      )
                      
                      
                      (0.004
                      )Outstanding
      at September 30, 2010:
                      
                      
                      631,931,168
                      
                      
                      $
                      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:





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




The
aggregate fair value of vesting options of $1,715,425 was charged to current
period operations for the nine months ended September 30, 2010.





F-14




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
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
September 30, 2010:





September 30, 2010CarryingFinancial instruments
                    
                    Amount
                    
                    
                    Fair ValueCash
      and cash equivalents
                    
                    $
                    112,529
                    
                    
                    $
                    215,559Accounts
      payable and accrued liabilities
                    
                    
                    (559,814
                    )
                    
                    
                    (472,044
                    )$
                    447,285
                    
                    
                    $
                    256,485




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.





F-15




MEDCLEAN
TECHNOLOGIES, INC.


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2010





NOTE
10 – SUBSEQUENT EVENTS





Subsequent
events have been evaluated through the date that the financial statements were
issued and determined no reported event occurred.




F-16




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 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.




4




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





Net
Revenue





Total
revenue for the quarter ended September 30, 2010 was $306,825 compared with
$1,556,292 for the same period in 2009, a decrease of $1,249,467 or
80.1%.





Revenues
derived from the sale of consumables, component parts, service billings and
amortization of maintenance contracts decreased by $20,106 or 6.1% in the
current quarter to $306,825. We did not have recognizable contract revenues
during the quarter ended September 30, 2010.  In 2009, we completed a
contract totaling $1,229,361.  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.




Gross
Profit




The gross
profit for the three months ended September 30, 2010, was $253,741 (82.8% of
total revenue) compared with a gross profit of $914,249 (58.7% of total revenue)
for the same three month period of 2009.





In this
period, our gross profit margins increased from 58.7% to 82.7%, or a 40.9%
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 September 30, 2010, was $972,298
compared with $571,577 for the same three month period in 2009, an increase of
$400,720. In the three months ended September 30, 2010, we recognized non-cash
equity based compensation to service providers and employees of $336,926 as
compared to $35,424 recorded as equity based compensation for the three months
ended September 30, 2010.




Interest
and Other Income





Interest
and other income for the three month period ended September 30, 2010, was $41
compared to $-0- for the same period in 2009.




Interest
expense





Interest
expense and amortization for the three month period ended September 30, 2010,
was $35,165 compared with $3,366 in the same three month period of 2009. During
the three months ended September 30, 2010, we recognized non-cash amortization
expense amounting to $29,675, compared to $-0- in the same three month period of
2009.




5




Net
Income (loss)




Net loss
for the three month period ended September 30, 2010, was $753,681, compared to a
profit of $339,306 for the same period in 2009.





Nine
Months Ended September 30, 2010 Compared to Nine Months Ended September 30,
2009





Net
Revenue





Total
revenue for the nine months ended September 30, 2010 was $707,450 compared with
$2,328,474 for the same period in 2009, a decrease of $1,621,024 or
69.6%.





Revenues
derived from the sale of consumables, component parts, service billings and
amortization of maintenance contracts decreased by $391,663 or 35.6% in
the first nine month period to $707,450.  We did not have
recognizable contract revenues during the quarter ended September 30,
2010.  In 2009, we completed contracts totaling
$1,229,361.





Gross
Profit




The gross
profit for the nine months ended September 30, 2010, was $417,239 (59.0% of
total revenue) compared with a gross profit of $1,187,394 (51.0% of total
revenue) for the same nine month period of 2009.





In this
period, our gross profit margins increased from 51.0% to 59.0%, or a 15.7%
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 nine months ended September 30, 2010, was $3,788,302
compared with $4,500,851 for the same three month period in 2009, a decrease of
$712,549. In the nine months ended September 30, 2009, we recognized non-cash
equity based compensation to service providers and employees of $3,313,579 as
compared to $1,715,415 recorded as equity based compensation for the nine months
ended September 30, 2010.




Interest
and Other Income





Interest
and other income for the nine month period ended September 30, 2010, was $345
compared to $944 for the same period in 2009.





Interest
expense





Interest
expense and amortization for the nine month period ended September 30, 2010, was
$52,597 compared with $900,066 in the same nine month period of 2009. During the
nine months ended September 30, 2009, we recognized non-cash amortization
expense amounting to $889,967, compared to $43,822 in the same three month
period of 2010.




Net
Income (loss)




Net loss
for the nine month period ended September 30, 2010, was $3,423,315, compared to
$4,212,579 for the same period in 2009.





6




Liquidity
and Capital Resources





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




September 30,
                  
                  
                  December 31,2010
                  
                  
                  2009Cash
      on hand
                  
                  $
                  112,529
                  
                  
                  $
                  534,425Working
      capital (deficit)
                  
                  $
                  (579,313
                  )
                  
                  $
                  (229,469
                  )




The
Company purchased $5,569 in new fixed assets during the nine month period ended
September 30, 2010. Under current conditions, the Company anticipates purchasing
approximately $5,000 in additional fixed assets in 2010. Net cash used in
operating activities totaled $1,436,952 for the nine months ended September 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 September 30, 2010, was $493,506 net of an allowance of $24,693,
an increase of $349,389 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 nine months ended September 30, 2010, the Company
decreased its inventory on hand by $22,489 to $793,145.





During
the nine months ended September 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.  In addition, we
received $300,000 from our equity line of credit whereby we issued an aggregate
of 32,145,841 shares of our common stock as part of the put
agreement.





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.





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.





7




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 September 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 September 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.




8




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.




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 September 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.





Exhibit
                No.
              
              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:
      November 15, 2010
                      By:
                      /s/
      David LakyName:
      David LakyTitle:
      Chief Executive Officer and Principal Executive
                        OfficerDate:
      November 15, 2010
                      By:
                      /s/
      Cheryl K. SadowskiName:
      Cheryl K. SadowskiTitle:
      Chief Financial Officer and Principal Accounting
                        Officer




10