SECURITIES AND EXCHANGE
COMMISSION

Washington, D. C. 20549

FORM 10-QSB

| |  | QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For
the quarterly period ended March 31, 2007
| |  | ------------------------------------------------------------------------------------------------------------------------------

| | 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 0-9040
| | -----------------------------

DRYCLEAN USA, Inc.
(Exact name of small business issuer as specified in its charter)

|DELAWARE                                                       | 11-2014231                          
|-------------------------------------------------------------- | ------------------------------------
|(State of other jurisdiction of
incorporation or organization) | (I.R.S. Employer
Identification No.)

290 N.E. 68 Street, Miami, Florida 33138
(Address of principal executive offices)

(305) 754-4551
(Issuers telephone number)

Not Applicable
(Former name)

Check
whether the issuer:  (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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   No .

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

State
the number of shares outstanding of each of the issuers classes of common equity as
of the latest practicable date: Common Stock, $.025 par value per share  7,034,307
shares outstanding as of May 10, 2007.

Transitional
Small Business Disclosure Format:  Yes
 No

---

# PART 1.   FINANCIAL
INFORMATION

# Item 1.   Financial
Statements

DRYCLEAN USA, Inc. 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

|                                                         
|---------------------------------------------------------
|                                                         
|                                                         
|                                                         
|                                                         
|Net sales                                                
|Development fees, franchise and license fees, commissions
|and other                                                
|                                                         
|Total revenues                                           
|                                                         
|Cost of goods sold                                       
|Selling, general and administrative expenses             
|Research and development                                 
|                                                         
|Total operating expenses                                 
|                                                         
|                                                         
|Operating income                                         
|Interest income                                          
|                                                         
|                                                         
|Earnings before taxes                                    
|Provision for income taxes                               
|                                                         
|Net earnings                                             
|                                                         
|                                                         
|                                                         
|                                                         
|Basic and diluted earnings per share                     
|                                                         
|                                                         
|Weighted average number of shares                        
|Basic                                                    
|Diluted                                                  
|                                                         

See Notes to
Condensed Consolidated Financial Statements

2

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DRYCLEAN USA, Inc. 
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

|                                                      
|------------------------------------------------------
|                                                      
|                                                      
|                                                      
|Current Assets                                        
|Cash and cash equivalents                             
|Accounts and trade notes receivable, net              
|Inventories                                           
|Deferred income taxes                                 
|Other assets, net                                     
|                                                      
|Total current assets                                  
|Equipment and improvements - net of                   
|accumulated depreciation and amortization             
|Franchise, trademarks and other intangible assets, net
|Deferred tax asset                                    
|                                                      
|                                                      
|                                                      
|                                                      

See Notes to
Condensed Consolidated Financial Statements

3

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DRYCLEAN USA, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND
SHAREHOLDERS' EQUITY

|                                                                                 | March 31,
2007
(Unaudited) | June 30,
2006
|-------------------------------------------------------------------------------- | -------------------------- | -------------
|                                                                                
|Current Liabilities                                                              |                            |              
|Accounts payable and accrued expenses                                            |                            | $    892,708 
|Income taxes payable                                                             |                            | 5,799        
|Accrued employee expenses                                                        |                            | 390,538      
|Unearned income                                                                  |                            | 144,856      
|Customer deposits                                                                |                            | 1,258,582    
|Dividends payable                                                                |                            | 281,372      
|                                                                                
|Total current liabilities                                                        |                            | 2,973,855    
|                                                                                 |                           
|Total liabilities                                                                |                            | 2,973,855    
|                                                                                 |                           
|Shareholders' Equity                                                             |                            |              
|Preferred stock, $1.00 par value:                                                |                           
|Authorized shares - 200,000; none issued                                         |                           
|and outstanding                                                                  |                            | -            
|Common stock, $.025 par value; Authorized shares - 15,000,000; 7,065,500, shares |                           
|issued and outstanding, including shares held in treasury                        |                            | 176,638      
|Additional paid-in capital                                                       |                            | 2,095,069    
|Retained earnings                                                                |                            | 3,775,808    
|Treasury stock, 31,193 shares at March 31, 2007 and 31,050 shares at June 30,    |                           
|2006, at cost                                                                    |                            | (3,313       
|                                                                                
|Total shareholders' equity                                                       |                            | 6,044,202    
|                                                                                
|                                                                                 |                            | $ 9,018,057  
|                                                                                

See Notes to
Condensed Consolidated Financial Statements

4

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DRYCLEAN USA, Inc. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                   
|-----------------------------------------------------------------------------------
|                                                                                   
|                                                                                   
|                                                                                   
|Operating activities:                                                              
|Net earnings                                                                       
|Adjustments to reconcile net earnings to net cash provided by operating activities:
|Bad debt expense                                                                   
|Depreciation and amortization                                                      
|(Increase) decrease in operating assets:                                           
|Accounts, and trade notes receivables                                              
|Inventories                                                                        
|Other current assets                                                               
|Deferred income taxes                                                              
|Increase (decrease) in operating liabilities:                                      
|Accounts payable and accrued expenses                                              
|Accrued employee expenses                                                          
|Unearned income                                                                    
|Customer deposits                                                                  
|Income taxes payable                                                               
|                                                                                   
|Net cash provided by operating activities                                          
|                                                                                   
|                                                                                   
|Investing activities:                                                              
|Proceeds from note receivable                                                      
|Capital expenditures                                                               
|Patent and trademark expenditures                                                  
|                                                                                   
|Net cash (used) provided by investing activities                                   
|                                                                                   
|                                                                                   
|Financing activities:                                                              
|Dividends paid                                                                     
|Purchase of treasury stock                                                         
|                                                                                   
|Net cash used by financing activities                                              
|                                                                                   
|                                                                                   
|Net increase in cash and cash equivalents                                          
|Cash and cash equivalents at beginning of period                                   
|                                                                                   
|Cash and cash equivalents at end of period                                         
|                                                                                   
|                                                                                   
|Supplemental information:                                                          
|Cash paid for income taxes                                                         
|Dividend declared but not paid                                                     

See Notes to
Condensed Consolidated Financial Statements

5

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# DRYCLEAN USA, Inc.

# NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

Note (1) - General:The
accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America
for interim financial statements and the instructions to Form 10-QSB related to interim
period financial statements. Accordingly, these condensed consolidated financial
statements do not include certain information and footnotes required by accounting
principles generally accepted in the United States for complete financial statements.
However, the accompanying unaudited condensed consolidated financial statements contain
all adjustments (consisting only of normal recurring accruals) which, in the opinion of
management, are necessary in order to make the financial statements not misleading. The
results of operations for interim periods are not necessarily indicative of the results to
be expected for the full year. For further information, refer to the Companys
financial statements and footnotes thereto included in the Companys Annual Report on
Form 10-KSB for the year ended June 30, 2006. The June 30, 2006 balance sheet information
contained herein was derived from the audited consolidated financial statements included
in the Companys Annual Report on Form 10-KSB as of that date.

Note (2) - Earnings Per Share:
Basic and diluted earnings per share for the three and nine months ended March 31, 2007
and 2006 are computed as follows:

|                         | For the nine months ended
March 31, |                  | For the three months ended 
March 31, |                 
|------------------------ | ----------------------------------- | ---------------- | ------------------------------------- | ----------------
|                         | 2007
(Unaudited)                    | 2006
(Unaudited) | 2007
(Unaudited)                      | 2006
(Unaudited)
|                        
|Basic                    |                                     |                  |                                       |                 
|Net earnings             |                                     |                  | $                                     | 653,086         
|Weighted average shares  |                                     |                 
|outstanding              |                                     |                  |                                       | 7,034,418       
|                        
|Basic earnings per share |                                     |                  | $                                     | .09             
|                        
|Diluted                  |                                     |                 
|Net earnings             |                                     |                  | $                                     | 653,086         
|Weighted average shares  |                                     |                 
|outstanding              |                                     |                  |                                       | 7,034,418       
|Plus incremental shares  |                                     |                 
|from assumed exercise of |                                     |                 
|stock options            |                                     |                  |                                       | 3,453           
|                        
|Diluted weighted average |                                     |                 
|common shares            |                                     |                  |                                       | 7,037,871       
|                        
|Diluted earnings per     |                                     |                 
|share                    |                                     |                  | $                                     | .09             
|                        

No shares subject to stock options
were excluded at March 31, 2007 or 2006.

6

---

Note (3)  Revolving Credit
Line: On October 30, 2006, the Company received an extension until October 30, 2007 of
its existing $2,250,000 revolving line of credit facility. In addition, the related Loan
Agreement was amended to waive the requirement that the Company maintain windstorm
insurance coverage, thereby enabling the Company to self insure against wind damage. On
October 30, 2005, the Company received a similar one year extension and the Loan Agreement
was amended to eliminate the requirement that 51% of the stock of the Company be owned by
the Steiner family or any Steiner trust. The Companys obligations under the facility
are guaranteed by the Companys subsidiaries and collateralized by substantially all
of the Companys and its subsidiaries assets. No amounts were outstanding at
March 31, 2007 and June 30, 2006.

Note (4) - Stock-Based
Compensation Plans:The Companys 2000 Stock Option Plan and 1994 Non-Employee
Director Stock Option Plan are the Companys only stock-based compensation plans. The
2000 Stock Option Plan authorizes the grant (until May 2, 2010) of options to purchase up
to 500,000 shares of the Companys common stock to employees, directors and
consultants, of which no options were outstanding on March 31, 2007. The 1994 Non-Employee
Director Stock Option Plan terminated as to future grants on August 23, 2004, but options
to purchase 20,000 shares remain outstanding thereunder.

Effective January 1, 2006, the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 123
(revised), Share-Based Payment, (SFAS 123(R)) utilizing the
modified prospective approach. Prior to the adoption of SFAS 123(R), the Company accounted
for stock option grants under the recognition and measurement principles of APB,
Accounting Principles Board, Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations, and, accordingly, recognized no
compensation expense for stock option grants in net income.

Under the modified prospective
approach, SFAS 123(R) applies to new grants after December 15, 2005 and to grants that
were outstanding on December 31, 2005 to the extent not yet vested. Since no new options
were granted during the nine months ended March 31, 2007 and all outstanding options were
fully vested at December 31, 2005, no compensation cost for share-based payments was
recognized under SFAS 123(R) during the nine months ended March 31, 2007. Prior periods
are not required to be restated to reflect the impact of adopting the new standard. No
compensation cost would have been recognized under the provisions of SFAS 123(R) had SFAS
123(R) been in effect as to the Company during any of the periods reported in this Report.

In April 2006, a director exercised
an option to purchase 10,000 shares of the Companys common stock at an exercise
price of $.90625 per share.

Note (5) - Cash Dividends:The
following table sets forth information concerning the cash dividends declared by the
Companys Board of Directors during the periods covered by this Report:

|Declaration Date   |  | Payment Date     |  | Record Date      |  | Per Share
Amount |  | Total
Amount | 
|------------------ |  | ---------------- |  | ---------------- |  | ---------------- |  | ------------ | 
|March 29, 2007     |  | May 1, 2007      |  | April 13, 2007   |  | $ .04            |  | $281,372     | 
|September 26, 2006 |  | November 1, 2006 |  | October 13, 2006 |  | $ .04            |  | $281,378     | 
|March 31, 2006     |  | May 1, 2006      |  | April 14, 2006   |  | $ .04            |  | $281,378     | 
|September 23, 2005 |  | November 1, 2005 |  | October 14, 2005 |  | $ .04            |  | $280,978     | 
|March 23, 2005     |  | May 2, 2005      |  | April 15, 2005   |  | $.035            |  | $245,857     | 

7

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Note (6) - Segment
Information: The Companys reportable segments are strategic businesses that
offer different products and services. They are managed separately because each business
requires different marketing strategies. The Company primarily evaluates the operating
performance of its segments based on the categories noted in the table below. The Company
has no sales between segments. Financial information for the Companys business
segments is as follows:

|                                                   | For the nine months ended
March 31, |      | For the three months ended 
March 31, |           
|-------------------------------------------------- | ----------------------------------- | ---- | ------------------------------------- | ----------
|                                                   | 2007                                | 2006 | 2007                                  | 2006      
|                                                   | (Unaudited)                         |      | (Unaudited)                           |           
|                                                  
|Revenues:                                          |                                     |      |                                       |           
|Commercial and industrial laundry and dry cleaning |                                     |     
|equipment                                          |                                     |      | $                                     | 17,217,903
|License and franchise operations                   |                                     |      |                                       | 219,041   
|                                                  
|                                                   |                                     |     
|Total revenues                                     |                                     |      | $                                     | 17,436,944
|                                                  
|                                                   |                                     |     
|Operating income (loss):                           |                                     |     
|Commercial and industrial laundry and dry cleaning |                                     |     
|equipment                                          |                                     |      | $                                     | 1,015,523 
|License and franchise operations                   |                                     |      |                                       | 156,184   
|Corporate                                          |                                     |      |                                       | (229,705  
|                                                  
|                                                   |                                     |     
|Total operating income                             |                                     |      | $                                     | 942,002   
|                                                  

|                                                   | March 31, 2007
(Unaudited) |              |  |  | June 30, 2006 |             
|-------------------------------------------------- | -------------------------- | ------------ |  |  | ------------- | ------------
|                                                  
|Identifiable assets:                               |                            |              |  |  |               |             
|Commercial and industrial laundry and dry cleaning |                           
|equipment                                          |                            | $  8,628,437 |  |  |               | $  8,052,901
|License and franchise operations                   |                            | 221,739      |  |  |               | 668,828     
|Corporate                                          |                            | 167,881      |  |  |               | 216,300     
|                                                  
|                                                   |                           
|Total assets                                       |                            | $  9,018,057 |  |  |               | $  8,938,029
|                                                  

During the nine months ended March
31, 2006, one customer accounted for 19.4% of the Companys revenues.

Note (7) - Reclassification:
Certain items in the financial statements presented have been reclassified to conform to
the March 31, 2007 presentation.

8

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# New Accounting
Pronouncements

In December 2004, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 123 (Revised 2004),Share-Based Payment
(SFAS 123(R)). SFAS 123(R) replaced FASB 123, Accounting for Stock-Based
Compensation and superseded APB Opinion No. 25, Accounting for Stock Issued to
Employees. SFAS 123(R) requires compensation costs related to share-based payment
transactions to be recognized in the financial statements. With limited exceptions, the
amount of compensation cost is measured based on the grant-date fair value of the equity
or liability instruments issued. In addition, liability awards are to be re-measured each
reporting period. Compensation cost is recognized over the period that an employee
provides service in exchange for the award. This guidance became effective as of the first
interim or annual reporting period beginning after December 15, 2005 for Small
Business filers such as the Company. SFAS 123(R) has not affected the Company to date but
may affect the Company if it issues share-based compensation in the future.

In March 2006, the Emerging Issues
Task Force (EITF) reached a consensus on EITF Issue No. 06-3, How Taxes
Collected from Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement (that is, Gross versus Net Presentation). EITF 06-3 requires an
entity to disclose its policy for presenting taxes assessed on revenue-producing
transaction between a seller and customer. Such taxes may include sales, use, and some
excise taxes, among others. EITF 06-3 is effective for interim and annual periods ending
after December 15, 2006 with early application permitted. For the periods presented in
this Report, the Company has presented such taxes net. The implementation of EITF 06-3 did
not have an effect on the Companys financial statements.

In June 2006, the FASB issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN
48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in
financial statements and prescribes a two-step test for the recognition and measurement
of a tax position taken on a tax return.  FIN 48 provides guidance for
determining whether tax benefits may be recognized with respect to uncertain tax positions
and, if recognized, the amount that may be recorded.  FIN 48 is effective for fiscal
years beginning after December 15, 2006 and the Company is evaluating the effect FIN 48
will have on its consolidated financial statements.

In September 2006, the FASB Issued
SFAS No. 157, Fair Value Measurement (SFAS 157) which defines fair
value, establishes a framework for measuring fair value in accordance with generally
accepted accounting principles, and provides for additional fair value disclosures. SFAS
157 is effective for fiscal years beginning after November 15, 2007. The Company does not
believe SFAS 157 will have a material effect on its consolidated financial statements.

In September 2006, the Staff of the
Securities and Exchange Commission issued Staff Accounting Bulletin No. 108,
Considering the Effect of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements (SAB 108). SAB 108 requires the
use of two approaches in quantitatively evaluating the materiality of misstatements. If
the misstatement as quantified under either approach is material to the current year
financial statements, the misstatement must be corrected. If the effect of correcting a
prior year misstatement in the current year income statement is material, the prior year
financial statements should be corrected. In the year of adoption (fiscal years ending
after November 15, 2006), the misstatements may be corrected as an accounting change by
adjusting opening retained earnings rather than being included in the current year income
statement. The Company does not expect SAB 108 to have an impact on the Companys
consolidated financial statements.

In February 2007, the FASB issued
SFAS 159, The Fair Value Option for Financial Assets and Financial
Liabilities which permits, at specified election dates, all entities to choose to
measure eligible items at fair value. SFAS 159 is effective as of the beginning of an
entitys fiscal year beginning on or

9

---

after November 15, 2007 with early
application permitted as of the beginning of a fiscal year beginning on or before November
15, 2007 if an entity also elects to apply the provisions of SFAS 157. Retrospective
application is not permitted unless early adoption is adopted. The Company is evaluating
the effect, if any, the adoption of SFAS 159 will have on the Companys
financial statements.

# Item 2:
Managements Discussion and Analysis or Plan of Operations

# Overview

Revenues for the nine months ended
March 31, 2007 increased by 21.2% over the same period of fiscal 2006, setting a record
for the Company. However, revenues for the third quarter of fiscal 2007 were 9.1% lower
than in the comparable fiscal 2006 period which was benefited by a shipment under a large
order, production for which had been previously delayed due to the effects of Hurricanes
Katrina and Wilma. Quarterly comparisons are not necessarily indicative of future trends
due to the many factors that can affect shipments in the short run.

Net earnings for the nine month
period of fiscal 2007 increased by 6.9%, mostly due to higher interest income on
outstanding bank balances. Net earnings for the third quarter of fiscal 2007 was
essentially flat when compared to the third quarter of fiscal 2006 as improved margins
during the third quarter of fiscal 2007 offset the lower revenues.

Operating activities during the first
nine months of fiscal 2007 provided a positive cash flow of $689,737 from which the Board
of Directors declared a $.04 per share semi-annual dividend (an aggregate of $281,372),
payable on May 1, 2007 to shareholders of record on April 13, 2007.

# Liquidity and Capital
Resources

Cash increased by $324,541 during the
first nine months of fiscal 2007 compared to an increase of $603,987 during the same
period of fiscal 2006. The following summarizes the Companys Condensed Consolidated
Statements of Cash Flows:

|                            
|----------------------------
|                            
|                            
|                            
|Net cash (used) provided by:
|Operating activities        
|Investing activities        
|Financing activities        

For the nine months ended March 31,
2007, operating activities provided cash of $689,737 compared to $869,337 during the first
nine months fiscal 2006. The lower comparative production of cash from operating
activities was principally due to a lower increase in customer
deposits in the fiscal period ($36,386) than in the fiscal 2006 period ($276,298) which, in the 2006 period,
related to the receipt of certain large
orders.

Cash generated from operating
activities during the first nine months of fiscal 2007 was provided by the Companys
net earnings of $653,086 and non-cash expenses for depreciation and amortization of
$89,706 and bad debts of $10,538. This was partially offset, in addition to the
lower increase in customer deposits, by a net $63,593 use of cash as a result of changes in
other operating assets and liabilities. An increase in inventories ($155,821) and
decreases in accrued employee expenses ($200,595), unearned income ($62,081) and income
taxes payable ($64,592) were other principal uses of

10

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cash.    
          These uses of cash were offset by cash generated by reductions in accounts and
          trade notes receivable ($229,990), other current assets ($139,167) and deferred
          taxes ($14,458).

For the first nine months of fiscal
2006, the Company generated cash through net earnings of $610,813 and non-cash expenses
for depreciation and amortization of $101,788 and bad debts of $15,731. Changes in
operating assets and liabilities provided an additional $141,005, in addition to the
$276,298 increase in customer deposits, mostly due to a decrease in accounts and trade
notes receivables ($158,186) and increases in accounts payable and accrued expenses
($168,566) and income taxes payable ($55,940). They were partially offset by uses of cash
related to an increase in inventories ($339,824) and decreases in accrued employee
expenses ($117,986) and unearned income ($62,081).

Investing activities for the first
nine months of fiscal 2007 used cash of $83,525 for capital expenditures of machinery and
equipment and leasehold improvements. During the same period of fiscal 2006 investing
activities provided cash of $15,628, mainly as a result of payments received on a note
from the sale of the Companys telecommunications segment ($67,857), which note was
fully paid in November 2005. Capital expenditures of $50,921 and patent and trademark
expenses of $1,308 partially offset the proceeds received from the note receivable.

Financing activities used cash of
$281,378 and $280,978 for the nine months ended March 31, 2007 and 2006, respectively, to
pay cash dividends. A table of declared dividends is set forth in Note 5 of the
Notes to Condensed Consolidated Financial Statements. In addition, in February
2007, the Company purchased 143 shares of its common stock from an unaffiliated
stockholder using $293.

On October 30, 2006, the Company
received an extension until October 30, 2007 of its existing $2,250,000 revolving line of
credit facility. In addition, the related Loan Agreement was amended to waive the
requirement that the Company maintain windstorm insurance coverage, thereby enabling the
Company to self insure against wind damage. On October 30, 2005, the Company received a
similar one year extension and the Loan Agreement was amended to eliminate the requirement
that 51% of the stock of the Company be owned by the Steiner family or any Steiner family
trust. The Companys obligations under the facility continue to be guaranteed by the
Companys subsidiaries and collateralized by substantially all of the Companys
and its subsidiaries assets. No amounts were outstanding at March 31, 2007 and June
30, 2006.

The Company believes that its present
cash position and cash it expects to generate from operations, as well as, if needed, cash
borrowings available under its $2,250,000 line of credit, will be sufficient to meet its
presently anticipated operational needs.

# Off-Balance Sheet
Financing

The Company has no off-balance sheet
financing arrangements within the meaning of item 303(c) of Regulation S-B.

11

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# Results of Operations

The following table sets forth
certain information with respect to changes in the Companys revenues for the periods
presented:

|                      | Nine months ended
March 31, |                  |          |                  |                  | Three months ended
March 31,
|--------------------- | --------------------------- | ---------------- | -------- | ---------------- | ---------------- | ----------------------------
|                      | 2007
(Unaudited)            | 2006
(Unaudited) | %
Change | 2007
(Unaudited) | 2006
(Unaudited) | %
Change                    
|                     
|                      |                             |                  |          |                  |                  |                             
|Net sales             |                             |                  | $        | 16,944,641       |                  | $                           
|Development fees,     |                             |                 
|franchise and license |                             |                 
|fees, commissions     |                             |                 
|and other             |                             |                  |          | 492,303          |                  |                             
|                     
|Total revenues        |                             |                  | $        | 17,436,944       |                  | $                           

Revenues for the nine month period
ended March 31, 2007 increased by $3,047,205 (21.2%) over the same period of fiscal 2006.
However, for the third quarter of fiscal 2007, revenues decreased by $515,849 (9.1%) from
the same period of fiscal 2006.

For the first nine months of fiscal
2007, sales increased by $3,267,633 (23.9%) over the same period of fiscal 2006. Increases
were across all product categories, as commercial laundry equipment increased by 36.1%,
dry cleaning equipment by 16.0%, boilers by 24.3% and spare parts by 3.9%. The increase in
sales for the nine month period was attributable to better pricing which attracted larger
contracts. For the three month period ended March 31, 2007, sales decreased by $524,000
(9.5%) from the same three month period in fiscal 2006. Although, in the 2007 three month
period, increases were achieved in sales of dry cleaning equipment (8.4%) and spare parts
(3.0%), laundry equipment sales decreased by 19.3% and boilers (2.6%) on a comparative
basis as sales in the third quarter of fiscal 2006 were benefited by a shipment under a
large order, production for which had been delayed due to the effect of Hurricanes Katrina
and Wilma.

Development fees, franchise and
license fees, commissions and other income decreased by $220,428 (30.9%) for the nine
month period of 2007, but increased by $8,151 (4.4%) in the third quarter of fiscal 2007,
in each case, when compared to the same period of fiscal 2006. The comparative decrease
for the nine month period was due principally to the absence of commissions paid to the
Company in fiscal 2006 by manufacturers which shipped equipment during the fiscal 2006
period directly to the Companys customers. The increase during the three month
period of fiscal 2007 was mainly due to higher brokerage and development fees which offset
the effect of the lower level of commissions.

|                                                     | Nine months ended
March 31, | Three months ended
March 31,
|---------------------------------------------------- | --------------------------- | ----------------------------
|                                                     | 2007
(Unaudited)            | 2006
(Unaudited)            
|                                                    
|                                                     |                             |                             
|As a percentage of sales:                            |                            
|Cost of goods sold                                   |                             | 77.1                        
|As a percentage of revenue:                          |                            
|Selling, general and
        administrative expenses |                             | 19.5                        
|Research and development                             |                             | .2                          
|Total expenses                                       |                             | 94.6                        

12

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Costs of goods sold, expressed as a
percentage of sales, increased to 77.1% from 75.3% for the first nine months of fiscal
2007 over the same period of fiscal 2006. However, for the third quarter of fiscal 2007,
cost of goods sold decreased to 75.6% from 77.7% from the third quarter of fiscal 2006.
The increase for the nine month period was due to larger contract sales which carry a
smaller margin but increases overall profitability. During the third quarter of fiscal
2007, the Company experienced a better mix of sales, which accounted for the increase in
its gross profit margin.

Selling, general and administrative
expenses increased by $263,105 (8.4%) and $16,543 (1.6%) for the nine and three month
periods, respectively, of fiscal 2007 from the same periods in fiscal 2006, primarily as a
result of increased payroll expense and sales commission expense associated with increased
sales in the nine month period of fiscal 2007 and increased payroll expense in the three
month period of fiscal 2007. As a percentage of revenues these costs decreased to 19.5%
for the nine month period of fiscal 2007 from 21.8% for the comparable fiscal 2006 period
due to the higher volume of sales, but increased to 20.7% for the fiscal 2007 three month
period from 18.6% from the comparable fiscal 2006 period due to the increase in expenses
coupled with the lower sales level.

Research and development expenses are
a small part of the Companys total operating expenses and relate to on-going
research for the Companys dry cleaning machines.

Interest income increased by $66,040
(137.4%) and $6,526 (24.2%) for the nine and three month periods of fiscal 2007,
respectively, over the same periods of fiscal 2006 as a result of higher outstanding bank
balances and increased prevailing interest rates.

The effective income tax rate was
approximately 38% for all periods of fiscal 2007 and 2006.

# Inflation

Inflation has not had a significant
effect on the Companys operations during any of the reported periods.

# Transactions with
Related Parties

The Company leases 27,000 square feet
of warehouse and office space from Sheila Steiner, the wife of William K. Steiner, a
principal shareholder, Chairman of the Board of Directors and a director of the Company.
The lease provides for a three-year term that commenced on November 1, 2005 at an annual
rental of $94,500, with annual increases commencing November 1, 2006 of 3% over the rent
in the prior year. The Company bears real estate taxes, utilities, maintenance,
non-structural repairs and insurance. The lease contains two three-year renewal options in
favor of the Company. The Company believes that the terms of the lease are comparable to
terms that would be obtained from an unaffiliated third party for similar property in a
similar locale.

# Critical Accounting
Policies

The accounting policies that the
Company has identified as critical to its business operations and to an understanding of
the Companys results of operations remain unchanged from those described in detail
in the Managements Discussion and Analysis or Plan of Operation section of the
Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 2006. The
Company makes estimates and assumptions that affect the reported amount of assets and
liabilities, contingent assets and liabilities, and the reported amounts of revenues and
expenses during the reported period. Therefore, there can be no assurance that the actual
results will not differ from those estimates.

13

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# New Accounting
Pronouncements:

In December 2004, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 123 (Revised 2004),Share-Based Payment
(SFAS 123(R)). SFAS 123(R) replaced FASB 123, Accounting for Stock-Based
Compensation and superseded APB Opinion No. 25, Accounting for Stock Issued to
Employees. SFAS 123(R) requires compensation costs related to share-based payment
transactions to be recognized in the financial statements. With limited exceptions, the
amount of compensation cost is measured based on the grant-date fair value of the equity
or liability instruments issued. In addition, liability awards are to be re-measured each
reporting period. Compensation cost is recognized over the period that an employee
provides service in exchange for the award. This guidance became effective as of the first
interim or annual reporting period beginning after December 15, 2005 for Small
Business filers such as the Company. SFAS 123(R) has not affected the Company to date but
may affect the Company if it issues share-based compensation in the future.

In March 2006, the Emerging Issues
Task Force (EITF) reached a consensus on EITF Issue No. 06-3, How Taxes
Collected from Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement (that is, Gross versus Net Presentation). EITF 06-3 requires an
entity to disclose its policy for presenting taxes assessed on revenue-producing
transaction between a seller and customer. Such taxes may include sales, use, and some
excise taxes, among others. EITF 06-3 is effective for interim and annual periods ending
after December 15, 2006 with early application permitted. For the periods presented in
this Report, the Company has presented such taxes net. The implementation of EITF 06-3 did
not have an effect on the Companys financial statements.

In June 2006, the FASB issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN
48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in
financial statements and prescribes a two-step test for the recognition and measurement
of a tax position taken on a tax return.  FIN 48 provides guidance for
determining whether tax benefits may be recognized with respect to uncertain tax positions
and, if recognized, the amount that may be recorded.  FIN 48 is effective for fiscal
years beginning after December 15, 2006 and the Company is evaluating the effect FIN 48
will have on its consolidated financial statements.

In September 2006, the FASB Issued
SFAS No. 157, Fair Value Measurement (SFAS 157) which defines fair
value, establishes a framework for measuring fair value in accordance with generally
accepted accounting principles, and provides for additional fair value disclosures. SFAS
157 is effective for fiscal years beginning after November 15, 2007. The Company does not
believe SFAS 157 will have a material effect on its consolidated financial statements.

In September 2006, the Staff of the
Securities and Exchange Commission issued Staff Accounting Bulletin No. 108,
Considering the Effect of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements (SAB 108). SAB 108 requires the
use of two approaches in quantitatively evaluating the materiality of misstatements. If
the misstatement as quantified under either approach is material to the current year
financial statements, the misstatement must be corrected. If the effect of correcting a
prior year misstatement in the current year income statement is material, the prior year
financial statements should be corrected. In the year of adoption (fiscal years ending
after November 15, 2006), the misstatements may be corrected as an accounting change by
adjusting opening retained earnings rather than being included in the current year income
statement. The Company does not expect SAB 108 to have an impact on the Companys
consolidated financial statements.

In February 2007, the FASB issued
SFAS 159, The Fair Value Option for Financial Assets and Financial
Liabilities which permits, at specified election dates, all entities to choose to
measure eligible items at fair value. SFAS 159 is effective as of the beginning of an
entitys fiscal year beginning on or

14

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after November 15, 2007 with early
application permitted as of the beginning of a fiscal year beginning on or before November
15, 2007 if an entity also elects to apply the provisions of SFAS 157. Retrospective
application is not permitted unless early adoption is adopted. The Company is evaluating
the effect, if any, the adoption of SFAS 159 will have on the Companys
financial statements.

# Forward Looking
Statements

Certain statements in this Report are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. When used in this Report, words such as may, should,
seek, believe, expect, anticipate,
estimate, project, intend, strategy and
similar expressions are intended to identify forward-looking statements regarding events,
conditions and financial trends that may affect the Companys future plans,
operations, business strategies, operating results and financial position. Forward-looking
statements are subject to a number of known and unknown risks and uncertainties that may
cause actual results, trends, performance or achievements of the Company, or industry
trends and results, to differ materially from the future results, trends, performance or
achievements expressed or implied by such forward-looking statements. Such risks and
uncertainties include, among others: general economic and business conditions in the
United States and other countries in which the Companys customers are located;
industry conditions and trends, including supply and demand; changes in business
strategies or development plans; the availability, terms and deployment of debt and equity
capital; technology changes; competition and other factors which may affect prices which
the Company may charge for its products and its profit margins; the availability and cost
of the equipment purchased by the Company; relative values of the United States currency
to currencies in the countries in which the Companys customers, suppliers and
competitors are located; changes in, or the failure to comply with, government regulation,
principally environmental regulations; and the Companys ability to successfully
introduce, market and sell at acceptable profit margins its new Green Jet®
dry-wetcleaning machine and Multi-Jet dry cleaning machine. These and certain
other factors are discussed in this Report and from time to time in other Company reports
filed with the Securities and Exchange Commission. The Company does not assume an
obligation to update the factors discussed in this Report or such other reports.

# Item 3.   Controls and
Procedures

As of the end of the period covered
by this Report, management of the Company, with the participation of the Companys
President and principal executive officer and the Companys principal financial
officer, evaluated the effectiveness of the Companys disclosure controls and
procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934.
Based on that evaluation, these officers concluded that, as of the date of their
evaluation, the Companys disclosure controls and procedures were effective to
provide reasonable assurance that information required to be disclosed in the
Companys periodic filings under the Securities Exchange Act of 1934 is accumulated
and communicated to the Companys management, including those officers, to allow
timely decisions regarding required disclosure. It should be noted that a control system,
no matter how well designed and operated, can provide only reasonable, not absolute,
assurance that it will detect or uncover failures within the Company to disclose material
information otherwise required to be set forth in the Companys periodic reports.

During the period covered by this
Report, there were no changes in the Companys internal control over financial
reporting that have materially affected, or are reasonably likely to materially affect,
the Companys internal control over financial reporting.

15

---

# PART II.   OTHER
INFORMATION

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

|(a) |  | Sales
of Unregistered Equity Securities
|--- |  | ---------------------------------------

| | None |  | 
| | ---- |  | 

|(b) |  | Use
of Proceeds from Public Offerings
|--- |  | -------------------------------------

| | Not  Applicable |  | 
| | --------------- |  | 

|(c) |  | Repurchases
of Equity Securities
|--- |  | --------------------------------

During
the quarter ended March 31, 2006, the Company repurchased 143 shares of its common stock
in an unsolicited private purchase at a total cost of $293 as follows:

|Month    |  | Total Number of Shares
Purchased |  | Average Price Paid Per
Share |  | Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs |  | Maximum Number (or Approximate
Dollar Value) of Shares that May
Yet Be Purchased Under the Plans
or Programs | 
|-------- |  | -------------------------------- |  | ---------------------------- |  | -------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ | 
|January  |  | -                                |  | -                            |  | -                                                                                |  | -                                                                                                            | 
|February |  | 143                              |  | $2.05                        |  | -                                                                                |  | -                                                                                                            | 
|March    |  | -                                |  | -                            |  | -                                                                                |  | -                                                                                                            | 

# Item 6.   Exhibits

|(a) |  | Exhibits:
|--- |  | ---------

| | 31.01 |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 promulgated under the Securities Exchange Act of 1934.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.02 |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 promulgated under the Securities Exchange Act of 1934.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.01 |  | Certification
of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
                  of 2002.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------

| | 32.02 |  | Certification
of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
                  of 2002.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------

16

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# SIGNATURES

In accordance with the requirements
of the Exchange Act, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                    |                                      
|------------------- | -------------------------------------
|Date:  May 14, 2007 | DRYCLEAN USA, Inc.                   
|                   
|                   
|                    | By:    /s/ Venerando J. Indelicato   
|                    | Venerando J. Indelicato,             
|                    | Treasurer and Chief Financial Officer

17

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# Exhibit Index

| | 31.01 |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 promulgated under the Securities Exchange Act of 1934.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.02 |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 promulgated under the Securities Exchange Act of 1934.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.01 |  | Certification
of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
                  of 2002.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------

| | 32.02 |  | Certification
of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
                  of 2002.
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------

18