SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                   FORM 10-QSB

[X]      QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934 For the quarterly period ended March 31, 2005

         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                             (I.R.S. Employer
incorporation or organization)                             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  X    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 - 7,024,450 shares outstanding as of May 2, 2005.

Transitional Small Business Disclosure Format:       Yes               No  X
                                                         --------         ------




<PAGE>


DRYCLEAN USA, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                     For the nine months ended           For the three months ended
                                                             March 31,                            March 31,
                                                     2005                2004               2005             2004
                                                            (Unaudited)                          (Unaudited)
------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                <C>                 <C>               <C>
Sales                                          $     13,145,479   $     10,500,193    $      4,254,976  $     3,391,164
Development, franchise and license fees,
   commissions and other income                         647,881            502,682             163,589           170,539
Total revenues                                       13,793,360         11,002,875           4,418,565         3,561,703

Cost of goods sold                                    9,835,990          7,608,745           3,127,459         2,459,083
Selling, general and
   administrative expenses                            3,044,125          2,766,009           1,009,418           946,247
Research and development                                 34,250             32,934              18,925            14,059
Total operating expenses                             12,914,365         10,407,688           4,155,802         3,419,389

       Operating income                                 878,995            595,187             262,763           142,314

Interest income                                           8,751             19,436               2,314             6,897
Earnings before taxes                                   887,746            614,623             265,077           149,211
Provision for income taxes                              355,098            245,845             106,031            59,680
Net earnings                                   $        532,648   $        368,778    $        159,046  $        89,531

------------------------------------------------------------------------------------------------------------------------

Basic and diluted earnings per share           $            .08   $            .05    $            .02  $           .01

------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares
   Basic                                              7,022,711          7,007,446           7,024,450         7,014,450
   Diluted                                            7,036,942          7,033,314           7,041,717         7,028,696
========================================================================================================================
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                       2
<PAGE>


DRYCLEAN USA, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        March 31, 2005           June 30, 2004
                                                                        --------------           -------------
                                                                         (Unaudited)
ASSETS
<S>                                                                <C>                       <C>
CURRENT ASSETS
Cash and cash equivalents                                          $        1,970,837        $         1,742,251
Accounts and trade notes receivable, net                                    1,681,429                  1,600,087
Inventories                                                                 3,094,164                  2,971,803
Note receivable                                                               107,143                    157,143
Lease receivables                                                              21,375                     35,172
Deferred income taxes                                                          97,618                     97,618
Other assets, net                                                             270,124                    112,375
-----------------------------------------------------------------------------------------------------------------
       Total current assets                                                 7,242,690                  6,716,449

Lease receivables, due after one year                                           1,000                     10,000
Note receivable, less current portion                                               -                     67,857
Equipment and improvements - net of
   accumulated depreciation and amortization                                  227,758                    217,200
Franchise, trademarks and other intangible assets, net                        374,580                    385,756
Deferred tax asset                                                             26,859                     26,859

-----------------------------------------------------------------------------------------------------------------
                                                                   $        7,872,887        $         7,424,121
===================================================================================================================
</TABLE>


            See Notes to Condensed Consolidated Financial Statements




                                       3
<PAGE>


DRYCLEAN USA, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                    March 31, 2005            June 30, 2004
                                                                    --------------            -------------
                                                                     (Unaudited)

CURRENT LIABILITIES
<S>                                                                <C>                      <C>
Accounts payable and accrued expenses                              $      1,166,418         $     1,228,062
Income taxes payable                                                         11,970                   1,871
Customer deposits and unearned income                                       929,172                 550,042
Dividends payable                                                           245,857                       -
-------------------------------------------------------------------------------------------------------------
       Total current and total liabilities                                2,353,417               1,779,975


SHAREHOLDERS' EQUITY
Common stock, $.025 par value; 15,000,000 shares
   authorized; 7,055,500 and 7,045,500 shares issued
   and outstanding at March 31, 2005 and June 30, 2004,
   respectively, including shares held in treasury                          176,388                 176,138
Additional paid-in capital                                                2,075,870               2,066,120
Retained earnings                                                         3,270,232               3,404,908
Treasury stock, 31,050 shares at cost                                        (3,020)                 (3,020)
-------------------------------------------------------------------------------------------------------------
       Total shareholders' equity                                         5,519,470               5,644,146
-------------------------------------------------------------------------------------------------------------
                                                                   $      7,872,887         $     7,424,121
=============================================================================================================
</TABLE>

            See Notes to Condensed Consolidated Financial Statements




                                       4
<PAGE>


DRYCLEAN USA, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Nine months ended     Nine months ended
                                                                       March 31, 2005        March 31, 2004
                                                                        (Unaudited)           (Unaudited)
                                                                        -----------           -----------
Operating activities:
<S>                                                                  <C>                   <C>
   Net earnings                                                      $      532,648        $      368,778
     Adjustments to reconcile net earnings to net cash (used)
       provided by operating activities:
       Bad debt expense                                                      21,181                10,296
       Depreciation and amortization                                         87,861                86,811
         (Increase) decrease in operating assets:
           Accounts, trade notes and lease receivables                      (79,727)              138,782
           Inventories                                                     (122,362)             (324,814)
           Other current assets                                            (157,750)               17,633
           Refundable income taxes                                                -                (2,226)
         Increase (decrease) in operating liabilities:
           Accounts payable and accrued expenses                            (61,646)             (268,618)
           Customer deposits and unearned income                            379,129                60,228
           Income taxes payable                                              10,098              (112,925)
-------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities                            609,432               (26,055)
-------------------------------------------------------------------------------------------------------------

Investing activities:
   Proceeds from note receivable                                            117,857               104,761
   Capital expenditures                                                     (55,281)              (13,115)
   Patent and trademark expenditures                                        (31,955)              (33,248)
-------------------------------------------------------------------------------------------------------------

Net cash provided by investing activities                                    30,621                58,398
-------------------------------------------------------------------------------------------------------------

Financing activities:
   Dividends paid                                                          (421,467)             (350,723)
   Proceeds from exercise of stock options                                   10,000                18,000
-------------------------------------------------------------------------------------------------------------
Net cash used by financing activities                                      (411,467)             (332,723)
-------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents                        228,586              (300,380)
Cash and cash equivalents at beginning of period                          1,742,251             1,614,141
-------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                           $    1,970,837        $    1,313,761
=============================================================================================================

Supplemental information:
   Cash paid for income taxes                                        $      325,000        $      361,000
</TABLE>


            See Notes to Condensed Consolidated Financial Statements




                                       5
<PAGE>

                                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,  2004.  The June 30, 2004 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, 2005 and 2004 are computed as follows:

<TABLE>
<CAPTION>
                                                         For the nine months ended       For the three months ended
                                                                 March 31,                        March 31,
                                                           2005             2004            2005             2004
-----------------------------------------------------------------------------------------------------------------------

<S>                                                   <C>              <C>             <C>              <C>
Basic
-----
Net earnings                                          $     532,648    $     368,778   $     159,046    $      89,531
Weighted average shares outstanding                       7,022,711        7,007,446       7,024,450        7,014,450

Basic earnings per share                              $         .08    $         .05   $         .02    $         .01

Diluted
-------
Net earnings                                          $     532,648    $     368,778   $     159,046    $      89,531
Weighted average shares outstanding                       7,022,711        7,007,446       7,024,450        7,014,450
Plus incremental shares from assumed exercise of
   stock options                                             14,231           25,868          17,267           14,246
-----------------------------------------------------------------------------------------------------------------------
Diluted weighted average common shares                    7,036,942        7,033,314       7,041,717        7,028,696
-----------------------------------------------------------------------------------------------------------------------
Diluted earnings per share                            $         .08    $         .05   $         .02    $         .01
=======================================================================================================================
</TABLE>

There were 20,000 shares subject to outstanding  stock options at March 31, 2004
that were  excluded  in the  computations  of  earnings  per share  because  the
exercise  prices of the options were at least the average  market  prices of the
Company's common stock during these periods.  No shares subject to stock options
were excluded at March 31, 2005.

NOTE (3) - REVOLVING  CREDIT LINE: On October 28, 2004, the Company  received an
extension,  until October 30, 2005, of its existing $2,250,000 revolving line of
credit facility. In addition, on October 28, 2004, the Loan Agreement,  dated as
of December  19,  2001,  as amended,  under which the  revolving  line of credit
facility  was   established,   was  amended  to  eliminate  the  borrowing  base
restriction on borrowings under the revolving credit facility,  thereby enabling
the  Company  to borrow up to the full  $2,250,000  amount  available  under the
facility   regardless  of  the  Company's  levels  of  accounts  receivable  and
inventories.  The  Company's  obligations  under  the  facility  continue  to be
guaranteed by the Company's subsidiaries and collateralized by substantially all
the Company's and its subsidiaries' assets.



                                       6
<PAGE>

NOTE (4) - STOCK OPTIONS: The Company accounts for its stock-based  compensation
plans under Accounting  Principles Board ("APB") Opinion No. 25,  Accounting for
Stock Issued to Employees.  See Note 7. The pro forma information below is based
on provisions  of Statement of Financial  Accounting  Standard  ("FAS") No. 123,
Accounting for Stock-Based  Compensation,  as amended by FAS 148, Accounting for
Stock-Based Compensation-Transition and Disclosure, issued in December 2002:

<TABLE>
<CAPTION>
                                                                  For the nine months           For the three months
                                                                    ended March 31,               ended March 31,
                                                                  2005           2004           2005           2004
-------------------------------------------------------------------------------------------------------------------------

<S>                                                          <C>             <C>            <C>            <C>
Net earnings, as reported                                    $    532,648    $  368,778     $  159,046     $   89,531
Less: Fair value of employee stock compensation                       -          (4,500)             -         (1,500)
-------------------------------------------------------------------------------------------------------------------------
Pro forma net earnings                                       $    532,648    $  364,278     $  159,046     $   88,031
Earnings per common share:
Net earnings as reported - Basic and diluted                 $        .08    $      .05     $      .02     $      .01
Net earnings, pro forma - Basic and diluted                  $        .08    $      .05     $      .02     $      .01
</TABLE>

There were no options  granted  during the three and nine months ended March 31,
2005 and 2004. In August 2004, a director exercised an option to purchase 10,000
shares of the Company's common stock at an exercise price of $1.00 per share. In
January 2005, 10,000 options expired unexercised. In October 2003, two employees
exercised  options to purchase  18,000 shares of the Company's  common stock for
$1.00 per share. In November 2003, 389,000 stock options expired unexercised.

NOTE (5) - CASH  DIVIDENDS:  On March 23, 2005, the Company's Board of Directors
declared a $.035 per share cash dividend (an  aggregate of $245,857)  payable on
May 2, 2005 to  shareholders of record on April 15, 2005. On September 27, 2004,
the  Company's  board of Directors  declared a $.06 per share cash  dividend (an
aggregate  of  approximately  $421,467)  which was paid on  November  1, 2004 to
shareholders of record on October 15, 2004. On September 26, 2003, the Company's
Board of  Directors  declared a $.05 per share cash  dividend  (an  aggregate of
approximately  $350,000)  which was paid on October 31, 2003 to  shareholders of
record on October 17, 2003.

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:



                                       7
<PAGE>
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------
                                                    For the nine months ended        For the three months ended March
                                                            March 31,                               31,
                                                    2005                2004               2005             2004
                                                           (Unaudited)                          (Unaudited)
-----------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                <C>                 <C>               <C>
Revenues:
   Commercial and industrial laundry and
     dry cleaning equipment                   $    13,476,732    $    10,776,790     $     4,334,304   $     3,512,029

   License and franchise operations                   316,628            226,085              84,261            49,674


-----------------------------------------------------------------------------------------------------------------------
Total revenues                                $    13,793,360    $    11,002,875     $     4,418,565   $     3,561,703
=======================================================================================================================
Operating income (loss)
   Commercial and industrial laundry and
     dry cleaning equipment                   $       884,233    $       643,505     $       280,785   $       181,876

   License and franchise operations                   244,380            146,808              65,515            29,242

   Corporate                                         (249,618)          (195,126)            (83,537)          (68,804)
-----------------------------------------------------------------------------------------------------------------------
Total operating income                        $       878,995    $       595,187     $       262,763   $       142,314
=======================================================================================================================

                                                         March 31, 2005                        June 30, 2004
                                                           (Unaudited)
Identifiable assets:
   Commercial and industrial laundry and
     dry cleaning equipment                   $             6,810,384                $             6,348,504

   License and franchise operations                           798,100                                655,744

   Corporate                                                  264,403                                419,873


-----------------------------------------------------------------------------------------------------------------------
Total assets                                  $             7,872,887                $             7,424,121
=======================================================================================================================
</TABLE>

NOTE (7) - NEW ACCOUNTING PRONOUNCEMENTS: In December 2004, the FASB issued SFAS
No. 123 (Revised  2004) (SFAS 123(R))  "Share-based  payment".  SFAS 123(R) will
require  compensation  costs related to share-based  payment  transactions to be
recognized in the financial statements.  With limited exceptions,  the amount of
compensation  cost will be measured  based on the  grant-date  fair value of the
equity or liability  instruments  issued. In addition,  liability awards will be
re-measured each reporting period. Compensation cost will be recognized over the
period that an employee  provides service in exchange for the award. FASB 123(R)
replaces FASB 123,  Accounting for Stock-Based  Compensation  and supersedes APB
Opinion No. 25,  Accounting  for Stock  Issued to  Employees.  This  guidance is
effective as of the first interim or annual  reporting  period  beginning  after
December 15, 2005 for Small Business filers such as the Company.

NOTE (8) - On  January  3,  2005,  the  Company  entered  into a Patent  License
Agreement with Whirlpool Corporation  ("Whirlpool") in which the Company granted
Whirlpool  an  exclusive  license  until  December  31,  2008 and  thereafter  a
non-exclusive  license to make and sell  laundry  appliances  incorporating  the
Company's patent applications and other intellectual  property related to fabric
treatment technology for improving the drying and refreshing of garments in home
clothes dryers.  In  consideration  for the grant of

                                       8
<PAGE>

the  license,  Whirlpool  has paid the  Company a  $350,000  fee.  Approximately
$331,100 of the payment was classified as unearned income and is being amortized
over 48 months, the life of the agreement. In addition,  Whirlpool is to pay the
Company a per unit  royalty for dryers using the  licensed  technology  that are
sold during the three year period following the first sale following  commercial
production of dryers using the license technology, as well as a to-be-negotiated
royalty  with  respect to the sale of licensed  after  market kits (to  retrofit
existing  home dryers) for which the Company has retained  marketing  rights but
granted Whirlpool a non-exclusive license.




                                       9
<PAGE>


ITEM 2:       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

OVERVIEW
--------

In June 2004,  the Company  obtained an expansion  of the  territory in which it
acts as a distributor for certain laundry products to cover most of Florida. The
Company added two experienced  sales  engineers to cover the expanded  territory
and to expand  sales of the  other  products  marketed  by the  Company  in that
geographical area.

During the nine and three  month  periods  ended  March 31,  2005,  in which the
Company has operated with the expanded  territory,  sales increased by 25.2% and
25.5%, respectively.  For the nine and three month periods in fiscal 2005, gross
profit margins were reduced by 2.3 and 1.0 percentage points, respectively, from
the  comparable  periods of fiscal 2004 due to the larger  volume of sales which
carry  smaller  margins in order to remain  competitive  and obtain sales in the
early part of our expansion into our new territory.

Inventory  levels at March 31, 2005  increased  by $122,361  from June 30, 2004;
however,  they are  expected to increase to a higher  level in order to maintain
increased  sales  and  the  greater  number  of  customers  due to the  expanded
territory.  Selling,  general and administrative expenses increased by 10.0% for
the nine month period,  and 6.7% for the third  quarter,  of fiscal 2005 and are
mostly attributable to the larger sales staff.

Cash on hand  has  been  adequate  to  fund  this  expansion,  having  risen  to
$1,970,837  on March 31,  2005.  The  Company's  Board of  Directors  declared a
semi-annual  dividend of $.035 per share (an aggregate of $245,857)  paid on May
2, 2005 to shareholders of record on April 15, 2005.  Although future  inventory
levels  will  absorb  some of the  cash,  management  does not  expect to borrow
against the Company's existing credit facility.

In  January  2005,  the  Company  signed an  exclusive  license  agreement  with
Whirlpool  Corporation,  licensing the use of the Company's patent technology on
home appliances.  In February 2005, Whirlpool paid to the Company a $350,000 one
time up front fee and is to pay royalties during the three year period following
the  introduction  of  Whirlpool   manufactured   products  using  the  licensed
technology. After this period, Whirlpool will retain a non-exclusive license and
the  Company  is  free  to  license  its  technology  to  other   manufacturers.
Approximately  $331,100 of the payment was classified as unearned  income and is
being amortized over 48 months, the life of the contract.

LIQUIDITY AND CAPITAL RESOURCES

For the nine month  period  ended March 31,  2005,  cash  increased  by $228,586
compared to a decrease in cash of $300,380  for the same period of fiscal  2004.
The primary reason for the increase was due to the one-time  payment of $350,000
received  from  Whirlpool  in  accordance  with the  license  agreement  and the
Company's  net  earnings  of  $532,648.  This  income  was offset in part by the
payment of  $421,467 in  dividends  in November  2004.  The  decrease in cash in
fiscal 2004 was  attributable  to the payment of $350,723 in cash  dividends  in
October 2003.




                                       10
<PAGE>


The following summarizes the Company's Consolidated Statement of Cash Flows.

                                            Nine Months Ended March 31,
                                            2005                   2004
-------------------------------------------------------------------------------
Net cash provided (used) by:
     Operating activities                  $   609,432        $   (26,055)
     Investing activities                       30,621             58,398
     Financing activities                     (411,467)          (332,723)

For the first nine months of fiscal 2005 operating  activities  provided cash of
$609,432 as a result of the  Company's  net earnings of  $532,648,  the non-cash
expenses for depreciation and amortization of $87,861 and the $21,181  provision
for bad debts. Changes in operating assets and liabilities used cash of $32,258,
mostly to support an increase in inventory ($122,362),  accounts trade notes and
lease receivables  ($79,727),  other current assets ($157,750) and a decrease in
accounts  payable and accrued expenses  ($61,646).  These uses were offset by an
increase  in  customer  deposits  and  unearned  income of  $379,129  due to the
Whirlpool  payment and income taxes payable of $10,098.  Except for the unearned
income  resulting  from the one  time up front  payment  from  Whirlpool,  these
fluctuations in assets and liabilities are the result of normal transactions and
in supporting the expanded sales territory

For the first nine  months of fiscal  2004,  operating  activities  used cash of
$26,055. The Company's net earnings of $368,778,  coupled with non-cash expenses
for depreciation  and  amortization of $86,811,  provided most of the cash. This
was offset by changes in  operating  assets and  liabilities  which used cash of
$491,940 mostly to support an increase in inventories  ($324,814) and a decrease
in accounts payable and accrued expenses ($268,618). Additional cash was used by
a decrease in income taxes payable ($112,925) which was offset by an increase in
customer  deposits and unearned income of $60,228 and a decrease in other assets
of $17,633.

For the first nine months of fiscal 2005,  investing activities provided cash of
$30,621  mainly as a result of payments  ($117,857)  received on a note from the
sale of the  Company's  telecommunications  segment,  offset,  in large part, by
capital expenditures of $55,281 and patent and trademark work ($31,955). For the
same  period of fiscal  2004,  investing  activities  provided  cash of $58,398,
mostly as a result of payments received on the note ($104,761), offset, in part,
by capital expenditures of $13,115 and $33,248 for patent and trademark work.

For the nine months  ended March 31,  2005,  financing  activities  used cash of
$411,467,  as the result of a $.06 per share cash  dividend  ($421,467)  paid on
November 1, 2004,  slightly  offset by $10,000  received  from the exercise of a
stock  option to purchase  10,000  shares of the  Company'  common  stock at the
exercise  price of $1.00  per  share by a  director  of the  Company.  Financing
activities  during the first half of fiscal  2004 used cash of $332,723 to pay a
$.05 per share cash dividend ($350,723) on October 31, 2003, partially offset by
the receipt of $18,000  from the exercise of employee  stock  options in October
2003.  On March 23, 2005,  the  Company's  Board of  Directors  declared a $.035
semi-annual dividend,  payable on May 2, 2005 to shareholders of record on April
15, 2005. The previous cash dividend of $.06 per share,  distributed on November
1, 2004, was an annual dividend

On October 28, 2004, the Company received an extension until October 30, 2005 of
its existing  $2,250,000  revolving  line of credit  facility.  In addition,  on
October 28, 2004, the Loan Agreement, dated as of December 19, 2001, as amended,
under which the revolving line of credit facility was  established,  was amended
to eliminate the borrowing base  restriction  on borrowings  under the revolving
credit  facility,  thereby  enabling  the  Company  to  borrow  up to  the  full
$2,250,000  amount  available  under that  facility  regardless of the Company's
levels of accounts receivable and inventories.  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.



                                       11
<PAGE>

The Company  believes  that its  present  cash  position  and cash it expects to
generate from operations and cash borrowings available under its $2,250,000 line
of credit will be sufficient to meet its 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

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                   Nine months ended           Percent                  Three months ended         Percent
                                       March 31,              increase                      March 31,              increase
                                  2005            2004                                 2005            2004
-----------------------------------------------------------------------------------------------------------------------------

<S>                          <C>             <C>                 <C>              <C>             <C>                 <C>
Net sales                    $   13,145,479  $   10,500,193      25.2%            $    4,254,976  $    3,391,164      25.5%
Development fees,
   franchise and license
   fees, commissions and
   other income                     647,881         502,682      28.9%                   163,589         170,539      (4.1)%
-----------------------------------------------------------------------------------------------------------------------------
    Total revenues           $   13,793,360  $   11,002,875      25.4%            $    4,418,565  $    3,561,703      24.1%
</TABLE>

Revenues for the nine and three month periods ended March 31, 2005, increased by
$2,790,485 (25.4%) and $856,862 (24.1%), respectively,  from the same periods of
fiscal 2004.

For the nine and three month periods of fiscal 2005,  revenues of the commercial
laundry and dry cleaning  segment  increased by $2,699,942  (25.1%) and $822,275
(23.4%), respectively,  from the comparable periods of fiscal 2004. Increases in
sales were experienced in commercial laundry and dry cleaning  machines,  mostly
attributable  to the expansion of the  territory,  since June 2004, in which the
Company  acts as a  distributor  for certain  laundry  products to cover most of
Florida when another distributor ceased operations,  and the increased number of
sales staff.  Increased revenues were also reported by the Company's development
business which develops turn-key dry cleaning establishments for resale to third
parties and broker  business  which  assists  others  seeking to buy or sell dry
cleaning  stores and coin  laundries.  For the nine month period of fiscal 2005,
sales of parts increased by 13.8%,  laundry equipment  increased 24.7%,  boilers
increased 28.4% and dry cleaning equipment  increased 6.6%. Similar results were
achieved  for the three month period  ended March 31,  2004,  with  increases of
11.9% in parts sales,  coupled  with  increases  in laundry  equipment  sales of
53.6%,  and dry clean equipment of 20.6%;  however,  boiler sales  decrease,  by
11.5%.

Franchise and license fees increased by $90,543  (40.0%) and $34,587 (69.6%) for
the nine and three month periods,  respectively, of fiscal 2005 when compared to
the same periods of fiscal 2004. This improved  performance was  attributable to
an improved domestic economy resulting in new licensees.



                                       12
<PAGE>

<TABLE>
<CAPTION>
                                          Nine months ended                 Three months ended
                                              March 31,                          March 31,
                                        2005             2004              2005             2004
----------------------------------------------------------------------------------------------------
<S>                                     <C>              <C>              <C>               <C>
As a percentage of sales
   Cost of goods sold                   74.8%            72.5%            73.5%             72.5%

As a percentage of revenue
   Selling, general and
     administrative expenses            22.1%            25.1%            22.8%             26.6%
   Research and development               .2%              .3%              .4%               .4%
   Total expenses                       93.6%            94.6%            94.1%             96.0%
</TABLE>

Cost of goods sold,  expressed as a percentage of sales  increased to 74.8% from
72.5% and 73.5% from 72.5% for the nine and three month  periods,  respectively,
of fiscal 2005 compared to the same periods of fiscal 2004. The increased  costs
were due to larger  sales  which  carry a  smaller  margin  and a  strategically
planned  sales  campaign  to  increase  the  Company's  market  share in the new
territory.

Selling,  general and administrative  expenses increased by $278,116 (10.1%) and
$63,171  (6.7%) for the nine and three month  periods,  respectively,  of fiscal
2005 when compared to the same periods in fiscal 2004 due to the increased sales
and service  expenses which were planned in connection with the increased sales.
However,  as a percentage of revenue these categories of expenses decreased from
25.1% to 22.1% for the nine  month  period and from 26.6% to 22.8% for the three
month period due to the significant sales increases.

Research  and  development  expenses,  as a  percentage  of  revenues,  remained
essentially  stable  and are a very small  part of the total  company  operating
expenses.  These expenses  relate to the on-going  research on the  Green-Jet(R)
technologies  and the application of these  technologies to smaller machines for
the dry cleaning and hotel industry.

The overall expenses of the Company, as a percentage of revenues,  decreased for
the first nine months of fiscal  2005 to 93.6% from  94.6%.  For the three month
period these  expenses  decreased to 94.1% from 96.0%.  Except for the increased
sales and service  expenses which were planned in connection  with the increased
sales, most expenses in this category did not increase to the same degree as the
increase in sales.

Interest income declined for both periods of fiscal 2005 when compared to fiscal
2004 due to the lower  outstanding  balance on the note  receivable  received in
connection with the sale of the  telecommunications  segment  effective July 31,
2002. These reductions were partially offset by an increase in the interest rate
applicable to this note.

The effective tax rate used in each period was 40%.

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 William
K. Steiner,  a principal  stockholder,  Chairman of the Board of Directors and a
director of the Company,  under a lease which  expires in October  2005.  Annual
rental under this lease is approximately  $83,200. The Company



                                       13
<PAGE>

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 are described in detail in the Company's Annual Report on Form 10-KSB
for the fiscal year ended June 30, 2004. In many cases, the accounting treatment
of a particular  transaction is specifically  dictated by accounting  principles
generally  accepted  in  the  United  States  of  America,   with  no  need  for
management's judgment in their application.  In other cases,  preparation of the
Company's  unaudited  condensed  consolidated  financial  statements for interim
periods  requires us to make estimates and assumptions  that effect the reported
amount  of  assets  and  liabilities,   disclosure  of  contingent   assets  and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reported period. There can be no assurance that
the actual results will not differ from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS:
------------------------------

In December  2004,  the FASB issued SFAS No. 123  (Revised  2004) (SFAS  123(R))
"Share-based  payment".  SFAS 123(R) will require  compensation costs related to
share-based payment  transactions to be recognized in the financial  statements.
With limited exceptions,  the amount of compensation cost will be measured based
on the grant-date fair value of the equity or liability  instruments  issued. In
addition,   liability  awards  will  be  re-measured   each  reporting   period.
Compensation  cost will be recognized over the period that an employee  provides
service in exchange for the award.  FASB 123 (R) replaces  FASB 123,  Accounting
for Stock-Based  Compensation and supersedes APB Opinion No. 25,  Accounting for
Stock Issued to Employees. This guidance is effective as of the first interim or
annual  reporting  period after December 15, 2005 for Small Business filers such
as the Company.

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(R)  dry-wetcleaning(TM)
machine and Multi-Jet(TM) 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.



                                       14
<PAGE>

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 our  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.

                           PART II. OTHER INFORMATION

ITEM 6.         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.

                                   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 16, 2005

                                           DRYCLEAN USA, Inc.

                                     By:   /s/ Venerando J. Indelicato
                                           -------------------------------------
                                           Venerando J. Indelicato,
                                           Treasurer and Chief Financial Officer




                                       15
<PAGE>


                                  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.




                                       16