SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(D)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2000

[ ]      TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(D) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

Commission file number 0-9040

                               DRYCLEAN USA, Inc.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)
<TABLE>
<CAPTION>
<S>                                                                                <C>
                       Delaware                                                    11-2014231
--------------------------------------------------------     -------------------------------------------------------
            (State or other jurisdiction of                                     (I.R.S. Employer
            incorporation or organization)                                    Identification No.)
         290 N.E. 68th Street, Miami, Florida                                        33138
--------------------------------------------------------     -------------------------------------------------------
       (Address of principal executive offices)                                    (Zip Code)

Issuer's telephone number, including area code: 305-754-4551

Securities registered under Section 12(b) of the Exchange Act:  Common Stock, $.025 par value

Securities registered under Section 12(g) of the Exchange Act: None
</TABLE>

         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 [
]

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         The aggregate market value as at September 15, 2000 of the Common Stock
of the  issuer,  its only  class of voting  stock,  held by  non-affiliates  was
approximately  $3,336,000,  calculated on the basis of the mean between the high
and low  sales  prices  of the  Company's  Common  Stock on the  American  Stock
Exchange on that date.  Such market value excludes shares owned by all executive
officers  and  directors  (and their  spouses);  this should not be construed as
indicating that all such persons are affiliates.

         The number of shares  outstanding  of the  issuer's  Common Stock as at
September 15, 2000 was 6,990,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the issuer's  Proxy  Statement  relating to its 2000 Annual
Meeting of Stockholders  are  incorporated by reference into Items 10, 11 and 12
in Part III of this Report.

Transitional Small Business Disclosure Format   Yes [  ]   No  [X]


<PAGE>

                           FORWARD LOOKING STATEMENTS

         Certain   statements  in  this  Report  under  the  captions  "Item  1.
Business,"  "Item 2.  Properties"  and  "Item  6.  Management's  Discussion  and
Analysis of Financial  Condition  or Plan of  Operation,"  are  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995 (the  "Reform  Act").  When used in this  Report,  words  such as "may,"
"should,"  "seek,"  "believe,"  "expect,"  anticipate,"  "estimate,"  "project,"
"intend,"  "strategy"  and "pro forma" 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,  as well as 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 and raw materials 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;  availability  of qualified
personnel; and changes in, or the failure to comply with, government regulation,
principally  environmental  regulations.  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.

                                     PART I
                                     ------

ITEM 1.           BUSINESS.
-------           ---------

GENERAL
-------

         On November 1, 1998, Steiner-Atlantic Corp. ("Steiner") was merged (the
"Merger") with and into,  and therefore  became,  a  wholly-owned  subsidiary of
Metro-Tel  Corp.  ("Metro-Tel"  and  collectively  with  Steiner  and  Steiner's
wholly-owned  subsidiaries,  the  "Company").  As a result  of the  Merger,  the
Company added  Steiner's  operations  as a supplier of dry cleaning,  industrial
laundry equipment and steam boilers to Metro-Tel's  operations as a manufacturer
and seller of telephone test and customer premise equipment.

         For financial  accounting (but not corporate law) purposes,  the Merger
is treated as a "reverse  acquisition"  of Metro-Tel by Steiner,  utilizing  the
"purchase" method of accounting.  As a result,  all financial  statements of the
Company  included  in this  Report  covering  periods  prior to November 1, 1998
reflect  only the results of  operations,  financial  position and cash flows of
Steiner on a stand-alone  basis.  All consolidated  financial  statements of the
Company  for  periods  commencing

                                       2
<PAGE>

November 1, 1998,  in  addition,  include the results of  operations,  financial
position and cash flows of Metro-Tel from and after November 1, 1998.

         Steiner is a supplier of dry  cleaning  equipment,  industrial  laundry
equipment and steam boilers to customers in the United States, the Caribbean and
Latin  American  markets.  This  aspect  of  Steiner's  services  includes:  (1)
designing and planning  "turn-key"  laundry and/or dry cleaning  systems to meet
the layout,  volume and budget  needs of a variety of  institutional  and retail
customers,  (2) supplying replacement equipment and parts to its customers,  (3)
providing  warranty  and  preventative   maintenance   through   factory-trained
technicians  and service  managers,  (4)  selling  its own line of dry  cleaning
systems under its Aero-Tech  brand name;  and (5) selling  process steam systems
and boilers.

         In  March  1999,  Steiner  formed  a new  subsidiary,  Steiner-Atlantic
Brokerage  Corp.  ("Steiner  Brokerage"),  to act as a business broker to assist
others  seeking to buy or sell  existing  dry  cleaning  stores and coin laundry
businesses.  Some of Steiner's  existing customers have become Steiner Brokerage
clients,  utilizing  Steiner's  staff and  ability to assist them in the sale of
their businesses and associated real property.

         In July 1999, Steiner acquired certain assets of DRYCLEAN USA Franchise
Company,  including,  among  other  things,  the  worldwide  rights  to the name
DRYCLEAN USA along with existing franchise and license agreements.  DRYCLEAN USA
is one of the largest  franchise  and  license  operations  in the dry  cleaning
industry,  currently  consisting of  approximately  400  franchised and licensed
locations in the United States, the Caribbean and Latin America. Steiner expects
to  aggressively  increase the number of existing  franchisees  and licensees of
DRYCLEAN USA through proven sales and advertising methods with an expanded sales
staff. In fiscal 2000,  area franchises were sold for Charlotte,  North Carolina
and Puerto  Rico.  In  addition,  it has begun to advertise  its  franchise  and
license program on an internet website.  The website is also expected to provide
interactive  information  and solutions to clothing and textile  problems in the
home and office.

         Metro-Tel is engaged in the  manufacture and sale of telephone test and
customer  premise  equipment  utilized by telephone and  telephone  interconnect
companies in the  installation and maintenance of telephone  equipment.  Through
internal research and development and through  acquisition,  Metro-Tel has added
various product lines to its telephone test and customer premise product lines.


                                       3
<PAGE>


STEINER'S OPERATIONS
--------------------

         History.  Steiner was founded in 1960 by William K. Steiner,  initially
operating  as a  distributor  of dry  cleaning  systems  and  boilers,  and as a
rebuilder of laundry,  dry cleaning and boiler  equipment.  Steiner  expanded in
1972,  when it began  distributing  institutional  laundry  equipment to hotels,
motels and hospitals. In 1980, Steiner began importing dry cleaning systems from
an  English   manufacturer   and,  four  years  later,   Steiner  replaced  this
manufacturer  with a relationship  with an Italian  manufacturer of dry cleaning
systems.  In 1990,  Steiner  established  its own branded  product line with the
introduction  of an updated  dry  cleaning  system  under the  Aero-Tech  label,
substantially all of which is currently manufactured  exclusively for Steiner in
Italy.  In fiscal  2000,  Steiner's  Aero-Tech  division  entered into a license
agreement with Green Earth  Solutions to use the Great Earth cleaning  system in
Steiner's Green Jet(TM) dry cleaning machines.

         Product Lines.  Steiner offers a broad line of laundry and dry cleaning
equipment and steam boilers,  as well as a  comprehensive  parts and accessories
inventory.  Steiner's laundry equipment  features washers and dryers,  including
coin-operated  machines,  boilers,  water  reuse and heat  reclamation  systems,
flatwork  ironers  and  automatic  folders.  Steiner's  dry  cleaning  equipment
includes  dry cleaning  machines,  garment  presses,  finishing  equipment,  and
sorting and distributing conveyors.

         Steiner's  product  lines  are  positioned  and  priced  to  appeal  to
customers in each of the high-end, mid-range and value priced markets. Steiner's
product  lines are  offered  under a wide range of price  points to address  the
needs of a  diverse  customer  base.  Suggested  prices  for  most of  Steiner's
products  range from  approximately  $5,000 to $50,000.  Steiner's  product line
offers its  customers a "one-stop  shop" for laundry and dry  cleaning  systems,
boilers and accessories.  By providing "one-stop" shopping,  Steiner believes it
is better able to attract and support  potential  customers  who can choose from
Steiner's broad product line.

         Steiner  seeks to establish  customer  satisfaction  by offering (1) an
on-site training and preventive maintenance program performed by factory trained
technicians  and  service  managers;  (2)  design  and  layout  assistance;  (3)
maintenance of a comprehensive  parts and accessories  inventory and same day or
overnight  availability;   and  (4)  competitive  pricing.  Steiner  provides  a
toll-free support line to resolve customer service problems.

         In March 1999,  Steiner formed Steiner Brokerage as a new subsidiary to
act as a business  broker to assist  others  seeking to buy or sell existing dry
cleaning and laundry  businesses.  Some of  Steiner's  existing  customers  have
become  Steiner  Brokerage  clients,  utilizing  Steiner's  staff and ability to
assist them in the sale of their businesses and associated real property.

         In July 1999, Steiner acquired certain assets of DRYCLEAN USA Franchise
Company,  including  the  worldwide  rights to the name  DRYCLEAN USA along with
existing franchisees and licensees and associated annual revenues.  DRYCLEAN USA
is one of the largest  franchise  and  license  operations  in the dry  cleaning
industry,  currently  consisting of  approximately  400  franchised and licensed
locations in the United States, the Caribbean and Latin America.

                                       4
<PAGE>

         Sales,  Marketing  and  Customer  Support.  Steiner's  laundry  and dry
cleaning equipment products are marketed in the United States, the Caribbean and
Latin  America.  Steiner  employs  sales  executives  to  market  its  products,
including its  Aero-Tech  products,  in the United  States and in  international
markets.  Steiner supports its products by  representative  advertising in trade
publications,  participating in trade shows and engaging in regional  promotions
and sales incentive programs. A substantial portion of Steiner's equipment sales
orders are obtained by  telephone,  e-mail and fax  inquiries  originated by the
customer or by Steiner and  significant  repeat sales are derived from  existing
customers.

         Steiner trains its sales and service  employees to provide  service and
customer support.  Steiner uses specialized  classroom  training,  instructional
videos  and  vendor  sponsored  seminars  to  educate  employees  about  product
information.  In addition,  Steiner's technical staff has prepared comprehensive
training manuals, written in English and Spanish,  relating to specific training
procedures. Steiner's technical personnel are continuously updated and retrained
as new technology is developed.  Steiner monitors service technicians' continued
educational  experience  and  fulfillment of  requirements  in order to evaluate
their  competence.   All  of  Steiner's  service   technicians  receive  service
bulletins, service technicians' tips and continued training seminars.

         Customers   and   Markets.   Steiner's   customer   base   consists  of
approximately  500  customers  in the United  States,  the  Caribbean  and Latin
America,   including   independent   and  franchise  dry  cleaning   chains  and
institutions, hotels, motels, hospitals, cruise lines, nursing homes, government
institutions  and  distributors.  No  customer  accounted  for more  than 10% of
Steiner's revenues during the years ended June 30, 2000 or June 30, 1999.

         Sources of Supply.  Steiner purchases laundry and dry cleaning systems,
boilers  and  other  products  from a  number  of  manufacturers,  none of which
accounted for more than 20% of Steiner's  purchases for the years ended June 30,
2000 or June 30, 1999. Steiner has established long-standing  relationships with
many of the leading laundry,  dry cleaning and boiler  manufacturers.  Steiner's
management  believes  these  supplier   relationships  provide  Steiner  with  a
substantial competitive advantage, including exclusivity in certain products and
areas and  favorable  prices and terms.  Therefore,  the loss of a major  vendor
relationship could adversely affect Steiner's  business.  Historically,  Steiner
has not experienced difficulty in purchasing desired products from its suppliers
and believes it has good working relationships with its suppliers.

         Steiner  has  a  formal   contract  with  only  one  of  its  equipment
manufacturers  and  relies  on its  long-standing  relationship  with its  other
suppliers.  Steiner collaborates in the design,  closely monitors the quality of
the  manufactured   product  and  believes  its  Aero-Tech  systems  exceed  the
environmental  regulations set by safety and environmental  regulatory agencies.
Steiner  must place its orders with its Italian  manufacturer  of its  Aero-Tech
product line prior to the time Steiner has received all of its orders.  However,
because of Steiner's close working  relationship with the Italian  manufacturer,
Steiner can usually adjust orders rapidly and efficiently to reflect a change in
customer demands.

         According to its  arrangement  with the Italian  manufacturer,  Steiner
purchases dry cleaning  systems in Italian lira.  Imports into the United States
are also affected by the cost of

                                       5
<PAGE>

transportation,  the imposition of import duties and increased  competition from
greater production demands abroad. The United States and Italy may, from time to
time,  impose  new  quotas,  duties,  tariffs  or other  restrictions  or adjust
prevailing quotas, duties or tariff levels, which could affect Steiner's margins
on  its  Aero-Tech   systems.   United  States  customs  duties   presently  are
approximately 1% of invoice cost on dry cleaning systems.  However,  in the case
of a  substantial  decline in the value of the U.S.  dollar  against the Italian
lira or the implementation of significant custom duties import controls or trade
barriers with Italy,  Steiner  believes it has the ability to have its Aero-Tech
line manufactured by other international suppliers.

         Competition.  The  laundry  and  dry  cleaning  equipment  distribution
business  is  highly  competitive  and  fragmented  with over 100  full-line  or
partial-line equipment  distributors in the United States.  Steiner's management
believes  that no  distributor  supplies  more  than 6% of the  market  and that
substantially  all such  distributors  are  independently  owned  and,  with the
exception of several regional distributors,  operate primarily in local markets.
Competition is based on price,  product  quality,  delivery and support services
provided  by the  distributor  to the  customer.  In  South  Florida,  Steiner's
principal  domestic market,  Steiner's  primary  competition is derived from two
full-line  distributors  which  operate  out of the Miami  area.  In the  export
market,  Steiner competes with several  distributors  and anticipates  increased
competition  as the export  market  grows.  As Steiner  expands  the sale of its
Aero-Tech line to its  distributors on a national level, it competes with over a
dozen  manufacturers  of dry cleaning  equipment  whose products are distributed
nationally.  Steiner  competes  by  offering  an  extensive  product  selection,
value-added  services,   such  as  product  inspection  and  quality  assurance,
toll-free customer support line,  reliability,  warehouse  location,  price and,
with the Aero-Tech line, competitive special features and exclusivity.

As a  franchisor/licensor  of retail dry cleaning stores,  DRYCLEAN USA competes
with several other  franchisors  and turn-key  suppliers of dry cleaning  stores
primarily on the basis of trademark  recognition and reputation.  As a broker in
the purchase and sale of retail dry cleaning  stores and coin laundry  business,
Steiner  Brokerage  competes with business  brokers  generally,  as well as with
other  professionals  with  contacts in the retail dry cleaning and coin laundry
business.  Competition  in this latter area is  primarily  based on  reputation,
advertising and, to a lesser degree, on the level of fees charged.

METRO-TEL'S OPERATIONS.
-----------------------

         History.  Metro-Tel  was  incorporated  under  the laws of the State of
Delaware on June 30, 1963.  Since its  inception,  Metro-Tel has been engaged in
the  manufacture  and sale of  telephone  test and  customer  premise  equipment
utilized by telephone and telephone  interconnect  companies in the installation
and  maintenance  of  telephone   equipment.   Through  internal   research  and
development and through  acquisition,  Metro-Tel has added various product lines
to its telephone test and customer premise product lines.

         Product Lines.  Metro-Tel is primarily  engaged in the  manufacture and
sale of telephone test equipment and customer premise equipment.

                                       6
<PAGE>

         Telephone Test  Equipment.  Most of Metro-Tel's  sales are of telephone
test  equipment and  transmission  test  equipment.  Metro-Tel's  telephone test
equipment  includes  portable  test  sets  designed  for  use in  locating  high
resistance  faults  resulting  from  moisture  in  exchange  cables and by cable
splicers on exchange and toll cables for identification of cable wires and other
tone-testing  purposes;  linemen's rotary and/or touch-tone testing handsets and
portable line test sets for use by telephone  installers,  repairmen and central
office  personnel;  hand and pole exploring  coils which are used in cable fault
finding;  solid state conversion  amplifier kits;  Volt-Ohmmeter  test sets; and
Cable Hound(R), a portable electronic unit that locates and determines the depth
of underground  cable and metal pipes  primarily for the telephone,  utility and
construction industries.

         Metro-Tel's  transmission  test equipment is used in telephone  company
central office  installations by operating  companies,  long distance  telephone
resellers and large  companies who own their own networks.  Among these products
are digital and analog  rack-mounted  test systems,  portable  transmission test
sets, remote test systems and fiber optic test sets.

         Customer Premise  Equipment.  Metro-Tel also manufactures and markets a
line of telephone  station and  peripheral  products,  including  telephone call
sequencers (which answer calls on up to 12 incoming  unattended  lines,  provide
the  caller  with an  appropriate  message  and place  the calls in queue  until
answered by an  attendant)  and a line of digital  announcers  (which  provide a
pre-programmed  message  with  the  ability  to ring  through  at the end of the
message if so desired by the caller).  This product line also  includes a series
of specialty  telephone  products,  including  call diverters  (call  forwarding
devices used both by end-users and in telephone company central offices),  speed
dialers, specialty telephones and amplified handsets for the hearing impaired.

         In addition, Metro-Tel distributes a line of Channel Service Units/Data
Service  Units  (CSU/DSU)  for the  data  industry.  These  devices  are used to
terminate a digital channel on a customer's premises and enable computer data to
be  transmitted  and received at high speeds over the telephone line without the
use of a modem.

         Other Products and Services. Additionally,  Metro-Tel sells spare parts
for its product lines and provides repair services for its products.

         Methods of Distribution. Metro-Tel presently sells its products through
its own regional sales managers and sales representatives who assist Metro-Tel's
national telephone equipment distributors. Sales managers are presently based in
Georgia and California. In addition, Metro-Tel maintains an in-house sales staff
at its facilities in Milpitas, California.

         Principal  Customers.  Metro-Tel  is  not  dependent  upon  any  single
customer.  However,  North Supply Company,  a national  distributor of telephone
products,  accounted for  approximately 13% and 11% of Metro-Tel's net sales for
the years ended June 30, 2000 and June 30, 1999, respectively, but less than 10%
of the Company's  consolidated  revenues for those years.  Walker Associates,  a
national  distributor of telephone products,  accounted for 12.7% of Metro-Tel's
net sales for the year  ended June 30,  2000 but less than 10% of the  Company's
consolidated  revenues for that year. Metro-Tel believes that, should it for any
reason lose either

                                       7
<PAGE>

of these  distributors,  Metro-Tel  could be adversely  impacted  although these
sales would normally be absorbed by other Metro-Tel distributors.

         Sources of  Supply.  The basic  materials  used in the  manufacture  of
Metro-Tel's  telephone  test  equipment  and  telephone  station and  peripheral
telephone  equipment consist of electronic  components.  Metro-Tel utilizes many
suppliers and is not dependent on any supplier.  Its raw materials generally are
readily available from numerous suppliers.

         Competition.  Competition  is high with respect to each of  Metro-Tel's
product lines.  However,  as the products contained in such lines are varied and
similar  products  contain varying  features,  neither  Metro-Tel nor any of its
competitors  is a  dominant  factor  in any  product  line  market,  except  for
linemen's  test sets for which  Dracon,  a division  of Harris  Corporation,  is
dominant.

         The principal method of competition for each of Metro-Tel's products is
price and product  features,  with service and warranty having a relatively less
significant  impact.  Metro-Tel  believes  its product  lines are  competitively
priced.  Many of Metro-Tel's  competitors have greater  financial  resources and
have  more  extensive   research  and  development  and  marketing  staffs  than
Metro-Tel.

         Research and Development.  Metro-Tel is regularly engaged in the design
of  new  products  and   improvement  of  existing   products  for  all  of  its
telecommunication  equipment products lines. The amounts specifically  allocated
to research  and  development  activities  for the years ended June 30, 2000 and
1999 was $231,219 and $171,354,  respectively.  All research and  development is
internally generated, except for products designed for Metro-Tel by unaffiliated
third parties compensated by either a lump-sum payment or on a royalty basis.

PATENTS AND TRADEMARKS
----------------------

         The Company is the owner of United  States  service mark  registrations
for the names Aero-Tech,  Logitrol, Petro-Star, Aqua Star and Enviro-Star, which
are used in connection with its laundry and dry cleaning  business lines, and of
DRYCLEAN USA, which is licensed by it to retail dry cleaning establishments. The
Company intends to use and protect these or related service marks, as necessary.
The Company believes its trademarks and service marks have significant value and
are an important factor in the marketing of its products.

         The  Company  has  obtained  a number of  trademarks  which are used to
identify its telephone test and customer  premise  product lines.  None of these
trademarks is  considered  to be material to the  Company's  telecommunication's
product  lines.   The  Company  also  pays  royalties  to  third  parties  under
arrangements  permitting the Company to manufacture various items in its product
lines.

COMPLIANCE WITH ENVIRONMENTAL AND OTHER GOVERNMENT LAWS AND REGULATIONS
-----------------------------------------------------------------------

         Over the past several decades in the United States,  federal, state and
local  governments  have enacted  environmental  protection  laws in response to
public concerns about the

                                       8
<PAGE>

environment.  A number of  industries,  including  the dry  cleaning and laundry
equipment  industry,  are  subject  to  these  evolving  laws  and  implementing
regulations. As a supplier to the industry, the Company serves customers who are
primarily responsible for compliance with environmental  regulations.  Among the
federal laws that the Company  believes are applicable to the industry,  are the
Comprehensive  Environmental  Response,  Compensation  and Liability Act of 1980
("CERCLA"),  which provides for the  investigation  and remediation of hazardous
waste sites;  The  Resource  Conservation  and Recovery Act of 1976,  as amended
("RCRA"),  which regulates  generation and  transportation of hazardous waste as
well as its  treatment,  storage and  disposal;  and the  Occupation  Safety and
Health Administration Act ("OSHA"), which regulates exposure to toxic substances
and other health and safety hazards in the  workplace.  Most states and a number
of  localities  have laws that  regulate the  environment  which are at least as
stringent as the federal laws. In Florida,  for example,  in which a significant
amount of the  Company's  dry  cleaning  and laundry  equipment  sales are made,
environmental  matters are regulated by the Florida  Department of Environmental
Protection which generally follows the Environmental Protection Agency's ("EPA")
policy in the EPA's  implementation  of CERCLA and RCRA and  closely  adheres to
OSHA's standards.

         Certain of the  Company's  customer  premise  equipment  products  that
connect to public telephone networks need Federal Communications Commission (or,
in the case of foreign sales,  the equivalent  agency in the foreign  country in
which they will be sold) approval prior to their sale.

         The Company does not believe that  compliance  with Federal,  state and
local  environmental and other laws and regulations which have been adopted have
had, or will have, a material  effect on its capital  expenditures,  earnings or
competitive position.

EMPLOYEES
---------

         The Company  currently  employs 58 employees on a full-time  basis,  of
whom three are in executive  management,  17 are engaged in sales and marketing,
16 are  administrative and clerical,  two are engineers and technicians,  15 are
engaged  in  production  and five are in  warehouse  support.  Of the  Company's
employees, 36 are employed exclusively with respect to the Company's laundry and
dry cleaning equipment  operations,  20 are employed exclusively with respect to
the Company's  telecommunications  equipment  operations and 2 currently  divide
their time  between the two  operations.  None of the  Company's  employees  are
subject to a collective  bargaining  agreement,  nor has the Company experienced
any work stoppages.  The Company  believes that its relations with employees are
satisfactory.

FOREIGN AND GOVERNMENT SALES
----------------------------

         Steiner's  export  sales  of the  Company's  laundry  and dry  cleaning
business were  approximately  $3,387,149 and  $3,276,000  during the years ended
June 30,  2000 and June 30,  1999,  respectively.  Such  export  sales were made
principally   to   Latin   America   and   the   Caribbean.   See   "--Steiner's
Operations-Customers and Markets".

                                       9
<PAGE>

         Metro-Tel's  export  sales  of  telephone  test  and  customer  premise
equipment were  approximately  $265,000 and $167,000 for the year ended June 30,
2000 and the eight months ended June 30, 1999,  respectively.  Such export sales
were made principally to Europe,  Canada and South America.  Some of Metro-Tel's
export sales are made through distributors and agents.

         All of the Company's  export sales require the customer to make payment
in United  States  dollars.  Accordingly,  foreign  sales may be affected by the
strength of the United States dollar relative to the currencies of the countries
in which their customers and competitors are located.

         Revenues  from  sales  to the  United  States  government  (none of the
contracts  relating  thereto  being  subject  to  renegotiation  of  profits  or
termination at the election of the government) are immaterial.

ITEM 2.           PROPERTIES.
                  -----------

         The Company's  executive offices and the main  distribution  center for
its laundry  and dry  cleaning  equipment  products  are housed in three  leased
adjacent facilities totaling approximately 47,000 square feet in Miami, Florida,
and the  manufacturing  and  distribution  facility for its  telephone  test and
customer premise equipment  operations is located in approximately 21,500 square
feet  of  leased  space  in  Milpitas,  California.  The  Company  believes  its
facilities  are  adequate  for its present and  anticipated  future  needs.  The
following  table sets forth certain  information  concerning the leases at these
facilities:

                                   Approximate
Facility                             Sq. Ft.                   Expiration
--------                             -------                   ----------
Miami, Florida (1)                       27,000               October 2004
Miami, Florida                            8,000               Month to Month
Miami, Florida                           12,000               Month to Month
Milpitas California                      21,500               March 2002
--------------

(1)      Leased from William K.  Steiner,  a director of the Company.  The lease
         includes an option to renew the lease for a ten-year  term at a rent to
         be agreed upon by the parties.

ITEM 3.       LEGAL PROCEEDINGS.
              ------------------

         Not applicable.

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
              ---------------------------------------------------

         Not applicable.

                                       10
<PAGE>


                                     PART II
                                     -------

ITEM 5.       MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
-------       -------------------------------------------------------------

         The  Company's  Common  Stock  has been  traded on the  American  Stock
Exchange (the "Amex") under the symbol "DCU" since  November 10, 1999 and on the
Chicago  Stock  Exchange  under the symbol  "MTF" from  January  11,  1999 until
November 9, 1999 and  thereafter  under the symbol  "DCU." From January 11, 1999
until November 9, 1999, the Company's Common Stock was also quoted on the Nasdaq
Electronic Bulletin Board and prior thereto on The Nasdaq Stock Market Small Cap
Market,  each under the symbol  "MTRO." The following  table sets forth the high
and low sales prices on the Amex since  November 10, 1999,  as reported by Amex,
and high and low bid prices prior  thereto for the Company's  Common  Stock,  as
reported by Nasdaq,  for each quarterly period reflected.  The Nasdaq quotations
are without  retail  markups,  markdowns or  commissions  and may not  represent
actual transactions.

                                            HIGH                    LOW
                                            ----                    ---
         Fiscal 1999
         -----------

         First Quarter                      1 3/8                    7/8
         Second Quarter                     3 9/16                   5/8
         Third Quarter                      3 3/16                 2 1/2
         Fourth Quarter                     2 3/4                 1 11/16

         Fiscal 2000
         -----------

         First Quarter                      3 3/8                 1 3/4
         Second Quarter                     2 7/8                 1
         Third Quarter                      5 7/8                 1 1/4
         Fourth Quarter                     3 7/8                 1 5/16

         As of September 15, 2000 there were approximately 910 holders of record
of the Company's Common Stock.

         Except  for  S  Corporation  distributions  prior  to  the  Merger,  no
dividends have been paid on the Company's Common Stock during either of the last
two fiscal  years.  Steiner is a party to a Loan and Security  Agreement  with a
commercial  bank,  loans under which are  guaranteed by Metro-Tel and secured by
substantially  all of the  assets  of the  Company.  Among  other  things,  this
agreement  provides  that the Company may not declare or pay  dividends  if such
payment would likely cause it to fail to maintain a specified  consolidated debt
service ratio or a specified ratio of  consolidated  liabilities to tangible net
worth.  The Company  does not intend to pay cash  dividends  in the  foreseeable
future.

                                       11
<PAGE>

ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
              ---------------------------------------------------------

GENERAL
-------

On  November  1,  1998,  Steiner-Atlantic  Corp.  ("Steiner")  was  merged  (the
"Merger")  with and into,  and therefore  became,  a wholly owned  subsidiary of
Metro-Tel Corp.  ("Metro-Tel" and collectively with Steiner and Steiner's wholly
owned subsidiaries, the "Company"). As a result of the Merger, the Company added
Steiner's operations as a supplier of dry cleaning, industrial laundry equipment
and steam boilers to Metro-Tel's telecommunications operations as a manufacturer
and seller of telephone test and customer premise equipment.

On November 5, 1999,  the  Company  filed an  amendment  to its  Certificate  of
Incorporation, pursuant to which, effective November 7, 1999, the Company's name
was changed from Metro-Tel Corp. to DRYCLEAN USA, Inc.

In March 1999 Steiner  formed a new  subsidiary  to act as a business  broker to
assist  others  seeking  to buy or sell  existing  drycleaning  stores  and coin
laundry businesses. In July 1999, Steiner acquired certain assets, including the
worldwide  rights to the name "DRYCLEAN  USA" along with existing  franchise and
licensing agreements from an unaffiliated third party.

For financial accounting (but not corporate law) purposes, the Merger is treated
as a "reverse  acquisition"  of Metro-Tel by Steiner  utilizing  the  "purchase"
method of  accounting.  As a result,  all  financial  statements  of the Company
included in this Report covering  periods prior to November 1, 1998 reflect only
the results of  operations,  financial  position  and cash flows of Steiner on a
stand-alone  basis.  All  consolidated  financial  statements of the Company for
periods  commencing  November  1, 1998,  in  addition,  include  the  results of
operations,  financial  position  and cash  flows of  Metro-Tel  from and  after
November  1, 1998.  The  consolidated  results  for the year ended June 30, 1999
include eight months of telecommunications operations.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

As of June 30, 2000, the Company had cash and cash equivalents of $982,588.  Net
cash provided by operating  activities  was $1,200,432 for 2000 and $152,191 for
1999.  Cash provided by operating  activities in 2000 was principally the result
of net income of $965,449,  a decrease in inventories of $139,668, a decrease in
income  taxes  payable of  $201,270,  and an increase  in  customer  deposits of
$96,388,  which were partially offset by an increase of $287,783 in accounts and
lease  receivables  and an  increase  in  other  assets  of  $126,285.  Non-cash
adjustments  to  net  income,   principally   resulting  from  depreciation  and
amortization amounted to $177,023. Cash provided by operating activities in 1999
was principally the result of net income of $761,476,  a decrease in inventories
of  $289,954,  a decrease  in other  assets of $63,136 and an increase in income
taxes payable of $80,674. These increases in cash flow were offset by a $285,451
increase in accounts and lease  receivables,  a decrease in accounts payable and
accrued  expenses of $792,618 and an decrease in customer  deposits of $111,363.
Non-cash adjustments to net income,  principally resulting from depreciation and
amortization and deferred income taxes amounted to $146,383 in 1999.

                                       12
<PAGE>

Net cash used in investing  activities  in 2000  amounted to  $767,612,  and was
principally  due to capital  expenditures  for  equipment  of  $137,612  and the
acquisition of a franchise license for $550,000, and other licenses amounting to
$80,000. Net cash provided by investing activities in 1999 amounted to $154,631,
and was  principally  the  result  of the  Company's  capital  expenditures  for
equipment of $143,687, offset by cash acquired from the Metro-Tel acquisition of
$298,318.

Net cash  used in  financing  activities  amounted  to  $415,000  in  2000,  and
principally  resulted from payments on the term loan of $480,000,  offset by the
proceeds  from the  exercise  of stock  options  of  $65,000.  Net cash  used in
financing activities in 1999 amounted to $170,444, and principally resulted from
repayments  of the line of credit of  $1,000,000,  payments  on the term loan of
$696,613, advances to affiliates of $198,000, cash distributions to shareholders
of $727,394, offset by borrowings under the term loan of $2,400,000 and proceeds
from the exercise of stock options of $51,563.

The Company  believes  that its present  cash,  cash it expects to generate from
operations and borrowings  available under its $2,250,000 line of credit will be
sufficient to meet its operational  needs. The Company has no present borrowings
outstanding  under this line of credit (which,  as extended,  matures on October
30,  2000,  subject to  renewal  at the  discretion  of the  lender).  As to the
$1,600,000  principal  amount  outstanding  under its term loan,  the Company is
required  to make  monthly  payments of $40,000  until  January  2002,  when the
remaining  $960,000  will  become due.  The Company  believes it will be able to
refinance such debt at that time.

RESULTS OF OPERATIONS
---------------------

Total  revenues for the fiscal year ended June 30, 2000  increased by $1,049,701
(5.7%)  over  fiscal  1999.  Sales of the  laundry  and dry  cleaning  equipment
business segment decreased by $938,706 (5.7%),  principally due to a decrease in
the number of units sold.  In July 1999,  the license and  franchise  operations
business segment commenced  operations.  Revenues from the sale of such licenses
and  franchises of retail dry cleaning  establishments  under the name DRYCLEAN,
USA aggregated $536,340 for the year ended June 30, 2000. Sales of the Company's
telephone  test  equipment  business  segment  increased   $1,452,067   (70.9%),
principally  due to the  inclusion  of a full year of  operations  versus  eight
months in fiscal 1999.

Costs of goods sold,  expressed as a percentage of net sales,  improved to 71.6%
in  fiscal  2000 from  73.3% in fiscal  1999.  The  improvement  for the year is
attributable  to the  inclusion of a full year in fiscal  2000,  in lieu of only
eight months in fiscal 1999, of telecommunication operations, which historically
carry a higher margin.

Selling,  general and  administrative  expenses increased by $558,704 (14.5%) in
fiscal 2000 over fiscal  1999,  of which  $337,000  was due to the  inclusion of
Metro-Tel's  expenses in this  category for the full year versus eight months in
fiscal 1999. Additionally, amortization expense of the newly acquired franchise,
trademark and other  intangible  assets amounted to $74,000.  The balance of the
increase  was  substantially  all  attributable  to the  license  and  franchise
business segment which commenced operations in July 1999.

                                       13
<PAGE>

Research and  development  expenses,  which relate solely to  telecommunications
operations  increased  by $59,865  (34.9%) in fiscal 2000 mainly due to the fact
that only eight months of telecommunications  operations were included in fiscal
1999.

Interest  income  decreased  by $26,086  (42.0%)  in fiscal  2000 over 1999 as a
result of fewer  customer  leases of laundry and dry cleaning  equipment  (which
qualify as sales-type leases) being outstanding.

In fiscal 2000, interest expense decreased by $7,267 (4.2%) from fiscal 1999 due
to a  reduction  in  outstanding  debt,  which  was  partially  offset by higher
interest rates.

The provision for income taxes increased by $173,510 (44.4%) in fiscal 2000 over
fiscal  1999 due  primarily  to the  increase  in  pre-tax  profit  and a higher
effective  tax rate than in fiscal 1999 when,  for the first four months of that
fiscal year,  Steiner was taxed as a Subchapter S Corporation under the Internal
Revenue Code of 1986, as amended, and accordingly its shareholders,  rather than
it, were subject to income taxation on Steiner's earnings.

INFLATION
---------

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

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

In March 2000,  the  Financial  Accounting  Standards  Board (FASB)  issued FASB
Interpretation No. 44 (Interpretation  44), Accounting for Certain  Transactions
Involving  Stock  Compensation.  Interpretation  44  provides  criteria  for the
recognition  of  compensation   expense  in  certain  stock-based   compensation
arrangements  that are accounted for under  Accounting  Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees. Interpretation 44 is effective
July 1, 2000,  with  certain  provisions  that are  effective  retroactively  to
December  15, 1998 and January 12,  2000.  Interpretation  44 is not expected to
have an impact on the Company's future consolidated financial statements.

In  June  1998,  the  FASB  issued  SFAS  No.  133,  Accounting  for  Derivative
Instruments and Hedging Activities. SFAS No. 133 requires companies to recognize
all  derivatives  contracts as either assets or liabilities in the balance sheet
and to measure them at fair value.  If certain  conditions are met, a derivative
may be  specifically  designated as a hedge,  the objective of which is to match
the  timing  of gain or loss  recognition  on the  hedging  derivative  with the
recognition  of (i) the  changes  in the fair  value  of the  hedged  assets  or
liability that are  attributable  to the hedged risk or (ii) the earnings effect
of the hedged  forecasted  transaction.  For a derivative  not  designated  as a
hedging instrument, the gain or loss is recognized in the period of change. SFAS
No. 133 is effective  for all fiscal  quarters of fiscal years  beginning  after
June 15,  2000.  Historically,  the  Company  has not  entered  into  derivative
contracts   either  to  hedge  existing  risks  or  for  speculative   purposes.
Accordingly,  the  Company  does not  expect  adoption  of the new  standard  to
materially affect its financial statements.

                                       14
<PAGE>

ITEM 7.        FINANCIAL STATEMENTS.
               ---------------------

                        Metro-Tel Corp. And Subsidiaries

                   Index to Consolidated Financial statements
<TABLE>
<CAPTION>
                                                                                       Page No.
                                                                                      --------
<S>                                                                                     <C>
Report of Independent Certified Public Accountants                                      17

Consolidated Balance Sheets at June 30, 2000 and 1999                                   18

Consolidated Statements of Income for the years ended June 30, 2000
   and June 30, 1999                                                                    19

Consolidated Statements of Shareholders' Equity for the years ended
   June 30, 2000 and June 30, 1999                                                      20

Consolidated Statements of Cash Flows for the years ended June 30, 2000
   and June 30, 1999                                                                    21

Summary of Business and Significant Accounting Policies                                 22

Notes to Consolidated Financial Statements                                              26
</TABLE>


                                       15
<PAGE>

Report of Independent Certified Public Accountants

Board of Directors and Shareholders
DRYCLEAN USA, Inc.
Miami, Florida

We have audited the  accompanying  consolidated  balance sheets of DRYCLEAN USA,
Inc. and Subsidiaries as of June 30, 2000 and 1999, and the related consolidated
statements  of  income,  shareholders'  equity and cash flows for the years then
ended.  These  consolidated  financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
DRYCLEAN  USA,  Inc.  and  Subsidiaries  as of June 30,  2000 and 1999,  and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.

Miami, Florida                                                 BDO Seidman, LLP
August 11, 2000

                                       16
<PAGE>

                                             DRYCLEAN USA, Inc. and Subsidiaries

                                                     Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,                                                                    2000              1999
-----------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>
ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                                 $ 982,588        $ 964,768
   Accounts receivable, net of allowance for doubtful accounts
     of $36,000 and $25,000 at 2000 and 1999, respectively                   2,065,761        1,741,698
   Lease receivables (Note 2)                                                  105,394          116,927
   Inventories (Note 3)                                                      4,103,680        4,243,348
   Deferred income tax asset (Note 5)                                           46,135           43,141
   Other current assets (Note 7)                                               270,170          143,885
-----------------------------------------------------------------------------------------------------------

Total current assets                                                         7,573,728        7,253,767

LEASE RECEIVABLES - due after one year (Note 2)                                 45,519           90,882

EQUIPMENT AND IMPROVEMENTS, at cost - net of accumulated
   depreciation and amortization (Note 4)                                      340,342          333,705
FRANCHISE, TRADEMARKS AND OTHER INTANGIBLE ASSETS - net of
   accumulated amortization of $74,327 (Notes 1 and 9)                         621,941                -
DEFERRED INCOME TAX ASSET (Note 5)                                               2,514           22,884
-----------------------------------------------------------------------------------------------------------

                                                                           $ 8,584,044      $ 7,701,238
-----------------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable and accrued expenses                                   $ 1,301,537      $ 1,266,838
   Income taxes payable                                                        281,944           80,674
   Customer deposits                                                           374,396          278,008
   Current portion of term loan (Note 6)                                       480,000          440,000
-----------------------------------------------------------------------------------------------------------
Total current liabilities                                                    2,437,877        2,065,520
TERM LOAN, less current portion (Note 6)                                     1,160,000        1,680,000
-----------------------------------------------------------------------------------------------------------
Total liabilities                                                            3,597,877        3,745,520
-----------------------------------------------------------------------------------------------------------
COMMITMENTS (Notes 7, 9 and 10)
-----------------------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY (Notes 1, 11 and 12) Common stock, $0.025 par value:
     Authorized shares - 15,000,000; 7,016,250 and 6,951,250
       shares issued and outstanding at 2000 and 1999,
       respectively, including shares held in treasury                         175,406          173,781
   Additional paid-in capital                                                2,037,602        1,974,227
   Retained earnings                                                         2,773,159        1,807,710
   Treasury shares, 26,250 shares in 2000 and 1999, at cost                          -                -
-----------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                   4,986,167        3,955,718
-----------------------------------------------------------------------------------------------------------
                                                                           $ 8,584,044      $ 7,701,238
-----------------------------------------------------------------------------------------------------------
</TABLE>

                                       17
<PAGE>

                                             DRYCLEAN USA, Inc. and Subsidiaries

                                               Consolidated Statements of Income
<TABLE>
<CAPTION>

Year ended June 30,                                                           2000               1999
---------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                <C>
REVENUES:
    Net sales                                                         $ 18,447,560       $ 17,985,847
    Management fee, franchise and license fees, commissions
       and other income (Note 7)                                         1,076,939            488,951
---------------------------------------------------------------------------------------------------------

Total                                                                   19,524,499         18,474,798
---------------------------------------------------------------------------------------------------------

COST OF SALES                                                           13,213,440         13,178,610
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 7 and 9)             4,422,131          3,863,427
RESEARCH AND DEVELOPMENT EXPENSES                                          231,219            171,354
---------------------------------------------------------------------------------------------------------

Total                                                                   17,866,790         17,213,391
---------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                         1,657,709          1,261,407
---------------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE):
    Interest income                                                         35,994             62,080
    Interest expense                                                      (164,254 )         (171,521 )
---------------------------------------------------------------------------------------------------------

Total Other Expense                                                       (128,260 )         (109,441 )
---------------------------------------------------------------------------------------------------------

EARNINGS BEFORE INCOME TAXES                                             1,529,449          1,151,966
PROVISION FOR INCOME TAXES (Note 5)                                        564,000            390,490
---------------------------------------------------------------------------------------------------------

NET EARNINGS                                                             $ 965,449          $ 761,476
---------------------------------------------------------------------------------------------------------

Basic earnings per share                                                     $0.14              $0.12
Diluted earnings per share                                                   $0.13              $0.12
---------------------------------------------------------------------------------------------------------

Weighted average number of shares of common stock outstanding:

       Basic                                                             6,952,083          6,165,318
       Diluted                                                           7,305,931          6,491,450
---------------------------------------------------------------------------------------------------------

PRO FORMA AMOUNTS (UNAUDITED) (NOTE 5):

    Earnings before income taxes                                                          $ 1,151,966
    Provision for income taxes (Notes 1 and 5)                                                493,490
---------------------------------------------------------------------------------------------------------

    PRO FORMA NET EARNINGS                                                                  $ 658,476
---------------------------------------------------------------------------------------------------------

    Pro forma basic earnings per share                                                          $0.11
    Pro forma diluted earnings per share                                                        $0.10
---------------------------------------------------------------------------------------------------------
</TABLE>

                                       18
<PAGE>

                                             DRYCLEAN USA, Inc. and Subsidiaries

                                 Consolidated Statements of Shareholders' Equity
                                                                        (Note 1)
<TABLE>
<CAPTION>

                                          Common Stock        Additional   Treasury Stock                 Undistributed
                                       --------------------    Paid-in   --------------------   Retained   Shareholders
                                         Shares     Amount     Capital     Shares     Amount    Earnings     Earnings     Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>       <C>       <C>                     <C>       <C>          <C>        <C>
Balance at June 30, 1998               4,720,954 $ 118,024 $    51,726          -  $       - $ 1,448,950  $  324,678 $  1,943,378

Year ended June 30, 1999:

   Distributions                              -          -           -          -          -           -    (727,394 )   (727,394 )

   Reclassification of cumulative
     undistributed earnings applicable
     to the Company's S corporation
     status                                   -          -           -          -          -    (402,716 )   402,716            -

   Stock exchanged in acquisition
     of business                       2,180,296    54,507   1,872,188     26,250          -           -           -    1,926,695

   Stock options exercised               50,000      1,250      50,313          -          -           -           -       51,563

   Net income                                            -           -          -          -     761,476           -      761,476
-----------------------------------------------------------------------------------------------------------------------------------

Balance at June 30, 1999               6,951,250   173,781   1,974,227     26,250          -   1,807,710           -    3,955,718

Year ended June 30, 2000:

   Stock options exercised               65,000      1,625      63,375          -          -           -           -       65,000

   Net income                                 -          -           -          -          -     965,449           -      965,449
-----------------------------------------------------------------------------------------------------------------------------------

Balance at June 30, 2000               7,016,250 $ 175,406 $ 2,037,602     26,250  $       - $ 2,773,159  $        - $  4,986,167
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       19
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                                           Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended June 30,                                                                 2000                1999
--------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                 <C>
OPERATING ACTIVITIES:
   Net income                                                                   $965,449            $761,476
   Adjustments to reconcile net income to net cash
     provided by operating activities, net of effect of acquisition:
       Bad debt expense                                                           20,614              33,793
       Depreciation and amortization                                             139,033              50,615
       Deferred income taxes                                                      17,376              61,975
       (Increase) decrease in:
         Accounts and lease receivables                                         (287,783 )          (285,451 )
         Inventories                                                             139,668             289,954
         Other assets                                                           (126,285 )            63,136
       Increase (decrease) in:
         Accounts payable and accrued expenses                                    34,702            (792,618 )
         Income taxes payable                                                    201,270              80,674
         Customer deposits                                                        96,388            (111,363 )
--------------------------------------------------------------------------------------------------------------

Net cash provided by operating activities                                      1,200,432             152,191
--------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
   Capital expenditures                                                         (137,612 )          (143,687 )
   Acquisition of franchise and license agreements                              (630,000 )                 -
   Cash of acquired company                                                            -             298,318
--------------------------------------------------------------------------------------------------------------

Net cash (used in) provided by investing activities                             (767,612 )           154,631
--------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES:
   Repayments under line of credit                                                     -          (1,000,000 )
   Payments on term loans                                                       (480,000 )          (696,613 )
   Borrowings under term loan                                                          -           2,400,000
   Advances to affiliate                                                               -            (198,000 )
   Cash distributions to shareholders                                                  -            (727,394 )
   Proceeds from exercise of stock options                                        65,000              51,563
--------------------------------------------------------------------------------------------------------------

Net cash used in financing activities                                           (415,000 )          (170,444 )
--------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                                         17,820             136,378
Cash and cash equivalents at beginning of year                                   964,768             828,390
--------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of year                                        $982,588            $964,768
--------------------------------------------------------------------------------------------------------------

Supplemental Information:
   Cash paid for:
     Interest                                                                   $164,254            $171,521
     Income taxes                                                               $345,625            $239,311
--------------------------------------------------------------------------------------------------------------

Non-cash Transaction:
   Acquisition of business, net of cash of acquired company (Note 1)              $    -         $ 1,628,377
--------------------------------------------------------------------------------------------------------------
</TABLE>

                                       20
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                         Summary of Business and Significant Accounting Policies


        NATURE OF BUSINESS         DRYCLEAN   USA,   Inc.   and
                                   Subsidiaries  (collectively,  the  "Company")
                                   are  engaged  in the sale of  commercial  and
                                   industrial    laundry   and   dry    cleaning
                                   equipment, boilers and replacement parts, the
                                   sale of individual and area franchises  under
                                   the DRYCLEAN  USA name,  acting as a business
                                   broker in  connection  with the  purchase and
                                   sale of retail dry  cleaning  stores and coin
                                   laundries  and the  manufacture  and  sale of
                                   telephone test equipment and customer premise
                                   equipment, as well as related accessories.

                                   The  Company  primarily  sells  to  customers
                                   located in the United  States,  the Caribbean
                                   and Latin America.

        PRINCIPALS OF              The accompanying consolidated financial
        CONSOLIDATION              statements include the accounts of DRYCLEAN
                                   USA, Inc. and its wholly-owned subsidiaries.
                                   Intercompany transactions and balances have
                                   been eliminated in consolidation.

        REVENUE                    Sales of products are  generally recorded as
        RECOGNITION                they are shipped. Commissions and
                                   management  fees are  recorded  when  earned.
                                   Individual  franchise  arrangements include a
                                   license  and  provide  for payment of initial
                                   fees,  as well as  continuing  service  fees.
                                   Initial franchise fees are generally recorded
                                   upon the  opening  of the  franchised  store.
                                   Continuing  services  fees are recorded  when
                                   earned.

        INVENTORIES                Inventories  are  valued at the lower of cost
                                   or   market   determined   on  the   first-in
                                   first-out method.

        EQUIPMENT,                 Property and  equipment  are stated at cost.
        IMPROVEMENTS AND           Depreciation and amortization are calculated
        DEPRECIATION               on  accelerated  and  straight-line  methods
                                   over  lives  of  five  to  seven  years  for
                                   furniture  and equipment and the life of the
                                   lease for  leasehold  improvements  for both
                                   financial reporting and income tax purposes,
                                   except that leasehold improvements which are
                                   amortized  over  31  years  for  income  tax
                                   purposes.

        FRANCHISE LICENSE,         The franchise  license,  trademark and other
        TRADEMARK AND OTHER        intangible  assets  are  stated at cost less
        INTANGIBLE ASSETS          accumulated  amortization.  These assets are
                                   amortized on a straight-line  basis over the
                                   estimated  future  periods  to be  benefited
                                   (2-15  years).   The  Company   reviews  the
                                   recoverability  of  the  franchise  license,
                                   trademark and other intangible  assets based
                                   primarily  upon an analysis of  undiscounted

                                       21
<PAGE>

                                             DRYCLEAN USA, Inc. and Subsidiaries

                         Summary of Business and Significant Accounting Policies

                                   cash flows from the acquired assets.  In the
                                   event the  expected  future  net cash  flows
                                   should become less than the carrying  amount
                                   of the assets,  an  impairment  loss will be
                                   recorded in the period such determination is
                                   made based on the fair value of the  related
                                   assets.

        ASSET IMPAIRMENTS          The   Company   periodically   reviews   the
                                   carrying  value of  certain of its assets in
                                   relation  to  historical  results,   current
                                   business  conditions  and trends to identify
                                   potential  situations  in which the carrying
                                   value of assets may not be  recoverable.  If
                                   such  reviews  indicate  that  the  carrying
                                   value of such assets may not be recoverable,
                                   the Company would estimate the  undiscounted
                                   sum of the  expected  future  cash  flows of
                                   such assets or analyze the fair value of the
                                   asset, to determine if permanent  impairment
                                   exists.  If a permanent  impairment  exists,
                                   the Company  would  determine the fair value
                                   by using quoted market prices, if available,
                                   for such assets,  or if quoted market prices
                                   are  not   available,   the  Company   would
                                   discount the  expected  future cash flows of
                                   such assets. There were no asset impairments
                                   during 2000 and 1999.

        INCOME TAXES               For the purpose of the  provision for income
                                   taxes,   the   Company   has   adopted   the
                                   provisions   of   Statement   of   Financial
                                   Accounting   Standards   (SFAS)   No.   109,
                                   Accounting for Income Taxes, for all periods
                                   presented.  Under the  asset  and  liability
                                   method of SFAS No. 109,  deferred  taxes are
                                   recognized    for    differences     between
                                   consolidated  financial statement and income
                                   tax bases of assets and liabilities.

        STATEMENT OF               For   purposes  of  this   statement,   cash
        CASH FLOWS                 equivalents   include   all  highly   liquid
                                   investments  with  original   maturities  of
                                   three months or less.

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

                                       22
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                         Summary of Business and Significant Accounting Policies

        STOCK BASED                The Company recognizes  compensation expense
        COMPENSATION               for its stock option  incentive  plans using
                                   the  intrinsic  value method of  accounting.
                                   Under  the  terms  of  the  intrinsic  value
                                   method,  compensation cost is the excess, if
                                   any, of the quoted market price of the stock
                                   at the  grant  date,  or  other  measurement
                                   date,  over the amount an employee  must pay
                                   to acquire the stock.  During 2000 and 1999,
                                   all stock options were granted with exercise
                                   prices at least equal to the market price of
                                   the stock at the grant date.

        EARNINGS PER SHARE         The Company has  adopted the  provisions  of
                                   SFAS No. 128,  Earnings  Per Share,  for all
                                   periods  presented.  SFAS No. 128 requires a
                                   dual   presentation  of  basic  and  diluted
                                   earnings per share. See Note 11.

                                   Basic  earnings per share are computed on the
                                   basis  of  the  weighted  average  number  of
                                   common shares  outstanding  during each year.
                                   Diluted  earnings  per share are  computed on
                                   the basis of the weighted  average  number of
                                   common   shares   and   dilutive   securities
                                   outstanding  during  each  year.   Securities
                                   having an antidilutive effect on earnings per
                                   share are excluded  from the  calculation  of
                                   diluted earnings per share.

                                   The weighted  average number of common shares
                                   outstanding   for   all   periods   presented
                                   retroactively  reflects  the  effects  of the
                                   recapitalization  of the Company described in
                                   Note 1.

        ADVERTISING                The  Company  expenses  the  costs  of
        COSTS                      advertising   as  of  the   first   date  the
                                   advertisements   take   place.   The  Company
                                   expensed  approximately $200,000 and $185,000
                                   of advertising costs for the years ended June
                                   30, 2000 and 1999, respectively.

        FAIR VALUE OF              The Company's financial  instruments consist
        FINANCIAL INSTRUMENTS      principally  of cash,  accounts  receivable,
                                   leases  receivables,  accounts  payable  and
                                   accrued  expenses  and  debt.  The  carrying
                                   amounts  of such  financial  instruments  as
                                   reflected in the  accompanying  consolidated
                                   balance sheets  approximate  their estimated
                                   fair value.  Their  estimated  fair value is
                                   not  necessarily  indicative  of the amounts
                                   the  Company  could  realize  in  a  current
                                   market  exchange  or of future  earnings  or
                                   cash flows.

                                       23
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                         Summary of Business and Significant Accounting Policies


        SEGMENTS                   The  Company   applies  the   provisions  of
                                   Statement of Financial  Accounting Standards
                                   No.  131  ("SFAS   131"),   Segments  of  an
                                   Enterprise  and  Related   Information,   in
                                   determining its segments and reporting. SFAS
                                   131  supercedes   SFAS  No.  14,   Financial
                                   Reporting   for   Segments   of  a  Business
                                   Enterprise.    Information   regarding   the
                                   Company's segments is reported in Note 13.

        NEW ACCOUNTING             In  June  1998,  the  Financial   Accounting
        PRONOUNCEMENTS             Standard   Board   issued   SFAS  No.   133,
                                   Accounting  for Derivative  Instruments  and
                                   Hedging  Activities.  SFAS No. 133  requires
                                   companies  to  recognize   all   derivatives
                                   contracts as either assets or liabilities in
                                   the  balance  sheet and to  measure  them at
                                   fair value. If certain conditions are met, a
                                   derivative may be specifically designated as
                                   a hedge,  the objective of which is to match
                                   the  timing of gain or loss  recognition  on
                                   the hedging  derivative with the recognition
                                   of (i) the  changes in the fair value of the
                                   hedged   assets   or   liability   that  are
                                   attributable  to the hedged risk or (ii) the
                                   earnings  effect  of the  hedged  forecasted
                                   transaction. For a derivative not designated
                                   as a hedging instrument, the gain or loss is
                                   recognized   in  income  in  the  period  of
                                   change.  SFAS No. 133 is  effective  for all
                                   fiscal  quarters of fiscal  years  beginning
                                   after  June  15,  2000.  Historically,   the
                                   Company  has not  entered  into  derivatives
                                   contracts  either to hedge existing risks or
                                   for speculative purposes.  Accordingly,  the
                                   Company does not expect  adoption of the new
                                   standard to materially  affect its financial
                                   statements.

                                   In  March  2000,  the  Financial   Accounting
                                   Standards    Board    (FASB)    issued   FASB
                                   Interpretation  No. 44  (Interpretation  44),
                                   Accounting for Certain Transactions Involving
                                   Stock    Compensation.    Interpretation   44
                                   provides  criteria  for  the  recognition  of
                                   compensation  expense in certain  stock-based
                                   compensation  arrangements that are accounted
                                   for under Accounting Principles Board Opinion
                                   No.  25,   Accounting  for  Stock  Issued  to
                                   Employees.  Interpretation  44  is  effective
                                   July  1,  2000,   with   certain   provisions
                                   effective  retroactively to December 15, 1998
                                   and January 12, 2000.  There was no effect of
                                   the retroactive  provisions of Interpretation
                                   44 on the  Company's  consolidated  financial
                                   statements. Interpretation 44 is not expected
                                   to have a  material  effect on the  Company's
                                   consolidated financial statements.

                                       24
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements

1.      ACQUISITIONS AND           On  July  9,  1999,  the  Company   acquired
        REORGANIZATION             DRYCLEAN  USA  Franchise   Company  and  the
                                   worldwide  rights to the name  DRYCLEAN  USA
                                   along with  existing  franchise  and license
                                   agreements  for $550,000 cash. In connection
                                   with this acquisition,  the Company acquired
                                   $50,000  of  current   assets,   $10,000  of
                                   fixtures   and   equipment,    $610,000   of
                                   franchise   license,   trademark  and  other
                                   intangibles,  and assumed $80,000 of current
                                   liabilities.  The pro  forma  effect  of the
                                   transaction   was   insignificant   to   the
                                   consolidated statement of income for 2000.

                                   On   November   1,  1998,   Metro-Tel   Corp.
                                   ("Metro-Tel")  completed  a merger in which a
                                   wholly-owned  subsidiary  was merged with and
                                   into Steiner-Atlantic Corp.  ("Steiner").  In
                                   connection   therewith,    Metro-Tel   issued
                                   4,720,954  shares of its common  stock to the
                                   shareholders  of Steiner and Steiner became a
                                   wholly-owned  subsidiary  of the Company.  In
                                   addition,  Metro-Tel  granted options for the
                                   purchase  of  up to  500,000  shares  of  its
                                   common   stock  to   employees   of  Steiner.
                                   Subsequently,   on  November  7,  1999,   the
                                   Company  changed  its name to  DRYCLEAN  USA,
                                   Inc.

                                   For  financial  accounting   purposes,   this
                                   transaction  was  accounted  for as a reverse
                                   acquisition of Metro-Tel by Steiner.  In this
                                   connection,  historical  amounts,  shares and
                                   per  share  amounts  for  Steiner  have  been
                                   retroactively   adjusted   to   reflect   the
                                   foregoing transactions.

                                   The  purchase  of  Metro-Tel  was  valued  at
                                   approximately  $1,926,000, an amount equal to
                                   the  fair  market  value  of the  Metro-Tel's
                                   outstanding  common shares.  This acquisition
                                   was accounted for under the purchase  method,
                                   whereby the purchase  price was  allocated to
                                   the  underlying  assets  and  liabilities  of
                                   Metro-Tel  based  upon their  estimated  fair
                                   values.   The  transaction  was  recorded  as
                                   follows:
<TABLE>
<CAPTION>
                                <S>                                                           <C>
                                  Fair value of net assets acquired:
                                      Current assets                                          $       2,520,898
                                      Other assets                                                      150,278
                                  --------------------------------------------------------------------------------

                                  Total                                                               2,671,176
                                  Less liabilities assumed                                             (744,481)
                                  --------------------------------------------------------------------------------

                                  Net                                                         $       1,926,695
                                  --------------------------------------------------------------------------------
</TABLE>
                                       25
<PAGE>

                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements

                                   The consolidated statements of income include
                                   the  results of  operations  of the  acquired
                                   business (Metro-Tel) from November 1, 1998.

                                   The  following  unaudited  pro forma  summary
                                   presents   the   consolidated    results   of
                                   operations   of   the   Company   as  if  the
                                   acquisition had occurred on July 1, 1998, and
                                   the Company's S  Corporation  status had been
                                   terminated as of that date:
<TABLE>
<CAPTION>
<S>                                               <C>                                                      <C>
                                  Year ended June 30,                                                      1999
                                  --------------------------------------------------------------------------------
                                  Pro forma revenues                                          $      19,751,668
                                  --------------------------------------------------------------------------------
                                  Pro forma net earnings                                      $         917,275
                                  --------------------------------------------------------------------------------
                                  Pro forma basic earnings per share                          $            0.15
                                  --------------------------------------------------------------------------------
                                  Pro forma diluted earnings per share                        $            0.14
                                  --------------------------------------------------------------------------------
</TABLE>

2.      LEASE RECEIVABLES         Lease   receivables   result  from  customer
                                  leases of equipment under arrangements which
                                  qualify as  sales-type  leases.  At June 30,
                                  2000,  annual future lease payments,  net of
                                  deferred   interest  ($17,714  at  June  30,
                                  2000),   due  under  these   leases  are  as
                                  follows:
<TABLE>
<CAPTION>
                                  Years ending June 30,
                                  --------------------------------------------------------------------------------
<S>                               <C>                                                         <C>
                                  2001                                                        $        105,394
                                  2002                                                                  39,567
                                  2003                                                                   4,262
                                  2004                                                                   1,690
                                  --------------------------------------------------------------------------------
                                                                                              $        150,913
                                  --------------------------------------------------------------------------------
</TABLE>

                                       26
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
3.      INVENTORIES                The components of inventories are summarized as follows:
<S>                                    <C>                                            <C>                  <C>
                                  June 30,                                            2000                 1999
                                  --------------------------------------------------------------------------------

                                  Raw materials                          $         709,606    $         713,867
                                  Work-in-process                                  311,384              180,947
                                  Finished goods                                 3,082,690            3,348,534
                                  --------------------------------------------------------------------------------
                                                                         $       4,103,680    $       4,243,348
                                  --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
4.      EQUIPMENT AND              Major classes of equipment and improvements consist of the following:
        IMPROVEMENTS
<S>                                    <C>                                                  <C>               <C>
                                  June 30,                                                  2000              1999
                                  ----------------------------------------------------------------------------------

                                  Furniture and equipment                         $      696,728    $      661,407
                                  Leasehold improvements                                 298,764           262,714
                                  ----------------------------------------------------------------------------------
                                  Total                                                  995,492           924,121

                                  Less accumulated depreciation and
                                      amortization                                       655,150           590,416
                                  ----------------------------------------------------------------------------------
                                                                                  $      340,342    $      333,705
                                  ----------------------------------------------------------------------------------
</TABLE>
                                   Depreciation  and  amortization  amounted  to
                                   $64,734  and $50,617 for the years ended June
                                   30, 2000 and 1999, respectively.

5.      INCOME TAXES               Through  October  31,  1998,  Steiner,   the
                                   source of its income which,  as explained in
                                   Note 1,  represented  the  Company's  entire
                                   reportable  income for  financial  reporting
                                   purposes  for  periods  prior to November 1,
                                   1998, with the consent of its  shareholders,
                                   elected  to be  taxed  as  an S  Corporation
                                   under the  provisions of Subchapter S of the
                                   Internal  Revenue  Code of 1986,  as amended
                                   (the   "Code").   Shareholders   of   an   S
                                   Corporation are taxed on their proportionate
                                   share  of  the  company's   taxable  income.
                                   Accordingly,  no  provision  for  federal or
                                   state  income tax is  required  for  periods
                                   prior to October 31,  1998.  Had the Company
                                   been treated as a C Corporation, the Company
                                   would have incurred  approximately  $103,000
                                   of  additional  income taxes during the year
                                   ended June 30, 1999.

                                       27
<PAGE>

                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements

                                   The  following  are the  components of income
                                   tax expense:
<TABLE>
<CAPTION>

<S>                                               <C>                                         <C>             <C>
                                  Year ended June 30,                                         2000            1999
                                  -----------------------------------------------------------------------------------

                                  Current
                                      Federal                                        $     466,729   $     280,499
                                      State                                                 79,895          48,016
                                  -----------------------------------------------------------------------------------

                                                                                           546,624         328,515
                                  -----------------------------------------------------------------------------------

                                  Deferred
                                      Federal                                               15,803          50,087
                                      State                                                  1,573          11,888
                                  -----------------------------------------------------------------------------------

                                                                                            17,376          61,975
                                  -----------------------------------------------------------------------------------

                                  Total                                              $     564,000   $     390,490
                                  -----------------------------------------------------------------------------------
</TABLE>
                                   The  reconciliation  of  income  tax  expense
                                   computed at the Federal statutory tax rate of
                                   34% to the  provision  for income taxes is as
                                   follows:
<TABLE>
<CAPTION>
                                                                                              Pro Forma
                                  Year ended June 30,                            2000              1999
                                  ------------------------------------------------------------------------
<S>                                                                     <C>            <C>
                                  Tax at the statutory rate             $     520,013  $        391,668

                                  Tax effect of S Corporation status                -          (103,000 )

                                  State income taxes,
                                     net of federal benefit                    53,769            50,222

                                  Income taxes attributable to
                                     termination of S Corporation
                                     status                                         -            21,427

                                  Other                                        (9,782 )          30,173
                                  ------------------------------------------------------------------------

                                  Total                                 $     564,000  $        390,490
                                  ------------------------------------------------------------------------
</TABLE>
                                   Deferred  income  taxes  reflect  the net tax
                                   effect of temporary  differences  between the
                                   bases of assets and liabilities for financial
                                   reporting  purposes  and the  bases  used for
                                   income tax purposes.  Significant  components
                                   of  the  Company's   current  and  noncurrent
                                   deferred  tax assets and  liabilities  are as
                                   follows:

                                       28
<PAGE>

                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S>                                               <C>                                      <C>              <C>
                                  Year ended June 30,                                      2000             1999
                                  ---------------------------------------------------------------------------------
                                  Current deferred tax asset (liability):

                                      Allowance for doubtful accounts             $      13,680    $       9,408
                                      Inventory capitalization                           18,414           25,174
                                      Compensation                                       21,845           14,129
                                      Other                                              (7,804 )         (5,570 )
                                  ---------------------------------------------------------------------------------

                                                                                         46,135           43,141
                                  ---------------------------------------------------------------------------------

                                  Noncurrent deferred tax asset (liability):

                                      Depreciation                                       (9,452 )         16,271
                                      Amortization                                       11,966                -
                                      Other                                                   -            6,613
                                  ---------------------------------------------------------------------------------

                                                                                          2,514           22,884
                                  ---------------------------------------------------------------------------------

                                  Total net deferred tax asset                    $      48,649    $      66,025
                                  ---------------------------------------------------------------------------------
</TABLE>

6.      CREDIT AGREEMENT           The  Company is a party to a loan  agreement
                                   facility  consisting  of a line of credit of
                                   $2,250,000  and a term  loan of  $2,400,000.
                                   Borrowings    under   the    agreement   are
                                   guaranteed by the Company,  bear interest at
                                   the Adjusted  LIBOR Market Index Rate (9.40%
                                   at June 30, 2000) and are  collateralized by
                                   substantially  all of the Company's  assets.
                                   The line of  credit  is due on  demand.  The
                                   term loan is due January  2002.  At June 30,
                                   2000 and  1999,  there  were no  outstanding
                                   borrowings  under  the line of  credit  and,
                                   therefore,    the   Company   could   borrow
                                   $2,250,000.  At June 30, 2000 and 1999,  the
                                   Company  owed   $1,640,000  and  $2,120,000,
                                   respectively,  under the term loan. The term
                                   loan  requires  monthly  payments of $40,000
                                   plus  interest,   with  a  $960,000  balloon
                                   payment  in  January  2002.   The  agreement
                                   requires  maintenance  of certain  financial
                                   ratios  and   contains   other   restrictive
                                   covenants.  The  Company  was in  compliance
                                   with these ratios and  covenants at June 30,
                                   2000.

7.      RELATED PARTY              During  the years  ended  June 30,  2000 and
        TRANSACTIONS               1999, the Company charged management fees of
                                   $118,391 and $265,000,  respectively,  to an
                                   entity  controlled  by one of the  principal
                                   shareholders  of the  Company.  At June  30,
                                   2000  and   1999,   $86,391   and   $23,000,
                                   respectively,  was due from that company and
                                   is included in other  current  assets in the
                                   accompanying balance sheets.  Advances to or
                                   from that affiliate are non-interest bearing
                                   and are due on demand.

                                       29
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements


                                   The  Company  leases  warehouse  and  office
                                   space from a  principal  shareholder  of the
                                   Company  under  an  operating   lease  which
                                   expires  in  October  2004.   Annual  rental
                                   commitments  under  this  lease  approximate
                                   $83,200.

8.      CONCENTRATIONS OF          The  Company   places  its  excess  cash  in
        CREDIT RISK                overnight  deposits  with a  large  national
                                   bank.  Concentration  of  credit  risk  with
                                   respect  to trade and lease  receivables  is
                                   limited due to a large customer base.  Trade
                                   and   lease    receivables   are   generally
                                   collateralized with equipment sold.

                                   The  Company is  exposed to foreign  currency
                                   risk in Italy.  To  mitigate  such risk,  the
                                   Company enters into foreign  exchange forward
                                   contracts  to hedge  transactions  related to
                                   firm   commitments   to  purchase   equipment
                                   denominated in Italian Lira. Gains and losses
                                   are deferred and accounted for as part of the
                                   underlying  transactions.  At June 30,  2000,
                                   the Company has foreign exchange contracts to
                                   purchase  approximately  675 million  Italian
                                   Lira, for delivery in July and August 2000.

9.      COMMITMENTS                Rent
                                   ----

                                   The  Company  leases  additional  office  and
                                   warehouse  space  under   operating   leases,
                                   including two leases on a monthly basis.  The
                                   leases  expire in March 2002 and October 2004
                                   (the  latter  has an  option  to renew  for a
                                   period  of ten  years at a rent to be  agreed
                                   upon).  Minimum future rental  commitment for
                                   leases in effect at June 30, 2000,  including
                                   leases to related  parties,  approximates the
                                   following:

                                  Years ending June 30,
                                  ----------------------------------------------

                                  2001                         $        261,000
                                  2002                                  219,000
                                  2003                                   83,000
                                  2004                                   83,000
                                  2005                                   28,000
                                  ---------------------------------------------
                                   Rent  expense,  including  rentals  paid to a
                                   related   party  (see  Note  7),   aggregated
                                   $309,794  and  $232,013  for the years  ended
                                   June 2000 and 1999, respectively.

                                       30
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements

                                   License Agreements

                                   The Company is a party to a license agreement
                                   under  which  it is  obligated  to pay 10% of
                                   annual   sales  of  certain   products.   The
                                   agreement  may be  canceled  by  the  Company
                                   annually upon sixty days notice.  In February
                                   2000, the Company acquired,  for $80,000, all
                                   the   manufacturing   rights  under   another
                                   license   agreement   under   which   it  was
                                   obligated  to pay the greater of 10% of sales
                                   of certain  products or $75,000 per year. The
                                   Company recorded the license as an intangible
                                   asset for $80,000 as of June 30, 2000, and is
                                   amortizing  the  license  on a  straight-line
                                   basis over 5 years.  During  the years  ended
                                   June  30,  2000  and  1999,  royalty  expense
                                   aggregated $40,677 and $54,640, respectively.

10.     DEFERRED                   The  Company  has a  participatory  deferred
        COMPENSATION               compensation   plan   wherein   it   matches
        PLAN                       employee   contributions   up  to,   at  the
                                   Company's   option,    for   all   employees
                                   determined annually, 1% or 2% of an eligible
                                   employee's  yearly  compensation.  Employees
                                   are  eligible  to  participate  in the  plan
                                   after three  months of service.  The Company
                                   contributed  $23,926  and  $18,657 in fiscal
                                   2000 and 1999, respectively. The plan is tax
                                   exempt under Section  401(k) of the Internal
                                   Revenue Code.

                                   The Company also  maintains a  profit-sharing
                                   plan   which   covers    substantially    all
                                   employees.     Annual    contributions    are
                                   determined at the  discretion of the Board of
                                   Directors.  There were no  contributions  for
                                   fiscal years 2000 and 1999.

11.     EARNINGS PER SHARE         The following reconciles the components of
                                   the earnings per share computation:
<TABLE>
<CAPTION>
                                 Year ended June 30,                                                      2000
                                 ---------------------------------------------------------------------------------
                                                                           INCOME        SHARES        PER SHARE
                                                                        (NUMERATOR)   (DENOMINATOR)      AMOUNT
                                 ---------------------------------------------------------------------------------
<S>                                                                        <C>           <C>             <C>
                                 Net earnings                              $965,449      6,952,083       $0.14

                                 Effect of dilutive securities:
                                     Stock options                                -        353,848        (.01 )
                                 ---------------------------------------------------------------------------------

                                 Net earnings plus assumed dilution        $965,449      7,305,931       $0.13
                                 ---------------------------------------------------------------------------------
</TABLE>

                                       31
<PAGE>

                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

                                 Year ended June 30,                                                  1999
                                 -----------------------------------------------------------------------------

                                                                         Income         Shares   Per Share
                                                                    (Numerator)  (Denominator)      Amount
                                 -----------------------------------------------------------------------------
<S>                                                                    <C>           <C>             <C>
                                 Net earnings                          $761,476      6,165,318       $0.12

                                 Effect of dilutive securities:
                                     Stock options                            -        326,132           -
                                 -----------------------------------------------------------------------------

                                 Net earnings plus assumed dilution    $761,476      6,491,450       $0.12
                                 -----------------------------------------------------------------------------
</TABLE>

                                   There were no stock  options  outstanding  at
                                   June  30,  2000  that  were  excluded  in the
                                   computation  of  earnings  per share for 2000
                                   because  the  exercise  prices of the options
                                   were less than the  average  market  price of
                                   the common shares for that year.

12.     STOCK OPTIONS              At June 30,  2000 and 1999,  the Company had
                                   in  effect  two  stock   option  plans  that
                                   authorize  the grant of options to  purchase
                                   850,000 shares (until  September,  2001) and
                                   100,000   shares   (until   August,   2004),
                                   respectively,  of the Company's common stock
                                   to employees and  non-employee  directors of
                                   the Company,  respectively. In addition, the
                                   Company's  board  of  directors   authorized
                                   another   plan,   subject   to   shareholder
                                   approval,  that would authorize the grant of
                                   options  to  purchase   500,000   shares  to
                                   employees,  directors and  consultants.  The
                                   Company  applies APB Opinion 25,  Accounting
                                   for Stock Issued to  Employees,  and related
                                   interpretations   in  accounting  for  stock
                                   options.  Under APB Opinion 25,  because the
                                   exercise   price  of  the  Company's   stock
                                   options  equals or exceeds the market  price
                                   of  the  underlying  stock  on the  date  of
                                   grant,   no   compensation   cost  has  been
                                   recognized.

                                   Pursuant to the pre-existing and new employee
                                   plans,  the Company may grant incentive stock
                                   options and nonqualified  stock options.  All
                                   options under the non-employee  director plan
                                   are nonqualified  stock options.  Options may
                                   have a  maximum  term  of 10  years,  are not
                                   transferable   and  must  be  granted  at  an
                                   exercise price of at least 100% of the market
                                   value  of the  common  stock  on the  date of
                                   grant.  Incentive stock options granted to an
                                   individual  owning more than 10% of the total
                                   combined voting power of all classes of stock
                                   issued by the  Company  must have an exercise
                                   price of at  least  equal to 110% of the fair
                                   market  value of the shares  issuable  on the
                                   date of the  grant and may not have a

                                       32
<PAGE>

                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements

                                   term  of more  than  five  years.  Incentive
                                   stock  options  granted  under the plans are
                                   subject to the limitation that the aggregate
                                   fair market value (determined as of the date
                                   of grant) of those  options  which may first
                                   become  exercisable  in  any  calendar  year
                                   cannot exceed $100,000.  Generally,  options
                                   terminate three months following termination
                                   of service (except generally one year in the
                                   case of  termination of service by reason of
                                   death or disability).

                                   Generally,  options granted to date have been
                                   exercisable  as to  one-fourth  of the shares
                                   covered  thereby on the first  anniversary of
                                   grant  and   one-fourth  on  the  next  three
                                   anniversaries  of  grant.  However,   options
                                   granted under the non-employee directors plan
                                   become  immediately  exercisable upon certain
                                   events  which are  deemed to be a "change  in
                                   control"  of  the  Company.  Options  granted
                                   under   the   pre-existing    employee   plan
                                   terminate  upon a merger in which the Company
                                   is not the surviving  corporation,  a capital
                                   reorganization  in which more than 50% of the
                                   Company's  common stock is exchanged,  or the
                                   liquidation  or  dissolution  of the Company,
                                   unless  other  provision is made by the board
                                   of directors.

                                   In fiscal 2000,  the Company  granted  10,000
                                   options  to  an  employee,  exercisable  at a
                                   price of $2.00 per share.

                                   In fiscal 1999,  the Company  granted a total
                                   of 565,000 options to employees,  exercisable
                                   at  prices of $1.00 or $2.00  per  share.  In
                                   addition,  the  Company  granted  a total  of
                                   30,000  options to directors,  exercisable at
                                   prices of $0.91 or $2.00 per share.

                                   SFAS No.  123,  "Accounting  for  Stock-Based
                                   Compensation,"   requires   the   Company  to
                                   provide pro forma  information  regarding net
                                   income   and  net  income  per  share  as  if
                                   compensation  cost  for the  Company's  stock
                                   options  had been  determined  in  accordance
                                   with the fair value based  method  prescribed
                                   in SFAS No. 123.  The Company  estimates  the
                                   fair value of each stock  option at the grant
                                   date    by    using     the     Black-Scholes
                                   option-pricing   model  with  the   following
                                   weighted-average  assumptions used for grants
                                   in  fiscal  year  2000:  no  dividend   yield
                                   percent;   expected   volatility   of  46.1%;
                                   risk-free  interest  rates  of  approximately
                                   6.36%,  and expected lives of 5 years.  Based
                                   on these  assumptions,  under the  accounting
                                   provisions of SFAS No. 123, the Company's net
                                   income and net income per common  share would
                                   have been as follows:.

                                       33
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S>                                               <C>                                                       <C>
                                  Year ended June 30,                                                       2000
                                  --------------------------------------------------------------------------------

                                  Net income                                       As reported   $      965,449
                                                                                   Pro forma     $      957,649
                                  -------------------------------------------------------------------------------

                                  Net income per common share:

                                  Basic                                            As reported   $         0.14
                                                                                   Pro forma     $         0.14
                                  -------------------------------------------------------------------------------

                                  Diluted                                          As reported   $         0.13
                                                                                   Pro forma     $         0.13
                                  -------------------------------------------------------------------------------

                                  Year ended June 30,                                                      1999
                                  -------------------------------------------------------------------------------

                                  Net income                                       As reported  $       761,476
                                                                                   Pro forma    $       761,081
                                  -------------------------------------------------------------------------------

                                  Net  income  per  common  share - basic  and     As reported  $          0.12
                                  diluted                                          Pro forma    $          0.12
                                  -------------------------------------------------------------------------------
</TABLE>

                                   A summary  of  options  under  the  Company's
                                   stock option plans and non-plan options as of
                                   June 30,  2000,  and changes  during the year
                                   then ended is presented below:
<TABLE>
<CAPTION>
                                                                                                       WEIGHTED
                                                                                                        AVERAGE
                                                                                                       EXERCISE
                                                                                        SHARES            PRICE
                                  -------------------------------------------------------------------------------
<S>                                                                                    <C>                <C>
                                  Outstanding at beginning of year                     720,000            $1.10
                                  Granted                                               10,000             2.00
                                  Exercised                                            (65,000 )           1.00
                                  Expired                                              (55,000 )           1.42
                                  -------------------------------------------------------------------------------

                                  Outstanding at end of year                           610,000             1.09
                                  -------------------------------------------------------------------------------

                                  Options exercisable at year-end                      172,500            $1.01
                                  -------------------------------------------------------------------------------

                                  Weighted-average fair value per share of
                                      options granted during the year                    $2.00
                                  -------------------------------------------------------------------------------
</TABLE>

                                       34
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements

                                   A  summary  of the  status  of the  Company's
                                   stock option plan and non-plan  options as of
                                   June 30,  1999,  and changes  during the year
                                   then ended is presented below:
<TABLE>
<CAPTION>
                                                                                                       Weighted
                                                                                                        Average
                                                                                                       Exercise
                                                                                        Shares            Price
                                  -------------------------------------------------------------------------------
<S>                                                                                    <C>                <C>
                                  Outstanding at beginning of year                     225,000            $0.98
                                  Granted                                              595,000             1.12
                                  Exercised                                            (50,000 )           1.03
                                  Expired                                              (50,000 )           0.97
                                  -------------------------------------------------------------------------------

                                  Outstanding at end of year                           720,000             1.10
                                  -------------------------------------------------------------------------------

                                  Options exercisable at year-end                      125,000             0.97
                                  -------------------------------------------------------------------------------

                                  Weighted-average fair value per share of
                                      options granted during the year                    $1.12
                                  -------------------------------------------------------------------------------
</TABLE>

                                   The following  table  summarizes  information
                                   about stock option plan and non-plan  options
                                   outstanding at June 30, 2000:
<TABLE>
<CAPTION>
                                                                   Weighted
                                                      Number        Average      Weighted       Number     Weighted
                                       Range of  Outstanding      Remaining       Average   Exercisable     Average
                                       Exercise           at    Contractual      Exercise           at     Exercise
                                         Prices      6/30/00           Life         Price      6/30/00        Price
                                  ------------------------------------------------------------------------------------
<S>                                  <C>    <C>      <C>               <C>          <C>        <C>            <C>
                                     $ 0.81-2.00     610,000           3.30         $1.09      172,500        $1.01
                                  ------------------------------------------------------------------------------------
</TABLE>

13.     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     technology    and    marketing
                                    strategies.   Steiner-Atlantic   Corp.   and
                                    Steiner-Atlantic   Brokerage  Company,  Inc.
                                    comprise  the   commercial   and  industrial
                                    laundry and dry cleaning  equipment segment.
                                    Steiner-Atlantic  Corp. is a supplier of dry
                                    cleaning   equipment,   industrial   laundry
                                    equipment  and steam boilers to customers in
                                    the United  States,  the Caribbean and Latin
                                    American markets. Steiner-Atlantic Brokerage
                                    Company,  Inc. acts as a business  broker to
                                    assist   others   seeking  to  buy  or  sell
                                    existing    dry    cleaning    and   laundry
                                    businesses.  Metro-Tel  Corp.  comprises the
                                    manufacture   and  sale  of  telephone  test
                                    equipment  segment.  This segment is engaged
                                    in the  manufacture  and  sale of  telephone
                                    test and customer premise equipment utilized

                                       35
<PAGE>
                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Notes to Consolidated Financial Statements

                                    by  telephone  and  telephone   interconnect
                                    companies    in   the    installation    and
                                    maintenance of telephone equipment. DRYCLEAN
                                    USA License Corp.  comprises the license and
                                    franchise  operations segment. In July 1999,
                                    Steiner-Atlantic   Corp.   acquired  certain
                                    assets of DRYCLEAN  USA  Franchise  Company,
                                    including, among other things, the worldwide
                                    rights to the name  DRYCLEAN  USA along with
                                    existing  franchise and license  agreements.
                                    DRYCLEAN USA is one of the largest franchise
                                    and license  operations  in the dry cleaning
                                    industry,     currently     consisting    of
                                    approximately  400  franchised  and licensed
                                    locations   in  the   United   States,   the
                                    Caribbean  and Latin  America.  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.

                                   For the years  ended June 30,  2000 and 1999,
                                   export  sales,  principally  to the Caribbean
                                   and Latin America,  aggregated  approximately
                                   $3,652,000 and $3,443,000, respectively.

                                   No single  customer  accounted for more than
                                   10% of the Company's revenues.

                                   Financial   information  for  the  Company's
                                   business segments is as follows:
<TABLE>
<CAPTION>
                               Year ended June 30,                                           2000            1999
                               ------------------------------------------------------------------------------------
<S>                                                                                   <C>             <C>
                               Revenues:
                                  Commercial and industrial laundry and dry
                                    cleaning equipment                                $15,487,499     $16,426,205
                                  Manufacture and sale of telephone test
                                  equipment                                             3,500,660       2,048,593
                                  License and franchise operations                        536,340               -
                               ------------------------------------------------------------------------------------
                               Total revenues                                         $19,524,499     $18,474,798
                               ------------------------------------------------------------------------------------
                               Operating income (loss):
                                  Commercial and industrial laundry
                                    and dry cleaning equipment                         $1,272,313      $1,556,895
                                 Manufacture and sale of telephone test
                                 equipment                                                 21,414        (295,488 )
                                 License and franchise operations                         363,982               -
                               ------------------------------------------------------------------------------------
                               Total operating income                                  $1,657,709      $1,261,407
                               ------------------------------------------------------------------------------------
                               Identifiable assets:
                                  Commercial and industrial laundry
                                    and dry cleaning equipment                         $5,043,287      $6,015,693
                                  Manufacture and sale of telephone test
                                  equipment                                             2,559,252       1,685,545
                                  License and franchise operations                        981,505               -
                               -----------------------------------------------------------------------------------
                               Total assets                                            $8,584,044      $7,701,238
                               -----------------------------------------------------------------------------------
</TABLE>

                                       36

<PAGE>


ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

                  ACCOUNTING AND FINANCIAL DISCLOSURE.
                  ------------------------------------

         On  January  4, 1999,  the  Company  selected  BDO  Seidman,  LLP ("BDO
Seidman") to replace  Grant  Thornton LLP ("Grant  Thornton")  as the  Company's
independent public accountants. BDO Seidman has acted as independent accountants
for Steiner,  which became a wholly-owned  subsidiary of the Company pursuant to
the Merger. The Company believes that the change to BDO Seidman as the Company's
independent  accountants will facilitate the audit of the Company's consolidated
financial statements.  The decision to change auditors was approved by the Audit
Committee of the Board of Directors.

         Grant Thornton's report on the financial  statements of the Company for
each of the past two  fiscal  years  did not  contain  any  adverse  opinion  or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.

         During the Company's two most recent fiscal years,  and the  subsequent
interim period through January 4, 1999, there were no  disagreements  with Grant
Thornton  on  any  matter  of  accounting  principles  or  practices,  financial
statement disclosure,  or auditing scope or procedure,  which disagreements,  if
not  resolved to the  satisfaction  of Grant  Thornton,  would have caused Grant
Thornton  to make  reference  to the  subject  matter  of the  disagreements  in
connection  with their audit report with respect to financial  statements of the
Company either individually or consolidated with Steiner.

         During the Company's two most recent fiscal years,  and the  subsequent
interim  period  through  January 4,  1999,  Grant  Thornton  did not advise the
Company of any of the items listed in Item 304(a)(1)(iv)(B) of Regulation S-B.


                                       37
<PAGE>

                                    PART III
                                    --------

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
        --------------------------------------------------

         The following  information  is presented with respect to the background
of each of the directors and executive officers of the Company:

         Michael S. Steiner,  44, has been President and Chief Executive Officer
of the Company since the  effectiveness of the Merger on November 1, 1998 and of
Steiner  since 1988.  Mr.  Steiner has been a director of the Company  since the
effectiveness of the Merger on November 1, 1998.

         William K. Steiner, 70, has been Chairman of the Board of Steiner since
he founded Steiner in 1960. Mr. Steiner has been a director of the Company since
the effectiveness of the Merger on November 1, 1998.

         Venerando J. Indelicato, 67, was President of the Company from December
1967  until the  effectiveness  of the Merger on  November  1, 1998 and has been
Treasurer and Chief Financial Officer of the Company since December 1969.

         Lloyd Frank, 75, has been a member of the law firm of Parker Chapin LLP
since 1977. Mr. Frank has been a director of the Company since 1977. The Company
retained  Parker Chapin  during the Company's  last fiscal year and is retaining
that firm during the Company's current fiscal year. Mr. Frank is also a director
of Park Electrochemical Corp. and Volt Information Sciences, Inc.

         David  Blyer,  40, has served as a director  of the  Company  since the
effectiveness  of the  Merger on  November  1,  1998.  Mr.  Blyer has been Chief
Executive  Officer and President of Vento  Software,  since he  co-founded  that
company in 1994.  Vento  Software  develops  software for  specialized  business
application.  Before founding Vento Software, Mr. Blyer served as Senior Account
Manager of the South Florida and Caribbean regions for Tandem Computers.

         Alan M. Grunspan, 40, has served as a director of the Company since May
1999.  Mr.  Grunspan  has been a member of the law firm of Kaufman  Dickstein  &
Grunspan P.A.  since 1991. The Company has retained  Kaufman Miller  Dickstein &
Grunspan P.A.  during the Company's  last fiscal year and is retaining that firm
during the Company's current fiscal year.

         Stuart  Wagner,  68, has served as a director of the Company  since the
effectiveness  of the  Merger on  November  1, 1998 and has been  retained  as a
consultant  for  Diversitech  Corp.  since 1997.  From 1975 to 1997,  Mr. Wagner
served as President of Wagner Products Corp., a manufacturer  and distributor of
products in the HVAC industry, a company which he founded.

         Mr. Michael S. Steiner is the son of Mr. William K. Steiner.  There are
no other family  relationships among any of the directors and executive officers
of  the  Company.   All  directors  serve  until  the  next  annual  meeting  of
stockholders  and until  the  election  and  qualification  of their  respective
successors. All officers serve at the pleasure of the Board of Directors.

         The following  information  is presented with respect to the background
of each person who is not an  executive  officer but who is expected to continue
to make a significant contribution to the Company:

         Osvaldo  Rubio,  37, serves as Vice President and Director of Sales for
the Export Department of Steiner since joining Steiner in May 1993.

         Ronald  London,  67, serves as Vice  President  and primarily  overseas
sales of the retail Dry Cleaning  Equipment  Department of Steiner since joining
Steiner in September 1992.

         Jon D.  Robinette,  42, has, since July 1999,  served as Vice President
and General Manager of the Company's telecommunications operations,  responsible
for managing and coordinating  operations in the Company's Milpitas,  California
facility.  Prior thereto,  Mr.  Robinette  served as Operations  Manager for the
Company's telecommunications operations from October 1984.

                                       38
<PAGE>

ITEM 10.    EXECUTIVE COMPENSATION.
--------    -----------------------

                  The  information  called for by this Item will be contained in
the Company's  definitive  Proxy  Statement  with respect to the Company's  2000
Annual Meeting of  Stockholders to be filed pursuant to Regulation l4A under the
Securities Exchange Act of 1934, and is incorporated herein by reference to such
information.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-------- --------------------------------------------------------------

                  The  information  called for by this Item will be contained in
the Company's  definitive  Proxy  Statement  with respect to the Company's  2000
Annual Meeting of  Stockholders to be filed pursuant to Regulation l4A under the
Securities Exchange Act of 1934, and is incorporated herein by reference to such
information.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-------- ------------------------------------------------

                  The  information  called for by this Item will be contained in
the Company's  definitive  Proxy  Statement  with respect to the Company's  2000
Annual Meeting of  Stockholders to be filed pursuant to Regulation l4A under the
Securities Exchange Act of 1934, and is incorporated herein by reference to such
information.

                                       39
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
         ---------------------------------

                     (a)   Exhibits

2(a)              Agreement  of  Merger  dated  as of July  1,  1998  among  the
                  Company, Metro-Tel Acquisition Corp.,  Steiner-Atlantic Corp.,
                  William K. Steiner and Michael S.  Steiner.  (Exhibit A of the
                  definitive  Proxy  Statement  of the  Company  filed  with the
                  Commission on October 5, 1998, File No. 0-9040.)

3(a)(1)           Certificate of Incorporation of the Company, as filed with the
                  Secretary  of State of the State of Delaware on June 30, 1963.
                  (Exhibit  4.1(a) to the Company's  Current  Report on Form 8-K
                  dated (date of earliest event reported) October 29, 1998.)

3(a)(2)           Certificate of Amendment to the  Certificate of  Incorporation
                  of the  Company,  as filed with the  Secretary of State of the
                  State of Delaware on March 27,  1968.  (Exhibit  4.1(b) to the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(3)           Certificate of Amendment to the  Certificate of  Incorporation
                  of the  Company,  as filed with the  Secretary of State of the
                  State of Delaware on November 4, 1983.  (Exhibit 4.1(c) to the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(4)           Certificate of Amendment to the  Certificate of  Incorporation
                  of the  Company,  as filed with the  Secretary of State of the
                  State of Delaware on November 5, 1986.  (Exhibit 4.1(d) to the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(5)           Certificate of Change of Location of Registered  Office and of
                  Agent,  as filed with the  Secretary  of State of the State of
                  Delaware  on  December  31,  1986.   (Exhibit  4.1(e)  to  the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(6)           Certificate  of  Ownership  and  Merger of Design  Development
                  Incorporated into the Company,  as filed with the Secretary of
                  State of the  State of  Delaware  on June 30,  1998.  (Exhibit
                  4.1(f) to the Company's Current Report on Form 8-K dated (date
                  of earliest event reported) October 29, 1998.)

3(a)(7)           Certificate  of  Amendment  to the  Company's  Certificate  of
                  Incorporation  as  filed  with the  Secretary  of State of the
                  State of Delaware on October 30, 1998.  (Exhibit 4.1(g) to the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(8)           Certificate  of  Amendment  to the  Company's  Certificate  of
                  Incorporation,  as filed  with the  Secretary  of State of the
                  State of Delaware on  November  5,

                                       40

<PAGE>

                  1999.  (Exhibit 4.1 to the Company's  Quarterly Report on Form
                  10-QSB for the quarter  ended  September  30,  1999,  File No.
                  0-9040.)

3(b)              By-Laws  of  the  Company,  as  amended.  (Exhibit  4.2 to the
                  Company's  Quarterly  Report on Form  10-QSB  for the  quarter
                  ended September 30, 1999, File No. 0-9040.)

4(a)(1)           Loan and  Security  Agreement  dated  November 2, 1998 between
                  Steiner-Atlantic Corp. and First Union National Bank. (Exhibit
                  4.2(a) to the Company's Current Report on Form 8-K dated (date
                  of earliest event reported) October 29, 1998.)

4(a)(2)           Guaranty and Security  Agreement dated November 2, 1998 by the
                  Company in favor of First Union National Bank. (Exhibit 4.2(b)
                  to the  Company's  Current  Report on Form 8-K dated  (date of
                  earliest event reported) October 29, 1998.)

10(a)(1)(i)       Lease  dated  April  1,  1991   between  the  Company  and  CB
                  Institutional   Fund  VII  with   respect  to  the   Company's
                  facilities  at  240  South   Milpitas   Boulevard,   Milpitas,
                  California.  (Exhibit  10(a)(2) to the Company's Annual Report
                  on Form  10-K  for the year  ended  June  30,  1991,  File No.
                  0-9040.)

10(a)(1)(ii)      Second  Amendment to Lease dated  November 1, 1998 between the
                  Company   and   The   Realty   Associates   Fund   III,   L.P.
                  (successor-in-interest  to CB  Institutional  Fund  VII)  with
                  respect  to the  Company's  facilities  at 240 South  Milpitas
                  Boulevard, Milpitas, California.  (Exhibit 10(a)(1)(ii) to the
                  Company's  Transition Report on Form 10-KSB for the transition
                  period  from  January  1,  1998 to June  30,  1998,  File  No.
                  0-9040.)

10(a)(2)          Lease dated  October 6, 1995 between  Steiner and William,  K.
                  Steiner with respect to Steiner's  facilities located 290 N.E.
                  68th  Street,  297  N.E.  67 St.  and 277 N.E.  67 St.  Miami,
                  Florida.  (Exhibit 10(a)(2) to the Company's Transition Report
                  on Form 10-KSB for the transition  period from January 1, 1998
                  to June 30, 1998, File No. 0-9040.)

10(b)(1)(i)+      Employment  Agreement  dated July 1, 1981  between the Company
                  and  Venerando  J.  Indelicato.  (Exhibit  10(b)(1)(i)  to the
                  Company's Annual Report on Form 10-KSB for the year ended June
                  30, 1995, File No. 0-9040.)

10(b)(1)(ii)+     Amendment No. 1 dated July 1, 1983 to the Employment Agreement
                  dated  July 1, 1981  between  the  Company  and  Venerando  J.
                  Indelicato.  (Exhibit  10(b)(1)(ii)  to the  Company's  Annual
                  Report on Form 10-KSB for the year ended June 30,  1995,  File
                  No. 0-9040.)

10(b)(1)(iii)+    Amendment  No.  2 dated  October  30,  1998 to the  Employment
                  Agreement dated July 1, 1981 between the Company and Venerando
                  J.  Indelicato.   (Exhibit   10(b)(1)(iii)  to  the  Company's
                  Transition  Report on Form  10-KSB for the  transition  period
                  from January 1, 1998 to June 30, 1998, File No. 0-9040.)

                                       41
<PAGE>

10(b)(2)+         Letter agreement dated August 29, 1996 between the Company and
                  Richard A. Wildman, a former executive officer of the Company.
                  (Exhibit  10(b)(2)  to the  Company's  Annual  Report  on Form
                  10-KSB for the year ended June 30, 1997, File No. 0-9040.)

10(c)(1)+         The  Company's  1991 Stock Option Plan,  as amended.  (Exhibit
                  99.3 to the Company's  Current  Report on Form 8-K dated (date
                  of earliest event reported) October 29, 1998, File No.0-9040.)

10(c)(2)(a)+      The Company's 1984 Non-Employee Director Stock Option Plan, as
                  amended.  (Exhibit  10(d)(2) to the Company's Annual Report on
                  Form 10-K for the year ended June 30, 1987, File No. 0-9040.)

10(c)(2)(b)+      The Company's  1994  Non-Employee  Director Stock Option Plan.
                  (Exhibit A to the Company's  Proxy Statement dated October 14,
                  1994 used in connection with the Company's 1994 Annual Meeting
                  of Stockholders, File No. 0-9040.)

10(c)(2)(c)+      The  Company's  2000 Stock Option Plan.  (Exhibit  99.1 to the
                  Company's   Registration  Statement  on  Form  S-8,  File  No.
                  333-37582).

10(c)(3)+         Form of Stock  Option  Agreement  dated June 25, 1991  entered
                  into between the Company and each of Sheppard  Beidler (option
                  has since expired), Lloyd Frank and Michael Michaelson (option
                  has  since   been   exercised),   together   with  a  schedule
                  identifying the details in which the actual  agreements differ
                  from the  exhibit  filed  herewith.  (Exhibit  10(c)(4) to the
                  Company's  Annual  Report on Form 10-K for the year ended June
                  30, 1991, File No. 0-9040.)

10(c)(4)+         Form of Stock Option  Agreement dated May 4, 1993 entered into
                  between the Company and each of Sheppard  Beidler  (option has
                  since expired), Lloyd Frank and Michael Michaelson (option has
                  since been  exercised),  together with a schedule  identifying
                  the  details in which the actual  agreements  differ  from the
                  exhibit  filed  herewith.  (Exhibit  10(c)(4) to the Company's
                  Annual Report on Form 10-KSB for the year ended June 30, 1993,
                  File No. 0-9040.)

*27               Financial Data Schedule.

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

*        Filed with this Report.  All other exhibits are incorporated  herein by
         reference  to  the  filing  indicated  in the  parenthetical  reference
         following the exhibit description.

+        Management contract or compensatory plan or arrangement.

                  (b)      Reports on Form 8-K

                  No Reports on Form 8-K were filed  during the last  quarter of
the period covered by this Report.

                                       42
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange  Act of 1934,  the  Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       DRYCLEAN USA, Inc.

Dated: September 27, 2000
                                       By: /s/ Michael S. Steiner
                                           --------------------------
                                           Michael S. Steiner
                                           President and Chief Executive Officer

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

Signature                                    Capacity                                    Date
---------                                    --------                                    ----
<S>                                        <C>                                         <C>
/s/ Michael S. Steiner                       President,                                  September 27, 2000
-------------------------------------------  Chief Executive Officer
Michael S. Steiner                           (Principal Executive Officer) and
                                             Director


/s/ William K. Steiner                       Director                                    September 27, 2000
-------------------------------------------
William K.  Steiner

/s/ Venerando J. Indelicato                  Chief Financial Officer                     September 27, 2000
-------------------------------------------  (Principal Financial and Accounting
Venerando J.  Indelicato                     Officer) and Director


/s/ Lloyd Frank                              Director                                    September 27, 2000
-------------------------------------------
Lloyd Frank

/s/ Alan M. Grunspan                         Director                                    September 27, 2000
-------------------------------------------
Alan M. Grunspan

/s/ Stuart Wagner                            Director                                    September 27, 2000
-------------------------------------------
Stuart Wagner

/s/ David Blyer                              Director                                    September 27, 2000
-------------------------------------------
David Blyer
</TABLE>

                                       43
<PAGE>

2(a)              Agreement  of  Merger  dated  as of July  1,  1998  among  the
                  Company, Metro-Tel Acquisition Corp.,  Steiner-Atlantic Corp.,
                  William K. Steiner and Michael S.  Steiner.  (Exhibit A of the
                  definitive  Proxy  Statement  of the  Company  filed  with the
                  Commission on October 5, 1998, File No. 0-9040.)

3(a)(1)           Certificate of Incorporation of the Company, as filed with the
                  Secretary  of State of the State of Delaware on June 30, 1963.
                  (Exhibit  4.1(a) to the Company's  Current  Report on Form 8-K
                  dated (date of earliest event reported) October 29, 1998.)

3(a)(2)           Certificate of Amendment to the  Certificate of  Incorporation
                  of the  Company,  as filed with the  Secretary of State of the
                  State of Delaware on March 27,  1968.  (Exhibit  4.1(b) to the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(3)           Certificate of Amendment to the  Certificate of  Incorporation
                  of the  Company,  as filed with the  Secretary of State of the
                  State of Delaware on November 4, 1983.  (Exhibit 4.1(c) to the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(4)           Certificate of Amendment to the  Certificate of  Incorporation
                  of the  Company,  as filed with the  Secretary of State of the
                  State of Delaware on November 5, 1986.  (Exhibit 4.1(d) to the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(5)           Certificate of Change of Location of Registered  Office and of
                  Agent,  as filed with the  Secretary  of State of the State of
                  Delaware  on  December  31,  1986.   (Exhibit  4.1(e)  to  the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(6)           Certificate  of  Ownership  and  Merger of Design  Development
                  Incorporated into the Company,  as filed with the Secretary of
                  State of the  State of  Delaware  on June 30,  1998.  (Exhibit
                  4.1(f) to the Company's Current Report on Form 8-K dated (date
                  of earliest event reported) October 29, 1998.)

3(a)(7)           Certificate  of  Amendment  to the  Company's  Certificate  of
                  Incorporation  as  filed  with the  Secretary  of State of the
                  State of Delaware on October 30, 1998.  (Exhibit 4.1(g) to the
                  Company's  Current  Report on Form 8-K dated (date of earliest
                  event reported) October 29, 1998.)

3(a)(8)           Certificate  of  Amendment  to the  Company's  Certificate  of
                  Incorporation,  as filed  with the  Secretary  of State of the
                  State of Delaware on  November  5, 1999.  (Exhibit  4.1 to the
                  Company's  Quarterly  Report on Form  10-QSB  for the  quarter
                  ended September 30, 1999, File No. 0-9040.)

                                       44
<PAGE>

3(b)              By-Laws  of  the  Company,  as  amended.  (Exhibit  4.2 to the
                  Company's  Quarterly  Report on Form  10-QSB  for the  quarter
                  ended September 30, 1999, File No. 0-9040.)

4(a)(1)           Loan and  Security  Agreement  dated  November 2, 1998 between
                  Steiner-Atlantic Corp. and First Union National Bank. (Exhibit
                  4.2(a) to the Company's Current Report on Form 8-K dated (date
                  of earliest event reported) October 29, 1998.)

4(a)(2)           Guaranty and Security  Agreement dated November 2, 1998 by the
                  Company in favor of First Union National Bank. (Exhibit 4.2(b)
                  to the  Company's  Current  Report on Form 8-K dated  (date of
                  earliest event reported) October 29, 1998.)

10(a)(1)(i)       Lease  dated  April  1,  1991   between  the  Company  and  CB
                  Institutional   Fund  VII  with   respect  to  the   Company's
                  facilities  at  240  South   Milpitas   Boulevard,   Milpitas,
                  California.  (Exhibit  10(a)(2) to the Company's Annual Report
                  on Form  10-K  for the year  ended  June  30,  1991,  File No.
                  0-9040.)

10(a)(1)(ii)      Second  Amendment to Lease dated  November 1, 1998 between the
                  Company   and   The   Realty   Associates   Fund   III,   L.P.
                  (successor-in-interest  to CB  Institutional  Fund  VII)  with
                  respect  to the  Company's  facilities  at 240 South  Milpitas
                  Boulevard, Milpitas, California.  (Exhibit 10(a)(1)(ii) to the
                  Company's  Transition Report on Form 10-KSB for the transition
                  period  from  January  1,  1998 to June  30,  1998,  File  No.
                  0-9040.)

10(a)(2)          Lease dated  October 6, 1995 between  Steiner and William,  K.
                  Steiner with respect to Steiner's  facilities located 290 N.E.
                  68th  Street,  297  N.E.  67 St.  and 277 N.E.  67 St.  Miami,
                  Florida.  (Exhibit 10(a)(2) to the Company's Transition Report
                  on Form 10-KSB for the transition  period from January 1, 1998
                  to June 30, 1998, File No. 0-9040.)

10(b)(1)(i)+      Employment  Agreement  dated July 1, 1981  between the Company
                  and  Venerando  J.  Indelicato.  (Exhibit  10(b)(1)(i)  to the
                  Company's Annual Report on Form 10-KSB for the year ended June
                  30, 1995, File No. 0-9040.)

10(b)(1)(ii)+     Amendment No. 1 dated July 1, 1983 to the Employment Agreement
                  dated  July 1, 1981  between  the  Company  and  Venerando  J.
                  Indelicato.  (Exhibit  10(b)(1)(ii)  to the  Company's  Annual
                  Report on Form 10-KSB for the year ended June 30,  1995,  File
                  No. 0-9040.)

10(b)(1)(iii)+    Amendment  No.  2 dated  October  30,  1998 to the  Employment
                  Agreement dated July 1, 1981 between the Company and Venerando
                  J.  Indelicato.   (Exhibit   10(b)(1)(iii)  to  the  Company's
                  Transition  Report on Form  10-KSB for the  transition  period
                  from January 1, 1998 to June 30, 1998, File No. 0-9040.)

10(b)(2)+         Letter agreement dated August 29, 1996 between the Company and
                  Richard A. Wildman, a former executive officer of the Company.
                  (Exhibit  10(b)(2)  to the

                                       45
<PAGE>

                  Company's Annual Report on Form 10-KSB for the year ended June
                  30, 1997, File No. 0-9040.)

10(c)(1)+         The  Company's  1991 Stock Option Plan,  as amended.  (Exhibit
                  99.3 to the Company's  Current  Report on Form 8-K dated (date
                  of earliest event reported) October 29, 1998, File No.0-9040.)

10(c)(2)(a)+      The Company's 1984 Non-Employee Director Stock Option Plan, as
                  amended.  (Exhibit  10(d)(2) to the Company's Annual Report on
                  Form 10-K for the year ended June 30, 1987, File No. 0-9040.)

10(c)(2)(b)+      The Company's  1994  Non-Employee  Director Stock Option Plan.
                  (Exhibit A to the Company's  Proxy Statement dated October 14,
                  1994 used in connection with the Company's 1994 Annual Meeting
                  of Stockholders, File No. 0-9040.)

10(c)(2)(c)+      The  Company's  2000 Stock Option Plan.  (Exhibit  99.1 to the
                  Company's   Registration  Statement  on  Form  S-8,  File  No.
                  333-37582).

10(c)(3)+         Form of Stock  Option  Agreement  dated June 25, 1991  entered
                  into between the Company and each of Sheppard  Beidler (option
                  has since expired), Lloyd Frank and Michael Michaelson (option
                  has  since   been   exercised),   together   with  a  schedule
                  identifying the details in which the actual  agreements differ
                  from the  exhibit  filed  herewith.  (Exhibit  10(c)(4) to the
                  Company's  Annual  Report on Form 10-K for the year ended June
                  30, 1991, File No. 0-9040.)

10(c)(4)+         Form of Stock Option  Agreement dated May 4, 1993 entered into
                  between the Company and each of Sheppard  Beidler  (option has
                  since expired), Lloyd Frank and Michael Michaelson (option has
                  since been  exercised),  together with a schedule  identifying
                  the  details in which the actual  agreements  differ  from the
                  exhibit  filed  herewith.  (Exhibit  10(c)(4) to the Company's
                  Annual Report on Form 10-KSB for the year ended June 30, 1993,
                  File No. 0-9040.)

*27               Financial Data Schedule.

--------------------
*        Filed with this Report.  All other exhibits are incorporated  herein by
         reference  to  the  filing  indicated  in the  parenthetical  reference
         following the exhibit description.

+        Management contract or compensatory plan or arrangement.

                                       46