UNITED STATES
                       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, 2003

[   ]    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)

                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

         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 Company's  revenues from continuing  operations for its fiscal year
ended June 30, 2003 were $14,317,448.

         The aggregate market value as at September 23, 2003 of the Common Stock
of the  issuer,  its only  class of voting  stock,  held by  non-affiliates  was
approximately  $3,945,000  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 23, 2003 was 6,996,450.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the issuer's  Proxy  Statement  relating to its 2003 Annual
Meeting of Stockholders  are incorporated by reference into Items 10, 11, 12 and
14 in Part III of this Report.

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



<PAGE>


                           FORWARD LOOKING STATEMENTS

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

                                     PART I
                                     ------

ITEM 1.  DESCRIPTION OF BUSINESS.
         -----------------------

GENERAL
-------

         The Company was incorporated under the laws of the State of Delaware on
June 30,  1963 under the name  Metro-Tel  Corp.  Until  November  1, 1999,  when
Steiner-Atlantic  Corp.  ("Steiner")  was merged  with and into,  and  therefore
became, a wholly-owned  subsidiary of the Company (the "Merger"),  the Company's
principal  business was 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 its Metro-Tel
telecommunications  segment (the  "Metro-Tel  segment").  Since the Merger,  the
Company's principal business has been as a supplier of commercial and industrial
dry  cleaning  equipment,  laundry  equipment  and  steam  boilers  and  related
activities.  To reflect  the change in the  Company's  principal  business,  the
Company changed its name to DRYCLEAN USA, Inc. on November 7, 1999.

         Effective  July 31,  2002,  the Company sold  substantially  all of the
operating  assets  (principally  inventory,  equipment  and  intangible  assets,
including  tradenames) of the Metro-Tel segment to an unaffiliated  third party.
The Company retained all of the cash, accounts receivable and liabilities of the
Metro-Tel segment.  The sales price was $800,000,  of which $250,000 was paid in
cash  on  August  2,  2002  and  the  remaining  $550,000  is  evidenced  by the
purchaser's  promissory  note that bears interest at the  prevailing  prime rate
plus 1% per annum and is payable  in 42 equal  monthly  installments  commencing
October 1,  2002.  Transaction  costs to the  Company  aggregated  approximately
$40,000.  In March 2003 the purchaser prepaid $50,000 of the principal amount of
the outstanding  promissory



                                       2
<PAGE>

note,  which was applied to the last  installments  to become  due.  Payment and
performance  of the  promissory  note is guaranteed by two companies  affiliated
with the purchaser  and the three  principal  shareholders  of purchaser and the
affiliated  companies,  and  is  collateralized  by  substantially  all  of  the
operating assets of the purchaser and the affiliated companies.  The Company has
agreed to  subordinate  payment of the promissory  note, the  obligations of the
affiliated  companies under their  guarantees and the collateral  granted by the
purchaser and the affiliated  companies to the  obligations of the purchaser and
the affiliated companies to two bank lenders,  subject to the Company's right to
receive installment  payments under the promissory note as long as the purchaser
and the  affiliated  companies  are not in default of their  obligations  to the
applicable  lender.  The Company agreed to a three-year  covenant not to compete
with the purchaser.  The Company had determined to sell the Metro-Tel segment in
light  of the  segment's  telecommunications  business  being  unrelated  to the
Company's  core business,  the reduction in revenues and increasing  losses that
the Metro-Tel  segment had been experiencing and to enable the Company to devote
its resources to its larger and profitable  core business  activities in the dry
cleaning   and  laundry   equipment   industry,   including   its  Green  Jet(R)
dry-wetcleaning(TM)  machine.  As a  result  of the  determination  to sell  the
Metro-Tel segment,  the operations of the Metro-Tel segment are reflected in the
financial statements included in this Report as a discontinued operation and are
not  discussed  in detail in this Report as the Company is no longer  engaged in
that business.

         The Company,  through Steiner,  supplies  commercial and industrial dry
cleaning  equipment,  laundry  equipment and steam boilers in the United States,
the Caribbean and Latin American markets.  This aspect of the Company's business
services includes:

         o     selling its own lines of laundry and dry cleaning machines under
               its Aero-Tech(R)and Green Jet(R)brand names;

         o     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;

         o     supplying replacement equipment and parts to its customers;

         o     providing warranty and preventative maintenance through
               factory-trained technicians and service managers; and

         o     selling process steam systems and boilers.

         In  March  1999,  the  Company  formed a  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 the  Company's  existing  customers  have  become  Steiner
Brokerage  clients,  utilizing the Company's staff and ability to assist them in
the sale of their businesses and associated real property.

         In July 1999,  the  Company,  through its  DRYCLEAN  USA LICENSE  CORP.
subsidiary, acquired certain assets of DRYCLEAN USA Franchise Company ("DRYCLEAN
USA Franchise"), 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 over 400 franchised and licensed locations in
the United  States,  the Caribbean  and Latin  America.  The Company  intends to
increase  the number of existing  franchisees  and  licensees  of  DRYCLEAN  USA
through proven sales and advertising methods.

         In February  2001, the Company formed  DRYCLEAN USA  Development  Corp.
("DRYCLEAN  USA  Development")  as a new  subsidiary to develop new turn-key dry
cleaning establishments for resale to third parties.



                                       3
<PAGE>

         Product  Lines.  The  Company  offers a broad  line of  commercial  and
industrial  laundry and dry cleaning  equipment and steam boilers,  as well as a
comprehensive  parts and  accessories  inventory.  The Company's  commercial and
industrial   laundry   equipment   features   washers  and   dryers,   including
coin-operated  machines,  boilers,  water  reuse and heat  reclamation  systems,
flatwork  ironers and automatic  folders.  The Company's dry cleaning  equipment
includes  commercial dry cleaning machines sold primarily under the Aero-Tech(R)
and Green Jet(R) names, garment presses,  finishing  equipment,  and sorting and
storage conveyors.

         In  December  2001,  the Company  began  shipping  its  environmentally
friendly  Green Jet(R)  dry-wetcleaning(TM)  machine.  This new machine not only
cleans garments efficiently, but it also eliminates the use of perchloroethylene
(Perc)  in  the  dry  cleaning  process,  thereby  eliminating  the  health  and
environmental concerns that Perc poses to our customers and their landlords.  It
also  alleviates  flammability,  odor and cost issues  inherent  in  alternative
solvents and cleaning  processes.  Patents have been applied for to protect this
innovative approach to garment cleaning.  In August 2003, the Company introduced
its Multi-Jet(TM) dry cleaning machine which can use a number of environmentally
safe solvents and will replace certain existing products.

         The Company's products are positioned and priced to appeal to customers
in each of the  high-end,  mid-range  and value priced  markets.  The  Company's
products are offered  under a wide range of price points to address the needs of
a diverse  customer base.  Suggested  prices for most of the Company's  products
range from  approximately  $5,000 to $50,000.  The Company's products afford the
Company's  customers a "one-stop shop" for commercial and industrial laundry and
dry  cleaning  machines,  boilers  and  accessories.   By  providing  "one-stop"
shopping,  the  Company  believes  it is  better  able to  attract  and  support
potential  customers  who can choose  from the  Company's  broad  product  line.
Product sales accounted for approximately 94% of fiscal year 2003 revenues.

         The Company seeks to establish customer satisfaction by offering:

         o     an on-site training and preventive maintenance program performed
               by factory trained technicians and service managers;

         o     design and layout assistance;

         o     maintenance of a comprehensive parts and accessories inventory
               and same day or overnight availability;

         o     competitive pricing; and

         o     a toll-free support line to resolve customer service problems.

         In  addition,  the  Company,  under the name  DRYCLEAN  USA,  currently
franchises and licenses over 400 retail drycleaning stores in the United States,
the Caribbean and Latin America, making it one of the largest retail drycleaning
license and  franchise  operations in the dry cleaning  industry.  During fiscal
2003, the Company's license and franchise segment contributed approximately 2.4%
of the Company's  revenues  from  continuing  operations  and 12.9% of operating
income from continuing operations.

         Through  its  Steiner  Brokerage  subsidiary,  the  Company  acts  as a
business  broker to assist  others  seeking to buy or sell existing dry cleaning
and laundry  businesses.  Some of the Company's  existing  customers have become
Steiner Brokerage  clients,  utilizing the Company's staff and ability to assist
them in the sale of their businesses and associated real property. This business
contributed 1.3% of revenue from continuing operations during fiscal 2003.



                                       4
<PAGE>

         The Company, through its DRYCLEAN USA Development subsidiary,  develops
new turn-key dry cleaning  establishments  for resale to third  parties.  During
fiscal 2003,  DRYCLEAN USA  Development  contributed  under 1% of revenues  from
continuing operations.

         Sales,  Marketing and Customer  Support.  The Company's laundry and dry
cleaning equipment products are marketed in the United States, the Caribbean and
Latin  America  to its  customers,  as well as  customers  of its  DRYCLEAN  USA
Franchise  subsidiary.  The  Company  employs  sales  executives  to market  its
products,  including its Aero-Tech(R)  and Green Jet(R) products,  in the United
States and in  international  markets.  The  Company  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 the  Company's  equipment  sales  orders are  obtained by  telephone,
e-mail and fax inquiries originated by the customer or by representatives of the
Company, and significant repeat sales are derived from existing customers.

         Additionally,  the  Company's  Aero-Tech(R)  machines  are sold through
distributors  and dealers  throughout  the United States,  the Caribbean,  Latin
America and Europe.  The  Company is in the  process of  developing  distributor
relationships  in North  America  and Europe for the  distribution  of its Green
Jet(R)  dry-wetcleaning(TM)  machine and its Multi-Jet(TM)  dryclean machine. To
date, it has entered into  distributorship  arrangements for the Company's Green
Jet(R) dry-wetcleaning(TM)  machines with approximately 12 distributors in North
America.

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

         Customers  and  Markets.   The  Company's  customer  base  consists  of
approximately  500  customers  in the United  States,  the  Caribbean  and Latin
America,  including  independent  and franchise dry cleaning  stores and chains,
hotels, motels, hospitals,  cruise lines, nursing homes, government institutions
and  distributors.  No  customer  accounted  for more than 10% of the  Company's
revenues during the years ended June 30, 2003 or June 30, 2002.

         Sources of Supply.  The  Company  purchases  laundry  and dry  cleaning
machines,  boilers and other  products from a number of  manufacturers,  none of
which accounted for more than 20% of the Company's purchases for the years ended
June 30, 2003 or June 30, 2002.  The Green Jet(R)  dry-wetcleaning(TM)  machines
are currently  manufactured  exclusively for the Company by one  manufacturer in
the United  States.  Substantially  all of the Company's dry cleaning  equipment
sold under the Aero-Tech(R) label is currently manufactured  exclusively for the
Company by two manufacturers in Italy. The Company has established long-standing
relationships with these manufacturers.  The Company's management believes these
supplier  relationships  provide  the  Company  with a  substantial  competitive
advantage,  including  exclusivity  in certain  products and areas and favorable
prices and terms. Therefore, the loss of one of these vendor relationships could
adversely  affect the  Company's  business.  Historically,  the  Company has not
experienced  difficulty  in purchasing  desired  products from its suppliers and
believes it has good working relationships with its suppliers.

         The  Company  has a  formal  contract  with  a  few  of  its  equipment
manufacturers  and  relies  on its  long-standing  relationship  with its  other
suppliers.  The  Company  collaborates  in the design and closely



                                       5
<PAGE>

monitors  the quality of the  manufactured  product.  The Company must place its
orders   with   its   United   States   manufacturer   of   the   Green   Jet(R)
dry-wetcleaning(TM)   machine   and  with  its  Italian   manufacturer   of  its
Aero-Tech(R)  dry cleaning  machines  prior to the time the Company has received
all of its orders. However,  because of the Company's close working relationship
with its  manufacturers,  the  Company  can usually  adjust  orders  rapidly and
efficiently to reflect a change in customer  demands.  The Company believes that
if, for any reason its arrangement with these manufacturers were to cease, or in
the event the cost of these products were to be adversely  affected,  it will be
able to have these products manufactured by other suppliers.

         Under  its  arrangement  with the  Italian  manufacturer,  the  Company
purchases dry cleaning  machines in Euros. The Company's  current bank revolving
credit facility includes a $250,000 foreign exchange subfacility for the purpose
of enabling the Company to mitigate its currency exposure in connection with its
import activities through spot foreign exchange and forward exchange contracts.

         Imports  into  the  United  States  are  also  affected  by the cost of
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 the Company's
margins on its Aero-Tech(R) machines. United States customs duties presently are
less than 1% of invoice cost for the Company's imported dry cleaning machines.

         Competition.  The commercial  and  industrial  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. The
Company's  management  believes that no one distributor has a major share of the
market and that substantially all 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,  the
Company's  principal  domestic  market,  the Company's  primary  competition  is
derived from two full-line  distributors which operate out of the Miami area. In
the  export  market,   the  Company  competes  with  several   distributors  and
anticipates  increased  competition  as the export market  grows.  On a national
level,  the Company  competes  with over a dozen  manufacturers  of dry cleaning
equipment whose products are  distributed  nationally.  The Company  competes by
offering an extensive product selection,  value-added services,  such as product
inspection  and  quality   assurance,   a  toll-free   customer   support  line,
reliability,  warehouse location,  price, competitive special features and, with
respect to certain products, 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
businesses,  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.

RESEARCH AND DEVELOPMENT
------------------------

         The  Company  has  designed  and   introduced   its  new  Green  Jet(R)
dry-wetcleaning(TM)  and  Multi-Jet(TM)  drycleaning  machines and  continues to
improve these products. The amounts of research and development expenses for the
years ended June 30, 2003 and 2002 were $44,009 and $31,499.



                                       6
<PAGE>

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

         The Company is the owner of United  States  service mark  registrations
for the names Aero-Tech(R), Logitrol(R), Petro-Star(R), Enviro-Star(R) and Green
Jet(R),  which  are  used in  connection  with  its  laundry  and  dry  cleaning
equipment,  and of  DRYCLEAN  USA(R),  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.  Patents  have been  applied  for to protect the  Company's  new Green
Jet(R) dry-wetcleaning(TM) machine.

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   environment,   including   with   respect   to
perchloroethylene  (Perc),  the  primary  cleaning  agent  historically  used in
commercial  and  industrial  dry  cleaning  process.  A  number  of  industries,
including  the  commercial  and  industrial  dry cleaning and laundry  equipment
industries, 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.

         The Company  believes its Aero-Tech(R) and Green Jet(R) machines exceed
the  environmental  regulations  set  by  safety  and  environmental  regulatory
agencies.

         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.

         The Company is also  subject to Federal  Trade  Commission  (the "FTC")
regulations  and various state laws regulating the offer and sale of franchises.
The FTC and various  state laws  require the  Company  to,  among other  things,
furnish to  prospective  franchisees a franchise  offering  circular  containing
prescribed  information.  Certain states in the United States  require  separate
filings in order to offer and sell  franchises in those  states.  The Company is
presently registered in four of those states. The Company believes that it is in
compliance in all material respects with these laws.

EMPLOYEES
---------

         The Company  currently  employs 32 employees on a full-time  basis,  of
whom three serve in executive management capacities, 11 are engaged in sales and
marketing,  11 are  administrative  and clerical  personnel,  and seven serve as
warehouse support.  None of the Company's  employees are subject to a



                                       7
<PAGE>

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

         Export sales of the  Company's  laundry and dry cleaning  business were
approximately $2,596,000 and $2,081,000 during the years ended June 30, 2003 and
June 30, 2002, respectively,  and were made principally to Latin America and the
Caribbean. See "Customers and Markets".

         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, as well as the strength of
the economies of the countries in which the Company's customers are located.

ITEM 2.  DESCRIPTION OF PROPERTIES.
         -------------------------

         The Company's  executive offices and the main  distribution  center for
its  products  are  housed  in  three  leased   adjacent   facilities   totaling
approximately  45,000 square feet in Miami,  Florida.  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               March 2004 (2)
         Miami, Florida                     10,000               December 2005
______________

(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.
(2)  In addition, the Company has two separate two-year renewal options.

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

         The Company is not a party to any material pending legal proceedings.

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

         Not applicable.



                                       8
<PAGE>



                                     PART II
                                     -------

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

         The  Company's  Common Stock is traded on the American  Stock  Exchange
(the "Amex") and on the Chicago Stock Exchange, each under the symbol "DCU." The
following  table sets forth,  for the Company's  Common Stock,  the high and low
sales prices on the Amex, as reported by Amex, for the periods reflected below.

                                            HIGH                  LOW
                                            ----                  ---

         Fiscal 2002
         -----------
         First Quarter                      $  .85                $  .50
         Second Quarter                        .60                   .42
         Third Quarter                         .99                   .50
         Fourth Quarter                        .89                   .55

         Fiscal 2003
         -----------
         First Quarter                      $  .65                $  .35
         Second Quarter                        .62                   .31
         Third Quarter                         .97                   .55
         Fourth Quarter                        .79                   .57

         As of September 16, 2003 there were approximately 494 holders of record
of the Company's Common Stock.

         No dividends have been paid on the Company's Common Stock during either
of the last two fiscal  years.  However,  on September  26, 2003,  the Company's
Board of Directors declared a dividend of $.05 per share, payable on October 31,
2003 to holders of the Company's Common Stock of record on October 17, 2003. The
Company is a party to a Loan and  Security  Agreement  with a  commercial  bank,
which,  among  other  things,  provides  that the  Company  may  declare  or pay
dividends  only to the extent that the  dividend  payment  would not  reasonably
likely  result in a failure by the  Company to maintain  specified  consolidated
debt service or short-term debt to equity ratios.

         The  following  table sets forth  certain  information,  as at June 30,
2003, with respect to the Company's equity compensation plans:



                                       9
<PAGE>

<TABLE>
<CAPTION>
                                                                                             NUMBER OF SECURITIES
                                    NUMBER OF SECURITIES TO BE      WEIGHTED-AVERAGE       REMAINING AVAILABLE FOR
                                     ISSUED UPON EXERCISE OF       EXERCISE PRICE OF           FUTURE ISSUANCE
                                       OUTSTANDING OPTIONS,       OUTSTANDING OPTIONS,           UNDER EQUITY
        PLAN CATEGORY                  WARRANTS AND RIGHTS        WARRANTS AND RIGHTS         COMPENSATION PLANS
        -------------                  -------------------        -------------------         ------------------

<S>                                              <C>                     <C>                        <C>
Equity   compensation   plans
approved by security holders..                   439,000 (a)             $1.02                      560,000 (b)

Equity   compensation   plans
not   approved   by  security
holders.......................                        -0-                   --                           -0-
                                   -----------------------------------------------------------------------------------
  Total......................                    439,000                 $1.02                      560,000
                                   ============================= ======================= =============================
</TABLE>

(a)      Includes 399,000 and 40,000 shares subject to options granted under the
         Company's  1991 Stock Option Plan under which no future  options may be
         granted and the Company's 1994 Non-Employee  Director Stock Option Plan
         (the "1994 Plan"), respectively.

(b)      Includes  500,000 shares available for future grant under the Company's
         2000 Stock Option Plan (the "2000  Plan"),  which  permits the grant of
         options to employees and directors of, and consultants to, the Company,
         and 60,000 shares available for grant to future non-employee  directors
         under the 1994 Plan. Upon the  expiration,  cancellation or termination
         of  unexercised  options,  shares subject to options under the 2000 and
         1994 Plans will again be available  for the grant of options  under the
         applicable plan.

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

GENERAL
-------

         The  following  discussion  should  be read  in  conjunction  with  the
Consolidated  Financial  Statements  and Notes thereto which appear in Item 7 of
this Report.

         Effective  July 31,  2002,  the Company sold  substantially  all of the
operating  assets  (principally  inventory,  equipment  and  intangible  assets,
including tradenames) of its Metro Tel segment to an unaffiliated third party. A
provision of $555,000 for the estimated loss on the sale was  established in the
Company's  financial  statements  for the year ended June 30, 2002. As discussed
below,  for the year ended June 30,  2003,  the  Company  recorded a net gain of
$57,659  as a  result  of the  settlement  of  liabilities  associated  with the
discontinued  operation.  The results of operations  of the Company's  Metro Tel
segment  are not  discussed  in detail  below as they have  been  classified  as
discontinued  operations.  The  following  discussion  relates  primarily to the
Company's continuing operations.

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

         For the year ended June 30, 2003,  cash increased by $349,784  compared
to an increase of $888,445 for the year ended June 30, 2002.

         In fiscal  2003,  operating  activities  provided net cash of $787,620,
compared to $1,251,708 in fiscal 2002. Net earnings from  continuing  operations
($546,134),  together with non-cash  expenses for  depreciation and amortization
($114,941),  a provision  for bad debts  ($126,210),  and a decrease in deferred
income  taxes  ($102,154)  produced an  aggregate  of $889,439 of cash in fiscal
2003.  Changes in operating



                                       10
<PAGE>

assets and liabilities used cash of $101,819.  The principal uses of cash during
fiscal 2003 were caused by a reduction of accounts  payable and accrued expenses
by $577,086 as fiscal 2002 year end levels were higher than at the end of fiscal
2003 due principally to the accrual of expenses related to the sale of the Metro
Tel segment toward the end of fiscal 2002 and lower inventory  purchases  toward
the end of fiscal  2003,  and a result of a reduction  in  customer  deposits by
$204,280.  These were  partially  offset by cash  provided by  reductions in the
level of inventories  ($341,534)  due to the lower level of inventory  purchases
toward the end of fiscal 2003, accounts and notes receivable ($18,172) and other
assets  ($16,537),  the collection of refundable  income taxes ($225,167) and an
increase in income taxes payable ($78,137).  The level of inventory and accounts
and notes receivable vary in the normal course of business.

         Cash provided by operating  activities  in fiscal 2002 was  $1,251,708.
Continuing  operations  provided  $1,162,701 of the net cash. In generating cash
from operations, the Company's net income from continuing operations of $479,978
was  supplemented  by  $113,102  of  non-cash   expenses  for  depreciation  and
amortization  and  partially  offset by deferred  taxes of $167,098.  Changes in
operating  assets  and  liabilities  contributed  $746,144  to net cash due to a
decrease  of  $489,989  in  accounts,  notes  and  lease  receivables  resulting
primarily  from  decreased  sales  and  an  improvement  in  the  collection  of
receivables  and a $261,660  increase in accounts  payable and accrued  expenses
resulting primarily from accrued expenses of the discontinued Metro Tel segment.

         Discontinued  operations in fiscal 2003 represents the non-cash gain on
the settlement of  liabilities of the Metro Tel segment  discussed in "General,"
above, net of taxes. In fiscal 2002, these discontinued operations provided cash
of $89,007.

         Investment  activities  provided  cash of $362,164  for the fiscal year
ended June 30,  2003,  principally  as a result of $210,000  provided by the net
proceeds  from the sale of the  Company's  Metro Tel segment and  $180,952  from
payments  received,  including  a $50,000  prepayment,  on a note  received as a
portion of the sales price.  Capital  expenditures for equipment  purchases used
cash of  $15,634  and  $13,154  was  used for  patent  costs.  Net cash  used by
investing  activities in fiscal 2002 was $243.  Equipment purchases used $97,969
of cash and patent  expenditures used cash of $16,769.  These were substantially
offset by $114,495 provided by the collection of a related party receivable.

         In fiscal 2003,  financing activities used cash of $800,000 for monthly
payments on the Company's  term loan  ($266,667)  and, on May 7, 2003, to prepay
the balance of that loan  ($533,333).  Financing  activities in fiscal 2002 used
cash of $363,020 to make payments on the Company's term loan  ($360,000) and for
the purchase of Company common stock ($3,020).

         On October 11, 2002, the Company  received an extension,  until October
30,  2003,  of its  existing  $2,250,000  revolving  line  of  credit  facility.
Revolving  credit  borrowings are limited by a borrowing base of 60% of eligible
accounts  receivable  and 60% of certain  inventories  and 50% of other eligible
inventories. As of June 30, 2003 the Company had no outstanding borrowings under
the line of credit.  The Company believes it can negotiate an extension of this,
or a new line of credit facility, by October 30, 2003.

         On September 26, 2003, The Company's Board of Directors declared a $.05
per share annual dividend (or an aggregate of approximately $350,000) payable on
October 31, 2003 to shareholders of record on October 17, 2003.

         The Company believes that its present cash position and cash it expects
to generate from operations will be sufficient to meet its operational needs.

OFF-BALANCE SHEET FINANCING
---------------------------

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



                                       11
<PAGE>

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

         Revenues from continuing operations for the fiscal year ended June, 30,
2003  increased  by $28,944  (.2%) over fiscal  2002.  Sales of  commercial  and
industrial laundry and dry cleaning equipment increased by $92,179 (.7%), mostly
due to increases  in parts sales of 3% and boiler sales of 4.1%,  which offset a
5% decrease in the sales of dry cleaning  equipment.  Export  sales  improved by
24.7% in fiscal 2003 over fiscal  2002,  which  offset a decline in sales to the
domestic market due to the sluggish economy.

         Revenues from the Company's  license and franchise segment decreased by
$3,985 (1.2%) with a decrease in initial license fee income offset,  in part, by
an increase in royalty income.

         Cost of goods sold  expressed as a percentage of net sales  improved to
72.1% in fiscal 2003 from 72.5% in fiscal  2002,  primarily  due to the relative
mix of products sold in each period.

         Selling,  general  and  administrative  expenses  decreased  by $50,806
(1.3%) in fiscal 2003 from fiscal 2002  principally as a result of reductions in
advertising and exhibit expenses ($53,842),  commissions ($29,671), supplies and
utilities ($25,479) and professional fees ($34,138),  net of increased bad debts
of $126,210 due principally to the economy in Latin America.

         Research  and  development  expenses  increased  by $12,510  (39.7%) in
fiscal 2003 over fiscal 2002. The increase was due to the continuing development
of the Company's Green-Jet(R)  dry-wetcleaning(TM) machine and the Company's new
Multi-Jet(TM)  dry cleaning  machine,  the latter of which was  introduced at an
industry show in August 2003.

         Interest  income  increased  by  $17,878  (164.8%),  primarily  due  to
interest  earned on a note received by the Company as part of the  consideration
for the sale of the Metro Tel segment in July 2002.

         Interest  expense  decreased  by  $29,393  (54.5%) as a result of lower
average  outstanding  debt during the year and the  prepayment of the balance of
the loan in May 2003.

         The provision for income taxes on  continuing  operations  increased by
$39,010  (13.2%) due  primarily  to the  increase in  earnings  from  continuing
operations.  The effective tax rate  applicable to the Company's  pre-tax income
from  continuing  operations  was 38% for both fiscal 2003 and fiscal 2002.  See
Note  4  to  the  Consolidated  Financial  Statements  for  further  information
concerning the provision for income taxes.

         Discontinued  operations  provided a non-cash  gain of $57,659,  net of
taxes,  for  fiscal  year  2003,  as a result  of the  settlement  of  estimated
liabilities  accrued in fiscal 2002 for the sale of the assets of the  Company's
Metro Tel  segment to an  unaffiliated  third  party  effective  July 31,  2002.
Savings  were  realized  principally  in lease  termination  expenses  and other
transaction costs.

INFLATION
---------

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

TRANSACTIONS WITH RELATED PARTIES
---------------------------------

         The Company  leases  27,000  square feet of warehouse  and office space
from  William K.  Steiner,  a  principal  shareholder,  Chairman of the Board of
Directors and a director of the Company,  under a lease which expires in October
2004.  Annual  rental  under this lease is  approximately  $83,200.  The Company



                                       12
<PAGE>

believes  that the terms of the  lease are  comparable  to terms  that  would be
obtained  from an  unaffiliated  third party for  similar  property in a similar
locale.

CRITICAL ACCOUNTING POLICIES
----------------------------

         Securities and Exchange  Commission  Financial Reporting Release No. 60
encourages all companies to include a discussion of critical accounting policies
or methods used in the preparation of financial statements.  Management believes
the following critical accounting policies affect the significant  judgments and
estimates used in the preparation of the Company's financial statements:

         REVENUE RECOGNITION AND ACCOUNTS AND NOTES RECEIVABLE

         Sales  of  products  are  generally   recorded  as  they  are  shipped.
Commissions  and development  fees are recorded when earned,  generally when the
services are performed.  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,
which is evidenced by a certificate  from the  franchisee,  indicating that such
store has opened, and collectibility is reasonably assured.  Continuing services
fees  represent  regular  contractual  payments  received  for  the  use  of the
"Dryclean USA" marks, which are recognized as revenue when earned,  generally on
a straight line basis.

         Accounts and trade notes receivable are customer  obligations due under
normal trade terms.  The Company  sells its  products  primarily to  independent
dryclean and laundry stores. Note receivable represents the amounts due from the
sale of the telecommunications  business. The Company performs continuing credit
evaluations of its customers'  financial  condition and depending on the term of
credit,  the amount of the credit granted and  management's  past history with a
customer,  the Company may require the debtor to pledge the purchased  equipment
as collateral for the receivable.  Senior management  reviews accounts and notes
receivable on a regular basis to determine if any such amounts will  potentially
be  uncollectible.  The Company  includes any balances that are determined to be
uncollectible,  along  with a general  reserve,  in its  overall  allowance  for
doubtful  accounts.  After all attempts to collect a receivable have failed, the
receivable  is  written  off.  The  Company's  non-trade  notes  receivable  are
collateralized by the assets sold and are subject to personal  guarantees by the
principals of the debtor.  All payments on such notes are current.  Based on the
information  available to  management,  it believes the Company's  allowance for
doubtful  accounts as of June 30,  2003 and 2002 is  adequate.  However,  actual
write-offs might exceed the recorded allowance.

         FRANCHISE LICENSE TRADEMARK AND OTHER INTANGIBLE ASSETS

         The franchise license, trademark,  patents and trade name are stated at
cost  less   accumulated   amortization.   Those  assets  are   amortized  on  a
straight-line  basis over the estimated  future  periods to be benefited  (10-15
years).  The patents are amortized over the shorter of the patents'  useful life
or legal life from the date such  patents are granted.  The Company  reviews the
recoverability  of  intangible  assets  based  primarily  upon  an  analysis  of
undiscounted  cash flows from the intangible  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.

         USE OF ESTIMATES

         The  preparation of financial  statements  requires  management to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,   and  related  disclosure  of  contingent  assets  and
liabilities.   On  an  ongoing  basis,  management  evaluates  these  estimates,
including  those related to allowances  for doubtful  accounts  receivable,  the
carrying  value of  inventories  and  long-lived  assets,  the



                                       13
<PAGE>

timing of revenue  recognition for initial license and franchise fees from sales
of franchise  arrangements and continuing license and franchise service fees, as
well as sales returns. Management bases these estimates on historical experience
and on various other  assumptions  that are believed to be reasonable  under the
circumstances,  the results of which form the basis for making  judgments  about
the  recognition  of revenues and expenses and the carrying  value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

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

         In June 2002, the FASB issued  Statement No. 146,  Accounting for Costs
Associated  with  Exit or  Disposal  Activities.  This  Statement  requires  the
recognition  of a  liability  for a cost  associated  with an  exit or  disposal
activity when the liability is incurred  versus the date the Company  commits to
an exit  plan.  In  addition,  this  Statement  states the  liability  should be
initially  measured  at fair  value.  The  Statement  is  effective  for exit or
disposal  activities  that are initiated  after  December 31, 2002.  The primary
effect  to  the  Company's  financial  statements  would  be in  the  timing  of
accounting recognition of potential future exit activities. The adoption of this
pronouncement  did  not  have  a  material  effect  on the  Company's  financial
statements.

         In  December  2002,  the FASB  issued  SFAS No.  148,  "Accounting  for
Stock-Based Compensation - Transition and Disclosure".  The Statement amends the
transition  provisions  of SFAS No. 123 for  companies  that choose to adopt the
fair value based method of accounting for stock based employee compensation. The
Statement  does not  amend  the  provisions  of SFAS No.  123,  which  allow for
entities to continue to apply the intrinsic value-based method prescribed in APB
No. 25, "Accounting for Stock Issued to Employees",  however, it does amend some
of the  disclosure  requirements  regardless  of the method  used to account for
stock-based employee compensation.

         During  April  2003,  the FASB  issued  SFAS No.  149 -  "Amendment  of
Statement 133 on Derivative  Instruments and Hedging Activities",  effective for
contracts  entered into or modified after June 30, 2003,  except as stated below
and for hedging  relationships  designated  after June 30,  2003.  In  addition,
except as stated  below,  all  provisions  of this  Statement  should be applied
prospectively.  The  provisions of this  Statement  that relate to Statement 133
Implementation  Issues that have been  effective for fiscal  quarters that began
prior to June 15, 2003,  should  continue to be applied in accordance with their
respective effective dates. In addition, paragraphs 7(a) and 23(a), which relate
to forward purchases or sales of then-issued securities or other securities that
do not yet exist, should be applied to both existing contracts and new contracts
entered  into after June 30,  2003.  The Company  does not  participate  in such
transactions, however, it is evaluating the effect of this new pronouncement, if
any, and will adopt FASB 149 prospectively as proscribed.

         During May 2003,  the FASB  issued SFAS 150 -  "Accounting  for Certain
Financial  Instruments  with  Characteristics  of both  Liabilities and Equity",
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise  effective at the beginning of the first interim period  beginning
after June 15, 2003.  This  Statement  establishes  standards  for how an issuer
classifies and measures certain financial  instruments with  characteristics  of
both liabilities and equity.  It requires that an issuer classify a freestanding
financial  instrument  that is within its scope as a  liability  (or an asset in
some  circumstances).  Many of those  instruments were previously  classified as
equity or in a separate  category  between  debt and equity in a balance  sheet.
Some of the  provisions  of this  Statement  are  consistent  with  the  current
definition  of  liabilities  in FASB  Concepts  Statement  No. 6,  "Elements  of
Financial  Statements".  The Company does not  participate in such  transactions
however,  is evaluating the effect of this new  pronouncement,  if any, and will
adopt FASB 150 within the proscribed time.



                                       14
<PAGE>

         In November 2002, the FASB issued  Interpretation  No. 45,  Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness to Others,  an  interpretation of FASB Statements No.
5,  57,  and  107  and  a  rescission  of  FASB   Interpretation  No.  34.  This
Interpretation  elaborates on the  disclosures  to be made by a guarantor in its
interim and annul financial  statements  about its obligations  under guarantees
issued.  The  Interpretation  also  clarifies  that a  guarantor  is required to
recognize,  at inception of a guarantee,  a liability  for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of the
Interpretation  are  applicable to guarantees  issued or modified after December
31,  2002  and  did  not  have a  material  effect  on the  Company's  financial
statements.

         In January  2003,  the FASB  issued FASB  Interpretation  No. 46 (" FIN
46"),  "Consolidation  of Variable  Interest  Entities."  FIN 46  clarifies  the
application  of Accounting  Research  Bulletin No. 51,  "Consolidated  Financial
Statements,"  to certain  entities  in which  equity  investors  do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated financial support from other parties. FIN 46 applies immediately to
variable  interest  entities  ("VIE's")  created after January 31, 2003,  and to
VIE's in which an enterprise  obtains an interest after that date. It applies in
the first fiscal year or interim period  beginning after June 15, 2003, to VIE's
in which  an  enterprise  holds a  variable  interest  that it  acquired  before
February 1, 2003.  FIN 46 applies to public  enterprises  as of the beginning of
the applicable  interim or annual period. The Company is evaluating the effects,
if any, the adoption of FIN 46 may have on the Company's  consolidated financial
position, liquidity, or results of operations.











                                       15
<PAGE>


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

                                             DRYCLEAN USA, Inc. and Subsidiaries

                                      Index to Consolidated Financial Statements

Report of Independent Certified Public Accountants                        17

Consolidated Balance Sheets at June 30, 2003 and 2002                     18

Consolidated Statements of Operations for the years ended
   June 30, 2003 and 2002                                                 19

Consolidated Statements of Shareholders' Equity for the years ended
   June 30, 2003 and 2002                                                 20

Consolidated Statements of Cash Flows for the years ended
   June 30, 2003 and 2002                                                 21

Summary of Accounting Policies                                            22

Notes to Consolidated Financial Statements                                27




                                       16
<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, 2003 and 2002, and the related consolidated
statements of operations, 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 auditing standards generally accepted
in the  United  States of  America.  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,  2003 and 2002,  and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with accounting  principles generally accepted in the United
States of America.

Miami, Florida                                                  BDO Seidman, LLP
September 10, 2003




                                       17
<PAGE>


<TABLE>
<CAPTION>
                                                                       DRYCLEAN USA, Inc. and Subsidiaries

                                                                               Consolidated Balance Sheets


June 30,                                                                    2003              2002
-----------------------------------------------------------------------------------------------------------

ASSETS (Note 5)

CURRENT ASSETS

<S>                                                                 <C>                 <C>
   Cash and cash equivalents                                        $        1,614,141  $     1,264,357
   Accounts  and trade notes  receivable,  net of  allowance  for
doubtful                                                                     1,382,386        1,542,691
     accounts of $205,000 and $130,000, respectively
   Lease receivables (Note 2)                                                   53,894           37,290
   Inventories                                                               2,576,938        2,918,472
   Refundable income taxes                                                           -          225,167
   Deferred income taxes (Note 4)                                              118,525          240,351
   Current assets of discontinued operations (Note 12)                               -          745,000
   Note receivable-current (Note 12)                                           157,143                -
   Other current assets                                                        169,094          185,631
------------------------------------------------------------------------------------------------------------
Total current assets                                                         6,072,121        7,158,959

LEASE RECEIVABLES - due after one year (Note 2)                                      -              681

NOTE RECEIVABLE, LESS CURRENT PORTION (NOTE 12)                                211,905                -


EQUIPMENT AND IMPROVEMENTS, net (Note 3)                                       233,767          274,124

FRANCHISE, TRADEMARKS AND OTHER INTANGIBLE ASSETS, net
   (Note 1)                                                                    409,308          455,104

DEFERRED INCOME TAXES (Note 4)                                                  28,541            8,869

NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS (NOTE 12)                              -           15,000
------------------------------------------------------------------------------------------------------------

                                                                    $        6,955,642  $     7,912,737
===========================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

   Accounts payable and accrued expenses                            $        1,066,860  $     1,736,393
   Income taxes payable                                                        112,925                -
   Customer deposits and other                                                 335,206          539,486
   Current portion of term loan (Note 5)                                             -          320,000
-----------------------------------------------------------------------------------------------------------
Total current liabilities                                                    1,514,991        2,595,879
TERM LOAN, less current portion (Note 5)                                             -          480,000
-----------------------------------------------------------------------------------------------------------
Total liabilities                                                            1,514,991        3,075,879
-----------------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES (Notes 6, 8 and 9)
-----------------------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY (Note 11) Common stock, $0.025 par value:

     Authorized shares - 15,000,000;  7,027,500  shares issued
       and outstanding, including shares held in treasury                      175,688          175,688
   Additional paid-in capital                                                2,048,570        2,048,570
   Retained earnings                                                         3,219,413        2,615,620
   Treasury stock, 31,050  shares at cost                                       (3,020)          (3,020)
-----------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                   5,440,651        4,836,858
-----------------------------------------------------------------------------------------------------------
                                                                    $        6,955,642  $     7,912,737
===========================================================================================================
             See accompanying summary of accounting policies and notes to consolidated financial statements
</TABLE>



                                       18
<PAGE>


<TABLE>
<CAPTION>
                                                                      DRYCLEAN USA, Inc. and Subsidiaries

                                                                    Consolidated Statements of Operations

Year ended June 30,                                                              2003            2002
---------------------------------------------------------------------------------------------------------

REVENUES:

<S>                                                                     <C>             <C>
    Net sales                                                           $  13,413,145   $  13,330,158
    Development fees, franchise and license fees, commissions
       and other                                                              904,303         958,346
---------------------------------------------------------------------------------------------------------

Total                                                                      14,317,448      14,288,504
---------------------------------------------------------------------------------------------------------

COST OF SALES                                                               9,676,975       9,667,630
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 8 and 9)                3,720,404       3,771,210
RESEARCH AND DEVELOPMENT EXPENSES                                              44,009          31,499
---------------------------------------------------------------------------------------------------------

Total                                                                      13,441,388      13,470,339
---------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                              876,060         818,165
---------------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE):

    Interest income                                                            28,725          10,847
    Interest expense                                                          (24,562)        (53,955)
---------------------------------------------------------------------------------------------------------

Earnings from continuing operations before income taxes                       880,223         775,057
Provision for income taxes (Note 4)                                           334,089         295,079
---------------------------------------------------------------------------------------------------------

EARNINGS FROM CONTINUING OPERATIONS                                           546,134         479,978

Loss from  discontinued  operations,  net of income tax  benefit of $0
and  $127,787, respectively (Note 12)                                               -        (204,992)
Estimated gain (loss) on disposal of discontinued  operations,  net of
income tax expense  (benefit) of ($34,788) and $347,358,  respectively         57,659        (554,996)
(Note 12)
---------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations                                     57,659        (759,988)
---------------------------------------------------------------------------------------------------------

NET EARNINGS (LOSS)                                                     $     603,793   $    (280,010)
=========================================================================================================

Earnings per share from continuing operations, basic                    $         .08   $         .07
Earnings (loss) per share from discontinued operations,  net of taxes,            .01            (.11)
basic

=========================================================================================================
Net earnings (loss) per share, basic (Note 10)                          $         .09   $        (.04)
=========================================================================================================

Earnings per share from continuing operations, diluted                  $         .08   $         .07
Earnings (loss) per share from discontinued operations,  net of taxes,            .01            (.11)
diluted

=========================================================================================================
Net earnings (loss) per share, diluted (Note 10)                        $         .09   $        (.04)
=========================================================================================================

Weighted average number of shares of
    common stock outstanding:
       Basic                                                                6,996,450       6,996,813
       Diluted                                                              6,996,450       6,997,342
=========================================================================================================
           See accompanying summary of accounting policies and notes to consolidated financial statements

</TABLE>

                                       19
<PAGE>


<TABLE>
<CAPTION>
                                                                                          DRYCLEAN USA, Inc. and Subsidiaries

                                                                               Consolidated Statements of Shareholders' Equity

                                                            Additional
                                          COMMON STOCK        Paid-in        Treasury Stock
                                       --------------------              -----------------------   Retained
                                        Shares     Amount     Capital      SHARES     COST         Earnings       Total

------------------------------------------------------------------------------------------------------------------------------
<S>             <C>                    <C>       <C>       <C>              <C>     <C>          <C>            <C>
Balance at July 1, 2001                7,027,500 $ 175,688 $ 2,048,570      26,250  $      -     $ 2,895,630    $  5,119,888

   Treasury stock repurchases                 -          -           -       4,800    (3,020)              -          (3,020)

   Net loss                                   -          -           -           -         -        (280,010)       (280,010)
------------------------------------------------------------------------------------------------------------------------------

Balance at June 30, 2002               7,027,500   175,688   2,048,570      31,050    (3,020)      2,615,620       4,836,858


   Net earnings                               -          -           -           -         -         603,793        603,793
------------------------------------------------------------------------------------------------------------------------------

BALANCE AT JUNE 30, 2003               7,027,500 $ 175,688 $ 2,048,570      31,050  $ (3,020)    $ 3,219,413   $  5,440,651
==============================================================================================================================
                                See accompanying summary of accounting policies and notes to consolidated financial statements
</TABLE>



                                       20
<PAGE>

<TABLE>
<CAPTION>
                                                                           DRYCLEAN USA, Inc. and Subsidiaries

                                                                         Consolidated Statements of Cash Flows

YEAR ENDED JUNE 30,                                                                 2003                2002
--------------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES:

<S>                                                                        <C>                 <C>
   Net earnings from continuing operations                                 $     546,134       $     479,978
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation and amortization                                             114,941             113,102
       Bad debt (recovery) expense                                               126,210              (9,425)
       Provision for deferred income taxes                                       102,154            (167,098)
       (Increase) decrease in operating assets:
         Accounts, notes and lease receivables                                    18,172             498,989
         Inventories                                                             341,534                (311)
         Refundable income taxes                                                 225,167              32,196
         Other current assets                                                     16,537             (12,578)
       Increase (decrease) in operating liabilities:
         Accounts payable and accrued expenses                                  (577,086)            261,660
         Income taxes payable                                                     78,137                   -
         Customer deposits and other                                            (204,280)            (33,812)
--------------------------------------------------------------------------------------------------------------

Net cash provided by continuing operations                                       787,620           1,162,701
--------------------------------------------------------------------------------------------------------------

Net income (loss) from discontinued operations                                    57,659            (759,988)
   Adjustments:

       Estimated (gain) loss on disposal of assets                               (92,447)            902,354
       Decrease (increase) in net operating assets                                34,788             (53,359)
--------------------------------------------------------------------------------------------------------------

Net cash provided by discontinued operations                                           -              89,007
--------------------------------------------------------------------------------------------------------------

Cash provided by operating activities                                            787,620           1,251,708
--------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
   Net proceeds upon disposal of business                                        210,000                   -
   Payments received on note receivable                                          180,952                   -
   Capital expenditures                                                          (15,634)            (97,969)
   Collection of related party receivable                                              -             114,495
   Patent expenditures                                                           (13,154)            (16,769)
--------------------------------------------------------------------------------------------------------------

Net cash provided by (used) in investing activities                              362,164                (243)
--------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES:

   Payments on term loan                                                        (800,000)           (360,000)
   Acquisition of treasury stock                                                       -              (3,020)
--------------------------------------------------------------------------------------------------------------

Net cash used in financing activities                                           (800,000)           (363,020)
--------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                                        349,784             888,445
Cash and cash equivalents at beginning of year                                 1,264,357             375,912
--------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of year                                   $   1,614,141       $   1,264,357
==============================================================================================================

Supplemental Information:
   Cash paid for:
     Interest                                                              $      24,562       $      53,955
     Income taxes                                                                 24,000             171,000
==============================================================================================================
                See accompanying summary of accounting policies and notes to consolidated financial statements

</TABLE>


                                       21
<PAGE>


                                             DRYCLEAN USA, Inc. and Subsidiaries

                                                  Summary of Accounting Policies

        NATURE OF BUSINESS    DRYCLEAN USA, Inc. and subsidiaries (collectively,
                              the  "Company")  sell  commercial  and  industrial
                              laundry and dry  cleaning  equipment,  boilers and
                              replacement   parts;   sell  individual  and  area
                              franchises under the DRYCLEAN USA name; and act as
                              a business  broker in connection with the purchase
                              and sale of retail  dry  cleaning  stores and coin
                              laundries.

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

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


        REVENUE RECOGNITION   Sales of products are  generally  recorded as they
                              are shipped. Shipping, delivering and handling fee
                              income of approximately  $118,000 and $121,000 for
                              the   years   ended   June  30,   2003  and  2002,
                              respectively,  are  included as other  revenues in
                              the consolidated  financial statements.  Shipping,
                              delivering and handling costs are included in cost
                              of sales.  Commissions  and  development  fees are
                              recorded   when   earned.   Individual   franchise
                              arrangements include a license and provide for the
                              payment of  initial  fees,  as well as  continuing
                              royalty fees. Initial franchise fees are generally
                              recorded upon the opening of the franchise  store.
                              Continuing royalty fees are recorded when earned.

        ACCOUNTS  AND NOTES   Accounts and trade notes  receivable  are customer
        RECEIVABLE            obligations  due under  normal  trade  terms.  The
                              Company   sells   its   products    primarily   to
                              independent  dryclean  and  laundry  stores.  Note
                              receivable  represents  the  amounts  due from the
                              sale  of  the   telecommunications   segment.  The
                              Company performs  continuing credit evaluations of
                              its customers'  financial  condition and depending
                              on the terms of  credit,  the amount of the credit
                              granted and management's  history with a customer,
                              the Company may require the customer to pledge the
                              purchased   equipment   as   collateral   for  the
                              receivable. Senior management reviews accounts and
                              notes  receivable  on a regular basis to determine
                              if  any   such   amounts   will   potentially   be
                              uncollectible.  The Company  includes any balances
                              that are  determined  to be  uncollectible,  along
                              with a general reserve,  in its overall  allowance
                              for  doubtful  accounts.  After  all  attempts  to
                              collect a receivable  have failed,  the receivable
                              is  written  off.  The  Company's  non-trade  note
                              receivable  is  collateralized  by the assets sold
                              and are  subject  to  personal  guarantees  by the
                              principals  of the  debtor.  All  payments on such
                              notes  are  current.   Based  on  the  information
                              available,   management   believes  the  Company's
                              allowance  for  doubtful  accounts  as of June 30,
                              2003  and  2002  is  adequate.   However,   actual
                              write-offs might exceed the recorded allowance.

        INVENTORIES           Inventories  consist principally of finished goods
                              and are  valued  at the  lower  of cost or  market
                              determined on the first-in first-out method.



                                       22
<PAGE>

        EQUIPMENT,            Property  and   equipment   are  stated  at  cost.
        IMPROVEMENTS  AND     Depreciation  and  amortization  are calculated on
        DEPRECIATION          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  are  amortized  over  31  years  for
                              income tax purposes.

        ASSET IMPAIRMENTS     The  Company  accounts  for  long-lived  assets in
                              accordance  with the  provisions  of the Financial
                              Accounting  Standards Board ("FASB")  Statement of
                              Financial  Accounting  Standard  ("SFAS") No. 144,
                              "Accounting  for the  Impairment  or  Disposal  of
                              Long-Lived  Assets".  This statement requires that
                              long-lived   assets   and   certain   identifiable
                              intangibles  be reviewed for  impairment  whenever
                              events or changes in  circumstances  indicate that
                              the  carrying  amount  of  an  asset  may  not  be
                              recoverable.  Recoverability  of assets to be held
                              and  used  is  measured  by a  comparison  of  the
                              carrying  amount  of an asset to  future  net cash
                              flows  expected to be generated  by the asset.  If
                              such assets are  considered  to be  impaired,  the
                              impairment  to be  recognized  is  measured by the
                              amount by which the carrying  amount of the assets
                              exceeds the fair value of the assets. Assets to be
                              disposed  of  are  reported  at the  lower  of the
                              carrying amount or fair value less estimated costs
                              to sell.

        INCOME TAXES          The  Company  utilizes  the  asset  and  liability
                              method  wherein  deferred taxes are recognized for
                              differences   between    consolidated    financial
                              statement  and  income  tax  bases of  assets  and
                              liabilities.

        CASH EQUIVALENTS      Cash   equivalents   include  all  highly   liquid
                              investments  with  original  maturities  of  three
                              months or less.

        ESTIMATES             The   preparation   of   consolidated    financial
                              statements   in   conformity    with    accounting
                              principles generally accepted in the United States
                              of America  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.

        STOCK BASED           SFAS   No.   123,   Accounting   for   Stock-Based
        COMPENSATION          Compensation,  requires the Company to provide pro
                              forma information  regarding net income (loss) and
                              net  income  (loss)  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  2002:  no  dividend  yield; expected
                              volatility  of 95%;  risk-free  interest  rates of
                              approximately 4.2%, and expected lives of 5 years.
                              No options were granted in fiscal year 2003. Based
                              on  these   assumptions,   under  the   accounting
                              provisions  of SFAS No.  123,  the  Company's  net
                              income  (loss)  and net  income  (loss) per common
                              share would have been as follows:



                                       23
<PAGE>

<TABLE>
<CAPTION>
                                 Year ended June 30,                                          2003         2002
                                 ---------------------------------------------------------------------------------

                                <S>                                                    <C>            <C>
                                 Earnings from  continuing operations, as reported     $   546,134    $ 479,978
                                 Less:  Total  stock-based  employee   compensation
                                 expense  determined  under fair value based method
                                 for all awards                                            (14,377)     (25,624)
                                 ---------------------------------------------------------------------------------
                                 Pro forma earnings from continuing operations         $   531,757    $ 454,354
                                 =================================================================================

                                 Net income (loss), as reported                        $   603,793    $ (280,010)
                                 Less:  Total  stock-based  employee   compensation
                                 expense  determined  under fair value based method
                                 for all awards                                            (14,377)     (25,624)
                                 ---------------------------------------------------------------------------------
                                 Pro forma net income (loss)                           $   589,416    $(305,634)
                                 =================================================================================

                                 Earnings  per  common  share  from   continuing
                                 operations:

                                     Basic                              As reported    $       .08    $     .07
                                                                          Pro forma            .08          .06
                                     Diluted                            As reported            .08          .07
                                                                          Pro forma            .08          .06
                                 =================================================================================

                                 Net income (loss) per common share:
                                     Basic                              As reported    $       .09    $    (.04)
                                                                          Pro forma            .08         (.04)
                                     Diluted                            As reported            .09         (.04)
                                                                          Pro forma            .08         (.04)
                                 ---------------------------------------------------------------------------------
</TABLE>
        EARNINGS PER SHARE    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  anti-dilutive   effect  on
                              earnings   per   share  are   excluded   from  the
                              calculations.

        ADVERTISING COSTS     The Company expenses the cost of advertising as of
                              the  first  date  the  advertisement  is run.  The
                              Company   expensed   approximately   $179,000  and
                              $218,000 of advertising  costs for the years ended
                              June 30, 2003 and 2002, respectively.

        FAIR VALUE OF
        FINANCIAL INSTRUMENTS The  Company's   financial   instruments   consist
                              principally of cash and cashequivalents,  accounts
                              receivable,  lease receivables,  notes receivable,
                              accounts  payable and accrued  expenses  and debt.
                              Due  to  their  relatively  short-term  nature  or
                              variable  rates,  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.

        FRANCHISE LICENSE,    Franchise license, trademark, and other intangible
        TRADEMARK AND OTHER   assets  are   stated  at  cost  less   accumulated
        INTANGIBLE ASSETS     amortization.  These  assets  are  amortized  on a
                              straight-line  basis  over  the  estimated  future
                              periods to be benefited (10-



                                       24
<PAGE>

                              15 years).  Patents are amortized over the shorter
                              of the patents' useful life or legal life from the
                              date such patents are granted. The Company reviews
                              the  recoverability  of  intangible  assets  based
                              primarily  upon an analysis of  undiscounted  cash
                              flows  expected to be generated  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.

        NEW ACCOUNTING        In June 2002,  the FASB issued  Statement No. 146,
        PRONOUNCEMENTS        Accounting  for  Costs  Associated  with  Exit  or
                              Disposal  Activities.  This Statement requires the
                              recognition  of a liability for a cost  associated
                              with  an  exit  or  disposal   activity  when  the
                              liability is incurred  versus the date the Company
                              commits  to  an  exit  plan.  In  addition,   this
                              Statement states the liability should be initially
                              measured at fair value. The Statement is effective
                              for exit or disposal activities that are initiated
                              after December 31, 2002. The primary effect to the
                              Company's  financial  statements  would  be in the
                              timing  of  accounting  recognition  of  potential
                              future  exit  activities.  The  adoption  of  this
                              pronouncement  did not have a  material  effect on
                              the Company's financial statements.

                              In  December  2002,  the FASB issued SFAS No. 148,
                              "Accounting   for   Stock-Based   Compensation   -
                              Transition and  Disclosure".  The Statement amends
                              the  transition  provisions  of SFAS  No.  123 for
                              companies  that  choose  to adopt  the fair  value
                              based  method  of   accounting   for  stock  based
                              employee  compensation.  The  Statement  does  not
                              amend the  provisions of SFAS No. 123, which allow
                              for  entities to  continue to apply the  intrinsic
                              value-based  method  prescribed  in  APB  No.  25,
                              "Accounting   for  Stock  Issued  to   Employees",
                              however,  it does  amend  some  of the  disclosure
                              requirements  regardless  of the  method  used  to
                              account for stock-based employee compensation.

                              During April 2003,  the FASB issued SFAS No. 149 -
                              "Amendment   of   Statement   133  on   Derivative
                              Instruments and Hedging Activities", effective for
                              contracts  entered into or modified after June 30,
                              2003,  except  as  stated  below  and for  hedging
                              relationships  designated  after June 30, 2003. In
                              addition,  except as stated below,  all provisions
                              of this Statement should be applied prospectively.

                                       25
<PAGE>
                              The  provisions of this  Statement  that relate to
                              Statement 133 Implementation Issues that have been
                              effective for fiscal  quarters that began prior to
                              June 15,  2003,  should  continue to be applied in
                              accordance with their respective  effective dates.
                              In  addition,  paragraphs  7(a) and  23(a),  which
                              relate   to   forward   purchases   or   sales  of
                              then-issued securities or other securities that do
                              not yet exist,  should be applied to both existing
                              contracts  and new  contracts  entered  into after
                              June 30, 2003. The Company does not participate in
                              such transactions,  however,  it is evaluating the
                              effect of this new pronouncement, if any, and will
                              adopt FASB 149 prospectively as proscribed.

                              During  May  2003,  the  FASB  issued  SFAS  150 -
                              "Accounting for Certain Financial Instruments with
                              Characteristics  of both  Liabilities and Equity",
                              effective for financial  instruments  entered into
                              or  modified  after May 31,  2003,  and  otherwise
                              effective at the  beginning  of the first  interim
                              period   beginning   after  June  15,  2003.  This
                              Statement  establishes standards for how an issuer
                              classifies   and   measures   certain    financial
                              instruments   with    characteristics    of   both
                              liabilities and equity. It requires that an issuer
                              classify a freestanding  financial instrument that
                              is within its scope as a liability (or an asset in
                              some  circumstances).  Many of  those  instruments
                              were  previously  classified  as  equity  or  in a
                              separate  category  between  debt and  equity in a
                              balance  sheet.  Some  of the  provisions  of this
                              Statement   are   consistent   with  the   current
                              definition   of   liabilities   in  FASB  Concepts
                              Statement   No.   6,    "Elements   of   Financial
                              Statements".  The Company does not  participate in
                              such  transactions   however,  is  evaluating  the
                              effect of this new pronouncement, if any, and will
                              adopt FASB 150 within the proscribed time.

                              In November 2002,  the FASB issued  Interpretation
                              No.  45,  Guarantor's  Accounting  and  Disclosure
                              Requirements  for Guarantees,  Including  Indirect
                              Guarantees   of   Indebtedness   to   Others,   an
                              interpretation  of FASB  Statements No. 5, 57, and
                              107 and a rescission  of FASB  Interpretation  No.
                              34.   This   Interpretation   elaborates   on  the
                              disclosures  to be  made  by a  guarantor  in  its
                              interim and annul financial  statements  about its
                              obligations   under   guarantees    issued.    The
                              Interpretation  also clarifies that a guarantor is
                              required  to   recognize,   at   inception   of  a
                              guarantee,  a liability  for the fair value of the
                              obligation undertaken. The initial recognition and
                              measurement  provisions of the  Interpretation are
                              applicable to guarantees  issued or modified after
                              December  31,  2002  and did not  have a  material
                              effect on the Company's financial statements.

                              In   January   2003,    the   FASB   issued   FASB
                              Interpretation No. 46  ("FIN 46"),  "Consolidation
                              of Variable  Interest  Entities." FIN 46 clarifies
                              the  application of Accounting  Research  Bulletin
                              No. 51,  "Consolidated  Financial  Statements," to
                              certain  entities in which equity investors do not
                              have   the   characteristics   of  a   controlling
                              financial  interest  or  do  not  have  sufficient
                              equity  at risk  for the  entity  to  finance  its
                              activities   without    additional    subordinated
                              financial  support  from  other  parties.  FIN  46
                              applies  immediately to variable interest entities
                              ("VIE's")  created after January 31, 2003,  and to
                              VIE's in which an  enterprise  obtains an interest
                              after  that date.  It applies in the first  fiscal
                              year or interim  period  beginning  after June 15,
                              2003,  to VIE's in  which  an  enterprise  holds a
                              variable interest that it acquired before February
                              1, 2003.  FIN 46 applies to public  enterprises as
                              of the  beginning  of the  applicable  interim  or
                              annual  period.  The  Company  is  evaluating  the
                              effects,  if any,  the adoption of FIN 46 may have
                              on the Company's  consolidated financial position,
                              liquidity, or results of operations.

                                       26
<PAGE>

1.      INTANGIBLE ASSETS     Franchise,  trademark and other intangible  assets
                              consist of the following:

<TABLE>
<CAPTION>
                              ---------------------------------------------------------------------------------
                                                                     Estimated
                                                                   Useful Lives       JUNE 30,      June 30,
                                                                    (in years)           2003          2002
                              ---------------------------------------------------------------------------------
<S>                                                                         <C>   <C>           <C>
                              Franchise license agreements                  10    $   529,500   $   529,500
                              Trademarks, patents and trade
                              name                                       10-15        105,944        93,910
                              ---------------------------------------------------------------------------------
                                                                                      635,444       623,410
                              Less accumulated amortization                          (226,136)     (168,306)
                              ---------------------------------------------------------------------------------
                                                                                  $   409,308   $   455,104
                              =================================================================================
</TABLE>

2.      LEASE  RECEIVABLES    Lease  receivables  result from customer leases of
                              equipment  under  arrangements  which  qualify  as
                              sales-type  leases.  At June 30,  2003  and  2002,
                              future lease  payments,  net of deferred  interest
                              ($3,212 and $4,685 at June 30, 2003 and 2002), due
                              under  these   leases   amounted  to  $53,894  and
                              $37,971, respectively.

3.      EQUIPMENT AND         Major  classes  of  equipment   and   improvements
        IMPROVEMENTS          consist of the following:


<TABLE>
<CAPTION>
                              June 30,                                                 2003              2002
                              ---------------------------------------------------------------------------------
<S>                                                                          <C>               <C>
                              Furniture and equipment                        $      670,262    $      646,501
                              Leasehold improvements                                322,514           330,877
                              ---------------------------------------------------------------------------------
                                                                                    992,776           977,378
                              Less accumulated depreciation and
                                  amortization                                     (759,009)         (703,254)
                              ---------------------------------------------------------------------------------
                                                                             $      233,767    $      274,124
                              =================================================================================
</TABLE>

                              Depreciation  and  amortization  of equipment  and
                              improvements  amounted  to $55,991 and $55,723 for
                              the   years   ended   June  30,   2003  and  2002,
                              respectively.

4.      INCOME TAXES          Income   taxes    (benefit)    included   in   the
                              consolidated   statements   of  operations  is  as
                              follows:

<TABLE>
<CAPTION>
                              Year ended June 30,                                        2003              2002
                              -----------------------------------------------------------------------------------

<S>                                                                            <C>               <C>
                              Continuing operations                            $      334,089    $      295,079
                              Discontinued operations                                       -          (127,787)
                              Income (loss) on sale of discontinued
                              operations                                               34,788          (347,358)
                              -----------------------------------------------------------------------------------
                                                                               $      368,877    $     (180,066)
                              ===================================================================================
</TABLE>



                                       27
<PAGE>

                              The following  are the  components of income taxes
                              (benefit):

<TABLE>
<CAPTION>
                              Year ended June 30,                                     2003                2002
                              -----------------------------------------------------------------------------------
<S>                                                                     <C>                   <C>
                              Current
                                  Federal                               $          227,828    $        (11,721)
                                  State                                             38,895              (1,247)
                              -----------------------------------------------------------------------------------
                                                                                   266,723             (12,968)
                              -----------------------------------------------------------------------------------
                              Deferred
                                  Federal                                           87,134            (150,979)
                                  State                                             15,020             (16,119)
                              -----------------------------------------------------------------------------------
                                                                                   102,154            (167,098)
                              -----------------------------------------------------------------------------------
                                                                        $          368,877    $       (180,066)
                              ===================================================================================
</TABLE>

                              The  reconciliation of income tax expense computed
                              at the Federal statutory tax rate of 34% to income
                              taxes (benefit) is as follows:

<TABLE>
<CAPTION>
                              Year ended June 30,                            2003                2002
                              ---------------------------------------------------------------------------
<S>                                                                 <C>                  <C>
                              Tax at the statutory rate             $     330,708        $   (166,317)

                              State income taxes,
                                 net of federal benefit                    35,584             (11,462)
                              Other                                         2,585              (2,287)
                              ---------------------------------------------------------------------------

                                                                    $     368,877        $   (180,066)
                              ===========================================================================
</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:

<PAGE>

<TABLE>
<CAPTION>
                              Year ended June 30,                                      2003             2002
                              ---------------------------------------------------------------------------------
<S>                                                                           <C>              <C>
                              Current deferred tax asset (liability):
                                  Allowance for doubtful accounts             $      77,142    $      48,919
                                  Inventory capitalization                           47,454           65,318
                                  Loss on sale of assets                                753          133,929
                                  Other                                              (6,824)          (7,815)
                              ---------------------------------------------------------------------------------
                                                                                    118,525          240,351
                              ---------------------------------------------------------------------------------

                              Noncurrent deferred tax asset (liability):
                                  Depreciation                                       (5,075)         (18,680)
                                  Amortization                                       33,616           27,549
                              ---------------------------------------------------------------------------------
                                                                                     28,541            8,869
                              ---------------------------------------------------------------------------------
                              Total net deferred income taxes                 $     147,066    $     249,220
                              ---------------------------------------------------------------------------------
</TABLE>


                                       28
<PAGE>
5.      CREDIT AGREEMENT      In December 2001, the Company  entered into a bank
        AND TERM LOAN         loan  agreement  with a facility  consisting  of a
                              term  loan  of  $960,000  and a  revolving  credit
                              facility of  $2,250,000,  including  a  $1,000,000
                              letter of credit  subfacility and $250,000 foreign
                              exchange subfacility.  Revolving credit borrowings
                              are limited by a borrowing base of 60% of eligible
                              accounts receivable and 60% of certain, and 50% of
                              other, eligible inventories.  Borrowings under the
                              term loan facility and revolving  credit  facility
                              bear  interest  at  2.65%  and  2.50%  per  annum,
                              respectively,  above  the  Adjusted  LIBOR  Market
                              Index Rate, are guaranteed by all of the Company's
                              subsidiaries    and    are    collateralized    by
                              substantially   all  of  the   Company's  and  its
                              subsidiaries'   assets.  At  June  30,  2002,  the
                              Company owed $800,000, under the term loan. In May
                              2003,  the Company  pre-paid the then  outstanding
                              balance ($533,333) of its term loan and no amounts
                              are  outstanding  at June 30, 2003.  The revolving
                              credit facility  matures October 30, 2003. At June
                              30,  2003  and  2002,  there  were no  outstanding
                              borrowings  under  the  line of  credit.  The loan
                              agreement requires maintenance of certain earnings
                              based  and other  financial  ratios  and  contains
                              other  restrictive  covenants.  The loan agreement
                              also contains  limitations  on the extent to which
                              the  Company  and  its   subsidiaries   may  incur
                              additional indebtedness,  pay dividends, guarantee
                              indebtedness of others,  grant liens,  sell assets
                              and make investments.

6.      RELATED PARTY         At  June  30,  2001,  $114,495,  net  of  $100,000
        TRANSACTIONS          allowance  for  doubtful  accounts,  was  due  the
                              Company  from an entity  controlled  by one of the
                              principal shareholders of the Company.  During the
                              year ended June 30,  2002,  the full  $114,495 was
                              collected.

                              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. The lease is renewable for a
                              ten-year  term at an amount  to be agreed  upon by
                              the parties.

7.      CONCENTRATIONS OF     The Company  places its excess  cash in  overnight
        CREDIT  RISK          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  note
                              receivable  is  collateralized  by the assets sold
                              and   subject  to  personal   guarantees   by  the
                              principals of the debtor.

                              From time to time, the Company purchases inventory
                              from  manufacturers  in Europe,  as a result,  the
                              Company is exposed  to  foreign  currency  risk in
                              Europe.  To  mitigate  such risk,  the Company may
                              enter into foreign exchange  forward  contracts to
                              reduce  its  risk  to  foreign   exchange   losses
                              associated with commitments to purchase  equipment
                              denominated   in  Euros.   The  Company  does  not
                              designate    such    contracts   as   hedges   and
                              accordingly,  all changes in fair value associated
                              with its forward contracts are recorded in cost of
                              sales.  At June 30, 2003 and 2002, the Company had
                              no  outstanding  commitments  to purchase  foreign
                              currency.

                                       29
<PAGE>

8.      COMMITMENTS           In  addition  to the  warehouse  and office  space
                              leased from a principal  shareholder (see Note 6),
                              the  Company  leases  two  additional  office  and
                              warehouse  spaces under operating  leases expiring
                              in March 2004 and  December  2005.  As of June 30,
                              2003,  the  Company is also  obligated  under five
                              leases  for  future  dry   cleaning   stores  that
                              aggregate $144,000 to $149,000 in annual base rent
                              per year  for the next  five  years.  The  Company
                              anticipates  assigning such leases to dry cleaning
                              franchisees  or other  customers  when the  leased
                              facilities are available for occupancy.

                              Minimum  future rental  commitments  for leases in
                              effect   at  June  30,   2003   approximates   the
                              following:

<TABLE>
<CAPTION>
                              Years ending June 30,
                              --------------------------------------------------------------------------------
                              <S>                                                         <C>
                              2004                                                        $        283,000
                              2005                                                                 208,000
                              2006                                                                 164,000
                              2007                                                                 148,000
                              2008                                                                 149,000
                              --------------------------------------------------------------------------------

</TABLE>
                              Rent expense aggregated  $153,841 and $151,196 for
                              the years ended June 2003 and 2002, respectively.

                              As of June 30, 2003 the Company had an outstanding
                              letter of credit to an Italian manufacturer in the
                              amount  of  $134,400,  due July  25,  2003 for the
                              purchase of inventory.  The commitment was honored
                              on schedule.

                              The Company,  through its manufacturers,  provides
                              parts   warranties   for  products   sold.   These
                              warranties   are   the   responsibility   of   the
                              manufacturer,  as such,  warranty related expenses
                              are  insignificant to the  consolidated  financial
                              statements.

9.      DEFERRED              The   Company   has   a   participatory   deferred
        COMPENSATION          compensation  plan  wherein  it  matches  employee
        PLAN                  contributions  up to 1% of an eligible  employee's
                              yearly compensation.

                              Employees are eligible to  participate in the plan
                              after  three   months  of  service.   The  Company
                              contributed  approximately  $10,000 to the Plan in
                              each of 2003 and  2002.  The plan is tax  deferred
                              under Section 401(k) of the Internal Revenue Code.



                                       30
<PAGE>


10.  EARNINGS PER SHARE       The  following  reconciles  the  components of the
                              earnings per share computation:

<TABLE>
<CAPTION>
                              YEAR ENDED JUNE 30,                                                       2003
                              ---------------------------------------------------------------------------------
                                                                                                         PER
                                                                          INCOME         SHARES        SHARE
                                                                     (NUMERATOR)  (DENOMINATOR)       AMOUNT
                              ---------------------------------------------------------------------------------
<S>                                                                 <C>               <C>           <C>
                              Earnings from continuing operations   $    546,134      6,996,450     $    .08

                              Effect of dilutive securities:
                                  Stock options                                -              -            -
                              ---------------------------------------------------------------------------------

                              Net earnings plus assumed dilution    $    546,134      6,996,450     $    .08
                              ---------------------------------------------------------------------------------

                              YEAR ENDED JUNE 30,                                                       2002
                              ---------------------------------------------------------------------------------

                                                                                                         PER
                                                                          INCOME         SHARES        SHARE
                                                                     (NUMERATOR)  (DENOMINATOR)       AMOUNT
                              ---------------------------------------------------------------------------------
                              Earnings from continuing operations   $    479,978      6,996,813     $    .07

                              Effect of dilutive securities:
                                  Stock options                                -            529            -
                              ---------------------------------------------------------------------------------
                              Net earnings plus assumed dilution    $    479,978      6,997,342     $    .07
                              ---------------------------------------------------------------------------------
</TABLE>

                              There were  outstanding  stock options to purchase
                              439,000  and  497,750,  shares  of  the  Company's
                              common  stock  outstanding  at June  30,  2003 and
                              2002,  respectively,  that  were  excluded  in the
                              computation  of earnings  per share for such years
                              because the exercise prices of the options were at
                              least the average  market  price of the  Company's
                              common stock for that year.

11.      STOCK OPTIONS        The Company has stock option plans that  authorize
                              the grant of  options  to  purchase  up to 500,000
                              shares  (until May 2010) of the  Company's  common
                              stock to employees and  consultants and options to
                              purchase 100,000 shares (until August 2004) of the
                              Company's   common   stock  to  directors  of  the
                              Company.

                              The   Company   applies   APB   Opinion   No.  25,
                              "Accounting  for Stock Issued to  Employees,"  and
                              related  interpretations  in accounting  for stock
                              options  to  employees  and  directors.  Under APB
                              Opinion No. 25,  because the exercise price of the
                              stock  options  equals or exceeds the market price
                              of the underlying  stock on the date of grant,  no
                              compensation cost has been recognized.  No options
                              have been granted to consultants.

                              Pursuant  to the  plans,  the  Company  may  grant
                              incentive  stock  options and  nonqualified  stock
                              options.  All options  under the 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.



                                       31
<PAGE>

                              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
                              110%  of the  fair  market  value  of  the  shares
                              issuable on the date of the grant and may not have
                              a term of more than five  years.  Incentive  stock
                              options   granted  under  the  employee  plan  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).

                              The Company also has options  outstanding  under a
                              stock  option plan that expired as to the grant of
                              new options in September 2001.

                              Generally,  options  granted  to  date  have  been
                              exercisable,   on  a  cumulative   basis,   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,  in
                              fiscal 2002, the Company granted 25,000 options to
                              two employees,  exercisable  upon issuance through
                              2007 at a price of $.56 per  share.  There were no
                              stock  options  granted  in fiscal  2003.  Options
                              granted under the plans terminate upon a merger in
                              which   the   Company   is   not   the   surviving
                              corporation,   or  in  certain   events  in  which
                              Shareholders  before the transaction  cease to own
                              at least 50% of the  combined  voting power in the
                              elections   of   directors   of   the    surviving
                              corporation, the sale of substantially, all of the
                              Company's assets or the liquidation or dissolution
                              of the Company,  unless other provision is made by
                              the board of directors.

                              A summary of  options  under the  Company's  stock
                              option  plans as of June  30,  2003,  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                      522,750       $    1.04
                              Granted                                                     -               -
                              Expired                                               (83,750)           1.05
                              --------------------------------------------------------------------------------
                              Outstanding at end of year                            439,000       $    1.02
                              --------------------------------------------------------------------------------
                              Options exercisable at year-end                       436,500       $    1.02
                              ================================================================================
</TABLE>



                                       32
<PAGE>

                              A summary of  options  under the  Company's  stock
                              option  plans as of June  30,  2002,  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                      594,750       $    1.09
                              Granted                                                25,000             .56
                              Expired                                               (97,000)           1.22
                              --------------------------------------------------------------------------------

                              Outstanding at end of year                            522,750       $    1.04
                              --------------------------------------------------------------------------------

                              Options exercisable at year-end                       400,812       $    1.03
                              ================================================================================
                              Weighted average fair value options granted
                              during the year                                     $     .45
                              --------------------------------------------------------------------------------
</TABLE>

                              The following table summarizes  information  about
                              stock option plan and non-plan options outstanding
                              at June 30, 2003:

<TABLE>
<CAPTION>
                                                               Weighted
                                                  Number        Average      Weighted        Number    Weighted
                                  Range of   Outstanding      Remaining      Average    Exercisable    Average
                                  Exercise            at    Contractual      Exercise            at    Exercise
                                    Prices       6/30/03           Life        Price        6/30/03      Price
                              -----------------------------------------------------------------------------------
<S>                             <C>              <C>          <C>          <C>              <C>      <C>
                                $ .91-$1.00$     419,000      .33 years    $    1.00        419,000  $    1.00
                                $     2.00 $      20,000      1.5 years    $    2.00         17,500  $    2.00
                              -----------------------------------------------------------------------------------
</TABLE>

12.     DISCONTINUED          In May 2002, the Company  initiated a plan to sell
        OPERATIONS            substantially   all   of  the   operating   assets
                              (principally  inventory,  equipment and intangible
                              assets)  of  its  Metro-Tel  segment,   which  was
                              engaged in the  manufacture  and sale of telephone
                              test equipment.

                              The sale,  to an  unaffiliated  purchaser,  closed
                              July 31,  2002.  The  purchase  price was $800,000
                              less  $40,000  in  estimated  transactions  costs,
                              consisting  of  $250,000  in cash  and a  $550,000
                              promissory  note,  bearing interest at prime + 1%,
                              (5% at June 30, 2003) and payable  monthly over 42
                              months commencing  October 1, 2002. The promissory
                              note is guaranteed by certain companies affiliated
                              with the  purchaser  and the  purchaser's  and the
                              affiliates'   principal    shareholders   and   is
                              collateralized  by  the  operating  assets  of the
                              purchaser  and  the  affiliated   companies.   The
                              Company has agreed to  subordinate  payment of the
                              promissory  note,  obligations  of the  affiliated
                              companies of the purchaser under their  guarantees
                              and the  collateral  granted by the  purchaser and
                              the affiliated  companies to the obligation of the
                              purchaser and the affiliated companies to two bank
                              lenders. The purchaser prepaid $50,000 of the note
                              in 2003.  As of June 30, 2003,  there was $369,048
                              due  the  Company   under  this  note.   Principal
                              payments  on  this  note  are   scheduled   to  be
                              collected as follows:

                                       33
<PAGE>


                              Years ending June 30,
                              -------------------------------------------------
                              2004                                    $ 157,143
                              2005                                      157,143
                              2006                                       54,762
                              --------------------------------------------------
                                                                      $ 369,048
                              ==================================================

                              The Company retained all of the segment's accounts
                              receivable,  cash and liabilities  existing at the
                              time  of  closing  and  agreed  to  a   three-year
                              covenant not to compete with the purchaser.

                              In connection  with the sale, the Company  accrued
                              costs,   including   estimated  lease  termination
                              costs, aggregating  approximately $184,000 at June
                              30,  2003.  Additionally,  the Company  recorded a
                              provision of $718,000 to reduce the carrying value
                              of assets sold to their  estimated net  realizable
                              value at June 30, 2002. The estimated loss on sale
                              of the discontinued  operation,  net of income tax
                              benefit,   recorded   as  of  June  30,  2002  was
                              $555,000.

                              During the year ended  June 30,  2003 the  Company
                              settled   certain   of  these   estimated   costs,
                              including lease  termination fees and professional
                              fees for amounts less than  previously  estimated.
                              Accordingly,  the  Company  recognized  a gain  on
                              disposal of approximately $58,000, net of taxes in
                              fiscal 2003.

                              Net  assets   and   operating   results   for  the
                              discontinued   operations  are   approximately  as
                              follows:

<TABLE>
<CAPTION>
                              June 30,                                                2003           2002
                              -------------------------------------------------------------------------------
<S>                                                                            <C>           <C>
                              Inventory                                        $          -  $     745,000
                              Property and equipment, net                                 -         10,000
                              Intangible asset, net                                       -          5,000
                              -------------------------------------------------------------------------------

                              Net assets of discontinued operations            $          -  $     760,000
                              -------------------------------------------------------------------------------

                              June 30,                                                2003           2002
                              --------------------------------------------------------------------------------

                              Revenues                                         $     55,000  $   1,648,000
                              Expenses                                              (55,000)    (1,981,000)
                              Income tax benefit                                          -        128,000
                              ================================================================================

                              (Loss) from discontinued operations              $          -  $    (205,000)
                              --------------------------------------------------------------------------------
</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., Steiner-Atlantic Brokerage
                              Corp.   and   DRYCLEAN  USA   Development   Corp.,
                              wholly-owned subsidiaries of the



                                       34
<PAGE>

                              Company,  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   Corp.   acts  as  a
                              business broker to assist others seeking to buy or
                              sell   existing  dry  cleaning  and  coin  laundry
                              businesses.   DRYCLEAN   USA   Development   Corp.
                              develops turn-key dry cleaning  establishments for
                              resale to third parties.

                              DRYCLEAN  USA  License  Corp.  is the  license and
                              franchise operations segment.

                              The  Company  primarily  evaluates  the  operating
                              performance   of  its   segments   based   on  the
                              categories  noted in the table below.  The Company
                              has no sales between segments.

                              Financial  information for the Company's  business
                              segments is as follows:

<TABLE>
<CAPTION>
                              Year ended June 30,                                           2003            2002
                              ------------------------------------------------------------------------------------
<S>                                                                              <C>              <C>
                              Revenues:
                                 Commercial and industrial laundry and dry
                                   cleaning equipment                            $    13,980,780  $   13,947,851
                                 License and franchise operations                        336,668         340,653
                              ------------------------------------------------------------------------------------
                              Total revenues                                     $    14,317,448  $   14,288,504
                              ====================================================================================
                              Operating income (loss):
                                 Commercial and industrial laundry
                                   and dry cleaning equipment                    $     1,013,611  $      869,397
                                License and franchise operations                         112,893         157,668
                                Corporate                                               (250,444)       (208,900)
                              ------------------------------------------------------------------------------------
                              Total operating income                             $       876,060  $      818,165
                              ------------------------------------------------------------------------------------
                              Identifiable assets:
                                 Commercial and industrial laundry
                                   and dry cleaning equipment                    $     5,498,438  $    5,585,225
                                 License and franchise operations                        759,750         789,179
                                 Corporate                                               737,454         778,333
                                 Assets of discontinued operations                             -         760,000
                              ------------------------------------------------------------------------------------
                              Total assets                                       $     6,995,642  $    7,912,737
                              ====================================================================================
</TABLE>

                              For the years ended June 30, 2003 and 2002, export
                              revenues,  principally  to the Caribbean and Latin
                              America,  aggregated  approximately $2,720,000 and
                              $2,206,000,  respectively of which,  approximately
                              $2,596,000 and $2,081,000 for years ended June 30,
                              2003  and  2002,  respectively,   related  to  the
                              commercial and industrial laundry and dry cleaning
                              equipment segment.  All such sales are denominated
                              in U.S. Dollars and accordingly the Company is not
                              exposed to risks of foreign currency  fluctuations
                              as a result of such sales.

                              No single customer  accounted for more than 10% of
                              the Company's revenues in 2003 and 2002.



                                       35
<PAGE>


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE.
        -----------------------------------

       Not applicable.

ITEM 8A. CONTROLS AND PROCEDURES.
         -----------------------

         As of the end of the period  covered by this report,  management of the
Company,  with  the  participation  of the  Company's  President  and  principal
executive officer and the Company's principal  financial officer,  evaluated the
effectiveness of the Company's  "disclosure controls and procedures," as defined
in Rule  13a-15(e)  under the  Securities  Exchange  Act of 1934.  Based on that
evaluation,  these officers  concluded that, as of the date of their evaluation,
the  Company's  disclosure  controls and  procedures  were  effective to provide
reasonable  assurance that information required to be disclosed in the Company's
periodic  filings under the Securities  Exchange Act of 1934 is accumulated  and
communicated  to our  management,  including  those  officers,  to allow  timely
decisions regarding required disclosure.

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

                                    PART 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,  47, 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, 73, 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, 70, 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,  78,  has been a  member  of the law  firm of  Jenkens  &
Gilchrist Parker Chapin LLP and its predecessor since 1977. Mr. Frank has been a
director of the Company  since 1977.  The Company  retained  Jenkens & Gilchrist
Parker  Chapin LLP 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,  43, has served as a director  of the  Company  since the
effectiveness  of the Merger on November 1, 1998. Mr. Blyer was Chief  Executive
Officer and President of Vento Software, a developer of software for specialized
business  applications,  from  1994,  when he  co-founded  that  company,  until
mid-2002. Since that time, Mr. Blyer has been an independent consultant.



                                       36
<PAGE>

         Alan M. Grunspan, 43, 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 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,  71, has served as a director of the Company  since the
effectiveness  of the  Merger  on  November  1,  1998.  Mr.  Wagner  has  been 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,  40, has served as Vice President and Director of Sales
for the Export Department of Steiner since joining Steiner in May 1993.

         Ronald London,  70, has served as Vice  President,  primarily  oversees
sales of the retail Dry Cleaning  Equipment  Department of Steiner since joining
Steiner in September 1992.

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 2003 Annual
Meeting  of  Stockholders  to be filed  pursuant  to  Regulation  14A  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 AND
         ------------------------------------------------------------------
         RELATED STOCKHOLDER MATTERS.
         ---------------------------

         The  information  called  for by this  Item  will be  contained  in the
Company's  definitive  Proxy Statement with respect to the Company's 2003 Annual
Meeting  of  Stockholders  to be filed  pursuant  to  Regulation  14A  under the
Securities Exchange Act of 1934, and is incorporated herein by reference to such
information, except that the information as to the Company's equity compensation
plans,  contained  in  the  last  paragraph  of  Item  5,  of  this  Report,  is
incorporated by reference into this Item 11.

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 2003 Annual
Meeting  of  Stockholders  to be filed  pursuant  to  Regulation  14A  under the
Securities Exchange Act of 1934, and is incorporated herein by reference to such
information.



                                       37
<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 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, File
                  No. 0-9040.)

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, File No. 0-9040.)

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, File No. 0-9040.)

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, File No. 0-9040.)

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, File No. 0-9040.)

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,  File  No.
                  0-9040.)

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, File No. 0-9040.)

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.)

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)(A)        Loan and  Security  Agreement,  dated as of December 19, 2001,
                  from  the  Company  in favor of  First  Union  National  Bank.
                  (Exhibit  4.1(a)  to the  Company's  Quarterly  Report on Form
                  10-QSB for the  quarter  ended  December  31,  2001,  File No.
                  0-9040).



                                       38
<PAGE>

4(a)(1)(B)        Letter  agreement dated September 23, 2002 between the Company
                  and First  Union  National  Bank  (Exhibit  4(a)(1)(B)  to the
                  Company's Annual Report on Form 10-KSB for the year ended June
                  30, 2002, File No. 0-0904.).

*4(a)(1)(C)       Letter  agreement  dated  October 11, 2002 between the Company
                  and Wachovia  (Exhibit 4.01 to the Company's  Quarterly Report
                  on Form 10-QSB for the quarter ended  September 30, 2002, File
                  No. 0-9040).

4(a)(2)           Term Note,  dated as of December 19, 2001, from the Company in
                  favor of First Union  National  Bank.  (Exhibit  4.1(b) to the
                  Company's  Quarterly  Report on Form  10-QSB  for the  quarter
                  ended December 31, 2001, File No. 0-9040).

4(a)(3)           Revolving Credit Note, dated as of December 19, 2001, from the
                  Company in favor of First Union National Bank. (Exhibit 4.1(c)
                  to the  Company's  Quarterly  Report  on Form  10-QSB  for the
                  quarter ended December 31, 2001, File No. 0-9040).

4(a)(4)           Guaranty  and  Security  Agreement,  dated as of December  19,
                  2001, from Steiner-Atlantic Corp.,  Steiner-Atlantic Brokerage
                  Company,  DRYCLEAN  USA  Development  Corp.  and  DRYCLEAN USA
                  License Corp.,  subsidiaries of the Company, in favor of First
                  Union  National  Bank.   (Exhibit   4.1(d)  to  the  Company's
                  Quarterly Report on Form 10-QSB for the quarter ended December
                  31, 2001, File No. 0-9040).

10(a)(1)          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)(l)(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(c)(l)+         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)+         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)(3)+         The  Company's  2000 Stock Option Plan.  (Exhibit  99.1 to the
                  Company's   Registration  Statement  on  Form  S-8,  File  No.
                  333-37582).

21                Subsidiaries  of the  Company.  (Exhibit  21 to the  Company's
                  Annual Report on Form 10-KSB for the year ended June 30, 2001,
                  File No. 0-9040.)

*23               Consent of BDO Seidman, LLP.

*31(a)            Certification  of  principal  executive  officer  pursuant  to
                  Section  302 of the  Sarbanes-Oxley  Act of  2002  promulgated
                  under the Securities Exchange Act of 1934.



                                       39
<PAGE>

*31(b)            Certification  of  principal  financial  officer  pursuant  to
                  Section  302 of the  Sarbanes-Oxley  Act of  2002  promulgated
                  under the Securities Exchange Act of 1934.

*32(a)            Certification  of  Principal  Executive  Officer  pursuant  to
                  Section 906 of the Sarbanes-Oxley Act of 2002.

*32(b)            Certification  of  Principal  Financial  Officer  pursuant  to
                  Section 906 of the Sarbanes-Oxley Act of 2002.

 _______________________

 *        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

         During the  quarter  ended June 30,  2003,  the Company  furnished  one
report on Form 8-K,  dated  May 14,  2003,  reporting  under  Item 7,  Financial
Statements, Pro Forma Financial Information and Exhibits, and Item 9, Regulation
FD  Disclosure  (Information  is Being  Provided  Under Item 12).  No  financial
statements were filed with that Report.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
         --------------------------------------

         The  information  called  for by this  Item  will be  contained  in the
Company's  definitive  Proxy Statement with respect to the Company's 2003 Annual
Meeting  of  Stockholders  to be filed  pursuant  to  Regulation  14A  under the
Securities Exchange Act of 1934, and is incorporated herein by reference to such
information.



                                       40
<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 29, 2003

                                       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 29, 2003
---------------------------------            Chief Executive Officer
Michael S. Steiner                           (Principal Executive Officer) and
                                             Director

/s/ William K. Steiner                       Director                                    September 29, 2003
---------------------------------
William K. Steiner

/s/ Venerando J. Indelicato                  Chief Financial Officer                     September 29, 2003
---------------------------------            (Principal Financial and Accounting
Venerando J. Indelicato                      Officer) and Director

/s/ Lloyd Frank                              Director                                    September 29, 2003
---------------------------------
Lloyd Frank

/s/ Alan M. Grunspan                         Director                                    September 29, 2003
---------------------------------
Alan M. Grunspan

/s/ Stuart Wagner                            Director                                    September 29, 2003
---------------------------------
Stuart Wagner

                                             Director
---------------------------------
David Blyer

</TABLE>


                                       41
<PAGE>



                                  EXHIBIT INDEX

Exhibit No.       Description
-----------       -----------

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 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, File
                  No. 0-9040.)

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, File No. 0-9040.)

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, File No. 0-9040.)

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, File No. 0-9040.)

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, File No. 0-9040.)

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,  File  No.
                  0-9040.)

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, File No. 0-9040.)

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.)

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)(A)        Loan and  Security  Agreement,  dated as of December 19, 2001,
                  from  the  Company  in favor of  First  Union  National  Bank.
                  (Exhibit  4.1(a)  to the  Company's  Quarterly  Report on Form
                  10-QSB for the  quarter  ended  December  31,  2001,  File No.
                  0-9040).

4(a)(1)(B)        Letter  agreement dated September 23, 2002 between the Company
                  and First  Union  National  Bank  (Exhibit  4(a)(1)(B)  to the
                  Company's Annual Report on Form 10-KSB for the year ended June
                  30, 2002, File No. 0-0904.).


                                       42
<PAGE>

*4(a)(1)(C)       Letter  agreement  dated  October 11, 2002 between the Company
                  and Wachovia  (Exhibit 4.01 to the Company's  Quarterly Report
                  on Form 10-QSB for the quarter ended  September 30, 2002, File
                  No. 0-9040).

4(a)(2)           Term Note,  dated as of December 19, 2001, from the Company in
                  favor of First Union  National  Bank.  (Exhibit  4.1(b) to the
                  Company's  Quarterly  Report on Form  10-QSB  for the  quarter
                  ended December 31, 2001, File No. 0-9040).

4(a)(3)           Revolving Credit Note, dated as of December 19, 2001, from the
                  Company in favor of First Union National Bank. (Exhibit 4.1(c)
                  to the  Company's  Quarterly  Report  on Form  10-QSB  for the
                  quarter ended December 31, 2001, File No. 0-9040).

4(a)(4)           Guaranty  and  Security  Agreement,  dated as of December  19,
                  2001, from Steiner-Atlantic Corp.,  Steiner-Atlantic Brokerage
                  Company,  DRYCLEAN  USA  Development  Corp.  and  DRYCLEAN USA
                  License Corp.,  subsidiaries of the Company, in favor of First
                  Union  National  Bank.   (Exhibit   4.1(d)  to  the  Company's
                  Quarterly Report on Form 10-QSB for the quarter ended December
                  31, 2001, File No. 0-9040).

10(a)(1)          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)(l)(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(c)(l)+         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)+         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)(3)+         The  Company's  2000 Stock Option Plan.  (Exhibit  99.1 to the
                  Company's   Registration  Statement  on  Form  S-8,  File  No.
                  333-37582).

21                Subsidiaries  of the  Company.  (Exhibit  21 to the  Company's
                  Annual Report on Form 10-KSB for the year ended June 30, 2001,
                  File No. 0-9040.)

*23               Consent of BDO Seidman, LLP.

*31(a)            Certification  of  principal  executive  officer  pursuant  to
                  Section  302 of the  Sarbanes-Oxley  Act of  2002  promulgated
                  under the Securities Exchange Act of 1934.

*31(b)            Certification  of  principal  financial  officer  pursuant  to
                  Section  302 of the  Sarbanes-Oxley  Act of  2002  promulgated
                  under the Securities Exchange Act of 1934.

*32(a)            Certification  of  Principal  Executive  Officer  pursuant  to
                  Section 906 of the Sarbanes-Oxley Act of 2002.

                                       43
<PAGE>

*32(b)            Certification  of  Principal  Financial  Officer  pursuant  to
                  Section 906 of the Sarbanes-Oxley Act of 2002.

 _______________________

 *        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.














                                       44