UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

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

For the fiscal year ended June 30, 2007

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

Commission file number 1-14757

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 is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

        Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No

        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. [ ]

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

        The Company’s revenues from continuing operations for its fiscal year ended June 30, 2007 were $22,748,527.

        The aggregate market value as at September 21, 2007 of the Common Stock of the issuer, its only class of voting stock, held by non-affiliates was approximately $4,011,000 based on the closing price 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 21, 2007 was 7,034,307.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the issuer’s Proxy Statement relating to its 2007 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

TABLE OF CONTENTS

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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. These risks and uncertainties include, among others: general economic and business conditions in the United States and other countries in which the Company’s customers and suppliers are located; industry conditions and trends; 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 inventory 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 Green-Jet® dry-wetcleaning machine and Multi-Jet® dry cleaning machine; the Company’s ability to implement changes in its business strategies and development plans; and the availability, terms and deployment of debt and equity capital if needed for expansion. 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

General

        The Company was incorporated under the laws of the State of Delaware on June 30, 1963 under the name Metro-Tel Corp. and changed its name to DRYCLEAN USA, Inc. on November 7, 1999. Since November 1, 1998, when Steiner-Atlantic Corp. (“Steiner”) was merged with and into, and therefore became, a wholly-owned subsidiary of the Company, the Company’s principal business has been as a supplier of commercial and industrial laundry and dry cleaning equipment and steam boilers and related activities.

        Unless the context otherwise requires, as used in this Report, the “Company” includes DRYCLEAN USA, Inc. and its subsidiaries.

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

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        The Company’s wholly-owned indirect subsidiary, Steiner-Atlantic Brokerage Corp. (“Steiner Brokerage”), acts 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.

        The Company, through its DRYCLEAN USA LICENSE CORP. wholly-owned indirect subsidiary, owns 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.

        Through DRYCLEAN USA Development Corp. (“DRYCLEAN USA Development”), a wholly-owned indirect subsidiary, the Company also develops new turn-key dry cleaning establishments for resale to third parties.

Available Information

        The Company files Annual Reports on Form 10-KSB and Quarterly Reports on Form 10-QSB, files or furnishes Current Reports on Form 8-K, files or furnishes amendments to those reports, and files proxy and information statements with the Securities and Exchange Commission (the “SEC”). These reports and statements may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 580, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. These reports and statements, as well as beneficial ownership reports filed by the Company’s officers, directors and beneficial owners of more than 10% of the Company’s common stock, may be obtained without charge through the Company’s Internet site http://www.drycleanusa.com as soon as reasonably practicable after such materials are filed with, or furnished to, the SEC.

Product Lines

        The Company sells a broad line of commercial and industrial laundry and dry cleaning equipment and steam boilers, as well as parts and accessories therefor.

        The commercial and industrial laundry equipment distributed by the Company features washers and dryers, including coin-operated machines, boilers, water reuse and heat reclamation systems, flatwork ironers, automatic folders and feeders. The Company’s dry cleaning equipment includes commercial dry cleaning machines manufactured by others under the Company’s Aero-Tech®, Multi-Jet® and Green-Jet® names, as well as garment presses, finishing equipment, sorting and storage conveyors and accessories distributed for others.

        The Company’s proprietary environmentally friendly Green-Jet® dry-wetcleaning machine not only cleans garments efficiently, but also eliminates the use of perchloroethylene (Perc) in the dry

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cleaning process, thereby eliminating the health and environmental concerns that Perc poses to customers and their landlords. It also alleviates flammability, odor and cost issues inherent in alternative solvents and cleaning processes. In May 2005, patents were granted to the Company from the United States to protect this innovative approach to garment cleaning. Patents from other countries are still pending. In August 2003, the Company introduced its Multi-Jet® dry cleaning machine which uses a number of environmentally safe solvents.

        The products sold by the Company are positioned and priced to appeal to customers in each of the high-end, mid-range and value priced markets. These 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 $100,000. The products supplied by the Company 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 and parts sales accounted for approximately 97% and 96% of revenues in fiscal 2007 and 2006, respectively.

        The Company seeks to establish customer satisfaction by offering:

        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 2007 and 2006, the Company’s license and franchise segment contributed approximately 1.2% and 1.7%, respectively, of the Company’s revenues.

        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 less than 1% of the Company’s revenues during each of fiscal 2007 and 2006.

        The Company, through its DRYCLEAN USA Development subsidiary, develops new turn-key dry cleaning establishments for resale to third parties. During fiscal 2007, DRYCLEAN USA Development contributed less than 1% of the Company’s revenues. It did not contribute any revenues in fiscal 2006.

Sales, Marketing and Customer Support

        The laundry and dry cleaning equipment products marketed by the Company are sold by it to its customers in the United States, the Caribbean and Latin America, as well as customers of its

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DRYCLEAN USA licensing subsidiary. The Company employs sales executives to market its proprietary and distributed products, including its Aero-Tech®, Multi-Jet® and Green-Jet® products, in the United States and in international markets. The Company supports product sales by advertising in trade publications, participating in trade shows and engaging in regional promotions and sales incentive programs. A substantial portion of equipment and parts 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.

        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 750 customers in the United States, the Caribbean and Latin America, including independent and franchise dry cleaning stores and chains, hotels, motels, cruise lines, hospitals, nursing homes, government institutions and distributors. One customer accounted for approximately 11% of the Company’s revenues during the year ended June 30, 2007. Another customer accounted for approximately 17% of the Company’s revenues during the year ended June 30, 2006.

Foreign Sales

        For the years ended June 30, 2007 and 2006, export revenues, principally to the Caribbean and Latin America, aggregated approximately $3,684,000 and $2,739,000, respectively, of which approximately $3,548,000 and $2,533,000, respectively, related to commercial and industrial laundry and dry cleaning equipment.

        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.

Sources of Supply

        The Company purchases laundry and dry cleaning machines, boilers and the other products from a number of manufacturers. Two of its suppliers accounted for approximately 24% and 21% of the Company’s purchases for the year ended June 30, 2007. One of these suppliers accounted for approximately 23% of the Company’s purchases for the year ended June 30, 2006. The Company’s major suppliers are Pellerin Milnor Corporation, Chicago Dryer Company, FMB Group and Unipress Corporation. Historically, the Company has not experienced difficulty in purchasing products it distributes for others and believes it has good working relationships with its suppliers.

        The supplier of a significant portion of the Company’s laundry equipment and related spare parts is located near New Orleans. While its plant was only slightly damaged by Hurricane Katrina, its power and employee availability were disrupted, causing shipment delays during fiscal 2006.

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        The Company’s proprietary Green-Jet® dry-wetcleaning 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® and Multi-Jet® labels 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 its supplier relationships for the products it distributes for others and its proprietary products provide the Company with a substantial competitive advantage, including exclusivity for certain products in certain areas and favorable prices and terms. Therefore, the loss of certain of these vendor relationships could adversely affect the Company’s business.

        The Company has a formal contract with only a few of its equipment suppliers and manufacturers and relies on its long-standing relationship with its other suppliers and manufacturers. The Company collaborates in the design of products and closely monitors the quality of its manufactured product. The Company must place its orders with its United States manufacturer of the Green-Jet® dry-wetcleaning machine and with its Italian manufacturers of its Aero-Tech® and Multi-Jet® dry cleaning machines prior to the time the Company has received all of its orders and, in certain instances, places orders for products it distributes in advance of its receipt of sales orders. However, because of the Company’s close working relationship with its suppliers and 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 arrangements with the manufacturers of its proprietary products 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.

        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. There were no open foreign exchange contracts at either June 30, 2007 or 2006.

        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, Italy and the European Union may, from time to time, impose 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® and Multi-Jet® machines. There have been no custom duties on the Company’s imported dry cleaning machines in either fiscal 2007 and 2006.

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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, substantially all distributors are independently owned and, with the exception of several regional distributors, operate primarily in local markets. Competition is based primarily on price, product quality, delivery and support services provided to the customer. In Florida, the Company’s principal domestic market, the Company’s primary competition is derived from a number of full line distributors, which operate throughout Florida. In the export market, the Company competes with several distributors and anticipates increased competition as the export market grows. The Company’s proprietary dry cleaning equipment competes with over a dozen manufacturers of dry cleaning equipment whose products are distributed nationally. In all geographic areas, 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, as to which the Company acts as distributor, 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 Green-Jet® dry-wetcleaning and Multi-Jet® drycleaning machines and continues to improve these products. The amounts of research and development expenses for the years ended June 30, 2007 and 2006 were $41,910 and $27,805, respectively.

Patents and Trademarks

        The Company is the owner of United States service mark registrations for the names Aero-Tech®, Multi-Jet® and Green-Jet®, which are used in connection with its laundry and dry cleaning equipment, and of DRYCLEAN USA®, which is licensed by it to retail dry cleaning establishments. The Company intends to use and protect these or related service marks, as necessary. The Company believes its trademarks and service marks have significant value and are an important factor in the marketing of its products. Patents were granted in May 2005 for the protection of the Company’s new Green-Jet® dry-wetcleaning machine in the United States which will expire in May 2021 and patents have been applied for in certain foreign countries.

        On January 3, 2005, the Company entered into a Patent License Agreement with Whirlpool Corporation (“Whirlpool”) in which the Company granted Whirlpool an exclusive license until December 31, 2008 and thereafter a non-exclusive license to make and sell laundry appliances incorporating the Company’s patent applications and other intellectual property related to fabric treatment technology for improving the drying and refreshing of garments in home clothes dryers. In consideration for the grant of the exclusive license through December 31, 2008, Whirlpool paid the Company $350,000, of which $331,100 was for the exclusive license fee. In addition, Whirlpool is to pay the Company a per unit royalty for dryers using the licensed technology that are sold during the three year period following the first sale following commercial production of dryers using the license technology. As of June 30, 2007 Whirlpool has not introduced any products containing the Company’s technologies.

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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 the 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 the generation and transportation of hazardous waste as well as its treatment, storage and disposal; and the Occupational 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 United States government’s 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® and Multi-Jet® dry cleaning machines and its Green-Jet® dry-wetcleaning machine exceed environmental regulation standards 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 believes that it is in compliance in all material respects with these laws.

Employees

        The Company currently employs 34 employees on a full-time basis, of whom 4 serve in executive management capacities, 13 are engaged in sales and marketing, 8 are administrative and clerical personnel, and 9 serve as warehouse support. None of the Company’s employees are subject to a collective bargaining agreement, nor has the Company experienced any work stoppages. The Company believes that its relations with employees are satisfactory.

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        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:

_________________

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

        Not applicable.

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PART II

        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.

        As of September 21, 2007, there were approximately 480 holders of record of the Company’s Common Stock.

        The following table sets forth information concerning the cash dividends declared by the Company’s Board of Directors during the periods covered by this Report:

        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 Company did not sell any equity securities during the year ended June 30, 2007 that were not registered under the Securities Act of 1933, as amended. The Company did not repurchase any securities during the fourth quarter of fiscal 2007.

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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.

Overview

        The Company set record revenues and increased its earnings in fiscal 2007, increasing revenues by 11.4% to $22,748,527 and net income by 9.6% to $880,990 over fiscal 2006. While the quarters in fiscal 2006 were somewhat erratic due to the hurricanes of southern Florida suffered in fiscal 2006, which affected quarterly comparative results, the yearly comparisons more accurately represent the Company’s comparative performance.

        The improved performance was led by a 21.1% increase in sales of commercial laundry equipment, a 33.8% increase in boiler sales and a 5.3% increase in parts sales, partially offset by a decrease of 8.6% in sales of dry cleaning equipment. Approximately 40.1% of the overall revenue improvement was produced by increased foreign sales due to improvements in the economies of the foreign market served by the Company, which had been weak over the last few years.

        The increase in sales offset a 8/10 of 1 percentage point decline in gross profit percentage caused by accepting larger orders which carry a smaller margin in order to remain competitive. The Company believes that its future growth will be with respect to commercial laundry equipment, which historically carries lower margins, and away from dry cleaning equipment sales, which are expected to remain subdued in coming years.

        Operating costs have remained under control, having risen by only 1.1 percentage point, mostly due to higher payroll expenses. Due to the high cost of windstorm property insurance following the hurricanes in Florida in fiscal 2006, the Company decided to self-insure against wind damage, thereby keeping costs at reasonable levels during fiscal 2007. However, effective August 15, 2007, the Company purchased windstorm property insurance on inventory and personal property at reasonable rates.

        The Company continues to strengthen its financial condition. Inventories have remained relatively constant while cash on hand increased to over $4 million at the end of fiscal 2007. The excess cash is invested in money market and overnight “sweep” accounts which, together with higher prevailing interest rates, resulted in an increase in interest income.

        In fiscal 2008, the Company will be subject to Sarbanes-Oxley section 404, which requires adequate internal controls over financial reporting. Management believes it already has adequate controls in place and should be able to meet these new regulations with a minimum investment.

        At the start of fiscal 2008, the Company reorganized a number of individual responsibilities and hired a new operations manager. These changes will strengthen the Company’s operations while allowing the Company to focus on continuing to improve its sales performance.

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Liquidity and Capital Resources

        For the twelve month period ended June 30, 2007, cash increased by $1,189,712 compared to an increase of $1,524,587 during fiscal 2006.

        The following table summarizes the Company’s Consolidated Statement of Cash Flows:

        For the twelve month period ended June 30, 2007, operating activities provided cash of $1,847,801 compared to $2,082,462 for the twelve month period ended June 30, 2006. The decrease was mostly due to a reduction in changes in assets and liabilities of $409,708, attributed mainly to a reduction of $501,329 in customer deposits, which in fiscal 2006 related to the receipt of certain large orders.

        Cash generated from operating activities during fiscal 2007 was provided by net earnings of $880,990 and non-cash expenses for depreciation and amortization of $120,479, bad debt expense of $32,183, deferred taxes of $66,105 and inventory reserves of $57,428, coupled with changes in assets and liabilities of $690,616. The cash generated by changes in assets and liabilities was mostly due to decreases in accounts, trade notes and lease receivables ($391,214) arising from large end of year shipments in fiscal 2006 which were paid for in fiscal 2007, inventories ($21,213) and other assets ($154,722). Additional cash was provided by increases in accounts payable and accrued expenses ($183,087), accrued employee expenses ($14,250) and customer deposits ($143,427). Cash was reduced by unearned income of $82,775 associated with the amortization of the initial fee received from Whirlpool in January 2005 and a decrease in taxes payable of $70,391.

        For the twelve month period of fiscal 2006, the Company generated cash through net earnings of $803,981 and non-cash expenses for depreciation and amortization of $142,453, bad debt expense of $36,731 and inventory reserves of $60,279. This cash was partially offset by a reduction in deferred taxes of $61,306. Changes in assets and liabilities provided additional cash of $1,100,324 principally due to a $644,756 increase in customer deposits, coupled with a decrease in accounts, trade notes and lease receivables ($49,630) and inventories ($98,582) and increases in accounts payable and accrued expenses ($213,708), accrued employee expenses ($295,693) and income taxes payable ($74,884). This was partially offset by an increase in other assets ($134,145) and a decrease in unearned income ($82,775).

        Investing activities for the twelve month period ended June 30, 2007, used cash of $95,046 mainly for capital expenditures of machinery and equipment and leasehold improvements ($93,846). During the same period of fiscal 2006 investing activities used cash of $4,582, as capital expenditures of $71,131 were offset by payments received on a note from the sale of the Company’s telecommunications segment ($67,857), which was fully paid in November 2005.

        Financing activities used cash of $563,043 and $553,293 for the twelve month period ended June 30, 2007 and 2006, respectively, mostly to pay cash dividends. In fiscal 2006, cash of $9,063 was received from the exercise of a stock option to purchase 10,000 shares of the Company’s common stock.

        On September 25, 2007, the Board of Directors declared a $.04 per share semi-annual dividend (or an aggregate of $281,372) payable on November 1, 2007 to stockholders of record on October 12, 2007.

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        On October 30, 2006, the Company received an extension until October 30, 2007 of its existing $2,250,000 revolving line of credit facility. In addition, the Loan Agreement was amended to eliminate the requirement that 51% of the stock of the Company be owned by the Steiner family or any Steiner trust. The Company’s obligations under the facility continue to be guaranteed by the Company’s subsidiaries and collateralized by substantially all of the Company’s and its subsidiaries’ assets. The Company has had no borrowings under this facility since May 2003. The Company intends to renew, and believes the bank will agree to renew, this line for another year.

        The Company believes that its present cash position, the cash it expects to generate from operations and, should it need cash not presently anticipated, cash borrowings available under its line of credit will be sufficient to meet its presently contemplated operational needs.

Off-Balance Sheet Financing

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

Results of Operations

        Revenues for the year ended June 30, 2007 increased by $2,333,637 (11.4%) over fiscal 2006. The commercial laundry and dry cleaning segment increased its revenues by 12.0% primarily due to the addition of a new salesman and a $1,015,000 (40.1%) increase in foreign sales. However, the Company’s license and franchise segment experienced a decrease of 22.2% in revenues, primarily due to a reduction in royalties and new dry cleaning franchises. For the year ended June 30, 2007, sales of commercial laundry equipment increased by 21.1%, sales of boilers increased by 33.8%, and sales of spare parts increased by 5.3%. These increases were partially offset by an 8.6% decrease in sales of dry cleaning equipment. Revenues of the Brokerage and Development divisions, which are included in the commercial laundry and dry cleaning segment, each contributed less the 1% of the Company’s revenues.

        Overall expenses of the Company, including costs of sales, were 94.5% of total revenues in fiscal 2007, compared to 94.4% in fiscal 2006. The slight increase reflects the Company’s ability to maintain a control on costs.

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        Cost of goods sold, expressed as a percentage of sales, increased to 76.7% in fiscal 2007 compared to 75.9% in fiscal 2006 mostly due to some larger contracts which carry smaller margins in order to remain competitive and a change in product mix.

        Selling, general and administrative expenses increased by $50,084 (1.1%), but improved as a percentage of revenues to 19.8% in fiscal 2007 from 21.8% in fiscal 2006. The slight increase in costs can be attributed to increased payroll and travel expenses, but were offset by reductions in office expenses, professional fees and utility costs. The improvement as a percentage of revenues resulted from spreading the costs over the increased revenues.

        Research and development expenses are a small part of the Company’s total operating expenses. These expenses relate to the on-going research on the Company’s Green-Jet® and Multi-Jet® technologies and the application of these technologies to smaller machines for the dry cleaning and hotel industry.

        Interest income increased by $87,350 (115.8%) as a result of interest earned on higher outstanding bank balances and higher prevailing rates.

        The Company’s effective income tax rate increased to 37.6% in fiscal 2007 from 34.5% in fiscal 2006 mostly due to a decrease in deferred tax assets.

Inflation

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

Transactions with Related Parties

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

        In fiscal 2007 and 2006, the Company paid a law firm, in which a director is of counsel, $46,700 and $45,300, respectively, for legal services performed.

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:

         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

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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 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.

         Revenue Recognition and Accounts and Notes Receivable

        Equipment and replacement parts are generally shipped FOB from the Company’s warehouse or drop shipped FOB factory at which time risk of loss and title passes to the purchaser and the sale is recorded. Commissions and development fees are recorded when earned, generally when the services are performed or the transaction is closed. Individual franchise arrangements include a license and provide for payment of initial fees, as well as continuing royalties. Initial franchise fees are generally recorded upon the opening of the franchised store, which is evidenced by a certificate from the franchisee, indicating that the store has opened, and collectibility is reasonably assured. Continuing royalties 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 dry clean and laundry plants. 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 customer to grant a security interest in 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 based on older aged amounts, in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off. Based on the information available to management, it believes the Company’s allowance for doubtful accounts as of June 30, 2007 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.

New Accounting Pronouncements

        In March 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, Gross versus Net Presentation).” EITF 06-3 requires an entity to disclose its policy for presenting taxes assessed on revenue-producing transaction between a seller and customer. Such taxes may include sales, use, and some excise taxes, among others. EITF 06-3 is effective

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for interim and annual periods ending after December 15, 2006 with early application permitted.

For the periods presented in this Report, the Company has presented such taxes net. The implementation of EITF 06-3 did not have an effect on the Company’s financial statements.

        In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements and prescribes a two-step test for the recognition and measurement of a tax position taken on a tax return.  FIN 48 provides guidance for determining whether tax benefits may be recognized with respect to uncertain tax positions and, if recognized, the amount that may be recorded.  FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not believe FIN 48 will have a material effect on its consolidated financial statements.

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

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

        In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities” which permits, at specified election dates, all entities to choose to measure eligible items at fair value. SFAS 159 is effective as of the beginning of an entity’s fiscal year beginning on or after November 15, 2007 with early application permitted as of the beginning of a fiscal year beginning on or before November 15, 2007 if an entity also elects to apply the provisions of SFAS 157. Retrospective application is not permitted unless early adoption is adopted. The Company is evaluating the effect, if any, the adoption of SFAS 159 will have on the Company’s financial statements.

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DRYCLEAN USA, Inc. and Subsidiaries

Index to Consolidated Financial Statements

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheet of DRYCLEAN USA, Inc. and Subsidiaries (the “Company”) as of June 30, 2007, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Company was not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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, 2007 and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Berkovits & Company, LLP

Fort Lauderdale, Florida
August 28, 2007, except
for the second paragraph of
Note 12 as to which the date
is September 25, 2007

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Report of Independent Registered Public Accounting Firm 

Board of Directors and Shareholders
DRYCLEAN USA, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheet of DRYCLEAN USA, Inc. and subsidiaries as of June 30, 2006, and the related consolidated statement of operations, shareholders’ equity and cash flows for the year then ended. These consolidated financial statement are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Company was not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, 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, 2006 and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Morrison, Brown, Argiz & Farra, LLP

Miami, Florida
September 8, 2006, except
for the first paragraph of
Note 12 as to which the date
is September 26, 2006

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DRYCLEAN USA, Inc. and Subsidiaries

Consolidated Balance Sheets

See accompanying summary of accounting policies and notes to consolidated financial statements.

21

DRYCLEAN USA, Inc. and Subsidiaries

Consolidated Statements of Operations

See accompanying summary of accounting policies and notes to consolidated financial statements.

22

DRYCLEAN USA, Inc. and Subsidiaries

Consolidated Statements of Shareholders' Equity

See accompanying summary of accounting policies and notes to consolidated financial statements.

23

DRYCLEAN USA, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

See accompanying summary of accounting policies and notes to consolidated financial statements.

24

DRYCLEAN USA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

25

DRYCLEAN USA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

26

DRYCLEAN USA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

27

DRYCLEAN USA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

28

DRYCLEAN USA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

29

DRYCLEAN USA, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

30

31

32

33

34

35

36

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        Not applicable.

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

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

        None.

PART III

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

        Michael S. Steiner, 51, has been President, Chief Executive Officer and a director of the Company since November 1998 and of Steiner since 1988.

        William K. Steiner, 77, has been a director of the Company since November 1998 and Chairman of the Board of Steiner since he founded Steiner in 1960.

        Venerando J. Indelicato, 74, was President of the Company from December 1967 until November 1998 and has been Treasurer and Chief Financial Officer of the Company since December 1969.

        Alan I. Greenstein, 51, has been Executive Vice President and Chief Operating Officer of Steiner since May 2004. From October 1995 until it was sold in 2000, he was President and principal stockholder of Professional Cleaners, Inc., an operator of a south Florida chain of dry cleaning and laundry stores. From February 2001 to September 2004, Mr. Greenstein was Vice President and a principal shareholder of South Florida Transport, Inc., a south Florida Thrifty Car rental franchise. In October 2004, South Florida Transport, Inc. filed a Chapter 11 bankruptcy proceeding, which subsequently converted to Chapter 7 liquidation. Mr. Greenstein believes the heavy losses from the hurricanes that hit Florida in the

38

summer of 2004 were the cause for South Florida Transport, Inc.'s financial problems. Since he joined Steiner, Mr. Greenstein has been a full time employee of Steiner.

        Lloyd Frank, 82, has been a director of the Company since 1977. Mr. Frank has been of counsel to the law firm of Troutman Sanders LLP since April 2005. Prior thereto, Mr. Frank was a member of the law firm of Jenkens & Gilchrist Parker Chapin LLP and its predecessor from 1977 until the end of 2003 and of counsel to that firm from January 2004 until March 2005. The Company retained Troutman Sanders 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, 47, has served as a director of the Company since November 1998. Mr. Blyer has been Co-Chairman of Profiles in Concrete, Inc., a manufacturer and installer of architectural cast stone for residential and commercial construction markets, since January 2005. From July 2002 until January 2005, Mr. Blyer was an independent consultant. Mr. Blyer was Chief Executive Officer and President of Vento Software, Inc., a developer of software for specialized business applications, from 1994, when he co-founded that company, until November 1999, when the company was acquired by SPSS Inc, a computer software company that develops and distributes technology for the analysis of data in decision making. From November 1999 until December 2000, Mr. Blyer served as Vice President of Vento Software, Inc., and, from January 2001 until July 2002, served as President of the Enabling Technology Division of SPSS Inc.

        Alan M. Grunspan, 47, has served as a director of the Company since May 1999. Since 2004, Mr. Grunspan has been a member of the law firm of Carlton Fields, PA. Prior thereto, Mr. Grunspan was a member of the law firm of Kaufman Dickstein & Grunspan P. A. from 1991 until 2004.

        Stuart Wagner, 75, has served as a director of the Company since November 1998. Mr. Wagner has been retired since 1999. 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, and served as a consultant to Diversified Corp., which acquired Wagner Products Corp., from 1997 until 1999 .

    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 balance of the information called for by this Item will be contained in the Company’s definitive Proxy Statement with respect to the Company’s 2007 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.

        The information called for by this Item will be contained in the Company’s definitive Proxy Statement with respect to the Company’s 2007 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.

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        The following table sets forth certain information, as at June 30, 2007, with respect to the Company’s equity compensation plans:

        The balance of the information called for by this Item will be contained in the Company’s definitive Proxy Statement with respect to the Company’s 2007 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.

        The information called for by this Item will be contained in the Company’s definitive Proxy Statement with respect to the Company’s 2007 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

41

42

_________________

        The information called for by this Item will be contained in the Company’s definitive Proxy Statement with respect to the Company’s 2007 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.

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SIGNATURES

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

        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.

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EXHIBIT INDEX

45

46