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EX-32.1 - MedClean Technologies, Inc.v194874_ex32-1.htm
EX-31.2 - MedClean Technologies, Inc.v194874_ex31-2.htm
EX-31.1 - MedClean Technologies, Inc.v194874_ex31-1.htm
EX-32.2 - MedClean Technologies, Inc.v194874_ex32-2.htm
UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: June 30, 2010

or

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

For the transition period from                 to

Commission File Number: 000-03125

MEDCLEAN TECHNOLOGIES, INC.
(Exact Name of registrant as specified in its charter)
Delaware
 
21-0661726
(State or other Jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification Number)

3 Trowbridge Drive
Bethel, Connecticut 06801
(Address of principal executive offices)

(203) 798-1080
(Registrant’s telephone number, including area code)
 
Copies to:
 
Joseph M. Lucosky, Esq.
195 Rt. 9 South, 2nd floor
Manalapan, NJ 07726
Tel No.: (732) 409-1212
Fax No.: (732) 577-1188

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 þ   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes o   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:
o
Large Accelerated Filer
 
o
Accelerated Filer
         
o
Non-Accelerated Filer
 
þ
Smaller Reporting Company

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

As of August 19, 2010, there were 726,564,141 shares outstanding of the registrant’s common stock.
 

 

 
Page
PART I—FINANCIAL INFORMATION 
   
Item 1. Financial Statements
3
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
4
   
Item 3. Quantitative and Qualitative disclosures about Market Risk
7
   
Item 4. Controls and Procedures
8
   
PART II—OTHER INFORMATION
   
Item 1. Legal Proceedings
8
   
Item1A. Risk Factors
9
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
9
   
Item 3. Defaults Upon Senior Securities
9
   
Item 4. (Removed and Reserved)
9
   
Item 5. Other Information
9
   
Item 6. Exhibits
9
   
Signatures
10
 
2

 
PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
PAGE
   
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009
F-1
   
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
F-2
   
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
F-3
   
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
F-4
 
3

 
MEDCLEAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

   
June 30,
   
December 31,
 
   
2010
   
2009
 
   
(unaudited)
       
ASSETS
           
Current assets
           
Cash
  $ 215,559     $ 534,425  
Accounts receivable, net of $24,693 allowance
    507,590       144,117  
Revenues in excess of billings
    7,679       7,679  
Inventory
    771,643       815,634  
Prepaid expenses
    56,208       32,646  
Total current assets:
    1,558,679       1,534,501  
                 
Property, plant and equipment, net
    170,668       212,801  
                 
Other assets:
               
Notes receivable
    731,222       -  
Deposits
    32,808       32,808  
                 
Total assets
  $ 2,493,377       1,780,110  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
               
Current liabilities
               
Accounts payable and accrued liabilities
  $ 472,044     $ 253,742  
Payroll liabilities
    416,878       401,408  
Deferred revenue
    100,735       236,500  
Billings in excess of revenue
    1,021,673       657,673  
Notes payable
    220,497       214,647  
Total current liabilities:
    2,231,827       1,763,970  
                 
Long term debt:
               
Convertible notes, net of debt discount of $964,598
    307,402       -  
Total liabilities
    2,539,229       1,763,970  
                 
Stockholders' (deficit) equity
               
Preferred stock, $0.0001 par value, 60,000,000 shares authorized, none issued outstanding
               
Common stock, $0.0001 par value; 3,500,000,000 shares authorized; 708,612,530 and 675,478,445 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively
    70,861       67,548  
Additional paid in capital
    28,013,314       25,411,906  
Accumulated deficit
    (28,130,027 )     (25,463,314 )
Total stockholders' (deficit) equity:
    (45,852 )     16,140  
                 
Total liabilities and stockholders' (deficit) equity
  $ 2,493,377     $ 1,780,110  

See the accompanying notes to these unaudited condensed consolidated financial statements

F-1

 
MEDCLEAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

   
Three months ended June 30,
   
Six months ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
Revenues
                       
Sales and service revenues
  $ 131,758     $ 354,755     $ 400,625     $ 772,182  
                                 
Cost of sales
    71,674       225,965       237,127       499,037  
                                 
Gross profit
    60,084       128,790       163,498       273,145  
                                 
Operating expenses
                               
Salaries and wages
    570,422       1,995,716       1,762,731       3,063,579  
General and administrative expenses
    537,178       332,018       1,008,343       821,536  
Depreciation
    22,577       21,050       44,930       44,159  
Total operating expenses
    1,130,177       2,348,784       2,816,004       3,929,274  
                                 
Loss from operations
    (1,070,093 )     (2,219,994 )     (2,652,506 )     (3,656,129 )
                                 
Other income and expenses
                               
Interest income
    31,292       38       31,526       944  
Interest expense
    (42,808 )     (448,203 )     (45,733 )     (896,700 )
                                 
Net Loss before income taxes
    (1,081,609 )     (2,668,159 )     (2,666,713 )     (4,551,885 )
                                 
Provision for income taxes (benefit)
    -       -       -       -  
                                 
Net Loss
  $ (1,081,609 )   $ (2,668,159 )   $ (2,666,713 )   $ (4,551,885 )
                                 
Loss per common share, basic and fully diluted
  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.01 )
                                 
Weighted average common shares outstanding, basic and fully diluted
    703,752,904       561,542,968       693,837,432       561,542,968  

See the accompanying notes to these unaudited condensed consolidated financial statements

F-2

 
MEDCLEAN TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
   
Six months ended June 30,
 
   
2010
   
2009
 
Cash flows from operating activities:
           
Net loss
  $ (2,666,713 )   $ (4,551,885 )
Adjustments to reconcile net loss to net cash used in operating activities
               
Depreciation
    47,702       44,159  
Amortization of add on interest, net
    (27,737 )     -  
Amortization of debt discount
    36,398       -  
Fair value of common stock, options and warrants issued for services rendered
    1,541,079       3,278,155  
(Increase) decrease in:
               
Accounts receivable
    (363,473 )     21,705  
Inventory
    43,991       (421,564 )
Prepaid expenses
    (23,562 )     (59,617 )
Increase (decrease) in:
               
Accounts payable
    224,152       (549,459 )
Payroll liabilities
    15,470       -  
Deferred revenue
    (135,765 )     5,784  
Billings in excess of revenue
    364,000       886,249  
Deposits payable
    -       (386,428 )
Net cash used in operating activities
    (944,458 )     (1,732,901 )
                 
Cash flows from investing activities:
               
Purchase of equipment
    (5,569 )     (23,309 )
Net cash used in investing activities
    (5,569 )     (23,309 )
                 
Cash flows from financing activities:
               
Proceeds from exercise of warrants
    131,161       -  
Proceeds from convertible notes payable
    500,000       -  
Net cash provided by financing activities
    631,161       -  
                 
(Decrease) increase in cash and cash equivalents
    (318,866 )     (1,756,210 )
                 
Cash and cash equivalents, beginning of period
    534,425       1,922,401  
                 
Cash and cash equivalents, end of period
  $ 215,559     $ 166,191  
                 
Supplemental disclosures of cash flow information:
               
Cash paid during the period for:
               
Interest
  $ -     $ 883  
Taxes
  $ -     $ -  
                 
Supplemental disclosures of non-cash investing and financing activities:
         
Equity based compensation
  $ 1,541,079     $ 3,278,155  

See the accompanying notes to these condensed consolidated financial statements
 
F-3

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying financial statements is as follows:

General

The accompanying unaudited condensed consolidated financial statements of MedClean Technologies, Inc. and subsidiaries, (“MedClean” or the “Company” or “MCLN”), have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Accordingly, the results from operations for the six-month period ended June 30, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.  The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated December 31, 2009 financial statements and footnotes thereto included in the Company's Form 10-K filed with the SEC on March 3, 2010.

The consolidated financial statements as December 31, 2009 have been derived from the audited consolidated financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.

Business and Basis of Presentation

On January 2, 2009, the Company merged its wholly owned subsidiary, Aduromed Corporation into Aduromed Industries Inc. and changed its corporate name from Aduromed Industries, Inc. to MedClean Technologies, Inc.

MedClean is in the business of providing solutions for managing medical waste on site including designing; selling, installing and servicing on site (i.e. “in-situ”) turnkey systems to treat regulated medical waste. The Company provides these systems to hospitals and other medical facilities as efficient, safe, cost effective and legally compliant solutions to incineration, off site hauling of untreated waste and other alternative treatment technologies and methodologies. The MedClean Series System is offered in three configurations: Containerized System, Mobile System and the Fixed System (our traditional fixed installation).

Accounts Receivable
 
The Company assesses the realization of its receivables by performing ongoing credit evaluations of its customers’ financial condition. Through these evaluations, the Company may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy. The Company’s reserve requirements are based on the best facts available to the Company and are reevaluated and adjusted as additional information is received. The Company’s reserves are also based on amounts determined by using percentages applied to certain aged receivable categories. These percentages are determined by a variety of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience. Allowance for doubtful accounts for accounts and notes receivable was $24,693 and 15,589 as of June 30, 2010 and December 31, 2009, respectfully.
 
F-4

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue recognition

The Company recognizes revenues upon completion of the system installation and customer acceptance.  Clients will be invoiced upon the following milestones, contract signing, delivery of components, and the completion and acceptance of installation and start-up.

Contract costs include all direct material and labor costs and those indirect costs related to contract performance. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period.

The Company provides a one year warranty on the systems it installs. The Company also obtains a one year warranty on the system components from the component manufacturer, thereby mitigating potential warranty costs. Accordingly, the Company has accrued no reserve for warranty. On the installed base after the warranty term has expired, the Company offers a maintenance agreement of one or more years to the customer. The Customer is billed for, and pays for the maintenance agreement in advance. Revenues from such maintenance agreements are recognized ratably over the lives of the maintenance agreements, with the excess of the amount collected over the amount recognized as deferred revenue. At June 30, 2010 and December 31, 2009 the Company had $100,735 and $236,500 in deferred revenue from maintenance agreements.

Revenues from the sale of our mobile unit, accessories, repairs and replacement parts are recognized when shipped to the customer in accordance with a valid contract or order agreement. The contract or order agreement specifies delivery terms and pricing, and is considered to reasonably assure collection from the customer.

Revenues and cost from multi-year rental contracts on our mobile unit will be recognized ratably over the life of the rental contract.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

The Company maintains cash deposits with financial institutions, which from time to time may exceed federally insured limits.  The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash. At June 30, 2010 and December 31, 2009, the Company has cash balances on deposit in one account with a financial institution in excess of the federally insured limits.

Estimates

The preparation of the accompanying financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
 
F-5

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reclassification

Certain reclassifications have been made to prior periods’ data to conform to the current year’s presentation. These reclassifications had no effect on reported income or losses.

Segment information

Accounting Standards Codification (“ASC”) establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The Company applies the management approach to the identification of our reportable operating segment as provided in accordance with ASC. The information disclosed herein materially represents all of the financial information related to the Company’s principal operating segment.
 
Control by principal stockholders 

The directors, executive officers, participants and their affiliates or related parties, own beneficially and in the aggregate, the majority of the voting power of the outstanding shares of the common stock of the Company. Accordingly, the directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including increasing the authorized capital stock of the Company and the dissolution, merger or sale of the Company's assets.

Dependence on principal customer

For 2010 and going forward, the Company does not anticipate that the loss of any one customer will have a significant adverse impact on our business.

Fair Values

In the first quarter of fiscal year 2008, the Company adopted Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”).  ASC 820-10 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure. ASC 820-10 delays, until the first quarter of fiscal year 2009, the effective date for ASC 820-10 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of ASC 820-10 did not have a material impact on the Company’s financial position or operations. Refer to Footnote 10 for further discussion regarding fair valuation.

Stock based compensation

The Company has adopted ASC subtopic 718-10, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.  

F-6

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

As more fully described in Note 9 below, the Company granted equity based compensation over the years to employees of the Company under its equity plans.  The Company granted non-qualified stock options to purchase 22,500,000 and -0- shares of common stock during the six-month period ended June 30, 2010 and 2009, respectively, to employees and directors of the Company.

Fair Value of Financial Instruments

ASC subtopic 825-10 requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments.

Inventory

The Company maintains an inventory, which consists primarily of component parts, spare parts and disposable goods.  The average cost method is utilized in valuing the inventory, and is stated at the lower of cost or market.  The following table summarizes these assets as of June 30, 2010 and December 31, 2009:

   
June 30,
2010
     
December 31,
2009
 
Component & spare parts
 
$
   747,867
   
$
767,325
 
Consumables
   
     23,776
     
30,980
 
Advance payments
           
17,329
 
Total inventory
 
$
771,643
   
$
815,634
 

Property, plant and equipment

The Company has property, plant and equipment that consist of automobiles, computers and related accessories, and office furniture.  The depreciation is calculated using the straight line method over the life of the property.  All property has a useful life of 3 to 10 years.  The following table summarizes these assets as of June 30, 2010 and December 31, 2009:

   
June 30,
2010
     
December 31,
2009
 
Office Furniture
 
$
170,094
   
$
164,525
 
Computers and Accessories
   
208,802
     
208,801
 
Leasehold Improvements
   
135,380
     
135,380
 
     
514,276
     
508,706
 
Accumulated Depreciation
   
343,608
     
295,905
 
   
$
170,668
   
$
212,801
 

During the three and six-month periods ended June 30, 2010, depreciation expense charged to operations was $23,739 and $47,702, respectively, of which $1,386 and $2,772 was included as part of cost of goods sold, respectively.

F-7

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Earnings (loss) per common share

The net earnings (loss) per common share are computed by dividing the net loss for the period by the weighted average number of shares outstanding for the period. Shares issued upon conversion of convertible debt, outstanding warrants and options for the six-month  periods ending June 30, 2010 and 2009 amounting to 809,344,538 and 49,201,769 respectively were not included in the calculation for net loss per common share because it would be antidilutive or exceeded the average market price of the Company’s common stock for period.

The numerator and denominator used in the basic and diluted earnings (loss) per share of common stock computations are presented in the following table:

   
Six months ended June 30,
     
Three months ended June 30,
 
   
2010
   
2009
   
2010
   
2009
 
NUMERATOR FOR BASIC AND DILUTED EPS (LPS)
                       
Net loss per statement of operations
 
$
(2,666,713
)
 
$
(4,551,885
)
 
$
(1,081,609
)
 
$
(2,668,159
)
                                 
DENOMINATOR FOR BASIC AND DILUTED EPS (LPS)
                               
Weighted average shares of common stock outstanding
   
693,837,432
     
561,542,968
     
703,752,904
     
561,542,968
 
                                 
Basic and diluted EPS (LPS)
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
 

Recent Accounting Pronouncements
 
In May 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-19 (ASU 2010-19), Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have a material effect on the financial position, results of operations or cash flows of the Company.

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-17 (ASU 2010-17), Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
F-8

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements (continued)

In February 2010, the FASB issued Accounting Standards Update 2010-09 (ASU 2010-09), "Subsequent Events (Topic 855)."  The amendments remove the requirements for an SEC filer to disclose a date, in both issued and revised financial statements, through which subsequent events have been reviewed.  Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP.  ASU 2010-09 is effective for interim or annual financial periods ending after June 15, 2010.  The Company does not expect the provisions of ASU 2010-09 to have a material effect on the financial position, results of operations or cash flows of the Company

There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.

NOTE 2 - GOING CONCERN MATTERS

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has incurred substantial recurring losses, which raises substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
The Company has available cash and cash equivalents of approximately $215,559 at June 30, 2010 which it intends to utilize for working capital purposes and to continue developing its business. To supplement its cash resources, the Company has secured alternative financing arrangements with two investment entities. While the acquisition of cash through these programs is related to company performance, we believe we will have access to the necessary funds for us to execute our business plan.  However, we continue to incur significant operating losses which will result in the reduction of our cash position.  We cannot assure that we will be able to continue to obtain funding through the alternative financing arrangements and the lack thereof would have a material adverse impact on our business. Moreover, any equity funding could be substantially dilutive to existing stockholders. The aforementioned factors raise doubt about our ability to continue as a going concern. In the event the Company is unable to continue as a going concern it may pursue a number of different options, including, but not limited to, filing for protection under the federal bankruptcy code.

F-9

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 3 – CONTRACTS IN PROCESS

The Company entered into construction type contracts to furnish and install its systems in hospitals. There were four outstanding contracts at June 30, 2010 and December 31, 2009.  The following table summarizes these outstanding contracts:
 
Contract
 
Revenue
   
Amounts
   
Revenues in
   
Billings in excess
 
Amount
 
Recognized
   
Billed
   
excess of Billings
   
of Revenues
 
Outstanding contracts at June 30, 2010:              
$
  1,327,930
  $ 949,221     $ 1,327,930     $ -     $ 378,709  
 
231,257
    29,347       21,668       7,679       -  
 
287,029
    163,939       215,271       -       51,332  
 
282,948
    -       188,632       -       188,632  
 
750,000
    -       375,000       -       375,000  
 
28,000
            28,000               28,000  
                                   
$
 2,907,164
    1,142,507 (1)   $ 2,156,501     $ 7,679     $ 1,021,673  
                                   
Outstanding contracts at December 31, 2009:                  
$
 1,327,930
  $ 949,221     $ 1,327,930     $ -     $ 378,709  
 
231,257
 
  29,347       21,668       7,679       -  
 
287,029
    163,939       215,271       -       51,332  
 
282,948
    -       188,632       -       188,632  
 
78,000
    -       39,000       -       39,000  
$
 2,207,164
  $ 1,142,507     $ 1,792,501     $ 7,679     $ 657,673  
 
(1)   Revenue recognized in prior years on outstanding contracts.

NOTE 4 – NOTES RECEIVABLE

In connection with the issuance of convertible promissory notes as described in Note 6 below, the Company received an aggregate of $1,272,000 in secured notes receivable with add on interest of 6% and are due three years from the date of issuance.  During the three months ended June 30, 2010, the Company received an aggregate of $500,000 as payments.  The balance receivable as of June 30, 2010 is $731,222, net of unearned interest.

NOTE 5 – NOTES PAYABLE-SHORT TERM

The Company’s outstanding unsecured note bears a 12% interest rate and matured on December 15, 2003. Both parties have entered a verbal agreement to extend the maturity date on this note indefinitely. No accrued interest has been paid on this note to date. As of June 30, 2010 and December 31, 2009 the balance due was $220,497 and $214,647 respectively.  

F-10

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 6 – CONVERTIBLE NOTES

On April 1, 2010, the Company issued a $600,000 Convertible Promissory Note that matures March 31, 2013. The Promissory Note bear a onetime interest charge at a rate of 6% per annum and will be convertible into Company’s common stock at any time at a conversion rate of the highest of a) 70% of the lowest closing price in the 20 trading days previous to the conversion or b) par value of the Company’s common stock.

In accordance with Accounting Standards Codification subtopic 470-20, Debt With Conversions and Other Options (“ASC 470-20”), the Company recognized an embedded beneficial conversion feature present in the Convertible Promissory Note. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of $332,481 of the proceeds, which is equal to the intrinsic value of the embedded beneficial conversion feature, to additional paid-in capital and a discount against the Convertible Note. The debt discount attributed to the beneficial conversion feature is charged operations as interest expense ratably over the term of the note.
 
For the six months ended June 30, 2010, the Company amortized the debt discount and charged $27,631 to interest expense.
 
As of June 30, 2010, $450,000 of the above proceeds has been received related note receivable (see Note 4).
 
On June 14, 2010, the Company issued a $600,000 Convertible Promissory Note that matures June 13, 2013. The Promissory Note bear a onetime interest charge at a rate of 6% per annum and will be convertible into Company’s common stock at any time at a conversion rate of the highest of a) 70% of the lowest closing price in the 20 trading days previous to the conversion or b) par value of the Company’s common stock.

In accordance with Accounting Standards Codification subtopic 470-20, Debt With Conversions and Other Options (“ASC 470-20”), the Company recognized an embedded beneficial conversion feature present in the Convertible Promissory Note. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of $600,000 of the proceeds, which is equal to the intrinsic value of the embedded beneficial conversion feature, to additional paid-in capital and a discount against the Convertible Note. The debt discount attributed to the beneficial conversion feature is charged to operations as interest expense ratably over the term of the note.
 
For the six months ended June 30, 2010, the Company amortized the debt discount and charged $8,767 to interest expense.
 
As of June 30, 2010, $50,000 of the above proceeds has been received related note receivable (see Note 4).
 
NOTE 7 – CAPITAL STOCK

The Company is authorized to issue 3,500,000,000 shares of common stock, with a $0.0001 par value per share as of April 22, 2009 as approved by the majority of the Company stockholders. Prior to the April 22, 2009 share increase, the Company was authorized to issue 1,400,000,000 shares of common stock with a $0.0001 par value per share. In addition, the Company is authorized to issue 60,000,000 shares of preferred stock with a $0.0001 par value per share.

As of June 30, 2010 and December 31, 2009, the Company has 708,612,530 and 675,478,445 shares of common stock and no preferred stock issued and outstanding, respectively.
 
F-11

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 7 – CAPITAL STOCK (continued)

During the six month period ended June 30, 2010, the Company issued an aggregate of 9,800,000 shares of its common stock in exchange for services rendered.  The valuations of common stock issued for services were based on the value of the services rendered, which did not differ materially from the fair value of the common stock during the period the services were rendered.

NOTE 8 – WARRANTS AND OPTIONS

Warrants
 
The following table summarizes the changes in warrants outstanding and related prices for the shares of the Company’s common stock at June 30, 2010: 

Exercise Price
  
Number
Outstanding
  
  
Warrants
Outstanding
Weighted
Average
Remaining
Contractual Life
(years)
  
  
Weighted
Average
Exercise price
  
  
Number
Exercisable
  
  
Warrants
Exercisable
Weighted
Average
Exercise Price
  
$
0.0040
   
28,000,000
     
3.08
   
$
0.0040
     
28,000,000
   
$
0.0040
 
 
0.0075
   
75,069,071
     
3.09
     
0.0075
     
75,069,071
     
0.0075
 
 
0.0250
   
28,000,000
     
3.09
     
0.0250
     
28,000,000
     
0.0250
 
 
0.0900
   
600,000
     
2.71
     
0.0900
     
600,000
     
0.0900
 
 
0.2400
   
100,000
     
1.99
     
0.2400
     
100,000
     
0.2400
 
 
0.3788
   
2,204,386
     
0.56
     
0.3788
     
2,204,386
     
0.3788
 
 
0.5571
   
1,436,000
     
0.08
     
0.5571
     
1,436,000
     
0.5571
 
 
Total
   
135,409,457
     
3.02
   
$
0.0172
     
135,409,457
   
$
0.0172
 

Transactions involving the Company’s warrant issuance are summarized as follows: 

  
 
Number of
Shares
     
Weighted
Average
Price Per
Share
 
Outstanding at December 31, 2008
   
414,576,110
   
$
0.0265
 
Granted
   
167,419,113
         
Exercised
   
(90,260,439
)
       
Canceled or expired
   
(334,838,226
)
       
Outstanding at December 31, 2009
   
156,896,558
     
0.0212
 
Granted
   
-
         
Exercised
   
(21,487,101
)
   
(0.0064
)
Canceled or expired
   
-
         
Outstanding at June 30, 2010
   
135,409,457
   
$
0.0172
 
 
F-12

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 8 – WARRANTS AND OPTIONS (continued)

During the six month period ended June 30, 2010, the Company issued an aggregate of 20,643,435 shares of common stock in exchange for the exercise of 21,487,101 warrants.  The exercise prices ranged from $0.004 to $0.0075 resulting in proceeds of $122,377. 5,433,966 warrants were exercised on a cashless basis.

Stock options

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees and directors of the Company at June 30, 2010:

 
  
Options Outstanding
  
 
  
Options Exercisable
  
Exercise Prices
  
Number
Outstanding
  
Weighted Average
Remaining
Contractual Life
(Years)
  
Weighted
Average
Exercise Price
  
Number
Exercisable
  
Weighted
Average
Exercise Price
  
$
0.00400
   
540,547,634
 
3.88
 
$
0.00400
 
521,301,867
 
$
0.00400
 
 
0.00844
   
80,883,534
 
5.36
 
$
0.00844
 
26,961,178
   
0.00844
 
 
0.02800
   
22,500,000
 
4.54
   
0.02800
 
22,500,000
   
0.028
 
Total    
643,931,168
 
4.09
 
0.00539
 
570,763,045
 
0.00513
 
 
  Transactions involving stock options issued to employees are summarized as follows:
 
  
  
 
  
  
Weighted
Average
  
  
  
Number of
  
  
Price
  
  
  
Shares
  
  
Per Share
  
Outstanding at December 31, 2008:
   
78,358,950
   
$
0.072
 
Granted
   
551,883,534
     
0.00467 
 
Exercised
   
         
Canceled or expired
   
(5,515,666
)
       
Outstanding at December 31, 2009:
   
624,726,818
   
$
0.004
 
Granted
   
22,500,000
     
0.028
 
Exercised
   
(2,690,650
)
   
(0.004
Canceled or expired
   
(605,000
   
  (0.004
)
Outstanding at June 30, 2010:
   
643,931,168
   
$
0.00539
 

On January 14, 2010, the Company granted options to purchase 22,500,000 shares of the Company’s common stock to directors. The option grants as approved by the Compensation Committee were fully vested when issued and the exercise price is $0.028 per share for five years.

The fair value for these awards was estimated using the Black-Scholes option pricing model with the following weighted average assumptions, assuming no expected dividends:

F-13

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 8 – WARRANTS AND OPTIONS (continued)

Expected life (years)
   
5
 
Expected volatility
   
363.22
%
Risk-free interest rate
   
2.51
%
Dividend yield
   
%
 
The aggregate fair value of vesting options of $1,378,499 was charged to current period operations for the six months ended June 30, 2010.

NOTE 9 — FAIR VALUE

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
 
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of June 30, 2010:

   
June 30, 2010
  
     
Carrying
          
Financial instruments
  
Amount
     
Fair Value
 
Cash and cash equivalents
 
$
215,559
   
$
215,559
 
Accounts receivable, net
   
507,590
     
507,590
 
Accounts payable and accrued liabilities
   
(472,044
)
   
(472,044
)
   
$
251,105
   
$
251,105
 
 
F-14

 
MEDCLEAN TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

NOTE 9 — FAIR VALUE (continued)

For cash and cash equivalents, accounts receivable, and accounts payable, the carrying amount approximates fair value because of the relative short maturity of those instruments.

The Company adopted the provisions of ASC 825-10 prospectively effective as of the beginning of Fiscal 2008.  For financial assets and liabilities included within the scope of ASC 825-10, the Company was required to adopt the provisions of ASC 825-10 prospectively as of the beginning of Fiscal 2009.  The adoption of ASC 825-10 did not have a material impact on our consolidated financial position or results of operations.

NOTE 10 – SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date that the financial statements were issued.

F-15

 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

This quarterly report on Form 10-Q and other reports filed by the Company from time to time with the United States Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements (collectively the “Filings”) and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC, relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
 
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.  The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

Results of Operations

Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009

Net Revenue

Total revenue for the quarter ended June 30, 2010 was $131,758 compared with $354,755 for the same period in 2009, a decrease of $222,997 or 63%.

Revenues derived from the sale of consumables, component parts, service billings and amortization of maintenance contracts decreased by $222,997 or 63% in the current quarter to $131,758. We did not have revenues during the quarters ended June 30, 2010 and 2009 attributable to contract revenues.  The decrease in service billings was a result of fewer service calls required due to equipment failure.  Service billings will continue to fluctuate period to period based upon equipment failure, whether through operator error or wear and tear, and pre-scheduled service activities such as equipment relocation.  Service revenue attributable to contract revenues is recognized at the time of performance and not at the time of contract execution.
 
4

 
Gross Profit
 
The gross profit for the three months ended June 30, 2010, was $60,084 (45.6% of total revenue) compared with a gross profit of $128,790 (36.3% of total revenue) for the same three month period of 2009.

In this period, our gross profit margins increased from 36.3% to 45.6%, or a 25.6% increase.   By carefully managing the business we have been able to ensure that we are invoicing for all services performed and therefore, we have been able to increase our gross profit percentage from the comparable period, last year.

The components of costs of revenues for products include direct materials, depreciation, shipping and rigging costs and contract labor primarily used to install, repair and maintain our equipment.
 
Operating Expenses
 
Total operating expenses for the three months ended June 30, 2010, was $1,130,177 compared with $2,348,784 for the same three month period in 2009, a decrease of $1,218,607. In the three months ended June 30, 2009, we recognized non-cash equity based compensation to service providers and employees of $1,738,636 as compared to $458,749 recorded as equity based compensation for the three months ended June 30, 2010. 
 
Interest and Other Income

Interest and other income for the three month period ended June 30, 2010, was $31,292 compared to $38 for the same period in 2009.  The increase is due to the interest earned on our notes receivable entered into in the current quarter.

Interest expense

Interest expense and amortization for the three month period ended June 30, 2010, was $42,808 compared with $448,203 in the same three month period of 2009. During the three months ended June 30, 2009, we recognized non-cash amortization expense amounting to $444,984, compared to $36,398 in the same three month period of 2010.  
 
Net Income (loss)
 
Net loss for the three month period ended June 30, 2010, was $1,081,609, compared to $2,668,159 for the same period in 2009.

Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009

Net Revenue

Total revenue for the six months ended June 30, 2010 was $400,625 compared with $772,182 for the same period in 2009, a decrease of $371,557 or 48.1%.

5

 
Revenues derived from the sale of consumables, component parts, service billings and amortization of maintenance contracts decreased by $371,557 or 48.1% in the current quarter to $400,625. We did not have revenues during the quarters ended June 30, 2010 and 2009 attributable to contract revenues.

Gross Profit
 
The gross profit for the six months ended June 30, 2010, was $163,498 (40.8% of total revenue) compared with a gross profit of $273,145 (35.4% of total revenue) for the same three month period of 2009.

In this period, our gross profit margins increased from 35.4% to 40.8%, or a 13.2% increase.   By carefully managing the business we have been able to ensure that we are invoicing for all services performed and therefore, we have been able to increase our gross profit percentage from the comparable period, last year.

The components of costs of revenues for products include direct materials, depreciation, shipping and rigging costs and contract labor primarily used to install, repair and maintain our equipment.
 
Operating Expenses
 
Total operating expenses for the six months ended June 30, 2010, was $2,816,004 compared with $3,929,274 for the same three month period in 2009, a decrease of $1,113,270. In the six months ended June 30, 2009, we recognized non-cash equity based compensation to service providers and employees of $3,278,155 as compared to $1,541,079 recorded as equity based compensation for the three months ended June 30, 2010. 
 
Interest and Other Income

Interest and other income for the six month period ended June 30, 2010, was $31,526 compared to $944 for the same period in 2009.  The increase is due to the interest earned on our notes receivable entered into in the current quarter.

Interest expense

Interest expense and amortization for the six month period ended June 30, 2010, was $45,733 compared with $896,700 in the same three month period of 2009. During the six months ended June 30, 2009, we recognized non-cash amortization expense amounting to $889,967, compared to $36,398 in the same three month period of 2010.  
 
Net Income (loss)
 
Net loss for the six month period ended June 30, 2010, was $2,666,713, compared to $4,551,885 for the same period in 2009.

6


Liquidity and Capital Resources

The Company’s cash on hand and working capital as of June 30, 2010, and December 31, 2009, are as follows:
 
   
June 30,
     
December 31,
 
   
2010
   
2009
 
             
Cash on hand
 
$
215,559
   
$
534,425
 
                 
Working capital (deficit)
 
$
(673,148
)
 
$
(229,469
)
 
The Company purchased $5,569 in new fixed assets during the six month period ended June 30, 2010. Under current conditions, the Company anticipates purchasing approximately $10,000 in additional fixed assets in 2010. Net cash used in operating activities totaled $944,458 for the six months ended June 30, 2010.

Our accounts receivable balance may have dramatic swings from one period to another depending upon the timing and the amount of milestone billings included in the balance at the end of any accounting period. There are three milestone billings representing a percentage of the contract value for each installment and our payment terms are “upon receipt.” Receivable balances are typically paid within 15 days of the invoice date. Billings for maintenance contracts and consumables are due within 45 days and are more numerous but much smaller in value than milestone billings. We review our outstanding receivable balances on a regular basis to ensure that the allowance for bad debt is adequate.   Due to the varying nature in the timing and amounts of the receivable balances as noted above, the change in the allowance for doubtful account will not necessarily correlate with the increase or decrease in the accounts receivable balance. The accounts receivable balance as of June 30, 2010, was $507,590 net of an allowance of $24,693, an increase of $363,473 from year ended December 31, 2009.  

Our inventory balance may have dramatic swings from one period to another depending upon the expected installation date of our MedClean systems and our accounts payable balances can have similar swings depending on payment terms and any volume purchases or discounts we may take advantage of from time to time. During the six months ended June 30, 2010, the Company decreased its inventory on hand by $43,991 to $771,643.

During the six months ended June 30, 2010, we issued an aggregate of $1,200,000 in exchange for notes receivable, of which, we have collected a total of $500,000 to assist us in meeting our cash needs.

To supplement its cash resources, the Company has been pursuing a number of alternative financing arrangements with various investment entities. We are currently looking to secure additional working capital to provide the necessary funds for us to execute our business plan through various sources, including bank facilities, bridge loans and equity offerings. However, we continue to incur significant operating losses and the resultant reduction of our cash position.  We cannot assure that we will be able to obtain additional funding, and the lack thereof would have a material adverse impact on our business.  Moreover, any equity funding could be substantially dilutive to existing stockholders. The aforementioned factors raise substantial doubt about our ability to continue as a going concern. In the event the Company is unable to continue as a going concern it may pursue a number of different options, including, but not limited to, filing for protection under the federal bankruptcy code.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We do not hold any derivative instruments and do not engage in any hedging activities.

7

 
Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. Furthermore, smaller reporting companies face additional limitations.  Smaller reporting companies employ fewer individuals and find it difficult to properly segregate duties.  Often, one or two individuals control every aspect of the Company's operation and are in a position to override any system of internal control.  Additionally, smaller reporting companies tend to utilize general accounting software packages that lack a rigorous set of software controls.
  
Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's internal control over financial reporting as of June 30, 2010. In making this assessment, our Chief Executive Officer and Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework.  Based on this evaluation, Our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2010, our internal control over financial reporting was effective.
 
(b) Changes in Internal Control over Financial Reporting.  There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
 
8

 
Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC on March 3, 2010.


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

There were no unregistered sales of the Company’s equity securities during the quarter ended June 30, 2010 that were not otherwise disclosed on a Form 8-K.

Item 3. Defaults upon Senior Securities.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default not cured within 30 days, with respect to any indebtedness of the Company.

Item 4. (Removed and Reserved).

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit
No.
 
 
Description
     
31.1*
 
Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
31.2*
 
Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
32.1*
 
Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
 
Certification by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Filed herewith
 
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SIGNATURES

Pursuant to the requirements 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.

 
MEDCLEAN TECHNOLOGIES, INC.
   
Date: August XX, 2010
By: /s/ David Laky
 
Name: David Laky
 
Title: Chief Executive Officer and Principal Executive
Officer
   
Date: August XX, 2010
By: /s/ Cheryl K. Sadowski
 
Name: Cheryl K. Sadowski
 
Title: Chief Financial Officer and Principal Financial
Officer

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