Item 6: Management's Discussion and Analysis or Plan of Operation

Forward-Looking Statements

Certain statements made herein and in other public filings and releases by the Company contain "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risk and uncertainty. These forward-looking statements may include, but are not limited to, future capital expenditures, acquisitions (including the amount and nature thereof), future sales, earnings, margins, costs, number and costs of store openings, demand for clothing, market trends in the retail clothing business, inflation and various economic and business trends. Forward-looking statements may be made by management orally or in writing, including, but not limited to, Management's Discussion and Analysis or Plan of Operation section and other sections of our filings with the SEC under the Exchange Act and the Securities Act.

Actual results and trends in the future may differ materially depending on a variety of factors including, but not limited to, domestic economic activity and inflation, our successful execution of internal operating plans and new store and new market expansion plans, performance issues with key suppliers, severe weather, and legal proceedings. Future results will also be dependent upon our ability to continue to identify and complete successful expansions and penetrations into existing and new markets and our ability to integrate such expansions with our existing operations.

Company Overview and Recent Trends

Overview

USDC is a Delaware corporation that was formed on July 19, 2005 and on December 30, 2005 completed a reverse merger with a public "Shell Company", as discussed herein. Members of USDC's management are experienced in acquisition and the operating of retail and dry cleaning operations.

The operating results for the periods presented should not be deemed to be reflective of expected future operating results as such results only reflect operations for the year ended September 30, 2007 and for the year ended September 30, 2006. These results are not indicative of the Company's operations on a going-forward basis. The results were adversely affected by several factors including a fire at the primary Palm Springs location which shut down operations at that facility for over ten months and required the Company to process dry cleaning with third-party processors in order to retain market share. Other factors include the fact that CVR, Steam Press and CCI were significantly under-capitalized prior to being acquired by the Company and, as such, were unable to implement operational improvements and initiate significant marketing plans. We have initiated corrective actions, and are preparing these operations for additional sales volume resulting from planned future acquisitions.

Revenues

Net sales from continuing operations were approximately $8.4 million for the year ended September 30, 2007, an increase of approximately $2.3 million compared to the year ended September 30, 2006 of approximately $6.1 million. Our normal revenue of approximately $8.4 million for the year represents approximately a 38% increase year over year. The increase was primarily due to the February 2007 acquisition of Cleaners Club, Inc. dba Boston Cleaners.

Operating Expenses

Operating expenses were approximately $11.9 million for the year ended September 30, 2007, an increase of approximately $5.3 million compared to the year ended September 30, 2006 of approximately $6.6 million. Delivery, store, and sales expenses increased approximately $1.2 million to approximately $3.8 million for the year ended September 30, 2007 compared to approximately $2.6 million for the year ended September 30, 2006. The increase in operating expenses was primarily due to the acquisition of CCI and related to the operation of our retail stores. Administrative expenses increased approximately $4.1 million from approximately $8.1 million for the year ended September 30, 2007 compared to approximately $4.0 million for the year ended September 30, 2006. The increase was primarily due to an increase in financing, mergers and acquisition costs and the impairment of goodwill of approximately $2.0 million.

Operating Loss

Our operating loss increased by approximately $3.9 million from approximately $3.8 million for the year ended September 30, 2006 to approximately $7.7 million for the year ended September 30, 2007. The increase in our operating loss was primarily due to an increase in financing, mergers and acquisition costs and the impairment of goodwill.

---

Other Income and Expenses

Other income and expenses decreased by approximately $2.5 million from approximately $4.6 million for the year ended September 30, 2006 to approximately $(2.1) million for the year ended September 30, 2007. The decrease was primarily due to a decrease in interest expense of approximately $2.1 million and a decrease of approximately $1.7 million in loss on debt extinguishment offset by a decrease in other income of approximately $1.3 million.

Net Loss

For fiscal 2007 compared to fiscal 2006, our net loss grew by approximately $1.4 million from $8.4 million or $0.70 per common share to approximately $9.8 million or $0.53 per common share respectively.

Liquidity and Going Concern Considerations

Liquidity

As of September 30, 2007, we had a working capital deficit of approximately $3.7 million. Our current assets were approximately $2.8 million, which consisted primarily of approximately $1.6 million in cash, approximately $0.5 million in net trade receivables, approximately $0.6 million in deferred acquisition costs and approximately $0.1 million in prepaid expenses and other current assets. Our current liabilities were approximately $6.5 million, which consisted primarily of approximately $1.5 million in trade accounts payable, and accrued expenses of approximately $1.4 million and approximately $3.6 million in current portion of long-term debt.

Net cash used in operating activities during the year ended September 30, 2007 was approximately $4.4 million. The current period results were due primarily to the operating loss of approximately $9.8 million which was offset by approximately $4.2 million in non cash transactions made up primarily of depreciation and amortization, amortization of debt discounts, deferred financing costs and impairment of goodwill; an increase of approximately $1.1 million in accounts payable; and a decrease in accounts receivable and other current assets of approximately $0.2 million.

Cash flow used in investing activities for the year ended September 30, 2007, was approximately $1.8 million which consisted of capital expenditures, deferred acquisition costs and proceeds loaned to a stockholder.

For the year ended September 30, 2007, cash flow provided by financing activities totalled approximately $6.5 million which consisted primarily of the net proceeds from the issuance of notes payable (including convertible notes and line of credit) of approximately $3.0 million and net proceeds from the issuance of the Company's common stock of approximately $4.6 million, offset by repayments on notes payable, convertible notes payable and capital leases of approximately $1.0 million.

Going Concern Considerations

The consolidated financial statements included elsewhere herein have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. At September 30, 2007, the Company had an accumulated deficit of approximately $19.4 million, working capital deficit of approximately $3.7 million, and has suffered significant net losses since inception. The Company's business plan calls for various business acquisitions which will require substantial capital. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The Company intends to fund operations through debt and/or equity financing transactions. However, such financing transactions may be insufficient to fund its planned acquisitions, capital expenditures, working capital, and other cash requirements for the fiscal year ending September 30, 2008.

The Company will be required to seek additional funds to finance its long-term operations. The successful outcome of future activities cannot be determined at this time, and there is no assurance that, if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results subsequent to September 30, 2007.

The Company's capital requirements depend on numerous factors, including the rate of market acceptance of the Company's products and services, the Company's ability to service its customers, the Company's ability to maintain and expand its customer base, the level of resources required to expand the Company's marketing and sales organization, and other factors. As more fully explained elsewhere herein, the Company's management presently believes that cash generated from operations (if any), combined with the Company's current cash positions and debt and/or equity financing proposals now under consideration will be sufficient to meet the Company's anticipated liquidity requirements through September 2008. However, there can be no assurances that any debt and/or equity financing transactions now under consideration will be successful at acceptable terms.

The Company completed the initial closing of a private placement to accredited investors and received gross proceeds of approximately $3,325,000. See further discussion in Note 13 in the accompanying notes to the financial statements. In addition, the Company has developed a plan to increase revenues at certain stores thereby cutting losses. Furthermore, the Company is embarking on a cost cutting campaign to further enhance cash flow at the store level.

---

Critical Accounting Policies

To prepare the financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make significant 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 revenues and expenses during the reporting period. In particular, we provide for estimates regarding the collectability of accounts receivable, the recoverability of long-lived assets, as well as our deferred tax asset valuation allowance. On an ongoing basis, we evaluate our estimates based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Future financial results could differ materially from current financial results.

Revenue Recognition

We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB 104"). SAB 104 requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. The Company recognizes revenue on retail laundry and dry cleaning services when the services are deemed to have been provided and the earnings process is complete. For "walk-in and pickup-and-delivery" type retail customers, the order is deemed to have been completed when the work-order ticket is created and the sale and related account receivable are recorded. For commercial customers, the sale is not recorded until the Company delivers the cleaned garments to the commercial customer. Generally, the Company delivers the cleaned garments to commercial customers the same day they are dropped off (same-day service).

Returns and Allowances

We experience claims for items damaged during processing, adjustments in resolution of customer disputes, and promotional discounts, all of which are recorded as incurred. Such charges average about one percent of gross revenue. Sales are reported in the accompanying consolidated financial statements net of "Returns and Allowances", which are reflected as a reduction of gross sales.

Accounts Receivable

We perform ongoing credit evaluations of our customers and adjust credit limits based on payment history and the customers' current buying habits. We monitor collections and payments from our customers and maintain a provision for estimated credit losses based on specific customer collection issues that have been identified.

Long-lived Assets

The Company follows Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of", which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted cash flows from such asset, an impairment loss is recognized. Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value. See below for additional information regarding the identification and measurement of impairment of certain long-lived assets governed by SFAS No. 144.

---

We assess the impairment of long-lived assets, including goodwill, annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held for use is based on expectations of the estimated fair value of the asset, and when circumstances dictate, we adjust the asset to the extent that the carrying value exceeds the estimated fair value of the asset. Our judgments related to the expected useful lives of long-lived assets and our ability to estimate fair value in excess of the carrying amounts of such assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, and changes in operating performance. As we assess the ongoing estimated fair value and carrying amounts of our long-lived assets, these factors could cause us to realize a material impairment charge, which would result in decreased net income (or increased net loss) and reduce the carrying value of these assets.

Deferred Tax Assets

Deferred tax assets are recorded net of a valuation allowance. The valuation allowance reduces the carrying amount of deferred tax assets to an amount the Company's management believes is more likely than not realizable. In making the determination, projections of taxable income (if any), past operating results, and tax planning strategies are considered.

Purchase Price Allocations for Acquisitions

The allocation of the purchase price for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based upon their respective estimated fair values. We reached our conclusions regarding the estimated fair values assigned to such assets based upon the following factors:

Customer Relationship Assets

The Company has contractual relationships with several hotels to service the laundry needs of their guests. These contracts constitute roughly one-half of the total business. Our valuation is based on a discounted cash flow ("DCF") analysis of the cash flows attributable to the contracts that were in force. Revenue from these contracts were projected out for eighteen months and incorporating straight-line attrition during that period. We applied the industry operating margin to projected revenues and tax-affected the requisite return to arrive at a debt-free net cash flow attributable to the customer relationship contracts. The cash flows were then discounted to present to arrive at a total present value with a useful life based on the average contract term.

Non-contractual customer relationships were valued pursuant to the guidance of Emerging Issues Task Force ("EITF") bulletin 02-17. Annual attrition in the Company's base is generally low. Accordingly, our valuation is based on a ten year forecast horizon of revenues from these relationships. All operating expenses have been allocated based on revenue and operating income and tax-affected to arrive at debt-free net cash flow attributable to these relationships. The cash flows were then discounted to present to arrive at a present value with a useful life of ten years based on the reciprocal of the attrition rate.

Trade Name/Trademarks

Our valuation of the Trade Name/Trademarks is based on a derivative of the DCF method that estimated the present value of a hypothetical royalty stream. The royalty rate was derived by examining the royalties paid for dry cleaning franchises as well as the industry operating margin of sales. The royalty rate was applied to the appropriate revenue base to arrive at the periodic royalty due. The royalty was then reduced for the cost of administering and enforcing agreement and then reduced by income taxes to arrive at after-tax net royalties. The after-tax net royalties were discounted to present cost of equity, thereby yielding a value on Trade Name/Trademarks with a useful life of ten years.

Identifying and Measuring Impairment of Long-Lived Assets

Introduction

We follow the substance of the procedures outlined below (which are specified in the aforementioned accounting pronouncements) in identifying and measuring impairment of our intangible and other long-lived assets.

---

Intangible Assets

SFAS No. 142, "Goodwill and Other Intangible Assets" addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for upon their acquisition and after they have been initially recognized in the consolidated financial statements. SFAS No. 142 requires that goodwill and identifiable intangible assets that have indefinite lives not be amortized but rather be tested at least annually for impairment, and intangible assets that have finite useful lives be amortized over their estimated useful lives. SFAS No. 142 provides specific guidance for testing goodwill and intangible assets that will not be amortized for impairment. In addition, SFAS No. 142 expands the disclosure requirements about intangible assets in the years subsequent to their acquisition. See below for additional information regarding the identification and measurement of impairment of goodwill and identifiable intangible assets governed by SFAS No. 142.

The principal effect of SFAS No. 142 on our accompanying consolidated financial statements is that the goodwill in the accompanying consolidated financial statements is not required to be amortized.

Identifiable Intangible Assets

Except for Trade Name/Trademark, our only significant identifiable intangible assets are customer relationships, which arose in accounting for certain business combinations. As contemplated by GAAP, a "customer relationship" exists when an entity has information about the customer and is in regular contact with the customer, who in turn has the ability to make direct contact with the entity. Since these assets are subject to amortization, management reviews customer relationship assets for impairment using the methodology of SFAS No.
144. As noted above, that pronouncement requires that an impairment loss be recognized when an asset's carrying amount is not recoverable and the carrying amount exceeds its estimated fair value. As with goodwill, the traditional marketplace definition of fair value applies.

Customer relationship assets are tested for impairment whenever events or changes in circumstances suggest that their carrying amount may not be recoverable. Examples of such trigger events include a significant adverse change in the manner in which a long-lived asset is being used and a current period operating loss or negative operating cash flow. We generally apply the impairment testing required by SFAS No. 144 as summarized below.

A cash flow projection for a period approximating the estimated remaining useful life of the asset is prepared, based on available historical data and management's current estimate of future-year revenues associated with the acquired customers which are still in place on the testing date. Total annual revenues are typically forecasted to increase at a constant or decreasing rate based on the above criteria (and with due consideration of expected inflation), with the percentage attributable to existing customers declining over the estimated life of the customer relationship asset. Cost of sales and operating expenses for the first year of the forecast period are based on the entity's most recent budget; in subsequent years, these amounts are generally consistent with the year-one amounts on a percentage basis.

Based on the evaluation process summarized in the preceding paragraphs, it was determined that the customer relationship assets' estimated fair value was above their carrying amounts.

Goodwill

SFAS No. 142 establishes a two-step process that governs the review of goodwill for possible impairment at the reporting unit level. A reporting unit is either an operating segment (as defined in SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information"), or a component of an operating segment. A component must meet the definition of a "business" under the criteria established by GAAP. When applicable, other assets and asset groups (see "Identifiable Intangible Assets" and "Property and Equipment," below) are tested for impairment and any adjustment of the carrying values is reflected before the goodwill impairment test is performed.

The first phase, which is only designed to identify potential impairment, requires a comparison of a reporting unit's carrying amount (including goodwill) with its estimated fair value. For this purpose, the traditional marketplace definition of fair value applies. If the reporting unit's estimated fair value exceeds its carrying amount, the related goodwill is considered not impaired; under these circumstances, the second step of the impairment test described in the following paragraph is unnecessary.

---

The second phase, to measure an impairment loss, the carrying amount of the reporting unit's goodwill is compared to its "implied fair value." An entity is required to estimate the implied fair value of its goodwill by allocating the reporting unit's total fair value to all of its assets (including unrecognized intangible assets) and liabilities as if (1) the reporting unit had been acquired in a business combination and (2) the reporting unit's fair value was the purchase price. The excess of the reporting unit's fair value over the amounts assigned to its assets and liabilities represents the implied fair value of goodwill. We apply step one of the goodwill evaluation process as described in the following paragraph.

For goodwill-impairment testing the Company engaged an independent third party expert to conduct the impairment review and make impairment recommendations to management.

To estimate the fair value of a group of net assets (such as a reporting unit) as a whole, the market approach was used because; the quoted market price of the Company's stock does not represent the fair values of the operating units because their respective fair values were significantly higher or lower than the central tendency of the other fair values (the values were outliers); there were no prices available for goodwill in the dry cleaning industry. Notably, there are only two publicly traded companies in the dry cleaning industry; the Company had only developed a forecast with assumptions for fiscal year 2008 and at least three projected years are necessary for use of the discounted cash flow technique.

After employing the market approach for the first phase of goodwill-impairment testing two out of three of the Company's operating units failed the first phase, therefore, phase two was required. After employing the market approach for phase two both operating units' fair values at September 30, 2007 were lower than their carrying values.

Based on the evaluation process summarized in the preceding paragraphs, a recommendation to impair the goodwill of two of the Company's operating units was made to management. Management reviewed and accepted the recommendation and partially impaired the goodwill of two of the Company's operating units aggregating approximately $1,960,000 as described in Note 2.

Contractual Commitments

Effective on December 12, 2006, in connection with his appointment as the Company's new Chief Executive Officer, the Company entered into an employment agreement with Robert Y. Lee for a three-year term. The employment agreement provides for a base salary at the rate of $20,000 per month, which increases to $25,000 upon the Company achieving certain milestones in revenue and income. Mr. Lee is also entitled to a bonus, which will be represented by a promissory note issued by the Company bearing interest at eight percent per annum and in the principal amount of $200,000, of which $50,000 is payable at the earlier of the expiration of his employment term and the closing by the Company of a debt or equity financing of at least $1,500,000, and the balance of which payable upon the earlier of the expiration of his employment term and the closing by the Company of stock offering with proceeds of at least $3,000,000. In addition, upon the achievement of certain milestones by the Company, Mr. Lee will be entitled to additional bonuses ranging from $250,000 to $500,000. Furthermore, the Company agreed to issue to Mr. Lee fully vested options to purchase an aggregate of 800,000 shares of the Company's common stock, at exercise prices ranging from $3.50 to $10.00 per share, which options will be evidenced by a stock option agreement approved by the Board of Directors. The Company also agreed to pay an expense allowance for an automobile in an amount of $2,000 per month. The agreement also provides for non-competition covenant by Mr. Lee in favor of the Company and confidentiality provisions.

Effective on December 21, 2006, the Company entered into an employment agreement with Riaz Chauthani as Director of Real Estate and Business Development for a three-year term. The employment agreement provides for a base salary at the rate of $150,000 per year. The Company also agreed to pay an expense allowance for an automobile in an amount of $1,000 per month and benefits and other compensation such as health, disability, dental, life and other insurance plans that the Company may have in effect from time to time. Furthermore, the Company agreed to issue to Mr. Chauthani fully vested options to purchase an aggregate of 400,000 shares of the Company's common stock, at exercise prices ranging from $3.50 to $10.00 per share valued at $171,000 based on the estimated fair market value of the Company's common stock of $1.85 per share, which was that was included as part of the purchase price consideration in the acquisition of Cleaners Club, Inc. Additionally, the Company is obligated to pay Mr. Chauthani all accrued but unpaid base salary as of the effective date of termination together with the base salary payable through the end of the term upon termination without cause.

Effective on July 24, 2007, the Company entered into an employment agreement . . .