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

                                    FORM 10-K

          (Mark One)

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

          FOR THE FISCAL YEAR ENDED JUNE 30, 2002

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

                         COMMISSION FILE NUMBER 0-19343

                              VSI LIQUIDATION CORP.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                      34-1493345
(State or other jurisdiction of             (IRS Employer Identification Number)
 incorporation or organization)

      2170 PIEDMONT ROAD NE, ATLANTA, GEORGIA                 30324
      (Address of principal executive offices)             (zip code)

       Registrant's telephone number, including area code: (404) 888-2750

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:
                          COMMON STOCK, $.01 PAR VALUE
                                (Title of Class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  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 [X] NO [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]

     As of August 29,  2002:  (a)  7,906,617  shares of Common  Stock,  $.01 par
value, of the registrant were outstanding;  (b) 2,072,872 shares of Common Stock
were held by  non-affiliates;  and (c) the aggregate  market value of the Common
Stock held by  non-affiliates  was $124,372,  based on the closing sale price of
$.06 per share on August 29, 2002.


<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

Part I:   None

Part II:  None

Part III: All items - see registrant's  definitive proxy statement regarding the
          election  of  directors  and which is  expected  to be filed  with the
          Securities and Exchange  Commission within 120 days after the close of
          the fiscal year.

     o    Item 10: Directors and Executive Officers of the Registrant

     o    Item 11: Executive Compensation

     o    Item  12:  Security   Ownership  of  Certain   Beneficial  Owners  and
          Management

     o    Item 13: Certain Relationships and Related Transactions


                                     PART I

ITEM 1.  BUSINESS

GENERAL

     Prior to  January 5, 1999,  the  Company  was  engaged in the  business  of
providing  specialized  industrial  cleaning and other services to divisions and
facilities of Fortune 500 companies and other substantial  businesses engaged in
heavy  industry.  Such  services  generally  involved the removal of  industrial
grime,   deposits,   wastes,   encrustations  or  coatings  from  equipment  and
facilities.  The Company's principal  customers were in the chemical,  plastics,
power  generation,   petroleum  refining  and  primary  metals  businesses.  The
Company's  industrial  cleaning  methods  included,  in  addition  to the use of
waterblasting,   vacuuming,   and  other  more  conventional   procedures,   the
application of ultra-high pressure ("UHP") waterjetting and cutting methods.

     On  September  8, 1998,  the  Company  entered  into a Second  Amended  and
Restated Asset Purchase Agreement (the "Purchase Agreement") whereby essentially
all assets of the Company would be sold to, and substantially all liabilities of
the  Company  would  be  assumed  by,  HydroChem   Industrial   Services,   Inc.
("HydroChem").  This transaction closed on January 5, 1999, and was effective as
of January 1, 1999.  The  purchase  price for these assets and  liabilities  was
approximately  $30.0 million,  adjusted for increases or decreases in net assets
after June 30,  1998.  $4.0  million of the  proceeds  were  placed in escrow to
secure and indemnify HydroChem for any breach of the Company's covenants and for
any  environmental  liabilities.  Escrow funds were released over the three year
period  following the closing.  The remaining escrow balance of $872,000 at June
30,  2002 , to the  extent  not  needed  to  indemnify  HydroChem,  will also be
released  when the Company  can  provide  certain  environmental  assurances  to
HydroChem, expected to be sometime in 2003.

     The Company changed its name from Valley  Systems,  Inc. to VSI Liquidation
Corp. after the closing of this transaction, and does not have and will not have
any  business  operations  in the future  other than those  associated  with the
winding up and dissolution of the Company,  including distribution of any escrow
funds released to the Company. After the closing, the Company used approximately
$5.5  million of the  proceeds of the sale to redeem the  outstanding  shares of
Series C Preferred Stock,  approximately $380,000 to redeem outstanding employee
stock options and  approximately  $165,000 to pay  retention  bonuses to certain
officers and  employees.  The Company also paid a liquidating  dividend of $16.8
million ($2.13 per common share) to common stockholders from the proceeds of the
sale.  Additional  liquidating dividends of approximately $1.2 million ($.15 per
share),  $790,000  ($.10 per share) and  $950,000  ($.12 per share) were paid to
common stockholders in February 2000, 2001 and 2002 respectively.

INSURANCE

     Much of the work  performed by the Company was  pursuant to contracts  that
required the Company to indemnify the customer for injury or damage occurring on
the work site.  The terms of such  indemnity  agreements  varied,  but generally


                                       2
<PAGE>

provided  that the Company was  required to  indemnify  the  customer for losses
resulting from or incurred in connection with  performance by the Company of its
services  whether  or  not  the  Company  was  negligent.   Liability  for  such
indemnification claims is generally covered by the Company's insurance policies.

     Although  the Company  believes  that its  insurance  coverage is generally
consistent  with  industry  practice,  there are  exclusions  from the Company's
insurance  coverage for matters of  environmental  pollution  and other types of
environmental  damage  claims.  An  uninsured  or partially  insured  claim,  if
successful and of sufficient magnitude,  could have a material adverse effect on
the Company or its financial condition.

PROPRIETARY TECHNOLOGY, PATENTS, TRADEMARKS AND EQUIPMENT

     All  proprietary  technology,  patents,  trademarks  and  equipment  of the
Company were sold as part of the Purchase Agreement discussed above. See "Item 1
- General".

ENVIRONMENTAL STANDARDS AND GOVERNMENT REGULATIONS

     The Company's  operations were subject to numerous rules and regulations at
the federal,  state and local levels. The Company believes that it was and is in
substantial  compliance with the various rules and regulations.  The Company has
not experienced any significant regulatory problems.

     All of the Company's  operations were subject to regulations  issued by the
United States  Department of Labor under the Occupational  Safety and Health Act
("OSHA").  Additionally,  some of the Company's  operations  were subject to the
provisions of the Federal Mine Safety and Health Act of 1977. These  regulations
have strict  requirements for protecting  employees  involved with any materials
that are classified as hazardous. Violations of these rules can result in fines.

     The Company does not believe that its past operating activities are subject
to the duties  pertaining  to  hazardous  waste  treatment,  storage or disposal
facilities,  nor those  duties  pertaining  to  hazardous  waste  generators  or
transporters.

     In the event the  Company  performed  a cleaning  operation  involving  the
disposal  of a waste  that  would be defined  as  hazardous  under the  Resource
Conservation and Recovery Act ("RCRA"),  the Company could also be classified as
a "generator" of hazardous waste, and therefore  responsible for manifesting and
transporting  all  such  waste  to  permitted  treatment,  storage  or  disposal
facilities  in  accordance  with RCRA.  As a  generator,  the  Company  could be
potentially liable under the Comprehensive Environmental Response,  Compensation
and Liability Act of 1980  ("CERCLA"),  also known as the Superfund  Act. To the
Company's  knowledge,  none of the sites at which the Company performed services
have been designated as Superfund sites.  Moreover,  to the Company's knowledge,
it has not sent any  hazardous  substances  or  wastes to any site that has been
designated  as a Superfund  site.  Many states  have  implemented  environmental
guidelines similar in nature to RCRA and CERCLA.

     The Company believes that it was and is in substantial  compliance with all
federal,  state and local laws and regulations  governing its business. To date,
the Company has not been subject to any  significant  fines,  penalties or other
liabilities under such laws and regulations.  However, no assurance can be given
that future changes in such law, and regulations,  or  interpretations  thereof,
will not have an adverse impact on the Company's financial position.

     The  Company's  general  liability  insurance  is  subject  to a  pollution
exclusion  endorsement.  Such  exclusion is  generally  found in the majority of
general  liability  policies.   The  Company  does  not  maintain  environmental
impairment  liability  insurance.  Thus a claim for damages  against the Company
that  involves  pollution  or  environmental  impairment  will not be covered by
insurance,  and,  depending  on the size of the  claim,  could  have a  material
adverse  effect  upon the  financial  position  of the  Company.  See  "Item 1 -
Business-Insurance".

EMPLOYEES

     As of August 31, 2002, the Company had no employees other than its officers
and directors.

ITEM 2.  PROPERTIES

     As of August 31, 2002 the Company does not own or lease any property.

ITEM 3.  LEGAL PROCEEDINGS

     None.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year ended June 30, 2002.



                                       3
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


     The  Company's  Common  Stock traded on the Nasdaq  SmallCap  Market of the
Nasdaq Stock Market  under the symbol VALE until  January 5, 1999.  At that time
the  Company  was  delisted  from the  Nasdaq  Stock  Market  due to the sale of
substantially  all assets to HydroChem.  The following table sets forth the high
and low sale prices for the periods indicated on the non-Nasdaq OTC.

                                                       HIGH            LOW
FISCAL 2001:                                          ------         ------
July 1, 2000 - September 30, 2000                     $0.375         $0.063
October 1, 2000 - December 31, 2000                    0.250          0.141
January 1, 2001 - March 31, 2001                       0.156          0.141
April 1, 2001 - June 30, 2001                          0.203          0.156
FISCAL 2002:
July 1, 2001 - September 30, 2001                      0.180          0.180
October 1, 2001 - December 31, 2001                    0.230          0.180
January 1, 2002 - March 31, 2002                       0.240          0.210
April 1, 2002 - June 30, 2002                          0.210          0.100

     Based on information  furnished by certain  brokerage firms that are record
holders  of the  Company's  Common  Stock,  the  Company  has in  excess  of 800
beneficial owners of its Common Stock.


ITEM 6.   SELECTED FINANCIAL DATA

     Dollars in thousands, except per share data:
<TABLE>
<CAPTION>
<S>                                           <C>         <C>        <C>         <C>         <C>
                                                2002 (1)     2001       2000        1999         1998
                                              ----------------------------------------------------------
Sales                                          $      -    $     -    $     -     $ 13,537    $  24,431
Gross profit                                          -          -          -        5,072        9,040
Selling, general and
    administrative expenses                         297        353        225        3,663        7,145
Interest (income) expense, net                      (33)      (155)      (199)         163          593
Gain on sale of substantially all assets
    and assumption of substantially all
    liabilities of the Company                                   -          -       22,719            -
Net income (loss)                                  (164)      (129)       (17)      21,465        1,302
Earnings (loss) per common share:
    Basic and diluted                             (0.02)     (0.02)     (0.00)        2.69         0.12
Total assets                                      1,775      3,128      4,132        5,958       15,934
Total long-term debt                                  -          -          -            -        7,585
Total stockholders' equity                        1,049      2,162      3,082        4,285        5,354
</TABLE>

     (1)  July 1, 2001 through June 30, 2002


                                       4
<PAGE>

ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS

     The  following   discussion   should  be  read  in  conjunction   with  the
Consolidated  Financial Statements and Notes thereto appearing elsewhere in this
Report.

FORWARD LOOKING STATEMENTS:

     Forward-looking  statements in this Form 10-K are made pursuant to the safe
harbor provisions of the Private Securities  Litigation Reform Act of 1995. Such
forward-looking  statements are subject to certain risks and uncertainties  that
could cause actual results to differ  materially from those  projected.  Readers
are cautioned not to place undue reliance on these  forward-looking  statements,
which  speak  only as of the date  hereof.  Potential  risks  and  uncertainties
include,   but  are  not  limited  to,  the  possibility   that  HydroChem  will
successfully  assert  claims  against  funds  held in the  escrow  account,  the
possibility that the costs of winding up the Company's  affairs could exceed the
Company's projections,  the Company's potential liability pursuant to unasserted
claims not covered by insurance and general business and economic conditions.

RESULTS OF DISCONTINUED OPERATIONS - 2002 COMPARED TO 2001

     As discussed in the notes to the consolidated  financial  statements and in
"Item 1 - General,"  effective  January 1, 1999  substantially all assets of the
Company  were sold to,  and  substantially  all  liabilities  were  assumed  by,
HydroChem.  Operations  since that date have  consisted only of the sale itself,
distribution  of the proceeds of the sale, and other  transactions  winding down
the operations of the Company. The Company will not have any business operations
in the future other than those associated with the winding up and dissolution of
the Company, including distribution of any escrow funds released to the Company.

RESULTS OF DISCONTINUED OPERATIONS - 2001 COMPARED TO 2000

     As discussed in the notes to the consolidated  financial  statements and in
"Item 1 - General,"  effective  January 1, 1999  substantially all assets of the
Company  were sold to,  and  substantially  all  liabilities  were  assumed  by,
HydroChem.  Operations  since that date have  consisted only of the sale itself,
distribution  of the proceeds of the sale, and other  transactions  winding down
the operations of the Company. The Company will not have any business operations
in the future other than those associated with the winding up and dissolution of
the Company, including distribution of any escrow funds released to the Company.

QUARTERLY OPERATING RESULTS (UNAUDITED)

     The following  table  presents  certain  unaudited  consolidated  quarterly
operating  information for the Company and includes all  adjustments  considered
necessary for a fair presentation of such information for the interim periods.

<TABLE>
<CAPTION>
<S>                                 <C>       <C>         <C>        <C>      <C>       <C>         <C>        <C>
                                                                  THREE MONTHS ENDED
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                    9/30/00   12/31/00    3/31/01    6/30/01  9/30/01   12/31/01    3/31/02    6/30/02
                                    -------   --------    -------    -------  -------   --------    -------    -------
Sales                                $   -     $    -      $   -      $   -    $   -     $    -      $   -      $   -
Gross profit                             -          -          -          -        -          -          -          -
Net loss                               (11)       (14)       (99)        (5)     (30)       (46)       (48)       (40)
Earnings per common share -
    basic and diluted                $ .00     $  .00      $(.02)     $ .00    $ .00     $ (.01)     $(.01)     $ .00

</TABLE>


LIQUIDITY AND CAPITAL RESOURCES

     On January 5, 1999, the Company  completed the sale of substantially all of
its operating assets and the operating  assets of its  wholly-owned  subsidiary,
Valley Systems of Ohio,  Inc.  ("VSO"),  to HydroChem,  pursuant to the Purchase
Agreement,  for approximately  $30.0 million in cash, of which $26.0 million was
payable  immediately  and $4 million  was  deposited  into an escrow  account to
secure certain  indemnification  and other rights under the Purchase  Agreement,
and the  assumption  of the  Company's  and VSO's  bank debt and  certain  other
liabilities.

     Of  the  $26.0  million  received  at  closing,  after  payment  or  making
reasonable  provision for the payment of all known and  anticipated  liabilities
and  obligations  of the  Company,  payment  of  approximately  $5.5  million to
repurchase  all of the  55,000  shares  of the  Company's  outstanding  Series C
Preferred Stock held by Rollins Holding Company,  Inc., payment of approximately
$380,000  to  redeem   outstanding   employee   stock  options  and  payment  of
approximately  $165,000 as a retention bonus to certain  officers and employees,
approximately $16.8 million of the sale proceeds remained and were available for
distribution to stockholders pursuant to the Plan of Liquidation and Dissolution
adopted by the Company.

                                       5
<PAGE>

     On January 29, 1999, an initial  liquidating cash dividend of approximately
$16.8  million  ($2.13 per share)  was mailed to  stockholders  of record at the
close of business on January 22, 1999. Additional  liquidating cash dividends of
approximately  $1.2  million  ($.15 per  share),  $790,000  ($.10 per share) and
$950,000  ($.12 per share) were paid to  stockholders  of record on the close of
business on January 31, 2000, 2001 and 2002 respectively. The Company now has no
further  assets to distribute  and expects to have no  additional  assets in the
future other than cash received  from the escrow  account  referenced  above and
cash remaining  after payment of all remaining  expenses to wind up and dissolve
the Company, if any.

     The  Company  expects  that,  subject  to any  claims  which may be made by
HydroChem,  all  of the  remaining  escrowed  funds  of  approximately  $872,000
(including  earnings on escrowed funds to date) will be released at such time as
the Company delivers to HydroChem a certificate  regarding certain environmental
remediation  matters,  which is  currently  expected  to be possible in the year
2003.  There can be no  guarantee,  however,  that these  funds,  or any portion
thereof,  will be  released  to the  Company.  As escrowed  funds,  if any,  are
released to the Company,  they will be utilized to pay any unanticipated  unpaid
expenses, with the remainder to be distributed as a liquidating cash dividend to
stockholders as soon as is practicable.

     As of the fiscal year ended June 30,  2002 the  Company  had  approximately
$312,000  in cash in  addition  to  approximately  $872,000  held in the  escrow
account.

     The Company will not engage in any further business activities and the only
remaining   activities  will  be  those  associated  with  the  winding  up  and
dissolution of the Company. The Company believes that the remaining cash on hand
and in escrow will be sufficient to meet its liabilities  and obligations  until
the Company is dissolved in accordance  with  Delaware law. We currently  expect
that the Company will be dissolved in 2003.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company's  primary  market  risk is  interest  rate risk.  The Company
currently  minimizes  such risk by investing its temporary  cash in money market
funds and,  pursuant to the Escrow Agreement  entered into by and among Bank One
Texas,  N.A. and the Company,  the escrowed  funds are invested in United States
Treasury  Bills  having a maturity  of 90 days or less,  repurchase  obligations
secured by such United States Treasury Bills and demand deposits with the escrow
agent. The Company does not engage in derivative transactions,  and no financial
instrument  transactions are entered into for hedging purposes. As a result, the
Company believes that it has no material interest rate risk to manage.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  required  financial   statements  of  the  Registrant  are  set  forth
immediately  following  the  signature  page to this Form  10-K.  See "Item 14 -
Exhibits, Financial Statements, Schedules and Reports on Form 8-K," for index to
the financial statements.

ITEM 9.   CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item is expected to be set forth under the
captions   "Election  of  Directors"   and  "Executive   Compensation"   of  the
registrant's definitive proxy statement, and incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this item is expected to be set forth under the
caption "Executive Compensation" of the registrant's definitive proxy statement,
and incorporated herein by reference.


                                       6
<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is expected to be set forth under the
caption  "Beneficial   Ownership  of  Voting  Securities"  of  the  registrant's
definitive proxy statement, and incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is expected to be set forth under the
caption  "Certain  Relationships  and Related  Transactions" of the registrant's
definitive proxy statement, and incorporated herein by reference.

                                     PART IV

ITEM 14.  EXHIBITS,  FINANCIAL  STATEMENTS,  FINANCIAL  STATEMENT  SCHEDULES AND
          REPORTS ON FORM 8-K

     (A)  (1) FINANCIAL STATEMENTS FILED

             VSI Liquidation Corp. and Subsidiary:
               Report of Independent Accountants.
               Consolidated Balance Sheets at June 30, 2002 and 2001.
               Consolidated Statements of Discontinued Operations for the
                    years ended June 30, 2002, 2001 and 2000.
               Consolidated  Statements of  Stockholders'  Equity for the
                    years ended June 30, 2002, 2001 and 2000.
               Consolidated Statements of Cash Flows for the years ended
                    June 30, 2002, 2001 and 2000.
               Notes to Consolidated Financial Statements.

          (2) EXHIBITS

NO.       DESCRIPTION OF EXHIBIT
---       ----------------------
2.1       Second  Amended and Restated  Asset  Purchase  Agreement,  dated as of
          September 8, 1998, among the Company, Valley Systems of Ohio, Inc. and
          HydroChem Industrial Services,  Inc. (Incorporated herein by reference
          to Appendix A of the  Registrant's  Definitive  Information  Statement
          filed with the  Securities  and  Exchange  Commission  on December 15,
          1998).

3.1       Restated Certificate of Incorporation of the Company (filed as Exhibit
          3.1 to the Company's  Registration Statement on Form S-1 filed on June
          11, 1991, and incorporated therein by reference).

3.2       Certification  of Amendment of  Certificate  of  Incorporation  of the
          Company  (filed  as  Exhibit  3.2 to the  Company's  Form  10-K  dated
          September 25, 1995, and incorporated herein by reference).

3.3       Certificate  of Correction of  Certificate of Amendment of Certificate
          of Incorporation of the Company  (incorporated by reference to Exhibit
          3.3 to the Form 10-Q for the quarter ended December 31, 1998).

3.4       Certificate of  Elimination  of Series A Preferred  Stock and Series B
          Preference Stock of the Company  (incorporated by reference to Exhibit
          3.4 to the Form 10-Q for the quarter ended December 31, 1998).

3.5       Certificate  of  Amendment  of  Certificate  of  Incorporation  of the
          Company (incorporated by reference to Exhibit 3.5 to the Form 10-Q for
          the quarter ended December 31, 1998).

3.6       Bylaws  of the  Company,  as  amended,  (filed as  Exhibit  3.3 to the
          Company's Form 10-K dated September 25, 1995 and  incorporated  herein
          by reference).

10.1      Plan of Liquidation and Dissolution  (Incorporated herein by reference
          to Appendix C of the  Registrant's  Definitive  Information  Statement
          filed with the  Securities  and  Exchange  Commission  on December 15,
          1998).

10.2+     Purchase  Order dated June 11, 1998 between  Ohio  Edison/Pennsylvania
          Power Company and the Registrant (Incorporated by reference to Exhibit
          10.25 to the Form 10-K/A for the fiscal year June 30, 1998).

21.1*     Subsidiaries of the Company.

99.1*     Certification  Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant
          To Section 906 Of The Sarbanes-Oxley Act Of 2002.
__________________
*    Filed herewith.
+    The  Company has applied  for  confidential  treatment  of portions of this
     Agreement.  Accordingly,  portions  thereof  have  been  omitted  and filed
     separately with the Securities and Exchange Commission.

     (B) REPORTS ON FORM 8-K

          None.


                                       7
<PAGE>

                                   SIGNATURES

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


                                      VSI LIQUIDATION CORP.


September 25, 2002                    By: \s\  Ed Strickland
                                          -------------------------------------
                                          Ed Strickland, President
                                          and Chief Executive Officer


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

SIGNATURE                          TITLE               DATE
---------                          -----               ----

\s\  Allen O. Kinzer               Director            September 25, 2002
--------------------
Allen O. Kinzer

\s\  Joe M. Young                  Director            September 25, 2002
-----------------
Joe M. Young



                                       8
<PAGE>

CERTIFICATIONS

I, Ed Strickland, certify that:

1. I have reviewed this annual report on Form 10-K of VSI Liquidation Corp.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report; and

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.

Date: September 25, 2002
                                            /s/ ED STRICKLAND
                                            ------------------------------------
                                            Chief Executive Officer

I, Joe M. Young, certify that:

1. I have reviewed this annual report on Form 10-K of VSI Liquidation Corp.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report; and

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.

Date: September 25, 2002
                                            /s/ JOE M. YOUNG
                                            ------------------------------------
                                            Acting Financial Officer


EXPLANATORY  NOTE REGARDING  CERTIFICATIONS:  Representations  4, 5 and 6 of the
Certifications as set forth in Form 10-K have been omitted,  consistent with the
Final Provisions of SEC Exchange Act Release No.  34-46427,  because this Annual
Report on Form 10-K covers a period ending  before the  Effective  Date of Rules
13a-14 and 15d-14.



                                       9
<PAGE>



                      VSI LIQUIDATION CORP. AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                          Number
                                                                          ------
REPORT OF INDEPENDENT ACCOUNTANTS.........................................    12

CONSOLIDATED BALANCE SHEETS - June 30, 2002 and 2001......................    13

CONSOLIDATED  STATEMENTS OF  DISCONTINUED  OPERATIONS - Years ended
  June 30, 2002, 2001 and 2000............................................    14

CONSOLIDATED  STATEMENTS OF STOCKHOLDERS' EQUITY - Years ended
  June 30, 2002,  2001 and 2000...........................................    15

CONSOLIDATED  STATEMENTS OF CASH FLOWS - Years  ended  June 30,
  2002,  2001  and  2000..................................................    16

NOTES TO  CONSOLIDATED FINANCIAL STATEMENTS............................... 16-17

All schedules are omitted because they are not required under the  instructions,
are  inapplicable,  or the  information  is included  elsewhere in the financial
statements.




                                       10
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders
VSI Liquidation Corp.

We have audited the accompanying  consolidated  balance sheet of VSI Liquidation
Corp. (a Delaware  corporation) and subsidiary as of June 30, 2002 and 2001, and
the related consolidated  statements of discontinued  operations,  stockholders'
equity,  and cash flows for each of the three years ended June 30,  2002.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of VSI Liquidation and
subsidiary  as of June 30, 2001 and 2000,  and the  results of its  discontinued
operations  and its cash flows for each of the years in the period  ending  June
30, 2002 in conformity with U.S. generally accepted accounting principles.


/s/ Hall, Kistler & Company LLP
Hall, Kistler & Company LLP

Canton, Ohio
September 13, 2002



                                       11
<PAGE>

CONSOLIDATED BALANCE SHEETS
June 30, 2002 and 2001


<TABLE>
<CAPTION>
<S>                                                                    <C>                 <C>
                                                                             2002                2001
                                                                       -----------------   -----------------
                                ASSETS

Cash                                                                    $       312,412     $       215,310
Cash in escrow account                                                          871,514           2,372,849
Prepaid expenses and deposits                                                   591,114             539,775
                                                                       -----------------   -----------------
         Total assets                                                   $     1,775,040     $     3,127,934
                                                                       =================   =================

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses                                   $       168,941     $       163,597
Deferred income taxes                                                           556,845             802,072
                                                                       -----------------   -----------------
     Total liabilities                                                          725,786             965,669
                                                                       -----------------   -----------------
Stockholders' equity:
     Preferred stock, $.10 par value; authorized
        2,000,000 shares, none issued and outstanding                                 -                   -
     Common stock, $.01 par value; authorized 12,000,000
        shares, issued and outstanding 7,906,617 shares                          79,066              79,066
     Paid-in capital                                                            848,044           1,796,838
     Retained earnings                                                          122,144             286,361
                                                                       -----------------   -----------------
                                                                              1,049,254           2,162,265
                                                                       -----------------   -----------------
         Total liabilities and stockholders' equity                     $     1,775,040     $     3,127,934
                                                                       =================   =================
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.








VSI LIQUIDATION CORP. AND SUBSIDIARY    12
<PAGE>

CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
for the years ended June 30, 2002, 2001 and 2000

<TABLE>
<CAPTION>
<S>                                               <C>                 <C>                <C>
                                                        2002                2001               2000
                                                  -----------------   -----------------  -----------------
Sales                                              $             -     $             -    $             -
Cost of sales                                                    -                   -                  -
                                                  -----------------   -----------------  -----------------
     Gross profit                                                -                   -                  -
Selling, general and
  administrative expenses                                  297,387             352,515            224,708
Interest (income), net                                     (33,170)           (154,733)          (198,754)
                                                  -----------------   -----------------  -----------------
Loss from discontinued operations
  before income taxes                                     (264,217)           (197,782)           (25,954)
Income tax benefit                                        (100,000)            (69,000)            (9,000)
                                                  -----------------   -----------------  -----------------
     Net loss                                      $      (164,217)    $      (128,782)   $       (16,954)
                                                  =================   =================  =================
Earnings per share:
Net earnings per common share - basic              $         (0.02)    $         (0.02)   $          0.00
                                                  =================   =================  =================
Net earnings per common share -
   assuming dilution                               $         (0.02)    $         (0.02)   $          0.00
                                                  =================   =================  =================
Weighted average shares used in
  computation - basic and diluted                        7,906,617           7,906,617          7,906,617
                                                  =================   =================  =================
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.


VSI LIQUIDATION CORP. AND SUBSIDIARY    13
<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended June 30, 2002, 2001 and 2000

<TABLE>
<CAPTION>
<S>                             <C>           <C>             <C>              <C>             <C>
                                                                                 Retained
                                 Preferred       Common          Paid-In        (Deficit)
                                   Stock        Stock (1)        Capital         Earnings          Total
                                ------------  -------------- ---------------- --------------- -----------------
Balance, July 1, 1999            $        -    $     79,066   $    3,773,492   $     432,097   $     4,284,655
Net loss                                                                             (16,954)          (16,954)
Distribution of $.15 per
  share to common
  stockholders                                                    (1,185,992)                       (1,185,992)
                                ------------  -------------- ---------------- --------------- -----------------
Balance, June 30, 2000                    -          79,066        2,587,500         415,143         3,081,709
Net loss                                                                            (128,782)         (128,782)
Distribution of $.10 per
  share to common
  stockholders                                                      (790,662)                         (790,662)
                                ------------  -------------- ---------------- --------------- -----------------
Balance, June 30, 2001                    -          79,066        1,796,838         286,361         2,162,265
Net loss                                                                            (164,217)         (164,217)
Distribution of $.12 per
  share to common
  stockholders                                                      (948,794)                         (948,794)
                                ------------  -------------- ---------------- --------------- -----------------
Balance, June 30, 2002           $        -    $     79,066   $      848,044   $     122,144   $     1,049,254
                                ============  ============== ================ =============== =================

</TABLE>

     (1)  Per share totals are 100 times dollar amounts.



              The accompanying notes are an integral part of these
                       consolidated financial statements.


VSI LIQUIDATION CORP. AND SUBSIDIARY    14
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 2002, 2001  and 2000

<TABLE>
<CAPTION>
<S>                                                                <C>               <C>               <C>
                                                                        2002              2001               2000
                                                                   ----------------  ----------------  -----------------
Cash flows from operating activities:
   Net (loss) income                                                $     (164,217)   $     (128,782)   $       (16,954)
   Adjustments to reconcile net (loss) income  to cash
     provided by (used in) operating activities:
       Deferred income taxes                                              (245,227)         (116,449)          (202,479)
       (Increase) decrease in assets:
           Accounts receivable                                                   -           123,268            301,907
           Prepaid expenses and supplies                                   (51,339)         (135,000)           (48,124)
       Increase (decrease) in liabilities:
           Accounts payable and accrued expenses                             5,344            31,920           (261,683)
           Income tax payable                                                    -                 -           (159,000)
                                                                   ----------------  ----------------  -----------------
       Cash provided by (used in) operating activities                    (455,439)         (225,043)          (386,333)
                                                                   ----------------  ----------------  -----------------
Cash flows from investing activities:
   Change in escrow account                                              1,501,335           854,263            183,695
                                                                   ----------------  ----------------  -----------------
       Cash provided by (used in) investing activities                   1,501,335           854,263            183,695
                                                                   ----------------  ----------------  -----------------
Cash flows from financing activities:
   Distribution to common stockholders                                    (948,794)         (790,662)        (1,185,992)
                                                                   ----------------  ----------------  -----------------
       Cash used in financing activities                                  (948,794)         (790,662)        (1,185,992)
                                                                   ----------------  ----------------  -----------------
(Decrease) increase in cash                                                 97,102          (161,442)        (1,388,630)
Cash at beginning of year                                                  215,310           376,752          1,765,382
                                                                   ----------------  ----------------  -----------------
Cash at end of year                                                 $      312,412    $      215,310    $       376,752
                                                                   ================  ================  =================
Cash paid for:
   Interest                                                         $            -    $            -    $             -
   Income taxes                                                            135,000                 -                  -
Non-cash investing activities:
   Property and equipment acquired with capital leases                           -                 -                  -
</TABLE>




              The accompanying notes are an integral part of these
                       consolidated financial statements.


VSI LIQUIDATION CORP. AND SUBSIDIARY    15
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                for the years ended June 30, 2002, 2001 and 2000

1.   DESCRIPTION OF BUSINESS:

The Company was engaged in the  business  of  providing  specialized  industrial
cleaning and other services to divisions and facilities of Fortune 500 companies
and other  substantial  businesses  engaged  in heavy  industry.  Such  services
generally   involved  the  removal  of  industrial  grime,   deposits,   wastes,
encrustations  and  coatings  from  equipment  and  facilities.   The  Company's
principal customers were in the chemical, plastics, power generation,  petroleum
refining  and primary  metals  businesses.  The  Company's  industrial  cleaning
methods included,  in addition to the use of waterblasting,  vacuuming and other
more  conventional  procedures,  the application of ultra-high  pressure ("UHP")
waterjetting methods.

2.   SALE OF  SUBSTANTIALLY  ALL  ASSETS AND  ASSUMPTION  OF  SUBSTANTIALLY  ALL
     LIABILITIES OF THE COMPANY:

On September  8, 1998,  the Company  entered into a Second  Amended and Restated
Asset Purchase  Agreement (the "Purchase  Agreement")  whereby  essentially  all
assets of the Company would be sold to, and substantially all liabilities of the
Company would be assumed by, HydroChem Industrial Services,  Inc. ("HydroChem").
The purchase  price for these assets and  liabilities  was  approximately  $30.0
million,  adjusted for increases or decreases in net assets after June 30, 1998.
This  transaction  closed on January 5, 1999, and was effective as of January 1,
1999.  Costs  totaling  $1.3 million were  incurred by the Company in connection
with the sale.  $4.0 million of the proceeds were placed in escrow to secure and
indemnify  HydroChem  for any  breach  of the  Company's  covenants  and for any
environmental liabilities. Escrow funds were released over the three year period
following  the closing.  The  remaining  escrow  balance of $872,000 at June 30,
2002,  to the extent not needed to  indemnify  HydroChem,  will also be released
when the Company can provide  certain  environmental  assurances  to  HydroChem,
expected to be sometime in 2003.

The Company changed its name from Valley Systems,  Inc. to VSI Liquidation Corp.
after the closing of this transaction, and will not have any business operations
other than those  associated with the winding up and dissolution of the Company,
including  distribution  of any escrow funds released to the Company.  After the
closing, the Company used approximately $5.5 million of the proceeds of the sale
to redeem the  outstanding  shares of Series C  Preferred  Stock,  approximately
$380,000 to redeem outstanding employee stock options and approximately $165,000
to pay retention  bonuses to certain  officers and  employees.  The Company also
paid a liquidating  dividend of $16.8 million ($2.13 per common share) to common
stockholders from the proceeds of the sale. Additional  liquidating dividends of
approximately  $1.2 million ($.15 per common  share),  $790,000 ($.10 per common
share) and $950,000 ($.12 per share) were paid in fiscal February 2000, 2001 and
2002 respectively.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION:  The consolidated  financial statements include the
accounts  of  the  Company  and  its  wholly-owned   subsidiary.   All  material
intercompany  transactions have been eliminated in the accompanying consolidated
financial statements.

REVENUE  RECOGNITION:  Sales and the related cost of sales for services provided
were recorded as the services were performed.

CASH IN ESCROW ACCOUNT: Cash in escrow includes highly liquid investments with a
maturity  of three  months  or less  when  purchased.  Carrying  values  of such
investments  approximate  fair  value  due to the  short-term  nature  of  these
instruments.

ACCOUNTS  RECEIVABLE:  The Company's customers were located primarily throughout
the United States. The Company monitored potential credit losses and such losses
have been within  management's  expectations.  Accounts  receivable which become
uncollectible are written off against  operations at the time they are deemed to
be worthless.  Bad debt  recoveries  amounted to $100,000 in the year ended June
30, 2000.

CONCENTRATIONS  OF CREDIT RISK ARISING  FROM CASH  DEPOSITS IN EXCESS OF INSURED
LIMITS:  The Company  maintains its cash balances in one financial  institution.
The  balances are insured by the Federal  Deposit  Insurance  Corporation  up to
$100,000. At June 30, 2002 and 2001, respectively,  the Company's uninsured cash
balances totaled $212,412 and $115,310.

The cost  and  related  accumulated  depreciation  of  assets  retired,  sold or
otherwise  disposed of were  removed  from the accounts and any gain or loss was
reflected in the current years' results of operations.

INCOME TAXES:  Deferred  income taxes are provided to reflect the tax effects of
temporary differences between financial and tax reporting.


VSI LIQUIDATION CORP. AND SUBSIDIARY    16
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                for the years ended June 30, 2002, 2001 and 2000

EARNINGS  PER  COMMON  SHARE:  Earnings  per  share of  common  stock  have been
calculated  according to the  guidelines of Financial  Accounting  Standards No.
128,  "Earnings  Per Share."  Basic  earnings  per common  share are computed by
dividing net income for the period by the weighted  average  number of shares of
common stock  outstanding for the period.  Diluted  earnings per common share do
not vary from basic earnings per share for any of the periods  presented because
there  were no  dilutive  potential  shares of  common  stock  outstanding.  The
dilutive  effect of  outstanding  potential  shares of common stock was computed
using the treasury stock method.

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

BUSINESS  SEGMENT  INFORMATION:  Management  has  determined  that  the  Company
consists  of a single  operating  segment,  therefore,  there are no  disclosure
requirements under Financial  Accounting  Standards No. 131,  "Disclosures about
Segments of an Enterprise and Related Information."

FAIR VALUE OF FINANCIAL INSTRUMENTS:  The carrying values of accounts receivable
and short-term  borrowings  represent reasonable estimates of the fair values of
these  instruments  due to their short  maturities.  The fair value of long-term
debt is estimated  by  discounting  the future cash flows using rates  currently
available to the Company for debt with similar terms and remaining maturities.

4.   INCOME TAXES:

The income tax provision for the three years ended June 30, 2002 is comprised of
the following amounts:
<TABLE>
<CAPTION>
<S>                                                     <C>                 <C>                 <C>
                                                              2002                2001                2000
                                                        ------------------  ------------------  -----------------
Current                                                  $        400,000    $              -    $             -
Deferred                                                         (500,000)            (69,000)            (9,000)
                                                        ------------------  ------------------  -----------------
     Total Provision                                     $       (100,000)   $        (69,000)   $        (9,000)
                                                        ==================  ==================  =================
Statutory Rate                                                        (34)%               (34)%              (34)%
State and local taxes, net of federal benefit                          (4)                 (1)                (1)
Operating loss utilized                                                 -                   -                  -
                                                        ------------------  ------------------  -----------------
     Effective rate                                                   (38)%               (35)%              (35)%
                                                        ==================  ==================  =================
</TABLE>

Deferred  federal  income  taxes  reflect  the  impact for  financial  statement
reporting purposes of temporary  differences between the financial statement and
tax basis of assets and  liabilities.  At June 30, 2002 and 2001, the components
of the net deferred tax assets and liabilities were as follows:

                                             2002             2001
                                       ----------------- ----------------
Deferred tax liabilities:
    Escrow account                      $       556,845   $      802,072
                                       ----------------- ----------------
Net deferred tax liabilities            $       556,845   $      802,072
                                       ================= ================

5.   EMPLOYEE BENEFIT PLAN:

In 1991,  the  Company  adopted a 401(k)  plan  that  covers  substantially  all
employees.  The plan is a discretionary  plan in that the Company may or may not
make  contributions  to the plan.  The  Company did not  contribute  to the plan
during the three  years  ended June 30,  2002.  Effective  January 1, 1999,  the
Company terminated this plan as a result of the sale of substantially all of the
Company's  assets  to  HydroChem.  On  April  20,  1999  the  Company  filed  an
application  for  termination  of the plan with the  Internal  Revenue  Service.
Termination was completed in December 1999.

6.   FINANCIAL STATEMENT PRESENTATION

The 2002 financial  statements are presented on an unclassified basis due to the
working capital distinction being irrelevant. 2000 and 2001 financial statements
have been reclassified to conform to the 2002 presentation.



VSI LIQUIDATION CORP. AND SUBSIDIARY    17


1512771