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, 2005

            [ ] 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)

<TABLE>
<CAPTION>
<S>                                                           <C>
                 DELAWARE                                                 34-1493345
(State or other jurisdiction of incorporation                 (IRS Employer Identification Number)
           or organization)
</TABLE>

                  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. [ ]

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

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

     As of August 31,  2005:  (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 $128,725,  based on the closing sale price of
$0.0621 per share on August 29, 2005.


<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 and Related Stockholder Matters

     o    Item 13: Certain Relationships and Related Transactions

     o    Item 14: Principal Accounting Fees and Services



                                     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 six year
period  following the closing.  The remaining escrow balance of $578,000 at June
30, 2005, is expected to be utilized for certain environmental remediation.

     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

     The Company has no operations and therefore does not maintain any insurance
coverage.


                                       2
<PAGE>


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 former general liability insurance was 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, 2005, the Company had no employees other than its officers
and directors.

ITEM 2. PROPERTIES

     As of August 31, 2005 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, 2005.



                                       3
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S  COMMON EQUITY RELATED  STOCKHOLDER  MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

     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 2004:
July 1, 2003 - September 30, 2003                         $0.070         $0.070
October 1, 2003 - December 31, 2003                        0.080          0.060
January 1, 2004 - March 31, 2004                           0.080          0.050
April 1, 2004 - June 30, 2004                              0.050          0.050
FISCAL 2005:
July 1, 2004 - September 30, 2004                          0.050          0.050
October 1, 2004 - December 31, 2004                        0.060          0.040
January 1, 2005 - March 31, 2005                           0.065          0.055
April 1, 2005 - June 30, 2005                              0.065          0.055

     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.  During  2005,  the  Company  did not
repurchase any equity securities.


ITEM 6.   SELECTED FINANCIAL DATA

     Dollars in thousands, except per share data:

<TABLE>
<CAPTION>
<S>                                                 <C>             <C>            <C>           <C>            <C>
                                                      2005(1)          2004          2003          2002           2001
                                                    ------------    -----------    ----------    ----------    ------------
Sales                                               $       -       $      -       $      -      $     -       $       -
Gross profit                                                -              -              -            -               -
Selling, general and administrative expenses              496             71            445          297             353
Interest income                                            (9)            (4)            (7)         (33)           (155)
Net loss                                                 (240)           (44)          (273)        (164)           (129)
Earnings (loss) per common share:
     Basic and diluted                                  (0.03)         (0.01)         (0.03)       (0.02)          (0.02)
Total assets                                            1,078          1,260          1,340        1,775           3,128
Total long-term debt                                        -              -              -            -               -
Total stockholders' equity                                492            732            776        1,049           2,162

</TABLE>

(1)      July 1, 2004 though June 30, 2005


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


                                       4
<PAGE>

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 - 2005 COMPARED TO 2004

     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.

     Selling,  general and  administrative  expenses in 2005 were more than 2004
due to probable costs  associated  with  remediation  claims.  During the fourth
quarter of 2005, the environmental consultant engaged by the Company performed a
new  assessment  of the  remediation  required  at one of the  Company's  former
properties. The assessment indicated a higher cost than previously estimated for
the remediation.  Under the terms of the Purchase Agreement,  the Company is not
required to pay the remediation  costs in excess of the amount of the balance in
the escrow  account.  The Company  accrued  additional  expense in the amount of
$433,000 to reflect the use of the entire  balance of the escrow account to fund
the  remediation.  The Company  expects  that it will return to a lower level of
operating expenses in 2006.

RESULTS OF DISCONTINUED OPERATIONS - 2004 COMPARED TO 2003

     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.

     Selling,  general and  administrative  expenses in 2004 were less than 2003
due to a lower level of activity winding down the business,  and lower levels of
expenditures for insurance and environmental remediation.

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)
                                    9/30/03   12/31/03   3/31/04    6/30/04    9/30/04   12/31/04    3/31/05   6/30/05
                                    -------   --------   -------    -------    -------   --------    -------   -------
Sales                               $    -    $     -    $    -     $    -     $    -    $     -     $    -    $    -
Gross profit                             -          -         -          -          -          -          -         -
Net loss                                (9)        (8)      (17)       (10)        (7)       (10)       (12)     (211)
Earnings per common share -
    basic and diluted               $ (.00)   $  (.00)   $ (.00)    $ (.01)    $ (.00)   $  (.00)    $ (.00)   $ (.03)
</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


                                       5
<PAGE>

distribution to stockholders pursuant to the Plan of Liquidation and Dissolution
adopted by the Company.

     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  all  of  the  remaining   escrowed  funds  of
approximately  $578,000 will be utilized in environmental  remediation  matters.
The Company  expects that the total costs of remediation of the property sold to
HydroChem  will  exceed the  balance  in the escrow  account by an amount in the
range of approximately $125,000 to $900,000,  based on current estimates.  Under
the terms of the  Purchase  Agreement,  the  Company is not  required to pay the
remediation  costs in excess  of the  escrow  balance.  There is a risk that the
Company could have predecessor  liability for additional,  undetermined  amounts
under environmental  regulations,  should HydroChem  ultimately fail to complete
the   remediation,   despite  the  fact  that  the  Company  believes  that  the
contamination  on the property was not created during the relatively  short time
that the Company owned the property.

     As of the fiscal year ended June 30,  2005 the  Company  had  approximately
$500,000  in cash in  addition  to  approximately  $578,000  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 2006.

SCHEDULED CONTRACTUAL OBLIGATIONS

     The Company does not have material contractual obligations,  except for its
environmental  obligations  under the Purchase  Agreement.  At June 30, 2005 the
Company has accrued an estimate of $578,000 for these  obligations,  and expects
that most of this amount will be paid out within the fiscal year ending June 30,
2006.

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 JP Morgan
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.

ITEM 9A. CONTROLS AND PROCEDURES

     (a) Evaluation of disclosure  controls and procedures.  Our Chief Executive
Officer (CEO) and our Acting Chief  Financial  Officer (CFO) have  evaluated the
effectiveness of our disclosure controls and procedures as of June 30, 2005 (the
Evaluation Date).

     The Company's  management,  including the CEO and CFO, does not expect that
its Disclosure  Controls will prevent all error and all fraud. A control system,
no matter how well  conceived and  operated,  can provide only  reasonable,  not
absolute,  assurance that the objectives of the control system are met. Further,
the design of a control  system must  reflect  the fact that there are  resource
constraints,  and the benefits of controls must be considered  relative to their
costs.  Because of the inherent limitations in all control system, an evaluation
of controls may not detect all control  issues and  instances of fraud,  if any,
within the Company..  These  inherent  limitations  include the  realities  that
judgments in decision-making can be faulty, and that breakdown can occur because
of simple error or mistake.  The design of any system of controls  also is based


                                       6
<PAGE>

in part upon certain  assumptions  about the  likelihood of future  events.  The
design may not succeed in achieving its stated goals under all potential  future
conditions.  The Company  has,  however,  designed its  disclosure  controls and
procedures  to provide,  and  believes  that such  controls  and  procedures  do
provide,  reasonable  assurance that information required to be disclosed by the
Company in reports that it files or submits under the Securities Exchange Act of
1934 is recorded,  processed,  summarized  and reported  within the time periods
specified in the SEC's rules and forms.  The disclosure in this paragraph  about
inherent  limitations  of control  systems does not modify the  conclusions  set
forth in the next  paragraph of the  Company's  CEO and its CFO  concerning  the
effectiveness of the Company's disclosure controls and procedures.

     Based upon the Company's  Disclosure Controls  evaluation,  the CEO and CFO
have  concluded  that the  Company's  Disclosure  Controls are effective to give
reasonable  assurance  that the  information  required  to be  disclosed  by the
Company in its periodic  reports is accumulated and  communicated to management,
including the CEO and CFO, as  appropriate to allow timely  decisions  regarding
disclosure and is recorded,  processed,  summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.

     (b)  Changes  in  internal  controls.  We  maintain  a system  of  internal
accounting  controls that are designed to provide reasonable  assurance that our
books and records  accurately  reflect our transactions and that our established
policies and procedures are followed. For the quarter ended June 30, 2005, there
were no  significant  changes to our internal  controls or in other factors that
could significantly affect our internal controls.

ITEM 9B. OTHER INFORMATION

     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.

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

     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.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

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

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES

     (A) (1) FINANCIAL STATEMENTS FILED

             VSI Liquidation Corp. and Subsidiary:
               Report of Independent Registered Public Accounting Firm.
               Consolidated Balance Sheets at June 30, 2005 and 2004.
               Consolidated  Statements of Discontinued Operations for the years
                 ended June 30, 2005, 2004 and 2003.


                                       7
<PAGE>

               Consolidated  Statements  of  Stockholders'  Equity for the years
                 ended June 30, 2005, 2004 and 2003.
               Consolidated  Statements  of Cash Flows for the years  ended June
                 30, 2005, 2004 and 2003.
               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 Registrant

31.1*          Certification of Chief Executive  Officer pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.

31.2*          Certification of Chief Financial  Officer pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002

32.1*          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.

                                   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 28, 2005                       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 28, 2005
--------------------
Allen O. Kinzer
\s\  Donald P. Carson              Director and        September 28, 2005
---------------------
Donald P. Carson                   Acting Chief
                                   Financial Officer




                                       8
<PAGE>





                      VSI LIQUIDATION CORP. AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S>                                                                                                           <C>
                                                                                                               Page
                                                                                                              Number

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                         10

CONSOLIDATED BALANCE SHEETS - June 30, 2005 and 2004                                                            11

CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS - Years ended June 30, 2005, 2004 and 2003                   12

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Years ended June 30, 2005, 2004 and 2003                      13

CONSOLIDATED STATEMENTS OF CASH FLOWS - Years ended June 30, 2005, 2004 and 2003                                14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                     15-16
</TABLE>

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







                                       9
<PAGE>




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
VSI Liquidation Corp.

We have audited the accompanying  consolidated balance sheets of VSI Liquidation
Corp. (a Delaware  corporation) and subsidiary as of June 30, 2005 and 2004, and
the related consolidated  statements of discontinued  operations,  stockholders'
equity,  and cash flows for each of the three years ended June 30,  2005.  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 the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  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, 2005 and 2004,  and the  results of its  discontinued
operations  and its cash flows for each of the three years in the period  ending
June 30, 2005 in conformity with U.S. generally accepted accounting principles.


/s/ Hall, Kistler & Company LLP

Canton, Ohio
September 21, 2005




                                       10
<PAGE>


CONSOLIDATED BALANCE SHEETS
June 30, 2005 and 2004


<TABLE>
<CAPTION>
<S>                                                                                  <C>              <C>
                                                                                         2005              2004
                                                                                     -------------    ---------------
                                      ASSETS
Cash                                                                                  $   499,633       $    497,264
Income tax refund receivable                                                                    -             60,000
Cash in escrow account                                                                    578,314            703,099
                                                                                     -------------    ---------------
         Total assets                                                                 $ 1,077,947       $  1,260,363
                                                                                     =============    ===============
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                                                      $     7,176       $      8,873
Accrued environmental remediation                                                         578,314            222,538
Deferred income taxes                                                                           -            296,893
                                                                                     -------------    ---------------
     Total liabilities                                                                    585,490            528,304
                                                                                     -------------    ---------------
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            848,044
     Retained earnings                                                                   (434,653)          (195,051)
                                                                                     -------------    ---------------
                                                                                          492,457            732,059
                                                                                     -------------    ---------------
         Total liabilities and stockholders' equity                                   $ 1,077,947       $  1,260,363
                                                                                     =============    ===============
</TABLE>


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



                                       11

VSI LIQUIDATION CORP. AND SUBSIDIARY

<PAGE>


CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
for the years ended June 30, 2005, 2004 and 2003


<TABLE>
<CAPTION>
<S>                                          <C>                       <C>                       <C>
                                                      2005                     2004                      2003
                                             ---------------------     ---------------------     ---------------------
Sales                                        $                -        $               -         $                -
Cost of sales                                                 -                        -                          -
                                             ---------------------     ---------------------     ---------------------
    Gross profit                                              -                        -                          -
Selling, general and
  administrative expenses                                63,770                   71,094                    306,530
Environmental remediation expense                       432,643                        -                    138,569
Interest income                                          (9,229)                  (4,140)                    (6,858)
                                             ---------------------     ---------------------     ---------------------
Loss from discontinued operations
  before income taxes                                  (487,184)                 (66,954)                  (438,241)
Income tax benefit                                     (247,582)                 (23,000)                  (165,000)
                                             ---------------------     ---------------------     ---------------------
    Net loss                                 $         (239,602)       $         (43,954)        $         (273,241)
                                             =====================     =====================     =====================
Earnings per share:
Net earnings per common share - basic        $            (0.03)       $           (0.01)        $            (0.03)
                                             =====================     =====================     =====================
Net earnings per common share -
  Assuming dilution                          $            (0.03)                   (0.01)        $            (0.03)
                                             =====================     =====================     =====================
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.



                                       12

VSI LIQUIDATION CORP. AND SUBSIDIARY

<PAGE>


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended June 30, 2005, 2004 and 2003


<TABLE>
<CAPTION>
<S>                                            <C>                <C>             <C>           <C>          <C>
                                                                                                 RETAINED
                                                 PREFERRED            COMMON        PAID-IN      (DEFICIT)
                                                   STOCK            STOCK (1)       CAPITAL      EARNINGS       TOTAL
                                               ---------------    --------------- ------------- ------------ -------------
Balance, July 1, 2002                                  $    -           $ 79,066  $    848,044    $ 122,144  $  1,049,254
Net loss                                                                                           (273,241)     (273,241)
                                               ---------------    --------------- ------------- ------------ -------------
Balance, June 30, 2003                                      -             79,066       848,044     (151,097)      776,013
Net loss                                                                                            (43,954)      (43,954)
                                               ---------------    --------------- ------------- ------------ -------------
Balance, June 30, 2004                                      -             79,066       848,044     (195,051)      732,059
Net loss                                                                                           (239,602)     (239,602)
                                               ---------------    --------------- ------------- ------------ -------------
Balance, June 30, 2005                                 $    -           $ 79,066  $    848,044  $  (434,653) $    492,457
                                               ===============    =============== ============= ============ =============

     (1)  Per share totals are 100 times dollar amounts.
</TABLE>



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



                                       13

VSI LIQUIDATION CORP. AND SUBSIDIARY

<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended June 30, 2005, 2004 and 2003


<TABLE>
<CAPTION>
<S>                                                                         <C>           <C>            <C>
                                                                                2005          2004          2003
                                                                            ------------- -------------- ------------
Cash flows from operating activities:
   Net loss                                                                  $  (239,602)  $    (43,954)  $ (273,241)
   Adjustments to reconcile net loss to cash
       provided by (used in) operating activities:
       Deferred income taxes                                                    (296,893)      (107,952)    (152,000)
       (Increase) decrease in assets:
           Income tax refund receivable                                           60,000        153,000     (213,000)
           Prepaid expenses and supplies                                               -              -      591,114
       Increase (decrease) in liabilities:
           Accounts payable and accrued expenses                                 354,079         72,097       (9,627)
                                                                            ------------- -------------- ------------
       Cash provided by (used in) operating activities                          (122,416)         73,191     (56,754)
                                                                            ------------- -------------- ------------
Cash flows from investing activities:
   Change in escrow account                                                      124,785            858      167,557
                                                                            ------------- -------------- ------------
       Cash provided by (used in) investing activities                           124,785            858      167,557
                                                                            ------------- -------------- ------------
Cash flows from financing activities:
       Cash used in financing activities                                               -              -            -
                                                                            ------------- -------------- ------------
(Decrease) increase in cash                                                        2,369         74,049      110,803
Cash at beginning of year                                                        497,264        423,215      312,412
                                                                            ------------- -------------- ------------
Cash at end of year                                                         $    499,633   $    497,264   $  423,215
                                                                            ============= ============== ============
Cash paid for:
   Interest                                                                       $    -         $    -       $    -
   Income taxes                                                                        -              -            -
</TABLE>


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


                                       14

VSI LIQUIDATION CORP. AND SUBSIDIARY

<PAGE>


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 $578,300  at June 30,  2005,  is expected to be utilized  for certain
environmental remediation.

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:

BASIS OF ACCOUNTING:  After the Company  entered into the Purchase  Agreement to
sell substantially all assets and liabilities, the Company decided to liquidate.
Substantially all of the remaining assets are cash and cash equivalents that are
liquid in nature,  therefore a revaluation of its assets and  liabilities to the
amounts  expected to be  collected  and paid during  liquidation  was not deemed
necessary.

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.

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, 2005 and 2004, respectively,  the Company's uninsured cash
balances totaled $382,946 and $398,932.

INCOME TAXES:  The Company is a  C-Corporation  for tax  reporting  purposes and
accounts for income taxes under SFAS No. 109, Accounting for Income Taxes.

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to undistributed  escrow funds for the installment  sale. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and  liabilities  are  recovered  or settled,  and are  measured  using  enacted
marginal tax rates and laws.  Deferred  taxes also are  recognized for operating
losses that are available to offset future  taxable income that are available to
offset future Federal income taxes.



<PAGE>

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."

RECLASSIFICATIONS:  Certain  amounts  reported  in the 2004  and 2003  financial
statements have been reclassified to conform to the 2005 presentation.


4.   INCOME TAXES:

The income tax provision for the three years ended June 30, 2005 is comprised of
the following amounts:

<TABLE>
<CAPTION>
<S>                                                           <C>                  <C>                 <C>
                                                                    2005                2004                 2003
                                                              -----------------    ----------------    -----------------
Current                                                       $        4,311       $     (55,000)      $      (213,000)
Deferred                                                            (251,893)             32,000                48,000
                                                              -----------------    ----------------    -----------------
     Total Provision                                          $     (247,582)      $     (23,000)      $      (165,000)
                                                              =================    ================    =================

Statutory Rate                                                           (34)%               (34)%                 (34)%
State and local taxes, net of federal benefit                              -                   -                    (4)
                                                              -----------------    ----------------    -----------------
     Effective rate                                                      (34)%               (34)%                 (38)%
                                                              =================    ================    =================
</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, 2005 and 2004, the components
of the net deferred tax assets and liabilities were as follows:

<TABLE>
<CAPTION>
<S>                                                         <C>                    <C>
                                                                   2005                   2004
                                                            -------------------    -------------------
     Deferred tax liabilities:
       Operating loss carryforward                          $           27,000     $             -
       Escrow account                                                        -             281,240
       Accrued environmental liability                                                     (69,015)
       Reserve for state tax audit liability                                                84,668
       Deferred tax asset valuation allowance                          (27,000)                  -
                                                            -------------------    -------------------
     Net deferred tax liabilities                           $                0     $       296,893
                                                            ===================    ===================
</TABLE>

Net operating  losses for the current year will expire June 31, 2025.  Since the
Company is in liquidation and no future taxable income is expected,  a valuation
allowance is recognized.

The  Company,  when  operating,  provided  services  in many  different  states.
Franchise taxes occurred and a corresponding  provision was recorded in the year
of sale of the operating assets for the estimated state taxes.  This accrual was
estimated based on the tax from the sale of assets and anticipated  taxes due to
obtain tax releases from each  jurisdiction.  Final state tax returns were filed
with less than  anticipated  tax. Each year the Company  evaluates the remaining
states in which the  Company  had not  obtained a tax  release  and  reduces the
deferred tax liability accordingly. Since much of the tax was initially recorded
as franchise taxes it was included in selling, general and administrative costs,
therefore  the reversal or relief of taxes have been  recorded as a reduction to
selling,  general and administrative  expenses. A reduction of selling,  general
and  administrative  expenses for the reversal of  franchise  taxes  amounted to
$45,000,  $140,000 and $200,000  during the years ended June 31, 2005,  2004 and
2003, respectively.

5. ACCRUED ENVIRONMENTAL REMEDIATION: The Company is subject to an environmental
inspection by the Texas Commission on Environmental  Quality (TCEQ).  An accrual
of $578,314  and  $222,538  for the years ended June 30, 2005 and 2004 have been
recorded for probable costs associated with remediation of the property.  Actual
estimated  costs are in excess of the accrual at June 30, 2005,  but are limited
to the escrow held by the Company in accordance with the Purchase Agreement.