##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


Form 10-QSB

|      |  |                                                                                         
|----- |  | ----------------------------------------------------------------------------------------
|[X]   |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 
|      |  |                                                                                         
|      |  | For the quarterly period ended December 31, 2002OR                                      
|      |  |                                                                                         
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from  to .

COMMISSION FILE NUMBER: 0-16011

UST LIQUIDATING CORPORATION (F/K/A USTMAN TECHNOLOGIES, INC.)

(Exact name of small business issuer as specified in its charter)


|                                                                                      |  |                                                
|------------------------------------------------------------------------------------- |  | -----------------------------------------------
|California
(State or other jurisdiction of
incorporation or organization)             |  | 95-2873757
(I.R.S. Employer
Identification No.)
|                                                                                      |  |                                                
|536 Pacific Avenue San Francisco, California
(Address of principal executive offices) |  | 94133
(Zip Code)                               

Issuers telephone number: (415) 989-7770

Former name, former address and former fiscal year, if changed since last
report: N/A

Indicate by check mark whether the issuer (1) has filed all annual, quarterly
and other reports required to be filed by Section 13 or 15(d) of the 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. [X] Yes [   ] No

As of February 12, 2003, there were 22,298,598 shares of the Registrants
no-par common shares outstanding.





---

TABLE OF CONTENTS



|                                                 |                                                             |  |  |  |  |  |  | 
|------------------------------------------------ | ----------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                  
|                                                 | ITEM 1. FINANCIAL STATEMENTS                               
|                                                 | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS               
|                                                 | ITEM 3. CONTROLS AND PROCEDURES                            
|PART II  OTHER INFORMATION                     
|                                                 | ITEM 1. LEGAL PROCEEDINGS                                  
|                                                 | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS          
|                                                 | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                    
|                                                 | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|                                                 | ITEM 5. OTHER INFORMATION                                  
|                                                 | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                   
|SIGNATURES                                      
|EX-99.1 Certification by Chief Executive Officer
|EX-99.2 Certification by Chief Financial Officer



---



##### Table of Contents



INDEPENDENT ACCOUNTANTS REPORT

The Board of Directors and Shareholders
UST Liquidating Corporation

We have reviewed the accompanying condensed consolidated balance sheet of UST
Liquidating Corporation and subsidiaries as of December 31, 2002, and the
related condensed consolidated statements of operations for the three-month and
six-month periods ended December 31, 2002 and 2001, and the condensed
consolidated statements of cash flows for the six-month periods ended December
31, 2002 and 2001. These condensed consolidated financial statements are the
responsibility of the Companys management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States
of America, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such
an opinion.

Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.

GELFOND HOCHSTADT PANGBURN, P.C.

Denver, Colorado
February 12, 2003

2



---



##### Table of Contents









PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


UST LIQUIDATING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
(UNAUDITED)

|                                     |                                                         |                                                                                                                                                        |           |                            |             |   |           | 
|------------------------------------ | ------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | --------- | -------------------------- | ----------- | - | --------- | 
|ASSETS                               |                                                        
|Current assets:                      |                                                         |                                                                                                                                                        |           |                           
|                                     | Cash                                                    |                                                                                                                                                        | $         | 48,000                     |            
|                                     | Prepaid expenses                                        |                                                                                                                                                        |           | 25,000                     |            
|                                     | Receivable from purchaser, net of allowance of $200,000 |                                                                                                                                                        |           | 1,388,000                  |            
|                                     | Deferred income taxes                                   |                                                                                                                                                        |           | 419,000                    |            
|                                     |                                                         |                                                                                                                                                        |           |                           
|                                     |                                                         |                                                                                                                                                        |           | Total current assets       |             |   | 1,880,000 | 
|                                     |                                                         |                                                                                                                                                        |           |                           
|Other assets                         |                                                         |                                                                                                                                                        | 4,000     |                           
|                                     |                                                         |                                                                                                                                                        |           |                           
|                                     |                                                         | $                                                                                                                                                      | 1,884,000 |                           
|                                     |                                                         |                                                                                                                                                        |           |                           
|LIABILITIES AND SHAREHOLDERS EQUITY |                                                        
|Current liabilities:                 |                                                         |                                                                                                                                                        |           |                           
|                                     | Accounts payable and accrued expenses                   |                                                                                                                                                        | $         | 17,000                     |            
|                                     | Estimated costs of liquidation                          |                                                                                                                                                        |           | 224,000                    |            
|                                     | Deferred gain and interest                              |                                                                                                                                                        |           | 1,388,000                  |            
|                                     |                                                         |                                                                                                                                                        |           |                           
|                                     |                                                         |                                                                                                                                                        |           | Total current liabilities  |             |   | 1,629,000 | 
|                                     | Estimated costs of liquidation, net of current portion  |                                                                                                                                                        |           | 209,000                    |            
|                                     |                                                         |                                                                                                                                                        |           |                           
|                                     |                                                         |                                                                                                                                                        |           | Total liabilities          |             |   | 1,838,000 | 
|                                     |                                                         |                                                                                                                                                        |           |                           
|                                     | Shareholders equity:                                   |                                                                                                                                                        |           |                            |            
|                                     |                                                         | Series A preferred stock, no par value; 1,000,000 shares
authorized; 9,717 shares issued and outstanding;
remaining liquidation preference, $6,721,000 |           |                            | 46,000      |  
|                                     |                                                         | Common stock, no par value: 25,000,000 shares authorized,
22,298,598 shares issued and outstanding                                                     |           |                            | 12,291,000  |  
|                                     |                                                         | Class A common stock, no par value; 15,000,000 shares
authorized, none issued and outstanding                                                          |           |                            |            |  
|                                     |                                                         | Class B common stock, no par value; 15,000,000 shares
authorized, none issued and outstanding                                                          |           |                            |            |  
|                                     |                                                         | Accumulated deficit                                                                                                                                    |           |                            | (12,291,000 | )
|                                     |                                                         |                                                                                                                                                        |           |                           
|                                     |                                                         |                                                                                                                                                        |           | Total shareholders equity |             |   | 46,000    | 
|                                     |                                                         |                                                                                                                                                        |           |                           
|                                     |                                                         | $                                                                                                                                                      | 1,884,000 |                           
|                                     |                                                         |                                                                                                                                                        |           |                           

See accompanying notes.

3



---



##### Table of Contents



UST LIQUIDATING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
(UNAUDITED)

|                                                                                |  |      |            |      |  |   |            |  
|------------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                                                                |  | 2002 |            | 2001
|                                                                                |  |      |            |     
|Selling, general and administrative expenses                                    |  | $    | (6,000     | )    |  | $ | (138,000   | )
|Interest income                                                                 |  |      |           |      |  |   | 1,000      |  
|                                                                                |  |      |            |      |  |   |            |  
|Loss before income tax                                                          |  |      | (6,000     | )    |  |   | (137,000   | )
|Income tax benefit                                                              |  |      |           |      |  |   | 52,000     |  
|                                                                                |  |      |            |      |  |   |            |  
|Net loss                                                                        |  | $    | (6,000     | )    |  | $ | (85,000    | )
|                                                                                |  |      |            |      |  |   |            |  
|Basic and diluted net loss per share applicable
to common shareholders (Note 3) |  | $    |           |      |  | $ |           |  
|                                                                                |  |      |            |      |  |   |            |  
|Weighted average number of common shares outstanding                            |  |      | 22,298,598 |      |  |   | 22,298,598 |  
|                                                                                |  |      |            |      |  |   |            |  

See accompanying notes.

4



---



##### Table of Contents



UST LIQUIDATING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
(UNAUDITED)

|                                                                                |  |      |            |      |  |   |            |  
|------------------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                                                                |  | 2002 |            | 2001
|                                                                                |  |      |            |     
|Selling, general and administrative expenses                                    |  | $    | (12,000    | )    |  | $ | (159,000   | )
|Interest income                                                                 |  |      |           |      |  |   | 4,000      |  
|                                                                                |  |      |            |      |  |   |            |  
|Loss before income tax                                                          |  |      | (12,000    | )    |  |   | (155,000   | )
|Income tax benefit                                                              |  |      |           |      |  |   | 59,000     |  
|                                                                                |  |      |            |      |  |   |            |  
|Net loss                                                                        |  | $    | (12,000    | )    |  | $ | (96,000    | )
|                                                                                |  |      |            |      |  |   |            |  
|Basic and diluted net loss per share applicable
to common shareholders (Note 3) |  | $    |           |      |  | $ |           |  
|                                                                                |  |      |            |      |  |   |            |  
|Weighted average number of common shares outstanding                            |  |      | 22,298,598 |      |  |   | 22,298,598 |  
|                                                                                |  |      |            |      |  |   |            |  

See accompanying notes.

5



---



##### Table of Contents



UST LIQUIDATING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
(UNAUDITED)

|                                  |  |      |        |      |  |   |         |  
|--------------------------------- |  | ---- | ------ | ---- |  | - | ------- | -
|                                  |  | 2002 |        | 2001
|                                  |  |      |        |     
|Cash used in operating activities |  | $    | (7,000 | )    |  | $ | (46,000 | )
|                                  |  |      |        |      |  |   |         |  
|Decrease in cash                  |  |      | (7,000 | )    |  |   | (46,000 | )
|Cash, beginning of period         |  |      | 55,000 |      |  |   | 318,000 |  
|                                  |  |      |        |      |  |   |         |  
|Cash, end of period               |  | $    | 48,000 |      |  | $ | 272,000 |  
|                                  |  |      |        |      |  |   |         |  

See accompanying notes

6



---



##### Table of Contents



UST LIQUIDATING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001



|1. |  | BASIS OF PRESENTATION:
|-- |  | ----------------------



|   |  | The condensed consolidated financial statements of UST Liquidating
Corporation, formerly USTMAN Technologies, Inc. (the Company) included in
this Form 10-QSB, have been prepared by the Company without audit. Effective
September 21, 2000, holders of the majority of the Companys issued and
outstanding common stock adopted a plan of liquidation. Although certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted, the
Company believes that the disclosures are adequate to make the information
presented not misleading. The accompanying condensed consolidated financial
statements should be read in conjunction with the audited financial
statements and notes thereto included in the Companys Annual Report on Form
10-KSB for the fiscal year ended June 30, 2002.                                                                                                                                                                                                                                 
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In the opinion of management, all adjustments necessary for a fair
presentation of the results of operations for the three-month and six-month
periods ended December 31, 2002 and 2001, consist only of normal and
recurring adjustments, except for those described below. The results of
operations for the interim periods presented are not necessarily indicative
of the results to be expected for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|2. |  | SALE OF COMPANY ASSETS, PLAN OF LIQUIDATION, AND MANAGEMENTS PLANS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | On September 21, 2000, the Company sold substantially all of its assets, net
of certain liabilities, to Veeder-Root Service Company (Veeder-Root), a
wholly-owned subsidiary of Danaher Corporation (a publicly-traded company)
for an adjusted purchase price of $16,589,000, subject to additional
adjustment based on the terms of the Definitive Asset Purchase Agreement (the
Agreement). Of the total purchase price, $1,500,000 was held back by
Veeder-Root to secure indemnity obligations of the Company, of which a
reserve of $200,000 has been applied against the receivable at December 31,
2002. One-half of the holdback was to have been paid to the Company in April
2002. However, the amount was held pending resolution of matters concerning
existing claims against the Company. The Company believes it has resolved
these matters, and the Company expects to collect the net holdback balance of
$1,300,000 within the next six months. The holdback bears interest at the
prevailing published money market rate available from Citibank in New York
City. Interest receivable at December 31, 2002, is $88,000, which has been
recorded as deferred revenue.
|  
|   |  | The assets sold by the Company included all assets of the Company and its
subsidiaries except for cash and cash equivalents, the capital stock of the
Companys subsidiaries, and the assets of Toxguard Systems (which have no
carrying value at December 31, 2002). In addition, Veeder-Root assumed
substantially all liabilities and obligations of the Company, except those of
Toxguard Systems, the unpaid principal and accrued interest due under the
Companys credit facility with Fleet National Bank (f/k/a BankBoston), the
obligation under the Series A Preferred Stock liquidation preference, and
certain other liabilities including transaction costs incurred in connection
with the Veeder-Root transaction, and income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | Cash proceeds from the sale to Veeder-Root of $15,089,000 were used to repay
the outstanding $1.75 million term loan and accrued interest to Fleet
National Bank, pay approximately $450,000 of costs incurred in connection
with the Veeder-Root transaction, and pay $12,277,000 of the liquidation
preference of the Series A Preferred Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

7



---



##### Table of Contents



UST LIQUIDATING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

THREE AND SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001



|2. |  | SALE OF COMPANY ASSETS, PLAN OF LIQUIDATION, AND MANAGEMENTS PLANS (CONTINUED):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Sagaponack Partners, L.P., a private investment firm based in San Francisco
and New York, and its foreign affiliate, Sagaponack International Partners,
L.P. (collectively Sagaponack, or the Investors) own all of the Series A
Preferred Stock and beneficially own greater than 50% of the Companys common
stock. It is not expected that there will be funds available for distribution
to the common stockholders. Any proceeds to be received upon the release of
the held back portion of the sales price are to be used to pay costs
associated with preserving the value of the Companys remaining assets
(primarily proceeds from the sale), to pay costs associated with winding up
the Companys business, and to make additional distributions in accordance
with the Series A Preferred Stock liquidation preference.                                                                                                                                                                        
|  
|   |  | As a result of the Veeder-Root sale, the Company no longer has any ongoing
business operations, and subsequent to September 21, 2000, the Company
terminated executive management and employee positions. On August 16, 2000,
in contemplation of and conditioned upon the closing of the Veeder-Root
transaction, the Companys board of directors unanimously approved a plan of
liquidation (the Plan of Liquidation). The Plan of Liquidation provides
that subsequent to September 21, 2000, the Company will no longer engage in
any business, but will only act to preserve the value of the remaining assets
in order to make distributions to the Series A Preferred shareholders and
wind up the Companys business, at which time the Company is to cease to
exist as an operating entity. At December 31, 2002, the Company has recorded
a $433,000 reserve for estimated liquidation costs, which primarily represent
estimated costs to defend the Company against existing legal claims (Note 4).
|  
|   |  | The carrying values of the Companys financial instruments at December 31,
2002, approximate estimated fair values. It is at least reasonably possible
that the amounts expected to be realized in the liquidation process will
change in the near term, and these changes could be material.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|3. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | USE OF ESTIMATES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | PREFERRED STOCK:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | As disclosed in Note 2, the Company is in the process of liquidating, which
consists of settling all outstanding assets and liabilities, and distributing
any remaining net proceeds to its shareholders. Distributions are first made
to Series A preferred shareholders to satisfy the liquidation preference on
the Series A preferred stock. At December 31, 2002, the Series A preferred
stock has a liquidation preference of $6,721,000, and the estimated proceeds
from liquidation are not expected to exceed the Series A preferred stock
liquidation; therefore, no distributions are expected to be made to the
common shareholders. As a result, earnings and losses for the three-month
and six-month periods ended December 31, 2002 and 2001, have been allocated
to the preferred shareholders.                                                                                                                                                                                                  

8



---



##### Table of Contents



UST LIQUIDATING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)

THREE AND SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001



|3. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | EARNINGS PER SHARE:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share, requires dual presentation of basic and diluted earnings per share,
with a reconciliation of the numerator and denominator of the diluted income
per share computation. Basic income per share is computed using the weighted
average number of common shares outstanding during the period. Diluted
earnings per share is computed using the weighted average number of common
and dilutive common equivalent shares outstanding during the period. Common
equivalent shares consist of the shares issuable upon the exercise of stock
options under the treasury stock method. Stock options and warrants are not
considered in the calculation, as the impact of the potential common shares
would be to increase income per share and decrease loss per share.
|  
|   |  | For the three-month and six-month periods ended December 31, 2002 and 2001,
net income (loss) available to common shareholders is $0 due to the
allocation of all net income to the preferred shareholders. The allocation of
all net income to the preferred shareholders is due to their liquidation
preference exceeding the amount of net income, resulting in no net income
being available to common shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | INCOME TAXES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | Deferred income taxes are provided based on the estimated future tax effects
of differences between financial statement carrying amounts and the tax bases
of existing assets and liabilities using statutory tax rates expected to be
in effect in the period in which the deferred tax item is expected to be
settled. Deferred tax assets are reduced by a valuation allowance if, based
on the weight of available evidence, it is more likely than not that some
portion or all of the deferred tax assets may not be realized.                                                                                                                                                                                                                                                                                                                
|  
|4. |  | COMMITMENTS AND CONTINGENCIES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | TRANSACTIONS WITH INVESTORS AND OTHERS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | The Company incurred board of directors fees of $64,000 for the six months
ended December 31, 2001. There were no directors fees during the six-months
ended December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | LITIGATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | In June 2000, a class action complaint was filed against the Company and
certain other parties on behalf of certain common shareholders of the Company
(the Plaintiffs), alleging that the Company and other parties breached
their fiduciary duty to the Companys common shareholders in connection with
the Veeder-Root sale. The Plaintiffs also filed a derivative claim alleging
corporate waste. In August 2000, the Plaintiffs filed a motion for a
preliminary injunction, which was denied in a court hearing held on September
18, 2000. The Company and certain other parties subsequently filed a demurrer
to Plaintiffs complaints contending that Plaintiffs failed to state a valid
cause of action, which was granted in October 2000.                                                                                          

9



---



##### Table of Contents



UST LIQUIDATING CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)

THREE AND SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001



|4. |  | COMMITMENTS AND CONTINGENCIES (CONTINUED):                                                                                                                                                                                                                                                                                                                       
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | LITIGATION (CONTINUED)                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | The Plaintiffs filed a notice of appeal regarding the demurrer and
voluntarily dismissed the derivative claim alleging corporate waste, which
the trial court dismissed. On November 21, 2001, the California Court of
Appeals reversed the trial court with respect to the demurrer and ruled that
the Plaintiffs could assert a personal, non-derivative claim.
|  
|   |  | The Company intends to continue to contest this case vigorously; however, it
is too early at this time to determine the ultimate outcome of this matter
and the extent of the Companys exposure. At December 31, 2002, the Company
has accrued approximately $380,000 of estimated legal costs expected to be
incurred in connection with this contingency.     

10



---



##### Table of Contents






ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS

This report contains certain statements which are forward looking statements
under federal securities laws that are based on the beliefs of management as
well as assumptions made by and information currently available to management.
Forward looking statements appear throughout Item 2 of Part I, Managements
Discussion and Analysis concerning UST Liquidating Corporations Financial
Condition and Liquidity. Certain factors could cause actual results to differ
materially from those in the forward-looking statements. UST Liquidating
Corporation does not intend to update these forward looking statements.

RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31,
2002 AND 2001

The Company recognized selling, general and administrative expenses of $6,000
and $138,000 for the three months ended December 31, 2002 and 2001,
respectively, and $12,000 and $159,000 for the six months ended December 31,
2002 and 2001, respectively. The expense for the three months and six months
ended December 31, 2002 consisted of insurance expense as compared to legal
fees, insurance expense and directors fees for the same periods in 2001. In
addition, the Company recognized interest income of $1,000 and $4,000 for the
three months and six months ended December 31, 2001.

FINANCIAL CONDITION AND LIQUIDITY

On September 21, 2000, the Company sold substantially all of its assets, net of
certain liabilities, to Veeder-Root in accordance with the terms of the
definitive asset purchase agreement (the Agreement) executed by the parties
on July 21, 2000. Upon the closing of the sale, the Company ceased day-to-day
operations, all of which were assumed by Veeder-Root. There will not be any
proceeds available for distribution to the holders of the Companys common
stock. The Company intends to eventually wind up its affairs and liquidate and
dissolve the Company. The Company believes that revenues and expenses
subsequent to the transaction will represent a minimal continuing impact to the
Company.

Pursuant to the Agreement, the Company sold substantially all of the assets of
the Company to Veeder-Root for an adjusted purchase price of $16,589,000,
subject to additional adjustment based on the terms of the Agreement. Of the
total purchase price, $1,500,000 has been held back by Veeder-Root to secure
indemnity obligations of the Company. At December 31, 2002, a reserve of
$200,000 has been applied against the receivable. One-half of the holdback was
to have been paid to the Company in April 2002. However, the amount was held
pending resolution of matters concerning existing claims against the Company.
The Company believes it has resolved these matters, and the Company expects to
collect the net holdback balance of $1,300,000 within the next six months. The
holdback of $1,500,000 bears interest at the prevailing published money market
rate available from Citibank in New York City. Interest receivable at December
31, 2002, is $88,000, which has been recorded as deferred revenue.

On August 16, 2000, the Companys board of directors unanimously approved a
Plan of Liquidation. The Plan of Liquidation provides that after the sale, the
Company will not engage in any business, except for preserving the net value of
the Companys remaining assets (primarily proceeds from the sale) in order to
make distributions to the Series A Preferred shareholders and wind up the
Companys business, at which time the Company is to cease to exist as an
operating entity. At December 31, 2002, the Company has recorded a $433,000
reserve for estimated liquidation costs, which primarily represent estimated
costs to defend the Company against legal claims.

Management believes cash of $48,000 at December 31, 2002 as well as proceeds
expected to be received from Veeder-Root ($1,300,000 plus accrued
interest of $88,000 at December 31, 2002) are expected to be sufficient to fund the estimated costs to
liquidate for the next twelve months.

11



---



##### Table of Contents






ITEM 3. CONTROLS AND PROCEDURES

As of a date within 90 days prior to the filing of
this quarterly report (the Evaluation Date), the Companys management concluded its
evaluation of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. As of the Evaluation Date, the Companys
Co-Chairmen of the Board of Directors concluded that the Company maintains
disclosure controls and procedures that are effective in providing reasonable
assurance that information required to be disclosed in the Companys reports
under the Securities Act of 1934 (Exchange Act) is recorded, processed,
summarized and reported within the time periods specified in the SECs rules
and forms, and that such information is accumulated and communicated to the
Companys management, including its Co-Chairmen of the Board of Directors, as
appropriate, to allow timely decisions regarding required disclosure. The
Companys management necessarily applied its judgment in assessing the costs
and benefits of such controls and procedures, which, by their nature, can
provide only reasonable assurance regarding managements control objectives.
There have been no significant changes in the Companys internal controls or in
other factors that could significantly affect these controls subsequent to the
Evaluation Date.

12



---



##### Table of Contents
























PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In June 2000, a class action complaint was filed against the Company and
certain other parties on behalf of certain common shareholders of the Company
(the Plaintiffs), alleging that the Company and other parties breached their
fiduciary duty to the Companys common shareholders in connection with the
Veeder-Root sale. The Plaintiffs also filed a derivative claim alleging
corporate waste. In August 2000, the Plaintiffs filed a motion for a
preliminary injunction, which was denied in a court hearing held on September
18, 2000. The Company and certain other parties subsequently filed a demurrer
to Plaintiffs complaints contending that Plaintiffs failed to state a valid
cause of action, which was granted in October 2000.

The Plaintiffs filed a notice of appeal regarding the demurrer and voluntarily
dismissed the derivative claim alleging corporate waste, which the trial court
dismissed. On November 21, 2001, the California Court of Appeals reversed the
trial court with respect to the demurrer and ruled that the plaintiffs could
assert a personal, non-derivative claim.

The Company intends to continue to contest this case vigorously; however, it is
too early at this time to determine the ultimate outcome of this matter and the
extent of the Companys exposure. At December 31, 2002, the Company has
accrued approximately $380,000 of estimated legal costs expected to be incurred
in connection with this contingency.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits



| | 99.1 |  | Certification by Chief Executive Officer pursuant to 18 U.S.C. 1350
| | ---- |  | -------------------------------------------------------------------
|
| | 99.2 |  | Certification by Chief Financial Officer pursuant to 18 U.S.C. 1350

13



---



##### Table of Contents






SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|                  |  |    |                                          |                         |  |                             
|----------------- |  | -- | ---------------------------------------- | ----------------------- |  | ----------------------------
|                  |  |    | UST Liquidating Corporation
(Registrant)
|                  |  |    |                                          |                         |  |                             
|February 13, 2003 |  | By |                                          | /s/ Marc A. Weisman    
|                  |  |    |                                          |                         | 
|                  |  |    |                                          |                         |  | Marc A. Weisman
Director    
|                  |  |    |                                          |                         |  |                             
|February 13, 2003 |  | By |                                          | /s/ Barry S. Rosenstein
|                  |  |    |                                          |                         | 
|                  |  |    |                                          |                         |  | Barry S. Rosenstein
Director

14



---



##### Table of Contents



CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Marc A. Weisman, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-QSB of UST
Liquidating Corporation;                                                                                                                                                                                                                                          
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly 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 quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other
certifying officers and I have disclosed, based on our most recent
evaluation, to the
registrants auditors and the audit committee of registrants board of
directors (or persons performing the equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |                                                   | 
|----------------------- | ------------------------------------------------- | 
|Date: February 13, 2003 |                                                   | 
|                        |                                                   | 
|                        | /s/ Marc A. Weisman                               | 
|                        | Marc A. Weisman
Co-Chairman of Board of Directors | 

15



---



##### Table of Contents



CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry S. Rosenstein, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-QSB of UST
Liquidating Corporation;                                                                                                                                                                                                                                          
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly 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 quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other
certifying officers and I have disclosed, based on our most recent
evaluation, to the
registrants auditors and the audit committee of registrants board of
directors (or persons performing the equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|      |  |                   |                                                                                | 
|----- |  | ----------------- | ------------------------------------------------------------------------------ | 
|Date: |  | February 13, 2003 |                                                                                | 
|      |  |                   |                                                                                | 
|      |  |                   | /s/ Barry S. Rosenstein

Barry S. Rosenstein
Co-Chairman of Board of Directors | 

16



---



##### Table of Contents



INDEX TO EXHIBITS

|        |  |                                                                     |  | 
|------- |  | ------------------------------------------------------------------- |  | 
|EXHIBIT |  |                                                                     |  | 
|NUMBER  |  | DESCRIPTION                                                        
|        |  |                                                                    
|99.1    |  | Certification by Chief Executive Officer pursuant to 18 U.S.C. 1350
|99.2    |  | Certification by Chief Financial Officer pursuant to 18 U.S.C. 1350