ATS Liquidating Trust Reports New Developments
that Could Affect Projected Cash Distributions

San Diego, Calif., Dec. 3, 2003 -- The ATS Liquidating Trust (ATISZ.PK -- please read the disclaimer in the last paragraph of this release regarding trading under this symbol) announced today that Smith & Nephew’s Wound Management business has asserted an indemnification claim against the Trust.

The claim is a result of a decision by the United States Patent and Trademark Office (PTO) to grant a request for ex parte reexamination of Patent 4,963,489 (the "489 Patent"), which is among the assets Advanced Tissue Sciences, Inc. (ATS) sold to Smith & Nephew Wound Management (La Jolla) in the asset sales agreement dated April 28, 2003 (the Sale Agreement).

The 489 Patent covers a three-dimensional cell and tissue culture system relating to tissue cultures on scaffolds and is a key patent protecting the Trust’s Anginera™ cardiovascular technology. The 489 Patent was issued in 1990 and assigned by the inventors, Gail K. Naughton and Brian A. Naughton, to Marrow-Tech, Inc., which later became Advanced Tissue Sciences, Inc. The 489 Patent is scheduled to expire in 2008.

The decision by the PTO to grant the request for reexamination was in response to an undisclosed requestor who requested reexamination based on questions it asserts regarding patentability of some of the original patent claims submitted by the Naughtons in 1990.

The possible outcomes of a reexamination proceeding range from confirmation of some or all of the claims in the 489 Patent to the rejection of some or all of the 489 Patent claims.

The decision by the PTO to grant the reexamination of the 489 Patent could affect both the timing and amount of projected cash distributions by the Trust from the sale of its Anginera cardiovascular technology. The reexamination could also delay any Anginera sales agreement or reduce the amount potential buyers might offer. If the reexamination were to find some or all of the patent claims invalid, it could preclude any sale of Anginera by the Trust.

Smith & Nephew asserts that the reexamination of the patent is a breach of the representations and warranties of the April 2003 sale agreement between ATS and Smith & Nephew and that they may be entitled to indemnification, both from the $1,000,000 reserve set aside from the purchase price paid by Smith & Nephew under the sale agreement between ATS and Smith and Nephew dated October 2002 and now held by the Trust, and the set-off of future revenues owing the Trust by Smith & Nephew under the April Sale Agreement through the period ending in December 2004.

The Trustee disputes the assertion that Smith & Nephew has any claim against the reserve. The Trustee believes that the representations and warranties were accurate at the time the asset sale closed, that the sale was “as is,” and that there were no warranties against future challenges to the 489 Patent.

However, should Smith & Nephew prevail in their claim, the maximum liability of the Trust to Smith & Nephew would be the $1,000,000 in the reserve account, plus the loss of future revenue, if any, from Smith & Nephew under the Sale Agreement to the extent liability exceeds $1,000,000.

While the matter is pending, the Trust will not be able to make those funds available for distribution to Trust beneficiaries that held ATS stock as of the effective date of ATS' Liquidating Chapter 11 Plan of Reorganization.

The Trustee cannot predict how long it will take to resolve these matters.

As a result of the Chapter 11 Liquidating Plan of Reorganization (“Plan”) which was confirmed by the Bankruptcy Court by a final order dated March 21, 2003 and which became effective on March 31, 2003, the stock of ATS was cancelled and its former stockholders now hold non-trading interests in the ATS Liquidating Trust. According to the terms of the Plan, the Interests in the ATS Liquidating Trust are not to trade and the Liquidating Trustee will only recognize as beneficiaries of the Trust those equity holders of record as of the effective date of the Plan. Any trading that may be occurring after the effective date of the Plan under the symbol “atisz.pk” or otherwise is unauthorized by the Plan and will not be recognized by the Trustee. As a result of the terms of the Plan and the order of the bankruptcy court confirming the Plan, the Securities and Exchange Act of 1934 as amended and the rules promulgated thereunder no longer apply to the Company since it has no issued stock, no shareholders, and is no longer in business. However, to the extent applicable, the above cautionary statement is made by the Trust under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
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