IMPSA S.A. — Audit Report / Information 2000

May 9, 2002

IMPSA INTERNATIONAL, INC.

AND SUBSIDIARIES

Consolidated Financial Statements

January 31, 2000 and January 31, 1999

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors

IMPSA International, Inc.

Pittsburgh, Pennsylvania

We have audited the accompanying consolidated balance sheets of IMPSA International, Inc. and Subsidiaries as of January 31, 2000, and January 31, 1999, and the related consolidated statements of income, stockholder’s equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 IMPSA International, Inc. and Subsidiaries at January 31, 2000, and January 31, 1999, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles.

Certified Public Accountants

Pittsburgh, Pennsylvania

February 18, 2000

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JANUARY 31, 2000 AND JANUARY 31, 1999

ASSETS:

NOTES SCHEDULES 2000 1999

Current Assets:

Cash 1 $ 687,482 $ 795,780

Trade receivables 1 and 4 4,658,598 3,132,389

Prepaid expenses 91,137 7,094

Total Current Assets 5,437,217 3,935,263

Non-Current Assets:

Investments 1 and 2 B - 2,155,177

Fixed assets 1 and 3 A 11,268 30,202

Total Non-Current Assets 11,268 2,185,379

Total Assets $5,448,485 $6,120,642

LIABILITIES:

Current Liabilities:

Note payable 5 $ - $ 350,000

Accounts payable 2,064,570 1,332,548

Accrued taxes 1 and 7 - 63,046

Other liabilities 14,900 14,900

Total Current Liabilities 2,079,470 1,760,494

Stockholder’s Equity (as per

corresponding statement) 3,369,015 4,360,148

Total Liabilities and Equity $5,448,485 $6,120,642

The attached notes are an integral part of this statement.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE FISCAL YEARS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999

NOTES SCHEDULES 2000 1999

Net sales of goods and services 1 and 4 $1,233,484 $1,537,018

Expenses:

Selling 1 and 6 C 467,360 534,788

Administrative 1 and 6 C 511,547 534,143

978,907 1,068,931

Subtotal - Profit 254,577 468,087

Other income and expense 5 249,290 340,082

Profit Before Income Taxes 503,867 808,169

Income taxes 1 and 7 195,000 311,700

Net Income for the Year $ 308,867 $ 496,469

The attached notes are an integral part of this statement.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

FOR THE FISCAL YEARS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999

Owner's Contribution Reserves Other Unappropriated Total of

*Subscribed Adjustment Capital Irrevocable Comprehensive Retained Stockholders'

Capital Note to Capital Surplus Contributions Total Statutory Others Total Income Earnings Equity

Balance as of January 31, 1998 250 $ - $1,534,750 $ - $1,535,000 $ - $ - $ - $478,605 $2,328,679 $4,342,284

Net income for fiscal year

as per statement of income - - - - - - - - - 496,469 496,469

Gross unrealized holding losses

of available-for-sale invest-

ments net of applicable

income taxes - - - - - - - - (478,605) - (478,605)

Total Comprehensive Income - - - - - - - - - - 17,864

Balance as of January 31, 1999 250 - 1,534,750 - 1,535,000 - - - - 2,825,148 4,360,148

Net income for fiscal year

as per statement of income - - - - - - - - - 308,867 308,867

Return of capital to parent

company  -    -  (1,300,000)   -  (1,300,00)   -    -    -     -          -     (1,300,000)

Balance as of January 31, 2000 250 $ -  $ 234,750 $ -  $ 235,000 $ -  $ -  $ -  $  -     $3,134,015 $3,369,015

* Par Value $1 per share

Authorized 1,000 shares

Issued 250 shares

The attached notes are an integral part of this statement.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999

2000 1999

OPERATING ACTIVITIES:

Net income for the year $ 308,867 $ 496,469

Add: Items not representing source

of cash:

Depreciation and amortization 10,698 16,209

Gain on sale of fixed assets (3,764) -

Sources:

Increase in accounts payable 732,022 353,892

Use:

Increase in trade receivables (671,032) (1,732,397)

Increase in prepaid expenses (84,043) (1,132)

Decrease in other liabilities - (400,000)

Decrease in accrued taxes (63,046) (7,667)

Net Cash Provided (Used)

By Operating Activities 229,702 (1,274,626)

INVESTING ACTIVITIES:

Sources:

Proceeds from redemption of available-

for-sale debt investments - 2,144,000

Proceeds from sale of fixed assets 12,000 -

Use:

Purchase of fixed assets      -    (5,128)

Net Cash Provided By

Investing Activities 12,000 2,138,872

FINANCING ACTIVITIES:

Sources:

Proceeds from line of credit

borrowings 350,000 950,000

Use:

Principal payments on line of

credit borrowings (700,000) (1,150,000)

Net Cash Used By

Financing Activities (350,000) (200,000)

Net Increase (Decrease) In Cash $(108,298) $ 664,246

CASH AND CASH EQUIVALENTS AT BEGINNING

OF THE YEAR $ 795,780 $ 131,534

NET CHANGE IN CASH FOR THE YEAR (108,298) 664,246

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 687,482 $ 795,780

The attached notes are an integral part of this statement.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE FISCAL YEARS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999

2000 1999

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

INFORMATION:

Interest Paid $ 38,604 $ 33,345

Income Taxes Paid $ 345,113 $ 302,880

Noncash operating, investing and

financing activity:

Receipt of investments from

parent as payment on

receivables $    -     $2,884,627

Increase in receivables with

transfer of investments to

parent $2,155,177 $    -

Reduction in receivables with

return of paid-in-capital

to parent $1,300,000 $ -

The attached notes are an integral part of this statement.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2000 AND JANUARY 31, 1999

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, IMPSA International of Delaware, Inc. and Henry LaGarde, Inc. All intercompany accounts and transac­tions have been eliminated in consolidation.

IMPSA International, Inc. is a wholly-owned subsidiary of Industries Metalurgicas Pescarmona S.A.I.C.F., an Argentine based company. IMPSA International, Inc. acquires material requisitioned by the parent and affiliated companies on a commission basis. The Company also receives a commission from the parent company for sales of equipment manufactured in Argentina.

Comprehensive Income - Effective February 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130). Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. SFAS 130 requires that all items defined as comprehensive income, including changes in the amounts of unrealized gains and losses on available-for-sale securities, be shown as a component of comprehensive income. In the Company's financial statements, comprehensive income is presented as part of the statement of stockholders' equity. The only comprehensive income item the Company has is unrealized gains and losses on available-for-sale securities.

Use of Estimates in the Preparation of Financial Statements - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Concentrations of Credit Risk - Financial instruments potentially subject to concentrations of credit risk consist of cash in excess of federally insured limits and receivables. The company maintains part of its cash in money market savings accounts and checking accounts which at times exceeds federally insured limits. Receivables are due from parent and affiliates.

Cash Flows - The Company considers all temporary investments with a maturity of six months or less to be cash equivalents.

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Investments - The Company's investments in debt securities consisted of private placement bonds maturing in 2000 and 2001 and government bonds which were redeemed in 1999. The private placement bonds are classified as held-to-maturity and are reported at amortized cost. The government bonds were classified as available-for-sale and were reported at fair value with unrealized gains and losses reported as a separate component of stockholders' equity net of deferred taxes (See Note 2). For the purpose of determining gross realized gains and losses, the cost of securities sold is based upon specific identification.

Commission income is recognized at the time that a purchase order is placed for the parent company or affiliates or at the time cash is received for a sale when the Company successfully bids on a project for the parent company or affiliates.

Depreciation - Depreciation is computed under an accelerated method (MACRS) for both income tax and financial reporting purposes, except for certain fixed assets which are being depreciated under IRC Section 179 for income tax purposes and MACRS for financial reporting purposes. Depreciation expense amounted to $10,698 for 2000 and $16,209 for 1999.

Income Taxes - Income tax expense is based on reported income adjusted for differences of a permanent nature.

NOTE 2 - INVESTMENTS:

Proceeds from the redemption of debt securities classified as available-for-sale were $2,144,000 for 1999. Investments in available-for-sale debt securities resulted in unrealized holding losses of $478,605 at January 31, 1999 and is included as a component of other comprehensive income in stockholders' equity.

NOTE 3 - FIXED ASSETS:

A summary of fixed assets follows:

January 31,

2000 1999

Office equipment $180,612 $180,612

Furniture and fixtures 27,486 27,486

Automobile 10,851 30,296

218,949 238,394

Less: Accumulated depreciation 207,681 208,192

Total Fixed Assets $ 11,268 $ 30,202

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NOTE 4 - RELATED PARTY TRANSACTIONS:

All advances, as well as accounts receivable and notes receiv­able from the parent and affiliates, are made in U.S. dollars, and the exchange rate costs are accounted for by the parent and/or affiliates.

Commissions earned amounted to $1,233,484 and $1,537,018 for 2000 and 1999, respec­tively.

Trade receivables are as follows:

January 31,

2000 1999

Accounts receivable from

parent and affiliates $1,458,598 $2,132,389

Notes receivable from parent 3,200,000 1,000,000

$4,658,598 $3,132,389

NOTE 5 - NOTE PAYABLE:

The Company had a revolving line of credit agreement with National City Bank of Pennsylvania, which provided for an overall borrowing limit not to exceed $750,000. This revolving line of credit agreement expired June 30, 1999 and was not renewed.

Interest expense on line of credit borrowings and various purchase orders amounted to $38,604 and $33,345 for 2000 and 1999, respectively.

NOTE 6 - LEASE COMMITMENT:

The Company has a long-term lease with HFT Holdings covering its present office space in Scott Township, Pennsylvania. The lease extends from September 1, 1995, to August 31, 2000, at an average monthly base rent of $4,827. The lease can be terminated by the Company upon 180 days written notice at a cost of $9,655 plus unamortized construction costs and commissions amounting to $24,357. The Company also leases an automobile providing for monthly payments of $372 to July 20, 2001. Minimum lease payments under the previously described operating leases are as follows:

Year Ending January 31, Amount

2001 $38,248

2002 2,229

$40,477

Rent expense amounted to $66,262 for 2000 and $64,560 for 1999.

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NOTE 7 - TAXES ON INCOME:

Taxes on income are as follows:

January 31,

2000 1999

CURRENTLY PAYABLE:

Federal income tax $165,200 $258,000

State income tax 29,800 53,700

$195,000 $311,700

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INDEPENDENT AUDITOR'S REPORT

ON ADDITIONAL INFORMATION

To the Board of Directors

IMPSA International, Inc.

Pittsburgh, Pennsylvania

Our report on our audit of the basic financial statements of IMPSA International, Inc. and Subsidiaries for 2000 and 1999 appears on page 1. Those audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on pages 12 through 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

Certified Public Accountants

Pittsburgh, Pennsylvania

February 18, 2000

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

(SCHEDULE A)

FIXED ASSETS

JANUARY 31, 2000 AND JANUARY 31, 1999

Depreciation

Accumulated

Balance at balance at Accumulated

the beginning Balance at the the beginning Current Year at the end Net Residual Value

Account of the year Increases Decreases end of the year of the year Retirements Rate Amount of the year 2000 1999

Machinery and

Equipment $180,612 $ - $ - $180,612 $166,904 $ - various $ 5,565 $172,469 $ 8,143 $13,708

Furniture and

Equipment 27,486 - - 27,486 27,486 - various - 27,486 - -

Vehicles 30,296    -   19,445 10,851 13,802 11,209 various 5,133 7,726 3,125 16,494

TOTALS OF THE

PRESENT YEAR $238,394 $  -   $19,445 $218,949 $208,192 $11,209 $10,698 $207,681 $11,268 $30,202

TOTALS OF THE

PREVIOUS YEAR $233,266 $5,128 $ - $238,394 $191,983 $ - $16,209 $208,192 $30,202 $41,283

See Accountant's Report on Additional Information.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

(SCHEDULE B)

INVESTMENTS

JANUARY 31, 2000 AND JANUARY 31, 1999

Issuer and Type of Recorded Value

Securities Class Face Value Quoted Value 2000 1999

Private Placement Bonds:

Nucleoelectrica

Argentina S.A. Year of issuance - 1998

(Stated in U.S.

dollars) Year of expiration - 2000

and 2001 $2,155,177 non-applicable $  -   $2,155,177

See Accountant's Report on Additional Information.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

(SCHEDULE C)

CONSOLIDATED SCHEDULE OF SELLING AND ADMINISTRATIVE EXPENSES

FOR THE FISCAL YEARS ENDED JANUARY 31, 2000 AND JANUARY 31, 1999

Cost of Cost of Fixed

Total Production Assets Selling Administrative Total

Items 01/31/99 Inventories Construction Expenses Expenses 01/31/00

Fees and remunerations for

services $ 18,200 $ - $ - $ 3,851 $ 15,404 $ 19,255

Salaries and wages 456,677 - - 227,491 233,951 461,442

Payroll taxes 31,867 - - 16,919 17,344 34,263

Royalties and technical

services fees 39,000 - - 59,000 - 59,000

Advertising expenses and

credit publications 4,256 - - 1,651 - 1,651

Other taxes 9,024 - - - 13,890 13,890

Insurance 7,707 - - - 9,983 9,983

Depreciation of fixed assets 16,209 - - - 10,698 10,698

Travel and entertainment 34,616 - - 18,102 - 18,102

Rentals 64,560 - - 33,131 33,131 66,262

Telephone 41,806 - - 22,529 5,632 28,161

Dues and membership 14,227 - - 7,154 1,788 8,942

Office expenses 56,494 - - 36,465 9,116 45,581

Employee benefits 52,620 - - 36,095 13,954 50,049

Bidding expense 12,501 - - 713 - 713

Custom duties 34,420 - - - - -

Sales expense 2,766 - - - - -

Repairs and maintenance 2,976 - - - 3,685 3,685

Contributions 55,200 - - - - -

Moving expense 736 - - 147 - 147

Bank fees 451 - - - 520 520

Astra jet expense 104,000 - - - 126,000 126,000

Other expense 8,618     -     - 4,112 16,451 20,563

Totals as of 01/31/00 $    -     $ - $   -     $467,360 $511,547 $ 978,907

Totals as of 01/31/99 $1,068,931 $ -    $ -    $534,788 $534,143 $1,068,931

See Accountant's Report on Additional Information.

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