IMPSA S.A. — Audit Report / Information 2004

Apr 13, 2004

IMPSA INTERNATIONAL, INC.

Financial Statements

January 31, 2004 and January 31, 2003

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors

IMPSA International, Inc.

Pittsburgh, Pennsylvania

We have audited the accompanying balance sheets of IMPSA International, Inc. as of January 31, 2004, and January 31, 2003, and the related statements of income, stockholder’s equity and cash flows for the years then ended. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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. as of January 31, 2004 and January 31, 2003 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Certified Public Accountants

Pittsburgh, Pennsylvania

February 12, 2004

• 1 -

IMPSA INTERNATIONAL, INC.

BALANCE SHEETS

JANUARY 31, 2004 AND JANUARY 31, 2003

NOTES SCHEDULES 2004 2003

ASSETS:

Current Assets:

Cash 1 $ 137,524 $ 275,884

Trade receivables 1 and 3 1,791,171 5,235,673

Prepaid expenses 4,123 2,043

Total Current Assets 1,932,818 5,513,600

Non-Current Assets:
Deferred income tax benefit 5 273,000 273,000

Fixed assets 1 and 2 A - -

Total Non-Current Assets 273,000 273,000

Total Assets $2,205,818 $ 5,786,600

LIABILITIES:

Current Liabilities:

Accounts payable $ 37,792 $ 411,361

Other 6 - 2,846,789

Total Current Liabilities 37,792 3,258,150

Stockholder’s Equity (as per corresponding statement) 2,168,026 2,528,450

Total Liabilities and Equity $2,205,818 $ 5,786,600

The attached notes are an integral part of this statement.

• 2 -

IMPSA INTERNATIONAL, INC.

STATEMENTS OF INCOME

FOR THE FISCAL YEARS ENDED JANUARY 31, 2004 AND JANUARY 31, 2003

NOTES SCHEDULES 2004 2003

Net sales of goods and services 1 and 3 $ 40,273 $312,670

Expenses:

Selling 1 and 4 B 40,235 153,659

Administrative 1 and 4 B 372,168 338,670

412,403 492,329

Subtotal – Loss (372,130) (179,659)

Other income (expenses) 1 and 6 11,706 (169,456)

Loss Before Income Taxes (360,424) (349,115)

Income taxes (credit) 1 and 5 - (144,475)

Net Loss For The Year $(360,424) $ (204,640)

The attached notes are an integral part of this statement.

• 3 -

IMPSA INTERNATIONAL, INC.

STATEMENTS OF STOCKHOLDER’S EQUITY

FOR THE FISCAL YEARS ENDED JANUARY 31, 2004 AND JANUARY 31, 2003

Owner’s Contribution Reserves Unappropriated Total of

*Subscribed Adjustment Capital Irrevocable Retained Stockholder’s

Capital Notes to Capital Surplus Contributions Total Statutory Others Total Earnings Equity

Balance as of January 31, 2002 $ 250 $ - $234,750 $ - $235,000 $ - $ - $ - $2,498,090 $2,733,090

Net loss for fiscal year as

per statement of income - - - - - - - - (204,640) (204,640)

Balance as of January 31, 2003 250 - 234,750 - 235,000 - - - 2,293,450 2,528,450

Net loss for fiscal year as per

statement of income - - - - - - - - (360,424) (360,424)

Balance as of January 31, 2004 $ 250 $ - $234,750 $ - $235,000 $ - $ - $ - $1,933,026 $2,168,026

*Par Value - $1 per share

Authorized - 1000 shares

Issued - 250 shares

The attached notes are an integral part of this statement.

• 4 -

IMPSA INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED JANUARY 31, 2004 AND JANUARY 31, 2003

2004 2003

OPERATING ACTIVITIES:

Net loss for the year $ (360,424) $ (204,640)

Add:

Items not representing source of cash:

Depreciation - 3,772

Deferred income taxes - (144,475)

Sources:

Decrease in trade receivables 597,713 -

Decrease in prepaid expenses - 7,617

Decrease in refundable income taxes - 418,475

Increase in other liabilities - 1,846,789

Uses:

Increase in trade receivables - (1,512,065)

Increase in prepaid expenses (2,080) -

Decrease in accounts payable (373,569) (401,171)

Net Cash Provided (Used) By Operating Activities (138,360) 14,302

Net Increase (Decrease) In Cash $ (138,360) $ 14,302

CASH AND CASH EQUIVALENTS AT

BEGINNING OF YEAR $ 275,884$ 261,582

NET CHANGE IN CASH FOR THE YEAR (138,360)14,302

CASH AND CASH EQUIVALENTS AT

END OF YEAR $ 137,524$ 275,884

SUPPLEMENTAL DISCLOSURE OF CASH

FLOW INFORMATION:

Interest Paid $ 974 $ 5,162

Income Taxes Paid (Refunded) $ - $ (418,730)

Noncash transaction:

Payment of arbitration award liability by

an affiliated company $2,846,789 $ -

The attached notes are an integral part of this statement.

• 5 -

IMPSA INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2004 AND JANUARY 31, 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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.

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 the parent company and affiliates.

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

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. There was no depreciation expense for 2004 because all the fixed assets were fully depreciated. Depreciation expense amounted to $3,772 for 2003.

Interest – Interest expense consists of interest on accounts payable. Interest expense for 2003 also includes interest on the arbitration award described in Note 6. Interest expense amounted to $974 and $162,392 for 2004 and 2003 respectively.

Income Taxes - Income tax expense is based on reported income (loss) adjusted for differences of a permanent nature. Deferred income tax benefit relates to the temporary difference in the recognition of the Company’s net operating loss carryforward for financial and tax reporting purposes (See Note 5).

• 6 -

NOTE 2 - FIXED ASSETS:

A summary of fixed assets follows:

January 31,

2004 2003

Office equipment $180,612 $180,612

Furniture and fixtures 27,486 27,486

208,098 208,098

Less: Accumulated depreciation 208,098 208,098

Total Fixed Assets $ - $ -

NOTE 3 - RELATED PARTY TRANSACTIONS:

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

Commissions earned amounted to $40,273 and $312,670 for 2004 and 2003, respectively.

Trade receivables consist of accounts receivable from parent and affiliates.

NOTE 4 - LEASE COMMITMENTS:

The Company has a long-term lease with HFT Holdings covering its present office space in Scott Township, Pennsylvania. The lease extends from March 1, 2003 thru February 28, 2008 and is payable in 60 monthly payments of $2,034 with an escalation provision for real estate tax increases. The lease can be terminated by the Company upon 180 days written notice.

Minimum lease payments under the previously described operating lease are as follows:

Year Ending January 31, Amount

2005 $ 24,408

2006 24,408

2007 24,408

2008 24,408 2009 2,034

$ 99,666

Rent expenses amounted to $37,991 for 2004 and $47,029 for 2003.

• 7 -

NOTE 5 - TAXES ON INCOME:

Taxes on income (credit) are as follows:

January 31,

2004 2003

DEFERRED:

Federal income tax $(109,000) $(104,000)

State income tax 109,000 (40,475)

• (144,475)

Total $ - $(144,475)

Deferred income taxes result from the tax benefit of the company's current net operating loss adjusted for any changes in the valuation allowance.

The income tax effects of temporary differences that gave rise to the net deferred tax asset were as follows:

January 31,

2004 2003

Non Current Deferred Tax Asset:

Net operating loss carryforwards $418,000 $273,000

Valuation allowance (145,000) -

$273,000 $273,000

At January 31, 2004 the Company had net operations loss carryforwards totaling approximately $705,000 for federal income purposes which are available to offset future federal taxable income through 2024 and net operating loss carryforwards for state income tax purposes totaling approximately $2,049,000 which are available to offset future state taxable income through 2014. The Company has recorded a valuation allowance to reflect the amount of deferred tax asset which may not be realized due to the expiration of the previously described net operating loss carryforwards for state income tax purposes.

NOTE 6 - ARBITRATION AWARD:

An arbitration claim was filed against the Company by a subcontractor under a subcontract agreement with the Company for the erection of three container cranes at two United States Naval facilities. In January 2002, the Company recorded a liability of $1,000,000 relating to this claim, which at that time was management’s best estimate of possible loss relating to this claim. Any further expense relating to this claim excluding interest and legal fees would be charged to its parent Company. On February 13, 2003 all parties involved in this matter signed a final settlement which would pay the subcontractor $2,460,000 plus interest. On February 28, 2003 this claim was paid in the amount of $2,856,707 of which $1,699,477 was charged to its parent Company.

• 8 -

INDEPENDENT AUDITOR’S REPORT

ON ADDITIONAL INFORMATION

To the Board of Directors

IMPSA International, Inc.

Pittsburgh, Pennsylvania

Our report on our audits of the basic financial statements of IMPSA International, Inc. for 2004 and 2003 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 10 and 11 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 12, 2004

• 9 -

IMPSA INTERNATIONAL, INC.

(SCHEDULE A)

FIXED ASSETS

JANUARY 31, 2004 AND JANUARY 31, 2003

Net Residual

Depreciation Value

Balance at Balance at Accumulated Current Year Accumulated

Beginning End of Balance at Balance at

Account of Year Increases Decreases Year Beginning of Year Retirements Rate Amount End of Year 2004 2003

Machinery and Equipment $180,612 $ - $ - $180,612 $180,612 $ - Various $ - $180,612 $ - $ - $ -

Furniture and Equipment 27,486 - - 27,486 27,486 - Various - 27,486 - -

TOTALS OF PRESENT YEAR $208,098 $ - $ - $208,098 $208,098 $ - $ - $208,098 $ - $ - $ -

TOTALS OF PREVIOUS YEAR $208,098 $ -$ - $208,098$204,326 $ -$3,772$208,098$ -$ -$3,772

See Accountant’s Report on Additional Information.

• 10 -

IMPSA INTERNATIONAL, INC.

(SCHEDULE B)

SCHEDULE OF SELLING AND ADMINISTRATIVE EXPENSES

FOR THE FISCAL YEARS ENDED JANUARY 31, 2004 AND JANUARY 31, 2003

Cost of Cost of

Total Production Fixed Assets Selling Administrative Total

Items 01/31/03 Inventories Construction Expenses Expenses 01/31/04

Salaries and wages $311,388 $ - $ - $ 20,477 $184,292 $204,769

Rentals 47,029 - - 3,799 34,192 37,991

Telephone 7,178 - - 553 4,976 5,529

Travel and entertainment 11,218 - - 705 6,346 7,051

Dues and membership 750 - - - 1,626 1,626

Office expense 18,706 - - 2,045 18,408 20,453

Depreciation of fixed assets 3,772 - - - - -

Fees and renumerations services 17,852 - - 10,309 41,234 51,543

Advertising expenses and credit publication 490 - - 352 - 352

Payroll taxes 20,481 - - 1,715 15,434 17,149

Other taxes 6,000 - - - 916 916

Employee benefits 40,443 - - - 53,923 53,923

Insurance 2,865 - - - 5,448 5,448

Bidding expense - - - 35 - 35

Sales expense - - - - - -

Repairs and maintenance - - - - 50 50

Bank fees 1,700 - - - 1,776 1,776

Royalties and technical services fees 1,038 - - - - -

Other expense 1,419 - - 245 3,547 3,792

Totals as of 01/31/04 $ - $ - $ - $ 40,235 $372,168 $412,403

Totals as of 01/31/03 $ 492,329 $ - $ - $153,659 $338,670 $ -

See Accountant’s Report on Additional Information.

• 11 -