IMPSA S.A. — Audit Report / Information 2005

Apr 12, 2005

IMPSA INternational, Inc.

Financial Statements

January 31, 2005 and January 31, 2004

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, 2005, and January 31, 2004, 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 financial statements referred to above present fairly, in all material respects, the financial position of IMPSA International, Inc. as of January 31, 2005 and January 31, 2004 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 21, 2005

IMPSA International

balance Sheets

january 31, 2005 and January 31, 2004

nOTES sCHEDULES 2005 2004

ASSETS:

Current Assets:

Cash 1 $ 1,844,162 $ 137,524

Accounts and notes receivable –
affiliated companies 1 and 3 8,825,849 1,791,171

Prepaid expenses 3,916 4,123

Total Current Assets 10,673,927 1,932,818

Non-Current Assets:

Deferred income tax benefit 5 444,000 273,000

Fixed assets 2 A - -

Total Non-Current Assets 444,000 273,000

Total Assets $ 11,117,927 $ 2,205,818

LIABILITIES:

Current Liabilities:

Accounts payable $ 94,633 $ 37,792

Accounts payable – affiliated
companies 9,082,717 -

Total Current Liabilities 9,177,350 37,792

Stockholder’s Equity
(as per corresponding statement) 1,940,577 2,168,026

Total Liabilities and Equity $ 11,117,927 $ 2,205,818

The attached notes are an integral part of this statement.

IMPSA International, Inc.

Statements of Income

for The Fiscal Years Ended January 31, 2005 and January 31, 2004

nOTES sCHEDULES 2005 2004

Net sales of goods and services 1 and 3 $ 18,777 $ 40,273

Expenses:

Selling 4 B 115,349 40,235

Administrative 4 B 370,546 372,168

485,895 412,403

Subtotal – Loss (467,118) (372,130)

Other income (expenses) – Net 3 68,669 11,706

Loss Before Income Taxes (398,449) (360,424)

Income taxes (credit) 1 and 5 (171,000) -

Net Loss For The Year $ (227,449) $ (360,424)

The attached notes are an integral part of this statement.

IMPSA INTERNATIONAL, iNC.

sTATEMENTs OF Cash Flows

fOR THE FISCAL YEARS ENDED jANUARY 31, 2005 AND jANUARY 31, 2004

2005 2004

OPERATING ACTIVITIES:

Net loss for the year $ (227,449) $ (360,424)

Add:

Items not representing source of cash:

Deferred income taxes (171,000) -

Sources:

Decrease in accounts and notes
receivable – affiliated companies - 597,713

Decrease in prepaid expenses 207 -

Increase in accounts payable 56,841 -

Increase in accounts payable –
affiliated companies 9,082,717 -

Uses:

Increase in accounts and notes
receivable – affiliated companies (7,034,678) -

Increase in prepaid expenses - (2,080)

Decrease in accounts payable - (373,569)

Net Cash Provided (Used) By Operating Activities 1,706,638 (138,360)

Net Increase (Decrease) In Cash $ 1,706,638 $ (138,360)

CASH AT BEGINNING OF YEAR $ 137,524 $ 275,884

NET CHANGE IN CASH FOR THE YEAR 1,706,638 (138,360)

CASH AT END OF YEAR $ 1,844,162 $ 137,524

SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:

Interest Paid $ 33 $ 974

Noncash transaction:
Payment of arbitration award
liability by an affiliated company $ - $ 2,846,789

The attached notes are an integral part of this statement.

IMPSA International, Inc.

Notes to Financial Statements

January 31, 2005 and January 31, 2004

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

IMPSA International, Inc. is a wholly-owned subsidiary of Industrias 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.

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.

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).

NOTE 2 — FIXED ASSETS:

A summary of fixed assets follows:

January 31,

2005 2004

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, notes receivable and accounts payable from/to 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.

Accounts and notes receivable from affiliated companies consist of both accounts and notes receivable. There are two notes receivable from two different affiliated companies totaling $7,431,710 which bear interest at 4% per annum and are due on June 15, 2005. Interest income on accounts and notes receivable from affiliated companies amounted to $66,669 for 2005 and $38,936 for 2004.

Commissions earned amounted to $18,777 and $40,273 for 2005 and 2004, respectively.

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

2006 $ 24,408

2007 24,408

2008 24,408

2009 2,034

$ 75,258

Rent expenses amounted to $30,851 for 2005 and $37,991 for 2004.

NOTE 5 — TAXES ON INCOME:

Taxes on income (credit) are as follows:

January 31,

2005 2004

DEFERRED:

Federal income tax $ (131,000) $ (109,000 )

State income tax (40,000) 109,000

Total $ (171,000) $ -

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

NOTE 5 — TAXES ON INCOME (Continued):

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

January 31,

2005 2004

Non Current Deferred Tax Asset:

Net operating loss carryforwards $ 553,000 $ 418,000

Valuation allowance (89,000 ) (145,000 )

$ 444,000 $ 273,000

At January 31, 2005 the Company had net operations loss carryforwards totaling approximately $1,095,000 for federal income purposes which are available to offset future federal taxable income through 2025 and net operating loss carryforwards for state income tax purposes totaling approximately $2,438,000 which are available to offset future state taxable income through 2015. 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.

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 2005 and 2004 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 21, 2005

IMPSA International, INc. Schedule A

Fixed Assets

January 31, 2005 and January 31, 2004

Depreciation

Balance at Balance at Accumulated Accumulated Net Residual

Beginning End of Balance at Current Year Balance at Value

Account of Year Increases Decreases Year Beginning of Year Retirements Rate Amount End of Year 2005 2004

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 $ 208,098 $ - $ - $ 208,098 $ $ -

IMPSA International, INc. Schedule B

selling and administrative expenses

for the fiscal years ended January 31, 2005 and January 31, 2004

Cost of Cost of

Total Production Fixed Assets Selling Administrative Total

Items 01/31/04 Inventories Construction Expenses Expenses 01/31/05

Salaries and wages $ 204,769 $ - $ - $ 88,434 $ 206,347 $ 294,781

Rentals $ 37,991 - - 3,085 27,766 30,851

Telephone $ 5,529 - - 500 4,502 5,002

Travel and entertainment $ 7,051 - - 4,525 503 5,028

Dues and membership $ 1,626 - - - (25) (25)

Office expenses $ 20,453 - - 1,760 15,836 17,596

Depreciation of fixed assets $ - - - - - -

Fees and renumerations services $ 51,543 - - 2,099 8,395 10,494

Advertising expenses and
credit publication $ 352 - - - - -

Payroll taxes $ 17,149 - - 7,887 18,404 26,291

Other taxes $ 916 - - - 7,731 7,731

Employee benefits $ 53,923 - - 6,909 62,178 69,087

Insurance $ 5,448 - - - 5,407 5,407

Bidding expense $ 35 - - - - -

Sales expense $ - - - 150 - 150

Repairs and maintenance $ 50 - - - 565 565

Bank fees $ 1,776 - - - 2,049 2,049

Royalties and technical services
fees $ - - - - - -

Other expenses $ 3,792 - - - 10,888 10,888

Totals as of 01/31/05 $ - $ - $ 115,349 $ 370,546 $ 485,895

Totals as of 01/31/04 $ 412,403 $ - $ - $ 40,235 $ 372,16

IMPSA INTERNATIONAL

sTATEMENTs OF sTOCKHOLDERS EQUITY

FOR THE FISCAL YEARS ENDED JANUARY 31, 2005 AND JANUARY 31, 2004

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, 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

Net loss for fiscal year as per
statement of income - - - - - - - - (227,449) (227,449)

Balance as of January 31, 2005 $ 250 $ - $ 234,750 $ - $ 235,000 $ - $ - $ - $ 1,750,577 $ 1,940,577

* Par Value – $1 per share
Authorized – 1000 shares
Issued – 250 shares

The attached notes are an integral part of this statement