IMPSA S.A. — Audit Report / Information 2008

Feb 2, 2009

IMPSA INTERNATIONAL, INC.

Financial Statements

October 31, 2008 and October 31, 2007

To the Board of Directors

IMPSA International, Inc.

Pittsburgh, Pennsylvania

We have compiled the accompanying balance sheets of IMPSA International, Inc. as of October 31, 2008, and October 31, 2007, and the related statements of income, stockholder’s equity and cash flows for the nine months then ended in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.

A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them.

Certified Public Accountants

Pittsburgh, Pennsylvania

November 18, 2008

IMPSA INTERNATIONAL, INC.

BALANCE SHEETS

OCTOBER 31, 2008 AND OCTOBER 31, 2007

NOTES 2008 2007

ASSETS:

Current Assets:

Cash 1 $ 198,094 $ 98,926

Accounts receivable – affiliated companies 1 and 4 22,824,481 20,766,724

Prepaid expenses 740 513

Total Current Assets 23,023,315 20,866,163

Non-Current Assets:

Note receivable – affiliated company 4 731,075 -

Intellectual property 1 and 3 - 4,879,319

Deferred income tax benefit 1 and 7 413,000 413,000

Fixed assets 1, 2 and 5 35,947 42,067

Loan financing costs 1, 4 and 5 301,638 487,254

Total Non-Current Assets 1,481,660 5,821,640

Total Assets $ 24,504,975 $ 26,687,803

Liabilities:

Current Liabilities:

Current portion of long-term debt 5 $ 16,007,723 $ 1,506,799

Accounts payable 289,093 1,536,507

Accrued expenses 650,000 721,144

Total Current Liabilities 16,946,816 3,764,450

Long-Term Debt 5 6,522,437 22,530,161

Total Liabilities 23,469,253 26,294,611

Stockholder’s Equity (as per corresponding statement) 1,035,722 393,192

Total Liabilities and Stockholder’s Equity $ 24,504,975 $ 26,687,803

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA International, Inc.

StatementS of income

For the nine months ended october 31, 2008 and October 31, 2007

NOTES 2008 2007

Net sales of goods and services 1 and 4 $ 177,373 $ 76,993

Consulting income 3 - 325,000

177,373 401,993

Expenses:

Selling 1 and 3 - 1,583,910

Administrative 6 494,282 388,156

494,282 1,972,066

Subtotal – Loss (316,909) (1,570,073)

Other income and expense 4 and 5 82,027 289,811

Loss before income taxes (234,882) (1,280,262 )

Income taxes (credit) 1 and 7 - -

Net Loss for the Nine Month Period $ (234,882) $ (1,280,262 )

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA International, INc.

Statements of Cash Flows

For the Nine Months Ended October 31, 2008 and October 31, 2007

2008 2007

Operating Activities:

Net loss for the nine month period $ (234,882) $ (1,280,262 )

Add: Items not representing source of cash:

Depreciation 5,340 5,340

Amortization of intellectual property - 1,508,869

Amortization of loan fees 139,212 1,231,211

Sources:

Decrease in prepaid expenses 6,662 4,616

Increase in accounts payable - 1,297,565

Increase in accrued expenses 405,775 -

Uses:

Increase in accounts receivable – affiliated companies (126,787) (64,383,467)

Increase in notes receivable – affiliated companies (531,075) -

Decrease in accounts payable (418,717) -

Decrease in accrued expenses - (664,273 )

Net Cash Used By Operating Activities (754,472) (62,280,401 )

financing activities:

Loan financing costs - (918,613 )

Proceeds from borrowings - 60,000,000

Payments on long-term debt (5,180) (1,053,819 )

Net Cash Provided (Used) by Financing Activities (5,180) 58,027,568

Net Decrease in Cash $ (759,652) $ (4,252,833 )

Cash and Cash Equivalents – February 1 $ 957,746 $ 4,351,759

Net Decrease in Cash for the Period (759,652) (4,252,833 )

Cash and Cash Equivalents – October 31 $ 198,094 $ 98,926

Supplemental Disclosure of Cash
flow information:

Interest paid $ 3,155 $ 3,590

Noncash transactions:

Payment of debt by affiliated company $ 1,500,000 $ 84,950,000

Purchase of intellectual property thru reduction
of accounts receivable from affiliated companies $ - $ 2,972,200

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA International, Inc.

Notes to Financial Statements

October 31, 2008 AND October 31, 2007

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. In fiscal year ending January 31, 2007 the Company began offering consulting services relating to the hydro electric power business on a worldwide basis. In fiscal year ended January 1, 2008, this service was discontinued.

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.

Intellectual Property – Intellectual property was being amortized over 36 months. Amortization expense was $1,508,869 for 2007, which was reversed in the year ended January 31, 2008.

Depreciation – Depreciation is computed under an accelerated method (MACRS) for both income tax and financial reporting purposes. Depreciation expense for 2008 and 2007 was $5,340 for each nine month period.

Loan Financing Costs – The Company incurred $1,794,484 in loan financing cost which are being amortized over the original life of the long-term debt described in Note 5. Two loans were paid off in their entirety in the fiscal year ended January 31, 2008 which resulted in the unamortized loan fees related to these two loans becoming fully amortized. Amortization expense for 2008 and 2007 was $139,212 and $1,231,211, respectively, which was charged back to IMPSA International, Inc.’s parent company.

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 7).

NOTE 2 — FIXED ASSETS:

A summary of fixed assets follows:

October 31,

2008 2007

Automobiles $ 47,407 $ 47,407

Office equipment 180,612 180,612

Furniture and fixtures 27,486 27,486

255,505 255,505

Less: Accumulated depreciation 219,558 213,438

Total Fixed Assets $ 35,947 $ 42,067

note 3 — intellectual property:

The Company purchased intellectual property from its parent company consisting of know how and management expertise in the purchase and operation of a hydro electric power business. The Company had planned to use this expertise by providing consulting services to a newly formed company doing business in the hydro electric power industry. However, due to the failure in 2008 of the newly formed company, the Company reversed its purchase of intellectual property from its parent.

NOTE 4 — 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.

The balance due the Company from its parent company at October 31, 2008 and October 31, 2007 was $20,341,355 and $17,976,732, respectively.

Commissions earned amounted to $177,373 and $76,993 for 2008 and 2007, respectively.

Interest income on receivables from affiliated companies amounted to $78,333 for 2008 and $90,149 for 2007.

Interest expense and loan amortization fees charged back to the parent company was $1,535,879 for 2008 and $7,264,627 for 2007.

Note 5 — Long-term Debt:

On October 19, 2006 the Company entered into a credit agreement with certain lenders to borrow $50,000,000 bearing interest at 10½% per annum and payable in 6 semi-annual installments of principal and interest. This credit agreement was paid off in its entirety on October 29, 2007.

Note 5 — Long-term Debt (Continued):

On January 31, 2007 the Company financed two automobiles through Ford Credit. The notes bear interest at 12.8%, require 60 monthly payments of $926 beginning March 10, 2007, and are secured by the vehicles being purchased. The outstanding balance on these notes at October 31, 2008 and October 31, 2007 was $30,160 and $36,960, respectively.

On March 16, 2007 the Company entered into a credit agreement with certain lenders to borrow $36,000,000 bearing interest at 8½% per annum and payable in nine quarterly installments of principle beginning March 16, 2008 with quarterly interest only payments prior to that date. This credit agreement was paid off in its entirety on October 29, 2007.

On June 15, 2007 the Company entered into a credit agreement with certain lenders to borrow $24,000,000 bearing interest at 8% per annum and payable in 6 semi-annual installments of principal and interest beginning June 20, 2008. The outstanding balance on this credit agreement at October 31, 2008 and October 31, 2007 was $22,500,000 and $24,000,000, respectively.

The Company’s parent company has guaranteed all of the above loans except those from Ford Credit. The parent company was responsible for paying or reimbursing the Company for interest on the $50,000,000 and $36,000,000 and is still responsible for paying or reimbursing the Company for interest on the $24,000,000 loan.

Principal payments on long-term debt are due as follows:

October 31, Amount

2009 $ 16,007,723

2010 6,508,766

2011 9,952

2012 3,719

22,530,160

Portion Due in One Year 16,007,723

Long-Term Portion $ 6,522,437

NOTE 6 — 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 Company has exercised its option to renew of this lease for an additional 36 months until February 28, 2011 at a monthly rate of $1,901 with an escalation provision for real estate tax increases. The lease can be terminated by the Company upon 180 days written notice.

Rent expense amounted to $18,310 for 2008 and $20,110 for 2007.

Note 7 — Taxes on Income:

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

October 31,

2008 2007

Non Current Deferred Tax Asset:

Net operating loss carryforwards $ 867,000 $ 1,147,000

Valuation allowance (454,000) (734,000 )

$ 413,000 $ 413,000

At October 31, 2008 the Company had net operating loss carryforwards totaling approximately $1,967,000 for federal income tax purposes and $3,000,000 for state income tax purposes which are available to offset future taxable income through 2028. 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.

IMPSA INTERNATIONAL, INC.

STATEMENTs OF STOCKHOLDER’S EQUITY

FOR THE NINE MONTHS ENDED OCTOBER 31, 2008 AND OCTOBER 31, 2007

2008 2007

Owner’s Contribution Reserves Unappropriated Total of Total of

*Subscribed Adjustment Capital Irrevocable Retained Stockholder’s Stockholder’s
Capital Notes to Capital Surplus Contributions Total Statutory Others Total Earnings Equity Equity

Balance as of January 31 $ 250 $ - $ 234,750 $ - $ 235,000 $ - $ - $ - $ 1,035,604 $ 1,270,604 $ 1,673,454

Net loss for the nine
month period as per
statement income - - - - - - - - (234,882 ) (234,882 ) (1,280,262)

Balance as of October 31 $ 250 $ - $ 234,750 $ - $ 235,000 $ - $ - $ - $ 800,722 $ 1,035,722 $ 393,192

*Par Value $1 per share
Authorized 1,000 shares
Issued 250 shares

See Accompanying Notes and Accountant’s Compilation Report.