IMPSA S.A. — Audit Report / Information 2021

Jun 28, 2021

The Grant Building • 310 Grant Street • Suite 1020 • Pittsburgh, Pennsylvania 15219-2295 (412) 281-8270 • www.lovescherlebauer.com • FAX (412) 281-7791

IMPSA INTERNATIONAL, INC.

Financial Statements June 30, 2020

The Grant Building • 310 Grant Street • Suite 1020 • Pittsburgh, Pennsylvania 15219-2295 (412) 281-8270 • www.lovescherlebauer.com • FAX (412) 281-7791

INDEPENDENT ACCOUNTANT'S COMPILATION REPORT

To the Board of Directors IMPSA International, Inc. Pittsburgh, Pennsylvania

Management is responsible for the accompanying financial statements of IMPSA International, Inc. (a corporation), which comprise the statement of financial position as of June 30, 2020, and the related statements of profit and loss, changes in stockholder's equity and cash flow for the 6 months then ended, and the related notes to the financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. We have performed the compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the financial statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any form of assurance on these financial statements.

J. Scherle

Joseph S. Scherle, CPA

SWORN TO AND SUBSCRIBED BEFORE ME THIS 17^TH DAY OF AUGUST 2020.

COMMONWEALTH OF: PENNSYLVANIA COUNTY OF: ALLEGHENY

Notary Pub

Pittsburgh, Pennsylvania August 17, 2020

COMMONWEALTH OF PENNSYLVANIA NOTARIAL SEAL PATRICIA M ZAPF Notary Public CITY OF PITTSBURGH, ALLEGHENY COUNTY My Commission Expires Feb 4, 2021

STATEMENTS OF FINANCIAL POSITION

JUNE 30, 2020 AND DECEMBER 31, 2019

	NOTES	June 30, 2020	December 31, 2019
ASSETS:
Current Assets:
Cash and cash equivalents	2 and 5	\$	\$ 2,472
Accounts receivable - affiliated companies	2 and 3	1,918,300	1,918,300
Notes receivable - affiliated companies	3	5,170,192	5,170,192
Total Current Assets		7,088,492	7,090,964
Non-Current Assets:
Deferred income tax benefit	$2$ and $4$
Total Non-Current Assets
Total Assets		7,088,492 \$	7,090,964 S
LIABILITIES:
Current Liabilities:
Accounts payable	$\overline{7}$	\$ 1,880,164	\$ 1,883,443
Accounts payable - affiliated companies	3	3,775,082	3,734,132
Income taxes payable	$\overline{4}$	3,000	3,000
Total Current Liabilities		5,658,246	5,620,575
STOCKHOLDERS' EQUITY:
Common stock		100	100
Additional paid-in capital		2,734,900	2,734,900
Retained earnings (deficit)		(1,304,754)	(1,264,611)
Total Stockholders' Equity		1,430,246	1,470,389
Total Liabilities and Stockholders' Equity		7,088,492 \$	7,090,964 \$

STATEMENT OF PROFIT OR LOSS

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019

	NOTES	June 30, 2020	June 30, 2019
Net sales of goods and services	2 and 3	\$	\$
Interest income	2 and 3
Administrative expenses	3	(49,056)	(49, 115)
Interest expense	3
Other		8,913	(69)
Income (Loss) Before Income Taxes		(40, 143)	(49, 184)
Income taxes	2 and 4
Income (Loss) For The Period		(40, 143)	(49, 184)
Earnings (Loss) Per Share		(401)	(492)

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019

	Common Stock		Additional Paid-in Capital	Retained Earnings (Deficit)		Total of Stockholders' Equity
Balance as of December 31, 2018	\$ 100	S.	2,734,900	(1,156,415)	\$	1,578,585
Loss for the 6 month period ended June 30, 2019				(49, 184)		(49, 184)
Balance as of June 30, 2019	100	S.	2,734,900	\$(1,205,599)	S	1,529,401
Balance as of December 31, 2019	\$ 100	\$	2,734,900	\$(1,264,611)	S.	1,470,389
Loss for the 6 month period ended June 30, 2020				(40, 143)		(40, 143)
Balance as of June 30, 2020	100	\$.	2,734,900	(1,304,754) S.		1,430,246

Par Value - \$1 per share Authorized - 1,000 shares Issued - 100 shares

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STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND JUNE 30, 2019

		June 30, 2020	June 30, 2019
OPERATING ACTIVITIES:
Profit (loss) for the period Increase (decrease) in accounts payable Increase (decrease) in accounts payable -		$\mathcal{S}$	(40, 143) (3,279)	\$	(49, 184) (79)
affiliated companies Interest expense recognized in profit or loss			40,950		50,488
Cash Provided (Used) by Operations			(2, 472)		1,225
Interest Paid
Net Cash Provided (Used) by Operating Activities			(2, 472)		1,225
Net Increase (Decrease) in Cash and Cash Equivalents			(2, 472)		1,225
Cash and Cash Equivalents - Beginning of Period			2,472		5,363
Cash and Cash Equivalents - End of Period	5				6,588

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IMPSA INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2020 AND JUNE 30, 2019

NOTE 1 - GENERAL INFORMATION:

IMPSA International, Inc. is a wholly-owned subsidiary of IMPSA S.A., 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 and has sales to affiliated companies. The Company is a United States of America corporation whose principal place of business is located in Pittsburgh, Pennsylvania.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:

Statement of Compliance - The financial statements have been prepared in accordance with International Financial Reporting Standards.

Currencies - The financial statements are presented in U.S. dollars, which is the functional currency of the Company. Monetary transactions denominated in foreign currencies are translated at the exchange rate on the transactions date and the resulting exchange differences are recognized in the income statement.

Basis of Preparation - The financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of consideration given in exchange for assets. The principal accounting policies are as follows:

Critical Accounting Judgments and Key Sources of Estimation Uncertainty – In the application of the Company's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgments by management in applying accounting policies and key sources of estimation uncertainty are disclosed in the relevant asset and liability notes to the financial statements.

Financial Instruments - Financial assets consist of cash and cash equivalents and accounts and notes receivable from affiliated companies. Cash and cash equivalents are described in Note 5. Accounts and notes receivable from affiliated companies are recognized at fair value based on amounts exchanged which equates to cost. Financial liabilities consisting of accounts payable and long-term debt are recognized at fair value based on amounts exchanged which equates to cost. Accounts payable are described in Note 7.

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

For financial assets carried at cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Concentrations of Credit Risk - Financial instruments potentially subject to concentrations of credit risk consist of receivables. Receivables are due from the parent company and affiliates.

Revenue Recognition - 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 from sales to affiliated companies is recognized when billed.

Income Taxes - Income tax expense represents the sum of the tax currently payable and deferred tax.

Currently payable income taxes are based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates in effect at the balance sheet date.

The carrying amount of the deferred tax benefit is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. The deferred tax benefit is measured at the tax rates that are expected to apply in the period in which the asset is realized, based on tax rates in effect at the balance sheet date. The measurement of the deferred tax benefit reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover the carrying amount of its benefit.

Capital Risk Management - The Company in concert with its parent company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to its parent company. The capital structure of the Company consists of payables to affiliated companies and equity of the Company (comprising issued capital, reserves and retained earnings). The Company is not subject to any externally imposed capital requirements.

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. The amounts are included in the balance sheet as accounts receivable, notes receivable and accounts payable – affiliated companies. The balance due from the Company to its parent company at June 30, 2020 and December 31, 2019 was \$3,739,334 and \$3,698,384, respectively.

There were no commissions earned for either of the six month periods ending June 30, 2020 and June 30, 2019.

Notes receivable from affiliated companies currently consists of a note amounting to \$5,170,192 at both June 30, 2020 and December 31, 2019. Since December 31, 2017 no interest is being charged on this note payable. Prior to December 31, 2017 3% interest was being charged. There was no interest income on receivables from affiliated companies for either of the six month periods ending June 30, 2020 and June 30, 2019.

The renumeration of key management personnel for the six month period ended June 30, 2020 and June 30, 2019:

	June 30, 2020	June 30, 2019
Short-term benefits		39.968*

\$0 charged back to parent company

NOTE 4 – TAXES ON INCOME:

Income taxes recognized in profit and loss for the six month periods ended June 30, 2020 and June 30, 2019:

	June 30, 2020		June 30, 2019
Current Deferred - net operating loss carryforwards		$\overline{\phantom{a}}$		œ.

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

	June 30, 2020	December 31, 2019
Non Current Deferred Tax Asset: Net operating loss carryforwards Valuation allowance	211,000 \$ (211,000)	196,000 (196,000)

At June 30, 2020, the Company had a net operating loss ("NOL") carryforward for federal income tax purpose of \$258,000 which, under current law, has no expiration date. For state tax purposes, the Company has NOL carryforwards of \$1,567,000 which are available to offset future taxable income thru 2040. However, the federal NOL is currently limited to 80% of annual taxable income while the state NOL is currently limited to 40% of annual taxable income.

The Company has recorded a valuation allowance to reflect the amount of a deferred tax asset which may not be realized due to the expiration of the previously described net operating loss carryforwards for federal and state income tax purposes.

The income tax expense for the six month periods ended June 30, 2020 and June 30, 2019 can be reconciled to accounting profit as follows:

	June 30, 2020	June 30, 2019
Profit (loss) before taxes per income statement	(40, 143)	(49, 184)
Income tax expense (credit) calculated at 31%	(12, 400) S	(15,200)
Valuation allowance	12,400	15,200

The income tax rate used for the above periods is the effective combined federal and state rate of 31% payable for both 2020 and 2019 by the Company on taxable profits under tax law in the United States of America and the State of Pennsylvania.

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NOTE 5- CASH AND CASH EQUIVALENTS:

For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement can be reconciled to the related items in the balance sheet as follows:

	June 30, 2020	December 31, 2019
Cash and bank balances	œ	2 472

NOTE 6 - BUSINESS SEGMENTS:

The Company's primary business segment consists of acquiring materials requisitioned by its parent and affiliated companies on a commission basis and sales of equipment manufactured in Argentina on a commission basis. The Company also has sales to affiliated companies and provides wind energy consulting services.

All of the Company's business is conducted in the United States of America.

NOTE 7-ACCOUNTS PAYABLE:

Accounts payable consist of the following:

	June 30, 2020	December 31, 2019
Trade payables	\$1,879,444	1,881,737 S.
Withheld payroll taxes	720	1,706
	.880.164	,883,443

No interest is charged on accounts payable. The Company has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

NOTE 8 – FINANCIAL INSTRUMENTS:

Categories of financial instruments are:

	June 30, 2020			December 31, 2019
Financial Assets
Cash and cash equivalents	S.	$\frac{1}{2}$		2,472
Accounts receivable-affiliated companies	1,918,300		1,918,300
Notes receivable-affiliated companies		5,170,192		5,170,192

NOTE 8-FINANCIAL INSTRUMENTS (CONTINUED):

	June 30, 2020			December 31, 2019
Financial Liabilities
Accounts payable	S.	1,880,164		\$1,883,443
Accounts payable - affiliated companies		3,775,082		3,734,132
Income taxes payable		3,000		3,000

The Directors of the Company consider the carrying amounts of the above financial assets and financial liabilities approximate their fair values.

Ultimate responsibility for liquidity risk management rests with the Company's board of directors in concert with its parent company, which has built an appropriate liquidity risk management framework for the management of the Company's short, medium and long-term funding and liquidity management requirements. The Company in concert with its parent company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities that the Company has at its disposal to further reduce liquidity risk.

The following table details the Company's remaining contractual maturity for its financial liabilities. The table is based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both principal and interest cash flows.

	$1-3$	3 Months to
June 30, 2020	Months	1 Year	1-5 Years		5+ Years	Total
Accounts payable	\$ 720	1,879,444 \$	\$	\$		\$	1,880,164
Accounts payable -affiliated companies		3,775,082	۰				3,775,082
Income taxes payable		3,000					3,000
	720	\$5,657,526					\$5,658,246
		3 Months
December 31, 2019	$1-3$ Months	to 1 Year	1-5 Years		5+ Years		Total
Accounts payable	\$ 1,706	1,881,737 \$	\$	\$		\$	1,883,443
Accounts payable - affiliated companies Income tax payable		3,734,132					3,734,132
		3,000					3,000
	\$ 1,706	\$5,618,869	\$	$\mathbf S$			\$5,620,575

The following table details the Company's expected maturity for its financial assets. The table below is based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets.

NOTE 8-FINANCIAL INSTRUMENTS (CONTINUED):

June 30, 2020	$1-3$ Months	3 Months to 1 Year	1-5 Years	5+ Years		Total
Cash and cash equivalents Accounts receivable	\$	\$	\$	\$	\$
-affiliated companies		1,918,300				1,918,300
Notes receivable - affiliated companies		5,170,192				5,170,192
		7,088,492				7,088,492
	$1-3$	3 Months t o
December 31, 2019	Months	1 Year	1-5 Years	5+ Years		Total
Cash and cash equivalents Accounts receivable	\$ 2,472	\$	\$	S	\$	2,472
-affiliated companies		1,918,300				1,918,300
Notes receivable - affiliated companies		5,170,192				5,170,192
	2,472	7,088,492				7,090,964

NOTE 9 - PARENT COMPANY RESTRUCTURING:

IMPSA International, Inc.'s parent company, IMPSA S.A., entered into a debt restructuring agreement with certain creditors ("Participating Creditors") which included the transfer of 65% of the parent company's capital shares to a trust for the benefit of the Participating Creditors and changes in certain management personnel. The parent's operation in Malaysia was severed from the parent company, and offices in China, Columbia and other places were closed. For now, it is expected that IMPSA International, Inc. will remain with the parent company after the reorganization due to its presence in the United States of America. As of the date of our report, the possible effect of the debt restructuring agreement on IMPSA International, Inc.'s financial statements cannot be determined. Certain receivables and payables are likely to be written off the books of the Company pending final resolution of the restructuring.