IMPSA S.A. — Interim / Quarterly Report 2001

Sep 13, 2001

IMPSA INTERNATIONAL, INC.

AND SUBSIDIARIES

Consolidated Financial Statements

July 31, 2001 and July 31, 2000

To the Board of Directors

IMPSA International, Inc.

Pittsburgh, Pennsylvania

We have compiled the accompanying consolidated balance sheets of IMPSA International, Inc. and Subsidiaries as of July 31, 2001, and July 31, 2000, and the related consolidated statements of income, stockholders' equity and cash flows for the six 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

August 15, 2001

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JULY 31, 2001 AND JULY 31, 2000

ASSETS:

NOTES 2001 2000

Current Assets:

Cash 1 $ 71,389 $ 198,791

Trade receivables 1 and 3 4,500,400 3,843,653

Prepaid expenses 109,299 40,019

Total Current Assets 4,681,088 4,082,463

Non-Current Assets:

Fixed assets 1 and 2 5,547 9,468

Total Non-Current Assets 5,547 9,468

Total Assets $4,686,635 $4,091,931

LIABILITIES:

Current Liabilities:

Accounts payable $1,222,445 $ 592,812

Other liabilities 10,368 14,900

Total Current Liabilities 1,232,813 607,712

Stockholders' Equity (as per

corresponding statement) 3,453,822 3,484,219

Total Liabilities and Equity $4,686,635 $4,091,931

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JULY 31, 2001 AND JULY 31, 2000

NOTES 2001 2000

Net sales of goods and services 1 and 3 $119,201 $414,812

Expenses:

Selling 1 and 4 144,934 204,800

Administrative 1 and 4 130,709 176,008

275,643 380,808

Subtotal - Profit (Loss) (156,442) 34,004

Other income and expense 63,059 155,200

Profit (loss) before income taxes (93,383) 189,204

Income taxes (credit) 1 and 5 (27,000) 74,000

Net Income (loss) for the

Six Month Period $(66,383) $115,204

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JULY 31, 2001 AND JULY 31, 2000

2001 2000

Owner’s Contribution Reserves Unappropriated Total of Total of

*Subscribed Adjustment Capital Irrevocable Retained Stockholders’ Stockholders’

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

Balance as of January 31 $250 $ - $234,750 $ - $235,000 $ - $ - $ - $3,285,205 $3,520,205 $3,369,015

Net income (loss)

For the six month

period as per

statement of income   -      -        -        -        -        -    -     -  (66,383) (66,383) 115,204

Balance as of July 31 $250 $ - $234,750 $ - $235,000 $ - $ - $ - $3,218,822 $3,453,822 $3,484,219

* Par Value $l per share

Authorized 1,000 shares

Issued 250 shares

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JULY 31, 2001 AND JULY 31, 2000

2001 2000

OPERATING ACTIVITIES:

Net income (loss) for the six month period $ (66,383) $ 115,204

Add: Items not representing source or use of cash:

Depreciation 1,200 1,800

Source:

Decrease in trade receivables - 814,945

Decrease in prepaid expenses 47,266 51,118

Increase in accounts payable 623,805 -

Increase in other liabilities 10,368 -

Use:

Increase in trade receivables (724,566) -

Decrease in accounts payable - (1,471,758)

Net Cash Used By Operating Activities (108,310) (488,691)

Net Decrease In Cash $(108,310) $ (488,691)

Cash and Cash Equivalents - January 31 $ 179,699 $ 687,482

Net change in Cash for the Six Month Period (108,310) (488,691)

Cash and Cash Equivalents - July 31 $ 71,389 $ 198,791

SUPPLEMENTAL DISCLOSURE OF

CASH FLOW INFORMATION:

Interest paid $ 3,734 $ 3,635

Income taxes paid (refunded) $ (70,000) $ 27,400

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2001 AND JULY 31, 2000

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. Effective January 31, 2001 Henry LeGarde, Inc. was liquidated. This liquidation had no effect on the consolidated financial statements. 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.

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 primarily from parent 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. Depreciation expense amounted to $1,200 for 2001 and $1,800 for 2000.

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

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NOTE 2 - FIXED ASSETS:

A summary of fixed assets follows:

July 31,

2001 2000

Office equipment $180,612 $180,612

Furniture and fixtures 27,486 27,486

Automobiles 10,851 10,851

218,949 218,949

Less: Accumulated depreciation 213,402 209,481

Total Fixed Assets $ 5,547 $ 9,468

NOTE 3 - 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 $119,201 and $414,812 for 2001 and 2000, respectively.

Trade receivables are as follows:

July 31,

2001 2000

Accounts receivable from

parent and affiliates $4,500,400 $1,643,653

Notes receivable from parent

and affiliates - 2,200,000

$4,500,400 $3,843,653

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 September 1, 2000, to August 31, 2005. The first 24 monthly lease payments are $3,496 and the next 36 payments are $3,605. The new lease can be terminated by the Company upon 180 days written notice. The Company also leases an automobile providing for monthly payments of $372 thru July 20, 2001.

Rent expense amounted to $24,586 for 2001 and $32,943 for 2000.

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NOTE 5 - TAXES ON INCOME:

Taxes on income (credit) are as follows:

July 31,

2001 2000

Currently Payable (Refundable):

Federal income tax $(27,000) $66,000

State income tax - 8,000

$(27,000) $74,000

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