IMPSA S.A. — Interim / Quarterly Report 2001

Aug 3, 2001

IMPSA INTERNATIONAL, INC.

AND SUBSIDIARIES

Consolidated Financial Statements

April 30, 2001 and April 30, 2000

LS&B

LOVE, SCHERLE & BAUER, P.C.

CERTIFIED PUBLIC ACCOUNTANTS

A PROFESSIONAL CORPORATION

310 Grant Street - Suite 1020 – The Grant Building – Pittsburgh, Pennsylvania 15219-2295

(412) 281-8270 . FAX (412) 281-7791

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 April 30, 2001, and April 30, 2000, and the related consolidated statements of income, stockholders' equity and cash flows for the three 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.

<insert signature>

Certified Public Accountants

SWORN TO AND SUBSCRIBED BEFORE

ME THIS 15TH DAY OF MAY, 2001.

_______________________________

NOTARY PUBLIC

Pittsburgh, Pennsylvania

May 11, 2001

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

APRIL 30, 2001 AND APRIL 30, 2000

ASSETS:

NOTES 2001 2000

Current Assets:

Cash 1 $ 137,855 $ 788,989

Trade receivables 1 and 3 3,803,144 3,356,616

Prepaid expenses 107,432 35,578

Total Current Assets 4,048,431 4,181,183

Non-Current Assets:

Fixed assets 1 and 2 6,147 10,368

Total Non-Current Assets 6,147 10,368

Total Assets $4,054,578 $4,191,551

LIABILITIES:

Current Liabilities:

Accounts payable $ 583,675 $ 775,899

Other liabilities - 14,900

Total Current Liabilities 583,675 790,799

Stockholders' Equity (as per

corresponding statement) 3,470,903 3,400,752

Total Liabilities and Equity $4,054,578 $4,191,551

See accompanying notes and accountant's compilation report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED APRIL 30, 2001 AND APRIL 30, 2000

NOTES 2001 2000

Net sales of goods and services 1 and 3 $51,362 $184,330

Expenses:

Selling 1 and 4 82,048 109,397

Administrative 1 and 4 74,002 103,548

156,050 212,945

Subtotal – Profit (Loss) (104,688) (28,615)

Other income and expense 32,386 74,352

Profit (loss) before income taxes (72,302) 45,737

Income taxes (credit) 1 and 5 (23,000) 14,000

Net Income (Loss) for the Three

Month Period $(49,302) $31,737

See accompanying notes and accountant's compilation report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE THREE MONTHS ENDED APRIL 30, 2001 AND APRIL 30, 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 three

month period as

per statement of

income - - - - - - - - (49,302) (49,302) 31,737

Balance as of

April 30 $250 $ - $234,750 $ - $235,000 $ - $ - $ - $3,235,903 $3,470,903 $3,400,752

* Par Value $1 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 THREE MONTHS ENDED APRIL 30, 2001 AND APRIL 30, 2000

2001 2000

OPERATING ACTIVITIES:

Net income (loss) for the three month period $ (49,302) $ 31,737

Add: Items not representing source

or use of cash:

Depreciation 600 900

Sources:

Decrease in trade receivables - 1,301,982

Decrease in prepaid expenses 49,133 55,559

Use:

Increase in trade receivables ( 27,310) -

Decrease in accounts payable (14,965) (1,288,671)

Net Cash Provided (Used) by

Operating Activities (41,844) 101,507

Net Increase (Decrease)

in Cash $ (41,844) $ 101,507

Cash and Cash Equivalents -

January 31 $ 179,699 $ 687,482

Net Change in Cash for the

Three Month Period (41,844) 101,507

Cash and Cash Equivalents -

April 30 $ 137,855 $ 788,989

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid$ 34$ 3,614

Income taxes paid (refunded) $ (70,000) $ (39,300)

See accompanying notes and accountant's compilation report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2001 AND APRIL 30, 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 LaGarde, 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 exceed federally insured limits. Receivables are due primarily from the 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 is computed based 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 $600 for 2001 and $900 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:

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 212,802 208,581

Total Fixed Assets $ 6,147 $ 10,368

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 $51,362 and $184,330 for 2001 and 2000, respectively.

Trade receivables are as follows:

2001 2000

Accounts receivable from

parent and affiliates $3,803,144 $1,156,616

Note receivable from parent

and affiliates - 2,200,000

$3,803,144 $3,356,616

NOTE 4 – LEASE COMMITMENT:

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 thru 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 $12,479 for 2001 and $16,472 for 2000.

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NOTE 5 - TAXES ON INCOME:

Taxes on income (credit) are as follows:

2001 2000

Currently Payable (Refundable):

Federal income tax $(23,000) $ 14,000

State income tax    -     -˚˚˚˚

$(23,000) $ 14,000

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