IMPSA S.A. — Interim / Quarterly Report 2001

Feb 22, 2002

IMPSA INTERNATIONAL, INC.

AND SUBSIDIARIES

Consolidated Financial Statements

October 31, 2001 and October 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 October 31, 2001, and October 31, 2000, and the related consolidated 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

SWORN TO AND SUBSCRIBED BEFORE

ME THIS 13TH DAY OF November, 2001.

__________________________________

Notary Public

Pittsburgh, Pennsylvania

November 9, 2001

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

OCTOBER 31, 2001 AND OCTOBER 31, 2000

ASSETS:

NOTES 2001 2000

Current Assets:

Cash 1 $ 372,386 $ 378,198

Trade receivables 1 and 3 4,452,110 3,502,571

Prepaid expenses 13,400 119,260

Total Current Assets 4,837,896 4,000,029

Non-Current Assets:

Fixed assets 1 and 2 4,947 8,568

Total Non-Current Assets 4,947 8,568

Total Assets $4,842,843 $4,008,597

LIABILITIES:

Current Liabilities:

Accounts payable $ 1,270,564 $ 527,952

Other liabilities 10,368 14,900

Total Current Liabilities 1,280,932 542,852

Stockholder’s Equity (as per corresponding statement) 3,561,911 3,465,745

Total Liabilities and Equity $4,842,843 $4,008,597

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED OCTOBER 31, 2001 AND OCTOBER 31, 2000

NOTES 2001 2000

Net sales of goods and services 1 and 3 $371,190 $466,819

Expenses:

Selling 1 and 4 206,507 288,624

Administrative 1 and 4 184,439 249,250

390,946 537,874

Subtotal – Profit (Loss) (19,756) (71,055)

Other income and expense 76,462 214,785

Profit before income taxes 56,706 143,730

Income taxes 1 and 5 15,000 47,000

Net Income for the Nine Month Period $ 41,706 $ 96,730

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED OCTOBER 31, 2001 AND OCTOBER 31, 2000

2001 2000

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 $ - $ - $ - $3,285,205 $3,520,205 $3,369,015

Net income for the nine

month period as per statement

of income - - - - - - - - 41,706 41,706 96,730

Balance as of October 31 $250 $ - $234,750 $ - $235,000 $ - $ - $ - $3,326,911 $3,561,911 $3,465,745

* Par Value $1 per share

Authorized 1000 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 NINE MONTHS ENDED OCTOBER 31, 2001 AND OCTOBER 31, 2000

2001 2000

OPERATING ACTIVITIES:

Net income for the nine month period $ 41,706 $ 96,730

Add: Items not representing source of cash:

Depreciation 1,800 2,700

Sources:

Decrease in trade receivables - 1,156,027

Decrease in prepaid expenses 143,165 -

Increase in accounts payable 671,924 -

Increase in other liabilities 10,368 -

Uses:

Increase in trade receivables (676,276) -

Increase in prepaid expenses - (28,123)

Decrease in accounts payable - (1,536,618)

Net Cash Provided (Used) By Operating Activities 192,687 (309,284)

Net Increase (Decrease) In Cash $ 192,687 $ (309,284)

Cash and Cash Equivalents - February 1 $ 179,699 $ 687,482

Net Increase (Decrease) in Cash for the Period 192,687 (309,284)

Cash and Cash Equivalents - October 31 $ 372,386 $ 378,198

SUPPLEMENTAL DISCLOSURE OF CASH

FLOW INFORMATION:

Interest paid $ 10,115 $ 3,635

Income taxes paid (refunded) $(121,766) $81,900

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2001 AND OCTOBER 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 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 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 $1,800 for 2001 and $2,700 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:

October 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 214,002 210,381

Total Fixed Assets $ 4,947 $ 8,568

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 $371,190 and $466,819 for 2001 and 2000, respectively.

Trade receivables and advances at October 31, 2001, and 2000, are as follows:

October 31,

2001 2000

Accounts receivable from parent and affiliates $4,452,110 $1,302,571

Note receivable from parent and affiliates - 2,200,000

$4,452,110 $3,502,571

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 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 leased an automobile providing for monthly payments of $372 thru July 20, 2001.

Rent expense amounted to $36,905 for 2001 and $46,753 for 2000.

NOTE 5 - TAXES ON INCOME:

Currently payable taxes on income are as follows:

2001 2000

Federal income tax $12,000 $47,000

State income tax 3,000     -

$15,000 $47,000

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