IMPSA S.A. — Interim / Quarterly Report 2003

Jun 18, 2003

IMPSA INTERNATIONAL, INC.

Financial Statements

April 30, 2003 and April 30, 2002

LS&B

To the Board of Directors

IMPSA International, Inc.

Pittsburgh, Pennsylvania

We have compiled the accompanying balance sheets of IMPSA International, Inc. as of April 30, 2003 and April 30, 2002 and the related statements of income, stockholder’s 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.

Certified Public Accountants

Pittsburgh, Pennsylvania

May 8, 2003

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IMPSA INTERNATIONAL, INC.

BALANCE SHEETS

APRIL 30, 2003 AND APRIL 30, 2002

ASSETS:

NOTES 2003 2002

Current Assets:

Cash 1 $ 558,777 $1,295,751

Trade receivables 1 and 3 1,818,306 2,511,281

Prepaid expenses 3,050 8,049

Refundable federal income taxes - 399,276

Total Current Assets 2,380,133 4,214,357

Non-Current Assets:

Deferred income tax benefit 5 326,000 170,525

Fixed assets 1 and 2 - 2,830

Total Non-Current Assets 326,000 173,355

Total Assets $2,706,133 $4,387,712

LIABILITIES:

Current Liabilities:

Accounts payable 6 $ 254,768 $ 720,169

Other 6 - 1,000,000

Total Current Liabilities 254,768 1,720,169

Stockholder’s Equity (as per

corresponding statement) 2,451,365 2,667,543

Total Liabilities and Equity $2,706,133 $4,387,712

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC.

STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED APRIL 30, 2003 AND APRIL 30, 2002

NOTES 2003 2002

Net sales of goods and services 1 and 3 $ 7,750 $ 11,004

Expenses:

Selling 1 and 4 46,345 42,126

Administrative 1 and 4 105,660 95,912

152,005 138,038

Subtotal –Loss (144,255) (127,034)

Other income and expense 14,170 19,487

Loss before income taxes (130,085) (107,547)

Income taxes (credit) 1 and 5 (53,000) (42,000)

Net Loss for the Three Month Period $(77,085) $(65,547)

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC.

STATEMENTS OF STOCKHOLDER’S EQUITY

FOR THE THREE MONTHS ENDED APRIL 30, 2003 AND APRIL 30, 2002

2003 2002

Owner's Contribution Reserves Unappropriated Total of Total of

*Subscribed Adjustment Capital Irrevocable Retained Stockholder’s Stockholder’s

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

Balance as of

January 31 $ 250 $ - $234,750 $ - $235,000 $ - $ - $ - $2,293,450 $2,528,450 $2,733,090

Net loss

for the three

month period as

per statement of

income   -    -       -      -       -       -    -    -  (77,085) (77,085) (65,547)

Balance as of

April 30 $ 250 $ - $234,750 $ - $235,000 $ - $ - $ - $2,216,365 $2,451,365 $2, 667,543

* 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.

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED APRIL 30, 2003 AND APRIL 30, 2002

2003 2002

OPERATING ACTIVITIES:

Net loss for the three month period $ (77,085) $ (65,547)

Add: Items not representing source or use of cash:

Depreciation - 942

Deferred income taxes (53,000) (42,000)

Sources:

Decrease in trade receivables 570,578 1,212,327

Decrease in prepaid expenses - 1,611

Decrease in refundable income taxes - 19,199

Use:

Increase in prepaid expenses (1,007) -

Decrease in accounts payable (156,593) (92,363)

Net Cash Provided by Operating Activities 282,893 1,034,169

Net Increase in Cash $ 282,893 $1,034,169

Cash and Cash Equivalents -

January 31 $ 275,884 $ 261,582

Net Change in Cash for the

Three Month Period 282,893 1,034,169

Cash and Cash Equivalents -

April 30 $ 558,777 $ 1,295,751

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid$ 218$ 38

Income taxes refunded $ - $ (19,454)

Noncash transaction:

Payment of arbitration award liability by an

affiliated company$2,846,789 $ -

See Accompanying Notes and Accountant's Compilation Report.

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IMPSA INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS

APRIL 30, 2003 AND APRIL 30, 2002

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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. There was no depreciation expense for 2003 because all the fixed assets were fully depreciated. Depreciation expense amounted to $942 for 2002.

Income Taxes - Income tax expense (credit) is based on reported 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 carry forward for financial and tax reporting purposes (See Note 5).

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NOTE 2 - FIXED ASSETS:

A summary of fixed assets follows:

2003 2002

Office equipment $180,612 $180,612

Furniture and fixtures 27,486 27,486

208,098 208,098

Less: Accumulated depreciation 208,098 205,268

Total Fixed Assets $ - $ 2,830

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 $7,750 and $11,004 for 2003 and 2002, respectively.

Trade receivables consist of accounts receivable from parent and affiliates.

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 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 the option to renew the lease for an additional 36 months upon its expiration. The new lease can be terminated by the Company upon 180 days written notice.

Rent expense amounted to $14,895 for 2003 and $11,688 for 2002.

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NOTE 5 - TAXES ON INCOME:

Taxes on income (credit) are as follows:

2003 2002

CURRENTLY PAYABLE (REFUNDABLE):

Federal income tax $ - $ -

State income tax    -        -

-        -

DEFERRED:

Federal income tax (41,000) (31,000)

State income tax (12,000) (11,000)

(53,000) (42,000)

Total $(53,000) $(42,000)

The deferred income tax benefit results from the Company's available net operating loss carryforwards.

At April 30, 2003 the Company had federal and state net operating loss carryforwards of approximately $472,000 and $1,816,000, respectively, which will be available to reduce future taxable income. The federal and state net operating loss carryforwards expire in 2024 and 2014, respectively. Although realization is not assured, management believes it is more likely than not that the entire deferred income tax benefit relating to the net operating loss carryforwards will be realized. Accordingly, no valuation allowance is required.

NOTE 6 - ARBITRATION AWARD:

An Arbitration claim was filed against the Company by a subcontractor under a subcontract agreement with the Company for the erection of three container cranes at two United States Naval facilities. In January 2002, the Company recorded a liability of $1,000,000 relating to this claim, which at that time was management’s best estimate of the possible loss relating to this claim. Any further expense relating to this claim excluding interest and legal fees would be charged to its parent Company. On February 13, 2003 all parties involved in this matter signed a final settlement which would pay the subcontractor $2,460,000 plus interest. On February 28, 2003 this claim was paid in the amount of $2,856,707 of which $1,699,477 was charged to its parent Company.

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