IMPSA S.A. — Interim / Quarterly Report 2004

Sep 13, 2004

IMPSA INTERNATIONAL, INC.

Financial Statements

July 31, 2004 and July 31, 2003

To the Board of Directors

IMPSA International, Inc.

Pittsburgh, Pennsylvania

We have compiled the accompanying balance sheets of IMPSA International, Inc. as of July 31, 2004 and July 31, 2003 and the related statements of income, stockholder’s 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

Joseph S. Scherle, CPA

Pittsburgh, Pennsylvania

August 9, 2004

IMPSA INTERNATIONAL, INC.

BALANCE SHEETS

JULY 31, 2004 AND JULY 31, 2003

ASSETS:

NOTES 2004 2003

Current Assets:

Cash 1 $ 78,079 $ 335,453

Trade receivables 1 and 3 1,677,997 1,761,518

Prepaid expenses 1,627 1,745

Total Current Assets 1,757,703 2,098,716

Non-Current Assets:

Deferred income tax benefit 5 359,000 368,000

Fixed assets 1 and 2 - -

Total Non-Current Assets 359,000 368,000

Total Assets $ 2,116,703 $ 2,466,716

LIABILITIES:

Current Liabilities:

Accounts payable 6 $ 74,692 $ 78,282

Stockholder’s Equity (as per
corresponding statement) 2,042,011 2,388,434

Total Liabilities and Equity $ 2,116,703 $ 2,466,716

See Accompanying Notes and Accountant's Compilation Report.

IMPSA INTERNATIONAL, INC.

STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JULY 31, 2004 AND JULY 31, 2003

NOTES 2004 2003

Net sales of goods and services 1 and 3 $ 13,593 $ 17,062

Expenses:

Selling 1 and 4 20,682 87,249

Administrative 1 and 4 222,245 186,685

242,927 273,934

Subtotal –Loss (229,334) (256,872)

Other income and expense 17,319 21,856

Loss before income taxes (212,015) (235,016)

Income taxes (credit) 1 and 5 (86,000) (95,000)

Net Loss for the Six Month Period $ (126,015) $ (140,016)

See Accompanying Notes and Accountant's Compilation Report.

IMPSA INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JULY 31, 2004 AND JULY 31, 2003

2004 2003

OPERATING ACTIVITIES:

Net loss for the six month period $ (126,015) $ (140,016)

Add: Items not representing source or use of cash:

Deferred income taxes (86,000) (95,000)

Source:

Decrease in trade receivables 113,174 627,366

Decrease in prepaid expenses 2,496 298

Increase in accounts payable 36,900 -

Use:

Decrease in accounts payable - (333,079)

Net Cash Provided (Used) By Operating Activities (59,445) 59,569

Net Increase (Decrease) In Cash $ (59,445) $ 59,569

Cash and Cash Equivalents - January 31 $ 137,524 $ 275,884

Net Change in Cash for the Six Month Period (59,445) 59,569

Cash and Cash Equivalents - July 31 $ 78,079 $ 335,453

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid$ 33$ 220

Noncash transaction:

Payment of arbitration award liability by an
affiliated company$ -$ 2,846,789

See Accompanying Notes and Accountant's Compilation Report.

IMPSA INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2004 AND JULY 31, 2003

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 under an accelerated method (MACRS) for both income tax and financial reporting purposes, except for certain fixed assets which were depreciated under IRC Section 179 for income tax purposes and MACRS for financial reporting purposes. There was no depreciation expense for 2004 and 2003 because all the fixed assets were fully depreciated.

Income Taxes – Income tax expense (credit) is based on reported income (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 carryforward for financial and tax reporting purposes (See Note 5).

NOTE 2 — FIXED ASSETS:

A summary of fixed assets follows:

2004 2003

Office equipment $ 180,612 $ 180,612

Furniture and fixtures 27,486 27,486

208,098 208,098

Less: Accumulated depreciation 208,098 208,098

Total Fixed Assets $ - $ -

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 $13,593 and $17,062 for 2004 and 2003, 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 lease can be terminated by the Company upon 180 days written notice.

NOTE 5 — TAXES ON INCOME:

Taxes on income (credit) are as follows:

July 31,

2004 2003

DEFERRED:

Federal income tax $ (65,000) $ (72,000)

State income tax (21,000) (23,000)

Total $ (86,000) $ (95,000)

NOTE 5 — Taxes on Income (Continued):

Deferred income taxes result from the tax benefit of the Company's current net operating loss adjusted for any change in the valuation allowance.

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

July 31,

2004 2003

Non-Current Deferred Asset:

Net operating loss carryforwards $ 504,000 $ 368,000

Valuation allowance (145,000) -

Total $ 359,000 $ 368,000

At July 31, 2004 the Company had net operating loss carryforwards totaling $920,000 for federal income tax purposes which are available to offset future federal taxable income thru 2025 and net operating loss carryforwards for state income tax purposes totaling approximately $2,253,000 which are available to offset future state taxable income through 2015. The Company has recorded a valuation allowance to reflect the amount of deferred tax asset which may not be realized due to the expiration of the previously described net operating loss carryforwards for state income tax purposes.

IMPSA INTERNATIONAL, INC.

STATEMENTS OF Stockholder’s equity

FOR THE six MONTHS ENDED July 31, 2004 AND July 31, 2003

2004 2003

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 $ - $ - $ - $ 1,933,026 $ 2,168,026 $ 2,528,450

Net loss for
the six month
period as per
statement of
income - - - - - - - - (126,015) (126,015) (140,016)

Balance as
of July 31 $ 250 $ - $ 234,750 $ - $ 235,000 $ - $ - $ - $ 1,807,011 $ 2,042,011 $ 2,388,434

* Par Value $1 per share
Authorized 1,000 shares
Issued 250 shares

See Accompanying Notes and Accountant’s Compilation report