IMPSA S.A. — Interim / Quarterly Report 2006

Dec 12, 2006

IMPSA INTERNATIONAL, INC.

Financial Statements

October 31, 2006 and October 31, 2005

To the Board of Directors

IMPSA International, Inc.

Pittsburgh, Pennsylvania

We have compiled the accompanying balance sheets of IMPSA International, Inc. as of October 31, 2006, and October 31, 2005, and the related 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

Pittsburgh, Pennsylvania

November 1, 2006

IMPSA INTERNATIONAL, INC.

BALANCE SHEETS

OCTOBER 31, 2006 AND OCTOBER 31, 2005

NOTES 2006 2005

ASSETS:

Current Assets:

Cash 1 $ 28,434,563 $ 314,640

Accounts receivable – affiliated companies 1 and 3 21,630,991 1,577,922

Prepaid expenses 524 -

Total Current Assets 50,066,078 1,892,562

Non-Current Assets:

Deferred income tax benefit 1 and 6 444,000 533,000

Fixed assets 1 and 2 - -

Loan financing costs 1 875,871 -

Total Non-Current Assets 1,319,871 533,000

Total Assets $ 51,385,949 $ 2,425,562

Liabilities:

Current Liabilities:

Current portion of long-term debt 4 $ 20,000,000 $ -

Accounts payable 33,314 17,983

Accounts payable – affiliated companies 3 - 597,682

Accrued interest 72,917 -

Total Current Liabilities 20,106,231 615,665

Long-Term Debt 4 30,000,000 -

Total Liabilities 50,106,231 615,665

Stockholder’s Equity (as per corresponding statement) 1,279,718 1,809,897

Total Liabilities and Stockholder’s Equity $ 51,385,949 $ 2,425,562

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA International, Inc.

StatementS of income

For the nine months ended october 31, 2006 and October 31, 2005

NOTES 2006 2005

Net sales of goods and services 1 and 3 $ 14,111 $ 58,096

Expenses:

Selling 1 and 5 75,057 73,894

Administrative 1 and 5 286,483 257,738

361,540 331,632

Subtotal – Loss (347,429 ) (273,536 )

Other income and expense 3 (23 ) 53,856

Loss before income taxes (347,452 ) (219,680 )

Income taxes (credit) 1 and 6 - (89,000 )

Net Loss for the Nine Month Period $ (347,452 ) $ (130,680 )

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA International, INc.

Statements of Cash Flows

For the Nine Months Ended October 31, 2006 and October 31, 2005

2006 2005

Operating Activities:

Net loss for the nine month period $ (347,452 ) $ (130,680 )

Add: Items not representing source of cash:

Deferred income taxes - (89,000 )

Sources:

Decrease in accounts and notes receivable – affiliated companies - 7,247,927

Decrease in prepaid expenses 4,715 3,916

Increase in accrued interest 72,917 -

Uses:

Increase in accounts receivable – affiliated companies (19,924,916 ) -

Decrease in accounts payable (81,699 ) (76,650 )

Decrease in accounts payable – affiliated companies (10,927,870 ) (8,485,035 )

Net Cash Used By Operating Activities (31,204,305 ) (1,529,522 )

financing activities:

Loan financing costs (875,871 ) -

Proceeds from borrowings 72,000,000 -

Payments on long-term debt (12,000,000 ) -

Net Cash Provided by Financing Activities 59,124,129 -

Net Increase (Decrease) in Cash $ 27,919,824 $ (1,529,522 )

Cash and Cash Equivalents – February 1 $ 514,739 $ 1,844,162

Net Increase (Decrease) in Cash for the Period 27,919,824 (1,529,522 )

Cash and Cash Equivalents – October 31 $ 28,434,563 $ 314,640

Supplemental Disclosure of Cash
flow information:

Interest paid $ 148,005 $ -

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA International, Inc.

notes to financial statements

october 31, 2006 and october 31, 2005

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

IMPSA International, Inc. is a wholly – owned subsidiary of Industrias 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.

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 6).

Loan Financing Costs – Loan financing costs are being amortized over the original life of the long-term debt described in Note 4 or 36 months. Loan financing costs which amounted to $875,871 will be amortized starting in November 2006 at $24,330 per month.

Note 2 — Fixed Assets:

A summary of fixed assets follows:

October 31,

2006 2005

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.

Accounts and notes receivable from affiliated companies consist of both accounts and notes receivable. In 2005 there were two notes receivable from two different affiliated companies totaling $8,946,211 with interest at 4% per annum. These notes were satisfied in their entirety in June 2005. Interest income on accounts and notes receivable from affiliated companies amounted to $84,577 for 2006 and $21,445 for 2005.

Commissions earned amounted to $14,111 and $58,096 for 2006 and 2005, respectively.

Interest expense on long-term debt charged back to the parent company was $177,084 for the nine months ended October 31, 2006.

Note 4 — Long-term DeBt:

On October 19, 2006 the Company entered into a credit agreement with certain lenders to borrow $50,000,000 bearing interest at 10½% per annum and payable in 6 semi-annual installments of principal and interest. Principal payments on the credit agreement are due as follows:

Year Amount

2007 $ 20,000,000

2008 18,000,000

2009 12,000,000

$ 50,000,000

On September 14, 2006 the Company borrowed $12,000,000 from LW Forfaiting, Inc. which was satisfied in its entirety on October 27, 2006 from the proceeds from the above described loan.

On March 20, 2006 the Company obtained a $10,000,000 loan from Forum Absolute Return Fund, LTD. This loan was repaid directly to the lender by the parent company on April 7, 2006 and included interest of $104,167.

The Company’s parent company has guaranteed all of the above loans. The parent company also directly paid the interest on the $10,000,000 loan and is responsible for paying or reimbursing the Company for interest on the $50,000,000 loan.

NOTE 5 — 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 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.

Rent expense amounted to $23,274 for 2006 and $23,316 for 2005.

Note 6 — taxes on Income:

Taxes on income (credit) are as follows:

October 31,

2006 2005

DEFERRED:

Federal income tax $ - $ (67,000 )

State income tax - (22,000 )

Total $ - $ (89,000 )

Deferred income taxes result from the tax benefit of the company’s current net operating loss adjusted for any changes in the valuation allowance.

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

October 31,

2006 2005

Non Current Deferred Tax Asset:

Net operating loss carryforwards $ 740,000 $ 622,000

Valuation allowance (296,000 ) (89,000 )

$ 444,000 $ 533,000

At October 31, 2006 the Company had net operating loss carryforwards totaling approximately $1,753,000 for federal income purposes which are available to offset future federal taxable income through 2026 and net operating loss carryforwards for state income tax purposes totaling approximately $3,097,000 which are available to offset future state taxable income through 2016. 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 federal and state income tax purposes.

IMPSA INTERNATIONAL, INC.

STATEMENTs OF STOCKHOLDER’S EQUITY

FOR THE NINE MONTHS ENDED OCTOBER 31, 2006 AND OCTOBER 31, 2005

2006 2005

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 $ - $ - $ - $ 1,392,170 $ 1,627,170 $ 1,940,577

Net loss for the nine
month period as per
statement income - - - - - - - - (347,452 ) (347,452 ) (130,680 )

Balance as of October 31 $ 250 $ - $ 234,750 $ - $ 235,000 $ - $ - $ - $ 1,044,718 $ 1,279,718 $ 1,809,897

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

See Accompanying Notes and Accountant’s Compilation Report.