IMPSA S.A. — Interim / Quarterly Report 2006

Oct 6, 2006

IMPSA INTERNATIONAL, INC.

Financial Statements

July 31, 2006 and July 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 July 31, 2006 and July 31, 2005 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 23, 2006

IMPSA INTERNATIONAL, INC.

BALANCE SHEETS

JULY 31, 2006 AND JULY 31, 2005

ASSETS:

NOTES 2006 2005

Current Assets:

Cash 1 $ 112,718 $ 364,044

Accounts receivable – affiliated companies 1 and 3 1,807,237 1,554,120

Prepaid expenses 2,096 1,175

Total Current Assets 1,922,051 1,919,339

Non-Current Assets:

Deferred income tax benefit 1 and 6 444,000 502,000

Fixed assets 2 - -

Total Non-Current Assets 444,000 502,000

Total Assets 2,366,051 $ 2,421,339

LIABILITIES:

Current Liabilities:

Accounts payable $ 70,780 $ 44,104

Accounts payable – affiliated companies 3 830,281 523,005

Total Current Liabilities 901,061 567,109

Stockholder’s Equity (as per
corresponding statement) 1,464,990 1,854,230

Total Liabilities and Equity $ 2,336,051 $ 2,421,339

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA INTERNATIONAL, INC.

STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JULY 31, 2006 AND JULY 31, 2005

NOTES 2006 2005

Net sales of goods and services 1 and 3 10,740 $ 50,428

Expenses:

Selling 1 and 5 50,115 49,643

Administrative 1 and 5 187,411 174,849

237,526 224,492

Subtotal – Loss (226,786 ) (174,064 )

Other income and expense 4 64,606 29,717

Loss before income taxes (162,180 ) (144,347 )

Income taxes (credit) 1 and 6 - (58,000 )

Net Loss for the Six Month Period $ (162,180 ) $ (86,347 )

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JULY 31, 2006 AND JULY 31, 2005

2006 2005

OPERATING ACTIVITIES:

Net loss for six month period $ (162,180 ) $ (86,347 )

Add: Items not representing source or cash value

Deferred income taxes - (58,000 )

Sources:

Decrease in accounts and notes receivable – affiliated companies - 7,271,729

Decrease in prepaid expenses 3,143 2,741

Uses:

Increase in accounts and notes receivable – affiliated companies (101,162 ) -

Decrease in accounts payable (44,233 ) (50,529 )

Decrease in accounts payable – affiliated companies (10,097,589 ) (8,559,712 )

Net Cash Used by Operating Activities $ (10,402,021 ) $ (1,480,118 )

FINANCING ACTIVITIES:

Proceeds from borrowings 10,000,000 -

Net Cash Provided by Financing Activities 10,000,000 -

Net Decrease in Cash $ (402,201) $ (1,480,118 )

Cash and Cash Equivalents – January 31 $ 514,739 $ 1,844,162

Net Change in Cash for the Six Month Period (402,021 ) (1,480,118 )

Cash and Cash Equivalents – July 31 $ 112,718 $ 364,044

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Noncash Transactions:

Payoff of note payable and related interest expense
by affiliated company $ 10,104,167 $ -

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2006 AND JULY 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 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.

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).

NOTE 2 — FIXED ASSETS:

A summary of fixed assets follows:

July 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 company and affiliates, are made in U.S. dollars, and the exchange rate costs are accounted for by the parents 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 which charged interest at 4% per annum and were satisfied in year ended January 31, 2006. Interest income on accounts and notes receivable from affiliated companies amounted to $54,762 for 2006 and $1,851 for 2005.

Commissions earned amounted to $10,740 and $50,428 for 2006 and 2005, respectively.

NOTE 4 — Note Payable:

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

note 5 — 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 increase. The lease can be terminated by the Company upon 180 days written notice.

Rent expense amounted to $16,236 for 2006 and $15,612 for 2005.

NOTE 6 — TAXES ON INCOME:

Taxes on income (credit) are as follows:

July 31,

2006 2005

DEFERRED:

Federal income tax $ - $ (44,000 )

State income tax - (14,000 )

Total $ - $ (58,000 )

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,

2006 2005

Non-Current Deferred Asset:

Net operating loss carryforwards $ 725,000 $ 591,000

Valuation allowance (281,000 ) (89,000 )

Total $ 444,000 $ 502,000

NOTE 6 — TAXES ON INCOME (Continued):

At July 31, 2006 the Company had net operating loss carryforwards totaling $1,568,000 for federal income tax purposes which are available to offset future federal taxable income thru 2026 and net operating loss carryforwards for state income tax purposes totaling approximately $2,912,000 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.

IMPSA INTERNATIONAL, INC.

STATEMENTS OF Stockholder’s equity

FOR THE six MONTHS ENDED July 31, 2006 AND July 31, 2005

2006 2005

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

Net loss for
the six month
period as per
statement of
income - - - - - - - - (162,180 ) (162,180 ) (86,347 )

Balance as
of July 31 $ 250 $ - $ 234,750 $ - $ 235,000 $ - $ - $ - $ 1,229,990 $ 1,464,990 $ 1,854,230

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

See Accompanying Notes and Accountant’s Compilation report.