IMPSA S.A. — Interim / Quarterly Report 2007

Sep 11, 2007

IMPSA INTERNATIONAL, INC.

Financial Statements

July 31, 2007 and July 31, 2006

To the Board of Directors

IMPSA International, Inc.

The Grant Building • 310 Grant Street • Suite 1020 • Pittsburgh, Pennsylvania 15219-2295

(412) 281-8270 • Fax (412) 281-7791

Pittsburgh, Pennsylvania

We have compiled the accompanying balance sheets of IMPSA International, Inc. as of July 31, 2007 and July 31, 2006 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

Pittsburgh, Pennsylvania

August 3, 2007

IMPSA INTERNATIONAL, INC.

BALANCE SHEETS

July 31, 2007 AND July 31, 2006

Notes 2007 2006

Assets:

Current Assets:

Cash 1 $ 215,833 $ 112,718

Accounts receivable – affiliated companies 1 and 4 98,004,691 1,807,237

Prepaid expenses 2,052 2,096

Total Current Assets 98,222,576 1,922,051

Non-Current Assets:

Intellectual property 1 and 3 5,442,320 -

Deferred income tax benefit 1 and 7 413,000 444,000

Fixed assets 1, 2, and 5 43,847 -

Loan financing costs 1, 4, and 5 1,506,640 -

Total Non-Current Assets 7,405,807 444,000

Total Assets $ 105,628,383 $ 2,366,051

LIABILITIES:

Current Liabilities:

Current portion of long-term debt 5 $ 31,506,587 $ -

Accounts payable 743,492 70,780

Accounts payable – affiliated companies 4 - 830,281

Accrued interest 1,738,833 -

Total Current Liabilities 33,988,912 901,061

Long-Term Debt 5 70,531,942 -

Total Liabilities 104,592,854 901,061

Stockholder’s equity (as per corresponding statement) 1,107,529 1,464,990

Total Liabilities and Stockholder’s Equity $ 105,628,383 $ 2,336,051

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA INTERNATIONAL, INC.

STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JULY 31, 2007 AND JULY 31, 2006

NOTES 2007 2006

Net sales of goods and services 1 and 4 $ 66,409 $ 10,740

Consulting income 3 325,000 -

391,409 10,740

Expenses:

Selling 1 and 3 995,967 50,115

Administrative 6 218,304 187,411

1,214,271 237,526

Subtotal – Loss (822,862 ) (226,786 )

Other income and expense 4 and 5 256,937 64,606

Loss before income taxes (565,925 ) (162,180 )

Income taxes (credit) 1 and 7 - -

Net Loss for the Six Month Period $ (565,925 ) $ (162,180 )

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JULY, 31, 2007 AND jULY 31, 2006

2007 2006

OPERATING ACTIVITIES:

Net income (loss) for the six month period $ (565,925 ) $ (162,180 )

Add: Items not representing source of cash:

Depreciation 3,560 -

Amortization of intellectual property 945,868 -

Amortization of loan fees 211,825 -

Deferred income taxes - -

Increase in accounts payable 504,550 -

Increase in accrued interest 353,416 -

Sources:

Decrease in prepaid expenses 3,077 3,143

Uses:

Increase in accounts receivable – affiliated companies (63,621,435 ) (101,162 )

Decrease in accounts payable – affiliated companies - (10,097,589 )

Decrease in accounts payable - (44,233 )

Net Cash Used by Operating Activities (62,165,064 ) (10,402,021 )

FINANCING ACTIVITIES:

Loan financing costs (918,613 ) -

Proceeds from borrowings 60,000,000 10,000,000

Payments on long-term debt (1,052,249 ) -

Net Cash Provided by Financing Activities 58,029,138 10,000,000

Net Decrease in Cash $ (4,135,926 ) $ (402,201 )

Cash and Cash Equivalents – Beginning of Period 4,351,759 514,739

Net Decrease in Cash for the Period (4,135,926 ) (402,021 )

Cash and Cash Equivalents – End of Period $ 215,833 $ 112,718

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:

Interest paid $ 2,380 $ -

Noncash TRANSACTIONS:

Payment of debt by affiliated company $ 6,950,000 $ 10,104,167

Purchase of intellectual property thru reduction
of accounts receivable from affiliated companies $ 2,972,200 $ -

See Accompanying Notes and Accountant’s Compilation Report.

IMPSA International, Inc.

Notes to Financial Statements

JUly 31, 2007 AND July 31, 2006

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. Starting in fiscal year ending January 31, 2007 the Company began offering consulting services relating to the hydro electric power business on a worldwide basis.

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 from the parent company and affiliates.

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.

Intellectual Property – Intellectual property as described in Note 3 is being amortized over the period beginning January 1, 2007 and ending December 31, 2009. Amortization expense was $945,868 for 2007. There was no amortization expense for 2006.

Depreciation – Depreciation is computed under an accelerated method (MACRS) for both income tax and financial reporting purposes. Depreciation expense for 2007 was $3,560. There was no depreciation expense for 2006.

Loan Financing Costs – Loan financing costs of $1,794,484 are being amortized over the original life of the long-term debt described in Note 5. Amortization expense for 2007 was $211,825 and was charged back to IMPSA International, Inc.’s parent company. There was no amortization expense for 2006.

Income Taxes – Income tax expense 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 7).

NOTE 2 — FIXED ASSETS:

A summary of fixed assets follows:

April 30,

2007 2006

Automobiles $ 47,407 $ -

Office equipment 180,612 180,612

Furniture and fixtures 27,486 27,486

255,505 208,098

Less: Accumulated depreciation 211,658 208,098

Total Fixed Assets $ 43,847 $ -

note 3 — intellectual property:

The Company purchased intellectual property from its parent company consisting of know how and management expertise in the purchase and operation of a hydro electric power business. The Company plans to use this expertise by providing consulting services to a newly formed company doing business in the hydro electric power industry. The Company has paid to date $6,485,788 for the intellectual property and is amortizing this amount over its estimated useful life ending December 31, 2009.

NOTE 4 — RELATED PARTY TRANSACTIONS:

All advances, as well as accounts receivable, notes receivable and accounts payable from/to the parent company and affiliates, are made in U.S. dollars, and the exchange rate costs are accounted for by the parent company and/or affiliates.

Commissions earned amounted to $66,409 and $10,740 for 2007 and 2006, respectively.

Interest income on receivables from affiliated companies amounted to $59,288 for 2007 and $54,762 for 2006.

Interest expense and loan amortization fees charged back to the parent company was $3,951,491 for 2007. There were no interest and loan amortization fees charged back to the parent company for 2006.

Note 5 — 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. The outstanding balance on this credit agreement at July 31, 2007 was $42,000,000.

On January 31, 2007 the Company financed two automobiles through Ford Credit. The notes bear interest at 12.8%, require 60 monthly payments of $926 beginning March 10, 2007, and are secured by the vehicles being purchased. The outstanding balance on these notes at July 31, 2007 was $38,529.

On March 16, 2007 the Company entered into a credit agreement with certain lenders to borrow $36,000,000 bearing interest at 8½% per annum and payable in nine quarterly installments of principle beginning March 16, 2008 with quarterly interest only payments prior to that date. The outstanding balance on this credit agreement at July 31, 2007 was $36,000,000.

Note 5 — Long-term Debt (Continued):

On June 15, 2007 the Company entered into a credit agreement with certain lenders to borrow $24,000,000 bearing interest at 8% per annum and payable in 6 semi-annual installments of principal and interest beginning June 20, 2008. The outstanding balance on this credit agreement at July 31, 2007 was $24,000,000.

The Company’s parent company has guaranteed all of the above loans. The parent company also is responsible for paying or reimbursing the Company for interest on the $50,000,000, $36,000,000 and $24,000,000 loans.

Principal payments on long-term debt are due as follows:

July 31, Amount

2008 $ 31,506,587

2009 48,007,479

2010 22,508,492

2011 9,641

2012 6,330

102,038,529

Portion Due in One Year 31,506,587

Long-Term Portion $ 70,531,942

NOTE 6 — 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 expenses amounted to $13,625 for 2007 and $16,236 for 2006.

Note 7 — Taxes on Income:

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

July 31,

2007 2006

Non Current Deferred Tax Asset:

Net operating loss carryforwards $ 857,000 $ 725,000

Valuation allowance (444,000 ) (281,000)

$ 413,000 $ 444,000

At July 31, 2007 the Company had net operating loss carryforwards totaling approximately $1,893,000 for federal income tax purposes and $3,236,000 for state income tax purposes which are available to offset future taxable income through 2027. 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, 2007 AND July 31, 2006

2007 2006

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 $ - $ - $ - $ 1,438,454 $ 1,673,454 $ 1,627,170

Net loss for
the six month
period as per
statement of
income - - - - - - - - (565,925 ) (565,925 ) (162,180 )

Balance as
of July 31 $ 250 $ - $ 234,750 $ - $ 235,000 $ - $ - $ - $ 872,529 $ 1,107,529 $ 1,464,990

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

See Accompanying Notes and Accountant’s Compilation report.