<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

/X/      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997

/ /      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 FOR THE TRANSITION PERIOD FROM


                            ---------------- --, ----

                                       TO

                            ---------------- --, ----

                        COMMISSION FILE NUMBER: 1-10372

                           DOMINION BRIDGE CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

            DELAWARE                                    23-2577796
   (State or Other Jurisdiction             (I.R.S. Employer Identification No.)
of Incorporation or Organization)

    500 NOTRE DAME ST., 3RD FLOOR                         H8S 2B2
      LACHINE, QUEBEC, CANADA
(Address of Principal Executive Offices)                 (Zip Code)

       Registrant's telephone number, including area code: (514) 634-3550

           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

              Securities registered under Section 12(g) of the Act:

                     COMMON STOCK, PAR VALUE $.001 PER SHARE

                         PREFERRED STOCK PURCHASE RIGHTS

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

     (1)  Yes [X]   No [__]                 (2)  Yes [X]   No [__]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [__]

         The aggregate market value of the voting stock held by non-affiliates
of the registrant, as of January 7, 1998, was approximately $47,689,795 based
upon the closing price of the Common Stock on such date as reported on the
NASDAQ National Market System of $1.96875. The information provided shall in no
way be construed as an admission that any person whose holdings are excluded
from the figure is an affiliate or that any person whose holdings are included
is not an affiliate, and any such admission is hereby disclaimed. The
information provided is included solely for record keeping purposes of the
Securities and Exchange Commission.

        APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
                           DURING THE PAST FIVE YEARS

         Check whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.

                                 Yes [X] No [__]

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

         The number of shares outstanding of the registrant's sole class of
common stock as of January 7, 1998 was 31,447,648 shares.

         All dollar amounts included in this Report are shown in U.S. dollars,
unless otherwise indicated.

                       DOCUMENTS INCORPORATED BY REFERENCE

         None.
<PAGE>   2
                                TABLE OF CONTENTS

                                                                            Page

PART I.........................................................................2

ITEM 1.       DESCRIPTION OF BUSINESS..........................................2

ITEM 2.       DESCRIPTION OF PROPERTIES.......................................16

ITEM 3.       LEGAL PROCEEDINGS...............................................17

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............20

PART II.......................................................................21

ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........21

ITEM 6.       SELECTED FINANCIAL DATA.........................................23

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS.......................................23

ITEM 8.       FINANCIAL STATEMENTS............................................30

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
              AND FINANCIAL DISCLOSURE........................................30


PART III......................................................................31

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
              PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT......31

ITEM 11.      EXECUTIVE COMPENSATION..........................................36

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..39

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................43

PART IV.......................................................................44

ITEM 14.      EXHIBITS AND REPORTS ON FORM 8-K................................44


                                      -i-
<PAGE>   3
                          PRIVATE SECURITIES LITIGATION
                        REFORM ACT SAFE HARBOR STATEMENT

         When used in this Annual Report on Form 10-K and in other public
statements by the Company and Company officers, the words "expect," "estimate,"
"project," "intend," and similar expressions are intended to identify
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial condition. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial condition to differ materially. Such factors
include, among others: (i) the impact that a recent consent solicitation and the
possible sale of the Company may have on the Company's ongoing operations; (ii)
the risk of claims for product and construction liability or other liability
associated with the Company's construction operations; (iii) the Company's
ability to secure performance bonding on the projects it undertakes; (iv) the
intense competition and the bidding process in which the Company competes; (v)
the Company's ability to obtain financing on satisfactory terms and the degree
to which the Company is leveraged; (vi) the Company's ability to obtain loan
guarantees and other governmental support for projects to be undertaken by the
Company; (vii) the sensitivity of the Company's business to general economic
conditions, including conditions internationally where the Company's
subsidiaries operate; (viii) the timing of completion of projects; (ix) the
performance of suppliers and subcontractors; (x) the Company's ability to avoid
penalties for delays in completion of projects and cost overruns; (xi) factors
associated with international ventures such as the relative strength of the
dollar when compared to the currencies in the countries in which the Company
operates; (xii) the Company's ability to remain in compliance with the numerous
environmental, health and safety requirements to which it is subject; (xiii)
changes in accounting principles, policies or guidelines; and (xiv) other
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices. Additional factors
are described in this Annual Report on Form 10-K and in the Company's other
public reports filed with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date made. The Company undertakes no obligation to publicly
release the result of any revision of these forward-looking statements to
reflect events or circumstances after the date they are made or to reflect the
occurrence of unanticipated events.
<PAGE>   4
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

GENERAL DEVELOPMENT OF BUSINESS

         Dominion Bridge Corporation (the "Company") was incorporated on
February 16, 1989 in Delaware as Cedar Group, Inc. and subsequently changed its
name to Dominion Bridge Corporation in 1996 to more readily identify the Company
with its principal North American operating subsidiary. The Company primarily
operates as a diversified international engineering and construction company in
North America, Australia and Southeast Asia, and has additional operations in
shipbuilding and repair and industrial specialty fasteners.

         Since 1994, the Company has established its operations by way of four
principal and several other acquisitions. The principal acquisitions concluded
by the Company were:

                  (i) in 1994, the acquisition from United Dominion Industries
Limited ("UDI") of Dominion Bridge Inc. ("DBI"), a 116 year-old Canadian general
contractor engaged in infrastructure projects in Canada and North America;

                  (ii) in 1995, the acquisition of Steen Contractors Limited and
related subsidiaries ("Steen"), an 80 year-old engineering and construction
company which focuses on mechanical, heating, ventilation and air conditioning
and, recently, in the construction of oil and gas pipelines;

                  (iii) in 1996, the acquisition of a controlling interest in
McConnell Dowell Corporation Limited ("MDC"), a general contractor engaged in a
broad range of infrastructure projects in the Asia-Pacific region, the Middle
East and Eastern Europe; and

                  (iv) also in 1996, the acquisition of Davie Industries Inc.
("Davie," formerly known as "The MIL Group Inc."), which is engaged primarily in
commercial and military ship design, construction and repair, the construction
and repair of offshore drilling rigs and the manufacturing of industrial
products.

         The Company's initial acquisitions were in the industrial and aerospace
specialty fasteners market and included the 1994 acquisition of a controlling
interest in Unimetric Corporation ("Unimetric") from Ateliers de la Haute
Garonne ("AHG"), and several small acquisitions prior to the Unimetric
acquisition by a predecessor company, Edinov Corporation ("Edinov"). In 1994,
the Company sold its shares of Edinov, which owned several Canadian fastener
companies, and DBI's steel service center division.


                                      -2-
<PAGE>   5
         International Engineering and Construction

         The international engineering and construction activities of the
Company are conducted in North America by DBI and Steen and in Australia,
South East Asia, the Pacific Islands, the Middle East and Eastern Europe by
MDC. The following is a summary of the transactions that have been concluded
by the Company to establish its engineering and construction operations.

         Dominion Bridge Inc. On April 8, 1994, the Company completed the
acquisition of 85% of DBI from UDI, which had operated it as an unincorporated
division. The acquisition, effective March 9, 1994 for accounting purposes, had
UDI transfer all of the assets, liabilities and business of its Dominion Bridge
division into a newly-created subsidiary of UDI (which is now DBI), which the
Company purchased for a net payment of Cdn $5,000,000 in cash. UDI was also
issued Cdn $18.3 million of DBI's Class A Preferred Shares in connection with
the transfer of assets. Concurrently, the Company contributed Cdn $2 million to
DBI in exchange for its Class B Preferred Shares. The Class A Preferred Shares
were convertible into the Company's common stock at a rate of Cdn $6.00 and paid
a quarterly dividend at a rate of 7.5% annually. The Class A Preferred Shares
were subject to certain put and call rights.

         On October 21, 1994, the Company reached agreement with UDI whereby the
Company acquired from UDI the remaining 15% of the common shares of DBI and all
of the Class A Preferred Shares in exchange for future cash payments totaling
Cdn $18 million and transfer to UDI of certain assets having a book value of
Cdn $1.4 million. The Company received a waiver of that year's fourth quarter
Class A Preferred Share dividend payment. As of September 30, 1995, the Company
paid Cdn. $8.3 million, transferred the assets and received all of the common
shares of DBI held by UDI and Cdn. $8.8 million face value of the Class A
Preferred Shares. The agreement between the Company and UDI was further modified
on December 18, 1995, when the Company agreed to acquire the remaining Class A
Preferred Shares of UDI for aggregate consideration of Cdn $11.5 million,
consisting of cash of Cdn $5.0 million and the issuance of up to 1,250,334
shares of the Company's Common Stock to be sold by UDI from time to time to
permit UDI to realize up to Cdn $6.5 million. These financial obligations to UDI
were completed in 1996 and resulted in the Company issuing 1,050,334 shares of
Common Stock and paying UDI $967,000 in lieu of issuing the additional 200,000 
shares of Common Stock.

         At the time that the Class A Preferred Shares were purchased by the
Company, UDI released all of the registered security interests it held on the
assets of DBI, including any claims for bonding, letters of credit or other
guarantees. It further forgave any claims to Cdn $1.8 million of interest and
other claims against DBI, as well as all dividends accruing on the Class A
Preferred Shares.

         During fiscal 1995, in order to pay its obligations to UDI, the Company
sold to third party investors certain of the reacquired Class A Preferred
Shares, which were concurrently converted into shares of common stock of the
Company at a rate of Cdn $6.00. Of the 643,200 of Class A Preferred Shares
converted to common stock, 450,000 of Class A Preferred Shares were acquired by
Groupe Fidutech International Inc. from its purchase of $2.7 million of the
Class A Preferred Shares. Groupe Fidutech International, Inc. is a company owned
by Messrs. Marengere and Amyot, who are the Company's Chief Executive Officer
and a Director, respectively. SEE "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."

         Steen Contractors Limited. On July 31, 1995, but effective March 31,
1995, the Company purchased 75% of the outstanding common shares of Steen
Contractors Limited for a cash price of Cdn $6.3 million ($4.5 million). The
acquisition, accounted for under the purchase method of accounting, was
effective April 1, 1995 for accounting purposes, the date on which the Company
assumed operational control. The remaining 25% of common shares were purchased
for Cdn $2.1 million ($1.6 million) on March 31, 1996, with the consideration
being fully paid on May 3, 1996. The total cost of the Company's acquisition of
Steen was approximately U.S. $6.1 million. Funds for the initial acquisition of
the 75% of the common shares were provided to the Company by a U.S. $5.0 million
bridge loan from BT Commercial Corporation ("BTCC"), an affiliate of Banker's
Trust Company. The loan was repaid in full in October 1995 with funds


                                      -3-
<PAGE>   6
partially raised from the private placement sale of convertible preferred stock
by the Company's subsidiary, Cedar Group (TCI) Inc. LLC ("TCI"). SEE "ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."

         McConnell Dowell Corporation Limited. In January 1996, the Company,
through a subsidiary, acquired 19.9% of the ordinary shares of MDC from Morrison
Knudsen Corporation for A$1.25 (U.S. $0.98) per share. On January 18, 1996, a
tender offer was made for all ordinary shares of MDC at a net price to the
seller of A$1.25 (U.S. $0.98). This was later increased to A$1.60 (U.S. $1.25).
Under this tender offer, an additional 11,178,115 ordinary shares, or 26.89%,
were tendered and purchased by the Company's subsidiary. Prior to the expiration
of this tender offer, on March 29, 1996 the Company's subsidiary purchased
12,640,000 ordinary shares, or 30.4%, in a block purchase on the Australian
Stock Exchange, which provided 50.3% ownership of MDC. For purposes of
accounting, MDC was consolidated as of March 29, 1996. After the close of the
tender offer, the Company owned 32,187,000 ordinary shares, or 77.4% of the
outstanding ordinary shares of MDC. The total cost to acquire these ordinary
shares, including all related fees and expenses, was US $40.2 million.

         In June 1997, the Company sold 6,000,000 ordinary shares of MDC to
institutional investors for US $10.6 million, reducing its ownership to
approximately 63%. In November, through open market purchases, the Company
reacquired approximately 305,000 ordinary shares of MDC for approximately
$600,000. As of the date of this Report, the Company owns approximately 64% of
the outstanding shares of MDC. The ordinary shares of MDC continue to trade on
the Australian Stock Exchange and the New Zealand Stock Exchange.

         The Company financed the $40.2 million acquisition cost of MDC by the
issuance of US $24.2 million of a 6% convertible preferred shares of TCI by
way of an offshore private placement, and a U.S. $30.0 million credit facility
from BTCC. SEE "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES."

         Ship Construction, Repair, Design and Industrial Production

         The ship construction repair and design activities of the Company are
conducted by Davie. The following is a summary of the Company's acquisition of
Davie.

         Davie Industries Inc. On April 24, 1996, but effective March 31, 1996,
the Company, through a subsidiary, purchased from Societe Generale de
Financement ("SGF") 100% of the common stock of Davie Industries in a
privatization transaction. SGF is the industrial finance arm of the Government
of Quebec. Under terms of the transaction, the Company purchased for Cdn $1.00
(one dollar) all of the common stock of Davie and SGF assumed all the current
and contingent liabilities on the date of acquisition, including Davie's
accumulated working capital deficit. On May 15, 1996, SGF invested an additional
Cdn $25.0 million (US $ 18.5 million) to fund capital expenditures and provide
Davie with working capital over the next two years in accordance with the
business plan adopted by the Company and SGF. SGF has also agreed to invest up
to another Cdn $25.0 million in Davie at a rate of Cdn $1.00 for each Cdn $3.00
invested by the Company for expenditures under Davie's development plan. The
Company has agreed to invest over a three year period from the effective date of
acquisition Cdn $45 million to modernize Davie's facilities under the Davie
development plan, subject to financial market conditions and the conditions in
the potential industry sectors identified in the business plan. There is no
prescribed financial penalty or impact on the ownership of Davie if the Company
were to fail to make the agreed upon investment.

         The transaction was accounted for as a purchase for accounting
purposes. Under applicable accounting principles, the Company was further
required to value the assets of Davie acquired at the price paid for the


                                      -4-
<PAGE>   7
acquisition. Approximately US $24.2 million of net fixed assets were written
down to Cdn $1.00 (one dollar) and the remainder of the difference between the
new assets acquired and the purchase price was accounted for by negative
goodwill, which will be amortized against earnings over a three year period.

         Specialty Fasteners

         Unimetric Corporation. The Company acquired 70% of the shares of
Unimetric on April 26, 1994, and acquired the balance in December 1997. The
purchase price for the initial 70% was $1.0 million, consisting of a cash
payment of $900,000, issuance of 88,968 shares of the Company's common stock and
a $200,000 cash purchase of Unimetric 4% non-cumulative, non-voting preferred
shares. Approximately $900,000 of indebtedness due to AHG by Unimetric was
converted into 4% non-cumulative, non-voting preferred shares. The Company
subsequently purchased the preferred shares of Unimetric from AHG by issuing
338,033 shares of its common stock. Finally, in December 1997 the Company agreed
to purchase the balance of AHG's interest in Unimetric, including shareholder
loans, for a purchase price of $400,000 to be paid in installments.

         Although the Company has no formal plan to do so, the Company is
exploring the divestiture of the specialty fastener business. The acquisition of
AHG's remaining ownership interest is expected to facilitate such a divestiture.

         Divestitures

         Divestiture of the Company's Canadian commodity fastener business
carried out by its predecessor company, Edinov, was completed in December 1994.

         The Company at that time sold the shares that it held in Edinov for
cash of Cdn $1.0 million and received Cdn $5.1 million of preferred shares from
the purchaser, 3091473 Canada, Inc. The preferred shares carry a stated dividend
equal to the bank prime rate and are redeemable annually at varying amounts
commencing in 1995 through 2009. In August 1997, the acquirer failed to make the
required partial redemption and pay the accompanying dividend. The Company is
evaluating its rights as a result of this default.

         In December 1994, the Company sold its Amherst, Nova Scotia steel
service center division for gross proceeds of Cdn $900,000.

         In March 1997, the Company sold its Winnipeg rebar division for
approximately Cdn $700,000.


                                      -5-
<PAGE>   8
BREAKDOWN OF SALES, OPERATING PROFITS AND IDENTIFIABLE ASSETS BY BUSINESS
SEGMENT AND GEOGRAPHY

         The following table presents the breakdown of sales and operating
profit by business segment for the last three fiscal years.

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED                                  9/30/97             9/30/96              9/30/95
                                                                              ($ THOUSANDS)
                                                                              [As Restated] 
<S>                                                         <C>                 <C>                 <C>      
SALES BY BUSINESS SEGMENT
     Engineering & Construction (1)                         $513,409            $ 336,599           $ 150,996
     Shipbuilding and Repair (2)                              50,073               21,729                  --
     Fasteners                                                 4,096                4,296               4,754

Total Revenues                                               567,578            $ 362,624            $155,750

OPERATING INCOME (LOSS)
     Engineering & Construction (1)                          (2,433)              $ 2,611              $3,246
     Shipbuilding and Repair (2)                              2,333                (131)                  --
     Specialty Fasteners                                       (921)              (1,467)             (1,316)
     Segment Operating Income (Loss)                         (1,021)                1,013               1,930
     Corporate Expenses                                     (11,915)              (5,030)             (1,020)
     Interest                                                (5,215)              (2,104)               (406)
     Provision for Impairment in
         Value of an Investment                              (3,847)                  --                  --
     Other Income (Loss)                                     (4,166)                1,134               1,236
     Gain on Disposal of Subsidiary Shares                     1,342                   --                  --
     Income from Operations of Joint Ventures                  1,180                2,189               2,165
     Income Tax Provision                                    (4,833)                (574)             (1,693)
     Minority Interest - Common Stock                        (2,627)              (1,667)               (122)
     Minority Interest - Cash Dividends                           --                (645)                (70)
         on Preferred Shares
     Minority Interest - Deemed Dividends on                      --              (4,260)                  --
         Preferred Shares

TOTAL ASSETS (3)
     Engineering and Construction                           $219,694             $224,912             $79,400
     Shipbuilding and Maintenance                             16,960               28,655                  --
     Fasteners                                                 3,519                4,275               5,503
     Total Assets                                            240,173              257,842              84,903
</TABLE>

(1)      Includes revenues and operating income of Steen from April 1995 and of
         MDC from April 1996.

(2)      Includes revenues and operating income from Davie from April 1996.
         Prior thereto, the Company was not involved in this business segment.

(3)      Excludes corporate assets of $2,591, $7,405 and $11,496 in fiscal years
         1997, 1996 and 1995, respectively.

                                      -6-
<PAGE>   9
<TABLE>
<CAPTION>
GEOGRAPHIC SEGMENTS                                                NORTH            AUSTRALIA AND
FISCAL 1997                                                       AMERICA          SOUTHEAST ASIA
<S>                                                             <C>                  <C>     
Assets                                                            $107,436           $132,737
Sales                                                              271,955            295,623
Segment Operating Income (Loss)                                   (11,907)             10,886
</TABLE>

NARRATIVE DESCRIPTION OF BUSINESS

         Description of Engineering and Construction Business

         The Company is an engineering and construction company with operational
headquarters in Montreal, Canada and Melbourne, Australia. It has facilities
throughout Canada and, through MDC, in Australia, New Zealand, Singapore,
Thailand, Hong Kong and Indonesia. In fiscal 1997, approximately 90% of the
Company's total revenues were derived from engineering and construction.
Geographically, approximately 42% of these revenues were derived from North and
South America and 58% were derived from Asia-Pacific.

         The Company's principal business is infrastructure construction and
engineering projects. Traditionally, its principal operations include civil,
mechanical and electrical engineering and construction. Specifically, the
Company's infrastructure construction and engineering capabilities include
tunnels, bridges, pipelines, power plants, plants and factories, commercial
buildings, engineering and design, mechanical contracting, oil and gas offshore
platforms, mills and mining infrastructure, and steel fabrication. The Company
serves the broad commercial and industrial markets of energy, pulp and paper,
mining, port facilities, large cranes, material handling systems, petrochemical,
food processing, sports and entertainment facilities, as well as general
commercial and industrial facility construction.

         The Company believes that it has prospects for future growth due to the
need for building and replacing existing infrastructure in most parts of the
world. In addition, the Company is continuing to implement its strategy towards
obtaining recurring revenue projects. In this regard, DBI, Steen and MDC have
been able to obtain turnaround projects and similar work from major oil
companies which management believes will provide approximately $75 million of
revenue during each of the next three (3) fiscal years.

         North America. The Company's North American engineering and
construction operations are conducted by DBI and Steen. DBI's operations are
particularly suited to large scale engineering projects. The range of services
provided by DBI include: fabrication, installation, project management, as well
as, subcontracting, procurement, quality assurance and scheduling.

         DBI provides extensive services to the energy sector and, specifically,
to the oil and gas industry. These services consist primarily of (i) mechanical
installation of plant and equipment; (ii) design, fabrication and erection of
ABI storage tanks and ASME pressure vessels; (iii) spooling and heavy walled
pipe fabrication and installation; and (iv) refinery annual "turn around."

         Additionally, DBI is a major industrial contractor for the pulp and
paper and mining industries. It executes civil, structural, mechanical, pipe
fabrication and installation, pressure part (oilers) installation and
modernization. DBI is also involved in comprehensive scheduling and project
management for these industries.

         DBI's projects include the fabrication of box girder guide ways for
monorails, cranes for the shipping industry and super structure steel for
bridges; the supply and erection of structural steel for all types of


                                      -7-

<PAGE>   10
construction projects; and the engineering, manufacturing and installation of 
piping for the pulp and paper and chemical industries.

         The pipeline division of Steen was formed in January 1997 and has
completed Cdn $85 million of contracts for TransCanada Pipelines. With the
growing demand for gas and oil gathering and distribution systems, Steen expects
this division to continue to grow and to complement the compressor station
activities of DBI.

         Australia and Southeast Asia. The Company's Australian and Southeast
Asian engineering and construction operations are conducted by MDC. MDC is
organized into the following principal divisions: pipeline, civil, mechanical,
building and electrical. The operations of each division are described below.

         The pipeline division engineers, designs and constructs all aspects of
pipeline transportation systems including gas, liquid, fuels, slurries, water
and by-products throughout Australia, South East Asia, the Pacific Islands and
the Middle East. This division also provides project management, design,
engineering, estimating, procurement administration, quality assurance, quality
control, supervision and safety services to its pipeline customers.

         The civil division is MDC's largest division and is involved in the
procurement of design and construct contracts wherein MDC designs, builds and
then turns over a completed operational facility to the client. The civil
division has been involved in the construction of wharves and jetties, submarine
pipelines, soft ground and hard rock tunnels, heavy industrial civil works,
roads, bridges and supply and facilities, marine structures and piling.

         The mechanical division carries out a wide range of projects throughout
Australia and South East Asia. These include oil storage terminals, refineries,
processing plants, power generation and transmission lines. This division is
involved in managing sophisticated control system installations, high-tech
manufacturing facilities, state of the art fertilizer plants, major plant
shut-downs and rebuilds and geothermal and petrochemical facilities.

         The building division is involved in the design and construction of
industrial and process buildings primarily in Australia and Southeast Asia,
including projects undertaken on a turnkey basis. MDC believes there is an
increasing demand for such turnkey contracts and that it is has the engineering
expertise to compete for these projects.

         Finally, the electrical division is one of New Zealand's largest
suppliers of construction and maintenance services to the electrical and power
system industry. The electrical division has recently expanded operations into
Australia and Indonesia. This division is involved in power station,
sub-station, transmission line and distribution line maintenance and
construction; industrial and commercial maintenance and installation; and
engineering and project management.

         Backlog. As of September 30, 1997, the Company had confirmed contracts
in the engineering and construction segment of approximately $269 million,
approximately $243 million of which the Company intends to complete during
fiscal 1998. In addition to the backlog, the Company has been able to obtain
turnaround projects and similar work from major oil companies which management
believes will provide approximately $75 million in revenue in each of the next
three (3) fiscal years. Although, the dollar amounts of the backlog and the
recurring revenue are not necessarily directly proportional to the future
earnings of the Company, the backlog represents business which is considered to
be firm. In light of this statement, there can be no assurance that
cancellations or scope adjustments will not occur.

         Suppliers. The principal raw material in most of the Company's
infrastructure projects is steel. Steel utilized by the Company is supplied by
Canadian mills and is also imported from Europe and Japan. The Company is not
dependent on any single supplier for its raw materials. Although the price of
steel fluctuates, substantially all of the Company's steel requirements are
purchased for specific projects and the


                                      -8-
<PAGE>   11
cost of steel is usually reflected in the price of the project. As a policy, the
Company does not maintain significant raw material inventory not allocated to
specific projects.

         Steen's operations as a prime mechanical contractor dictate that a
number of raw materials be employed in its operations. Steen uses a number of
suppliers in its operations and is not dependent on any single supplier for its
raw materials. Steen's pipeline division contracts strictly for the laying of
pipe and does not supply any raw materials to the projects.

         Employees. As of the date of this Report, DBI, Steen and MDC employed,
in the aggregate, approximately 4,550 persons, of which approximately 20% are
members of a labor union. DBI (Lachine), with its approximately 350 employees,
had a collective bargaining agreement which expired in October 1997. As of the
date of this Report, DBI (Lachine) is in negotiations with the union with
respect to a new contract. In October 1997, the Company entered into a new
collective bargaining agreement for the Amherst, Nova Scotia plant. DBI's
Manitoba operations, with its approximately 130 employees, has a collective
bargaining agreement in place until May 31, 2000. Of the 230 Steen employees,
approximately 140 are hourly staff employees which are covered by a general
construction agreement, by each of their respective trades, to which Steen is a
signatory. The general construction agreements cover all aspects generally found
in collective bargaining agreements. MDC has experienced one work stoppage
during the past five years. Neither DBI nor Steen have suffered any work
stoppages during the past five years. The Company believes their labor relations
to be amicable.

         Governmental Regulations. Many aspects of the Company's operations are
subject to government regulations in the countries in which the Company
operates, including those relating to currency conversion and repatriation,
taxation of its earnings and the earnings of its personnel and its use of local
employees and suppliers. The Company's operations are also subject to the risk
of changes in national, state, provincial and local laws and policies which may
impose restrictions on the Company, including trade restrictions, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Other types of government regulations which could, if
enacted or implemented, materially and adversely affect the Company's operations
could include expropriation or nationalization decrees, confiscatory tax
systems, primary or secondary boycotts directed at specific countries or
companies, embargoes and port restrictions or other trade barriers, mandatory
sourcing rules and high labor rate and field price regulation. The Company
cannot determine to what extent future operations and earnings of the Company
may be affected by new legislation, new regulations or changes in, or new
interpretations of, existing regulations.

         The Company's operations and properties are affected by numerous
national, state, provincial and local environmental protection laws and
regulations including those governing discharges into air and water and the
handling and disposal of solid and hazardous waste. The Company expects
compliance with these increasingly stringent and complex laws and regulations to
become increasingly difficult and costly. In addition, the Company may be
subject to claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances.

         The Company is not aware of any non-compliance with environmental laws
that could have a material adverse effect on the Company's business or
operations. However, while the Company has an environmental compliance program
in place, it cannot guarantee that any non-compliance, if it exists, would not
have a material adverse effect on the Company. In addition, there can be no
assurance that environmental laws, regulations or their interpretation will not
change in the future in a manner that could not materially and adversely effect
the Company. Certain environmental laws provide for liability for investigation
and remediation of spills and other releases of hazardous substances. Such laws
may apply to conditions at properties presently or formerly owned or operated by
an entity or its predecessors, as well as the conditions at properties at which
waste or other contamination attributable to an entity or its predecessors come
to be located. The Company's facilities have been operated for many years and


                                      -9-
<PAGE>   12
substances which are or might be considered hazardous were used and disposed of
at some locations which will, or may, require the Company to make expenditures
for remediation. However, the Company does not anticipate incurring material
capital expenditures for environmental controls or for investigation or
remediation of environmental conditions during the current or succeeding fiscal
year. Nevertheless, the Company can give no assurance that it, or entities for
which it may be responsible, will not incur liability in connection with the
investigation and remediation of facilities it currently owns or operates (or
formerly owned or operated) or other locations in a manner that could materially
and adversely affect the Company.

         The Company's business sometimes involves working with volatile and
hazardous substances which expose it to risk of liability for personal injury or
property damage caused by any release, spill or other accident involving such
substances that occur as a result of the conduct of its business. The Company
has been, and may continue to be, unable to obtain adequate environmental damage
or pollution insurance at a reasonable cost. Although the Company maintains
general liability insurance, this insurance is subject to coverage limitations,
deductibles and exclusions and may exclude coverage for losses or liabilities
relating to pollution damage. Therefore, there can be no assurance that the
liabilities that may be incurred by the Company will be covered by its insurance
policies, or if covered, that the dollar amount of such liabilities will not
exceed the Company's policy limits. A partially uninsured claim, if successful
and of sufficient magnitude, could have a material adverse effect on the
Company's business, financial condition and results of operations.

         It is possible that environmental liabilities in addition to those
described above may arise in the future. Although the Company's facilities in
Canada and certain other jurisdictions operate under stringent environmental
laws, certain of its other operations, including those in the Middle East and
Southeast Asia, have not been so regulated. As a result, the Company could incur
significant future liabilities should the laws of the jurisdictions in which the
Company operates change to impose additional environmental remediation
obligations. The precise costs associated with these or other future
environmental laws are difficult to predict at this time.

         Health and safety records of contractors continue to be an important
decision criteria of project promoters and owners in the awarding of contracts.
Construction and heavy equipment involve a high degree of operational risk.
Natural disasters, adverse weather conditions or operator error can cause
personal injury or loss of life, severe damage to and destruction of property
and equipment and suspension of operations. Litigation arising from such an
occurrence may result in the Company being named as a defendant in lawsuits
asserting substantial claims. The primary responsibility for safety is that of
the various project managers. The Company also employs Safety and Quality
Assurance Managers. Although the Company has been subject to claims in the
ordinary course of its business, the Company believes its health and safety
record has been acceptable.

         Marketing. DBI, Steen and MDC obtain most of their projects by
competitive bid. DBI, Steen and MDC employ a full-time marketing work force and
also engage agents and consultants to enhance their in-house marketing
capabilities.



                                      -10-
<PAGE>   13
         Contract Risks. The Company generally uses one of three types of
contracting approaches, depending on the type of work, the degree of work scope,
definition and the degree of risk in the project. These methods may be used for
competitive situations or negotiated contracts. The material features of each
contract approach appear below.

                  (i) Fixed or Lump Sum Pricing. The Company's expertise in
performing its design and construction services enable it to typically contract
over 50% of its work on a fixed price or lump sum basis, using price adjustment
clauses and where appropriate, cost escalation and contingency clauses in its
contracts.

                  (ii) Cost Reimbursable Pricing. In instances where the degree
of definition of the work scope, schedule requirements or the evaluation of risk
does not allow for the use of fixed or lump sum pricing, the Company may choose
to contract only on a cost reimbursable basis. Contracts of this nature may have
cost incentive provisions.

                  (iii) Target Fixed or Lump Sum Pricing. This approach is often
used in connection with partnering arrangements. The Company and the customer
establish a target, based on the parties' estimate of the total installed cost
of a project. Cost savings and overruns are then shared by the Company and the
customer, thereby encouraging total alignment of both parties with respect to
cost-effective completion of the project.

         Facilities. DBI owns and operates manufacturing facilities in four
Canadian Provinces. In each of these facilities, DBI is equipped to receive and
ship material via road and rail. At the Lachine (Montreal) facility, the Company
can also ship by water through its access to international waterways via the St.
Lawrence Seaway.

         The largest of the four manufacturing facilities is the 400,000 square
foot facility located on 40 acres of land in a heavy industrial park in Lachine,
near downtown Montreal, Quebec, which recently became ISO 9001 qualified. The
second largest facility is a 29 acre site, also in a heavy industrial park, in
Winnipeg, Manitoba. The main building on this site is a 150,000 square foot
fabrication shop which houses most of DBI's bridge building activity. DBI owns a
23 acre site in Regina, Saskatchewan, which includes a 35,000 square foot heavy
manufacturing facility which has general heavy manufacturing capability. DBI
also owns a 77,000 square foot facility in Amherst, Nova Scotia, where it
operates its fabrication division. Finally, DBI owns an office in downtown
Amherst, which consists of 16,000 square feet of office space and 16,000 square
feet of land.

         In Nisku, Alberta, a suburb of Edmonton, DBI leases and operates a
30,000 square foot manufacturing facility. The major activity in this particular
facility is pipe spooling work for the oil and gas sector. In addition, DBI
operates construction offices from leased premises in the following locations:
Richmond, British Columbia; Calgary, Alberta; Nisku, Alberta; Regina,
Saskatchewan; Oakville, Ontario; and Sudbury, Ontario.

         Steen operates from leased premises in six locations in the Provinces
of Ontario, Quebec and the Maritimes. With the exception of Toronto, from each
of these locations, Steen carries out all of the mechanical work with its own
facilities and work force, subcontracting only for specialty services, such as
controls, insulation and electrical wiring. In Toronto, the sheet metal work is
subcontracted to independent sheet metal contractors. The other locations
operate sheet metal fabricating facilities equipped with CAD/CAM and automated
duct fabrication machines. All locations prefabricate piping systems and Steen's
facility in Toronto maintains a large pipe fabrication system.


                                      -11-
<PAGE>   14
         MDC operates from premises in Australia, New Zealand, Thailand,
Singapore, Hong Kong, Dubai and Indonesia. MDC also operates in seventeen other
countries on a project or joint venture basis. The locations in Australia, New
Zealand, Singapore, Thailand and Dubai include significant plant repair and
storage yard facilities which allow MDC to service its regional construction
equipment requirements and to undertake its various construction projects.

         Competition. The markets in which DBI, Steen and MDC operate are highly
competitive. Competition is primarily centered on price, reputation for quality,
timeliness experience, reliability and the financial strength of the contractor.
Due to the number of different markets in which the Company competes throughout
North America and the world, any meaningful estimate of the number of
competitors is impossible. Many of the Company's competitors are substantially
larger, with greater financial, marketing and other resources than those of the
Company. In some instances, due to the constraints of their respective bonding
capacities, DBI, Steen and MDC may be limited in their ability to compete for
very large projects. As has been its past practice, the Company will continue to
use its best efforts to bid for projects it cannot handle individually as part
of a consortium.

         During 1997, the Company was subject to a consent solicitation
sponsored by dissident shareholders which created negative publicity regarding
the Company and its management. The consent solicitation to replace management
may have had a material adverse affect on the Company's ability to compete in
the markets in which it operates. See "ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS."

         The Company's ability to compete effectively was also adversely
impacted by the Company's financial resources. The Company has responded to
these issues by securing a revolving credit facility from BNY Financial
Corporation - Canada ("BNY"). The Company is also exploring alternatives to
provide it with access to greater working capital either in the form of an
equity investment in the Company from a strategic partner or the possible sale
of the Company or one of its operating units. The Company is engaged in
preliminary negotiations with potential investors and acquirers, although there
have been no agreements reached and there can be no assurance that the Company
will be successful in reaching any agreement or that such an agreement will
provide the Company with the resources to compete effectively.

Description of Shipbuilding Segment

         The shipbuilding segment accounted for approximately 9% of the
Company's consolidated revenues in fiscal 1997 and is conducted through Davie.
Davie, founded in 1825, is Canada's oldest and largest shipbuilding and ship
repair facility and is located in Levis, across the St. Lawrence River from
Quebec City, Quebec. A subsidiary of Davie, MIL Systems, an engineering division
located in Ottawa, Canada, is classified ISO 9001 and specializes in advanced
ship design software, naval systems and computer aided logistics.

         Shipbuilding Operations. Davie's primary operation involves the
construction of a wide range of marine structures, including merchant and naval
vessels, ferries, tankers, bulk-carriers, destroyers and frigates. Davie's
accomplishments include building the largest ships ever produced in Canada
(80,000 dwt tankers), building the MV Caribou in 1986 which, at the time, was
the largest ferry of its class in the world, constructing three patrol frigates
and modernizing four destroyers of the Canadian Navy.


                                      -12-
<PAGE>   15
         Davie is also actively involved in ship repair and conversions. Davie
operates two large dry-docks, a floating dock and extension wharfage. The
dry-docks are primarily utilized for ship repair; however, they are also
available for newbuild business. These facilities, together with Davie's
strategic position on the St. Lawrence River, have enabled Davie to successfully
perform and complete a wide spectrum of ship repair work from routine surveys to
major overhauls including structural rebuilds and total conversions.

         Other Industrial Operations. On the basis of its experience in ship
construction and repair, Davie has been awarded manufacturing contracts from
other industrial sectors. For example, Davie has manufactured equipment for
nuclear power plants, scroll cases and rotary kilns and has served industries as
diverse as petro chemicals, pulp and paper, hydro-electricity and steel mills.
Davie has also manufactured 71 sonar dome structures for the U.S. Navy cruiser
and destroyer programs, and has been awarded a contract for the construction of
three sonar dome structures with a purchaser's option for an additional nine.

      Offshore Oil Platforms. Between 1979 and 1983, Davie diversified its
activities and profitably produced thirteen jack-up drilling platforms of large
size, for foreign customers in the offshore industry. A substantial portion of
Davie's future operations involve construction, retrofit and repair services for
offshore drilling rigs. Davie provides a full-range of design, engineering,
construction, conversion, retrofit and repair services for off-shore drilling
rigs, including construction of new-build off-shore drilling rigs. Davie's
shipyard located on the St. Lawrence River in Quebec has the capacity to provide
conversion, retrofit and repair services on off-shore drilling rigs
simultaneously with the timely and efficient construction of new off-shore
drilling rigs.

     Davie's primary platform customers are involved in drilling operations in
the South Atlantic and other offshore areas of the world. These drilling
contractors generally own and operate or charter offshore drilling rigs and
provide drilling services to oil and gas companies. The following is a brief
description of the primary types of offshore drilling rigs and production units:

     (i) Semisubmersibles. Semisubmersible rigs consist of an upper working and
living deck resting on vertical columns connected to lower hull members. Such
rigs operate in a semi-submerged position, remaining afloat in a position which
places the water-line approximately halfway between the top of the lower hulls
and bottom of the deck. The rig is dynamically positioned and remains stable for
drilling in the semi-submerged floating position.

     (ii) Jackups. Jackup rigs are mobile, self-elevating drilling platforms
equipped with legs which are lowered to the ocean floor until a foundation is
established to support the drilling platform. The rig hull includes the drilling
rig, jacking system, crew quarters, loading and unloading facilities, storage
areas for bulk and liquid materials, heliport and other related equipment.
Jackups are used extensively for drilling in water depths from 20 feet to 400
feet. Jackup rigs are generally characterized by their design as either slot
jackups or cantilevered jackups. Many slot-designed rigs have been converted to
cantilever configurations which may be utilized for drilling exploratory wells
as well as drilling over existing fixed structures.



                                      -13-
<PAGE>   16
         Retrofits consist generally of improvements to the technical
capabilities, tolerances and systems of drilling and production equipment.
Retrofits performed on semisubmersible rigs include buoyancy and stability
enhancements and the addition or improvement of self-propulsion systems,
positioning thrusters and self-contained mooring systems. Jackup retrofits
include strengthening and extending the rig legs.

         Current Business Plan. Historically, a large percentage of Davie's
business involved the construction and repair of commercial ships. During more
recent decades, Davie has been involved primarily in the procurement and
performance of military contracts from the Canadian government. After
recognizing a slowdown in Canadian military shipbuilding Davie has now refocused
its business on the commercial production of merchant ships principally for the
export market. This decision was based on Davie management's assessment that
there would be a significant increase in the demand for the next generation of
technologically and environmentally advanced merchant ships which would be
maintained through the year 2005. This increase in demand is materializing and
Davie management believes that it is primarily due to (i) an increase in
seaborne trade; (ii) additional replacement opportunities linked to the aging of
the world merchant vessel fleets; and (iii) a stricter regulatory environment
which is leading to an increase in the scrapping rate of older ships. Management
of Davie has concluded that the price level for new ships is determined mainly
by supply and demand as opposed to cost and, as such, the expected increase in
new building demand would lead to price increases over the level that prevailed
in the late 1980s and early 1990s.

         Davie's current business plan also involves continued emphasis on the
expanding offshore drilling platform and rig business. The level of worldwide
offshore drilling activity has increased substantially over the last two years
resulting in an increase in worldwide drilling rig utilization to approximately
99% in May 1997. In deep water areas where larger and more technically advanced
drilling rigs are needed, increased drilling activity has also increased demand
for retrofitting offshore drilling rigs to enhance their technical capabilities.
In addition, increased drilling activity in and around more mature fields in
shallower waters has contributed to the increase in demand for construction and
retrofit for jackups and other offshore drilling rigs. Davie believes these
positive trends will continue due to, among other things, the increasing
percentage of worldwide oil supply being produced from less accessible offshore
areas, technology advancements that have increased drilling success rates and
the increased focus on deep water exploration and production projects.

         Facilities. In terms of area, Davie owns and operates the largest
shipyard in Canada. The shipyard is located on the St. Lawrence River in Quebec
with access to international waterways. The shipyard is owned by Davie outright
and contains two main construction berths. Each berth is served by two gantry
cranes with lifting capacities of 39 and 45 tons and by four mobile cranes, the
largest of which has a maximum individual capacity of 200 tons. The berths are
uncovered and measure 352 meters by 37 meters and 183 meters by 37 meters,
respectively. The combined berth is capable of being extended to 300 meters by
150 meters. The shipyard also contains a floating dry-dock which measures 178
meters by 32 meters. Davie leases two dry-docks and approximately 14 acres of
land adjacent to the shipyard from the Canadian government. The shipyard also
houses approximately 220,000 square feet of office space. The shipyard and dry
docks constitute Davie's principal place of business.

         Competition. Commercial shipbuilding is a highly competitive market
with world wide competition. In order to compete successfully in this market,
Davie recognized that it would have to increase productivity by adopting a
continuous flow process for the production of ships. In order to implement this
continuous flow process, Davie continues to develop more simplified designs,
improve its facilities and production processes, increase worker flexibility and
more efficiently procure its raw materials. In this regard, Davie has completed
an agreement with a European commercial shipbuilder wherein Davie is given
access to designs and the benefit of marketing, technical, production and
planning support of product tankers containership. This has led to direct
contact with potential customers which has allowed Davie to utilize its in-house
capabilities to further refine


                                      -14-
<PAGE>   17
existing designs. Davie has also identified containerships with capacities of
between 1,500 and 3,000 dwt as a potential market.

         Labor. To effectively compete in world markets, Davie must maintain
reasonable labor costs. Davie currently employs approximately 600 persons of
which approximately 500 are unionized. The unionized workers consist of four
certified bargaining units, the largest of which consists of shipyard employees.
On March 15, 1995, Davie signed a six (6) year collective agreement with this
unit which provided for a 15% reduction in total labor costs, a profit sharing
program, the ability to contract out certain work, a more efficient deployment
of personnel by cutting trades from 27 to 13 and a more efficient utilization of
overtime. Given that labor represents 40% of the cost of building a commercial
ship, Davie management believes that its labor costs provide Davie with a
substantial competitive advantage in the international markets as its labor
costs are below those of its major competitors in the United States and Western
Europe. Davie management believes that its labor relations are amicable.

         Government Regulation. The shipbuilding industry is subject to
essentially the same types of government regulation as faced by the construction
and engineering industry, including substantial environmental regulation. In the
fall of 1993, the shipyard was the subject of a Phase I environmental study
conducted by consultants, Roche Ltee. Pursuant to certain recommendations
contained in the Phase I report, Davie has implemented certain clean up
procedures and is engaged in the routine clean up of its facilities. The Company
has been indemnified for such liability by SGF with respect to its Levis
facility. In connection with the Company's purchase of Davie, SGF agreed to
indemnify the Company for all such liabilities arising prior to the time of
sale.

         Backlog. As of the date of this report, the Company had confirmed
contracts in the shipbuilding and repair segment for approximately $12 million,
approximately $7 million of which is to be completed during fiscal 1998. This
backlog does not include signed contracts for the significant upgrade of the
production platform, Spirit of Columbus, or the new building of two deep-water
drilling platforms, Amethyst II and Amethyst III. These contracts contemplate
scope of work for Davie of approximately $200 million, but are subject to
financing and other conditions which are beyond the control of the Company.
Nonetheless, the Spirit of Columbus is in Quebec City and preparatory work is
underway. Although the dollar amount of the backlog is not necessarily
indicative of the future earnings of the Company related to the performance of
such work,the backlog represents business which is considered to be firm. In
light of this statement, there can be no assurance that cancellations or scope
adjustments will not occur.

         Description of Fasteners Business.

         Historically, the Company has owned three subsidiaries in the specialty
fastener business including Unimetric. Unimetric is engaged in the manufacturing
of specialty fasteners for the industrial and aerospace markets, and has been
working to broaden its product line to include nuts for the automotive industry.
The other two subsidiaries had been engaged in the importation and distribution
of standard industrial fasteners, a highly competitive market. In the fourth
quarter of Fiscal 1996, management of the Company decided to close the commodity
fastener business in order to focus resources on its core business and avoid
continued losses. The fastener segment represented less than 1% of the Company's
consolidated revenues during fiscal 1997. Although Unimetric was profitable
during fiscal 1997, in order to focus attention on core businesses, management
has begun to pursue a sale of Unimetric during fiscal 1998 if such a sale can be
completed on terms acceptable to the Company.


                                      -15-
<PAGE>   18
         Agreement With The New World Power Corporation.

         Effective as of October 31, 1996, the Company entered into a joint
venture agreement with The New World Power Corporation ("New World Power") to
develop specified projects of New World Power. These projects included the
further development of wind and hydro electric power plants in North, Central
and South America and China. Pursuant to the joint venture agreement and other
financing provided by the Company, the Company invested approximately $1 million
in exchange for common shares of New World Power and a 50% interest in the
financed projects. The Company was also given the option to convert its equity
in such projects into common stock of New World Power which, if all such equity
were earned and converted, would have given the Company ownership of
approximately 41% of the common stock of New World Power. As of September 30,
1997, the Company owned 15% of the common stock of New World Power.

         The only project financed was a wind farm in Big Springs, Texas. This
project was sold in late 1997 to York Research for $1.5 million, $750,000 of
which is to be paid to the Company in three installments. The first installment
of $152,000 was paid at closing in November 1997. The balance is to be paid upon
completion of an archeological impact study in 1998.

         The Company and New World Power have agreed not to pursue the remaining
projects in the joint venture.

         In addition to the joint venture agreement, the Company is providing
management assistance to New World Power. Pursuant to a Management Services
Agreement, the Company is providing Vitold Jordan, a Vice President of the
Company, as interim chief executive officer of New World Power.

         Dominion Kuhns Brothers & Company, Inc.

         In 1996, the Company formed a project finance subsidiary with John D.
Kuhns known as Dominion Kuhns Brothers and Company, Inc. ("DK"). The mission of
DK was to act as financial advisor to the Company on general corporate finance
matters, act as a liaison with the Company's investment bankers and provide
project financing for various projects. Due to the inability of DK to achieve
its desired objectives and its two principals commencing a consent solicitation
of the Company's stockholders to remove management, DK was closed down and the
Company wrote off its investment in DK which had a carrying value of
approximately $500,000. SEE "ITEM 3. LEGAL PROCEEDINGS."

ITEM 2. DESCRIPTION OF PROPERTIES.

         DBI owns four principal manufacturing facilities in Lachine, Quebec;
Winnipeg, Manitoba; Regina, Saskatchewan and Amherst, Nova Scotia; and leases a
manufacturing facility in Nisku, Alberta. In addition, DBI operates construction
offices from leased premises in Richmond, British Columbia; Calgary, Alberta;
and Oakville and Sudbury, Ontario.

         Steen operates from leased premises in six locations from the Provinces
of Ontario, Quebec and Canada's maritime provinces.

         MDC leases approximately fourteen different properties in New Zealand
and seven properties in Australia, as well as individual properties in
Indonesia, Singapore, Thailand, Dubai, Saudi Arabia, Hong Kong, and American
Samoa. MDC also owns a plant storage and plant maintenance facility in
Laverton, Victoria, Australia to house and maintain its equipment fleet. These
properties represent the primary office and production space utilized by MDC.

         Davie owns a shipyard in Quebec, Canada and leases two adjacent dry
docks from the Canadian government. The shipyard contains 220,000 square feet of
office space. Davie conducts all of its industrial


                                      -16-
<PAGE>   19
and manufacturing operations from these sites. Davie rents office space in 
Ottawa, Canada, for its military research and engineering division MIL
Systems.

         Unimetric operates from leased premises in East Providence, Rhode
Island.

         The Company believes its facilities are adequate for its current use 
and has no planned capital improvement plan for the facilities. It is the
opinion of management that the properties are adequately covered by insurance.
SEE "ITEM 1. DESCRIPTION OF BUSINESS - FACILITIES."

ITEM 3. LEGAL PROCEEDINGS.

         From time to time, disagreements with individual employees and
disagreements as to the interpretation, effect or nature of individual
agreements arise in the ordinary course of business and may result in legal
proceedings being commenced against the Company.

         Other than as set forth below, the Company is not currently involved in
any litigation or proceeding which is material, either individually or in the
aggregate, and, to the Company's knowledge, no other legal proceeding of a
material nature involving the Company is currently contemplated by any
individuals, entities or governmental authorities.

         1. By complaint dated July 18, 1995, Paul Kandola, a former employee of
DBI ("Kandola"), commenced an action in Quebec Superior Court against UDI,
seeking Cdn. $352,933 in severance payments under his employment agreement. On
September 11, 1995, UDI filed an action in warranty against DBI seeking
indemnification for any payments which may be required in this matter.

         By complaint dated August 4, 1995, Kandola filed an action in Quebec
Superior Court against DBI for constructive dismissal seeking damages in the
amount of Cdn. $490,901.92.

         The Company has answered these complaints denying liability and intends
to vigorously defend the actions.

         2. By letter dated July 24, 1996, UDI, the former owner of DBI, has
indicated that it intends to seek indemnification from the Company and from DBI,
with regard to legal proceedings instituted against UDI by Loblaws Inc. in the
Supreme Court of Newfoundland. The proceedings are based on the collapse of the
roof of a building owned by Loblaws Inc. and seek Cdn. $1.2 million in damages.

         DBI has informed UDI that neither itself nor the Company are liable
towards UDI in this matter. The Company has not yet been served with court
papers as of the date of this Report.

         3. IPCO International has commenced legal action in Thailand seeking
damages against the Thai company Si Chang Thong (as first defendant) and MDC's
Thailand subsidiary (as second defendant) in connection with alleged
infringements of intellectual property rights of IPCO International relating to
the construction of the Si Chang Thong Island Deep Sea Terminal and Tank Farm in
Thailand. This action was recently settled by MDC.

         4. On or about November 18, 1996 (but not served on the Company until
December 9, 1996), James B. Smith commenced a purported class action securities
lawsuit in the United States District Court for the Eastern District of
Pennsylvania against the Company and Messrs. Marengere and Matossian,
individually. The complaint seeks unspecified damages for the persons who traded
in the Company's common stock during the period commencing on April 20, 1995 and
ending on May 18, 1996.


                                      -17-
<PAGE>   20
         The action alleges that during the class period the Company issued
misleading press releases and reports to the Securities and Exchange Commission
in that the Company failed to disclose allegations made by a former disgruntled
employee regarding DBI's accounting practices, bonding capability and contracts
in connection with his action against the Company for constructive dismissal.

         On December 12, 1996, the Company filed an answer denying the
allegations and strongly affirming that the allegations, both by Smith and the
former employee, are entirely without merit. The Plaintiffs have filed a motion
to certify their proposed class which is pending before the court and no
discovery has been conducted.

         5. By complaint dated January 31, 1997 and filed with the courts of
Newfoundland, International Offshore Services Group Inc. and Ocean Management
and Trading Company Ltd., both former consultants to the Company, are claiming
Cdn $973,000 for purported unpaid retainer fees, success fees and finders fees.
In August 1997, the Company settled this matter for Cdn $50,000.

         6. By complaint dated February 24, 1997, the Company commenced an
action in Quebec Superior Court against Steinar Knai, a former executive of the
Company, DBI and Steen, following his termination for cause, for
misappropriation of corporate property. On March 14, 1997, Knai answered the
complaint and made a cross demand against the Company in the amount of Cdn $1.5
million for defamation. The Company intends to vigorously pursue its claim and
defend itself against Knai's cross demand. In December 1997, Knai filed another
claim against the Company seeking Cdn $1.5 million.

         7. On August 28, 1997, Regie des Installations Olympiques ("RIO")
commenced an action against DBI in the Superior Court for the District of
Montreal relating to the cancellation of a contract for the installation of a
new roof for the Montreal Olympic Stadium. In September 1994, DBI was awarded a
contract for the installation of the new roof and received an advance payment of
Cdn $3 million. After a change in the government of Quebec and the completion of
certain studies, the contract was canceled by RIO which now seeks to recoup the
Cdn $3 million previously advanced to DBI. DBI asserts that it incurred expenses
in excess of Cdn $7 million in connection with this contract. DBI and RIO are
currently discussing a settlement of this action.

         8. On March 31, 1997, Privatinvest Bank AG ("Privatinvest"), an
investor in the private placement of the TCI Preferred Shares, filed a Statement
of Claim in the Superior Court for the District of Montreal against the
Company's subsidiary, TCI, seeking recission of its investment in the preferred
shares of TCI based on the Company's alleged failure to deliver the correct
number of shares of common stock of the Company upon conversion of the TCI
preferred shares. Alternatively, Privatinvest seeks $445,849 plus interest
reflecting the value of shares not received in time as alleged by Privatinvest.
The Company believes it honored the terms of the TCI preferred shares and
intends to vigorously defend this action. Following the first motion filed by
TCI, Privatinvest was ordered to and deposited a sum of money in order to
guarantee the payment of court costs in the event that the complaint is
dismissed. TCI has filed a second motion alleging that the New York State Courts
and/or the United States Federal District Courts have jurisdiction over this
matter. This motion is currently pending before the court.

         9. On May 23, 1997, the so called "Committee to Revitalize Dominion
Bridge Corporation" (the "Kuhns Group" or the "Committee") commenced a lawsuit
against the Company in Federal District Court in Wilmington, Delaware seeking a
declaration that it should be permitted to solicit written consents from the
Company's stockholders without violating federal securities laws and that the
Company's Second Amended and Restated By-laws, particularly those provisions
relating to the stockholder's right to take action by written consent and
requiring advance notice of stockholders in order to submit a nominee to serve
on the


                                      -18-
<PAGE>   21
Company's Board of Directors, are invalid. The Committee alleges that the
description of these provisions appearing in certain public filings, including
the Company's 1997 Proxy Statement, render the election of directors at the
Company's 1997 Annual Meeting void. Concurrent with the filing of this lawsuit,
the Committee commenced a consent solicitation of the Company's stockholders.
With the exception of its claim that stockholders have the right to act by
written consent, the Company believes that all claims asserted by the Kuhns
Group are entirely without merit and the Company is vigorously defending this
matter. In that regard, on June 4, 1997 the Company filed its answer
affirmatively denying the factual allegations and legal theories of the
Committee along with a ten (10) count counterclaim. The counterclaim seeks
declaratory and injunctive relief against the Committee for its illegal and
improper consent solicitation in contravention of Delaware law and its violation
of federal securities laws by disseminating materially false and misleading
information to stockholders. The Company is also seeking damages for the
Committee's unjustified and tortious interference with the Company's contractual
and prospective relations with its customers and suppliers and its conspiracy to
harm the Company's business and prospects. Motions are pending before the court
with respect to the continuation of discovery on both the Committee's claim and
the Company's counterclaim.

         A group of investors negotiated a proposed settlement with the Kuhns
Group which would have required the Company to pay the Kuhns Group's
solicitation expenses, up to $400,000, in exchange for the mutual release of
litigation. The Company's Board of Directors rejected the settlement proposal.

         10. On June 2, 1997, the Company filed a complaint against Kuhns Group
member John M. Dutton in the United States District Court for the District of
Delaware seeking a preliminary and permanent injunction against Mr. Dutton, and
all other persons acting in concert with him, to prevent Mr. Dutton from
continuing to disseminate material non-public information about the Company in
furtherance of his conspiracy to illegally obtain control of the Company. During
his eight month tenure with the Company, Mr. Dutton maintained a position of
trust and was privy to proprietary and confidential non-public information about
the Company, its financial prospects, prospective projects and strategic
business plans. Upon his resignation from the Company on May 12, 1997, Mr.
Dutton took his laptop computer, which contained numerous confidential files,
and illegally retained other confidential documents including financial
statements and stockholder lists. The Company believes that he has disseminated
this confidential non-public information in his efforts to illegally gain
control of the Company and jeopardize the Company's current and potential
contractual relationships. The Company is seeking injunctive and monetary relief
based on Mr. Dutton's breaches of his fiduciary and common law duties to the
Company and his misappropriation and misuse of confidential information.
Although discovery has not been completed, Mr. Dutton has filed a motion for
summary judgment with respect to all of the Company's claims. This motion has
been opposed by the Company and is pending before the court. Motions with
respect to the continuation of discovery are also pending before the court.


                                      -19-
<PAGE>   22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         On May 23, 1997, the Committee commenced a consent solicitation of the
Company's stockholders seeking to (i) amend the Company's Bylaws to provide for,
among other things, the direct election of the Company's officers by the
stockholders; and (ii) remove Messrs. Marengere, Matossian and Despres as
executive officers of the Company and replace them with Messrs. Kuhns, Mariash
and Dutton. An initial consent was filed with the Company on May 23, 1997 which
was subsequently revoked and refiled on June 23, 1997 thereby establishing June
23, 1997 as the record date for the solicitation. The Company solicited
revocations of consent in opposition to the Committee's solicitation asserting,
among other things, that the Committee's solicitation sought action which would
be illegal under applicable Delaware law. SEE "ITEM 3. LEGAL PROCEEDINGS."

         Under applicable Delaware law, the Committee was required to deliver to
the Company written consents sufficient to approve its proposal by August 19,
1997. Although it is certain that the Committee did not obtain the requisite
number of consents, since no consents were delivered to the Company, the Company
has no reliable information regarding the exact number of valid consents, if
any, received by the Committee in support of its proposal.

         On August 20, 1997, a Committee member filed another written consent
with the Company establishing a new record date for a second solicitation by the
Committee. Although the Committee filed a preliminary consent solicitation
statement with the Securities and Exchange Commission seeking stockholder
consents for an identical proposal, no definitive statement was filed and no
consents were solicited from the Company's stockholders. During this time, the
Company filed a preliminary revocation statement with the Commission opposing
the Committee's solicitation. The second consent solicitation expired on October
19, 1997.

         The Company has no information regarding the continuing activities, if
any, of the Committee.


                                      -20-
<PAGE>   23
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Recent Sales of Unregistered Securities.

         On August 20, 1997, the Company issued 2,380,000 shares of Common Stock
upon the exercise of certain outstanding options to certain executive officers,
directors and a limited number of other current and former employees of the
Company. Of these shares, 580,000 were sold pursuant to the limited offering
exemption set forth in Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") for total consideration of approximately $1.2 million.
SEE "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS." 

         In September 1997, the Company issued 15,000 shares of Common Stock to
an employee pursuant to the exemption for issuances outside of the United States
provided in Regulation S under the Securities Act.

         Market Price Information

         The Company's Common Stock is traded on the over-the-counter market and
is included for quotation on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ").
Since November 4, 1993, the Company's Common Stock has also traded on the
Vancouver Stock Exchange.

         The following table sets forth certain information with respect to the
high and low sales prices of the Company's Common Stock during fiscal 1996
(October 1, 1995 to September 30, 1996) and fiscal 1997 (October 1, 1996 to
September 30, 1997).

<TABLE>
<CAPTION>
           FISCAL 1996                                         HIGH                               LOW
<S>                                                          <C>                               <C>    
           First Quarter                                     $7.4375                           $5.4375
           Second Quarter                                     6.9375                            4.5000
           Third Quarter                                      5.6875                            2.3750
           Fourth Quarter                                     3.2500                            1.5625


           FISCAL 1997                                         HIGH                               LOW

           First Quarter                                      $2.750                            $1.625
           Second Quarter                                      2.562                             1.406
           Third Quarter                                       1.781                             1.000
           Fourth Quarter                                      2.500                             1.093
</TABLE>

         Holders

         As of December 9, 1997, the approximate number of holders of record of
the Company's Common Stock was 300. Based upon the requests for consent
revocation materials during July, 1997, the Company believes the number of
beneficial owners of its Common Stock exceeds 6,000.

         Dividends

         The Company has not paid any cash dividends to date and does not
anticipate or contemplate paying cash dividends in the foreseeable future. It is
the present intention of management to utilize all available


                                      -21-
<PAGE>   24
funds for working capital. The Company's agreement with its principal lender
prohibits the payment of dividends without the lender's prior written consent.


                                      -22-
<PAGE>   25
   ITEM 6.  SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30          1997          1996          1995         1994         1993
-----------------------          ----          ----          ----         ----         ----
<S>                           <C>           <C>           <C>          <C>          <C>      
Net sales                     $ 567,578     $ 362,624     $ 155,750    $  67,959    $   7,003
Income (loss) from              (22,320)       (9,944)        2,020          416         (240)
continuing operations
Income (loss) from
continuing operations per
common share:                     (0.77)        (0.55)         0.14         0.05        (0.07)
   Primary                           (1)           (1)         0.11         0.05        (0.07)
   Fully Diluted

TOTAL ASSETS                    242,764       265,247        96,399       72,178        9,774

Long-term obligations and        14,932         5,767         1,760          518          454
redeemable preferred stock
Cash dividend declared per            0             0             0            0            0
common share
</TABLE>

(1)   Fully diluted earnings per share for this period is not calculated because
      inclusion of common share equivalents would be antidilutive.

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS.

BACKGROUND

   Initially, the Company operated as Edinov Corporation in the industrial
fasteners market. Since the effective date of the Plan of Reorganization with
the shareholders of Cedar Group, Inc. on September 30, 1993, the Company's
growth has been as a result of four principal acquisitions, three of which were
in the infrastructure construction and engineering segment and one of which was
in the shipbuilding and ship repair segment. In fiscal 1994, the Company
acquired DBI, in fiscal 1995 it acquired Steen, and in fiscal 1996 it acquired
MDC and Davie. Each of these acquisitions was accounted for in the Results of
Operations from the effective dates of its acquisition, which were March 9,
1994, April 1, 1995, March 29, 1996 and March 31, 1996, respectively. The
Company also acquired Unimetric, effective January 1, 1994.

   The Company has substantially reduced its industrial fastener operations.
During fiscal 1994, the Company divested its Canadian commodity fastener
distribution businesses that had been carried on by Edinov and its subsidiaries.
The divestiture was completed on December 22, 1994 (effective July 1, 1994) and
the Company sold all of the shares that it held in Edinov, which owned all of
the shares of George Hegedus Enterprises Ltd., Atto-Renaud Industries Inc. and
Specialty Fasteners Ltd. During the fourth quarter of fiscal 1996, the Company
completed the reduction of its commodity fastener distribution business which
entailed the purchase, importing, warehousing, reselling and distribution of
commodity fasteners from sales offices and warehouses in Houston, Chicago and
Philadelphia. As the inventories were liquidated and the warehouses and offices
closed, the Company assumed certain write-offs and closing costs associated with
its commodity fastener division. As of the date of this Report, the only
operations of this segment are those of Unimetric, which include the custom
fabrication of industrial fasteners and specialty steel fasteners for the
aerospace and automotive industries.

   In fiscal 1997, the infrastructure construction and engineering business
accounted for approximately 90% of all of the revenues of the Company, as
compared to 93% and 97% in fiscal 1996 and fiscal 1995,


                                      -23-
<PAGE>   26
respectively. The shipbuilding and repair segment accounted for approximately 9%
of the Company's fiscal 1997 revenues, as compared to 6% in fiscal 1996. The
shipbuilding and repair segment was a new segment in 1996.

   The industrial fasteners segment of the Company's business, which accounted
for approximately 1%, 1% and 3% of sales in fiscal 1997, 1996 and 1995,
respectively, had been unprofitable and adversely impacted the Company's
operating income by $1.5 million in 1996 and $1.3 million in 1995. This
negatively impacted the Company's earnings per share by $0.06 in fiscal 1996 and
$0.09 in the prior year. The Company undertook certain steps to return this
segment to profitability. These steps included key management changes and
marketing and production improvements. Unimetric achieved an operating profit in
fiscal 1997. However, due to closing costs incurred in the abandoned commodity
fastener business, the segment incurred an operating loss during fiscal 1997 of
$0.9 million.

   During fiscal 1996, the Company acquired Davie, its initial entrance into the
shipbuilding and repair business. For one dollar, the Company purchased 100% of
the shares of Davie from Societe Generale de Financement ("SGF"), the industrial
finance arm of the Government of Quebec, in a privatization transaction. The
acquisition involved competition between several companies for the
privatization, and the Company was selected based on the business plan it
submitted to commercially expand Davie. SGF assumed all the current and
contingent liabilities on the date of acquisition including Davie's accumulated
working capital deficiencies. On May 15, 1996, SGF invested an additional Cdn
$25 million (US $ 18.5 million) to fund capital expenditures and provide for
working capital over the next two years in accordance with the business plan
adopted by the Company and SGF. SGF has also agreed to invest in Davie up to
another Cdn $25 million by matching each Cdn $3.00 invested by the Company with
Cdn $1.00 of its own money under Davie's development plan.

   The acquisition was accounted for by the purchase method. As the acquisition
was made for a nominal amount (Cdn $1.00), negative goodwill amounting to $24.2
million at acquisition was applied to reduce the value of fixed assets to $ Nil
and the balance of $15.6 million is being amortized over a 3 year period. The
Company has adopted a multi-prong plan to build the revenue and earnings base of
Davie, which was instituted after the acquisition. Since its March 31, 1996
acquisition, Davie had reported operating loss of $0.2 million for the period
from April 1, 1996 to September 30, 1996 and operating income of $2.3 million
for fiscal 1997, including amortization of negative goodwill.

RESULTS OF OPERATIONS

   The following table provides selected expense and income items from the
Company's Consolidated Statements of Operations stated as a percentage of
revenues for the three most recent fiscal years. It will be referred to in the
discussions that follow the table.

<TABLE>
<CAPTION>
                                              FISCAL       FISCAL      FISCAL
                                                1997         1996        1995
                                                ----         ----        ----

       <S>                                    <C>          <C>         <C>   
       Sales                                  100.0%       100.0%      100.0%
       Cost of Sales                           91.4%        90.4%       89.5%
       Gross Profit                             8.6%         9.6%       10.5%
       Selling, General &                      10.8%        10.7%        9.9%
       Administrative                          
       (Loss) Income from Operations           (2.0)%       (0.5%)       2.0%
       (Loss) Income before Income Taxes                    
         and Minority Interests                (2.7)%       (0.8%)       2.5%
       Net (loss) income                       (3.9)%       (2.7%)       1.3%
</TABLE>


                                      -24-
<PAGE>   27
   Exchange rates used in this discussion for the translation of financial
results for fiscal 1997, 1996 and 1995 from Canadian to U.S. dollars were Cdn
$1.00 equals US $.7241, US $.7326 and US $.7270, respectively. For 1997 and
1996, the Australian dollar was converted to U.S. dollars at the exchange rate
of A $1.00 equals US $.76393 and US $.7898, respectively.


   Fiscal 1997 Compared to Fiscal 1996

         Sales. Sales for fiscal 1997 increased 57% to $568 million over fiscal
1996. The principal factors behind the growth in sales were the inclusion of MDC
and Davie for a full twelve month period in fiscal 1997, as opposed to only six
months in fiscal 1996, and significant growth in the pipeline division of Steen.
However, internal sales increased 7.1% during fiscal 1997, fueled by continuing
strong performance by MDC, which experienced internal sales growth of 9%, and 
Steen which experienced internal sales growth of 65% due primarily to its 
pipeline division. These increases were partially offset by decreased sales 
in the fabrication division of DBI.

      Notwithstanding the financial turmoil in Southeast Asia in which
MDC operates, the Company expects continued strong sales growth from MDC. While
some government projects in the Asia Pacific region have been put on hold, MDC's
principal customers are multi-national corporations who appear to be continuing
with their construction plans.

      During fiscal 1997, the Company's North American operations were adversely
affected by a number of factors, including adverse publicity generated as a
result of a consent solicitation to remove management and, for most of fiscal
1997, a lack of a working capital line of credit. In October 1997, the Company
obtained a $40 million asset-based revolving line of credit from a syndicate led
by BNY Financial Corporation-Canada ("BNY"), and is in discussions with several
potential investors and/or acquirers which would likely need to provide
additional working capital for the Company's North American operations. See
"LIQUIDITY AND CAPITAL RESOURCES," below.

   During fiscal 1997, the Company also successfully negotiated contracts for
Davie for the upgrading of the oil production platform Spirit of Columbus and
the new building of two deep water semi-submersible drilling platforms, Amethyst
II and Amethyst III. Based on their current specifications, these contracts
would involve approximately $430 million of procurement and construction
business for Davie and DBI to be completed over approximately two years.
Furthermore, the Company recently learned that the proposed operator of Amethyst
II and Amethyst III is considering upgrading the specifications for these
platforms to permit them to operate in even deeper water. These contracts are
subject to a number of contingencies and there can be no assurance that the
contracts will proceed as currently planned.

   Cost of Sales. Cost of sales as a percentage of sales, increased slightly to
91.4% in fiscal 1997 from 90.4% in fiscal 1996. The increase in cost of sales is
attributable, in part, to the inability of the Company's North American
operations to take advantage of supplier discounts or to obtain favorable
prices. In addition, due to their cash needs, DBI and Steen discounted holdbacks
receivable on certain construction contracts to accelerate payment. Finally,
certain adjustments were made to and reserves taken against work-in-process for
construction contracts which did not achieve the expected level of
profitability.

                                      -25-
<PAGE>   28
   Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") remained relatively constant as a percentage of
sales in fiscal 1997 at 10.8%, in spite of the Company incurring approximately
$912,000 in expenses associated with the consent solicitation and $2.1 million
in write-offs of assets charged to SG&A, excluding a $3.8 million provision for
impairment in value of an investment. The write-offs recorded in fiscal 1997
relate to certain investments made by the Company in the current and prior
fiscal years for which no future economic benefit could be achieved. The
write-offs were recorded as a result of changes in economic circumstances
relating to these assets.

   Income from Joint Ventures. Income from joint ventures declined to $1.1
million in fiscal 1997 from $2.2 million in fiscal 1996 due to the substantial
completion by a joint venture of which Steen is a partner, of the construction
of an offshore drilling platform.

   Interest Expense. Interest expense increased 148% in fiscal 1997 to $5.2
million from $2.1 million in fiscal 1996. The increased interest expense is
largely attributable to the Company's loan from BT Credit Corporation ("BTCC")
being outstanding for twelve months in fiscal 1997 as opposed to six months in
fiscal 1996, offset partially by a lower average outstanding balance. Included
in interest expense in fiscal 1997, is the amortization of financing fees
incurred with respect to the BTCC loan in the amount of $1.7 million.

   Gain on Sale of Shares of MDC. In March 1997, the Company sold a portion of
its interest in MDC for net proceeds of $10.4 million, resulting in a gain of
$270,000, net of income taxes of $1.1 million.

   Income Taxes. Income taxes expense increased over 660% in fiscal 1997 over
fiscal 1996 to $4.4 million, in spite of the Company's substantial consolidated
net loss. The principal cause of the increase in income tax was the
profitability of MDC, which is not consolidated with the North American
operations for the purpose of income taxes in the jurisdictions in which MDC
operates. Also contributing to the increase in income taxes were taxes paid on
the disposition of a portion of the Company's interest in MDC. No recognition
has been given to losses carried forward in the U.S. and Canada.

   Minority Interest.  Minority interest decreased 60% in fiscal 1997 to $2.6
million  This decrease reflected the effect in fiscal 1996 of the deemed
dividends on the shares of the Company's subsidiary, Cedar Group (TCI) LLC,
Inc. ("TCI").

   Net Income (Loss). The Company's net loss increased 125% to $22.3 million in
fiscal 1997 compared with $9.9 million in fiscal 1996. The principal factors
affecting the current year net loss were:

     (1) Reduced margins in construction contracts due to the inability of
         certain operations of the Company to obtain favorable trade conditions
         from suppliers;

     (2) Decline in the value of the Australian and Canadian dollar vs. the U.S.
         dollar which result in reduced earnings, especially from MDC;

     (3) Write-off of certain investments and provision for impairment in value
         of the Company's investment in preferred shares acquired upon the sale
         of its commodity fastener business;

     (4) Adjustments to and reserves taken against work-in-process for certain
         construction contracts which did not achieve the expected level of
         profitability;

     (5) Increase in interest costs; and

     (6) Increase in income taxes.

   Fiscal 1996 Compared to Fiscal 1995

   Sales. Sales for fiscal 1996 increased 133% to $362.6 million as compared to
$155.8 million in fiscal 1995. The $206.8 million total increase in sales growth
in fiscal 1996 over fiscal 1995 is principally attributable to the acquisitions
of MDC and Davie on March 29, 1996. Of this sales increase of $206.8 million,
$135.5 million (or 65.5% of the fiscal 1996 increase) is from the acquisition of
MDC on March 29, 1996 and $21.7 million (or 10.5%) is from the acquisition of
Davie on March 31, 1996. The remaining increase of $49.6 million (or 24% of the
fiscal 1996 sales increase) is from ongoing operations.

   The Company's internal growth, excluding MDC and Davie in fiscal 1996 was
16%. The 16% internal growth is derived by comparing the Company's remaining
operations for fiscal 1996 with their twelve months of operations in fiscal
1995. Pro forma 1995 sales of $177.5 million (versus $155.8 million reported)
are used to include the results of Steen for a twelve month period instead of
for six months from the date of its acquisition on April 1, 1995. Therefore, on
a comparable basis, the internal sales increase for fiscal 1996 was $27.9
million or 16%. Management attributes this increase to improved efficiencies in
marketing and sales at both DBI and Steen.


                                      -26-
<PAGE>   29
   Cost of Sales. Gross profit margins declined by 0.9% in fiscal 1996 as
compared to fiscal 1995. The Company's fiscal 1996 gross profit margin decline
to 9.6% was principally attributable to its DBI operations that were affected by
a change in its mix of business. In fiscal 1996, Steen improved its gross profit
margins over the prior year but, due to the nature of its engineering business,
Steen's gross profit margin is typically lower than the corporate average. The
inclusion of MDC and Davie for the Company's second six months of operations in
fiscal 1996, was positive with both having gross profit margins higher than the
corporate average in fiscal 1996. In addition, fiscal 1995 sales mix included a
substantial level of high margin fabrication.

   Selling, General and Administrative. SG&A costs increased from $15.4 million
in fiscal 1995 to $38.7 million in fiscal 1996 or from 9.9% of sales to 10.7% of
sales. Of the $23.3 million increase in total selling, general and
administrative expenses in fiscal 1996, $9.1 million and $5.4 million,
respectively, were from the inclusion of MDC and Davie. The remaining $8.8
million increase was from the inclusion of Steen for twelve months in fiscal
1996 as compared to six months in fiscal 1995 and the increases in the costs of
corporate overhead. Significantly, included in this latter category were
substantial marketing costs expended in fiscal 1996 by DBI to expand sales in
its Canadian markets. These expenditures have begun to provide returns, with the
December 1996 announcement of an initial Canadian pipeline contract for $12.6
million.

   During fiscal 1996, the Company incurred certain adjustments as part of its
operating costs which reduced significantly its net income and earnings per
share. These adjustments include:

   (a) The expensing in the period of $0.7 million of marketing costs associated
       with various foreign joint ventures;

   (b) The expensing of financing costs of $1.0 million associated with the
       Company's purchase of MDC; and

   (c) One-time tax costs of $1.4 million (see tax discussion below).

   Income from Joint Ventures. Income from the operations of joint ventures
primarily represents the Company's interests through Steen in the joint venture
that is providing project construction management service and procurement
services to an offshore drilling platform. Although there was minimal difference
recorded by the Company between fiscal 1996 and fiscal 1995 in its share of the
joint venture's earnings, fiscal 1995 represents, from the date of acquiring
Steen, only a six months interest in the earnings. The decrease in the Company's
earnings from the joint venture for fiscal 1996 as compared to fiscal 1995's pro
forma full year income reflects that the project should be completed by the end
of calendar 1997, the Company's first quarter of fiscal 1998. The termination of
the joint venture at the conclusion of the contract is not expected to result in
any expenses to the Company. Although there can be no assurance of success,
management continues to address additional offshore drilling projects being
planned to replace the stream of income.

      The North American segment operating income declined significantly from
fiscal 1995 to fiscal 1996 as a result of the accrual in fiscal 1996 of
estimated losses on certain contracts; by contrast several large, profitable
contracts were completed which positively affected operating income in 1995. The
significant decline in operating income in 1996 reflects the fact that the
contracts closed during fiscal 1996 were less profitable than those closed
during fiscal 1995. In accordance with the Company's accounting policies,
foreseeable losses on contracts are recorded in the period in which such losses
are first determinable. During fiscal 1996, the Company recognized


                                      -27-
<PAGE>   30
losses on certain contracts while no such losses were incurred in 1995.
Furthermore, during fiscal 1995, the Company completed contracts at
significantly higher margins than usual.

   Interest Expense. The increase in the Company's net interest expense of $1.7
million over fiscal 1995 to $2.1 million in fiscal 1996 is due to the interest
cost and amortization of financing fees of the $30 million credit facility from
BTCC, which was used to partially finance the acquisition of 77.4% of MDC.

   Income Taxes. The Company did not recognize any significant benefit from the
tax losses incurred in fiscal 1996. This was due to the incurrence of taxable
income and losses in different international tax jurisdictions. This precluded
obtaining the tax benefits of the Company's losses to offset the tax burden of
its profitable subsidiaries. Additionally, at September 30, 1996, the Company
reevaluated certain tax provisions in light of a) its expected disposition of
the US commodity fastener distribution business, b) the nature of the structure
of its 1996 acquisition financing and c) further information regarding various
tax matters. As a result of these re-evaluations, approximately $1.4 million has
been included in the 1996 income tax provision. In fiscal 1995, the Company had
an effective tax rate of 43.4% which was attributable to the losses in its
United States fastener divisions being unable to offset Canadian income tax on
its Canadian earnings.

   Minority Interest. The increase in preferred dividends paid in fiscal 1996
was from the issuance of the Company's 6% cumulative preferred stock through its
Cedar Group (TCI) Inc. LLC subsidiary ("TCI"), which were converted into Company
common stock according to a specified formula. The conversion entitled the TCI
preferred shareholders to convert their shares into common stock of the Company
at a discount to market. This beneficial conversion feature has been accounted
for as additional paid-in-capital, to reflect the paid-in-capital account at the
fair value of the shares issued and a deemed dividend to the TCI preferred
shareholders. During fiscal 1996, the Company issued $24.2 million of the TCI
preferred stock, and at year end, only $8.5 million remained to be converted to
common stock by the holders. The remaining preferred were converted into the
Company's common stock during the first quarter of fiscal 1997. The minority
interests attributable to common stock of $1.7 million, and the increase of $1.5
million over fiscal 1995, is attributable to the 22.6% of MDC not owned by the
Company. A small portion was attributable to the 25% of Steen owned by minority
shareholders before their interest was purchased effective March 15, 1996.

LIQUIDITY AND CAPITAL RESOURCES

   The Company's principal sources of liquidity since the Company's
reorganization have been proceeds from seller financing provided in connection
with the Company's acquisitions and the private placement of equity securities,
bank financing and cash from operations. In addition, in connection with the
Company's acquisition of Davie, the Company received $18.5 million in cash from
SGF, to fund Davie's operating deficit and to modernize Davie's operating
facilities.

   During fiscal 1996, TCI, a subsidiary of the Company, issued $24.2 million
of preferred shares by way of an offshore private placement and the Company
obtained a $30 million credit facility from BTCC. The proceeds from these
transactions, net of issuance costs of approximately $4.0 million, were used to
fund the $40.2 million acquisition of MDC, approximately $4.7 million to
partially retire the outstanding minority interest preferred shares in DBI, and
$5.0 million to repay the BTCC Steen acquisition bridge loan. The balance of
approximately $0.3 million was added to working capital. The TCI preferred
shares paid cash dividends at the rate of 6% per annum. The TCI Preferred Shares
became convertible into the Company's common stock, beginning May 31, 1996, at a
conversion price equal to 12% less than the market price of the common stock
during the five trading


                                      -28-
<PAGE>   31
days prior to conversion if converted prior to June 30, 1996, or 15% less than
the market price of the common stock during the five trading days prior to
conversion, if converted thereafter. There was no minimum conversion price. All
TCI preferred shares outstanding on the maturity date of October 31, 1998 were
to automatically convert into shares of common stock of the Company at a price
equal to the weighted average price of the Company's shares traded on NASDAQ
during the 20 previous trading days. As of the end of fiscal 1996, $7.3 million
of the preferred shares remained outstanding and $16.9 million had converted
into 7,994,606 shares of the Company's common stock. During the first three
months of fiscal 1997, the remaining outstanding balance of the TCI preferred
shares were converted into 3,971,126 shares of the Company's common stock.

   As of the fiscal year-end, the Company had a $30 million credit facility from
BTCC, of which $15 million was outstanding as of September 30, 1997. This
facility provided funding for the Company's acquisition of MDC. Subsequent to
year-end, the Company entered into a $40 million credit facility (the "BNY
Facility") with a syndicate led by BNY Financial Corporation - Canada ("BNY").
The BNY Facility was used to pay off BTCC and to provide working capital for the
Company's North American operation. The amount available to the Company under
the BNY Facility is based upon a percentage of the value of certain eligible
assets of the Company, including the MDC shares owned by the Company and the
accounts receivable, inventory and property, plant and equipment of the North
American operations. The BNY Facility matures in three years and bears interest
at a floating rate based upon BNY's prime rate. The BNY Facility agreements
provide for an acceleration of the maturity date in the event of an "Event of
Default" (as such term is defined in the BNY Facility agreements). An Event of
Default includes failure to pay when due any installment of interest on or
principal of the Facility and any failure to observe the covenants provided in
the BNY Facility agreements, including certain financial covenants.

   The BNY Facility contains various financial and other covenants including
maintaining a minimum shareholders equity of $52 million as of  September 30 
and December 31, 1997. This covenant was not met on these dates and constituted
a technical default under the BNY Facility. The Company has negotiated waivers
for these defaults. The Company is currently negotiating a waiver of or a
revision to the shareholders equity and other covenants contained in the BNY
Facility for the remainder of fiscal 1998. There can be no assurance that such
negotiations will result in a waiver or revision of such covenants. The
Company's failure to successfully negotiate such waiver or revisions would
adversely affect the Company's ability to obtain necessary working capital and
would have a material adverse effect on the continuing operations of the
Company.

   During the second quarter of fiscal 1997, the Company sold 6 million ordinary
shares of MDC for net proceeds of $10.4 million, of which $10 million was paid
to BTCC to reduce the principal balance of the BTCC facility.

   MDC has a revolving credit facility of $28 million which management believes
is adequate for its current level of operations. The Company's other
subsidiaries in North America rely upon cash on hand, trade payables and
customer advances for working capital. Due to restrictions under the BNY
Facility, these subsidiaries are precluded from drawing on their normal
operating lines of credit.

   During fiscal 1997, the Company's operations generated cash in the amount of
$3.9 million, while operations used cash of $4.7 million in fiscal 1996. The
net cash provided by operations in fiscal 1997 results principally from net
changes in working capital items, an increase in depreciation and amortization
(net of amortization of negative goodwill) of $1.9 million and non-cash items 
such as deferred income taxes and non-current asset write-offs.

   Since November 1997, Davie has been engaged in the upgrade of the Spirit of
Columbus. The Company has yet to obtain financing for this project and has been
incurring costs on behalf of Davie of approximately $1 million per week. As of
the date of this Report, Davie has not received any progress payments for the
work performed. In order to reserve limited working capital, the Company has
determined to cut back on the scope of work authorized until such time as
progress payments are received and financing is in place.

   The Company has instituted several significant business initiatives to
improve the operating cash flow. The Company has initiated plant and
administrative staff reductions in its DBI operations to achieve operating cost
savings and benefits from rationalization of operations with those of Steen and
these savings are currently being felt principally through increased margins and
reductions in SG&A. The Company has initiated its business plan at Davie to
focus on running the operation profitably. Davie reduced its operating loss to
$100,000 during fiscal 1997 before amortization of $5.3 million in negative
goodwill.


                                      -29-
<PAGE>   32
   The Company's operations are not significantly dependent upon computer
programs which are subject to the so-called "Year 2000" problem and, therefore,
the Company does not anticipate any material impact on its financial condition
or results of operation as a result therefrom.

   The Company is subject to a risk of claims for construction and product
liability. If a liability claim exceeding the Company's insurance coverage or
its own available resources was to be successfully asserted against the Company,
it could have a material adverse effect on the Company's financial condition.
The Company has general liability insurance of approximately $5 million per
occurrence, with a maximum of $5 million of claims payable during any policy
year. There is no assurance that such coverage will be sufficient to fully
insure against claims brought against the Company and its subsidiaries, or that
the Company will be able to maintain such insurance at affordable rates or
obtain additional insurance covering the projects it undertakes.

   In connection with the acquisition of Davie, the Company agreed to make Cdn
$45 million in capital additions pursuant to a three year revitalization plan.
This investment is on a best efforts basis and is subject to financial market
conditions and the general conditions in the chosen industrial markets
contemplated in the revitalization plan. SEE ITEM 1. "DESCRIPTION OF BUSINESS."

   Effect of Inflation

   The Company's operating costs are subject to general economic and
inflationary pressures. While operating costs have increased during the past
years, the Company does not believe that its operations have been significantly
affected by inflation.

   Foreign currency

   The Company operates principally in Canada, Australia and Southeast Asia and
is, therefore, exposed to currency fluctuations. Because the currencies in these
countries have significantly decreased in value relative to the United States
dollar, a charge of $4.2 million has been made to the cumulative translation
adjustment component of shareholders' equity principally as a result of a
re-valuation of the Company's assets in these countries. The Company does not
currently hedge its exposures to foreign currency fluctuations.

ITEM 8.     FINANCIAL STATEMENTS.

   The information required by this Item is found immediately following the
signature page to this report.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE.

   Not applicable.


                                      -30-
<PAGE>   33
                                    PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
            COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

   The following is a brief description of the business experience of each of
the directors and executive officers of the Company.

NAME                             AGE   POSITION
----                             ---   --------
Michel L. Marengere              50    Chairman, Chief Executive Officer and
                                       Director of the Company; Chairman of
                                       the Board of Directors of MDC

Nicolas Matossian                56    President, Chief Operating Officer and
                                       Director of the Company; Director of MDC

Olivier Despres                  42    Vice President, General Counsel and
                                       Corporate Secretary of the Company

Robert Chartier                  53    Vice President, Corporate Controller
                                       and Interim Chief Financial Officer of
                                       the Company

J. Arthur Gelinas                57    Vice President of the Company and
                                       President of Davie Industries Inc.

Rene Amyot                       71    Director of the Company and MDC

Reynald Lemieux                  70    Director of the Company and MDC

Louis Berlinguet                 71    Director

Ladislas O. Rice                 71    Director

Andrew Choa                      73    Director

Charles-Albert Poissant, FCA     72    Director

Allen S. Gerrard                 62    Director

Derek Tennant                    55    Director


                                      -31-
<PAGE>   34
EXECUTIVE OFFICERS

   Olivier Despres was appointed Vice President, General Counsel and Corporate
Secretary of the Company in September 1996. During the five years prior to such
time, Me Despres practiced in the areas of commercial and corporate law,
computer and high technology law, civil law, and related litigation in his own
firm. A member of the Canadian Bar Association and of the Quebec Bar, Me
Despres graduated in political science (1976) and in law (1979) from Ottawa
University, and obtained an M. Sc. in political science (1983) from the
University of Montreal.

   Robert Chartier was appointed Vice President and Corporate Controller of
the Company in October 1994, and Interim Chief Financial Officer in September
1996.  Mr.  Chartier graduated in accounting from Ecole des Hautes Etudes
Commerciales de Montreal.  He holds a C.A. and prior to joining the Company,
practiced as a Chartered Accountant in his own firm since 1971.

   J. Arthur Gelinas was appointed Vice President of the Company effective
October 1993 and President of Davie Industries Inc. effective upon its
acquisition by the Company in March 1996. Prior to his appointment, Mr.
Gelinas was the founding President of Administratique Inc., a management
consulting company involved in providing financial and administrative
services.  Mr. Gelinas graduated from Laval University with a Masters in
Commercial Sciences and is a Chartered Administrator.


                                      -32-
<PAGE>   35
DIRECTORS

   The Company's Board of Directors is divided into three classes with one class
elected at each Annual Meeting of Stockholders.

--------------------------------------------------------------------------------
Director Whose Term                                   Year in Which Service as
Expires at the 1998        Principal Occupation       a Director Began
Annual Meeting
--------------------------------------------------------------------------------

Derek Tennant              Consultant                           1997

Allen S. Gerrard           Attorney (self-employed)             1997

Ladislas O. Rice           Consultant; Independent              1997
                           Director
--------------------------------------------------------------------------------


   Derek Tennant was appointed a Director of the Company on October 9, 1997. Mr.
Tennant currently serves as a consultant to Deere Park Equities, LLC ("Deere
Park"), a principal stockholder of the Company, and serves on the Board as a
nominee of Deere Park. During the past five years, Mr. Tennant has served as
President of Active Living of Elliot Lake, Inc., a retirement housing company
and also as Site Selection Manager of Q. Canada, Inc., a developer of
entertainment centers. In 1994, Mr. Tennant filed a petition for personal
bankruptcy under federal bankruptcy laws due to losses incurred on real estate
investments. Mr. Tennant was discharged from bankruptcy in February 1995.

   Allen S. Gerrard was appointed a Director of the Company on November 13,
1997.  Mr. Gerrard obtained a Bachelor of Arts Degree from the University of
Illinois and a Law Degree from the University of Michigan.  Mr. Gerrard is a
self-employed attorney in Chicago, Illinois specializing in general civil
litigation.  Since 1975 he has been a Director of the Western Golf Association,
which manages the affairs of the Evans Scholarship Foundation. He is the father
of Douglas A. Gerrard, who is a Manager of Deere Park, a principal stockholder
of the Company.  Mr. Gerrard serves on the Board as a nominee of Deere Park.

   Ladislas O. Rice was appointed a Director of the Company on March 14, 1997.
He is currently a business consultant and outside director for a number of
companies. For the past 5 years he has served as an independent director for
Huntingdon Life Sciences PLC, Scudder New Europe Investment Co., Inc., Sovereign
High Yield Investment Co. NV and Venizaula High Yield Investment Co. NV. For the
past 3 years he has served as an independent director for Stanley Gibbons
Holdings PLC.


                                      -33-
<PAGE>   36
--------------------------------------------------------------------------------
Directors Whose Terms                                 Year in Which Service as
Expire at the 1999 Annual  Principal Occupation       a Director Began
Meeting
--------------------------------------------------------------------------------

Reynald Lemieux            President, Placement                 1995
                           R.N.S. Inc.

Rene Amyot                 Attorney (self-employed)             1993

Charles-Albert Poissant    Chairman of the Board of             1997
                           Donohue Inc.

Andrew Choa                Senior Advisor, Russell              1997
                           Reynolds Associates
--------------------------------------------------------------------------------


   Reynald Lemieux was elected a Director of the Company in February 1995. He
graduated in commerce from Laval University and has been involved in real estate
as an owner and developer for the past forty years. He is the President and
majority shareholder of Placement R.N.S. Inc., a private company specializing in
real estate and other investments. Mr. Lemieux also serves as a director of MDC.

   Rene Amyot, Q. C. was elected a Director of the Company in January 1994. Me
Amyot graduated in law from Laval University in Quebec City and received an MBA
from Harvard University. Me Amyot is a Queen's Counsel and retired in February
1996 as counsel to the Quebec City law firm of Jolin, Fournier, Morisset. Me
Amyot is a director of Rothman's Inc., a tobacco company. Me Amyot also serves
as a director of MDC.

     Charles-Albert Poissant, FCA was appointed a Director of the Company on
October 9, 1997. He is the Chairman of the Board of Directors of Donohue Inc., a
pulp and paper company located in Montreal, Canada. For the past 10 years he has
served as Vice-Chairman for Quebecor, Inc., a publicly held media and printing
company.

   Andrew Choa was appointed a Director of the Company on March 14, 1997. Since
1987, Mr. Choa has served as Senior Advisor to Russell Reynolds Associates, an
executive recruitment and consulting firm, where he conducts CEO level searches
and provides consulting services to a variety of public and private companies.
He previously served as the Managing Director for Russell. Prior to that, Mr.
Choa served as a Vice-President of Citibank Citicorp where he was the Division
Head of Asia Pacific.


                                      -34-
<PAGE>   37
--------------------------------------------------------------------------------
Directors Whose Terms      Principal Occupation            Year in Which
Expire at the 2000 Annual                                  Service as a
Meeting                                                    Director Began
--------------------------------------------------------------------------------

Michel L. Marengere        Chairman and Chief Executive            1993
                           Officer of the Company

Louis Berlinguet           Consultant                              1995

Nicolas Matossian          President and Chief Operating           1997
                           Officer of the Company
--------------------------------------------------------------------------------


   Michel L. Marengere was elected Chairman of the Board of Directors and Chief
Executive Officer of the Company effective as of October 1993. During the prior
five years, Mr. Marengere was President and Chief Executive Officer of Edinov, a
former subsidiary of the Company. Mr. Marengere also serves as Chairman of the
Board of Directors of MDC.

   Louis Berlinguet was elected a Director of the Company in August 1995.
He obtained a B.Sc.  (Honours) from the University of Montreal in 1947 and a
Ph.D.  in Chemistry from Laval University in 1950. Dr. Berlinguet is a
scientific consultant, president of the Order of Quebec, (1994-) and
president of the Quebec Advisory Committee on the Information Highway
(1995-).  From 1990 to January 1997, Dr. Berlinguet was President of the
"Conseil de la science et de la technologie du Quebec."

   Nicolas Matossian was appointed President and Chief Operating Officer of the
Company in April 1994 and has been a director of the Company since March 14,
1997. Dr. Matossian graduated from Harvard University with an MBA and acquired
his Ph.D. in economics from McGill University. Prior to joining the Company, Dr.
Matossian was the founding partner of ERA, an economic and management consulting
firm involved in major projects for the public and private sectors and was the
managing director of the Manitoba Development Corporation. Mr. Matossian also
serves as a director of MDC.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

   To the knowledge of the Company, based solely on a review of Forms 3, 4 and
5, and any amendments thereto, furnished to the Company, each of the Company's
directors, executive officers and 10% beneficial owners has complied with the
requirements of Section 16(a) of the Exchange Act, except that Messrs. Choa,
Rice and Gerrard each failed to timely file a Form 3 upon their appointment to
the Company's Board of Directors and Mr. Matossian failed to timely file a Form
4 with respect to his purchase of 25,000 shares of Common Stock in March, 1997.


                                      -35-
<PAGE>   38
ITEM 11.    EXECUTIVE COMPENSATION.

   The following table discloses, for the fiscal years ended September 30, 1997
("Fiscal 1997"), September 30, 1996 ("Fiscal 1996") and September 30, 1995
("Fiscal 1995"), individual compensation information relating to the Chief
Executive Officer and the four highest compensated executive officers of the
Company.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                               Annual Compensation                           Long Term Compensation Awards
                               -------------------                           -----------------------------
                                                                         Awards                           Payouts
                                                                         ------                           -------
                                                                                       Securities
                                                                        Restricted     Underlying                        All Other
                                Salary    Bonus         Other Annual      Stock       Options/SAR       LTIP/Payouts    Compensation
Name and Position      Year      ($)       ($)          Compensation    Award(s)($)        (#)               ($)            ($)     
-----------------      ----      ---       ---          ------------    ----------         ---               ---            ---
<S>                    <C>      <C>       <C>           <C>             <C>           <C>                <C>            <C>
Michel L. Marengere    1997     360,000   180,000                0              0              0                   0             0
   Chairman of the     1996     360,000   180,000(1)             0              0        825,000(2)                0             0
   Board of            1995     360,000   180,000(1)             0              0             (2)                  0             0
   Directors, Chief                                                                                                
   Executive Officer                                                                                               
   and Director                                                                                                    
                                                                                                                   
Nicolas Matossian      1997     240,000    96,000                0              0              0                   0             0 
   President and       1996     240,000    96,000(3)             0              0        400,000(4)                0             0
   Chief Operating     1995     240,000    96,000(3)             0              0             (4)                  0             0
   Officer                                                                                                         
                                                                                                                   
Robert Chartier        1997     125,000         0                0              0              0                   0             0
   Vice President,     1996     125,000         0                0              0        110,000(5)                0             0
   Corporate           1995     117,000         0                0              0             (5)                  0             0
   Controller and                                                                                                  
   Interim Chief                                                                                                   
   Financial Officer                                                                                               
                                                                                                                   
J. Arthur Gelinas      1997     150,000         0                0              0              0                   0             0
   Vice President      1996     113,000         0                0              0        200,000                   0             0
   of the Company      1995      90,000         0                0              0              0                   0             0
   and President of                                                                                                
   Davie Industries                                                                                                
   Inc                                                                                                             
                                                                                                                   
Olivier Despres(6)     1997     148,000         0                0              0               0                  0             0
   Vice President      1996      10,500         0                0              0         175,000                  0             0
   General Counsel                                                                                                 
   and Corporate                                                                                                   
   Secretary                                                                                                       
</TABLE>

(1)The Compensation Committee (now known as the Corporate Governance Committee)
   granted Mr. Marengere a bonus equal to one-half of his base compensation
   during Fiscal 1995 and Fiscal 1996. These bonuses were authorized and paid in
   January 1997.

(2)Consists of 175,000 options granted during Fiscal 1994, 500,000 options
   granted during Fiscal 1995 and 150,000 shares of Common Stock which were to
   be received upon the exercise of 75,000 unit options (exercisable for one
   share of Common Stock and one Common Stock purchase warrant) granted during
   Fiscal 1995 under Mr. Marengere's service agreement, all of which were
   repriced on September 12, 1996. All of these options were exercised in August
   1997.

(3)The Compensation Committee (now known as the Corporate Governance Committee)
   granted Mr. Matossian a bonus equal to 40% of his base compensation during
   Fiscal 1995 and Fiscal 1996. These bonuses were authorized and paid in
   January 1997.

(4)Consists of 300,000 options granted during Fiscal 1995 and 100,000 shares of
   Common Stock be received upon the exercise of 50,000 unit options
   (exercisable for one share of Common Stock and one Common Stock purchase
   warrant) granted during Fiscal 1995 under Mr. Matossian's service agreement,
   all of which were repriced on September 12, 1996. All of these options were
   exercised in August 1997.


                                      -36-
<PAGE>   39
(5)Consists of options granted during Fiscal 1995 which were repriced on
   September 12, 1996. All of these options were exercised in August 1997.

(6)Me Despres joined the Company in September 1996.


                 AGGREGATED OPTION EXERCISES IN 1997 FISCAL YEAR
                     AND FISCAL YEAR-END OPTION VALUES TABLE

<TABLE>
<CAPTION>
                                                   Number of
                                                  Unexercised
                         Shares                   Options/SARs
                        Acquired        Value     at FY-end (#)
                           on         Realized    Exercisable/
       Name            Exercise(#)      ($)(1)    Unexercisable
       ----            -----------      ------    -------------
<S>                    <C>            <C>         <C>
Michel L. Marengere      825,000           0             0/0
Nicolas Matossian        400,000           0             0/0
Robert Chartier          110,000           0             0/0
J. Arthur Gelinas        200,000           0             0/0
Olivier Despres          175,000           0             0/0
</TABLE>

(1)   All options were exercised on August 20, 1997. The closing price for the
      Company's Common Stock on that date was $1.844 which was lower than the
      exercise price of the options.

   The Company has no retirement, pension or profit-sharing plans covering its
officers and directors and does not contemplate implementing any such plans at
this time. Although the Company has no formal bonus arrangements, other than as
provided in the service agreements for Messrs. Marengere and Matossian, bonuses
will be granted at the discretion of the Board of Directors or by the Corporate
Governance Committee. SEE "CORPORATE GOVERNANCE COMMITTEE REPORT ON EXECUTIVE
COMPENSATION."

DIRECTORS' COMPENSATION

   During Fiscal 1997, Directors of the Company who are not employees of the
Company ("Outside Directors") were paid an annual stipend of $12,000 plus a fee
of $1,000 for each Audit Committee or Board meeting attended and $500 for each
other Committee meeting attended. The aggregate amount of fees paid to all
outside directors during Fiscal 1997 was $190,000. On November 25, 1996, Outside
Directors Rene Amyot, Reynald Lemieux and Louis Berlinquet were granted
three-year options to purchase 25,000 shares of Common Stock at a price of $2.00
per share. In addition, Outside Directors Ladislas O. Rice and Andrew Choa were
granted three (3) year options to purchase 25,000 shares of Common Stock at a
price of $2.00 per share upon their appointment to the Company's Board of
Directors on March 14, 1997.

CHANGE IN CONTROL ARRANGEMENTS

   SERVICE AGREEMENTS

   Effective February 1, 1995, the Company entered into three year service
agreements with Michel L. Marengere as Chairman and Chief Executive Officer,
Nicolas Matossian as President and Chief Operating


                                      -37-
<PAGE>   40
Officer and Robert Chartier as Vice President and Corporate Controller.
Effective April 1, 1996 and September 1, 1996, the Company entered into a three
year service agreement with Mr. Gelinas and a three-year employment agreement
with Me Despres. Mr. Marengere's employment agreement was extended for a
three-year period beginning February 1997.

   The service agreements with Messrs. Marengere, Matossian, Chartier, Gelinas
and Despres (individually an "executive") contain "change in control" language
which provides the executive with certain benefits, including payment to the
executive in the amount of three times his base compensation, if the executive
is terminated for "good reason," as that term is defined in the service
agreements, following a change in control of the Company. The service agreements
provide that a "change in control" shall mean a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A, as in effect on the date thereof, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided,
however, that, without limitation, such a change in control shall be deemed to
have occurred if (A) any "Person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), except for Michel L. Marengere, or a company
controlled by him, is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 10% or more of the combined voting
power of the Company's then outstanding securities; (B) there occurs a contested
proxy solicitation of the Company's stockholders that results in the contesting
party obtaining the ability to vote securities representing 20% or more of the
combined voting power of the Company's then outstanding securities; (C) there
occurs a sale, exchange, transfer or other disposition of substantially all of
the assets of the Company to another entity, except to an entity controlled
directly or indirectly by the Company, or a merger, consolidation or other
reorganization of the Company in which the Company is not the surviving entity,
or a plan of liquidation or dissolution of the Company other than pursuant to
bankruptcy or insolvency laws is adopted; or (D) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period. Notwithstanding the foregoing, a "change in control" shall not be deemed
to have occurred for purposes of the service agreements (i) in the event of a
sale, exchange, transfer or other disposition of substantially all of the assets
of the Company, or a merger, consolidation or other reorganization involving the
Company and the executive, alone or with other officers of the Company, or any
entity in which an executive (alone or with other officers) has, directly or
indirectly, at least a 25% equity or ownership interest or (ii) in a transaction
otherwise commonly referred to as a "management leveraged buy-out."

   If a "change in control" had occurred during Fiscal 1997, Messrs. Marengere,
Matossian, Chartier, Gelinas  and Despres would have been entitled to receive
$1,080,000, $720,000, $375,000, $450,000 and $450,000 respectively, based on
their base compensations pursuant to their respective service agreements. In
addition, since their service agreements are for three year terms ending
February 27, 2000, January 31, 1998, July 31, 1998, March 31, 1999 or August
31, 1999 they would also be entitled to receive their base compensation during
the terms of their respective service agreements.

                                      -38-
<PAGE>   41
CORPORATE GOVERNANCE COMMITTEE REPORT ON EXECUTIVE COMPENSATION 

   The Corporate Governance Committee of the Board of Directors (the
"Committee") is responsible for developing and making recommendations to the
Board with respect to the Company's executive compensation policies. The
Committee consists of Rene Amyot (Chairman), Charles-Albert Poissant, Louis
Berlinguet and Reynald Lemieux (temporary), each of whom is an outside director.
No member of the Corporate Governance Committee has a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity.

SENIOR AND OTHER EXECUTIVE OFFICER COMPENSATION PROGRAM

   For the purpose of this report, senior executives refers to Messrs. Marengere
and Matossian. The Company's senior and other executive compensation program is
based on the following four objectives: (i) to link the interests of management
with those of stockholders by encouraging stock ownership in the Company; (ii)
to attract and retain superior executives by providing them with the opportunity
to earn total compensation packages that are competitive with the industry;
(iii) to reward individual results by recognizing performance through cash
compensation and incentives as well as long-term stock based incentives; and
(iv) to manage compensation based on the level of skill, knowledge, effort and
responsibility needed to perform the job successfully.

   The components of the Company's compensation program for its senior and
executive officers include (i) cash compensation and bonuses provided pursuant
to service agreements or employment agreements; and (ii) performance-based cash
bonuses. In past years, the Company has provided incentive compensation in the
form of stock options.

   Cash Compensation. Cash compensation levels for the Company's senior and
other executive officers are determined, in part, through comparisons with
companies in the engineering and construction industry and other companies with
which the Company competes for personnel and general geographic market
conditions. Additionally, the Committee evaluates individual experience and
performance and the overall performance of the Company. The Committee reviews
each executive's cash compensation on an annual basis and may increase each
executive's cash compensation based on (i) the individual's increased
contribution to the Company over the preceding year; (ii) the individual's
increased responsibilities over the preceding year; or (iii) any increase in
median competitive pay levels.

   Annual Cash Bonuses. The Committee recommends the payment of bonuses from
time-to-time to the Company's employees and executive officers to provide these
persons with an incentive to be productive over the course of each fiscal year.
The service agreements for Messrs. Marengere and Matossian provide for minimum
cash bonuses equal to 50% and 40% of their respective base compensation. Subject
to the Committee's recommendation, other bonuses may be awarded only if the
Company achieves or exceeds certain corporate performance objectives relating to
net income, revenues and strategic acquisitions. Except as provided in the
service agreements, there is no mechanical formula or official policy regarding
the issuance of bonuses to the Company's other executive officers and key
employees.

   Stock Option Plans. Historically, the Company has utilized stock options to
provide an incentive to these officers and employees by allowing them to
directly participate in any increase in the long-term value of the Company and
to reward, motivate and retain the services of executive officers. The Company's
1995 Stock Option Plan provided for the grant of 1,500,000 Incentive Stock
Options and Non-Qualified Stock Options. All of these options were granted to
the executive officers and other key employees in prior fiscal years. Since all
outstanding options were repriced to $2.00 per share at the end of fiscal 1996,
the Committee did not consider presenting a new option plan for full board and
stockholder approval.

   Exercise of Options. During fiscal 1997, the Company's executive officers, Me
Amyot and certain other key employees of the Company exercised a total of
2,300,000 options at $2.00 providing the Company with approximately $4.8 million
in working capital. At the time of exercise, the Company's Common stock was
trading below $2.00 per share and the Company needed cash while it awaited
closing of the BNY Facility. These exercise thus provided the Company with much
needed working capital and demonstrated the executive officers commitment to
increase the long term value of the Company. See "ITEM 1 CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS."

CEO COMPENSATION

   Mr. Marengere's base compensation will be adjusted from time-to-time in
accordance with the criteria for the determination of executive officer
compensation as described above in the section captioned "Cash Compensation."
Mr. Marengere was principally responsible for the acquisitions which have
resulted in the Company's substantial growth over the time period since the
Company was reorganized in 1993. Furthermore, the Company's executive staff has
remained relatively small in spite of the Company's growth, resulting in
substantially increased responsibilities for Mr. Marengere. In setting the
compensation for Mr. Marengere for Fiscal 1998, the Committee will seek to
retain this key executive officer while continuing to tie a significant
percentage of his compensation to Company financial performance.

                              By the Corporate Governance Committee

                              Rene Amyot, Chairman
                              Charles-Albert Poissant
                              Louis Berlinguet
                              Reynald Lemieux


                                      38.1
<PAGE>   42





















ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

   The following table sets forth, as of January 7, 1998, certain
information concerning the stock ownership of all persons known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock based upon filings with the Securities and Exchange Commission,
including a Schedule 13D filed by Deere Park and certain executive officers
and directors of the Company, as well as the beneficial ownership of such
Common Stock, as of such date, of all executive officers and directors,
individually and as a group.  SEE "ITEM 13.  CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS."

<TABLE>
<CAPTION>
                                        Shares Owed Beneficially        Percentage of
Name and Address of Beneficial Owner         and of Record          Outstanding Shares(1)
------------------------------------         -------------          ---------------------
<S>                                     <C>                         <C>  
Michel L. Marengere                          7,188,260 (2)                   22.9%
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2

Nicolas Matossian                            7,188,260(3)                    22.9%
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2

Rene Amyot                                     61,000(4)                       *
523 Cote Ste. Anne
Ste. Anne de Beaupre
Sante-Foy, Quebec
Canada G0A 3C0
</TABLE>


                                      -39-
<PAGE>   43
<TABLE>
<CAPTION>
                                        Shares Owed Beneficially        Percentage of
Name and Address of Beneficial Owner         and of Record          Outstanding Shares(1)
------------------------------------         -------------          ---------------------
<S>                                     <C>                         <C>  
Reynald Lemieux                                26,000(5)                       *
1340 Duquet
Sillery, Quebec
Canada G1S 1A9

Louis Berlinquet                               25,000(6)                       *
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2

Andrew Choa                                    25,000(6)                       *
3801-4 Edinburgh Tower
The Landmark
16 Queens Road
Hong Kong

Ladislas O. Rice                               25,000(6)                       *
19 Redington Road
London, England NW3 7QX

Derek Tennant                                     ___                         ___
154 University Avenue
2nd Floor
Toronto, Ontario
Canada M5H 3Y9

Charles-Albert Poissant,                          ___                         ___
FCA
500 Sherbrooke West
Suite 800
Montreal, Quebec
Canada H3A 3C6

Allen S. Gerrard                                  ___(7)                      ___
33 North Dearborn Street
Suite 1850
Chicago, IL 60603

Robert Chartier                                20,000(8)                       *
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2

J. Arthur Gelinas                              20,000(9)                       *
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2

Olivier Despres                                 ___(10)                       ____
500 Rue Notre Dame
Lachine, Quebec
Canada H8S 2B2

Douglas A. Gerrard                           7,188,260(11)                    22.9%
c/o Deere Park Capital
Management L.L.C.
650 Dundee Road, Suite 640
Northbrook, IL 60062

Leonard Feldman                              7,188,260(12)                   22.9%
c/o Deere Park Capital
Management L.L.C.
650 Dundee Road, Suite 640
Northbrook, IL 60062

Dominion Park Equities, L.L.C.               7,188,260(13)                   22.9%
c/o Deere Park Equities, L.L.C.
</TABLE>


                                      -40-
<PAGE>   44
<TABLE>
<CAPTION>
                                        Shares Owed Beneficially        Percentage of
Name and Address of Beneficial Owner         and of Record          Outstanding Shares(1)
------------------------------------         -------------          ---------------------
<S>                                     <C>                         <C>  
650 Dundee Road, Suite 640
Northbrook, IL 60062

Deere Park Equities, L.L.C.                  7,188,260(14)                   22.9%
650 Dundee Road, Suite 640
Northbrook, IL 60062

Wellgate International Ltd.                  7,188,260(15)                   22.9%
c/o Dominion Bridge
Corporation
500 Notre Dame
Lachine, Quebec
Canada H8S 2B2

All Directors and                              7,350,260                     23.4%
Executive Officers
as a group (13 persons)
</TABLE>

-------------------------------------------
*     Less than 1%.

(1)   Except as otherwise indicated, percentages are presented after rounding to
      the nearest tenth and include the total number of shares outstanding and
      the number of shares which each person has the right to acquire, within 60
      days through the exercise of options, pursuant to Item 403 of Regulation
      S-K and Rule 13d-3(d)(1), promulgated under the Securities and Exchange
      Act of 1934, as amended (the "Exchange Act"). Percentages for the total of
      all persons and the total of all officers and directors include all
      outstanding shares and all shares which such persons have the right to
      acquire within 60 days.

(2)   As a manager of Dominion Park Equities, L.L.C. ("Dominion Park") which
      is the record owner of 4,490,100 shares of Common Stock and holds a
      proxy with respect to an additional 2,698,160 shares, Mr. Marengere has
      shared voting power with respect to all of these shares, shared
      investment power with respect to 4,490,100 of these shares and is
      deemed to beneficially own all such shares.  Also includes 1,359,792
      shares held of record by Fidutech Technologies, Inc. as to which Mr.
      Marengere has shared investment power.  Mr. Marengere is the sole
      stockholder of Gestion Edinov Inc. and Services M.L. Marengere, Inc.
      which own, in the aggregate, 75% of Fidutech.  Also includes 500,000
      shares held of record by Wellgate International Ltd. ("Wellgate") over
      which Mr. Marengere has shared investment power.  Mr. Marengere is an
      executive officer, director and shareholder of Wellgate.

(3)   As a manager of Dominion Park which is the record owner of 4,490,100
      shares of Common stock and holds a proxy with respect to an additional
      2,698,160 shares, Mr. Matossian has shared voting power with respect to
      all of these shares, shared investment power with respect to 4,490,100 of
      these shares and is deemed to beneficially own all such shares. Also
      includes 50,000 shares over which Mr. Matossian has sole investment power,
      4,000 of which held of record by Greyhorse Resources (Canada) Ltd. Mr.
      Matossian is the sole director, officer and shareholder of Greyhorse. Also
      includes 500,000 shares held of record by Wellgate over which Mr.
      Matossian has shared investment power. Mr. Matossian is an executive
      officer, director and shareholder of Wellgate.

(4)   Includes 25,000 shares of Common Stock that may be issued pursuant to
      stock options exerciseable at $2.00 per share. Although not deemed to be
      beneficially owned for the purposes of applicable SEC rules and
      regulations, Me Amyot has an economic interest in an additional 100,000
      shares of Common Stock which are deemed to be beneficially owned by
      Dominion Park and others.

(5)   Includes 25,000 shares of Common Stock which may be issued pursuant to
      stock options exercisable at $2.00 per share.


                                      -41-
<PAGE>   45
(6)   Consists of shares of Common Stock which may be issued pursuant to stock
      options exercisable at $2.00.

(7)   Mr. Gerrard is identified in the Schedule 13D filed by Deere Park and
      others as a member of a 13D Group which beneficially owns 7,188,260 shares
      of Common Stock. See note 13 below.

(8)   Represents shares of Common Stock held of record by Mr. Chartier over
      which he has sole investment power. These shares are subject to a proxy
      which vests Dominion Park with sole voting power. Although not deemed to
      be beneficially owned for the purposes of applicable SEC rules and
      regulations, Mr. Chartier has an economic interest in an additional
      110,000 shares of Common Stock which are deemed to be beneficially owned
      by Dominion Park and others.

(9)   Represents shares of Common Stock held of record by Mr. Gelinas over which
      he has sole investment power. These shares are subject to a proxy which
      vests Dominion Park with sole voting power. Although not deemed to be
      beneficially owned for the purposes of applicable SEC rules and
      regulations, Mr. Gelinas has an economic interest in an additional 200,000
      shares of Common Stock which are deemed to be beneficially owned by
      Dominion Park and others.

(10)  Although not deemed to be beneficially owned for the purposes of
      applicable SEC rules and regulations, Me Despres has an economic interest
      in 175,000 shares of Common Stock which are deemed to be beneficially
      owned by Dominion Park and others.

(11)  As a manager of Dominion Park, which is the record owner of 4,490,100
      shares of Common Stock and holds a proxy with respect to an additional
      2,698,160 shares, Mr. Gerrard has shared voting power with respect to all
      of these shares, shared investment power with respect to 4,490,100 of
      these shares and is deemed to beneficially own all such shares. Mr.
      Gerrard is the sole director and shareholder of Deere Park Capital
      Management, Inc. which is the record owner of 630,700 shares which are
      subject to a proxy vesting Dominion Park with sole voting power and over
      which Mr. Gerrard has sole investment power.

(12)  As a manager of Dominion Park, which is the record owner of 4,490,100
      shares of Common Stock and holds a proxy with respect to an additional
      2,698,160 shares, Mr. Feldman has shared voting power with respect to all
      of these shares, shared investment power with respect to 4,490,100 of
      these shares and is deemed to beneficially own all such shares

(13)  Dominion Park is the record owner of 4,490,000 shares of Common Stock and
      holds a proxy with respect to an additional 2,698,160 shares. Dominion
      Park is deemed to beneficially own all of these shares.

(14)  Consists of shares of Common Stock beneficially owned by Dominion Park.
      Deere Park is a member of Dominion Park and may also be deemed to
      beneficially own such shares.

(15)  Includes shares of Common Stock beneficially owned by Dominion Park.
      Wellgate is a member of Dominion Park and may also be deemed to
      beneficially own such shares. Also includes 500,000 shares held of record
      by Wellgate over which Wellgate has sole investment power. These shares
      are subject to a proxy which vests Dominion Park with sole voting power.


                                      -42-
<PAGE>   46
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

   As of September 30, 1997, a subscription receivable in the aggregate amount
of $1,824,000 was owed to the Company by Mr. Marengere or his affiliates
including Me Amyot.

   During Fiscal 1997, the Company paid approximately $80,000 in fees to Rene
Amyot, a director, for consulting and legal services provided to the Company.

   In connection with the settlement of a stockholder derivative action
brought against the Company and Messrs. Marengere and Amyot, a company
affiliated with Mr. Marengere guaranteed up to $1,155,000 of the value of the
preferred stock issued to the Company in connection with the sale of Edinov.

   On August 19, 1997, (i) Deere Park; (ii) the Company's Executive Officers
identified herein, outside director Rene Amyot and certain current and former
employees of the Company (collectively, the "Management Members"); and (iii)
certain principals of Deere Park, including principal stockholders Douglas A.
Gerrard and Leonard Feldman, and outside director Allen S. Gerrard,
(collectively, the "Group"), filed a Schedule 13D (the "13D") with the
Commission which was subsequently amended on September 16, 1997. The 13D
describes a series of transactions pursuant to which Deere Park purchased
2,110,000 shares of Company Common Stock and made a loan of approximately $4.8
million to the Management Members which was utilized to exercise 2,380,000
options. Thereafter, Deere Park contributed its 2,110,000 shares and the
Management Members contributed their 2,380,000 shares to Dominion Park, LLC
("Dominion Park"), a newly formed limited liability company jointly owned by
Deere Park and Messrs. Marengere and Matossian. The Management Members also
delivered a proxy to Dominion Park vesting it with sole voting power with
respect to an additional 2,067,460 shares owned of record by the Management
Members. The transaction documents provide for any gain on the 2,380,000 option
shares to be distributed 30% to Deere Park and 70% to the Management Members.

   Although the Company was not a party to these transactions, the proceeds of
the approximate $4.8 million loan from Deere Park were paid to the Company by
the Management Members to exercise outstanding options. The transactions were
also subject to prior approval by the Company's Board of Directors in order to
exempt the Group from the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law. In addition, the Board determined that the
transactions did not trigger the exercise of rights issued under the Company's
Shareholder Rights Plan and agreed to the appointment of Derek Tennant and Allen
S. Gerrard to the Company's Board as nominees of Deere Park.

   The 13D states that certain members of the Group are in the process of
formulating a proposal with a third party regarding a business combination with
the Company and that the Group or its members may also explore the possibility
of entering into a business combination with other third parties in the future.
Deere Park is an investor in American Eco Corporation, which has indicated an
interest in pursuing a business combination with the Company.

                                     PART IV

ITEM 14.    EXHIBITS AND REPORTS ON FORM 8-K.

A.    Financial Statements filed as part of this Report:

      Auditors' Report of Deloitte & Touche, Independent Auditors, on
      Company's Consolidated Financial Statements for the fiscal years ending
      September 30, 1997 and 1996

      Auditors' Report of Ernst & Young, Independent Auditors, on the
      Company's Consolidated Financial Statements for the fiscal year ending
      September 30, 1995

      Consolidated Balance Sheets of the Company as at September 30, 1997 and
      1996


                                      -43-
<PAGE>   47
      Consolidated Statements of Operations of the Company for the fiscal years
      ended September 30, 1997, 1996 and 1995

      Consolidated Statements of Cash Flows of the Company for the fiscal years
      ended September 30, 1997, 1996 and 1995

      Consolidated Statements of Stockholders' Equity of the Company for the
      fiscal years ended September 30, 1997, 1996 and 1995

      Notes to Consolidated Financial Statements of the Company

B.    The following Exhibits are filed as part of this Report:

EXHIBIT NO.      DESCRIPTION
-----------      -----------
3.1 (a)          Amended and Restated Certificate of Incorporation of the
                 Company (Incorporated by reference to Exhibit 3 (i) of the
                 Company's Report on Form 10-Q for the period ended June 30,
                 1996)

3.2(b)           Certificate of Designation for the Company's Series One
                 Preferred Stock (Incorporated by reference to the Company's
                 Registration Statement on Form 8-A for its Preferred Stock
                 Purchase Rights, filed December 11, 1996 (the "Form 8-A"))

3.2              Second Amended and Restated By-Laws (Incorporated by reference
                 to Exhibit 3.2 of the Company's Annual Report on Form 10-K for
                 the year ended September 30, 1996 ("1996 10-K"))

3.3              Certificate of Correction to the Company's Restated 
                 Certificate of Incorporation filed July 25, 1989.
                 (Incorporated by reference for the Company's Amended Current
                 Report on Form 8-A/A dated June 2, 1997)

3.4              Certificate of Correction to the Company's Certificate of
                 Amendment filed January 31, 1992.  (Incorporated by reference
                 for the Company's Amended Current Report on Form 8-A/A dated
                 June 2, 1997)

3.5              Certificate of Correction to the Company's Restated Certificate
                 of Incorporation filed September 5, 1996 (Incorporated by
                 reference to the Company's Amended Current Report on Form 8-A/A
                 dated June 2, 1997)

4.1              Shareholder Rights Plan dated as of November 26, 1996 between
                 the Company and Continental Stock Transfer & Trust Company
                 (Incorporated by reference to the Form 8-A)

4.2              Amendment No. 1 to Shareholders Rights Plan dated November
                 26, 1997 between the Company and Continental Stock Transfer &
                 Trust Company (Incorporated by reference to the Company's
                 Current Report on Form 8-K dated November 26, 1997)


                                      -44-
<PAGE>   48
10.1             Subscription Agreement dated July 25, 1993 between Edinov and
                 Fidutech relating to the purchase of Fidutech of 777,778 Units
                 (Incorporated by reference to Exhibit 10.1 to the Annual Report
                 on Form 10-KSB for the transition period from January 31, 1993
                 to September 30, 1993)

10.2             Subscription Agreement dated September 15, 1993 between Edinov
                 and Fidutech relating to the purchase of Fidutech of 266,667
                 Units (Incorporated by reference to Exhibit 10.2 to the Annual
                 Report on Form 10-KSB for the transition period from January
                 31, 1993 to September 30, 1993)

10.3             Master Agreement Between United Dominion Industries Limited,
                 Cedar Group, Inc., Edinov Corporation and Dominion Bridge
                 Inc. dated March 9, 1994 (incorporated by reference to the
                 Company's Form 8-K, dated April 8, 1994)

10.4             Rollover Agreement Between United Dominion Industries Limited
                 and 3010864 Canada Inc., effective December 31, 1993
                 (incorporated by reference to the Company's Form 8-K, dated
                 April 8, 1994)

10.5             Share Purchase Agreement Between United Dominion Industries
                 Limited and the Company dated March 10, 1994 (incorporated by
                 reference to the Company's Form 8-K, dated April 8, 1994)

10.6             Services Agreement between the Company and Michel Marengere
                 (incorporated by reference to Exhibit 10.13 to the Company's
                 Report on Form 10-KSB for the fiscal year ended September 30,
                 1995 (the "1995 10-KSB")

10.7             Services Agreement between the Company and Nicholas Matossian
                 (incorporated by reference to Exhibit 10.14 of the 1995
                 10-KSB)

10.8             The Company's 1995 Stock Option Plan (incorporated by
                 reference to Exhibit 10.15 of the 1995 10-KSB)

10.9             Credit Agreement dated September 12, 1997 among BNY, Groupe
                 Cedar Canada Inc., the Company, DBI, Steen, Davie, Becker, Les
                 Entrepreneurs Becker Inc. and MIL.

10.10            Letter of Credit Financing Supplement dated as of September 12,
                 1997 among BNY, Groupe Cedar Canada Inc., the Company, DBI,
                 Steen, Davie, Becker, Les Entrepreneurs Becker Inc. and MIL.

10.11            Guarantee dated September 12, 1997 of the Company.

10.12            Hypothecation of Securities dated September 12, 1997 between
                 BNY and the Company.

10.13            Hypothec on Movable Property dated September 12, 1997 between
                 BNY and the Company.

11               Statement of Computation of Earnings Per Share

21               Subsidiaries (incorporated by reference to Exhibit 21 of the
                 1996 10-K)

23.1             Consent of Deloitte & Touche

23.2             Consent of Ernest & Young

27               Financial Data Schedule

C.    Reports on Form 8-K

      Report on Form 8-K dated November 26, 1997, Item 5 regarding Amendment
      No. 1 to the Company's Shareholder Rights Plan.

D.    Financial Statement Schedule

      Schedule II -- Valuation and Qualifying Accounts (included at F-38)


                                      -45-
<PAGE>   49
                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of
1934, the Registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated: January 16, 1998             DOMINION BRIDGE CORPORATION


                                    By:/s/ MICHEL L. MARENGERE
                                       -----------------------
                                       Chief Executive Officer

                                    By:/s/ ROBERT CHARTIER
                                       -----------------------
                                       Interim Chief Financial Officer

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed by the following persons in the capacities and on the
dates indicated.

SIGNATURE                      TITLE                        DATE
---------                      -----                        ----

                                                         
/s/ MICHEL L. MARENGERE        Chairman of the Board of  
-----------------------        Directors, Chief Executive
Michel L. Marengere            Officer and Director         January 16, 1998


/s/ NICOLAS MATOSSIAN          President and Chief
---------------------          Operating Officer, Director  January 16, 1998
Nicolas Matossian                                                            


/s/ ROBERT CHARTIER            Vice President, Interim CFO  January 16, 1998
-------------------
Robert Chartier


/s/ RENE AMYOT                 Director                     January 16, 1998
--------------
Rene Amyot


/s/ REYNALD LEMIEUX            Director                     January 16, 1998
-------------------
Reynald Lemieux


/s/ LOUIS BERLINGUET           Director                     January 16, 1998
--------------------
Louis Berlinguet


/s/ LADISLAS O. RICE           Director                     January 16, 1998
--------------------
Ladislas O. Rice


                                      -46-
<PAGE>   50
         Consolidated financial statements of

         DOMINION BRIDGE CORPORATION

         September 30, 1997
<PAGE>   51
DOMINION BRIDGE CORPORATION
TABLE OF CONTENTS

<TABLE>
<S>                                                                     <C>
Independent auditors' report..........................................      F-1


Consolidated statements of operations.................................      F-3


Consolidated balance sheets...........................................      F-4


Consolidated statements of cash flows.................................    F-5-6


Notes to the consolidated financial statements........................   F-7-34


Consolidated statements of stockholders' equity.......................  F-35-37


Valuation and Qualifying Accounts.....................................     F-38
</TABLE>
<PAGE>   52
INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
Dominion Bridge Corporation

We have audited the accompanying consolidated balance sheets of Dominion Bridge
Corporation as at September 30, 1997 and 1996, and the related consolidated
statements of operations and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Dominion Bridge
Corporation as at September 30, 1997 and 1996, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.

The financial statements as at and for the year ended September 30, 1995 were
reported on by another firm of chartered accountants, which expressed an
unqualified opinion under date of December 20, 1995.

As discussed in Note 19, the accompanying 1996 consolidated financial statements
have been restated.


Montreal, Canada

December 16, 1997

(except as to Note 21 which is as of January 16, 1998)


                                      F-1
<PAGE>   53

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
CEDAR GROUP, INC. (NOW KNOWN AS DOMINION BRIDGE CORPORATION)

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Cedar Group, Inc., for the year ended
September 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects the consolidated results of the operations and the cash
flows of Cedar Group, Inc., for the year ended September 30, 1995 in conformity
with accounting principles generally accepted in the United States.

/s/ Ernst & Young

Montreal, Canada
December 20, 1995


                                      F-2
<PAGE>   54
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
=============================================================================
<TABLE>
<CAPTION>
                                                                         1997            1996           1995
                                                                                      (restated,
                                                                                     see Note 19)
                                                                     ----------      ----------      ----------    
                                                                          $                $              $

<S>                                                                  <C>             <C>             <C>    
SALES                                                                   567,578         362,624         155,750
---------------------------------------------------------------------------------------------------------------

Cost of sales                                                           518,955         327,921         139,407
Selling, general and administrative expenses                             61,559          38,720          15,433
---------------------------------------------------------------------------------------------------------------
                                                                        580,514         366,641         154,840
Income from operations of joint ventures (Note 8)                         1,180           2,189           2,165
---------------------------------------------------------------------------------------------------------------       
(Loss) income from operations                                           (11,756)         (1,828)          3,075
Interest expense                                                         (5,215)         (2,104)           (406)
Gain on disposal of subsidiary shares                                     1,342              --              --
Provision for impairment in value of an investment
   (Note 3 vi)                                                           (3,847)             --              --
Other income                                                              4,166           1,134           1,236
---------------------------------------------------------------------------------------------------------------
(Loss) income before income taxes and minority interest                 (15,310)         (2,798)          3,905
---------------------------------------------------------------------------------------------------------------
Income taxes (recovery) (Note 11)
   Current                                                                8,507           1,283            (300)
   Deferred                                                              (4,124)           (709)          1,993
---------------------------------------------------------------------------------------------------------------
                                                                          4,383             574           1,693
---------------------------------------------------------------------------------------------------------------
(Loss) income before minority interest                                  (19,693)         (3,372)          2,212
Minority interest - dividends on preferred shares                            --            (645)            (70)
Minority interest - deemed dividends on conversion
             of subsidiary preferred shares
             (Note 19)                                                       --          (4,260)             --
Minority interest - common stock                                         (2,627)         (1,667)           (122)
---------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME                                                       (22,320)         (9,944)          2,020
===============================================================================================================
Net (loss) income per common share and common
   share equivalents                                                          $               $               $
     Primary                                                              (0.77)          (0.55)           0.14
     Fully diluted                                                           --              --            0.11
---------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
   and common share equivalents outstanding
     Primary                                                         28,834,000      18,174,000      14,929,000
     Fully diluted                                                   29,384,000      23,565,000      17,688,000
---------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes

                                      F-3
<PAGE>   55
DOMINION BRIDGE CORPORATION
CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
===============================================================================
<TABLE>
<CAPTION>
                                                                                        1997         1996
                                                                                                   (restated,
                                                                                                   see Note 19)
----------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>          <C>    
                                                                                          $            $
ASSETS
Current assets
   Cash (Note 4)                                                                        9,021       26,231
   Accounts receivable, net (Note 5)                                                  107,956      126,911
   Inventories (Note 6)                                                                47,621       43,762
   Prepaid expenses and other current assets                                            5,862        5,417
----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                                  170,460      202,321
   Property, plant and equipment, net (Note 7)                                         51,827       38,289
   Assets of business transferred under contractual
     arrangements (preferred shares) (Note 3 vi)                                           --        3,847
   Goodwill                                                                             9,306       11,958
   Pension assets (Note 12)                                                             2,652        1,187
   Investments in unincorporated joint ventures (Note 8)                                  996        2,398
   Other assets                                                                         7,523        5,247
---------------------------------------------------------------------------------------------------------------
                                                                                      242,764      265,247
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Bank indebtedness (Note 9)                                                           7,165        5,624
   Term loan (Notes 9 and 20)                                                          15,000       30,000
   Accounts payable and accrued expenses                                              132,010      119,839
   Customer advances on construction contracts                                          8,447       16,166
   Deferred income taxes                                                                  805           --
   Current portion of obligations under capital leases                                  3,778        2,979
---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                             167,205      174,608
   Deferred income taxes                                                                  492        5,147
   Accrued post-retirement benefits other than pensions (Note 12)                       1,791          514
    Obligations under capital leases (Note 10)                                           9,363        2,274
   Minority interest (Note 3)                                                          19,243       18,783
   Negative goodwill (Note 3 ii)                                                        7,812       12,945
   Other long-term liabilities                                                          1,459        2,976
---------------------------------------------------------------------------------------------------------------
                                                                                      207,365      217,247
---------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 15)

STOCKHOLDERS' EQUITY (NOTE 13)
   Preferred stock, $0.001 par value; 25,000,000 shares
     authorized, none issued
   Common stock, $0.001 par value; 50,000,000 shares
     authorized; issued and outstanding: 31,447,648 in 1997
     and 24,722,188 shares in 1996                                                         34           25
   Additional paid-in capital                                                          74,529       60,624
   Deficit                                                                            (32,511)     (10,191)
   Cumulative translation adjustment                                                   (4,829)        (634)
---------------------------------------------------------------------------------------------------------------
                                                                                       37,223       49,824
   Subscription receivable                                                             (1,824)      (1,824)
---------------------------------------------------------------------------------------------------------------
   Total stockholders' equity                                                          35,399       48,000
---------------------------------------------------------------------------------------------------------------
                                                                                      242,764      265,247
===============================================================================================================
</TABLE>
See accompanying notes

                                      F-4
<PAGE>   56
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
===============================================================================
<TABLE>
<CAPTION>
                                                                        1997        1996        1995
                                                                                 (restated,
                                                                               see Note 19)
---------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>          <C>          <C>  
                                                                          $           $            $
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income                                                     (22,320)     (9,944)      2,020
Adjustments to reconcile net income to the
   cash used in operating activities
     Deemed dividends on conversion of subsidiary
        preferred shares (Note 19)                                         --       4,260          --
     Minority interest                                                  2,627       1,667         122
     Depreciation and amortization                                     11,478       6,902       3,217
     Common stock issued for services                                     649          85         170
     Amortization of negative goodwill                                 (5,257)     (2,626)         --
     Deferred pension costs                                            (1,465)       (709)      1,993
     Deferred income taxes                                             (4,124)        432         434
     Non-current asset write-offs                                       4,259          --          --
     Gain on sale of property, plant and equipment                         --      (1,105)       (689)
     Gain on sale of subsidiary shares                                 (1,342)         --          --
     Income from operations of unincorporated
        joint ventures                                                 (1,180)     (2,189)     (2,165)
     Investments in unincorporated joint ventures                       2,582         860        1,189
     Decrease (increase) in accounts receivable                        14,295     (25,963)     (10,797)
     Decrease (increase) in prepaid expenses and
        other assets                                                     (455)      6,516         806
     Decrease (increase) in inventories                                (6,048)     18,012      (3,148)
     (Decrease) increase in accounts payable and
        accrued expenses                                               17,083        (595)      5,660
     Decrease in customer advances                                     (7,719)       (272)     (3,263)
     Accrued post retirement benefits                                   1,277          (8)         --
     Other - net                                                         (401)        (22)        178
---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities                     3,939      (4,699)     (4,273)
--------------------------------------------------------------------------------------------------------------- 
CASH FLOW FROM INVESTING ACTIVITIES
Decrease in investments                                                    --          --       2,696
Decrease (increase) in term deposits                                       --       1,688      (1,688)
Cash consideration paid for acquired businesses                            --     (40,214)     (4,476)
Cash of acquired businesses                                                --      35,081         544
Purchase of minority interest of subsidiaries                              --      (6,186)     (8,298)
(Advance to) repayment by divested businesses                              --        (207)        739
Repayment by (advance to) a shareholder                                    --       1,198        (417)
Repayment of advance by an officer                                         --          --         565
Cash payment for purchase of equipment                                (16,742)     (7,132)        (10)
Proceeds from sale of property and equipment                            1,325       2,905       2,152
(Increase) decrease in other assets                                    (2,276)        312          --
Proceeds on disposal of subsidiary shares (Note 3i)                    10,378          --          --
---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                  (7,315)    (12,555)     (8,193)
---------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock                                     --       2,619       3,493
Proceeds from exercise of warrants                                        299         359         757
Proceeds from exercise of options                                       4,458          --          --
Issue of preferred shares of subsidiary to
   minority interest                                                       --      24,142          --
Issue costs of subsidiary preferred shares                                 --      (1,497)         --
Share issue costs                                                        (137)         --          --
Bank indebtedness                                                       1,541     (10,909)      1,688
Other long-term liabilities                                            (1,517)        250         488
Repayment of capital lease obligations                                 (2,717)       (745)         --
Term loan                                                             (15,000)     25,000       5,000
Decrease in subscription receivable                                        --          61          --
---------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities                   (13,073)     39,280      11,426
---------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate fluctuations on cash                     (761)       (560)        227
===============================================================================================================
Net change in cash                                                    (17,210)     21,466        (813)
Cash, beginning of year                                                26,231       4,765       5,578
===============================================================================================================
CASH, END OF YEAR (NOTE 4)                                              9,021      26,231       4,765
===============================================================================================================
</TABLE>

                                      F-5
<PAGE>   57
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
==============================================================================
<TABLE>
<CAPTION>
                                                     1997          1996           1995
                                                               (restated,
                                                              see Note 19)
-----------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>     
                                                      $             $              $


SUPPLEMENTAL CASH FLOW INFORMATION

CASH PAID DURING THE YEAR FOR:
   Interest                                           3,311         1,457         406

   Taxes                                              2,829           705         310
-----------------------------------------------------------------------------------------

NON-CASH INVESTING AND FINANCING ACTIVITIES
Issue of capital lease obligations                   10,605         5,077          --

Purchase of equipment under capital leases          (10,605)       (5,077)         --

Issuance of common stock on conversion of
   minority interest preferred shares                 8,641        22,723          --

Purchase of preferred stock minority interest
   of subsidiaries                                   (8,641)      (22,723)         --

Issuance of common stock in repayment of debt            --            --          --

Settlement on acquisition of minority interest           --          (627)      1,034
-----------------------------------------------------------------------------------------
</TABLE>

See accompanying notes

                                      F-6
<PAGE>   58
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
==============================================================================


1.    NATURE OF OPERATIONS

     Dominion Bridge Corporation (formerly Cedar Group Inc.), a Delaware
     corporation with executive offices in Montreal, Canada, specializes in
     international engineering, infrastructure development and project
     management and ship building and repair. In July 1996, Cedar Group, Inc.
     amended its certificate of incorporation to change its name to Dominion
     Bridge Corporation.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     These consolidated financial statements have been prepared by management in
     accordance with accounting principles generally accepted in the United
     States, the most significant of which are outlined below. These principles
     require the use of estimates to measure the financial effects of past
     transactions or events and the present status of assets and liabilities.

     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 and
     disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amount of revenue and expenses during
     the reporting period. Actual results could differ from those estimates.

                                      F-7
<PAGE>   59
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

     Principles of consolidation

     The financial statements include the accounts of the Company and its
     subsidiaries. All significant intercompany accounts and transactions have
     been eliminated upon consolidation.

     During 1996, the Company (1) acquired the remaining minority interests in
     Dominion Bridge Inc. and Steen Contractors Limited, (2) acquired
     approximately 77.4% of the outstanding shares of McConnell Dowell
     Corporation Limited and (3) acquired 100% of the outstanding share capital
     of Industries Davie Inc. (formerly Groupe MIL Inc.).

     During 1997, the Company disposed of a portion of its interest in McConnell
     Dowell Corporation Limited reducing its interest to 63% at September 30,
     1997.

     Each of the above acquisitions were accounted for under the purchase method
     of accounting. Under the purchase method of accounting, the assets of the
     acquired entity are reflected on the balance sheet at their fair market
     value on the date of purchase, with the balance of the purchase price
     attributed to goodwill. In the case of Industries Davie Inc., since the
     purchase price was nominal, the difference between the fair market value of
     the assets and the purchase price was first applied to non-current assets
     and the remaining portion was treated as negative goodwill. Goodwill is
     amortized on a straight-line basis over periods not exceeding forty years.
     Negative goodwill is amortized on a straight-line basis over a period of
     three years.

     Cash

     Cash includes short-term deposits with terms less than 90 days. Short-term
     deposits with terms longer than 90 days are stated at cost which
     approximates fair market value.

     Construction contracts

     Income on construction contracts is recognized on the
     percentage-of-completion basis. This method allows for the recording of
     income as the contract progresses based on estimates of the gross margin,
     the cost to complete and the percentage of completion. Anticipated losses
     are recorded as they become determinable.

     Management establishes these estimates by periodically assessing the status
     of each contract using actual costs incurred compared to budgeted costs,
     and hours worked compared to plan.

     In the ordinary course of its construction business, the Company, together
     with its client, may conduct a review following the completion of the
     project for the purpose of establishing a final contract amount. Income is
     recorded only when the Company's entitlement to additional amounts under
     such contracts is established.

                                      F-8
<PAGE>   60
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

     Inventories

     Inventories consist principally of work in process related to construction
     contracts which are stated at accumulated costs less amounts charged to
     income based on the percentage-of-completion of individual contracts. Work
     in process inventories, accounted for under the percentage-of-completion
     basis, are adjusted to reflect the lower of cost or net realizable value by
     accruing for any losses anticipated under such construction contracts as
     soon as such losses are identified. Raw materials consist principally of
     raw steel and supplies not held for resale and are stated at the lower of
     cost (first in, first out) or replacement cost (net realizable value). The
     policy of carrying these raw material inventories at the lower of cost and
     replacement cost reflects obsolescence or decline in market value of these
     inputs to the Company's end products. Finished goods comprise steel and
     steel hardware products held for resale and are stated at the lower of cost
     (first in, first out) or market (net realizable value).

     Investments in unincorporated joint ventures

     The Company's investments in unincorporated joint ventures are accounted
     for by the equity method whereby the investment is initially recorded at
     cost and the carrying value is adjusted thereafter to include the Company's
     pro rata share of earnings less drawings received.

     Property, plant and equipment

     Property, plant and equipment, including assets that were acquired under
     capital leases, are stated at cost. Maintenance and repairs are expensed as
     incurred. When assets are sold or otherwise disposed of, the cost and
     related accumulated depreciation are removed from their respective accounts
     and the resulting gain or loss is reflected in current operations.
     Depreciation is computed on the straight-line method over the estimated
     useful lives of the assets, generally five to twenty years for machinery
     and equipment and forty years for buildings.

     Pension costs

     The Company maintains defined benefit pension plans which cover certain of
     its Canadian employees. Pension plan obligations are valued using the
     projected benefit actuarial method and best estimate assumptions. Pension
     plan assets are valued at market-related values. The Company also
     participates in defined contribution plans for its Australian and certain
     of its Canadian employees.

     Post-retirement benefits other than pensions

     The Company accrues for benefits such as health care, life insurance
     coverage and long service leave to which retired employees are entitled.
     The obligation is adjusted on an annual basis to reflect the expected cost
     of providing post-retirement benefits during the years an employee renders
     service.

     Translation of foreign currencies and foreign exchange contracts

     All assets and liabilities of the Company's subsidiaries operating outside
     the United States are translated into U.S. dollars using current exchange
     rates and income statement items are translated using weighted average
     exchange rates for the year. The resulting translation adjustment is
     included as a component of stockholders' equity. Other foreign currency
     transaction gains and losses are included in determining net income.

     Impairment in value of long-lived assets

     The Company evaluates the carrying value of its long-lived assets on an
     ongoing basis. In order to determine whether an impairment exists,
     management considers the undiscounted cash flows estimated to be generated
     by those assets as well as other indicators. Any impairment in the carrying
     value of assets is charged against earnings in the period an impairment is
     determined. During 1997, the Company recorded a provision of $3,847 for
     impairment in value of certain assets (Note 3 vi).

                                      F-9
<PAGE>   61
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
     Income taxes

     The Company accounts for income taxes under the asset and liability method.
     Deferred taxes reflect the tax consequences in future years of differences
     between the tax bases of assets and liabilities and their financial
     reporting amounts.

     Net income (loss) per share

     Primary net income (loss) per common share is computed by dividing the
     income or loss applicable to common shares by the weighted average number
     of shares of common stock outstanding and common stock equivalents
     including the dilutive effect of options and warrants from the date of
     grant.

     Net income (loss) per common share on a fully diluted basis assumes that
     all convertible instruments were converted into common stock at the earlier
     of the beginning of each year or the date of issuance.

     Net loss per common share for the years ended September 30, 1997 and 1996
     is not presented on a fully-diluted basis as the existence of potentially
     dilutive warrants has an antidilutive effect on loss per common share.

     The loss per common share is computed by dividing net loss, plus the
     dividends on preferred stock, by the weighted average number of common
     shares outstanding and common stock equivalents, if dilutive. Preferred
     stock dividends include: (i) dividends stated in the respective certificate
     of designations; and (ii) dividends deemed to have been issued by virtue of
     a conversion price that is computed at the date of conversion using a
     discount to the market price of the Company's common stock. For the years
     ended September 30, 1997, 1996 and 1995, net income (loss) applicable to
     common stockholders is as follows:

<TABLE>
<CAPTION>
                                                1997         1996           1995
                                              --------------------------------------
<S>                                           <C>          <C>           <C>  
                                                 $            $              $

(Loss) income before minority interest        (19,693)      (3,372)       2,212

Minority interest - cash dividends on
   subsidiary preferred shares                     --         (645)         (70)

Minority interest - deemed dividends
   on conversion of subsidiary preferred
   shares                                          --       (4,260)          --

Minority interest - common stock               (2,627)      (1,667)        (122)
------------------------------------------------------------------------------------
NET (LOSS) INCOME APPLICABLE TO COMMON
   STOCKHOLDERS                               (22,320)      (9,944)       2,020
====================================================================================
</TABLE>

     Recent pronouncements

     In February 1997, the Financial Accounting Standards Board (FASB) issued
     SFAS 128, "Earnings per share" which is effective for fiscal years ending
     after December 15, 1997. SFAS 128 specifies the computation, presentation
     and disclosure for earnings per share for entities with publicly held
     common stock or potential common stock. The Company will adopt SFAS 128 in
     the preparation of its financial statements for fiscal year ending
     September 30, 1998. The adoption of SFAS 128 should not have a significant
     impact on reported loss per share of the Company.

     In June 1997, the FASB issued SFAS 131 - "Disclosures about Segments of an
     Enterprise and related information". SFAS 131 is effective for fiscal years
     ending after December 15, 1997. SFAS 131 requires public enterprises to
     report certain information about operating segments, products and services,
     geographic areas in which they operate and their major customers. The
     adoption of SFAS 131 should not have an impact on the financial statements
     of the Company.

                                      F-10
<PAGE>   62
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

3.    ACQUISITIONS AND DIVESTITURES

     (i) Acquisition of McConnell Dowell Corporation Limited

         Between March 9, 1996 and April 9, 1996, Cedar Group Australia Pty
         Ltd. (CGA), an Australian indirect wholly-owned subsidiary of the
         Company, purchased, through the facilities of the Australian Stock
         Exchange, 23,913,000 ordinary shares of McConnell Dowell Corporation
         Limited (MDC), representing approximately 57.5% of the issued ordinary
         shares of MDC. Prior to these acquisitions, CGA had acquired 8,274,000
         ordinary shares of MDC representing approximately 19.9% of the issued
         ordinary shares of MDC. At September 30, 1996, CGA owned 32,187,000
         ordinary shares of MDC representing a 77.4% ownership interest. MDC is
         an Australian based general contractor engaged in a broad range of
         infrastructure projects in the Asia-Pacific region, the Middle East and
         Eastern Europe.

         The purchase price for the acquisition, including acquisition costs,
         amounted to $40,214.

         The Company has accounted for the acquisition of MDC using the
         purchase method as of March 29, 1996, the date at which the Company
         achieved voting control of MDC. Accordingly, the assets and liabilities
         of MDC at September 30, 1996 and 1997 are consolidated into the
         accounts of the Company.

         Prior to March 29, 1996, the Company accounted for its investment in
         MDC using the equity method. Goodwill is being amortized over a period
         of forty years.

         The total cost of the acquisition was allocated to the net assets
         acquired on the basis of their fair value as follows:
<TABLE>
<S>                                                                        <C>    
                                                                               $
                                                                          
        Current assets                                                      108,691
        Fixed and other assets                                               14,390
        Goodwill                                                             11,875
-----------------------------------------------------------------------------------
        Total assets                                                        134,956
-----------------------------------------------------------------------------------
        Current liabilities                                                  81,708
        Other liabilities                                                     4,709
-----------------------------------------------------------------------------------
        Total liabilities                                                    86,417
-----------------------------------------------------------------------------------
        Net assets                                                           48,539
        Common shares held by minority shareholders at book value             8,325
-----------------------------------------------------------------------------------
        NET CONSIDERATION paid                                               40,214
===================================================================================
</TABLE>
   
       The acquisition was financed partially by a term loan and by the
       issuance of preferred shares by a subsidiary of the Company.

       In March 1997, the Company sold a portion of its interest in MDC for a
       cash consideration of $10,378, resulting in a gain of $270, net of
       income taxes of $1,072. At September 30, 1997, the Company owned 63.0%
       of the outstanding common shares of MDC.

                                      F-11
<PAGE>   63
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

3.    ACQUISITIONS AND DIVESTITURES (CONT'D)
    (ii) Acquisition of Industries Davie Inc.

         On April 24, 1996, but effective March 31, 1996, the Company's
         wholly-owned subsidiary, Cedar Group Canada Inc. acquired from Societe
         Generale de Financement du Quebec (SGF), 100% of the equity of
         Industries Davie Inc. (IDI) for the purchase price of CDN$1.00. IDI is
         a Canadian company engaged primarily in commercial and military ship
         design, construction and repair and in the manufacturing of industrial
         products.

         The Company has accounted for the acquisition of IDI using the purchase
         method effective March 31, 1996. Accordingly, the assets and
         liabilities of IDI at September 30, 1996 and 1997 are consolidated in
         the accounts of the Company.

         The total cost of the acquisition was allocated to the net assets
         acquired on the basis of their fair value as follows: 
<TABLE>
<S>                                                                     <C>   
                                                                           $
         Current assets                                                 44,127
         Fixed assets                                                      -
         Other assets                                                    2,089
         ---------------------------------------------------------------------
         Total assets                                                   46,216
         ---------------------------------------------------------------------
         Current liabilities                                            30,645
         Negative goodwill                                              15,571
         ---------------------------------------------------------------------
         Total liabilities                                              46,216
         ---------------------------------------------------------------------
         Net assets                                                        -
         ---------------------------------------------------------------------
         NET CONSIDERATION PAID                                            -
         =====================================================================
</TABLE>

         Negative goodwill amounting to $24,225 has been applied to reduce the
         value of long-term non-monetary assets to $Nil and the balance of
         $7,812 (net of accumulated amortization of $7,759) is being disclosed
         as negative goodwill on the balance sheet and is being amortized over a
         three-year period from the date of acquisition.

   (iii) Acquisition of Steen Contractors Limited

         Effective April 1, 1995, the Company acquired 75% of the common stock
         of Steen Contractors Limited (Steen), a Canadian company engaged in
         construction services provided in Canada, for a cash consideration of
         $4,476.

         Effective March 31, 1996, the remaining 25% of Steen's common shares
         were purchased for a cash consideration of CDN$2,135 (US$1,571),
         resulting in goodwill of $230 which was amortized during fiscal year
         1996.

                                      F-12
<PAGE>   64
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

3. ACQUISITIONS AND DIVESTITURES (CONT'D)
   (iii) Acquisition of Steen Contractors Limited (cont'd)

         The acquisitions have been accounted for under the purchase method of
         accounting and have been given effect from April 1, 1995 for the first
         purchase of 75% and from March 31, 1996 for the second purchase of 25%.

         The total cost of the initial 75% interest in Steen was allocated to
         the net assets acquired on the basis of their fair value as follows: 
<TABLE>
<S>                                                                  <C>
                                                                         $
         Current assets                                               18,505
         Fixed assets                                                    255
         Other assets                                                  1,235
         ---------------------------------------------------------------------
         Total assets                                                 19,995
         ---------------------------------------------------------------------
         Current liabilities                                          12,056
         Other liabilities                                             1,726
         ---------------------------------------------------------------------
         Total liabilities                                            13,782
         ---------------------------------------------------------------------
         Net assets                                                    6,213
         Common shares held by minority shareholders at book value     1,737
         ---------------------------------------------------------------------
         NET CONSIDERATION PAID                                        4,476
         =====================================================================
</TABLE>
         
         The acquisition was financed by a $5,000 term loan from Bankers Trust.

   (iv)  Acquisition of Dominion Bridge Inc.

         Effective March 9, 1994, the Company acquired from United Dominion
         Industries Limited (UDIL) 85% of the common stock of Dominion Bridge
         Inc. (DB), a Canadian company engaged in construction and engineering
         services provided in Canada for a cash consideration of $3,750 and the
         issue by DB of Class A preferred shares in the amount of CDN$18,338.
         The acquisition has been accounted for by the purchase method and
         earnings have been included in the results of operations from the date
         of acquisition.

                                      F-13
<PAGE>   65
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

3.  ACQUISITIONS AND DIVESTITURES (CONT'D)
    (iv) Acquisition of Dominion Bridge Inc. (cont'd)

         The total cost of the acquisition was allocated to the net assets
         acquired on the basis of their fair value as follows: 
<TABLE>
<S>                                                                                     <C>
                                                                                        $
          Current assets                                                              23,381
          Fixed assets                                                                25,632
          Other assets                                                                 3,525
          ----------------------------------------------------------------------------------
          Total assets                                                                52,538
          ----------------------------------------------------------------------------------
          Current liabilities                                                         23,765
          Other liabilities                                                           10,604
          ----------------------------------------------------------------------------------
          Total liabilities                                                           34,369
          ----------------------------------------------------------------------------------
          Net assets                                                                  18,169
          Common and preferred shares held by minority shareholders at book value     14,419
          ----------------------------------------------------------------------------------
          NET CONSIDERATION PAID                                                       3,750
          ==================================================================================
</TABLE>

         The CDN$18,338 Class A Preferred Shares of DB, bearing a cumulative
         dividend of 7.5%, originally issued to UDIL were convertible into the
         Company's common stock at a rate of CDN$6.00 per share. On October 21,
         1994, the Company agreed to acquire the minority holdings of common and
         Class A preferred shares of DB held by UDIL. The agreement provided
         that these interests would be acquired for cash payments of CDN$18,000,
         the transfer of assets having a book value of CDN$1,368 and the waiver
         of the preferred dividend requirement for the Company's 1994 fourth
         quarter. As of September 30, 1995, the Company paid CDN$8,300,
         transferred the assets and received all of the common shares of DB held
         by UDIL and received preferred shares having a face value of CDN$8,786.

         On December 18, 1995, the Company accepted UDIL's offer to acquire all
         remaining preferred shares of DB and the waiver of all claims and
         dividends for an aggregate consideration of CDN$11,500 (US$8,200)
         consisting of a cash payment of CDN$5,000 (US$3,648) and the balance to
         be paid through the issuance of up to 1,250,334 shares of the Company.
         The book value of the minority interest related to the preferred shares
         was $8,200 at September 30, 1995.

         During the year ended September 30, 1996, the Company issued 1,000,000
         common shares, valued at $2,855, and paid cash of $967 in lieu of
         issuing 200,000 common shares to UDIL to settle its obligation arising
         from the acquisition of the remaining preferred shares of DB. At
         September 30, 1996, an obligation to issue a final 50,334 shares
         remained and the Company settled this obligation through the issuance,
         in 1997, of 50,334 common shares valued at $104. The deficiency of the
         final consideration paid from the book value of the obligation has been
         credited as a capital transaction in the statement of stockholders'
         equity at September 30, 1996 and a decrease in minority interest in the
         amount of $627.

             
                                      F-14
<PAGE>   66
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

3.  ACQUISITIONS AND DIVESTITURES (CONT'D)
    (v)   Pro-forma results

         Set forth below is the Company's unaudited pro-forma combined condensed
         statement of operations for the year ended September 30, 1996 as though
         each of the acquisitions made during 1996 had been made on October 1,
         1995.
<TABLE>
<CAPTION>
                                                       (in thousands of dollars
                                                         except per share data)

<S>                                                         <C>      
         Sales                                                  $    527,555
         Net loss                                               $      9,260)
         Per common share
            Primary                                             $      (0.51)
            Fully diluted                                       $        --
         Average number of common shares and common
            share equivalents outstanding
              Primary                                             18,174,000
              Fully diluted                                       27,699,000
</TABLE>

         The unaudited pro-forma combined summary of operations has been
         prepared utilizing the historical financial statements of the Company
         and the acquired businesses. The unaudited pro-forma combined summary
         of operations does not purport to be indicative of the results which
         actually would have been obtained if the acquisitions had been made at
         the beginning of the Company's 1996 fiscal year.

         The unaudited pro-forma combined summary of operations includes the
         effects of the purchase price allocation adjustments. The purchase
         price allocation adjustments include the adjustment of the net assets
         acquired to the price paid for them, including the estimated costs
         associated with the integration of the businesses.

    (vi) Edinov Corporation

         Effective July 1, 1994, the Company decided to divest the Canadian
         commodity fastener distribution businesses, formerly conducted by
         Edinov Corporation. The transaction was completed on December 22, 1994
         by the receipt of CDN$1,000 cash and CDN$5,135 (US$3,847) preferred
         shares of the acquirer. No gain or loss was recognized on the
         transaction. The preferred shares bear a cumulative dividend equal to
         the bank prime rate at the beginning of every fiscal year where a
         dividend is declared and are collateralized by a pledge of Edinov's
         assets. These preferred shares are redeemable at varying amounts
         annually through 2009, commencing at CDN$250 in 1996 and CDN$350
         thereafter. No shares have been retired in 1997 (CDN$250 in 1996). The
         Company's ability to realize the value of the preferred shares is
         dependent on future operations of the divested businesses. During 1997,
         the Company recorded a $3,847 provision for impairment in value of this
         asset.

                                      F-15
<PAGE>   67
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

3. ACQUISITIONS AND DIVESTITURES (CONT'D)
   (vii) Fasteners distribution business

         In late fiscal 1996, the Company abandoned its industrial fastener
         importation and distribution business. The operations of this business
         were not significant to the Company and were not disclosed as
         discontinued operations as the Company continued to have operations in
         the fastener business.


4. CASH
     Included in cash is an amount of $268 ($17,078 in 1996) as indicated in the
     IDI accounts. Pursuant to the purchase agreement with SGF (see Note 3
     (ii)), this cash amount is restricted in its use to the benefit of IDI.


5. ACCOUNTS RECEIVABLE
     Accounts receivable are comprised of the following:
<TABLE>
<CAPTION>

                                                          1997           1996
                                                     ------------------------
<S>                                                  <C>             <C>
                                                            $              $

     Trade and other receivables                         84,100        99,389
     Holdbacks receivable                                16,774        13,714
     Unbilled receivables                                 7,316        15,312
     Allowance for doubtful accounts                       (234)       (1,504)
     -------------------------------------------------------------------------
                                                        107,956       126,911
     =========================================================================
</TABLE>

     Holdbacks receivable represent retainage provisions due from customers as
     is the normal course of business in long-term construction contracts.


6. INVENTORIES
<TABLE>
<CAPTION>
                                                          1997           1996
                                                     ------------------------
<S>                                                    <C>           <C>  
                                                            $              $

     Raw materials                                        9,040         2,958
     Construction contracts, work in process             38,459        38,625
     Finished goods                                         122         2,179
     ------------------------------------------------------------------------
                                                         47,621        43,762
     ========================================================================
</TABLE>

                                      F-16
<PAGE>   68
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

7.  PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
                                                                           ACCUMULATED     NET BOOK
                                                               COST       DEPRECIATION       VALUE
    -----------------------------------------------------------------------------------------------
<S>                                                          <C>            <C>           <C>     
                                                                 $              $              $
                                                              
     1997                                                     
        Land                                                   6,843              -         6,843
        Building                                               5,077            900         4,177
        Machinery and equipment                               50,867         22,358        28,509
        Machinery and equipment under capital leases          16,462          4,164        12,298
     --------------------------------------------------------------------------------------------
                                                              79,249         27,422        51,827
     ============================================================================================
     1996
        Land                                                   6,813              -         6,813
        Building                                               4,114            604         3,510
        Machinery and equipment                               35,458         12,779        22,679
        Machinery and equipment under capital leases           5,857           570          5,287
     --------------------------------------------------------------------------------------------
                                                              52,242         13,953        38,289
     ============================================================================================
</TABLE>

8.   INVESTMENTS IN UNINCORPORATED JOINT VENTURES
     Subsidiaries of the Company have interests in unincorporated joint ventures
     which are accounted for by the equity method. Unincorporated joint ventures
     are engaged in construction and engineering in Canada and Asia-Pacific.

     The Company's share of assets and liabilities as at September 30, and the
     revenue, expenses and net earnings of the joint ventures for the years
     ended September 30, are as follows:
<TABLE>
<CAPTION>

                                           1997           1996           1995
                                       --------------------------------------
<S>                                    <C>              <C>            <C>  
                                             $              $              $

     Assets                                2,510          5,716         1,608
     Liabilities                             862          3,205         2,358

     Revenue                              12,510         15,040         8,319
     Expenses                             11,330         12,851         6,154
     --------------------------------------------------------------------------
     Net income                            1,180          2,189         2,165
     ==========================================================================
</TABLE>

                                      F-17
<PAGE>   69
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE
INDICATED)
================================================================================

9.   FINANCING ARRANGEMENTS
     On April 29, 1996, the Company entered into an agreement with BT Commercial
     Corporation, an affiliate of Bankers Trust Company ("BTCC") for a term loan
     in the amount of $30,000. This loan bears interest at LIBOR and is
     collateralized by most assets of the consolidated group. The weighted
     average interest rate on the term loan was 11.37% for the year ended
     September 30, 1997 (8.25% in 1996). The original maturity date for the loan
     was April 30, 1997 and has since been extended to September 30, 1997. (See
     Note 20 - Subsequent event.)

     A subsidiary of the Company has entered into operating credit facilities
     totalling $4,120 bearing interest at variable rates. At September 30, 1997,
     $407 was outstanding under these facilities. Certain facilities have
     restrictions on their usage and are limited for use on specific projects.


10.   OBLIGATIONS UNDER CAPITAL LEASES

     A subsidiary of the Company has obligations under capital leases which are
     due as follows:
<TABLE>
<S>                                                <C>
                                                     $

               1998                                 4,473
               1999                                 3,577
               2000                                 3,374
               2001                                 2,948
               2002                                   614
               ------------------------------------------
                                                   14,986
               LESS: IMPUTED INTEREST              (1,845)
               ------------------------------------------
                                                   13,141
               LESS: AMOUNTS DUE WITHIN ONE YEAR    3,778
               ------------------------------------------
                                                    9,363
               ==========================================
</TABLE>
               
                                                 
                                      F-18
<PAGE>   70
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================

11.   INCOME TAXES

      The provision for income taxes comprises the following elements:
<TABLE>
<CAPTION>
                                         1997                  1996                 1995
                                    ---------------------------------------------------------
                                           $                     $                    $
      CURRENT
<S>                                 <C>                       <C>                    <C>
      United States                        --                    217                   --
      Canada                             1,661                   463                  (300)
      Asia-Pacific                       6,846                   603                   --
      ---------------------------------------------------------------------------------------
                                         8,507                 1,283                  (300)
      ---------------------------------------------------------------------------------------
                                                                           
      DEFERRED                                                             
      United States                       (415)                1,382                  (139)
      Canada                            (2,517)               (2,400)                2,132
      Asia-Pacific                      (1,192)                  309                   --
      ---------------------------------------------------------------------------------------
                                        (4,124)                 (709)                1,993
      ---------------------------------------------------------------------------------------
                                         4,383                   574                 1,693
      =======================================================================================
</TABLE>

      The related income (loss) before income taxes is as follows:

<TABLE>
<CAPTION>
                                          1997                  1996                 1995
                                    ---------------------------------------------------------
                                            $                     $                    $
<S>                                 <C>                       <C>                   <C>    
      United States                    (11,617)                 (364)               (1,246)
      Canada                           (18,331)               (8,981)                5,151
      Asia-Pacific                      14,638                 6,547                   --
      ---------------------------------------------------------------------------------------
                                       (15,310)               (2,798)                3,905
      =======================================================================================
</TABLE>

      Deferred tax liabilities and assets comprise the following elements at
      September 30:

<TABLE>
<CAPTION>
                                                                                     1997             1996
                                                                              ---------------------------------
                                                                                       $                $
<S>                                                                           <C>                    <C>
      Deferred tax liabilities
         Book over tax value of property and equipment                               1,128            3,959
         Income from operations of joint ventures                                      703              955
         Completed contracts basis                                                     840              536
         Holdbacks                                                                     506               --
         Other                                                                       2,165              492
      ---------------------------------------------------------------------------------------------------------
                                                                                     5,342            5,942
      ---------------------------------------------------------------------------------------------------------

      Deferred tax assets
         Post-employment benefits other than pensions                                1,309              193
         Rationalization reserves                                                    1,392              197
         Net operating losses carried forward                                       31,888           20,808
         Valuation allowance for operating losses carried forward                  (31,483)         (20,403)
         Other                                                                         939              --
      ---------------------------------------------------------------------------------------------------------
                                                                                     4,045              795
      ---------------------------------------------------------------------------------------------------------
        NET DEFERRED TAX LIABILITIES                                                 1,297            5,147
      =========================================================================================================
</TABLE>


                                      F-19
<PAGE>   71
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



11.     INCOME TAXES (CONT'D)

        The difference between the Company's effective income tax rate and the
        statutory rate on income from operations is reconciled below:

<TABLE>
<CAPTION>
                                                                1997                  1996                 1995
                                                          ---------------------------------------------------------
                                                                  $                     $                    $
<S>                                                       <C>                         <C>                   <C>
        Income tax expense (recovery) at U.S.
           statutory rate                                        (5,359)                (979)               1,367
        State tax (recovery), net of federal tax benefits          (919)                (167)                 234
        Foreign income taxes at less than statutory rate           (235)              (1,433)                (155)
        Operating losses without tax benefit                     12,229                1,746                  162
        Other                                                    (1,333)               1,407                   85
        -----------------------------------------------------------------------------------------------------------
                                                                  4,383                  574                1,693
        ===========================================================================================================
</TABLE>

        The Company conducts its construction projects in a wide variety of tax
        jurisdictions including Canada and many South East Asia and Pacific Rim
        countries. These tax jurisdictions have tax rates that are less than
        those of the statutory rates in the United States of America. The
        Company had positive net income in these jurisdictions and has reflected
        a net tax provision on these profits, but less of a provision than would
        have resulted had those foreign incomes been subject to the U.S.
        statutory rate. As a result, the expected net tax recovery from the
        overall combined foreign and domestic losses would be greater than had
        the profitable divisions resided in the USA. This gives rise to the
        additional expected recovery. This increased expectation of an overall
        recovery is then diminished by the non-recognition of tax benefits on,
        principally domestic, losses.

        At September 30, 1997, the Company had unused net operating losses
        carried forward for income tax purposes which expire as follows:

<TABLE>
<CAPTION>

                          UNITED STATES                                            CANADA
                             FEDERAL                                              FEDERAL
                                $                                                    $
                                                                                   (CDN)
<S>             <C>                      <C>                         <C>                     <C>  
                                                                     1998                      7,826
                2005                        160                      1999                      1,746
                2006                      1,298                      2000                      5,426
                2007                      3,541                      2001                     20,449
                2008                      1,491                      2002                     53,639
                2011                      1,657                      2003                     14,450
                2012                      6,256                      2004                     21,562
              ----------------------------------------------------------------------------------------
                                         14,403                                              125,098
              ========================================================================================
</TABLE>

        The benefit of these losses has been partly recognized in the Company's
        books. For financial reporting purposes, a valuation allowance of
        $31,888 ($20,403 in 1996) has been recognized to offset the deferred tax
        assets relating to the net operating losses carried forward.



                                      F-20
<PAGE>   72
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



12.     BENEFIT PLANS

        PENSION PLANS

        The Company maintains defined benefit pension plans covering employees
        at most Canadian operations. The benefits are based on an average of the
        employee's earnings in the years preceding retirement and on credited
        service. Certain supplemental unfunded plan arrangements also provide
        retirement benefits to specified groups of participants.

        The Company's funding policy for these plans is to contribute amounts
        sufficient to meet the minimum funding requirements of the regulatory
        authorities, plus any additional amounts which the Company may determine
        to be appropriate.

        The net pension expense for Company-sponsored pension plans consists of
        the following components:

<TABLE>
<CAPTION>
                                                                  1997                 1996                 1995
                                                          ----------------------------------------------------------
                                                                    $                    $                    $
<S>                                                       <C>                         <C>                  <C>
        Service cost - benefits earned during the year            1,222                1,199                  894
        Interest cost on projected benefit obligations            4,073                3,023                1,173
        Return on plan assets                                    (4,407)              (3,255)              (1,280)
        Net amortization                                            (59)                  96                    8
        ------------------------------------------------------------------------------------------------------------
        NET PENSION EXPENSE                                         829                1,063                  795
        ============================================================================================================
</TABLE>

        The reconciliation of the funded status of pension plans is as follows:

<TABLE>
<CAPTION>
                                                                                       1997                 1996
                                                                              ----------------------------------------
<S>                                                                           <C>                          <C>
                                                                                         $                    $
        Plan assets at fair value                                                     59,813               50,065
        Actuarial present value of projected benefit
           obligations                                                                53,179               46,585
        --------------------------------------------------------------------------------------------------------------
        Plan assets in excess of projected benefit
           obligations                                                                 6,634                3,480
        Unrecognized prior service cost for plan
           amendments                                                                    298                  769
        Unrecognized net experience gains                                             (4,280)              (3,062)
        --------------------------------------------------------------------------------------------------------------
        NET PENSION ASSETS RECOGNIZED IN THE
           CONSOLIDATED BALANCE SHEET                                                  2,652                1,187
        ==============================================================================================================
</TABLE>



                                      F-21
<PAGE>   73
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



12.     BENEFIT PLANS (CONT'D)

        The weighted average of assumptions used in the determination of the
        projected benefit obligation is:

<TABLE>
<CAPTION>
                                                                   1997                 1996                1995
                                                             -------------------------------------------------------
<S>                                                          <C>                        <C>                 <C>    
                                                                    %                    %                   %
        Discount rate                                               8.0                  8.0                 8.0
        Rate of increases in compensation level                     5.0                  6.0                 6.0
        Expected long-term rate of return on assets                 8.0                  8.0                 8.0
-------------------------------------------------------------------------------------------------------------------
</TABLE>

        The assets of the Company-sponsored plans are invested primarily in
        Canadian equities and bonds.

        POST-RETIREMENT BENEFITS OTHER THAN PENSIONS

        The Company currently provides post-retirement health care and life
        insurance benefits to certain Canadian retirees. In general, employees
        who retire after attaining age 60 with five years of service are
        eligible for continued health care and life insurance coverage.
        Dependent health care and life insurance coverage are also available.
        Most retirees contribute towards the cost of health care coverage, with
        the contributions generally varying based on service. The Company
        accrues the expected cost of providing post-retirement benefits during
        the years an employee renders service.

        Net periodic post-retirement benefit cost includes the following
        components:

<TABLE>
<CAPTION>
                                                                   1997                 1996                1995
                                                             --------------------------------------------------------
<S>                                                          <C>                        <C>                 <C>
                                                                     $                    $                    $
        Service cost - benefits earned during the year              143                    1                    1
        Interest cost on accumulated post-retirement
           benefit obligation                                        41                   41                   40
        -------------------------------------------------------------------------------------------------------------
        NET PERIODIC POST-RETIREMENT BENEFIT COST                   184                   42                   41
        =============================================================================================================
</TABLE>

        At present, there is no prefunding of the post-retirement benefits
        recognized under FASB Statement No. 106. The following table presents
        the status of the plans reconciled with amounts recognized in the
        consolidated balance sheets for the Company's post-retirement benefits:

<TABLE>
<CAPTION>
                                                                                       1997                 1996
                                                                              -------------------------------------------
<S>                                                                           <C>                           <C>
                                                                                         $                    $
        Accumulated post-retirement benefit obligation                                 2,692                  514
        Unrecognized obligation                                                         (901)                   -
        -----------------------------------------------------------------------------------------------------------------
        POST-RETIREMENT BENEFIT LIABILITY RECOGNIZED
           IN THE CONSOLIDATED BALANCE SHEETS                                          1,791                  514
        =================================================================================================================
</TABLE>



                                      F-22
<PAGE>   74
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



12.     BENEFIT PLANS (CONT'D)

        For measurement purposes, the assumed weighted average annual rate of
        increase for capital cost of health care benefits is 11.5% for 1997 and
        assumed to decrease 0.5% per year to 7% in the year 2006 and remain
        constant thereafter. The weighted average discount rate used in
        determining the accumulated post-retirement benefit obligation was 8% at
        September 30, 1997. The rate of increase in compensation levels assumed
        was 6%.

        OTHER

        Certain subsidiaries of the Company contribute to defined contribution
        plans for eligible employees. The contributions for 1997, 1996 and 1995
        were $1,788, $942 and $4,186, respectively.

        A subsidiary of the Company recognizes the future liability for wages
        and salaries, annual leave and sick leave. The liability is measured as
        the present value of expected future payments to be made in respect of
        services provided by employees up to the reporting date. Consideration
        is given to expected future wage and salary levels, experience of
        employee departures and periods of service. Expected future payments are
        discounted using interest rates on Australian government guaranteed
        securities with terms that match, as closely as possible, the estimated
        future cash flows. The current portion of the liability in the amount of
        $3,837 ($2,625 in 1996) has been presented as part of "Accounts payable
        and accrued expenses" and the long-term portion in the amount of $882
        ($1,030 in 1996) has been presented as part of "Other long-term
        liabilities".

13.     STOCKHOLDERS' EQUITY

        Each of the conversion prices disclosed below, in each of the fiscal
        years, represents the fair market value of the Company's common stock as
        of the date the underlying transaction.

        1997

        During 1997, the Company issued 3,971,126 shares of its common stock
        upon the conversion of $7,300 of Cedar Group (TCI) LLC Inc. ("TCI")
        preferred shares in accordance with the terms of the Preferred Share
        Agreement. All the shares relating to this Preferred Share Agreement
        have been fully converted into the Company's common shares. As a result,
        the minority interest balance of $1,237 relating to the embedded
        dividend implicit in the TCI preferred shares has been reversed and
        credited to the "Additional paid-in capital".

        During 1997, the Company issued 50,334 shares of its common stock to
        UDIL as part of the settlement to acquire the remaining UDIL held
        preferred shares of DB for a total consideration of $104 (Note 3 (iv)).

        During 1997, the Company issued 324,000 shares of its common stock
        valued at $650 for services rendered by employees and a former officer
        of the Company.

        During 1997, the Company issued 150,000 shares of its common stock for a
        consideration of $300 upon exercise of warrants.

        During 1997, the Company issued 2,230,000 shares of its common stock for
        a consideration of $4,460 pursuant to the exercise of stock options.



                                      F-23
<PAGE>   75
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



13.     STOCKHOLDERS' EQUITY (CONT'D)

        1996

        During 1996, the Company issued 7,994,606 shares of its common stock
        upon the conversion of $16,845 of TCI preferred shares in accordance
        with the terms of the Preferred Share Agreement.

        During fiscal 1996, the Company recorded a deemed dividend totalling
        $4,260 relating to the embedded dividend implicit in the TCI preferred
        shares from March 1996, through to June 30, 1996, the first date the
        preferred shares were entitled to convert to common stock at a 15%
        discount from the market price of the common stock. The embedded
        dividend is charged to earnings as "Minority interest - deemed dividends
        on conversion of subsidiary preferred shares" and a corresponding amount
        is included as part of the minority interest on the balance sheet. As
        the TCI preferred shares are converted to common stock of the Company,
        the related amount is credited to "Additional paid-in capital". As of
        September 30, 1996, there remained $1,237 included as part of "Minority
        interest" which was reclassified to "Additional paid-in capital" upon
        conversion of the TCI preferred shares into common stock of the Company
        in 1997.

        During 1996, the Company issued 1,000,000 shares of its common stock to
        UDIL as part of the settlement to acquire the remaining UDIL held
        preferred shares of DB for a total consideration of $2,855 (Note 3 iv).

        During 1996, the Company issued 30,000 shares of its common stock valued
        at $85 for services rendered by a consultant and a former officer of the
        Company.

        During 1996, the Company issued 107,394 shares of its common stock for a
        consideration of $359 upon exercise of warrants.

        During 1996, the Company issued 600,000 shares of its common stock to
        the public for total proceeds of $2,619.

        1995

        In December 1994, the Company sold CDN$2,700 of Class A Preferred Shares
        of Dominion Bridge Inc. to Groupe Fidutech International, Inc. (GFI).
        Subsequently, pursuant to the terms of the Class A Preferred Shares, GFI
        converted the CDN$2,700 of Class A Preferred Shares into 450,000 shares
        of common stock of the Company. GFI is owned by certain officers and
        directors of the Company. During the year, the Company issued an
        additional 193,200 shares of its common stock at a price of $4.43 per
        share upon conversion of Class A Preferred Shares of Dominion Bridge
        Inc., in accordance with the terms of the Preferred Shares Agreement.
        These conversion transactions of Dominion Bridge Inc. Class A Preferred
        Shares provided total proceeds of $2,849.

        In December 1994, the Company issued 409,207 shares of its common stock
        at a price of $2.81 per share upon conversion of preferred shares of
        Unimetric Corporation in accordance with the terms of the preferred
        shares for a total consideration of $1,150.


                                      F-24
<PAGE>   76
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



13.     STOCKHOLDERS' EQUITY (CONT'D)

        1995 (CONT'D)

        During 1995, the Company issued 262,363 shares of its common stock to
        Fidutech Technologies Inc., a company owned by an officer of the Company
        and 22,500 shares to an individual at a price of $2.60 upon exercise of
        warrants granted in connection with the September 30, 1993 private
        placement for aggregate proceeds of $741.

        During 1995, the Company issued 45,000 shares of its common stock to
        various parties for services rendered aggregating $170. The amount has
        been included in selling, general and administrative expenses for the
        year ended September 30, 1995.

        During 1995, the Company issued 90,000 shares of its common stock for
        services rendered by underwriters and directors in May 1993.

        On February 2, 1995, the Company issued 10,000 shares of its common
        stock at a price of $1.68 per share upon exercise of warrants issued on
        September 30, 1993.

        INCENTIVE PLANS

        At September 30, 1997, the Company has stock-based compensation plans
        available to executive officers, non-executive officers and certain key
        employees of the Company.

        The Company has a stock option plan available to grant options to
        executive officers, non-executive officers and certain key employees of
        the Company. The stock plan was adopted in 1995 and provides for the
        issuance of 2,180,000 options to purchase 2,180,000 shares of the
        Company at a price ranging from $0.59 to $4.124 per share. The options
        are exercisable over a three-year period. Pursuant to a resolution of
        the Board of Directors dated September 12, 1996, the exercise price of
        certain share options has been changed to $2.00 per share (market value
        of the shares at the time) and the expiry date was changed to September
        30, 1998. During the year ended September 30, 1997, all options issued
        under the stock option plan have been exercised.

        Pursuant to certain employment agreements, the Company has a plan
        available to grant units to its key executive officers. The unit allows
        the holder to obtain one share in the common stock of the Company for
        $2.00 and one warrant. The warrant can then be converted into one common
        share, of the Company for $2.00. The total number of units outstanding
        is 150,000 and can be converted into 300,000 shares of common stock of
        the Company. These units expire on September 30, 1998. During the year
        ended September 30, 1997, all units issued under this plan have been
        exercised.

        The Company has granted warrants to key executive officers of the
        Company and non-employees of the Company at prices ranging from $2.00 to
        $4.00. The total number of warrants outstanding is 550,000 (including
        those available as part of the units described above) which can be
        converted into 550,000 shares of common stock of the Company. These
        warrants expire from September 30, 1998 to December 31, 1999.


                                      F-25

<PAGE>   77
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



13.     STOCKHOLDERS' EQUITY (CONT'D)

<TABLE>
<CAPTION>
                                                                                  OPTION, WARRANT
                                                                                  AND UNIT PRICE
                                                               SHARES                PER SHARE            AGGREGATE
        -----------------------------------------------------------------------------------------------------------
<S>                                                          <C>                  <C>                     <C>
                                                                                        $                     $
        OUTSTANDING AT SEPTEMBER 30, 1995                     1,835,000            2.68 to 4.125            7,136
        Adjustment for 1995 warrants outstanding                600,500             2.00 to 4.00            1,601
        Granted                                                 675,000                     2.00            1,350
        Exercised                                              (107,394)           3.25 to 4.125             (359)
        Cancelled                                              (123,106)                    2.00             (246)
        Adjustment to share option price                            --                       --            (3,322)
        -----------------------------------------------------------------------------------------------------------
        OUTSTANDING AT SEPTEMBER 30, 1996                     2,880,000             2.00 to 4.00            6,160
        -----------------------------------------------------------------------------------------------------------
        Granted                                                  50,000                     2.00              100
        Exercised                                            (2,380,000)                    2.00           (4,760)
        -----------------------------------------------------------------------------------------------------------
        OUTSTANDING AT SEPTEMBER 30, 1997                       550,000             2.00 to 4.00            1,500
        -----------------------------------------------------------------------------------------------------------
</TABLE>

        The exercise price of the various options granted was determined based
        on the average trading price of the common stock for the five trading
        days immediately preceding the date of the grant.

        Fair value of stock options

        The fair value of each option grant is estimated at the date of grant
        using the Black-Scholes option pricing model with the following weighted
        average assumptions used for grants in 1997, 1996 and 1995 respectively;
        dividend yield of 0% for all years, expected volatility of 76.7%, 68.2%
        and 73.4%, risk free interest rates of 5.8%, 6.3% and 6.6% and expected
        lives of three years for the options.

        The Company applied APB 25 and related Interpretations in accounting for
        its stock based compensation plans. No compensation expense was charged
        against income in 1997, 1996 and 1995. Had compensation cost for the
        Company's stock-based compensation plans been determined based on the
        fair value at the grant dates for awards under those plans consistent
        with the method of FASB Statement 123, the Company's pro-forma net loss
        and loss per share would have been as indicated below:

<TABLE>
<CAPTION>
                                                                  1997                  1996                1995
                                                                    $                     $                   $
<S>                                                             <C>                   <C>                  <C>    
        Net income (loss)
           As reported                                          (22,320)               (9,944)              2,020
           Pro-forma                                            (22,391)              (10,549)             (3,792)

        Primary earnings (loss) per share
           As reported                                           (0.77)                (0.55)                0.14
           Pro-forma                                             (0.77)                (0.58)               (0.25)

        Fully-diluted earnings per share
           As reported                                              --                    --                 0.11
           Pro-forma                                                --                    --

        Weighted-average fair value of
           options granted                                         0.94                  0.55                2.31
</TABLE>


                                      F-26

<PAGE>   78
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



14.     RELATED PARTY TRANSACTIONS

        In 1995, the Company advanced $994 to a shareholder, Groupe Fidutech
        International Inc. Of this amount, $577 was repaid during the year ended
        September 30, 1995 and the balance of $417 was repaid in December 1995.

15.     COMMITMENTS AND CONTINGENCIES

        The Company leases office and warehouse space under non-cancellable
        operating leases. Future minimum lease payments under all
        non-cancellable leases for the five years subsequent to September 30,
        1997 consist of the following:

<TABLE>
<CAPTION>
                                                         $
<S>                      <C>                             <C>  
                         1998                            3,557
                         1999                            2,592
                         2000                            1,680
                         2001                            1,368
                         2002                              484
</TABLE>

        Total rent expense for all operating leases amounted to $2,710, $1,580
        and $976 for the years ended September 30, 1997, 1996 and 1995,
        respectively.

        In December 1996, the Company was notified that a class action
        shareholder complaint had been filed against the Company and certain of
        its executive officers. The complaint alleges that the defendants misled
        the investing public as to the quality and status of a number of
        contracts obtained by the Company as well as failed to disclose various
        inaccurate and misleading accounting practices. Management intends to
        vigorously defend this claim and believes the claim is without merit. As
        the outcome of this claim is indeterminable, no provision has been
        recorded in the consolidated financial statements.

        In May 1997, the "Committee to Revitalize Dominion Bridge Corporation"
        (the "Committee") commenced a lawsuit against the Company seeking a
        declaration that it should be permitted to solicit written consents from
        the Company's stockholders. The claim seeks injunctive relief but no
        material monetary damages. The Company subsequently filed a counterclaim
        seeking declaratory and injunctive relief against the Committee for its
        consent solicitation and monetary damages. Motions are pending before
        the courts with respect to the continuation of discovery on both the
        Committee's claim and the Company's counterclaim. As no monetary
        material damage has been claimed by the Committee, no provision has been
        recorded in the accounts.

        During 1995, the Company submitted a claim against a customer in the
        amount of CDN$10,700 in view of recovering substantial cost increases
        pertaining to the design, manufacture and delivery of major
        infrastructure assets. In 1997, the counterparty submitted a claim
        against the Company in the amount of CDN$50,000. Management and legal
        counsel believe that this claim is without merit. Arbitration of the
        Company's claim and the customer's counterclaim is expected to begin in
        early 1998 and a decision is expected in April 1998. As it is impossible
        to determine the outcome of these claims, no provisions have been made
        in the accounts and no gain has been recognized.



                                      F-27

<PAGE>   79
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



15.     COMMITMENTS AND CONTINGENCIES (CONT'D)

        A number of claims and lawsuits seeking unspecified damages and other
        relief are pending against the Company. It is impossible at this time
        for the Company to predict with any certainty the outcome of such
        litigation. However, management is of the opinion, based upon
        information presently available, that it is unlikely that any liability,
        to the extent not provided for through insurance or otherwise, would be
        material in relation to the Company's consolidated financial position.

        The Company has guaranteed $5,000 of a subsidiary debt. At September 30,
        1997, the subsidiary had sufficient assets to meet such obligations.

        A subsidiary of the Company has guaranteed 49% of the debt of an equity
        investee. The debt of the equity investee is Aus$4,893. Accordingly,
        Aus$2,398 is guaranteed by the Company's subsidiary. At September 30,
        1997, the equity investee has sufficient assets to meet such
        obligations.

        Certain subsidiaries of the Company are contingently liable for letters
        of credit, commitments and performance guarantees arising in the
        ordinary course of business.

        In connection with the acquisition of IDI, the Company agreed to make
        CDN$45 million in capital additions pursuant to a three-year
        revitalization plan. This investment is on a best efforts basis and is
        subject to financial market conditions and the general conditions in the
        chosen industrial markets contemplated in the revitalization plan.

        The Company and its subsidiaries are engaged in manufacturing activities
        subject to numerous environmental laws, regulations and guidelines
        adopted by various governmental authorities in the jurisdictions in
        which the Company operates. The Company's policy is to accrue for
        environmental costs in the accounting period in which a loss is known or
        considered probable and the amount can be estimated.

16.     FINANCIAL INSTRUMENTS

        Concentration of credit risk

        Concentrations of credit risk with respect to trade, holdbacks and other
        receivables are limited due to the large number of customers comprising
        the Company's customer base and their dispersion across many different
        industries and geographic locations. The Company does not require
        collateral from its customers. At September 30, 1997 and 1996, the
        Company had no significant concentrations of credit risk.

        Interest rate risk

        As at September 30, 1997, the Company was not exposed to interest rate
        risk as most of its debt was at fixed interest rates. (See Note 20 -
        Subsequent event).

        Fair value of financial instruments

        The following methods and assumptions were used by the Company in
        estimating its fair value disclosures for financial instruments:

        Cash and bank indebtedness

        The carrying amounts reported in the balance sheet for cash and bank
        indebtedness approximate their fair value.



                                      F-28

<PAGE>   80
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



16.     FINANCIAL INSTRUMENTS (CONT'D)

        Accounts receivable and accounts payable

        The carrying amounts reported in the balance sheets for accounts
        receivable and accounts payable approximate their fair value.

        Term loan

        The carrying amount reported in the balance sheets approximates its fair
        value.

        Customer advances on construction  contracts

        The carrying amount reported in the balance sheet approximates its fair
        value.

        Other long-term liabilities

        The other long-term liabilities presented in the balance sheet are
        comprised of amounts accrued by a subsidiary for long service leave,
        annual leave and sick leave, and other amounts due after September 30,
        1997. The carrying amounts reported in the balance sheet approximate
        their fair value.

        The carrying amounts and fair values of the Company's financial
        instruments at September 30, 1997 are as follows:

<TABLE>
<CAPTION>
                                                                1997                                 1996
                                                 ---------------------------------    --------------------------------
                                                     CARRYING             FAIR            Carrying            Fair
                                                     AMOUNTS             VALUE            amounts            value
----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>                <C>              <C>      
                                                          $                $                  $                $
        Cash                                            9,021            9,021             26,231           26,231
        Accounts receivable                           107,956          107,956            126,911          126,911
        Assets of business transferred
           under contractual arrangements                 --               --               3,847            3,847
        Bank indebtedness                               7,165            7,165              5,624            5,624
        Term loan                                      15,000           15,000             30,000           30,000
        Accounts payable and accrued expenses         132,010          132,010            119,839          119,839
        Customer advances on construction
           contracts                                    8,447            8,447             16,166           16,166
        Other long-term liabilities                     1,459            1,459              2,076            2,076
        Obligations under capital leases               13,141           13,141              5,953            5,953
</TABLE>

17.     COMPARATIVE FIGURES

        Certain comparatives figures have been reclassified in order to conform
        with the presentation adopted in the current year.



                                      F-29

<PAGE>   81
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



18.     BUSINESS SEGMENTS

        The Company operates in the following industry segments:

        Construction products and services - Design, engineering and
        construction of large industrial and commercial structures and
        construction services.

        Fasteners - Design and manufacturing of speciality fasteners.

        Ship building, repair, design and engineering.

<TABLE>
<CAPTION>
                                         CONSTRUCTION
                                           PRODUCTS                                SHIP BUILDING
                                         AND SERVICES           FASTENERS            AND REPAIR            TOTAL
                                              $                     $                    $                   $
        -------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                    <C>                <C>                    <C>                 <C>
        1997
        Assets(1)                          219,694                3,519               16,960              240,173
        ===================================================================================================================

        Sales                              513,409                4,096               50,073              567,578
        ===================================================================================================================

        Segment operating income
           (loss)                           (2,433)                (921)               2,333               (1,021)
           Gain on disposal of
               subsidiary shares                                                                            1,342
           Corporate expenses                                                                             (11,915)
           Interest expense, net                                                                           (5,215)
           Provision for impairment of
               an investment (Note 3 vi)                                                                   (3,847)
           Other income                                                                                     4,166
           Income from operations
               of joint ventures                                                                            1,180
           Income taxes                                                                                    (4,383)
        Minority interest - common stock                                                                   (2,627)
        -------------------------------------------------------------------------------------------------------------------
        Net loss                                                                                          (22,320)
        ===================================================================================================================

        Capital expenditures                23,505                    -                3,842               27,347
        ===================================================================================================================

        Depreciation and amortization       10,561                  328                   91               10,980
        ===================================================================================================================
</TABLE>




(1) Assets exclude $2,591, $7,405 and $11,496 of corporate amounts in 1997, 1996
and 1995, respectively.



                                      F-30

<PAGE>   82
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



18.      BUSINESS SEGMENTS (CONT'D)

<TABLE>
<CAPTION>
                                       CONSTRUCTION
                                         PRODUCTS                                  SHIP BUILDING
                                       AND SERVICES           FASTENERS             AND REPAIR            TOTAL
                                             $                    $                      $                  $
                                                                                                       (restated,
                                                                                                      see Note 19)
        ------------------------------------------------------------------------------------------------------------
<S>                                    <C>                    <C>                  <C>                <C>
        1996

        Assets(1)                          224,912                4,275               28,655              257,842
        ============================================================================================================

        Sales                              336,599                4,296               21,729              362,624
        ============================================================================================================

        Segment operating income (loss)      2,611               (1,467)                (131)               1,013
           Corporate expenses                                                                              (5,030)
           Interest expense, net                                                                           (2,104)
           Other income                                                                                     1,134
           Income from operations
               of joint ventures                                                                            2,189
           Income taxes                                                                                      (574)
        Minority interest
           - common stock                                                                                  (1,667)
        Minority interest
           - dividends on preferred shares                                                                   (645)
           - deemed dividends on
             conversion of subsidiary
             preferred shares                                                                              (4,260)
        ------------------------------------------------------------------------------------------------------------
        Net loss                                                                                           (9,944)
        ============================================================================================================

        Capital expenditures                11,781                  --                   428               12,209
        ============================================================================================================

        Depreciation and amortization        6,476                  327                   22                6,825
        ============================================================================================================
</TABLE>

-----------------

(1) Assets exclude $2,591, $7,405 and $11,496 of corporate amounts in 1997, 1996
and 1995, respectively.



                                      F-31

<PAGE>   83
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



18.      BUSINESS SEGMENTS (CONT'D)

<TABLE>
<CAPTION>
                                         CONSTRUCTION
                                           PRODUCTS                                  SHIP BUILDING
                                         AND SERVICES           FASTENERS             AND REPAIR            TOTAL
                                               $                    $                      $                  $
        --------------------------------------------------------------------------------------------------------------
<S>                                      <C>                    <C>                  <C>                  <C>

        1995

        Assets(1)                           79,400                5,503                   --               84,903
        ==============================================================================================================

        Sales                              150,996                4,754                   --              155,750
        ==============================================================================================================

        Segment operating income
           (loss)                            3,246               (1,316)                  --                1,930
           Corporate expenses                                                                              (1,020)
           Interest expense, net                                                                             (406)
           Other income                                                                                     1,236
           Income from operations
               of joint venture                                                                             2,165
           Income taxes                                                                                    (1,693)
        Minority interest - common stock                                                                     (122)
        Minority interest - dividends on
                            preferred shares                                                                  (70)
        --------------------------------------------------------------------------------------------------------------
        Net income                                                                                          2,020
        ==============================================================================================================

        Capital expenditures                   244                    8                   --                  252
        ==============================================================================================================

        Depreciation and amortization        2,687                  378                   --                3,065
        ==============================================================================================================
</TABLE>

---------------

(1) Assets exclude $2,591, $7,405 and $11,496 of corporate amounts in 1997, 1996
and 1995, respectively.



                                      F-32

<PAGE>   84
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



18.     BUSINESS SEGMENTS (CONT'D)

        GEOGRAPHIC SEGMENTS

<TABLE>
<CAPTION>
                                                                                     AUSTRALIA
                                            UNITED                                      AND
                                            STATES             CANADA                S.E. ASIA            TOTAL
                                               $                  $                      $                  $
        ------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                <C>                   <C>                  <C>

        1997

        Assets(1)                            3,519              103,917              132,737              240,173
        ==============================================================================================================

        Sales                                4,096              267,859              295,623              567,578
        ==============================================================================================================

        Segment operating income (loss)     (2,009)              (9,898)              10,886               (1,021)
        ==============================================================================================================

        1996

        Assets(1)                            4,275              119,064              134,503              257,842
        ==============================================================================================================

        Sales                                4,296              222,805              135,523              362,624
        ==============================================================================================================

        Segment operating income (loss)     (1,467)              (4,189)               6,669                1,013
        ==============================================================================================================

        1995

        Assets(1)                            5,503               79,400                  --                84,903
        ==============================================================================================================

        Sales                                4,754              150,996                  --               155,750
        ==============================================================================================================

        Segment operating income (loss)     (1,316)               3,246                  --                 1,930
        ==============================================================================================================
</TABLE>

----------

(1) Assets exclude $2,591, $7,405, and $11,496 of corporate amounts in 1997,
1996 and 1995, respectively.



                                      F-33

<PAGE>   85
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
================================================================================



19.     RESTATEMENT

        Subsequent to the issuance of fiscal 1996 financial statements,
        management determined that its accounting treatment for the issuance of
        the TCI convertible preferred shares did not reflect the dividend
        imbedded in the preferred shares' conversion feature in accordance with
        the view of the Securities and Exchange Commission. Accordingly, the
        Company's fiscal 1996 financial statements have been restated to reflect
        this imbedded dividend. A summary of the effects of this restatement is
        as follows:

<TABLE>
<CAPTION>
                                                                                   As previously             As
                                                                                     reported             restated
        ---------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                    <C>
                                                                                        $                     $

        For the year ended September 30, 1996
           - Net loss                                                                  5,684                9,944
           - Primary loss per share                                                     0.31                 0.55

        As at September 30, 1996
           - Minority interest                                                        17,546               18,783
           - Additional paid-in capital                                               57,601               60,624
</TABLE>


20.     SUBSEQUENT EVENT

        Financing arrangements

        On September 26, 1997, with effect on October 8, 1997, the Company
        entered into an agreement with a syndicate of bankers which provides the
        Company with a $40 million revolving credit facility, of which $37.4
        million was outstanding at December 16, 1997. The agreement is
        for an original term of three years and shall be automatically renewed
        for successive terms of one year unless terminated, under specific
        conditions by the Company or its lenders. The facility bears interest at
        prime plus 3% and is secured by substantially all assets of the
        Company's North American operations and the shares of MDC owned by the
        Company. The agreement provides for various covenants including but not
        restricted to the maintenance of certain financial ratios, such as
        minimum shareholders' equity, minimum working capital and total
        liabilities to EBITDA, limitation on incurrence of indebtedness, payment
        of dividends, capital expenditures and the sale of assets. The new
        facility will be used to retire existing debt and for general corporate
        purposes.

        Although the loan was disbursed in October 1997, minimum shareholders'
        equity covenant which was effective as at September 30, 1997 was not met
        at September 30, 1997. The Company has negotiated waivers for this
        covenant at September 30, 1997 and December 31, 1997. The Company is
        currently negotiating a waiver of or a revision to the covenants on its
        loan for the remainder of fiscal 1998.


21.     SUBSEQUENT EVENT -- JANUARY 16, 1998

        On January 16, 1998, the Company received two offers from potential
        investors. One offer calls for the purchase of treasury shares for a
        minimum of $16 million while the second offer involves a working
        capital loan combined with the purchase of all outstanding common
        stock of the Company. These offers are subject to approval by the Board
        of Directors of the Company and by the shareholders of the Company,
        as appropriate. A meeting of the Board of Directors will be held no
        later than January 23, 1998 to review these and any other offers which 
        may be received, and to make recommendations to the shareholders. The
        proposals are also subject to certain conditions and regulatory
        approvals.  

                                      F-34

<PAGE>   86

                           DOMINION BRIDGE CORPORATION

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  [DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]


YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                                          ADDITIONAL                  CUMULATIVE  
                                                             COMMON        PAID-IN                    TRANSLATION    SUBSCRIPTION
                                             SHARES       STOCK AMOUNT     CAPITAL        DEFICIT     ADJUSTMENT      RECEIVABLE
                                                               $              $              $             $               $
----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>             <C>             <C>         <C>            <C>
Balance at September 30, 1996
    (as restated)                          24,722,188          25           60,624        (10,191)        (634)         (1,824)

Issuance of common stock upon
    conversion of Dominion Bridge,
    Inc. Class A preferred shares              50,334           1              103           --           --              --

Issuance of common stock upon
    exercise of options                     2,230,000           2            4,458           --           --              --

Issuance of common stock upon
    exercise of warrants                      150,000           1              299           --           --              --

Issuance of common stock upon
    conversion of TCI preferred
    shares                                  3,971,126           4            7,296           --           --              --

Deemed dividend upon conversion
    of TCI preferred shares                      --            --            1,237           --           --              --

Issuance of common stock for
    services rendered                         324,000           1              649           --           --              --

Share issue costs                                --            --             (137)          --           --              --

Translation adjustments, net of income
    taxes of nil                                 --            --             --             --         (4,195)           --

Net loss for the year                            --            --             --          (22,320)        --              --
----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1997              31,447,648          34           74,529        (32,511)      (4,829)         (1,824)
==================================================================================================================================
</TABLE>



See accompanying notes



                                      F-35

<PAGE>   87
                           DOMINION BRIDGE CORPORATION

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  [DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
                                    (CONT'D)

YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995 (AS RESTATED, NOTE 19)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                           ADDITIONAL                 CUMULATIVE     
                                                              COMMON        PAID-IN                  TRANSLATION    SUBSCRIPTION
                                               SHARES      STOCK AMOUNT     CAPITAL       DEFICIT     ADJUSTMENT     RECEIVABLE
                                                                $              $             $            $               $
--------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>             <C>            <C>        <C>            <C>         
Balance at September 30, 1995                14,990,188         15           36,345         (874)         142          (1,885)
                                                                                                                     
Issuance of common stock upon                                                                                        
    conversion of Dominion Bridge, Inc.                                                                              
    Class A preferred shares                  1,000,000          1            2,854         --           --              --
                                                                                                                     
Issuance of common stock upon                                                                                        
    conversion of TCI                                                                                                
    preferred shares                          7,994,606          8           16,837         --           --              --
                                                                                                                     
Issuance of common stock upon                                                                                        
    exercise of warrants                        107,394         --              359         --           --              --
                                                                                                                     
Issuance of common stock                                                                                             
    for services rendered                        30,000         --               85         --           --              --
                                                                                                                     
Deemed dividend on TCI                                                                                               
    preferred shares                               --           --            3,023         --           --              --
                                                                                                                     
Issuance of common stock for cash                                                                                    
    consideration                               600,000          1            2,618         --           --              --
                                                                                                                     
Share issue costs                                  --           --           (1,497)        --           --              --
                                                                                                                     
Translation adjustments, net of income                                                                               
    taxes of nil                                   --           --             --           --           (776)           --
                                                                                                                     
Settlement on acquisition of minority                                                                                
    interest (Note 3 iv)                           --           --             --            627         --              --
                                                                                                                     
Receipt of cash during the year                    --           --             --           --           --                61
                                                                                                                     
Net loss for the year                              --           --             --         (9,944)        --              --
--------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996                24,722,188         25           60,624      (10,191)        (634)         (1,824)
================================================================================================================================
</TABLE>                            
                           
                           
See accompanying notes     



                                      F-36

<PAGE>   88
                           DOMINION BRIDGE CORPORATION

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  [DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
                                    (CONT'D)

YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                           ADDITIONAL                CUMULATIVE    
                                                              COMMON        PAID-IN                 TRANSLATION    SUBSCRIPTION
                                               SHARES      STOCK AMOUNT     CAPITAL      DEFICIT     ADJUSTMENT     RECEIVABLE
                                                                $              $            $            $              $
--------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>           <C>             <C>           <C>        <C>            <C>         
Balance at September 30, 1994                13,507,918         13           31,927      (1,860)       (342)         (1,885)   
                                                                                                                               
Issuance of common stock upon                                                                                                  
    conversion of Dominion Bridge, Inc.                                                                                        
    Class A preferred shares                    643,200          1            2,848        --          --              --      
                                                                                                                               
Issuance of common stock upon                                                                                                  
    conversion of Unimetric Corporation                                                                                        
    preferred shares                            409,207          1            1,149        --          --              --      
                                                                                                                               
Issuance of common stock upon                                                                                                  
    exercise of warrants                        284,863         --              741        --          --              --      
                                                                                                                               
Issuance of common stock                                                                                                       
    for services rendered                        45,000         --              170        --          --              --      
                                                                                                                               
Issuance of common stock                                                                                                       
    issue expenses                               90,000         --             --          --          --              --      
                                                                                                                               
Issuance of common stock upon                                                                                                  
    exercise of warrants                         10,000         --               16        --          --              --      
                                                                                                                               
Share issue costs                                  --           --             (506)       --          --              --      
                                                                                                                               
Settlement on acquisition of minority                                                                                          
    interest (Note 3 iv)                           --           --             --        (1,034)       --              --      
                                                                                                                               
Translation adjustments, net of income                                                                                         
    taxes of nil                                   --           --             --          --           484            --      
                                                                                                                               
Net loss for the year                              --           --             --         2,020        --              --      
--------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995                14,990,188         15           36,345        (874)        142          (1,885)   
================================================================================================================================
</TABLE>                        
                       
                       
See accompanying notes 
                            
                                      F-37
<PAGE>   89

                          DOMINION BRIDGE CORPORATION
                       VALUATION AND QUALIFYING ACCOUNTS
                 Years Ended September 30, 1997, 1996 and 1995
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                       Additions
                                    Balance      ------------------------ 
                                      at        Charged to       Charged                  Balance
                                   beginning     costs and       to other       Deduc-    at end
Description                        of year        expenses       accounts       tions     of year
                                   ---------     ----------      --------       -----     -------
<S>                                <C>            <C>             <C>           <C>       <C>
Year ended September 30, 1997
 Allowance for doubtful accounts
 (deducted from accounts
 receivable)                       1,504            234                         1,504 (1)    234
                                   =====          =====                         =====      =====

 Allowance for obsolescence
 (deducted from inventory)           nil            nil                           nil (2)    nil
                                   =====          =====                         =====      =====

Year ended September 30, 1996
 Allowance for doubtful accounts
 (deducted from accounts
 receivable)                       1,138          1,504                         1,138 (1)  1,504
                                   =====          =====                         =====      =====

 Allowance for obsolescence
 (deducted from inventory)           nil            nil                           nil (2)    nil
                                   =====          =====                         =====      =====

Year ended September 30, 1995
 Allowance for doubtful accounts
 (deducted from accounts
 receivable)                         477          1,138                           477 (1)  1,138
                                   =====          =====                         =====      =====

 Allowance for obsolescence
 (deducted from inventory)           nil            nil                           nil (2)    nil
                                   =====          =====                         =====      =====
</TABLE>

(1) Accounts deemed to be uncollectible.
(2) Amounts impaired.


                                      F-38
<PAGE>   90
                                 EXHIBIT INDEX

Exhibit No.       Description
-----------       -----------

10.9              Credit Agreement dated September 12, 1997 among BNY, Groupe
                  Cedar Canada Inc., the Company, DBI, Steen, Davie, Becker, Les
                  Entrepreneurs Becker Inc., Cedar Group Australia Party Limited
                  and MIL.

10.10             Letter of Credit Financing Supplement dated September 12, 1997
                  among BNY, Groupe Cedar Canada Inc., the Company, DBI, Steen,
                  Davie, Cedar Groupe Australia PTY Limited, Becker, Les
                  Entrepreneurs Becker Inc. and MIL.

10.11             Guarantee dated September 12, 1997 of the Company.

10.12             Hypothecation of Securities dated September 12, 1997 between
                  BNY and the Company.

10.13             Hypothec on Movable Property dated September 12, 1997 between
                  BNY and the Company.

11                Statement of Computation of Earnings Per Share.

23.1              Consent of Deloitte & Touche.

23.2              Consent of Ernst & Young.

27                Financial Data Schedule.