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

   
                                  FORM 10-K/A1
    

               /X/ Annual Report Under Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                  for the fiscal year ended September 30, 1996

               / / 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                     (I.R.S.  Employer Identification No.)
Jurisdiction of Incorporation
      or Organization)

     500  NOTRE DAME ST.,  3RD FLOOR
         LACHINE, QUEBEC, CANADA                          H8S 2B2
(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
                         ---     ---                    ---     ---
<PAGE>   2
         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 December 24, 1996, was approximately $53.1 million
based upon the closing price of the Common Stock on such date on the NASDAQ
National Market System of $1.97. 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 December 24, 1996 was 28,763,648 shares.

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

                      DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Proxy Statement for the registrant's 1997 Annual
Meeting of Stockholders (the "1997 Proxy Statement") are incorporated by
reference into Items 10, 11, 12 and 13 in Part III. If the 1997 Proxy Statement
is not filed by January 28, 1997, an amendment to this Annual Report setting
forth this information will be duly filed with the Securities and Exchange
Commission.

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                          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 Company's ability to identify appropriate
acquisition candidates, complete acquisitions on satisfactory terms, or
successfully integrate acquired businesses; (ii) the risk of claims for product
and construction liability; (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, including the extent to which currently outstanding options, warrants
and other convertible securities are exercised; (vi) the sensitivity of the
Company's business to general economic conditions; (vii) the performance of
suppliers and subcontractors; (viii) the timing of completion of projects; (ix)
the Company's ability to avoid penalties for delays in completion of projects
and cost overruns; (x) 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; (xi) the Company's ability to remain in
compliance with the numerous environmental, health and safety requirements to
which it is subject; (xii) changes in accounting principles, policies or
guidelines; and (xiii) 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.


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

         Dominion Bridge Corporation (the "Company") was incorporated on
February 16, 1989 in Delaware as Cedar Group, Inc. and changed its name to
Dominion Bridge Corporation in 1996 to more readily identify the Company with
its principal operating subsidiary. The Company primarily operates as a
diversified international engineering and construction company in North America
and Asia-Pacific, and has additional operations in ship building and repair and
industrial specialty fasteners. In fiscal 1996, the engineering and construction
portion of the Company's business accounted for over 90% of revenues and is
expected to remain at over 80% in fiscal 1997. SEE SEGMENT INFORMATION.

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         The Company since 1994 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 115 year old
Canadian general contractor engaged in infrastructure projects in Canada and
North America; (ii) the initial acquisition of 75% in 1995 (now owned 100%) of
Steen Contractors Limited ("Steen"), whose traditional business is international
engineering and construction primarily in mechanical, heating, ventilation and
air conditioning; (iii) in 1996, the acquisition of 77.4% of McConnell Dowell
Corporation Limited ("MDC"), a general contractor engaged in a broad range of
infrastructure projects in Asia-Pacific; and (iv) also in 1996, the acquisition
of 100% 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, and in the manufacturing of industrial products. Its
smaller initial acquisitions were in the industrial and aerospace specialty
fasteners market and included the 1994 acquisition of 70% of Unimetric
Corporation ("Unimetric") from Ateliers de la Haute Garonne ("AHG"), and several
small previous acquisitions 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.

         The international engineering and construction activities of the
Company are conducted in North America by DBI and Steen and in Asia-Pacific by
MDC. The following is a summary of the transactions that have been concluded by
the Company to establish its engineering and construction operations.


         INTERNATIONAL ENGINEERING AND CONSTRUCTION

         DOMINION BRIDGE INC. On April 8, 1994, the Company completed the
acquisition of majority ownership of DBI from UDI, which had operated it as a
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 (DBI) of which the Company
purchased for a net payment of Cdn $5,000,000 in cash, 85% ownership of DBI's
common shares. 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 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 $1.4
million. The Company received a waiver of that year's fourth quarter Class A
Preferred Share dividend payment. The agreement between the Company and UDI was
further modified on December 18, 1995, and the future payments to UDI were
reduced to 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

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<PAGE>   5
UDI to realize up to Cdn $6.5 million. These financial obligations to UDI were
completed in 1996.

         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 from its purchase of $2.7 million of the Class A Preferred
Shares. Groupe Fidutech 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 (US $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 (US $ 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 US $6.1 million. Funds for the initial acquisition of
the 75% of the common shares were provided to the Company by a $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 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 (vs$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 (US $0.98). This was later increased to A$1.60 (US $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's Australian subsidiary 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. The
ordinary shares of MDC continue to trade on the Australian Stock Exchange and
the New Zealand Stock Exchange.

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<PAGE>   6
         the Company financed the $40.2 million acquisition cost of MDC by the
issuance of $24. 2 million of a 6% convertible preferred shares of TCI by way of
an offshore private placement and a $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

   
         DAVIE INDUSTRIES INC. On April 24, 1996, but effective March 31, 1996,
the Company 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 in Davie up to another Cdn $25.0 million 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 product markets 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
acquisition. Approximately $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 INC. The Company acquired 70% of the shares of Unimetric on
April 26, 1994. The purchase price was $1.0 million, consisting of a cash
payment of $0.6 million, issuance of 88,968 shares of the Company's common stock
and a $0.2 million cash purchase of Unimetric 4% non-cumulative, non-voting
preferred shares. Approximately $0.9 million 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. AHG, the minority shareholder of
Unimetric, has advanced $485,000, which is being repaid from the sales of
aerospace fasteners.
    

DIVESTITURE OF CANADIAN FASTENER BUSINESS AND STEEL SERVICE CENTER

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

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<PAGE>   7
         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 dividend equal
to the bank prime rate and are redeemable annually at varying amounts commencing
in 1995 through 2009.

         In December 1994, the Company sold its Amherst, Nova Scotia steel
service center division for gross proceeds of Cdn $0.9 million.

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              9/30/96          9/30/95          9/30/94
                                                       ($THOUSANDS)
SALES BY BUSINESS SEGMENT
<S>                                    <C>              <C>              <C>
Engineering & Construction (1)         $ 336,599        $ 150,996        $  58,181
Shipbuilding and Maintenance (2)       $  21,729               --               --
Specialty Fasteners                        4,296            4,754            4,842
Divested Business                             --               --            4,936
         Total Revenues                  362,624          155,750           67,959

OPERATING INCOME (LOSS)

Engineering & Construction (1)         $   2,611            3,246              860
Shipbuilding and Maintenance (2)            (131)              --               --
Specialty Fasteners                       (1,467)          (1,316)            (574)
Divested Business                           --               --                380
Segment Operating Income                   1,013            1,930              666
Corporate Expenses                        (5,030)          (1,020)            (109)
Interest                                  (2,104)            (406)            (341)
Other income                               1,134            1,236              767
Income from operations of joint
  ventures                                 2,189            2,165               --
Income Tax provision                        (574)          (1,693)            (300)
Minority interest - common stock          (1,667)            (122)             (19)
Minority interest - cash dividends on 
  preferred shares                          (645)             (70)            (248)
Minority interest - deemed dividends on
  preferred shares                        (4.260)              --               --
  
TOTAL ASSETS

Engineering & Construction (1)         $ 224,912        $  79,400        $  52,990
Shipbuilding and Maintenance (2)          28,655               --               --
Specialty Fasteners                        4,275            5,503            5,150
Total Assets                             257,842           84,903           58,140
</TABLE>
    

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<TABLE>
<CAPTION>
             GEOGRAPHIC SEGMENTS             NORTH                    ASIA
                     FISCAL 1996           AMERICA                 PACIFIC
<S>                                        <C>                     <C>
        Assets                             123,339                 134,503 
        Sales                              227,101                 135,523
        Segment Operating Income (Loss)     (5,656)                  6,669
</TABLE>

(1)      Includes revenues and operating income of DBI from April 1994, of Steen
         from April 1995 and of Davie 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.

DESCRIPTION OF ENGINEERING AND CONSTRUCTION BUSINESS

         Dominion Bridge Corporation is a diversified engineering and
construction company with operational headquarters in Montreal, Canada and
Melbourne, Australia. It has facilities throughout Canada, Australia, New
Zealand, Singapore, Hong Kong and Indonesia. In fiscal 1996, approximately 93%
of the Company's total revenues were derived from engineering and construction.
Geographically, approximately 63% of these revenues were derived from North
America and 37% were from Asia-Pacific. Revenues from Asia-Pacific were included
only from March 29, 1996, representing the date of consolidation of MDC. It is
expected that revenues from Asia-Pacific will represent approximately 50% of the
Company's total revenues in fiscal 1997.

         The Company is engaged in infrastructure construction and engineering
projects. Its principal traditional activities include civil, mechanical and
electrical engineering and construction. Specifically, the Company's
capabilities include tunnels, bridges, pipelines, power plants, plants and
factories, commercial buildings, engineering and design, mechanical contracting,
shipbuilding and repair, 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's future increase in contractual work is expected to
be derived by the need for building and replacing existing infrastructure in
most parts of the world.

         While continuing to augment its engineering and construction capability
through acquisitions, the Company is also dedicated to diversify the historical
reliance of the operating companies on the core business of supply and erection
of steel products and associated services. To that effect the Company has
entered into a joint venture agreement with The New World Power Corporation to
develop renewable energy projects. In addition, pursuant to the management
services contract, one of the Company's officers has assumed the position of
Interim Chief Executive Officer of The New World Power Corporation.

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         BACKLOG. As of September 30, 1996 the Company had confirmed contracts
in the infrastructure, engineering and manufacturing services segment for
approximately $205.4 million, approximately $186.4 million of which is to be
completed during fiscal 1997. The dollar amount of the backlog is not
necessarily indicative of the future earnings of the Company related to the
performance of such work. Although backlog represents only business which is
considered to be firm, 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 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.

   
         EMPLOYEES. As of the date of this Report, DBI, Steen and MDC employed
in the aggregate approximately 6,176 persons, of which approximately 50% are
members of a labor union. DBI (Lachine), with its approximately 300 employees,
has a collective bargaining agreement in place until October 1997. DBI's
Manitoba operations, with its approximately 40 employees, has a collective
bargaining agreement in place until March 1997. Of the 405 Steen employees,
approximately 326 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. Neither DBI nor Steen have suffered any
work stoppages during the last five years and the Company believes their labor
relations to be amicable. 
    

   
         ENVIRONMENTAL. The infrastructure, engineering and construction
business is subject to local environmental laws in the locations in which it
conducts operations, with which the Company is in material compliance.
Compliance with such laws has not had a material impact on the Company's
historic results of operations, earnings and competitive position and are not 
expected to require material capital expenditures or expenses.
    

         HEALTH AND SAFETY. Health and safety records of contractors continue to
be an important decision criteria of project promoters and owners in the
awarding of contracts. The primary responsibility for safety is that of the
various project managers. DBI and Steen also employ Safety and
Quality Assurance Managers.

         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.

         DBI has developed an extensive construction cost database,
which allows DBI to calculate construction costs from the limited
engineering details typically available at bid time. Management believes this
database provides an important competitive

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advantage in that it enables DBI to quickly react in the generally short bid
periods that characterize the current marketplace.

         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. 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; Winnipeg, Manitoba; 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.

   
         MDC operates from premises in Australia, New Zealand, Thailand,
Singapore, Hong Kong, Dubai, Malaysia 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 repairs and storage yard facilities which allow MDC to service its
regional construction equipment requirements 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,

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the Company will continue to use its best efforts to bid for projects it
cannot handle individually as part of a consortium.

DESCRIPTION OF SHIPBUILDING SEGMENT

         The shipbuilding segment accounted for approximately 6% of the
Company's consolidated revenues in fiscal 1996 and is conducted through Davie.
Davie, founded in 1825, is Canada's oldest and largest shipbuilding and ship
repair facility. MIL Intermodal Inc., a subsidiary of Davie, is a designer and a
manufacturer of road-rail interchangeable systems, a recently developed
proprietary technology, which may provide economic and logistic advantages to
the surface transportation industry. Another subsidiary of Davie, MIL Systems,
an engineering division located in Ottawa, Canada, is classified ISO 9001 and
specializes in advance ship design software, naval systems, computer aided
logistic and global telecommunications.

         OPERATIONS. Davie's primary operation involves the construction of a
wide-range of merchant and naval vessels including 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 City Class Canada patrol frigates and modernizing four
Tribal Class destroyers of the Canadian Navy. Between 1979 and 1983, Davie
diversified its activities and profitably produced thirteen jack-up drilling
platforms of large size, principally to foreign customers in the offshore
industry.

         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.

         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. Most recently, Davie is developing
specialized rail equipment for a new road/rail intermodal transportation system.

         CURRENT BUSINESS PLAN. A large percentage of Davie's business has
historically consisted of the procurement and performance of military contracts
from the Canadian government. After recognizing a slowdown in Canadian military
shipbuilding, during the past decade, Davie has refocused its business on the
commercial production of merchant ships


                                       11
<PAGE>   12
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 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.

         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 200M x 65M and 250M x 65M, respectively. The combined
berth is capable of being extended to 300M x 150M. 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 ship building 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 its productivity mainly through
the production of ships in series which requires a continuous flow process. In
order to achieve this, Davie is continuing 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. This has led to direct contact with potential customers which
has allowed Davie to utilize its in-house capabilities to further refine
existing designs in order to produce the next generation of Handymax product
carrier. 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 575 persons of
which approximately 404 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 and a

                                       12
<PAGE>   13
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, Japan and Germany. Davie management believes
that its labor relations are amicable.

         ENVIRONMENTAL. Davie's operations are subject to Canadian environmental
laws and regulations. In the fall of 1993 the shipyard was the subject of a
Phase I environmental study conducted by consultants, Roche Ltee. Davie is
engaged in the routine clean-up of its facilities and, in this context, certain
recommendations contained in the Phase I report have been implemented.

         BACKLOG. As of the date of this report, the Company had confirmed
contracts in the shipbuilding and repair segment for approximately $40.7
million, approximately $36.7 million of which was to be completed during fiscal
1997. The dollar amount of the backlog is not necessarily indicative of the
future earnings of the Company related to the performance of such work.
Although backlog represents only business which is considered to be firm, 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, which is 70% owned. Unimetric is engaged
in the manufacturing of specialty fasteners for the industrial and aerospace
markets, and has been working to broaden its product line. At fiscal year end,
Unimetric's backlog was up substantially over the prior fiscal year due to an
automotive order. The other two subsidiaries are 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 due to the need to focus resources on its core
business and due to continued losses. The financial statements do not reflect 
any gain or loss as a result of such decision because any gain or loss is not
expected to have a material impact on the Company's financial condition or
results of operations.
    


AGREEMENT WITH THE NEW WORLD POWER CORPORATION

        The Company, effective as of October 31, 1996, entered into a joint
venture agreement with The New World Power Corporation ("New World Power") to
jointly develop specified projects of New World Power. These projects include
the further development of wind and hydro electric power plants in North,
Central and South America and China which New World Power has in various
stages of development. Pursuant to the agreement, the Company will invest up
to $2.5 million in the projects in exchange for 50% of New World Power's
interest in such projects. The Company was also given the option to convert is
equity into common stock of New World Power which if all such equity were
earned and converted would give the Company ownership of approximately 41% of
the common stock of New World Power.

        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.

        The Company recently formed, with John D. Kuhns, a project finance
subsidiary known as Dominion Kuhns Brothers and Company, Inc. ("DK"). The
initial mission of DK will be to act as financial advisor to project developers
and to complement the Company's engineering and construction abilities with
financing capability. Management of the Company believes that such capabilities
will be important in the competitive markets in which the Company operates.

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. SEE "ITEM 1. DESCRIPTION OF BUSINESS -
FACILITIES."

         Steen operates from leased premises in six locations from the Provinces
of Ontario, Quebec and Canada's maritime provinces at an aggregate cost per year
of approximately Cdn. $288,000.

         MDC leases approximately fourteen different properties in New Zealand
and seven properties in Australia, as well as individual properties in
Indonesia, Maylasia, Singapore, Thailand, Saudi Arabia, Hong Kong, and American
Somoa. These properties represent the primary office and production space
utilized by MDC.

        MDC in the ordinary course of business, makes investments in machinery
and equipment.


                                       13
<PAGE>   14
         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 and manufacturing operations
from these sites. Furthermore, Davie rents office space in Ottawa, Canada, for
its military research and engineering division MIL Systems. In connection with
the acquisition of Davie by the Company, the Company has committed to modernize
Davie's facilities by investing a minimum Cdn $45 million over the five years
following the date of the acquisition.

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

         Except as noted above, 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.



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. The Company commenced an action against Stelco Inc. on December 20,
1994 in The Ontario Court to obtain a declaration that it is the rightful owner
of 75% of the common shares of Stelco Fasteners Ltd. and for damages as a result
of a dispute that arose between the parties in connection with the Company's
acquisition of 75% of the common shares of Stelco Fasteners Ltd., a company
owned by Stelco Inc. The Ontario Court (General Division) denied the Company's
claim in a judgment released on December 21, 1995. On January 19, 1996 the
Company filed a notice of appeal with the Ontario Court of Appeal from the
decision of the Ontario Court General Division, which was denied on November 13,
1996. Under the Court's order the Company is potentially liable for Stelco's
court costs. The Company and Stelco are engaged in discussions with regard to
the settlement of the claims each may have against the other. These discussions
contemplate the Company releasing Stelco from management fees owed to it in
exchange for a mutual release of liability. In the financial statements for
fiscal 1996, the Company has written off Cdn $300,000 ($222,000) of such fees.
    

         2. By complaint dated November 7, 1995, certain shareholders of the
Company (the "Plaintiffs") brought a shareholders derivative suit in the
Chancery Court of the State of Delaware against the Company and Michel L.
Marengere, Micheline Prud'homme, and Rene Amyot, individually. The complaint
alleges certain interested and self-dealing transactions by Mr. Marengere. The
parties have entered into a stipulation of settlement, subject to court
approval. The settlement contemplates (i) the repayment to the Company, prior to
December 31, 1996, of certain loans to affiliates of Mr. Marengere; (ii) the
guarantee by a company controlled by Mr. Marengere of certain payments owed to
the Company by the purchasers of Edinov, a former subsidiary of the Company;
(iii) an agreement that no further interest free loans may be made to Mr.
Marengere; (iv) an agreement that all future transactions not in the ordinary
course

                                       14
<PAGE>   15
of business between the Company and Mr. Marengere be subject to independent
director approval; and (v) payment of attorney's fees in the amount of $140,000.
The loans referred to above were repaid in fiscal 1996. A court hearing on the
settlement has been scheduled for January 24, 1997.

         3. By letter dated July 24, 1996, UDI 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.

         The complaint seeks unspecified 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 Annual
Report.

         4. 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. MDC believes these allegations are baseless and are being vigorously
defended.

         5. 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 action 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. 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 affirms that the allegations, both by Smith and
the former employee, are entirely without merit.

   
         6. 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.
    

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

         None.

                                       15
<PAGE>   16
                                     PART II

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

         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 bid prices of the Company's Common Stock during fiscal 1995
(October 1, 1994 to September 30, 1995) and fiscal 1996 (October 1, 1995 to
September 30, 1996).


<TABLE>
<CAPTION>
               FISCAL 1995             High                Low
               -----------             ----                ---
<S>                                    <C>                 <C>
               First Quarter           8 5/32              5 3/4
               Second Quarter          6 2/8               3 5/8
               Third Quarter           5 3/4               3 5/8
               Fourth Quarter          6 1/2               3 7/8
</TABLE>

<TABLE>
<CAPTION>
               FISCAL 1996             High                Low
               -----------             ----                ---
<S>                                    <C>                 <C>
               First Quarter           7 7/16              5 7/16
               Second Quarter          6 5/16              4 1/2
               Third Quarter           5 11/16             2 3/8
               Fourth Quarter          3 1/4               1 9/16
</TABLE>

         The high and low bid prices for the Company's Common Stock are rounded
to the nearest 1/32. Such prices are inter-dealer prices without retail mark-ups
or commissions and may not represent actual transactions.

         HOLDERS

         As of December 20, 1996, the approximate number of holders of record of
the Company's Common Stock was 446. Based upon the requests for proxy
information for the Company's 1996 Annual Meeting of Stockholders, the Company
believes the number of beneficial owners of the 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 funds for working
capital. The Company's agreement with its principal lender prohibits the payment
of dividends without the lender's prior written consent.

                                       16
<PAGE>   17
ITEM 6.  SELECTED FINANCIAL DATA.
   

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30                               1996          1995          1994          1993           1992
                                                      ----          ----          ----          ----           ----
<S>                                                <C>           <C>            <C>            <C>            <C>
Net Sales                                          362,624       155,750        67,959         7,003          4,950

Income (loss) from continuing operations            (9,944)        2,020           416          (240)          (239)

Income (loss) from continuing operations
per common share:
   Primary                                            (.55)         0.14          0.05         (0.07)         (0.10)
   Fully Diluted                                        --(1)       0.11          0.03         (0.07)         (0.10)

TOTAL ASSETS                                       265,247        96,399        72,178         9,774          4,534

Long-term obligation and redeemable                  5,764         1,760           518           454             95
preferred stock

Cash dividend declared per common                        0             0             0             0              0
 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 engineering and manufacturing services 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 the 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 decided to close its industrial fastener importation and
distribution businesses as part of its ongoing effort to focus on its core
business, to reduce costs and to return its industrial fasteners segment to
profitability. 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.
    

                                       17
<PAGE>   18
         In fiscal 1996, the infrastructure engineering and manufacturing
services business accounted for approximately 93% of all of the revenues of the
Company, as compared to 97% and 86% in fiscal 1995 and 1994. The shipbuilding
and maintenance segment accounts for approximately 6% of the Company's fiscal
1996 revenues, which is a new segment in 1996.

         The industrial fasteners segment of the Company's business, which
accounted for approximately 1% and 3% of sales in fiscal 1996 and fiscal 1995,
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 (on a fully diluted basis) 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
the fourth quarter of fiscal 1996 and by the end of the fiscal year had
substantially increased its backlog of business. Management expects that
Unimetric will be profitable for fiscal 1997.

         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, management believes, 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 moneys under Davie's development plan.

         The acquisition was accounted for by the purchase method. After the
writing down of the fixed assets of Davie to zero, negative goodwill (to be
amortized over three years) amounting to $15.6 million, was created. The Company
has adopted a multi-prong plan to build the revenue and earnings base of Davie,
which was instituted after the acquisition. Davie had an operating loss of $2.4
million since its March 31, 1996 acquisition date but Davie's earnings before
tax and minority interest was $0.2 million reflecting the amortization of
negative goodwill.

         FISCAL 1996 COMPARED TO FISCAL 1995

         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 March 29, 1996, MDC and Davie. 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.

                                       18
<PAGE>   19
                  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. Continued
improvement in marketing and sales during fiscal 1997 is expected.

         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 1996       FISCAL 1995        FISCAL 1994
                                -----------       -----------        -----------
<S>                                <C>               <C>                <C>
Sales                              100.0%            100.0%             100.0%
Cost of Sales                       90.4%             89.5%              87.3%
Gross Profit                         9.6%             10.5%              12.7%
Selling, General &                  10.7%              9.9%              11.9%
Administrative
Income from Operations              (0.5%)             2.0%               0.8%
Income before Income                (0.8%)             2.5%               1.4%
Taxes and Minority
Interests
Net Income                          (2.7%)             1.3%               0.6%
</TABLE>

         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. Management has taken steps that should lead to improvement
in its gross profit margins in fiscal 1997. In fiscal 1996, Steen improved its
gross profit margins over the prior year but due 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.

   
    

                                       19
<PAGE>   20
         Selling, general and administrative 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 includes 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 certain financing costs $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 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 the offshore
drilling platform in the Hibernia oil field off the coast of Newfoundland.
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 Canadian 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 was not a result of varying operating
conditions of the Company, but rather the direct result of the outcome of
certain contracts completed in the different fiscal periods.
    

         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 BT
Commercial Corporation ("BTCC"), an affiliate of Banker's Trust Company, which
was used to partially finance the acquisition of 77.4% of MDC.

         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
         
                                       20
<PAGE>   21
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.
   

         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.
    

         Exchange rates used in this discussion for the translation of financial
results for the periods 1994, 1995 and 1996 from Canadian to U.S. dollars were
Cdn $1.00 equals US $.7387, US $.7270 and US $.7326 respectively. For 1996, the
Australian dollar was converted to US dollars at the exchange rate of A $1.00
equals US $.7899. For fiscal 1996, the Company incurred an additional cumulative
currency translation loss of $.8 million, which has been deferred as part of
shareholders' equity.


         FISCAL 1995 COMPARED TO FISCAL 1994

         Net sales for fiscal 1995 of $155 million were 129% higher than those
for fiscal 1994 of $67 million. This increase is primarily attributable to the
inclusion of a full year of DBI's operations during fiscal 1995 as opposed to
seven months during fiscal 1994, as well as the acquisition of Steen. On a
pro-forma basis (as though each of the acquisitions had occurred on October 1,
1993) net sales increased 11% in fiscal 1995 to $177 million from $159 million
in Fiscal 1994.

         Gross margin as a percentage of sales was 10.5% in fiscal 1995 versus
12.7% in fiscal 1994. Gross margin declined due to the acquisition of Steen,
which operates with a lower gross margin than DBI.

         Selling, general and administrative expenses increased 90% from $8
million in fiscal 1994 to $15 million in fiscal 1995. The increase was primarily
due to the expensing of approximately $1.7 million of marketing and development
costs in Asia and Latin America as well as the inclusion of twelve months of
such expenses in fiscal 1995 for DBI versus seven months in fiscal 1994.
Excluding the extraordinary marketing and development costs referred to above,
selling, general and administrative expenses declined from 11.9% of sales in
fiscal 1994 to 8.8% of sales in fiscal 1995.

                                       21
<PAGE>   22
         During fiscal 1995, the Company undertook certain one-time adjustments
which significantly reduced the Company's net income and its earnings per share.
These adjustments included:

         (i)      The expensing in the period of most of the previous and
                  current year costs associated with various foreign joint
                  ventures in the aggregate amount of $1.6 million;

         (ii)     A write-off of $348,000 of certain assets that remained on the
                  books of the Company at the time of its September 30, 1993
                  plan of arrangement which resulted in the Company's exiting
                  from Chapter 11;

         (iii)    A write-down of $283,000 for certain pension assets that had
                  been overstated in fiscal 1994; and

         (iv)     The expensing of $682,000 of financing costs representing the
                  Company's costs on the Steen transaction.

         Furthermore, the Company's income did not include the following
deferred income items;

         (i)      The sum of approximately $2.05 million of contract gains not
                  included in income as they are considered contingent gains;
                  and

         (ii)     The deferral by DBI of the value of its interest in a judgment
                  pertaining to mining assets and mineral claims by
                  approximately $778,000 which the Company plans to realize in
                  fiscal 1996.

         Although the above one-time adjustments have decreased the Company's
income and earnings for the period, management believes that this decision will
enhance the Company's financial position and its balance sheet while positioning
it strongly for its planned expansion program.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's principal sources of liquidity since the Company's
reorganization have been proceeds from 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. As of September 30, 1996, Davie's cash balance amounted to
$17.1 million, which must be utilized solely for Davie's benefit.

         The Company issued during fiscal 1996 $24.2 million of preferred shares
of its subsidiary, TCI, by way of an offshore private placement, and obtained a
$30.0 million credit facility from BTCC. The proceeds, 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, $5.0 million to repay the BTCC Steen
acquisition bridge loan and 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,

                                       22
<PAGE>   23
   
beginning May 31, 1996, at a conversion price equal to 12% less than the market
price of the common stock during the five trading 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. The implicit beneficial conversion feature of 15%
discount to market on the $24.2 million of TCI preferred shares issued
(2,840,209 shares) resulted in a deemed dividend of $4.3 million being charged
to net income. As of the end of the fiscal year, 858,826 of the preferred
shares remained outstanding and 1,981,383 shares had converted into 7,994,606
shares of the Company's common stock. During the first quarter of fiscal 1997,
the remaining outstanding balance of the TCI preferred shares were converted
into 3,686,704 shares of the Company's common stock.
    

         The Company has a $30 million Credit Facility (the "Facility") from
BTCC, of which $30 million was outstanding as of September 30, 1996. The
Facility provided funding for the Company's acquisition of MDC. Amounts
outstanding under the Facility bear interest at (i) the greater of 1.5% per
annum above the prime rate announced from time to time by Banker's Trust Company
or 0.5% above the federal funds rate established from time to time by the
Federal Reserve Bank of New York; or (ii) at a rate equal to 2.5% above the
London Interbank Offered Rate for a period of up to six months, at the election
of the Borrower. The Facility matures on April 30, 1997 and is secured by a lien
on substantially all of the assets of the Company. The 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 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 Facility agreements, including certain financial covenants.

         The Company is exploring with BTCC the conversion of the Facility into
a long-term loan. Management of the Company is also exploring alternative
sources to refinance amounts outstanding under the Facility. Management of the
Company believes that it will be able to convert the Facility or otherwise
obtain replacement financing prior to the maturity date of the Facility.

         During fiscal 1996, the Company's operations used cash in the amount of
$4.7 million, while operations used cash of $4.3 million in fiscal 1995. The
net use of cash in operations was attributable to the net operating loss and
augmented by substantial investments in working capital at the fiscal year end.
In its normal course of business, the Company may be investing in inventories
and have amounts due from its customers that it cannot finance through customer
advances and accounts payable. DBI, Steen and MDC were each committed to
various infrastructure projects which were net users of cash at the year-end.
Subsequent to the year-end, several of these major projects have commenced to
reverse the net cash investment and the Company is scheduled to produce net
positive cash flows from changes in working capital accounts over the first two
quarters of fiscal 1997.

         In addition to the reversal of the working capital investment, the
Company has instituted several significant business initiatives to correct the
operating cash flow deficiency. The Company has entered into arrangements to
sell its commodity fastener trading stock and plant assets for cash proceeds in
the first quarter of 1997. The Company has initiated plant and administrative
staff reductions in its DBI operations to achieve operating cost savings and
benefit from rationalization of operations with those of Steen. The Company has
initiated its business plan at Davie to focus on returning the operation to
profitability and positive cash flow.

   
         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,
page 6).
    

         The Company has historically grown through acquisitions and expects to
continue to explore acquisition opportunities. Such acquisitions may have a
significant impact on the Company's need for capital. The Company would explore
a range of financing options which could include public or private debt or
equity financing. There can be no assurance that such financing will be
available, or if available, will be available on terms attractive to the 
Company.

         The Company is subject to a risk of claims for product liability. If a
product 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

                                       23
<PAGE>   24
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 products.

         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.


ITEM 8.  FINANCIAL STATEMENTS.

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

         The financial statements of the Company's unconsolidated joint venture
interest in the PCL-ACKER STORD-STEEN-BECKER joint venture for the fiscal year
ending January 31, 1997 will be filed by an amendment to the Annual Report in
accordance with Rule 3-09 of Regulation S-X not later than ninety days after
the joint venture's fiscal year-end.


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

         Not applicable.

                                       24
<PAGE>   25
                                    PART III

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

         Information with regard to this item is incorporated herein by
reference to the Company's definitive 1997 Proxy Statement under the captions
"ELECTION OF DIRECTORS" and "MANAGEMENT OF THE COMPANY," or in an Amendment to
this Annual Report to be filed with the Securities and Exchange Commission.

ITEM 11.  EXECUTIVE COMPENSATION.

          Information with regard to this item is incorporated herein by
reference to the Company's definitive 1997 Proxy Statement under the caption
"EXECUTIVE COMPENSATION."

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

         Information with regard to this item is incorporated herein by
reference to the registrant's definitive 1997 Proxy Statement under the caption
"BENEFICIAL OWNERSHIP OF COMMON STOCK," or in an Amendment to this Annual Report
to be filed with the Securities and Exchange Commission.


                                       25



<PAGE>   26
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Information with regard to this item is incorporated herein by
reference to the Company's definitive 1997 Proxy Statement under the caption
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS," or in an Amendment to this
Annual Report filed with the Securities and Exchange Commission.

                                     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 year ending
         September 30, 1996

         Auditors' Report of Ernst & Young, Independent Auditors, on the
         Company's Consolidated Financial Statements for the fiscal years ending
         September 30, 1995 and 1994

         Consolidated Balance Sheets of the Company as at September 30, 1996 and
         1995

         Consolidated Statements of Operations of the Company for the fiscal
         years ended September 30, 1996, 1995 and 1994

         Consolidated Statements of Cash Flows of the Company for the fiscal
         years ended September 30, 1996, 1995 and 1994

         Consolidated Statements of Stockholders' Equity of the Company for the
         fiscal years ended September 30, 1996, 1995 and 1994

         Notes to Consolidated Financial Statements of the Company


                                       26
<PAGE>   27
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"))

        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)

        10.1               Subscription Agreement dated July 26, 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               Shareholders' Agreement Between United Dominion
                           Industries Limited, the Company, Edinov Corporation,
                           and 3010864 Canada, Inc., dated April 8, 1994
                           (incorporated by reference to the Company's Form 8-K,

                                       27
<PAGE>   28
                           dated April 8, 1994)

        10.7               Guarantee and Indemnity Agreements Between United
                           Dominion Industries Limited, the Company and Edinov
                           Corporation (incorporated by reference to the
                           Company's Form 8-K, dated April 8, 1994)

        10.8               Registration Rights Agreement Between United Dominion
                           Industries Limited the Company dated April 8, 1994
                           (incorporated by reference to the Company's Form 8-K,
                           dated April 8, 1994)

        10.9               Hypothecation and Pledge of Securities Agreement
                           between United Dominion Industries Limited and the
                           Company (incorporated by reference to the Company's
                           Form 8-K, dated April 8, 1994)

        10.10              United Dominion Industries Limited Security Agreement
                           with 3010864 Canada (incorporated by reference to the
                           Company's Form 8-K, dated April 8, 1994)

        10.11              Debenture Between 3010864 Canada and United Dominion
                           Industries Limited, dated April 8, 1994 (incorporated
                           by reference to the Company's Form 8-K, dated April
                           8, 1994)

        10.12              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")

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

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

        10.15              Credit Facility Agreement between the Company and BT
                           Commercial Corporation (Incorporated by reference to
                           Exhibit 2.1 to the Company's Current Report on Form
                           8-K dated March 29, 1996 (the "March 29, 1996 Form
                           8-K"))

        10.16              Cedar Group, Inc. Guarantee Agreement (Incorporated
                           by reference to Exhibit 2.2 to the March 29, 1996
                           Form 8-K)

        10.17              Cedar Group, Inc. Pledge Agreement (Incorporated by
                           reference to Exhibit 2.3 to the March 29, 1996 Form
                           8-K)

        10.18              Cedar Group, Inc. Security Agreement (Incorporated by
                           reference to Exhibit 2.4 to the March 29, 1996 Form
                           8-K)

        10.19              Cedar Group Canada, Inc. Pledge Agreement
                           (Incorporated by reference to Exhibit 2.5 to the
                           March 29, 1996 Form 8-K)

        10.20              Cedar Group Canada, Inc. Security Agreement
                           (Incorporated by reference to Exhibit 2.6 to the
                           March 29, 1996 Form 8-K)

        11.0               Statement regarding computation of earnings per share
                           (Incorporated from within the Financial Statements)

        21                 Subsidiaries (Incorporated by reference to Exhibit 21
                           of the Company's 1996 10-K)

        23.1               Consent of Deloitte & Touche

        23.2               Consent of Ernst & Young


                                       28
<PAGE>   29
C.       Reports on Form 8-K

                           Report on Form 8-K dated November 26, 1996 reporting
                           adoption of the Shareholder Rights Plan (Incorporated
                           by reference to the Company's 1996 10-K).

   
D.      Financial Statement Schedule

                           Schedule II -- Valuation and Qualifying Accounts
    

                                       29
<PAGE>   30
                                   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: June 12, 1997                     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/A 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          June 12, 1997
-----------------------      Directors, Chief Executive
Michel L. Marengere          Officer and Director

/s/ Rene Amyot               Director                          June 12, 1997
-----------------------
Rene Amyot

/s/ Peter P. Gil             Director                          June 12, 1997
-----------------------
Peter P. Gil

/s/ Nicolas Matossian        President and Chief Operating     June 12, 1997
-----------------------      Officer
Nicolas Matossian

/s/ Robert Chartier          Vice President, Interim CFO       June 12, 1997
-----------------------
Robert Chartier

/s/ Reynald Lemieux          Director                          June 12, 1997
-----------------------
Reynald Lemieux

/s/Louis Berlinguet          Director                          June 12, 1997
-----------------------
Louis Berlinguet

/s/Ladislas O. Rice          Director                          June 12, 1997
-----------------------
Ladislas O. Rice

/s/Andrew Choa               Director                          June 12, 1997
-----------------------
Andrew Choa
                                       30
<PAGE>   31








INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Dominion Bridge Corporation

   
We have audited the accompanying consolidated balance sheet of Dominion Bridge
Corporation as at September 30, 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended. Our
audit also included the financial statement schedule listed in the index at
Item 14. These financial statements and financial statement schedule 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 audit 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 financial position of Dominion Bridge
Corporation as at September 30, 1996, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
    

The financial statements as at and for the years ended September 30, 1995 and
1994 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.
    

/s/ Deloitte & Touche
Montreal, Canada

   
December 23, 1996, except as to Note 19 which is as of June 13, 1997
    





                                      F-1



<PAGE>   32
                          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 balance sheet of CEDAR GROUP, INC.
as of September 30, 1995 and the consolidated statements of operations,
stockholders' equity and cash flows for the years ended September 30, 1995 and
1994. 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
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 audits provide 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 Cedar Group, Inc.
as at September 30, 1995 and the consolidated results of its operations and its
cash flows for the years ended September 30, 1995 and 1994 in conformity with
accounting principles generally accepted in the United States.

/s/ Ernst & Young

Montreal, Canada
December 20, 1995




                                      F-2



<PAGE>   33
   
<TABLE>
<CAPTION>
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
-----------------------------------------------------------------------------------------------------------------
                                                                1996                  1995                 1994
                                                        (restated, see Note 19)
-----------------------------------------------------------------------------------------------------------------
                                                                  $                     $                    $


<S>                                                          <C>                  <C>                  <C>   
SALES                                                           362,624              155,750               67,959
-----------------------------------------------------------------------------------------------------------------
Cost of sales                                                   327,921              139,407               59,295
Selling, general and administrative expenses                     38,720               15,433                8,107
-----------------------------------------------------------------------------------------------------------------
                                                                366,641              154,840               67,402
Income from operations of joint ventures (Note 8)                 2,189                2,165                    -
-----------------------------------------------------------------------------------------------------------------
Income (loss) from operations                                    (1,828)               3,075                  557
Interest expense, net                                            (2,104)                (406)                (341)
Other income                                                      1,134                1,236                  767
-----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and minority interest          (2,798)               3,905                  983
-----------------------------------------------------------------------------------------------------------------
Income taxes (Note 11)
    Current                                                       1,283                 (300)                  70
    Deferred                                                       (709)               1,993                  230
-----------------------------------------------------------------------------------------------------------------
                                                                    574                1,693                  300
-----------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest                           (3,372)               2,212                  683
Minority interest - cash dividends on preferred shares             (645)                 (70)                (248)
Minority interest - deemed dividends on conversion
    of subsidiary preferred shares (Note 19)                     (4,260)                   -                    - 
Minority interest - common stock                                 (1,667)                (122)                 (19)
-----------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME                                                (9,944)               2,020                  416
-----------------------------------------------------------------------------------------------------------------

Net income (loss) per common share and common
    share equivalents                                              $                     $                    $
        Primary                                                  (0.55)                 0.14                 0.05
        Fully diluted                                                -                  0.11                 0.03
-----------------------------------------------------------------------------------------------------------------

Weighted average number of common shares
    and common share equivalents outstanding
        Primary                                              18,174,000           14,929,000            8,912,000
        Fully diluted                                        23,565,000           17,688,000           12,064,000
-----------------------------------------------------------------------------------------------------------------
</TABLE>
    

See accompanying notes

                                      F-3
<PAGE>   34
   
<TABLE>
<CAPTION>
DOMINION BRIDGE CORPORATION
CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
-----------------------------------------------------------------------------------------------------------------
                                                                                      1996                 1995
                                                                             (restated, see Note 19)
-----------------------------------------------------------------------------------------------------------------
                                                                                        $                    $

<S>                                                                                  <C>                   <C> 
ASSETS
Current assets
    Cash (Note 4)                                                                     26,231                4,765
    Term deposits collateralizing bank indebtedness                                        -                1,688
    Investments                                                                            -                2,779
    Accounts receivable (Note 5)                                                     126,911               44,169
    Inventories (Note 6)                                                              43,762               12,746
    Prepaid expenses and other current assets                                          5,417                1,822
    Advances to shareholders                                                               -                  501
-----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                                 202,321               68,470
-----------------------------------------------------------------------------------------------------------------
    Property, plant and equipment, net (Note 7)                                       38,289               20,661
    Advances to a shareholder                                                              -                  697
    Assets of business transferred under contractual
       arrangements (preferred shares) (Note 3 vii)                                    3,847                3,640
    Goodwill                                                                          11,958                    -
    Pension assets (Note 12)                                                           1,187                1,619
    Advances to and investments in unincorporated joint ventures (Note 8)              2,398                    -
    Other assets                                                                       5,247                1,312
-----------------------------------------------------------------------------------------------------------------
                                                                                     265,247               96,399
-----------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
    Bank indebtedness (Note 9)                                                         5,624                1,688
    Term loan (Note 9)                                                                30,000                5,000
    Accounts payable and accrued expenses                                            119,839               31,991
    Customer advances                                                                 16,166                6,062
    Current portion of obligations under capital leases                                2,979                    -
-----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                            174,608               44,741
-----------------------------------------------------------------------------------------------------------------
    Advances from unincorporated joint venture                                             -                  750
    Deferred income taxes                                                              5,147                5,994
    Accrued post-retirement benefits other than pensions (Note 12)                       514                  522
    Obligations under capital leases (Note 10)                                         2,274                    -
    Minority interest                                                                 18,783               10,161
    Negative goodwill (Note 3 ii)                                                     12,945                    -
    Other long-term liabilities                                                        2,976                  488
-----------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
    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: 24,722,188 shares in 1996 and
       14,990,188 shares in 1995                                                          25                   15
    Additional paid-in capital                                                        60,624               36,345
    Deficit                                                                          (10,191)                (874)
    Cumulative translation adjustment                                                   (634)                 142
-----------------------------------------------------------------------------------------------------------------
                                                                                      49,824               35,628
    Subscription receivable (Note 14)                                                 (1,824)              (1,885)
-----------------------------------------------------------------------------------------------------------------
    Total stockholders' equity                                                        48,000               33,743
-----------------------------------------------------------------------------------------------------------------
                                                                                     265,247               96,399
-----------------------------------------------------------------------------------------------------------------
</TABLE>
    

Commitments and contingencies (Note 15)
See accompanying notes

                                      F-4
<PAGE>   35
   
<TABLE>
<CAPTION>
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
-----------------------------------------------------------------------------------------------------------------
                                                                 1996                 1995                 1994
                                                        (restated, see Note 19)
-----------------------------------------------------------------------------------------------------------------
                                                                   $                    $                    $
<S>                                                             <C>                  <C>                   <C>  
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income                                                (9,944)               2,020                  416
Adjustments to reconcile net income to the
    cash provided by (used for) operating activities
        Deemed dividend on conversion of subsidiary
          preferred shares                                        4,260                    -                    -
        Minority interest in net income                           1,667                  122                   19
        Depreciation and amortization                             6,902                3,217                2,224
        Common stock issued for services                             85                  170                    -
        Amortization of negative goodwill                        (2,626)                   -                    -
        Deferred income taxes                                      (709)               1,993                  230
        Deferred pension cost                                       432                  434                    -
        Gain on sale of assets                                   (1,105)                (689)                (210)
        Income from operations of joint ventures                 (2,189)              (2,165)                   -
        Advances to and investments in joint ventures               860                1,189                    -
        Increase in accounts receivable                         (25,963)             (10,797)              (6,594)
        Decrease in prepaid expenses and other assets             6,516                  806                  629
        Decrease (increase) in inventories                       18,012               (3,148)               2,390
        (Decrease) increase in accounts payable                    (595)               5,660               (1,529)
        Decrease in customer advances                              (272)              (3,263)              (5,132)
        Other - net                                                 (30)                 178                 (282)
-----------------------------------------------------------------------------------------------------------------
Net cash used in operating activities                            (4,699)              (4,273)              (7,839)
-----------------------------------------------------------------------------------------------------------------

CASH FLOW FROM INVESTING ACTIVITIES
Decrease (increase) in investments                                    -                2,696               (1,169)
Decrease (increase) in term deposits                              1,688               (1,688)                   -
Cash consideration paid for acquired businesses                 (40,214)              (4,476)              (4,550)
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                 (902)
Repayment by (advance to) a shareholder                           1,198                 (417)              (1,734)
Repayment by (advance to) an officer                                  -                  565                 (565)
Cash payment for purchase of equipment                           (7,132)                 (10)                 (94)
Proceeds from sale of property and equipment                      2,905                2,152                  604
Decrease in other assets                                            312                    -                    -
-----------------------------------------------------------------------------------------------------------------
Net cash used for investing activities                          (12,555)              (8,193)              (8,410)
-----------------------------------------------------------------------------------------------------------------

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock                            2,619                3,493               10,901
Proceeds from exercise of warrants                                  359                  757               13,195
Proceeds from exercise of options                                     -                    -                  303
Net repayments on line of credit                                      -                    -               (3,408)
Issue of preferred shares of subsidiary to minority interest     24,142                    -                  200
Issue costs of subsidiary preferred shares                       (1,497)                   -                    -
Bank indebtedness                                               (10,909)               1,688                    -
Other long-term liabilities                                         250                  488                    -
Repayment of capital lease obligations                             (745)                   -                    -
Term loan                                                        25,000                5,000                    -
Payment of other obligations                                          -                    -                 (592)
Decrease in subscription receivable                                  61                    -                    -
-----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                        39,280               11,426               20,599
-----------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate fluctuations on cash               (560)                 227                   93
-----------------------------------------------------------------------------------------------------------------
Net change in cash                                               21,466                 (813)               4,443
Cash, at beginning of year                                        4,765                5,578                1,135
-----------------------------------------------------------------------------------------------------------------
CASH, AT END OF YEAR (Note 4)                                    26,231                4,765                5,578
-----------------------------------------------------------------------------------------------------------------
</TABLE>
    

                                      F-5
<PAGE>   36
   
<TABLE>
<CAPTION>
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
-----------------------------------------------------------------------------------------------------------------
                                                                 1996                1995                  1994
                                                         (restated, see Note 19)
-----------------------------------------------------------------------------------------------------------------
                                                                   $                   $                     $


<S>                                                             <C>                    <C>                  <C>   
SUPPLEMENTAL CASH FLOW INFORMATION 
Cash paid during the year for:
    Interest                                                      1,457                  406                  341
    Taxes                                                           705                  310                    -
-----------------------------------------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES

Issuance of common stock for acquisition
    of businesses
        Fair value of assets acquired (net of
           cash acquired)                                             -                    -                2,771
        Liabilities assumed and minority interest                     -                    -                1,721
-----------------------------------------------------------------------------------------------------------------
Net assets acquired                                                   -                    -                1,050
Cash outlays                                                          -                    -                  800
-----------------------------------------------------------------------------------------------------------------
Issuance of common stock for acquisitions                             -                    -                  250
-----------------------------------------------------------------------------------------------------------------
Preferred shares received on transfer of assets of
    divested businesses
        Fair value of net assets divested                             -                    -                4,531
        Cash received                                                 -                    -                  739
-----------------------------------------------------------------------------------------------------------------
Preferred shares of the acquirer of divested businesses               -                    -                3,792
-----------------------------------------------------------------------------------------------------------------
Issue of capital lease obligations                                5,077                    -                    -

Purchase of equipment under capital lease                        (5,077)                   -                    -

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

Purchase of preferred stock minority interest
    of subsidiaries                                             (22,723)                   -                    -
-----------------------------------------------------------------------------------------------------------------
Issuance of common stock in repayment of debt                         -                    -                   66
-----------------------------------------------------------------------------------------------------------------
Settlement on acquisition of minority interest                     (627)               1,034                    -
-----------------------------------------------------------------------------------------------------------------
</TABLE>
    

See accompanying notes

                                      F-6
<PAGE>   37
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
-------------------------------------------------------------------------------

1.      NATURE OF OPERATIONS

        Pursuant to a resolution of the Board of Directors dated May 15, 1996,
        Cedar Group, Inc. changed its name to Dominion Bridge Corporation.
        Dominion Bridge Corporation, a Delaware corporation with executive
        offices in Montreal, Canada, specializes in international engineering,
        infrastructure development and project management and ship building and
        repair.

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 revenues
        and expenses during the reporting period.  Actual results could differ
        from those estimates.
    

        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.

        Since the beginning of the current fiscal year, the Company has (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.).

        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 is 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.

                                      F-7
<PAGE>   38
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 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)

        Construction contracts

        Income on construction contracts is recognized on the
        percentage-of-completion basis. Provisions for anticipated losses on
        uncompleted contracts are made in the period in which losses are first
        determinable.

   
        In the ordinary course of its construction business, the Company
        together with the client, may conduct a review following the completion
        of the project, for the purpose of establishing a final contract amount.
        Until such a final amount is agreed upon and fully documented, no
        revenue is recorded until the Company's entitlement to the payment is
        established. 
     

   
        Inventories

        Inventories consist principally of work in process related to
        construction contracts is 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 to market value of these inputs to the
        Company's end products.  Finished goods comprise steel and steel
        hardware products held for sale and are stated at the lower of cost
        (first in, first out) or market (net realizable value).
    

        Investment in and advances to unincorporated joint ventures

        The Company's investment in and advances to unincorporated joint
        ventures is 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 charged
        to expenses 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 seven
        years for machinery and equipment and forty years for buildings.


                                      F-8
<PAGE>   39
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 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)

        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.

   

        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 per common share is computed by dividing the income
        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 per common share on a fully diluted basis assumes that all
        convertible instruments were converted to common stock at the earlier of
        the beginning of each year or the date of issuance.
   
        Net loss per common share is not presented on a fully-diluted basis as
        the existence of potentially dilutive warrants and options has an
        antidilutive effect on loss per common share.
    

   
The loss per common share is computed by dividing the 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, 1996, 1995 and 1994, net income (loss) applicable to common stockholders is
as follows:
    
   

<TABLE>
<CAPTION>       
                                              1996          1995        1994
                                              ----          ----        ----
<S>                                         <C>            <C>          <C>
Income (loss) before minority interest      $(3,372)       $2,212       $683

Minority interest - cash dividends
  on subsidiary preferred shares               (645)          (70)      (248)

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

Minority interest - common stock             (1,667)         (122)        (19)
                                            -------        ------        ----   

Net income (loss) applicable to
  common stockholders                       $(9,944)       $2,020        $416
</TABLE>
    

   
Recent Pronouncements
    

   
In March 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of," which is effective for the Company's 1997 financial
statements.  SFAS 121 requires that long-lived assets and certain identifiable
intangible assets held and used by a company be reviewed for impairment
whenever events or circumstances indicate that the carrying amounts of the
assets might not be recoverable.  The Company does not anticipate the adoption
of SFAS 121 will have a significant impact on its financial statements.
    


                                      F-9
<PAGE>   40
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 1996                                                  
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
------------------------------------------------------------------------------- 

3.      ACQUISITIONS AND DIVESTED BUSINESSES

        (i)  Acquisition of McConnell Dowell Corporation Limited

             Cedar Group Australia Pty Ltd. (CGA), an Australian indirect
             wholly-owned subsidiary of the Company, purchased between March 29
             and April 9, 1996 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. As at
             September 30, 1996, CGA owns 32,187,000 ordinary shares of MDC
             representing a 77.4% ownership interest.

             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 as at September 30, 1996 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
             40 year period.
    

             The total cost of the acquisition was allocated to the net assets
             acquired on the basis of their fair value as follows:

<TABLE>
<CAPTION>
                                                                   $

<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 from Bankers
              Trust and by the issuance, by a subsidiary of the Company, of
              preferred shares.


                                      F-10

<PAGE>   41
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 1996                                                  
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
------------------------------------------------------------------------------- 

3.     ACQUISITIONS AND DIVESTED BUSINESSES (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.

              The Company has accounted for the acquisition of IDI using the
              purchase method and has been given effect at March 31, 1996.
              Accordingly, the assets and liabilities of IDI as at September 30,
              1996 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>
<CAPTION>
                                                                        $


<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
              to nil the value of long-term non-monetary assets and the balance
              of $12,945 (net of accumulated amortization of $2,626) is being
              disclosed as negative goodwill on the balance sheet and is being
              amortized over a three year period.
    

         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
              over the 1996 fiscal year.
    

              The acquisitions have been accounted for under the purchase method
              of accounting and have been given effect from April 1, 1995 for
              the first 75% purchase and from March 31, 1996 for the second 25%
              purchase. Accordingly, the assets and liabilities of Steen as at
              September 30, 1995 and 1996 are consolidated into the accounts of
              the Company.


                                      F-11

<PAGE>   42
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 1996                                                  
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
------------------------------------------------------------------------------- 

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

              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>
<CAPTION>
                                                                  $

<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 which was repaid on October 31, 1995.

     (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 and Asia 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-12

<PAGE>   43
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 1996                                                  
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
------------------------------------------------------------------------------- 

3.   ACQUISITIONS AND DIVESTED BUSINESSES (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>
<CAPTION>
                                                                                $

<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 CDN$8,786
             face value of preferred shares.

             On December 18, 1995, the Company accepted the offer of UDIL 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 a cash payment of $103 on November 4, 1996. 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-13
<PAGE>   44
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 1996                                                  
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
------------------------------------------------------------------------------- 

3.       ACQUISITIONS AND DIVESTED BUSINESSES (CONT'D)

        (v)    Acquisition of Unimetric Corporation

               Effective January 1, 1994, the Company acquired from Ateliers de
               la Haute-Garonne (AHG) 70% of the common stock of Unimetric
               Corporation (Unimetric), a United States manufacturer of
               specialty fasteners for the aerospace and industrial markets. The
               acquisition has been accounted for by the purchase method and
               earnings have been included in the results of operations from the
               date of the acquisition.

               The total cost of the acquisition was allocated to the net
               assets acquired on the basis of their fair value as follows:

<TABLE>
<CAPTION>
                                                                  $

<S>                                                             <C>  
Current assets                                                  1,136
Fixed assets                                                    1,613
Other assets                                                       22
---------------------------------------------------------------------
Total assets                                                    2,771
---------------------------------------------------------------------
Current liabilities                                               539
Other liabilities                                                 356
---------------------------------------------------------------------
Total liabilities                                                 895
---------------------------------------------------------------------
Net assets                                                      1,876
Common shares held by minority shareholders at book value         826
---------------------------------------------------------------------
NET CONSIDERATION PAID                                          1,050
---------------------------------------------------------------------

<CAPTION>
              

The acquisition was financed by:

                                                                      $
<S>                                                                 <C>
Issuance of common shares                                             250
Cash payment                                                          800
-------------------------------------------------------------------------
                                                                    1,050
-------------------------------------------------------------------------
</TABLE>


               The cash payment includes $200 which was invested by the minority
               shareholders in preferred shares of Unimetric Corporation.


                                      F-14
<PAGE>   45
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 1996                                                  
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
------------------------------------------------------------------------------- 

3.       ACQUISITIONS AND DIVESTED BUSINESSES (CONT'D)

       (vi)(a) Pro-forma results - 1996

               Set forth below is the Company's unaudited pro-forma combined
               summary 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 income (loss)                                $    (13,520)
Per common share
  Primary                                        $      (0.74)
  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
             year or of future results of operations.

             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)(b) Pro-forma results - 1995

             Set forth below is the Company's unaudited pro forma combined
             summary of operations for the years ended September 30, 1995 and
             1994 as though each of the acquisitions completed in 1995 had been
             made on October 1, 1993.

<TABLE>
<CAPTION>
[In thousands except per share data]                                         1995             1994
                                                                               $                $
--------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>
Sales                                                                     177,459          159,162
Net income (loss)                                                           1,114           (2,292)
Per common share
  Primary                                                                    0.07            (0.26)
  Fully diluted                                                              0.06            (0.26)
Average number of common shares and common
  share equivalents outstanding
  Primary                                                              14,929,000        8,951,000
  Fully diluted                                                        17,688,000        8,951,000
--------------------------------------------------------------------------------------------------
</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 1994
             year or of future results of operations.

             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.





                                      F-15

<PAGE>   46
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 1996                                                  
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
------------------------------------------------------------------------------- 

3.       ACQUISITIONS AND DIVESTED BUSINESSES (CONT'D)

         (vii) Divested businesses

               Effective July 1, 1994, the Company decided to divest the
               Canadian commodity fastener distribution businesses, formerly
               conducted by Edinov. The results of operations to June 30, 1994
               are included in the consolidated statements of operations and
               cash flows.

               The transaction was completed on December 22, 1994 by the receipt
               of CDN$1,000 cash and CDN$5,135 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. During 1996, Edinov retired shares for CDN$250. The
               Company's ability to realize the value of the preferred shares is
               dependent on future operations of the divested businesses.

4.       CASH

         Included in cash is $17,078 of cash which is in the accounts of IDI.
Pursuant to the purchase agreement with SGF (see note 3(ii)) this cash is
restricted in its use to the benefit of IDI.

5.       ACCOUNTS RECEIVABLE

         Accounts receivable are comprised of the following:

<TABLE>
<CAPTION>
                                                         1996            1995
                                                     --------------------------
                                                           $               $

<S>                                                    <C>              <C>    
Trade and other receivables                             99,389          34,874 
Holdback receivable                                     13,714           4,535 
Unbilled receivables                                    15,312           5,898 
Allowance for doubtful accounts                         (1,504)         (1,138)
-------------------------------------------------------------------------------
                                                       126,911          44,169 
-------------------------------------------------------------------------------
</TABLE>
   

Holdback receivables represent retainage provisions due from customers as is
the normal course of business in long term construction contracts
    

6.      INVENTORIES

<TABLE>
<CAPTION>
                                                         1996            1995
                                                      -------------------------
                                                           $               $

<S>                                                     <C>             <C>  
Raw materials                                            2,958           3,443
Construction contracts, work in process                 38,625           6,921
Finished goods                                           2,179           2,382
-------------------------------------------------------------------------------
                                                        43,762          12,746
-------------------------------------------------------------------------------
</TABLE>


                                      F-16
<PAGE>   47
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 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>
                                                                      ACUMULATED            NET BOOK
                                                    COST             DEPRECIATION             VALUE
----------------------------------------------------------------------------------------------------
                                                      $                     $                   $

<S>                                                <C>                    <C>                 <C>
        1996
        Land                                         6,813                    -                6,813
        Building                                     4,114                  604                3,510
        Machinery and equipment                     35,458               12,779               22,679
        Machinery under capital leases               5,857                  570                5,287
----------------------------------------------------------------------------------------------------
                                                    52,242               13,953               38,289
----------------------------------------------------------------------------------------------------

        1995
        Land                                         7,157                    -                7,157
        Building                                     4,079                  540                3,539
        Machinery and equipment                     16,636                6,671                9,965
----------------------------------------------------------------------------------------------------
                                                    27,872                7,211               20,661
----------------------------------------------------------------------------------------------------
</TABLE>


8.   ADVANCES TO AND INVESTMENTS IN UNINCORPORATED JOINT VENTURES

     Subsidiaries of the Company have interests in unincorporated joint
     ventures.

     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>
                                                            1996                1995
                                                          ----------------------------
                                                             $                    $

<S>                                                        <C>                   <C>  
        Assets                                              5,716                1,608
        Liabilities                                         3,205                2,358

        Revenue                                            15,040                8,319
        Expenses                                           12,851                6,154
----------------------------------------------------------------------------------------------------
        Net earnings                                        2,189                2,165
----------------------------------------------------------------------------------------------------
</TABLE>

                                      F-17
<PAGE>   48
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 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 Bankers
        Trust Commercial Corporation "(BTCC") for a term loan in the amount of
        $30,000. This loan bears interest at LIBOR and is collateralized by all
        the assets of the consolidated group. The weighted average interest rate
        on the term loan was 8.25% for the period ended September 30, 1996. The
        maturity date for the loan is April 30, 1997. At that time, the loan can
        be renegotiated. The Company is currently negotiating new financing
        arrangements with its lenders.

        A subsidiary of the Company has entered into operating credit facilities
        totalling $6,200 bearing interest at variable rates. At September 30,
        1996, $4,708 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>
<CAPTION>
                                               $

<S>                                          <C>  
1997                                         3,352
1998                                         1,210
1999                                           660
2000                                           440
2001                                           220
--------------------------------------------------
                                             5,882
LESS: IMPUTED INTEREST                         629
--------------------------------------------------
                                             5,253
LESS: AMOUNTS DUE WITHIN ONE YEAR            2,979
--------------------------------------------------
                                             2,274
--------------------------------------------------
</TABLE>

                                      F-18
<PAGE>   49
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 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>
                                                        1996          1995          1994
                                                      -----------------------------------
                                                          $             $             $
<S>                                                   <C>            <C>             <C>
CURRENT
United States                                            217             -             -    
Canada                                                   463          (300)           70 
Asia-Pacific                                             603             -             - 
-----------------------------------------------------------------------------------------
                                                       1,283          (300)           70 
-----------------------------------------------------------------------------------------

DEFERRED                                                                                 
United States                                          1,382          (139)            - 
Canada                                                (2,400)        2,132           230 
Asia-Pacific                                             309             -             - 
-----------------------------------------------------------------------------------------
                                                        (709)        1,993           230 
-----------------------------------------------------------------------------------------
                                                         574         1,693           300 
----------------------------------------------------------------------------------------- 
</TABLE>

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

<TABLE>
<CAPTION>
                                                         1996         1995         1994
                                                      ------------------------------------
                                                           $            $              $

<S>                                                    <C>           <C>            <C>  
United States                                            (364)       (1,246)         (381)
Canada                                                 (8,981)        5,151         1,364 
Asia-Pacific                                            6,547             -             - 
-----------------------------------------------------------------------------------------
                                                       (2,798)        3,905           983 
-----------------------------------------------------------------------------------------
</TABLE>

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

<TABLE>
<CAPTION>
                                                                       1996        1995
                                                                    --------------------
                                                                        $           $
<S>                                                                 <C>          <C>    
Deferred tax liabilities
Book over tax value of property and equipment                         3,959       4,443    
Income from operations of joint ventures                                955       1,226
Completed contracts basis                                               536       1,334
Other                                                                   492         161
----------------------------------------------------------------------------------------
                                                                      5,942       7,164
----------------------------------------------------------------------------------------
                                                                     
Deferred tax assets
   OPEB obligation                                                      193         203
   Rationalization reserves                                             197         481
   Net operating loss carryforward                                   20,808       2,019
   Valuation allowance for operating losses carried forward         (20,403)     (1,533)
----------------------------------------------------------------------------------------
                                                                        795       1,170
----------------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITIES                                          5,147       5,994
----------------------------------------------------------------------------------------
</TABLE>

                                      F-19
<PAGE>   50
   
DOMINION BRIDGE CORPORATION                                                     
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                                  
YEAR  ENDED SEPTEMBER 30, 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>
                                                                  1996                 1995                 1994
                                                              ---------------------------------------------------
                                                                   $                     $                    $

<S>                                                              <C>                   <C>                   <C>  
        Income tax expense (recovery) at U.S.
           statutory rate                                          (979)               1,367                  344
        State tax (recovery), net of federal tax benefits          (167)                 234                   59
        Foreign income taxes at less than statutory rate         (1,433)                (155)                 (35)
        Operating losses without tax benefit                      1,746                  162                    -
        Witholding taxes payable on subsidiary interest             600                    -                    -       
        Other                                                       807                   85                  (68)
------------------------------------------------------------------------------------------------------------------
                                                                    574                1,693                  300
------------------------------------------------------------------------------------------------------------------
</TABLE>
   

        The Company conducts its construction projects in a wide variety of tax
        jurisdictions including Canada and many South East Asian 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 what would have
        resulted had those foreign incomes been subject to the US statutory
        rate. As a result, the expected net tax recovery from the overall
        combined foreign and domestic losses would be greater then 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.

        The Company's income tax provision has provided for numerous other tax
        consequences of its corporate affairs. Most significant of these
        exposures is withholding taxes payable on interest paid from the
        Company's 100% owned subsidiary which borrowed funds from a US bank. The
        subsidiary is liable for the withholding taxes charged as the funds are
        transferred across the border. This tax exposure accounts for
        approximately $600,000 of the total "Other" item. The balance of the
        "Other" is made up of a number of individually immaterial items.
    

        As at September 30, 1996, 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>
                2006                        600
                2007                      1,673
                2008                      1,465
                2009                        381            2001             15,171
                2010                        340            2002             52,595
                2011                      1,763            2003              4,225
                -------------------------------------------------------------------
                                          6,222                             71,991
                ------------------------------------------------------------------- 
</TABLE>


        The benefit of these losses has been partly recognized in the Company's
        books. For financial reporting purposes, a valuation allowance of $
        20,403 (1995 - $1,533) has been recognized to offset the deferred tax
        assets relating to the net operating losses carried forward.


                                      F-20
<PAGE>   51
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 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>
                                                      1996          1995          1994
                                                      ----          ----          ----
                                                        $             $             $

<S>                                                  <C>           <C>           <C>
Service cost - benefits earned during the year        1,199           894           881
Interest cost on projected benefit obligations        3,023         1,173         1,178
Return on plan assets                                (3,255)       (1,280)       (1,354)
Net amortization                                         96             8            --
                                                      -----           ---           ---
NET PENSION EXPENSE                                   1,063           795           705
                                                      =====           ===           ===
</TABLE>

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

<TABLE>
<CAPTION>
                                                             1996           1995
                                                             ----           ----
                                                               $              $

<S>                                                         <C>            <C>   
Plan assets at fair value                                   50,065         17,305
Actuarial present value of projected benefit
   obligations                                              46,585         16,155
                                                            ------         ------
Plan assets in excess of projected benefit
   obligations                                               3,480          1,150
Unrecognized prior service cost for plan
   amendments                                                  769            361
Unrecognized net experience (gain) loss                     (3,062)           108
                                                            ------         ------
NET PENSION ASSET RECOGNIZED IN THE
   CONSOLIDATED BALANCE SHEET                                1,187          1,619
                                                            ======         ======
</TABLE>


                                      F-21
<PAGE>   52
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 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>
                                                                    1996                1995                1994
                                                                    ----                ----                ----
                                                                     %                    %                   %

<S>                                                                 <C>                  <C>                 <C>
        Discount rate                                               8.0                  8.0                 8.0
        Rate of increases in compensation level                     6.0                  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
        equities and bonds.

        POST-RETIREMENT BENEFITS OTHER THAN PENSIONS

        The Company currently provides post-retirement health care and life
        insurance benefits to most 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>
                                                                   1996                 1995                1994
                                                                   ----                 ----                ----
                                                                     $                    $                    $

<S>                                                                 <C>                  <C>                  <C>
        Service cost - benefits earned during the year                1                    1                    1
        Interest cost on accumulated post-retirement
           benefit obligation                                        41                   40                   41
        NET PERIODIC POST-RETIREMENT BENEFIT COST                    42                   41                   42
</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 sheet for the Company's post-retirement benefits:

<TABLE>
<CAPTION>
                                                                                      1996                1995
                                                                                      ----                ----
                                                                                        $                   $
<S>                                                                                    <C>                  <C>
        Accumulated post-retirement benefit obligation
           Active plan participants                                                    514                  522
        POST-RETIREMENT BENEFIT LIABILITY RECOGNIZED
           IN THE CONSOLIDATED BALANCE SHEET                                           514                  522
</TABLE>

                                      F-22
<PAGE>   53
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 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 percent for 1996
        and assumed to decrease one percent per year to 7 percent in the year
        2000 and remain constant thereafter. The weighted average discount rate
        used in determining the accumulated post-retirement benefit obligation
        was 8 percent at September 30, 1996. The rate of increase in
        compensation levels assumed was 6 percent.

        OTHER

        Subsidiaries of the Company contribute to defined contribution plans for
        eligible employees. The contributions for 1996, 1995 and 1994 were $942,
        $4,186 and Nil respectively.

        A subsidiary of the Company recognizes the 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
        $2,625 has been presented as part of "Accounts payable and accrued
        expenses" and the long-term portion in the amount of $1,030 has been
        presented as part of "Other long-term liabilities".


13.     RELATED PARTY TRANSACTIONS
        In 1995, the Company advanced $994 to a shareholder, Group 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.

        In 1994, the Company advanced $1,734 to a shareholder, Fidutech
        Technologies Ltd. and its affiliates. Of this amount, $1,155, was
        assumed by the acquirer of Edinov as of July 1, 1994, (Note 3 vii)). The
        balance of $579 was repaid during the year ended September 30, 1996.


14.     STOCKHOLDERS' EQUITY

        1996

        During 1996, the Company issued 7,994,606 shares of its common stock
        upon the conversion of $16,845 of Cedar Group (TCI) Inc. 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 will be reclassified to Additional Paid in Capital upon
        conversion of the TCI Preferred Shares into common stock of the Company.
    

        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)).


                                      F-23
<PAGE>   54
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
-------------------------------------------------------------------------------


14.     STOCKHOLDERS' EQUITY (CONT'D)
        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. which it held 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 total consideration of $1,150.

        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.


                                      F-24
<PAGE>   55
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
-------------------------------------------------------------------------------


14.     STOCKHOLDERS' EQUITY (CONT'D)

        1994

        On March 31, 1994, the Company issued 3,354,346 shares of its common
        stock at a price of $3.25 per share, aggregating $10,901 and warrants to
        purchase 3,354,346 common shares at a price of $3.75 per share: these
        warrants were exercised in July 1994, for proceeds aggregating $12,579.
        The Company issued 200,000 warrants to an underwriter to purchase an
        equivalent number of common shares at a price of $4.00 per share until
        January 31, 1999. The Company also issued 330,000 shares of its common
        stock and 200,000 warrants to purchase 100,000 common shares at a price
        of $3.25 per share until March 31, 1995 and 100,000 common shares at a
        price of $3.75 and $4.00 per share if exercised before March 31, 1995
        and March 31, 1996 respectively, to two individuals for services
        rendered in connection with the private placement.

        On March 31, 1994, the Company issued 88,968 shares of its common stock
        at a price of $2.81 per share, aggregating $250, as part of the
        consideration for the purchase of 70% of the outstanding shares of
        Unimetric Corporation common stock.

        On March 1, 1994, the Company issued 140,866 shares of its common stock
        at a price of $0.47 per share pursuant to a convertible debenture issued
        to an officer for aggregate proceeds of $66.

        In 1994, the Company issued 295,000 shares of its common stock for
        services rendered by underwriters and directors in connection with stock
        issuance for funds raised in 1993.

        In 1994, the Company issued 42,500 of its common stock upon exercise of
        options granted to underwriters and advisers for aggregate proceeds of
        $102.

        In 1994, the Company issued 237,360 shares of its common stock at a
        price of $2.60 per share upon exercise of warrants granted in connection
        with the September 30, 1993 private placement for aggregate proceeds of
        $616.
   
    

   
        1993
    

   
        On September 30, 1993, the Company issued to Fidutech Technologies,
        Inc., a company owned by the Chief Executive Officer of the Company,
        1,044,445 shares of its common stock at a price of $2.25 per share,
        aggregating $2,350. The Company received $465 in cash and the balance
        has been reflected in stockholders' equity in the accompanying balance
        sheets as a subscription receivable amounting to $1,885 and $1,824 at
        September 30, 1995 and 1996, respectively.
    

   
        INCENTIVE PLAN
    

   
        The Company has a stock option plan available to grant options to
        executive officers, non-executive officers and certain key employees of
        the Company at exercise prices equal to quoted market prices of the
        stock. This results in compensation costs measured at zero. The stock
        option plan was adopted by the shareholders 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 $4.125 per share. The options
        were exercisable over a three-year period.
    

   
        The Company did not believe the options granted to management,
        originally priced at an exercise price of $4.125, provided sufficient
        incentives to the option holders as they were all out of the money. The
        Company decided pursuant to a resolution of the Board of Directors dated
        September 12, 1996 to reprice the outstanding options at their current
        quoted market price of $2.00, and also changing the expiration date to
        September 30, 1998.  The Company has never repriced its options and does
        not intend to reprice the options again. The Company recorded no
        compensation cost as the options were repriced at market.

    

                                      F-25
<PAGE>   56
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
-------------------------------------------------------------------------------


14.     STOCKHOLDERS' EQUITY (CONT'D)
        INCENTIVE PLAN (CONT'D)

        Pursuant to certain employment agreements the Company has an additional
        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.

        The Company has a plan available to grant warrants to key executive
        officers of the Company (as explained above) and non-employees of the
        Company at prices ranging from $2.00 to $4.00. The total number of
        warrants outstanding is 550,000 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.

<TABLE>
<CAPTION>
                                                                                  OPTION, WARRANT
                                                                                  AND UNIT PRICE
                                                               SHARES                PER SHARE            AGGREGATE
                                                                                        $                     $
                                                               ------             ---------------         ---------
<S>                                                           <C>                   <C>                    <C>  
        OUTSTANDING
        SEPTEMBER 30, 1993                                      130,125             0.59 to 1.68              216
        Granted                                                 300,000                     2.68              804
        Cancelled                                              (120,000)            0.59 to 1.68              201
        Exercised                                               (10,125)            0.59 to 1.68               15
                                                              ---------            -------------           ------
        OUTSTANDING
        SEPTEMBER 30, 1994                                      300,000                     2.68              804
        Granted                                               1,535,000                    4.125            6,332
        Exercised                                                    --                       --               --
        Cancelled                                                    --                       --               --
                                                              ---------            -------------           ------
        OUTSTANDING
        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
        SEPTEMBER 30, 1996                                    2,880,000                                     6,160
                                                              =========            =============           ======
</TABLE>


                                      F-26
<PAGE>   57
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
-------------------------------------------------------------------------------


14.     STOCKHOLDERS' EQUITY (CONT'D)

        In October 1995, the Financial Accounting Standards Board issued
        Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
        for Stock-based Compensation" which will come into effect for the
        Company beginning October 1, 1996. SFAS No. 123 requires expanded
        disclosures of stock-based compensation arrangements and encourages (but
        does not require) compensation cost to be measured based on the fair
        value of the equity instrument awarded. Companies are permitted,
        however, to continue to apply APB Opinion No.25, which recognizes
        compensation cost based on the intrinsic value of the equity instrument
        awarded. The Company will continue to apply APB Opinion No.25 to its
        stock-based compensation awards and will disclose the required proforma
        effect on net income and earnings per share.

   

        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 grant.


    


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,
        1996 consist of the following:
<TABLE>
<CAPTION>
                                $

<C>                             <C>  
1997                            2,698
1998                            1,967
1999                            1,483
2000                            1,201
2001                              318
</TABLE>

        Total rent expense for all operating leases amounted to $1,580, $976 and
        $834 for the years ended September 30, 1996, 1995 and 1994,
        respectively.

        In December 1996, the Company was notified that a class action
        shareholder complaint had been filed against it and certain executive
        officers of the Company. 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.

        During 1995, the Company submitted a Claim Notification Letter to a
        customer and issued invoices to another customer against which a cash
        advance of $2,100 was applied. These amounts were originated with a view
        to recovering substantial cost increases pertaining to the design,
        manufacture and delivery of major infrastructure assets. The Company
        believes that the costs and expenses claimed are justified and has
        obtained a third party analysis as to the reasonability of its claim to
        the first customer. It has also received acknowledgment of the invoices
        issued to the second customer. During 1995, the value of these claims
        has been recognized in sales in the amount of $3,672. While management
        believes that the favourable outcome of these claims is probable, their
        resolution will involve further negotiation with the clients, or
        arbitration, and the ultimate realization may vary from the current
        estimates.

   
        During the fourth quarter of fiscal 1996, the Company reached a
        settlement with respect to the resolution of a major claim for a
        completed project. No recognition was given to the claim for fiscal 1996
        as there remained uncertainty regarding the collectibility of the
        amount. Such revenue will be recognized in the period in which the
        amounts are collected.
    



                                      F-27
<PAGE>   58
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 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.

   

        A subsidiary of the Company has guaranteed 49% of the debt of an equity
        investee. The debt of the equity investee is $ AUS $720. Accordingly,
        $ AUS 352 is guaranteed by the Company's subsidiary. At September 30,
        1996, the equity investee has sufficient assets to meet such
        obligations.

    

   

        The Company is contingently liable for amounts under letters of credit
        of $1,776 and $63,944 and performance guarantees of $1,858 and 
        $147,047, as of September 30, 1995 and 1996, respectively.

    

        Certain subsidiaries have given various warranties on asset sales and in
        respect of taxation to purchasers of certain of the Company's former
        subsidiaries and equity investments. A warranty claim from one purchaser
        of a former equity investment is being defended and remains unresolved.
        Management is of the opinion that it is unlikely that any liability
        would be material to the Company's consolidated financial position.

   
    

   

        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.

    

        Subsequent to year-end, the Company entered into a joint venture
        agreement in which it is committed to fund operations to a maximum
        amount of $2,500.

        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.

        The Company's Canadian subsidiary, DB, periodically entered into forward
        exchange contracts to hedge specific anticipated foreign currency
        inflow. It did not engage in speculation. The foreign exchange contracts
        do not subject the Company to operating risk due to exchange rate
        movements because gains and losses on these contracts offset losses and
        gains on the transactions being hedged. As at September 30, 1996, 1995
        and 1994, the Company had approximately NIL, NIL and $5,040 of foreign
        exchange contracts outstanding, hedging specific transactions. The
        forward exchange contracts generally had maturities which do not exceed
        one year and exchange rates are agreed to at the inception of the
        contracts. No significant gains or losses are deferred in the
        consolidated balance sheet.


                                      F-28
<PAGE>   59
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
--------------------------------------------------------------------------------

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. As at September 30, 1996 and 1995, the
     Company had no significant concentrations of credit risk.

     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.

     Accounts receivable and accounts payable

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

     Assets of business transferred under contractual arrangements

     The carrying amount of assets of business transferred under contractual
     arrangements reported in the balance sheet approximate its fair market
     value.

     Term loan

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

     Customer advances

     The carrying amount reported in the balance sheet approximate 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.


                                      F-29
<PAGE>   60
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 1996
(AS RESTATED, SEE NOTE 19)
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
    
--------------------------------------------------------------------------------

16.  FINANCIAL INSTRUMENTS (CONT'D)

     The carrying amounts and fair values of the Company's financial instruments
     at September 30, 1996 are as follows:

<TABLE>
<CAPTION>
                                                        CARRYING        FAIR
                                                         AMOUNTS        VALUE
     ------------------------------------------------------------------------
                                                            $             $
<S>                                                     <C>           <C>    
     Cash                                                26,231        26,231
     Accounts receivable                                126,911       126,911
     Assets of business transferred
        under contractual arrangements                    3,847         3,847
     Bank indebtedness                                    5,624         5,624
     Term loan                                           30,000        30,000
     Accounts payable and accrued expenses              119,839       119,839
     Customer advances                                   16,166        16,166
     Other long-term liabilities                          2,976         2,976
</TABLE>


17.  COMPARATIVE FIGURE

     Certain comparatives figures have been reclassified to conform with the
     presentation adopted in 1996.


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 specialty fasteners targeted to the
     aerospace industry and distribution of imported fasteners for industry.

     Ship building, repair, design and engineering.


                                      F-30
<PAGE>   61
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 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  DIVESTED
                                    AND SERVICES     FASTENERS     AND REPAIR    BUSINESS       TOTAL
                                          $              $              $            $            $
                                                                                            (restated, 
                                                                                          see note 19)
------------------------------------------------------------------------------------------------------
<S>                                 <C>              <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 - net                                                                             (2,104)
     Other income                                                                                1,134
     Income from operations
        of joint ventures                                                                        2,189
     Income tax provision                                                                         (574)
     Minority interest
        - common stock                                                                          (1,667)
     Minority interest
        -cash dividends on 
         preferred shares                                                                         (645)
        -deemed dividends on
         conversion of subsidiary
         preferred shares                                                                       (4,260)
------------------------------------------------------------------------------------------------------
     Net income                                                                                 (9,944)
------------------------------------------------------------------------------------------------------
     Capital expenditures               11,781            --            428           --        12,209
------------------------------------------------------------------------------------------------------
     Depreciation and
        amortization                     6,476           327         (2,604)          --         4,199
------------------------------------------------------------------------------------------------------
</TABLE>
    

-----------------
(1) Assets exclude $7,405, $11,496 and $14,038 of corporate amounts in 1996,
1995 and 1994 respectively.


                                      F-31
<PAGE>   62
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 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                   DIVESTED
                                          AND SERVICES    FASTENERS    BUSINESS      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 - net                                                                (406)
        Other income                                                                 1,236
        Income from operations
          of joint venture                                                           2,165
        Income tax provision                                                        (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>


                                      F-32
<PAGE>   63
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 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                    DIVESTED
                                         AND SERVICES    FASTENERS     BUSINESS      TOTAL
                                               $             $             $           $
-------------------------------------------------------------------------------------------
<S>                                      <C>             <C>           <C>           <C>
     1994

     Assets(1)                               52,990         5,150           --       58,140
-------------------------------------------------------------------------------------------
     Sales                                   58,181         4,842        4,936       67,959
-------------------------------------------------------------------------------------------
     Segment operating income
        (loss)                                  860          (574)         380          666
        Corporate expenses                                                             (109)
        Interest - net                                                                 (341)
        Other income                                                                    767
        Income tax provision                                                           (300)
     Minority interest - common stock                                                   (19)
     Minority interest - dividends
                         on preferred
                         shares                                                        (248)
-------------------------------------------------------------------------------------------
     Net income                                                                         416
-------------------------------------------------------------------------------------------
     Capital expenditures                        --            94           --           94
-------------------------------------------------------------------------------------------
     Depreciation and amortization            1,695           333           96        2,124
-------------------------------------------------------------------------------------------
</TABLE>
    


                                      F-33
<PAGE>   64
   
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR  ENDED SEPTEMBER 30, 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        DIVESTED
                                    STATES         CANADA        S.E. ASIA     BUSINESS       TOTAL
                                       $              $              $             $            $
-----------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>           <C>           <C>            <C>
     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)          3,216                           --         1,900
-----------------------------------------------------------------------------------------------------
     1994

     Assets(1)                       5,150          52,990                           --        58,140
-----------------------------------------------------------------------------------------------------
     Sales                           4,842          58,181                        4,936        67,959
-----------------------------------------------------------------------------------------------------
     Segment operating income
        (loss)                        (574)            860                          380           666
-----------------------------------------------------------------------------------------------------
</TABLE>
    

-----------------
(1) Assets exclude $7,405, $11,496 and $14,038 of corporate amounts in 1996,
1995 and 1994 respectively.

   
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 stock did not reflect the divided imbedded in the preferred stock's
conversion feature in accordance with a recently published position of the
Securities and Exchange Commission. Accordingly, the Company's fiscal 1996
financial statements are restated to reflect this imbedded dividend. A summary
of the effects of this restatement is as follows:
    

   
<TABLE>
<CAPTION>
                                    As Previously           As Restated
                                      Reported
                                    --------------          ------------

<S>                                 <C>                     <C>
For the Year ended
September 30, 1996
 -   Net Loss                          $5,684                  $9,944
 -   Primary Loss per share            $  .31                  $  .55

As of September 30, 1996
 -   Minority Interest                 $17,546                 $18,783
 -   Additional Paid-in-Capital        $57,601                 $60,624
</TABLE>
    

                                      F-34
<PAGE>   65
                           DOMINION BRIDGE CORPORATION

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

YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
   
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                   ADDITIONAL                              CUMULATIVE
                                                                     COMMON      PAID-IN                   TRANSLATION  SUBSCRIPTION
                                                     SHARES       STOCK AMOUNT   CAPITAL       DEFICIT     ADJUSTMENT    RECEIVABLE
                                                                        $           $              $            $             $
                                                                                (restated,    (restated, 
                                                                               see note 19)  see note 19) 
------------------------------------------------------------------------------------------------------------------------------------
<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 Cedar Group (TCI) LLC
   preferred shares                                 7,994,606            8        16,837           --           --            --

Deemed dividend on conversion of subsidiary
   preferred shares                                        --           --         3,023

Issuance of common stock upon
   exercise of warrants                               107,394           --           359           --           --            --

Issuance of common stock
   for services rendered                               30,000           --            85           --           --            --

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-35
<PAGE>   66
                           DOMINION BRIDGE CORPORATION

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

YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

<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-36
<PAGE>   67
                           DOMINION BRIDGE CORPORATION

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

YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

<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, 1993                 5,544,532        5        7,220       (2,276)        (21)       (1,885)

Issuance of common stock upon
   exercise of options                          162,500        1          302           --          --            --

Issuance of common stock upon
   exercise of warrants                       3,591,706        4       13,191           --          --            --

Issuance of common stock for
   Unimetric Corp.                               88,968       --          250           --          --            --

Issuance of common stock for
   stock issue expenses                         295,000       --           --           --          --            --

Issuance of common stock through
   private placement                          3,684,346        3       10,898           --          --            --

Issuance of common stock in
   repayment of debt                            140,866       --           66           --          --            --

Translation adjustments, net of income
   taxes of nil                                      --       --           --           --        (321)           --

Net income for the year                              --       --           --          416          --            --
-------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994                13,507,918       13       31,927       (1,860)       (342)       (1,885)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

   
See accompanying notes.
    


                                      F-37
<PAGE>   68
DOMINION BRIDGE CORPORATION
        SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
        (US$ 000'S)

   
<TABLE>
<CAPTION>

        DESCRIPTION                                     BALANCE          ADDITIONS                       ADDITIONS       
                                                        BEG OF PERIOD    CHARGED TO EXPENSE              CHARGED TO OTHER

<S>                                                         <C>                         <C>                        <C>
(A) VALUATION ACCOUNTS DEDUCTED FROM ASSETS
                                           
ALLOWANCE FOR DOUBTFUL ACCOUNTS                                1138                        0                            366
                                           
INVENTORY OBSOLESCENCE                                            0                        0                              0
                                           
                                           
                                           
(B) VALUATION ACCOUNTS SUPPORTING RESERVES 
                                           
NIL                                                               0                        0                              0

<CAPTION>
                                                                                                                       BALANCE
                                                          DESCRIPTION                      DEDUCTIONS    DESCRIPTION   END OF PERIOD
<S>                                                      <C>                                     <C>                      <C>
(A) VALUATION ACCOUNTS DEDUCTED FROM ASSETS
                                           
ALLOWANCE FOR DOUBTFUL ACCOUNTS                           RESERVES OF ACQUIRED BUSINESSES          0                         1504
                                           
INVENTORY OBSOLESCENCE                                                                             0                            0
                                           
                                           
                                           
(B) VALUATION ACCOUNTS SUPPORTING RESERVES 
                                           
NIL                                                                                                0                            0
</TABLE>
    

                                     F-38