<PAGE>

 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1997
                                                     REGISTRATION NO. 333-
 
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                                ---------------
 
                                   FORM S-1
 
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
 
                                ---------------
 
                       FRIEDE GOLDMAN INTERNATIONAL INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
       DELAWARE                      3731                 72-1362492
   (STATE OR OTHER       (PRIMARY STANDARD INDUSTRIAL  (I.R.S. EMPLOYER
     JURISDICTION         CLASSIFICATION CODE NUMBER)
                                                    IDENTIFICATION NUMBER)
 
 OF INCORPORATION OR   525 E. CAPITOL STREET, SUITE 402
    ORGANIZATION)         JACKSON, MISSISSIPPI 39201
                                (601) 352-1107
              (ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                                ---------------
 
                                J. L. HOLLOWAY
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                       525 E. CAPITOL STREET, SUITE 402
                          JACKSON, MISSISSIPPI 39201
                                (601) 352-1107
               (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
              NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
 
                                ---------------
 
             copy to:                                 copy to:
 
 
          THOMAS P. MASON                        ROBERT D. CAMPBELL
      Andrews & Kurth L.L.P.                   Thompson & Knight, P.C.
    4200 Texas Commerce Tower              1700 Pacific Avenue, Suite 3300
       Houston, Texas 77002                   Dallas, Texas 75201-4693
          (713) 220-4200                           (214) 969-1700
 
  APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
 
                                ---------------
 
  If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
 
  If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
 
  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
 
  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
 
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<TABLE>
<CAPTION>
                                       PROPOSED
                                       MAXIMUM
                                      AGGREGATE      AMOUNT OF
 TITLE OF EACH CLASS OF SECURITIES     OFFERING     REGISTRATION
          TO BE REGISTERED             PRICE(1)         FEE
----------------------------------------------------------------
 <C>                                <S>             <C>
 Common Stock, $.01 par value.....  $61,180,000       $18,540
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
    to Rule 457(a).
 
                                ---------------
 
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
 
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<PAGE>

 
                   SUBJECT TO COMPLETION, DATED MAY 22, 1997
 
PROSPECTUS
 
[LOGO]                          3,800,000 SHARES
 
                       FRIEDE GOLDMAN INTERNATIONAL INC.
                                  COMMON STOCK
 
                                 ------------
 
  Friede Goldman International Inc. ("Friede Goldman International" or the
"Company") is offering 2,300,000 shares, and certain selling stockholders (the
"Selling Stockholders") are offering 1,500,000 shares, of common stock (the
"Common Stock") of the Company (the "Offering"). Prior to the Offering, there
has been no public market for the Common Stock. The Company has applied for
listing of the Common Stock on the NASDAQ National Market under the symbol
"FGII." It is currently estimated that the initial public offering price will
be between $      and $      per share. See "Underwriting" for factors to be
considered in determining the initial public offering price.
 
                                 ------------
 
  SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
               THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.
 
                                 ------------
 
THESE SECURITIES HAVE  NOT BEEN APPROVED  OR DISAPPROVED BY  THE SECURITIES AND
EXCHANGE COMMISSION  OR ANY STATE SECURITIES COMMISSION NOR HAS  THE SECURITIES
 AND EXCHANGE COMMISSION  OR ANY  STATE SECURITIES COMMISSION  PASSED UPON THE
 ACCURACY OR ADEQUACY  OF THIS PROSPECTUS. ANY REPRESENTATION  TO THE CONTRARY
 IS A CRIMINAL OFFENSE.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<S>                                <C>         <C>          <C>         <C>
                                      PRICE                  PROCEEDS   PROCEEDS TO
                                       TO      UNDERWRITING     TO        SELLING
                                     PUBLIC    DISCOUNT(1)  COMPANY(2)  STOCKHOLDERS
------------------------------------------------------------------------------------
Per Share........................       $         $           $            $
------------------------------------------------------------------------------------
Total(3).........................  $           $            $           $
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
    several Underwriters against certain liabilities, including liabilities
    under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated to be $       .
(3) The Company has granted the Underwriters a 30-day option to purchase up to
    an aggregate of 570,000 additional shares of Common Stock on the same terms
    and conditions as set forth above solely to cover over-allotments, if any.
    If such option is exercised in full, the total Price to Public,
    Underwriting Discount, Proceeds to Company and Proceeds to Selling
    Stockholders will be $     , $     , $      and $     , respectively. See
    "Underwriting."
 
                                 ------------
 
  The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by the Underwriters.
The Underwriters reserve the right to reject orders in whole or in part. It is
expected that delivery of the shares of Common Stock will be made against
payment therefor in New York, New York on or about       , 1997.
 
JEFFERIES & COMPANY, INC.
                            BEAR, STEARNS & CO. INC.
                                                   JOHNSON RICE & COMPANY L.L.C.
 
     , 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
<PAGE>
 
 
 
          [PICTURES OF DRILLING RIGS BEING CONVERTED AND RETROFITTED]
 
 
  CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT AND OTHER STABILIZING TRANSACTIONS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
 
<PAGE>
 
                               PROSPECTUS SUMMARY
 
  The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) included
elsewhere in this Prospectus. Unless otherwise indicated, all information in
this Prospectus assumes that the Underwriters' over-allotment option with
respect to the sale of Common Stock will not be exercised. Except as otherwise
specified, (a) all references to the Company include Friede Goldman
International Inc. and, unless the context otherwise requires, its wholly-owned
subsidiaries, HAM Marine, Inc. ("HAM Marine") and Friede & Goldman, Ltd.
("Friede & Goldman"), and (b) all references to the activities of Friede &
Goldman prior to December 2, 1996 relate to the activities of the predecessor
company with respect to which the Company acquired certain of its assets and
business on such date (the "Friede Acquisition") and all references to Friede &
Goldman refer to the assets and business of such predecessor company acquired
by the Company. See "The Company--Corporate Restructuring."
 
                                  THE COMPANY
 
  Friede Goldman International Inc. is a leading provider of conversion,
retrofit and repair services for offshore drilling rigs, including jackups,
submersibles, semisubmersibles and drillships, and has entered the emerging
market for conversion of offshore drilling units and tankers into deepwater
floating production, storage and offloading vessels ("FPSOs"). In the last
seven years, the Company has completed 47 offshore drilling rig conversion or
retrofit projects, which the Company believes is more than any other shipyard
company in the United States. The Company, through its acquisition of Friede &
Goldman in December 1996, is also one of the world's largest designers of
offshore drilling rigs. The Company offers its customers a full range of
design, engineering, construction, conversion, retrofit and repair services for
offshore drilling rigs, including construction of new-build offshore drilling
rigs. The Company's customers consist primarily of drilling contractors that
drill offshore exploratory and development wells for oil and gas companies
throughout the world, particularly in the Gulf of Mexico, the North Sea and
areas offshore of West Africa and South America.
 
  The Company currently operates a 32-acre shipyard that is strategically
located in Pascagoula, Mississippi with direct access to the Gulf of Mexico.
The shipyard has the capacity to provide conversion, retrofit and repair
services on six offshore drilling rigs simultaneously. Due to increased demand
for its services, the Company has increased its backlog from $15.4 million at
March 31, 1996 to $65.5 million at March 31, 1997. To accommodate this
increased demand, the Company has recently leased additional dock space and
fabrication buildings adjacent to its existing shipyard in Pascagoula,
Mississippi and has increased its workforce from approximately 300 employees at
December 1, 1996 to approximately 800 employees at March 31, 1997.
 
  The Company plans to commence construction in the second quarter of 1997 of a
new state-of-the-art shipyard on a 105-acre site located approximately six
miles from the existing shipyard. The new shipyard has been designed
specifically to promote the most timely and efficient construction of new
offshore drilling rigs, and could also be used for conversion, retrofit and
repair services. The Company believes that the expected efficiencies of its new
shipyard, together with the Company's offshore drilling rig design
capabilities, its established relationships with drilling contractor customers
and its extensive construction experience, will provide the Company with
competitive advantages in the developing market for new construction of
offshore drilling rigs.
 
OFFSHORE DRILLING INDUSTRY
 
  The level of worldwide offshore drilling activity has increased substantially
over the last two years, resulting in an increase in worldwide utilization for
marketed offshore drilling rigs to 99% in May 1997. Dayrates worldwide for
cantilever jackups capable of drilling in water depths of 300 or more feet have
increased from an average of $37,000 in May 1996 to an average of $61,000 in
May 1997, with a recently reported high of
 
                                       3
<PAGE>
 
$116,000. Similarly, dayrates worldwide for third and fourth generations of
semisubmersibles have increased from an average of $83,000 in May 1996 to an
average of $118,000 in May 1997, with a recently reported high of $175,000. In
addition, oil and gas operators have recently begun to enter into multi-year
contracts with drilling contractors for offshore drilling rigs due to the
tightness of supply for available units. In deepwater areas where larger and
more technically advanced drilling rigs are needed, increased drilling activity
has also increased demand for retrofitting offshore drilling rigs to enhance
their technical capabilities and improved pricing levels for such services. In
addition, increased drilling activity in and around more mature fields in
shallower waters has contributed to the increase in demand for conversion,
retrofit and repair services for jackups and other offshore drilling rigs.
 
  The Company believes that these positive trends will continue due to (i) the
increasing percentage of worldwide oil supply being produced from offshore
areas, (ii) the increases in capital expenditure budgets of oil and gas
companies for offshore drilling activity, (iii) technological advancements that
have increased drilling success rates and (iv) the increased focus on deepwater
exploration and production projects, particularly in the Gulf of Mexico.
 
  The Company believes that the current supply of offshore drilling rigs
worldwide is inadequate to satisfy increasing demand. From 1985 to 1996, there
has been a decrease in the total number of offshore drilling rigs worldwide
from 809 to 639 rigs. The Company believes that, of the 366 jackups currently
marketed worldwide, only 47 are capable of drilling in water depths greater
than 300 feet and, of the 139 semisubmersibles currently marketed worldwide,
only 25 are capable of drilling in water depths greater than 3,000 feet. In
addition, substantially all of the current fleet of offshore drilling rigs were
built more than ten years ago, and many of these rigs need to be converted or
modified in order to continue to operate economically or to meet the
requirements for deepwater drilling.
 
COMPANY OPERATIONS
 
  The Company's operations currently consist primarily of conversion, retrofit
and repair services for offshore drilling rigs and the development of designs
for new offshore drilling rigs. The Company plans to construct a new shipyard
designed to build new offshore drilling rigs, which shipyard could also be used
for conversion, retrofit and repair services.
 
  CONVERSION, RETROFIT AND REPAIR SERVICES. The Company's conversion and
retrofit projects primarily include the conversion of jackup drilling rigs from
a slot design to a cantilever design, the lengthening of legs on jackup rigs,
the conversion of submersible rigs into semisubmersible rigs and the retrofit
of early generation semisubmersible rigs to provide the enhanced capabilities
associated with later generation semisubmersibles. These conversion and
retrofit projects are designed to improve the operating efficiency of a
drilling rig or provide increased technical capabilities, such as the ability
to operate in deeper water. The Company also has been involved in the
conversion of offshore drilling units and tankers to production units,
including FPSOs and mobile offshore production units ("MOPUs"). In addition,
the Company provides a broad range of structural rig repairs, including the
replacement of legs on jackup rigs, the repair of pontoons on semisubmersible
rigs and the repair of deck structures on offshore drilling rigs and production
platforms.
 
  OFFSHORE DRILLING RIG AND FPSO DESIGN. In December 1996, the Company acquired
Friede & Goldman, a company that designs mobile offshore drilling and
production units, including jackups, semisubmersibles, drillships and FPSOs,
and provides design and engineering services with respect to conversion and
retrofit projects. Friede & Goldman has more than 50 years of experience in
premier offshore rig design, beginning with the design of the first
semisubmersibles to operate in the Gulf of Mexico. The Company's designs
include the Friede & Goldman L-780 jackup design and Pacesetter and Trendsetter
semisubmersible designs. Approximately 10% of jackup rigs and approximately 30%
of semisubmersible rigs currently operating worldwide were designed by Friede &
Goldman. The Company has recently designed a new jackup for use in water depths
of approximately 400 feet that the Company believes would provide increased
operational efficiencies over
 
                                       4
<PAGE>
 
currently available designs, at a cost to construct that would be similar to
the last generation of jackups. The Company has developed a series of FPSOs
suitable for operations worldwide and is also currently in the process of
developing new designs for a semisubmersible drilling rig for use in deepwater
environments.
 
   CONSTRUCTION OF NEW OFFSHORE DRILLING RIGS AND FPSOS. Since the early 1980's
and until recently, there has not been any significant construction of new-
build offshore drilling rigs. The Company has recently completed a survey of
its customers that has indicated a substantial interest in new rig
construction. In addition, as of May 1997, 15 new offshore drilling rigs were
being constructed worldwide, consisting of six jackups, six semisubmersibles
and three drillships. Management of the Company attributes this increased
demand for new-build offshore drilling rigs to (i) the recent increases in
offshore drilling rig dayrates, (ii) the recent increases in offshore drilling
rig utilization and (iii) the recent willingness of oil and gas companies to
enter into longer-term contracts with drilling contractors.
 
  Due to capacity constraints of the Company's existing shipyard, the Company
has not been able to participate in the developing market for new offshore
drilling rig construction. In order to participate in this market, the Company
plans to commence construction in the second quarter of 1997 of a state-of-the-
art shipyard scheduled to be operational by early 1998 and completed later that
year at a total cost of approximately $29 million. The new shipyard has been
designed specifically for the construction of new offshore drilling rigs and
FPSOs, and it will have the capacity to perform various stages of construction
and outfitting activities on up to three drilling rigs or FPSOs simultaneously.
In addition, the Company may use its shipyard facilities, or establish a
separate manufacturing facility, to construct and assemble various components
of Friede & Goldman designed jackups that it would sell as kits that could be
used in the construction of new-build jackups either at the Company's shipyards
or at other shipyards. These kits would consist of such manufactured
components, including Friede & Goldman's patented rack chock leg fixation
system, and a Friede & Goldman jackup design.
 
  In addition to new offshore drilling rig construction, 13 new FPSOs were
under construction worldwide in early 1997, and management of the Company
anticipates that there will be an increase in the demand for new construction
of FPSOs for use in deepwater areas where there is not sufficient pipeline
infrastructure to adequately transport oil and gas production onshore. FPSOs
have only recently been constructed, typically through the conversion of a
crude oil tanker or a semisubmersible rig. The Company believes that demand for
FPSOs will increase as deepwater drilling activity increases, and that newly
constructed FPSOs will be more cost-effective than conversions of existing
crude oil tankers or semisubmersible rigs.
 
BUSINESS STRATEGY
 
  The Company's business strategy is to enhance its position as a leader in the
conversion, retrofit and repair of offshore drilling rigs and production units
and to be a leading participant in the developing market for new offshore
drilling rig and FPSO construction. The key elements of the Company's business
strategy are as follows:
 
  MAINTAIN FOCUS ON RIG CONVERSION, RETROFIT AND REPAIR SERVICES. Due to
increased demand for offshore drilling rigs with enhanced technical
capabilities, the demand for the Company's conversion, retrofit and repair
services has increased significantly during the past 12 months. As a result,
the Company's backlog has increased from $15.4 million at March 31, 1996 to
$65.5 million at March 31, 1997.
 
  PURSUE NEW OFFSHORE DRILLING RIG AND FPSO CONSTRUCTION. The Company believes
that a market for construction of new offshore drilling rigs and FPSOs is
developing. The Company intends to pursue opportunities to construct new
offshore drilling rigs and FPSOs by capitalizing on its existing relationships
with drilling contractors, its expertise and reputation for design of new
offshore drilling rigs, its reputation for high quality and reliability and the
state-of-the-art construction capabilities of its new shipyard.
 
                                       5
<PAGE>
 
 
  CAPITALIZE ON FRIEDE & GOLDMAN DESIGN CAPABILITIES. The Company intends to
emphasize its research and development efforts with respect to new designs for
offshore drilling rigs and floating production units. The Company believes that
its ability to provide its customers new designs for offshore drilling rigs and
production units will provide it with a competitive advantage in the developing
market for construction of new offshore drilling rigs and FPSOs.
 
  PROVIDE INTEGRATED SERVICES. The Company offers its customers a full range of
design, engineering, construction, conversion, retrofit and repair services for
offshore drilling rigs, including construction of new-build drilling rigs. The
Company believes that its full range of services will enable it to achieve
vertical integration with respect to new-build offshore drilling rigs through
the ability to provide state-of-the-art designs, the ability to provide
engineering expertise and the capability to build drilling rigs at the
Company's facilities.
 
  PURSUE STRATEGIC ACQUISITIONS AND JOINT VENTURES. The Company is actively
pursuing prospects to broaden its international exposure and expand its
capabilities to convert, retrofit and repair offshore drilling rigs, as well as
fabricate certain components of new offshore drilling rigs, through joint
ventures or subcontracting arrangements with one or more shipyards in the U.S.
or in foreign countries.
 
                                THE OFFERING (1)
 
<TABLE>
 <C>                                     <S>
 Common Stock offered by the Company.... 2,300,000 shares
 Common Stock offered by the
  Selling Stockholders.................. 1,500,000 shares
  Total Common Stock offered............ 3,800,000 shares
 Common Stock to be outstanding
  after the Offering.................... 11,500,000 shares
 Use of proceeds........................ To fund a portion of the Company's
                                         anticipated capital requirements over
                                         the next 12 to 18 months, including
                                         capital expenditures to construct and
                                         equip a new shipyard, capital
                                         expenditures to improve the productive
                                         capacity and efficiency of the
                                         existing shipyard, research and
                                         development costs relating to the
                                         design of new offshore drilling rigs
                                         and floating production units, working
                                         capital requirements and other general
                                         corporate purposes. See "Use of
                                         Proceeds."
 Proposed NASDAQ National Market Symbol. FGII
</TABLE>
--------
(1) Excludes the shares subject to the Underwriters' over-allotment option as
    well as options to purchase    shares which are currently outstanding and
    options to purchase    shares which are expected to be granted upon
    consummation of this Offering. See "Management--Equity Incentive Plan."
 
                                       6
<PAGE>
 
                             SUMMARY FINANCIAL DATA
 
  The following table sets forth summary historical financial data as of the
dates and for the periods indicated. The historical financial data for the year
ended July 31, 1992 and for each of the years ended December 31, 1994, 1995 and
1996 are derived from the audited financial statements of the predecessors of
the Company (the "Predecessors"). The historical financial data for the year
ended December 31, 1993, for the three months ended March 31, 1996 and 1997 and
as of March 31, 1997 are derived from unaudited financial statements of the
Predecessors. The unaudited financial statements of the Predecessors for the
three months ended March 31, 1996 and 1997 and as of March 31, 1997 reflect, in
the opinion of the Company's management, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of its
financial condition and results of operations for such periods. The following
table also sets forth pro forma statement of operations data of the Company for
the year ended December 31, 1996 that give pro forma effect to certain
transactions, including the Friede Acquisition and the issuance of Common Stock
of the Company in exchange for all of the outstanding common stock of the
Predecessors (the "Reorganization"). The following data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the historical financial statements of the
Predecessors and the related notes thereto, the historical financial statements
of the predecessor company to Friede & Goldman and the related notes thereto,
the historical balance sheet of the Company and the related notes thereto and
the pro forma statement of operations of the Company and the related notes
thereto included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                            YEAR ENDED DECEMBER 31,
                            YEAR    --------------------------------------------     THREE MONTHS
                           ENDED                                           PRO     ENDED MARCH 31,
                          JULY 31,                                        FORMA    -----------------
                          1992(1)    1993(1)   1994     1995     1996     1996(2)   1996      1997
                          --------  -------   -------  -------  -------  -------   -------  --------
                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                       <C>       <C>       <C>      <C>      <C>      <C>       <C>      <C>
STATEMENT OF OPERATIONS
 DATA:
Revenue.................  $22,703   $10,355   $23,891  $19,865  $21,759  $25,533   $ 2,965  $ 18,655
Cost of revenue.........   18,186     6,770    18,063   13,510   15,769   18,663     2,426    12,800
                          -------   -------   -------  -------  -------  -------   -------  --------
 Gross profit...........    4,517     3,585     5,828    6,355    5,990    6,870       539     5,855
Selling, general and
 administrative
 expenses(3)............    1,961     1,699     2,203    3,862    5,869    4,226       942     2,522
                          -------   -------   -------  -------  -------  -------   -------  --------
 Operating income.......    2,556     1,886     3,625    2,494      120    2,645      (404)    3,332
Net interest expense....     (265)     (135)     (346)    (197)    (448)    (538)      (83)     (120)
Gain on asset sales(4)..        3        11       808    1,869      349      349       230     1,379
Litigation
 settlements(5).........       --        --        --      750    3,467    3,467     3,467        --
Other...................       84        55        23        6      104      104       (27)       66
                          -------   -------   -------  -------  -------  -------   -------  --------
 Net income.............  $ 2,378   $ 1,817   $ 4,110  $ 4,921  $ 3,870  $ 6,027   $ 3,183  $  4,658
                          =======   =======   =======  =======  =======  =======   =======  ========
UNAUDITED PRO FORMA
 DATA:
Net income as reported
 above..................                                        $ 3,592  $ 6,027            $  4,658
Pro forma provision for
 income taxes(6)........                                         (1,329)  (2,230)             (1,810)
                                                                -------  -------            --------
 Pro forma net income...                                        $ 2,263  $ 3,797            $  2,848
                                                                =======  =======            ========
Pro forma net income per
 share(7)...............                                        $  0.25  $  0.41            $   0.31
Common and equivalent
 shares outstanding.....                                          9,200    9,200               9,200
OTHER FINANCIAL DATA:
Depreciation and
 amortization...........  $   426   $   339   $   347  $   425  $   696  $   821   $   174  $    215
Capital expenditures....      144     1,167     1,150    2,670    2,357    2,502     1,596     1,555
EBITDA(8)...............    2,982     2,225     4,054    2,919    1,092    3,466      (230)    3,922
</TABLE>
 
<TABLE>
<CAPTION>
                                                         AS OF MARCH 31, 1997
                                                      --------------------------
                                                                  PRO FORMA AS
                                                      HISTORICAL ADJUSTED(9)(10)
                                                      ---------- ---------------
BALANCE SHEET DATA:                                         (IN THOUSANDS)
<S>                                                   <C>        <C>
Working capital......................................  $ 2,387
Net property, plant and equipment....................    6,043
Total assets.........................................   31,456
Long-term debt.......................................    1,979
Stockholders' equity.................................    8,717
</TABLE>
 
                                       7
<PAGE>
 
--------
(1) Prior to December 31, 1992, the Company utilized a July 31 fiscal year end.
    Beginning in 1993, the Company adopted a calendar year as its fiscal year.
    Contract revenues for the five-month period ended December 31, 1992 were
    approximately $2.6 million. Other statement of operations data for the
    five-month period ended December 31, 1992 have not been presented because
    the amounts were not material.
 
(2) The pro forma statement of operations data for the year ended December 31,
    1996 give pro forma effect to (i) the Friede Acquisition as if it had
    occurred as of the beginning of the period presented, (ii) a reduction in
    selling, general and administrative expenses to reflect (a) a reduction of
    compensation expense of approximately $2 million in the aggregate, the
    amount by which the compensation paid in 1996 to three executive officers
    and stockholders of HAM Marine (the "Stockholder Employees") exceeded the
    compensation levels set forth in the employment contracts entered into
    between the Company and the Stockholder Employees in May 1997 and (b) the
    elimination of approximately $0.3 million of compensation expense
    attributable to the granting of common stock by one of the Predecessors to
    an employee in December 1996, and (iii) the Reorganization. See Note 3
    below.
 
(3) Included in selling, general and administrative expenses are bonuses paid
    to the Stockholder Employees of approximately $0.2 million, $1.2 million
    and $2.1 million for the years ended December 31, 1994, 1995 and 1996,
    respectively, which were intended primarily to provide a means by which the
    Stockholder Employees could meet the individual income tax obligations
    arising from the pass through of the Company's taxable income to the
    Stockholder Employees due to the status of the Predecessors as S
    Corporations in 1996 and prior periods. See Note 6 below.
 
(4) The gain on asset sales in 1994 and 1996 resulted primarily from the sale
    of assets not used in the Company's operations. The gain on asset sales in
    1995 resulted from the sale of assets acquired from an affiliated entity.
    Gain on asset sales for the three months ended March 31, 1997 includes
    approximately $0.9 million related to the distribution of real estate held
    for investment and an airplane to the stockholders of one of the
    Predecessors. The assets were not used directly in the Company's
    operations. See Notes 7 and 14 of Notes to the historical financial
    statements of the Predecessors included elsewhere in this Prospectus.
 
(5) The litigation settlement in 1995 represents the amount received as a
    result of a claim by the Company against a general contractor for which the
    Company served as a subcontractor. The litigation settlement in 1996
    represents the amount received by the Company as a result of a claim
    against a customer. See Note 13 of Notes to the Company's historical
    financial statements included elsewhere in this Prospectus.
 
(6) The pro forma provision for income taxes gives pro forma effect to the
    application of federal and state income taxes to the Company as if it were
    a C Corporation for tax purposes. For all periods presented herein, the
    Company and the Predecessors have operated as S Corporations for federal
    and state income tax purposes. Immediately prior to the Offering, the
    stockholders of the Company and the Predecessors intend to make elections
    terminating the S Corporation status of the Company and the Predecessors.
    As a result, the Company will become subject to corporate level income
    taxation. See "The Company--Corporate Restructuring," "Management's
    Discussion and Analysis of Financial Condition and Results of Operations"
    and Notes 1 and 2 of Notes to the historical financial statements of the
    Predecessors included elsewhere in this Prospectus.
 
(7) Pro forma net income per share is calculated by dividing the pro forma net
    income by the 9,200,000 shares outstanding immediately after the
    Reorganization as if such shares had been outstanding throughout each
    period presented. See "The Company--Corporate Restructuring."
 
(8) EBITDA represents operating income plus depreciation, amortization and non-
    cash compensation expense related to the issuance of stock and stock
    options to employees. EBITDA is not presented as an indicator of the
    Company's operations or performance or as a measure of liquidity calculated
    in accordance with generally accepted accounting principles.
 
                                       8
<PAGE>
 
 
(9)  The pro forma balance sheet data of the Company as of March 31, 1997 give
     pro forma effect to (i) the distribution of cash to the stockholders of one
     of the Predecessors prior to the closing of the Offering in an amount equal
     to the estimated federal and state income taxes payable by such
     stockholders on the undistributed earnings of such Predecessor through the
     closing of the Offering, (ii) the distribution of marketable securities and
     the assumption by such stockholders of the margin account indebtedness
     associated with such marketable securities, (iii) borrowings under the
     Company's revolving credit facility to fund the cash portion of the
     distribution to such stockholders, (iv) the recording of a deferred tax
     liability as a result of the termination of the status of the Predecessors
     as S Corporations prior to the closing of the Offering and (v) the
     Reorganization, in each case as if such event had occurred as of March 31,
     1997. See "The Company--Corporate Restructuring" and "Capitalization."
     
(10) Assumes the public offering of 2,300,000 shares of Common Stock by the
     Company at an assumed price of $   per share resulting in net proceeds of
     $   million (after deducting the underwriting discount and expenses of the
     Offering estimated at $   million) and the application thereof as
     described herein. See "Use of Proceeds."
 
                                       9
<PAGE>
 
                  WORLDWIDE OFFSHORE DRILLING RIG UTILIZATION
 
  The following table sets forth certain information relating to worldwide
offshore drilling rig utilization for the years ended December 31, 1992, 1993,
1994, 1995 and 1996 and the three months ended March 31, 1997. All information
in the following table has been derived from Offshore Data Services.
 
<TABLE>
<CAPTION>
                                                                                AVERAGE FOR THE
                           AVERAGES FOR THE YEAR ENDED DECEMBER 31,              THREE MONTHS
                           ----------------------------------------                  ENDED
                           1992       1993       1994       1995       1996     MARCH 31, 1997
                         --------   --------   --------   --------   --------   --------------- ---
<S>                      <C>        <C>        <C>        <C>        <C>        <C>             <C>
SEMISUBMERSIBLES:
  Number of Total
   Rigs(1)..............      167        161        159        142        143         144
  Utilization of Total
   Rigs(2)..............       77%        79%        78%        84%        92%         95%
  Utilization of
   Marketed Rigs(3).....       82%        86%        85%        91%        99%         99%
JACKUPS:
  Number of Total
   Rigs(1)..............      399        394        392        388        382         378
  Utilization of Total
   Rigs(2)..............       76%        85%        82%        84%        91%         94%
  Utilization of
   Marketed Rigs(3).....       84%        90%        87%        89%        96%         99%
ALL OFFSHORE DRILLING
 RIGS:
  Number of Total
   Rigs(1)..............      682        666        661        644        639         636
  Utilization of Total
   Rigs(2)..............       76%        83%        81%        84%        89%         92%
  Utilization of
   Marketed Rigs(3).....       83%        89%        87%        90%        96%         97%
</TABLE>
--------
(1) Includes rigs held for disposition.
 
(2) Defined as rigs working as a percentage of total rigs.
 
(3) Defined as rigs working as a percentage of rigs available for work
    (excludes mothballed, out of service, cold stacked and shipyard rigs).
 
                                       10
<PAGE>
 
                                 RISK FACTORS
 
  Prospective investors should carefully consider the following factors as
well as the other information contained in this Prospectus.
 
DEPENDENCE ON CONDITIONS IN THE OFFSHORE DRILLING INDUSTRY
 
  The Company's business and operations depend principally upon conditions
prevailing in the offshore drilling industry. In particular, the level of
demand for the Company's services is affected by the level of demand for the
services of offshore drilling contractors, which in turn is dependent upon the
condition of the oil and gas industry and, in particular, the level of capital
expenditures of oil and gas companies with respect to offshore drilling
activities. These capital expenditures are influenced by prevailing oil and
natural gas prices, expectations about future prices, the cost of exploring
for, producing and delivering oil and gas, the sale and expiration dates of
offshore leases in the United States and overseas, the discovery rate of new
oil and gas reserves in offshore areas, local and international political and
economic conditions, and the ability of oil and gas companies to access or
generate capital sufficient to fund capital expenditures for offshore
exploration, development and production activities. Although the trend of oil
and natural gas prices over the past year has been generally favorable, over
the past several years, oil and natural gas prices and the level of offshore
drilling and exploration activity have fluctuated substantially. A significant
or prolonged reduction in oil or natural gas prices in the future would likely
depress offshore drilling and development activity. A substantial reduction of
such activity would reduce demand for the Company's services and could have a
material adverse effect on the Company's financial condition and results of
operations.
 
EXPANSION OF OPERATIONS
 
  The Company has recently expanded its capacity to convert, retrofit and
repair offshore drilling rigs through the lease of additional dockspace and
fabrication buildings adjacent to its existing shipyard in Pascagoula,
Mississippi and the charter of a drydock vessel. The Company has also recently
acquired Friede & Goldman, a company that designs offshore drilling rigs and
floating production units. In addition, the Company has recently entered into
a memorandum of understanding with Jackson County, Mississippi to construct a
new shipyard on 105 acres approximately six miles from its existing shipyard
that would be capable of building new drilling rigs as well as converting,
retrofitting and repairing existing drilling rigs. In conjunction with such
actions, the Company plans to utilize its existing capabilities to fabricate
the structural components of drilling rigs, the design capabilities of Friede
& Goldman and the production capabilities of the new shipyard to build new
drilling rigs to the extent market conditions permit such applications to be
commercially viable. The Company may establish a manufacturing operation,
either at its shipyards or at another location, that would be capable of
constructing components for new-build jackups that the Company would sell,
along with Friede & Goldman jackup designs, as kits that could be used in the
construction of new-build jackups. In addition, the Company is considering
various opportunities to enter into joint venture or subcontracting
arrangements with existing shipyards in the United States, Mexico and Canada
that would provide additional capabilities to perform structural fabrication
or repair operations. There can be no assurance that market conditions,
including dayrates realized by offshore drilling contractors, will permit the
Company to obtain orders for the construction of new drilling rigs on a
profitable basis or that the Company will realize orders for a sufficient
quantity of new drilling rigs to justify the costs and expenses of
constructing, equipping and operating the new shipyard. In addition, the
Company has not completed all of the arrangements necessary to commence
construction of the new shipyard or to establish a new jackup component
manufacturing operation. In particular, with respect to the new shipyard, the
Company has not completed the negotiation of a construction contract to build
the shipyard and has not received all necessary governmental approvals. As a
result, there can be no assurance that the new shipyard will be completed or,
if completed, that the new shipyard will be completed on the schedule or at
the total cost to complete currently estimated by the Company. In addition,
the Company has not determined that it will proceed with the establishment of
a jackup component manufacturing operation or any other joint venture or
subcontracting arrangement to perform other operations.
 
                                      11
<PAGE>
 
  Any significant increase in the level of conversion, retrofit and repair
activity, as well as the development of a new drilling and production unit
construction business, will impose significant added responsibilities on
members of senior management, including the need to identify, recruit and
integrate additional management personnel and skilled laborers. Although the
Company has hired senior level management personnel who have experience in the
business of building new drilling rigs, there can be no assurance that
additional management personnel or skilled laborers will be identified and
retained by the Company. In addition, there can be no assurance that the
Company's systems, procedures and controls will be adequate to support the
Company's operations as they expand. If the Company is unable to manage its
growth efficiently and effectively, or if it is unable to attract and retain
additional qualified management personnel and skilled laborers, there could be
a material adverse effect on the Company's financial condition and results of
operations.
 
OPERATING RISKS
 
  The Company's activities relating to conversion, retrofit and repair of
drilling rigs and its proposed activities relating to new construction of
drilling rigs and production units involve the fabrication and refurbishment
of large steel structures, the operation of cranes and other heavy machinery
and other operating hazards that can cause personal injury or loss of life,
severe damage to and destruction of property and equipment and suspension of
operations. The failure of the structure of a drilling rig after the rig
leaves the Company's shipyard can result in similar injuries and damages. In
addition, the Company's employees who are engaged in offshore operations are
covered by provisions of the Jones Act, the Death on the High Seas Act and
general maritime law, which laws operate to exempt these employees from the
limits of liability established under worker's compensation laws and, instead,
permit them or their representatives to maintain actions against the Company
for damages or job-related injuries, with no limitations on the Company's
potential liability. The operation of the drydock vessel bareboat chartered by
the Company can give rise to large and varied liability risks, such as risks
of collisions with other vessels or structures, sinkings, fires and other
marine casualties, which could result in significant claims for damages
against both the Company and third parties for, among other things, personal
injury, death, property damage, pollution and loss of business. The failure to
adequately design a drilling rig or production unit could also result in
personal injury, loss of life or severe damage to and destruction of property
and equipment. Litigation arising from any such occurrences may result in the
Company being named as a defendant in lawsuits asserting large claims. In
addition, due to their proximity to the Gulf of Mexico, the Company's
facilities are subject to the possibility of physical damage caused by
hurricanes or flooding. Although the Company maintains such insurance
protection as it considers economically prudent, there can be no assurance
that any such insurance will be sufficient or effective under all
circumstances or against all hazards to which the Company may be subject. In
particular, due to the high cost of errors and omissions policies relating to
the design of drilling rigs and production units, the Company does not carry
insurance covering claims for personal injury, loss of life or property damage
relating to such design activity. A successful claim for which the Company is
not fully insured could have a material adverse effect on the Company.
Moreover, no assurance can be given that the Company will be able to maintain
adequate insurance in the future at rates that it considers economical.
 
CONTRACT BIDDING RISKS
 
  Due to the nature of the drilling rig construction industry, the Company
generally performs a portion of the work on each project on a fixed-price
basis and a portion of the work on a cost-plus basis, particularly for
projects completed in stages. With respect to the fixed-price portions of a
project, the Company receives the price fixed for such portion, and therefore
the Company must absorb any cost overruns relating to such portion of the
project. Under cost-plus arrangements, the Company receives its direct labor
cost and material cost plus specified percentages of such labor costs and
material costs. As a result, the Company is protected against cost overruns
under these cost-plus arrangements but does not benefit directly from cost
savings. See "Business--Contract Structure and Pricing."
 
  The revenue and costs associated with the fixed-price portion of any
particular project will often vary from the amounts originally estimated
therefor because of variations in the cost of labor and materials and
variations
 
                                      12
<PAGE>
 
in productivity of labor from the original estimates. These variations and the
risks inherent in the drilling rig construction industry may result in revenue
and gross profits different from those originally estimated and may result in
reduced profitability or losses on projects. Depending on the size of a
project, variations from estimated performance may have a significant impact
on the Company's operating results for any particular fiscal quarter or year.
 
PERCENTAGE-OF-COMPLETION ACCOUNTING
 
  Most of the Company's revenue is earned on a percentage-of-completion basis
based generally on the ratio of total costs incurred to the total estimated
costs. Accordingly, contract price and cost estimates are reviewed
periodically as the work progresses, and adjustments to income proportionate
to the percentage of completion are reflected in the period when such
estimates are revised. To the extent that these adjustments result in a
reduction or elimination of previously reported profits, the Company would
have to recognize a charge against current earnings, which may be significant
depending on the size of the project or the adjustment. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
 
DEPENDENCE ON SIGNIFICANT CUSTOMERS
 
  A large portion of the Company's revenue has historically been generated by
a few customers, although not necessarily the same customers from year to
year. For the years ended December 31, 1994, 1995 and 1996, the Company's
three largest customers in such years collectively accounted for 89%, 91% and
66% of revenue, respectively. The Company expects that a significant portion
of the Company's revenues for 1997 will be derived from one customer. Because
the level of services that the Company may provide to any particular customer
depends on that customer's needs for drilling rig conversion, retrofit or
repairs in a particular year, customers that account for a significant portion
of revenue in one fiscal year may represent an immaterial portion of revenue
in subsequent years. However, the loss of a significant customer for any
reason, including a sustained decline in that customer's capital expenditure
budget or competitive factors, could result in a substantial loss of revenue
and could have a material adverse effect on the Company's operating
performance. See "Business--Customers and Marketing."
 
BACKLOG
 
  The Company's backlog is based on management's estimate of future revenue
attributable to (i) the remaining amounts to be invoiced with respect to those
projects, or portions of projects, as to which a customer has authorized the
Company to begin work or purchase materials and (ii) projects, or portions of
projects, that have been awarded to the Company as to which the Company has
not commenced work. All projects currently included in the Company's backlog
are subject to change and/or termination at the option of the customer, either
of which could substantially change the amount of backlog currently reported.
In the case of a termination, the customer is required to pay the Company for
work performed and materials purchased through the date of termination;
however, due to the large dollar amounts of backlog estimated for each of a
small number of projects, amounts included in the Company's backlog could
decrease substantially if one or more of these projects were to be terminated
by the Company's customers. In particular, approximately 85% of the Company's
backlog as of March 31, 1997 was attributable to three projects, two of which
were with one customer. A termination of one or more of these large projects
or the loss of a significant customer could have a material adverse effect on
the Company's revenue, net income and cash flow for 1997. See "Business--
Backlog."
 
REGULATORY AND ENVIRONMENTAL MATTERS
 
  The Company's operations and properties are subject to and affected by
various types of governmental regulation, including numerous federal, state
and local environmental protection laws and regulations, compliance with which
is becoming increasingly complex, stringent and expensive. These laws may
provide for "strict liability" for damages to natural resources or threats to
public health and safety, rendering a party liable
 
                                      13
<PAGE>
 
for the environmental damage without regard to its negligence or fault.
Sanctions for noncompliance may include revocation of permits, corrective
action orders, administrative or civil penalties and criminal prosecution.
Certain environmental laws provide for strict, joint and several liability for
remediation of spills and other releases of hazardous substances. In addition,
companies may be subject to claims alleging personal injury or property damage
as a result of alleged exposure to hazardous substances. Such laws and
regulations may also expose the Company to liability for the conduct of or
conditions caused by others, or for acts of the Company that were in
compliance with all applicable laws at the time such acts were performed. In
addition, the Company depends on the demand for its services from the oil and
gas industry and is affected by changing taxes, price controls and other laws
and regulations relating to the oil and gas industry generally. The adoption
of laws and regulations curtailing exploration and development drilling for
oil and gas for economic, environmental and other policy reasons would
adversely affect the Company's operations by limiting demand for its services.
The Company cannot determine to what extent future operations and earnings of
the Company may be affected by new legislation, new regulations or changes in
existing regulations. See "Business--Government and Environmental Regulation."
 
FRIEDE ACQUISITION DEFAULT PROVISIONS
 
  Pursuant to the terms of the Friede Acquisition, the Company is obligated to
pay the former owner of the predecessor company to Friede & Goldman (i)
certain design and licensing payments on sales by Friede & Goldman of designs
for new-build vessels and (ii) specified payments in the event the Company
fails to design at least 20% of the new-build vessels ordered by U.S.-based
drilling companies (subject to certain maximum amounts), in each case with
respect to a 10-year period that commenced in December 1996. In the event the
Company fails to make such required payments, the former owner of such
predecessor company will have the right to (i) require the Company to return
all Friede & Goldman assets purchased by the Company (including the design for
drilling rigs and production units in existence at the time of the acquisition
but excluding the name Friede & Goldman and derivatives thereof and excluding
new designs developed by the Company after the acquisition) and (ii) terminate
the consulting and noncompetition provisions of such acquisition. See
"Business--Friede Acquisition."
 
DEPENDENCE ON KEY PERSONNEL
 
  The Company's operations are dependent on the continued efforts of its
executive officers. Although each of the Company's executive officers has
entered into an employment agreement with the Company, there can be no
assurance that any individual will continue in such capacity for any
particular period of time. The loss of key personnel, or the inability to hire
and retain qualified employees, could have an adverse effect on the Company's
business, financial condition and results of operations. The Company does not
carry key-person life insurance on any of its employees. See "Management."
 
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
 
  Following the completion of the Offering, the Company's executive officers
and directors will beneficially own 67.0% of the outstanding shares of Common
Stock (63.8% if the Underwriters' over-allotment option is exercised in full).
In addition, J. L. Holloway, the Company's Chairman of the Board, Chief
Executive Officer and President, will own 53.5% of the outstanding shares of
Common Stock (50.9% if the Underwriters' over-allotment option is exercised in
full). Consequently, these persons, if they were to act together, or Mr.
Holloway, acting alone, would have the ability to exercise control over the
Company's affairs, to elect the entire Board of Directors and to control the
disposition of any matter submitted to a vote of stockholders. See "Principal
and Selling Stockholders."
 
NO PRIOR MARKET, POSSIBLE VOLATILITY OF STOCK
 
  Prior to this Offering, no public market for the Common Stock has existed,
and the initial public offering price, which will be determined by negotiation
between the Company and representatives of the Underwriters, may not be
indicative of the price at which the Common Stock will trade after the
Offering. See "Underwriting"
 
                                      14
<PAGE>
 
for the factors to be considered in determining the initial public offering
price. Application has been made to list the Common Stock on the NASDAQ
National Market, but no assurance can be given that an active trading market
for the Common Stock will develop or, if developed, continue after the
Offering. The market price of the Common Stock after the Offering may be
subject to significant fluctuations from time to time in response to numerous
factors, including variations in the reported financial results of the Company
and changing conditions in the economy in general or in the Company's industry
in particular. In addition, the stock markets experience significant price and
volume volatility from time to time which may affect the market price of the
Common Stock for reasons unrelated to the Company's performance.
 
CERTAIN ANTI-TAKEOVER EFFECTS
 
  The Company's Amended and Restated Certificate of Incorporation (the
"Charter") and Bylaws contain various provisions that may hinder, delay or
prevent the acquisition of control of the Company without the approval of the
Board of Directors of the Company. Certain provisions of the Charter and the
Bylaws, among other things, (i) authorize the issuance of "blank-check"
Preferred Stock without stockholder action, (ii) divide the Company's Board
into three classes, the members of which (after an initial transition period)
will serve for three-year terms, (iii) establish advance notice requirements
for director nominations and stockholder proposals to be considered at annual
meetings and (iv) prohibit stockholder action by written consent. Certain
provisions of the Delaware General Corporation Law may also discourage
takeover attempts that have not been approved by the Board of Directors. See
"Description of Capital Stock."
 
SHARES ELIGIBLE FOR FUTURE SALE
 
  Immediately prior to the closing of the Offering, 9,200,000 shares of Common
Stock of the Company will be issued and outstanding. None of these shares was
or will be issued in a transaction registered under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, other than any such
shares included in the Offering, the shares may not be sold except in
transactions registered under the Securities Act or pursuant to an exemption
from registration, including the exemption contained in Rule 144 under the
Securities Act. When these shares become saleable, the market price of the
Common Stock could be adversely affected by the sale of substantial amounts of
the shares in the public market. The current stockholders of the Company have
certain registration rights with respect to their shares. If such
stockholders, by exercising such registration rights, cause a large number of
shares to be registered and sold in the public market, such sales may have an
adverse effect on the market price of the Common Stock. See "Description of
Capital Stock--Registration Rights" and "Shares Eligible for Future Sale."
 
  Upon the closing of this Offering, the Company also will have outstanding
options to purchase up to a total of      shares of Common Stock issued
pursuant to the Company's 1997 Equity Incentive Plan (the "Equity Incentive
Plan"). A total of 1,150,000 shares will be issuable pursuant to the Equity
Incentive Plan. The Company intends to register all the shares subject to
these options under the Securities Act for public resale. See "Management--
Equity Incentive Plan."
 
  The effect, if any, that the availability for sale, or sale, of the shares
of Common Stock eligible for future sale will have on the market price of the
Common Stock prevailing from time to time is unpredictable, and no assurance
can be given that the effect will not be adverse.
 
DILUTION
 
  The purchasers of the shares of Common Stock offered hereby will experience
immediate dilution in the net tangible book value of their shares of $     per
share (assuming an initial public offering price of $     per share). See
"Dilution." In the event the Company issues additional shares of Common Stock
in the future, including shares which may be issued in connection with
acquisitions or other public or private financings, purchasers of Common Stock
in the Offering may experience further dilution in the net tangible book value
per share of the Common Stock of the Company.
 
 
                                      15
<PAGE>
 
                                  THE COMPANY
 
GENERAL
 
  Friede Goldman International Inc. is a leading provider of conversion,
retrofit and repair services for offshore drilling rigs, including jackups,
submersibles, semisubmersibles and drillships, and has entered the emerging
market for conversion of offshore drilling units into FPSOs. In the last seven
years, the Company has completed 47 offshore drilling rig conversion or
retrofit projects, which the Company believes is more than any other shipyard
company in the United States. The Company, through its acquisition of Friede &
Goldman, is also one of the world's largest independent designers of offshore
drilling rigs. The Company offers its customers a full range of design,
engineering, construction, conversion, retrofit and repair services for
offshore drilling rigs, including construction of new-build offshore drilling
rigs.
 
RECENT DEVELOPMENTS
 
  Recently, the Company has taken several strategic initiatives to capitalize
on offshore drilling industry trends towards increased rig conversions and
retrofits and new rig construction.
 
  .    THE FRIEDE ACQUISITION. The Company recently acquired Friede & Goldman,
       one of the world's largest designers of offshore drilling rigs. The
       Friede Acquisition broadened the Company's range of services that it
       can provide to its customers, and the Company believes that its design
       capabilities will provide it with a competitive advantage with respect
       to attracting new offshore drilling rig construction business.
 
  .    CAPACITY EXPANSION. In December 1996, the Company significantly
       expanded its Pascagoula shipyard through the lease of additional
       dockspace, land and covered buildings for machine and fabrication
       shops, blast painting and storage.
 
  .    INCREASED WORKFORCE. The Company has increased its workforce from
       approximately 300 employees at December 1, 1996 to approximately 800
       employees at March 31, 1997 from the available supply of skilled
       shipyard workers in the Pascagoula, Mississippi area.
 
  .    UNIQUE TOWABLE DRYDOCK VESSEL. The Company recently entered into a
       bareboat charter that gives the Company operational control of a
       towable drydock vessel with heavy lift capacity and 30,000-ton load
       bearing capabilities. The Company believes that the towable drydock is
       the only vessel of its kind in the Gulf of Mexico, where increasing
       offshore vessel activity has significantly constrained drydock
       capacity.
 
  .    NEW STATE-OF-THE-ART SHIPYARD. The Company plans to commence
       construction in the second quarter of 1997 of a modern 105-acre yard
       designed specifically for new offshore drilling rig construction and
       could also be used for conversion, retrofit and repair of existing
       offshore drilling rigs and production units. The Company expects that
       its new shipyard will be operational by early 1998 and completed later
       that year.
 
  As a result of these strategic initiatives, the Company believes it is well
positioned to meet the needs of offshore drilling contractors and offshore
operators as they convert, retrofit, repair and expand their offshore drilling
rig fleets and floating production systems for the Gulf of Mexico and other
areas of the world.
 
CORPORATE RESTRUCTURING
 
  The Company's business of converting, retrofitting and repairing offshore
drilling rigs has been conducted by HAM Marine since its formation in 1982. In
December 1996, a company controlled by the stockholders of HAM Marine acquired
certain assets and business of the predecessor company of Friede & Goldman
("Friede Predecessor"), including substantially all of the designs developed
by Friede Predecessor and the name "Friede & Goldman, Ltd." and all
derivatives thereof. Following the completion of the acquisition, the
acquiring company changed its name to Friede & Goldman, Ltd.
 
 
                                      16
<PAGE>
 
  The Company was incorporated in Delaware in February 1997 to serve as the
holding company for HAM Marine and Friede & Goldman, collectively referred to
herein as the Predecessors. The stockholders of each of HAM Marine and Friede
& Goldman have entered into an agreement (the "Exchange Agreement") pursuant
to which such stockholders will exchange their shares in such corporations for
shares of Common Stock of the Company prior to the closing of the Offering. In
accordance with the terms of the Exchange Agreement, the stockholders of HAM
Marine and Friede & Goldman will receive a number of shares of Common Stock
proportionate to their relative share holdings in each of HAM Marine and
Friede & Goldman.
 
  Each of HAM Marine and Friede & Goldman has operated as an S Corporation for
federal and state income tax purposes. As a result, each of the Predecessors
currently pays no federal or state income tax, and their earnings are subject
to tax directly at the stockholder level. Immediately prior to the completion
of the Offering, the stockholders of each of the Predecessors intend to make
an election to terminate the S Corporation status of such Predecessors.
Accordingly, each of the Predecessors will become subject to corporate level
income taxation and, as a result, the Company will be required to record a net
deferred income tax liability through a charge to earnings estimated to be
approximately $0.8 million in the second quarter of 1997 attributable
primarily to the difference in financial reporting and tax reporting methods
of accounting for depreciation and sales-type leases. See the pro forma
statement of operations of the Company and related notes thereto included
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
 
  In the past, each of the Predecessors has made distributions to its
stockholders in order to provide a cash return to them and to fund their
federal and state income tax liability that resulted from the S Corporation
status of the Predecessors. In accordance with this practice, one of the
Predecessors intends to make a distribution, prior to the completion of the
Offering, of cash in an amount equal to the estimated federal and state income
taxes payable by the stockholders of the Predecessors on the aggregate
undistributed earnings of the Predecessors through the date of their election
to terminate S Corporation status of the Predecessors, which amount is
expected to be approximately $     million. In addition, in March 1997, one of
the Predecessors made a distribution to its stockholders of certain
nonoperating assets that have a fair market value of approximately $1.6
million in the aggregate. One of the Predecessors also plans to distribute to
its stockholders, prior to the completion of the Offering, marketable
securities having a fair market value of approximately $4.8 million as of
March 31, 1997 and in connection therewith such stockholders will assume the
related margin account indebtedness ($2.7 million as of March 31, 1997).
 
  The Company's executive offices are located at 525 E. Capitol Street, Suite
402, Jackson, Mississippi 39201, and its telephone number at that address is
(601) 352-1107.
 
                                      17
<PAGE>
 
                                USE OF PROCEEDS
 
  The net proceeds to the Company from the sale of the shares of Common Stock
offered by the Company, after deducting the underwriting discount and offering
expenses payable by the Company, are estimated to be approximately $
million (approximately $     million if the Underwriters' over-allotment
option is exercised in full), based on an assumed initial public offering
price of $     per share.
 
  The Company currently intends to utilize the net proceeds of the Offering to
fund a portion of its anticipated capital requirements over the next 12 to 18
months of between $50 million and $65 million, including (i) approximately $29
million to construct and equip its new shipyard, (ii) approximately $3 million
for capital expenditures to increase the productive capacity and efficiency of
its existing shipyard, (iii) approximately $3 million for research and
development expenditures related to the design of new, technologically
innovative offshore drilling rigs and floating production units, (iv) between
$10 million and $20 million of additional working capital related to increased
levels of conversion, retrofit and repair activities and new construction of
offshore drilling rigs and floating production units and (v) $5 million to $10
million for general corporate purposes, which may include the establishment of
a manufacturing operation, either at the Company's shipyards or at another
location, that would be capable of constructing and assembling components of
new-build jackups or the acquisition of one or more businesses that are
complementary to the Company's operations. The Company would expect to fund
the remaining portion of its anticipated capital requirements from cash flow
from operations, borrowings available under its existing revolving credit
facility or additional borrowings. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
 
  Pending the Company's use of the net proceeds of the Offering, the Company
intends to repay borrowings under its existing revolving credit facility ($2.6
million in principal amount of borrowings outstanding as of March 31, 1997 and
$7.2 million as of March 31, 1997 giving pro forma effect to borrowings to be
incurred to fund a distribution of proceeds to the stockholders of one of the
Predecessors prior to the closing of the Offering) and to invest the remaining
net proceeds to be received by it from the Offering in short-term, investment-
grade, interest-bearing instruments. For a description of the terms of the
revolving credit facility, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." The Company will not realize any of the proceeds from the sale of
the shares offered by the Selling Stockholders.
 
                                DIVIDEND POLICY
 
  It is the Company's current intention to retain earnings to finance the
expansion of its business. Any future dividends will be at the discretion of
the Board of Directors of the Company after taking into account various
factors, including, among others, the Company's financial condition, results
of operations, cash flows from operations, current and anticipated cash needs
and expansion plans, the income tax laws then in effect and the requirements
of Delaware law. In addition, HAM Marine's current credit facility prohibits
the payment of dividends from HAM Marine to the Company in the event that HAM
Marine defaults under the terms of such facility. In such an event, the
Company's ability to receive sufficient funds from HAM Marine to pay dividends
to the Company's stockholders would be significantly impaired. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
 
                                      18
<PAGE>
 
                                CAPITALIZATION
 
  The following table sets forth as of March 31, 1997 (i) the historical
capitalization of the Predecessors and (ii) the capitalization of the Company
on a pro forma basis giving effect to (a) the distribution of cash to the
stockholders of one of the Predecessors prior to the closing of the Offering,
(b) borrowings under the Company's revolving credit facility to fund such
distribution, (c) the recording of a deferred income tax liability as a result
of the termination of the status of the Predecessors as S Corporations prior
to the closing of the Offering and (d) the completion of the Reorganization,
as adjusted to give effect to the Offering and the application of the
estimated net proceeds therefrom. See "The Company--Corporate Restructuring"
and "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements of the Predecessors and
the related notes thereto included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                                              AS OF MARCH 31,
                                                                   1997
                                                            -------------------
                                                                     PRO FORMA
                                                            ACTUAL  AS ADJUSTED
                                                            ------- -----------
                                                                (DOLLARS IN
                                                                THOUSANDS)
<S>                                                         <C>     <C>
Cash and cash equivalents(1)............................... $ 3,203   $
                                                            =======   =======
Short-term debt and current maturities of long-term
 debt(2)................................................... $ 7,506   $
                                                            =======   =======
Long-term debt, less current maturities.................... $ 1,979   $
Stockholders' equity:
  Preferred Stock: $0.01 par value, 5,000,000 shares
   authorized; no shares issued and outstanding............      --        --
  Common Stock: $0.01 par value, 25,000,000 shares
   authorized; 9,200,000 shares issued and outstanding,
   11,500,000 shares issued and outstanding pro forma as
   adjusted(3).............................................       5
Additional paid-in capital.................................   1,628
Retained earnings..........................................   6,180
Unrealized gain on marketable securities...................     905
                                                            -------   -------
  Total stockholders' equity...............................   8,717
                                                            -------   -------
    Total capitalization................................... $10,696   $
                                                            =======   =======
</TABLE>
--------
(1) Includes certificates of deposit that are pledged as security for short-
    term borrowings.
 
(2) Short-term debt and current maturities of long-term debt include $1.1
    million of short-term debt secured by certificates of deposit and $2.7
    million of brokerage margin account debt secured by marketable securities.
 
(3) Excludes the shares of Common Stock subject to the Underwriters' over-
    allotment option as well as options to purchase    shares which are
    currently outstanding and options to purchase    shares which are expected
    to be granted upon consummation of this Offering.
 
                                      19
<PAGE>
 
                                   DILUTION
 
  As of March 31, 1997, the net tangible book value per share of Common Stock
was $0.82. The "net tangible book value per share" represents the amount of
the net tangible book value (total book value of tangible assets less total
liabilities) of the Company divided by the number of shares of Common Stock
outstanding. After giving effect to the distribution of cash to the
stockholders of one of the Predecessors prior to the closing of the Offering
and the sale of the shares of Common Stock offered hereby (at an assumed price
of $     per share and after deducting the estimated underwriting discount and
estimated offering expenses payable by the Company), the pro forma net
tangible book value of the Company at March 31, 1997 would have been $     or
$     per share, representing an immediate increase in net tangible book value
of $     per share to existing stockholders and an immediate dilution of $
per share to the investors purchasing shares of Common Stock in the Offering
("New Investors"). See "The Company--Corporate Restructuring" and "Use of
Proceeds." The following table illustrates this dilution to New Investors:
 
<TABLE>
<S>                                                                 <C>   <C>
Assumed initial public offering price per share....................       $
  Net tangible book value per share at March 31, 1997.............. $0.82
  Increase per share attributable to sale of Common Stock in the
   Offering........................................................
                                                                    -----
Pro forma net tangible book value per share after giving effect to
 the Offering......................................................
                                                                          -----
Dilution in net tangible book value per share to New Investors.....       $
                                                                          =====
</TABLE>
 
  The following table sets forth as of the date of this Prospectus the number
of shares of Common Stock purchased from the Company, the total consideration
received by the Company and the average price per share paid by existing
stockholders of the Company and by New Investors:
 
<TABLE>
<CAPTION>
                                                        TOTAL
                                  SHARES PURCHASED  CONSIDERATION
                                 ------------------ -------------- AVERAGE PRICE
                                   NUMBER   PERCENT AMOUNT PERCENT   PER SHARE
                                 ---------- ------- ------ ------- -------------
<S>                              <C>        <C>     <C>    <C>     <C>
Existing stockholders(1)(2).....  9,200,000   80.0% $           %      $
New Investors...................  2,300,000   20.0
                                 ----------  -----  -----   ----
  Total......................... 11,500,000  100.0% $           %
                                 ==========  =====  =====   ====
</TABLE>
--------
(1) The existing stockholders of the Company, after giving effect to the
    Reorganization, will have acquired all of their shares of Common Stock in
    exchange for the common stock of the Predecessors. Accordingly, the total
    consideration paid by the existing stockholders for their shares of Common
    Stock of the Company represents the total consideration paid by the
    existing stockholders for their shares of common stock of the
    Predecessors.
 
(2) The information shown for existing stockholders excludes options to
    purchase        shares of Common Stock at the initial public offering
    price granted to certain officers and directors of the Company. See
    "Management--Equity Incentive Plan."
 
                                      20
<PAGE>

 
                            SELECTED FINANCIAL DATA
 
  The following table sets forth summary historical financial data as of the
dates and for the periods indicated. The historical financial data for the
year ended July 31, 1992 and for each of the years ended December 31, 1994,
1995 and 1996 are derived from the audited financial statements of the
Predecessors. The historical financial data for the year ended December 31,
1993, for the three months ended March 31, 1996 and 1997 and as of March 31,
1997 are derived from unaudited financial statements of the Predecessors. The
unaudited financial statements of the Predecessors for the three months ended
March 31, 1996 and 1997 and as of March 31, 1997 reflect, in the opinion of
the Company's management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of its financial condition and
results of operations for such periods. The following table also sets forth
pro forma statement of operations data of the Company for the year ended
December 31, 1996 that give pro forma effect to certain transactions,
including the Friede Acquisition and the Reorganization. The following data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the historical financial
statements of the Predecessors and the related notes thereto, the historical
financial statements of the predecessor company to Friede & Goldman and the
related notes thereto, the historical balance sheet of the Company and the
related notes thereto and the pro forma statement of operations of the Company
and the related notes thereto included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31,
                             YEAR    --------------------------------------------     THREE MONTHS
                            ENDED                                           PRO     ENDED MARCH 31,
                           JULY 31,                                        FORMA    -----------------
                           1992(1)    1993(1)   1994     1995     1996     1996(2)   1996      1997
                           --------  -------   -------  -------  -------  -------   -------  --------
                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                        <C>       <C>       <C>      <C>      <C>      <C>       <C>      <C>
STATEMENT OF OPERATIONS
 DATA:
Revenue..................  $22,703   $10,355   $23,891  $19,865  $21,759  $25,533   $ 2,965  $ 18,655
Cost of revenue..........   18,186     6,770    18,063   13,510   15,769   18,663     2,426    12,800
                           -------   -------   -------  -------  -------  -------   -------  --------
 Gross profit............    4,517     3,585     5,828    6,355    5,990    6,870       539     5,855
Selling, general and
 administrative
 expenses(3)...............  1,961     1,699     2,203    3,862    5,869    4,226       942     2,522
                           -------   -------   -------  -------  -------  -------   -------  --------
 Operating income........    2,556     1,886     3,625    2,494      120    2,645      (404)    3,332
Net interest expense.....     (265)     (135)     (346)    (197)    (448)    (538)      (83)     (120)
Gain on asset sales(4)...        3        11       808    1,869      349      349       230     1,379
Litigation
 settlements(5)..........       --        --        --      750    3,467    3,467     3,467        --
Other....................       84        55        23        6      104      104       (27)       66
                           -------   -------   -------  -------  -------  -------   -------  --------
 Net income..............  $ 2,378   $ 1,817   $ 4,110  $ 4,921  $ 3,870  $ 6,027   $ 3,183  $  4,658
                           =======   =======   =======  =======  =======  =======   =======  ========
UNAUDITED PRO FORMA DATA:
Net income as reported
 above...................                                        $ 3,592  $ 6,027            $  4,658
Pro forma provision for
 income taxes(6).........                                         (1,329)  (2,230)             (1,810)
                                                                 -------  -------            --------
 Pro forma net income....                                        $ 2,263  $ 3,797            $  2,848
                                                                 =======  =======            ========
Pro forma net income per
 share(7)................                                        $  0.25  $  0.41            $   0.31
Common and equivalent
 shares outstanding......                                          9,200    9,200               9,200
OTHER FINANCIAL DATA:
Depreciation and
 amortization............  $   426   $   339   $   347  $   425  $   696  $   821   $   174  $    215
Capital expenditures.....      144     1,167     1,150    2,670    2,357    2,502     1,596     1,555
EBITDA(8)................    2,982     2,225     4,054    2,919    1,092    3,466      (230)    3,922
</TABLE>
 
<TABLE>
<CAPTION>
                                                                    AS OF MARCH 31, 1997
                          AS OF        AS OF DECEMBER 31,       ----------------------------- ---
                         JULY 31, -----------------------------                PRO FORMA
                           1992    1993   1994   1995    1996   HISTORICAL AS ADJUSTED(9)(10)
                         -------- ------ ------ ------- ------- ---------- ------------------
                                                    (IN THOUSANDS)
BALANCE SHEET DATA:
<S>                      <C>      <C>    <C>    <C>     <C>     <C>        <C>                <C>
Working capital.........  $  653  $   88 $2,370 $ 2,714 $ 1,104  $ 2,387
Net property, plant and
 equipment..............   3,337   2,952  3,582   4,079   5,546    6,043
Total assets............   6,921   7,069  8,584  14,980  27,582   31,456
Long-term debt..........   3,252   3,971  3,217   2,853   3,589    1,979
Stockholders' equity....   2,622   1,980  2,681   5,255   6,219    8,717
</TABLE>
 
                                      21
<PAGE>
 
--------
(1) Prior to December 31, 1992, the Company utilized a July 31 fiscal year
    end. Beginning in 1993, the Company adopted a calendar year as its fiscal
    year. Contract revenues for the five-month period ended December 31, 1992
    were approximately $2.6 million. Other statement of operations data for
    the five-month period ended December 31, 1992 have not been presented
    because the amounts were not material.
 
(2) The pro forma statement of operations data for the year ended December 31,
    1996 give pro forma effect to (i) the Friede Acquisition as if it had
    occurred as of the beginning of the period presented, (ii) a reduction in
    selling, general and administrative expenses to reflect (a) a reduction of
    compensation expense of approximately $2 million in the aggregate, the
    amount by which the compensation paid in 1996 to the Stockholder Employees
    exceeded the compensation levels set forth in the employment contracts
    entered into between the Company and the Stockholder Employees in May 1997
    and (b) the elimination of approximately $0.3 million of compensation
    expense attributable to the granting of common stock by one of the
    Predecessors to an employee in December 1996, and (iii) the
    Reorganization. See Note 3 below.
 
(3) Included in selling, general and administrative expenses are bonuses paid
    to the Stockholder Employees of approximately $0.2 million, $1.2 million
    and $2.1 million for the years ended December 31, 1994, 1995 and 1996,
    respectively, which were intended primarily to provide a means by which
    the Stockholder Employees could meet the individual income tax obligations
    arising from the pass through of the Company's taxable income to the
    Stockholder Employees due to the status of the Predecessors as S
    Corporations in 1996 and prior periods. See Note 6 below.
 
(4) The gain on asset sales in 1994 and 1996 resulted primarily from the sale
    of assets not used in the Company's operations. The gain on asset sales in
    1995 resulted from the sale of assets acquired from an affiliated entity.
    Gain on asset sales for the three months ended March 31, 1997 includes
    approximately $0.9 million related to the distribution of real estate held
    for investment and an airplane to the stockholders of one of the
    Predecessors. The assets were not used directly in the Company's
    operations. See Notes 7 and 14 of Notes to the historical financial
    statements of the Predecessors included elsewhere in this Prospectus.
 
(5) The litigation settlement in 1995 represents the amount received as a
    result of a claim by the Company against a general contractor for which
    the Company served as a subcontractor. The litigation settlement in 1996
    represents the amount received by the Company as a result of a claim
    against a customer. See Note 13 of Notes to the historical financial
    statements of the Predecessors included elsewhere in this Prospectus.
 
(6) The pro forma provision for income taxes gives pro forma effect to the
    application of federal and state income taxes to the Company as if it were
    a C Corporation for tax purposes. For all periods presented herein, the
    Company and the Predecessors have operated as S Corporations for federal
    and state income tax purposes. Immediately prior to the Offering, the
    stockholders of the Company and the Predecessors intend to make elections
    terminating the S Corporation status of the Company and the Predecessors.
    As a result, the Company will become subject to corporate level income
    taxation. See "The Company--Corporate Restructuring," "Management's
    Discussion and Analysis of Financial Condition and Results of Operations"
    and Notes 1 and 2 of Notes to the historical financial statements of the
    Predecessors included elsewhere in this Prospectus.
 
(7) Pro forma net income per share is calculated by dividing the pro forma net
    income by the 9,200,000 shares outstanding immediately after the
    Reorganization as if such shares had been outstanding throughout each
    period presented. See "The Company--Corporate Restructuring."
 
(8) EBITDA represents operating income plus depreciation, amortization and
    non-cash compensation expense related to the issuance of stock and stock
    options to employees. EBITDA is not presented as an indicator of the
    Company's operations or performance or as a measure of liquidity
    calculated in accordance with generally accepted accounting principles.
 
(9) The pro forma balance sheet data of the Company as of March 31, 1997 gives
    pro forma effect to (i) the distribution of cash to the stockholders of
    one of the Predecessors prior to the closing of the Offering in an amount
    equal to the estimated federal and state income taxes payable by such
    stockholders on the
 
                                      22
<PAGE>
 
     undistributed earnings of such Predecessor through the closing of the
     Offering, (ii) the distribution of marketable securities and the assumption
     by such stockholders of the margin account indebtedness associated with
     such marketable securities, (iii) borrowings under the Company's revolving
     credit facility to fund the cash portion of such distribution to such
     stockholders, (iv) the recording of a deferred tax liability as a result of
     the termination of the status of the Predecessors as S Corporations prior
     to the closing of the Offering and (v) the Reorganization, in each case as
     if such event had occurred as of March 31, 1997. See "The Company--
     Corporate Restructuring" and "Capitalization."
     
(10) Assumes the public offering of 2,300,000 shares of Common Stock by the
     Company at an assumed price of $     per share resulting in net proceeds
     of $     million (after deducting the underwriting discount and expenses
     of the Offering estimated at $     million) and the application thereof
     as described herein. See "Use of Proceeds."
 
                                      23
<PAGE>
 
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
 
INTRODUCTION
 
  The Company's results of operations are affected primarily by conditions
affecting offshore drilling contractors, including the level of offshore
drilling activity by oil and gas companies. The level of offshore drilling
activity is affected by a number of factors, including prevailing and expected
oil and natural gas prices, the cost of exploring for, producing and
delivering oil and gas, the sale and expiration dates of offshore leases in
the United States and overseas, the discovery rate of new oil and gas reserves
in offshore areas, local and international political and economic conditions
and the ability of oil and gas companies to access or generate capital
sufficient to fund capital expenditures for offshore exploration, development
and production activities. Improving oil and gas price levels over the past
five years have led to increased drilling activity in the Gulf of Mexico. This
increase in drilling activity is also attributable to a number of recent
industry trends, including three-dimensional seismic mapping, directional
drilling and other advances in technology that have increased drilling success
rates and efficiency and have led to the discoveries of oil and gas in subsalt
geological formations (which generally are located in depths of 300 to 800
feet of water) and deepwater areas of the Gulf of Mexico. In the deepwater
areas where larger and more technically advanced drilling rigs are needed,
increased drilling activity has increased demand for retrofitting offshore
drilling rigs and improved pricing levels for such services. In addition,
increased drilling activity in and around more mature fields in shallower
waters has contributed to the increase in demand for conversion, retrofit and
repair services for jackups and other offshore drilling rigs.
 
  The Company believes that the current supply of offshore drilling rigs
worldwide is inadequate to satisfy increasing demand. From 1985 to 1996, there
has been a decrease in the number of offshore drilling rigs worldwide from 809
to 639 rigs. The Company believes that, of the 366 jackups currently marketed
worldwide, only 47 are capable of drilling in water depths greater than 300
feet and, of the 139 semisubmersibles currently marketed worldwide, only 25
are capable of drilling in water depths greater than 3,000 feet. In addition,
substantially all of the current fleet of offshore drilling rigs were built
more than ten years ago, and many of these rigs need to be converted or
modified in order to continue to operate economically or to meet the
requirements for deepwater drilling.
 
  Due to increased demand for its services, the Company's backlog has
increased from $15.4 million at March 31, 1996 to $65.5 million at March 31,
1997. To accommodate this increased demand, the Company has recently leased
additional acreage adjacent to its existing shipyard in Pascagoula,
Mississippi that provides it with additional dockspace and covered fabrication
capacity and has increased its workforce from approximately 300 employees at
December 1, 1996 to approximately 800 employees at March 31, 1997. In
addition, the Company plans to commence construction in the second quarter of
1997 of a state-of-the-art shipyard that will be capable of constructing new
offshore drilling rigs and production units as well as converting,
retrofitting and repairing existing offshore drilling rigs and production
units.
 
  The Company generally performs conversion, retrofit and repair services
pursuant to contracts that provide for a portion of the work to be performed
on a fixed-price basis and a portion of the work to be performed on a cost-
plus basis. In addition, the scope of the services to be performed with
respect to a particular drilling rig often increases as the project progresses
due to additional retrofits or modifications requested by the customer or
additional repair work necessary to meet the safety or environmental standards
established by the Coast Guard or other regulatory authorities. With respect
to the fixed-price portions of a project, the Company receives the negotiated
contract price, subject to adjustment only for change orders placed by the
customer. As a result, under fixed price arrangements, the Company retains all
cost savings but is also responsible for all cost over-runs. Under cost-plus
arrangements, the Company receives specified amounts in excess of its direct
labor and materials cost so that it is protected against cost overruns but
does not benefit from cost savings. The cost and productivity of the Company's
labor force are primary factors affecting the Company's operating profits.
Accordingly, control by the Company of the cost and productivity of direct
labor hours worked on its projects is essential. The
 
                                      24
<PAGE>
 
Company has developed a cost reporting system that provides accurate cost
information to the Company's project managers on a daily basis. The Company
believes that the access to information provided in this system allows it to
better manage its current projects as well as to negotiate contracts on new
projects on a profitable basis. See "Business--Customers and Marketing."
 
  The Company's operations are subject to variations from quarter to quarter
resulting from fluctuations in demand for the Company's services and, due to
the large amounts of revenue that are typically derived from a small quantity
of projects, the timing of the receipt of awards for new projects. In
addition, the Company schedules projects based on the timing of available
capacity to perform the services requested and, to the extent that there are
delays in the arrival of a drilling rig or production unit into the shipyard,
the Company generally is not able to utilize the excess capacity created by
such delays. Although the Company may be able to offset the effect of such
delays through adjustments to the size of its skilled labor force on a
temporary basis, such delays may adversely affect the Company's results of
operations in any period in which such delays occur.
 
  The Company's revenue on contracts is earned, for the most part, on the
percentage-of-completion method based upon the percentage that incurred costs
to date bear to total estimated costs. Accordingly, contract price and costs
estimates are reviewed periodically as the work progresses, and adjustments
proportionate to the percentage of completion are reflected in the accounting
period in which the facts which require such adjustments become known.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Other changes, including those
arising from contract penalty provisions and final contract settlements, are
recognized in the period in which the revisions are determined. To the extent
that these adjustments result in a reduction or elimination of previously
reported profits, the Company would report such a change by recognizing a
charge against current earnings, which might be significant depending on the
size of the project or the adjustment. Cost of revenue includes costs
associated with the fabrication process and can be further broken down between
direct costs (such as direct labor hours and raw materials) allocated to
specific projects and indirect costs (such as supervisory labor, utilities,
welding supplies and equipment costs) that are associated with production but
are not directly related to a specific project.
 
  Each of HAM Marine and Friede & Goldman has operated as an S Corporation for
federal and state income tax purposes. As a result, each of the Predecessors
currently pays no federal or state income tax, and their earnings are subject
to tax directly at the stockholder level. Immediately prior to the completion
of the Offering, the stockholders of each of the Predecessors intend to make
an election to terminate the S Corporation status of such Predecessors.
Accordingly, each of the Predecessors will become subject to corporate level
income taxation and, as a result, the Company will be required to record a net
deferred income tax liability through a charge to earnings estimated to be
approximately $0.8 million in the second quarter of 1997 attributable
primarily to the difference in financial reporting and tax reporting methods
of accounting for depreciation and sales-type leases.
 
RESULTS OF OPERATIONS
 
 Comparison of Three Months Ended March 31, 1996 and 1997
 
  During the three months ended March 31, 1997, the Company generated revenue
of $18.7 million, an increase of 529%, compared to the $3.0 million generated
in the three months ended March 31, 1996. This increase reflects the
substantial increase in demand for conversion and retrofit services for the
three months ended March 31, 1997, including a greater number of relatively
larger projects, as compared to the three months ended March 31, 1996.
 
  Cost of revenue was $12.8 million for the three months ended March 31, 1997,
compared to $2.4 million for the three months ended March 31, 1996, reflecting
the significant increase in contract revenue. Gross profit for the three
months ended March 31, 1997 was $5.9 million as compared to $0.5 million for
the three months ended March 31, 1996. As a percent of revenue, gross profit
for the three months ended March 31, 1997 increased as a result of the nature
of the projects being performed. Generally, larger scale conversion and
modification projects provide an opportunity for a higher gross profit than do
repair and inspection services.
 
                                      25
<PAGE>
 
  Selling, general and administrative expenses ("SG&A expenses") were $2.5
million for the three months ended March 31, 1997 compared to $0.9 million for
the three months ended March 31, 1996. The increase in SG&A expenses is
primarily the result of the expansion of the Company's administrative staff
and facilities in relation to increased contract activity. SG&A expenses for
the three months ended March 31, 1997 also include $0.4 million in non-cash
compensation expenses related to stock granted to an employee. The decline in
SG&A expenses as a percent of revenue for the three months ended March 31,
1997 as compared to the three months ended March 31, 1996 is a result of the
relatively low level of contract activity in the three months ended March 31,
1996.
 
  Operating income increased to $3.3 million for the three months ended March
31, 1997, from an operating loss of $0.4 million for the three months ended
March 31, 1996, reflecting primarily the significant increase in contract
revenue and related gross profit.
 
  Net interest expense was $0.1 million for each of the three months ended
March 31, 1997 and 1996, reflecting a relatively stable interest rate
environment and a consistent level of net borrowings by the Company.
 
  During the three months ended March 31, 1996, the Company received
approximately $3.5 million in proceeds from the settlement of a lawsuit filed
in 1992 related to a contract. There were no similar settlement proceeds
received in 1997.
 
  In the three months ended March 31, 1997, the Company realized a gain of
approximately $0.9 million as a result of the distribution of certain
appreciated assets not used in the business to the stockholders of one of the
Predecessors. Also, gains of approximately $0.5 million resulted from the sale
of real estate held for investment and marketable securities. The gain on the
asset sales in the three months ended March 31, 1996 relates primarily to the
sale of marketable securities.
 
  The pro forma provision for income taxes is the result of the application of
a combined federal and state tax rate (37%) to income before income taxes.
Prior to consummation of the Offering, the Predecessors will terminate their
status as S Corporations, and, as a result, the Predecessors will become tax
paying entities.
 
 Comparison of the Years Ended December 31, 1996 and 1995
 
  During the year ended December 31, 1996, the Company generated revenue of
$21.8 million, an increase of 9.5%, compared to the $19.9 million generated in
1995. This increase was caused primarily by an increase in overall demand for
conversion and retrofit services and a general increase in the size of the
conversion and retrofit projects in 1996 as compared to 1995.
 
  Cost of revenue was $15.8 million in 1996 compared to $13.5 million in 1995,
resulting in a decline in gross profit from $6.4 million in 1995 to $6.0
million in 1996. This decline is primarily the result of the change in nature
of the contracts performed in each year. In 1995, a much larger portion of
contract revenue was derived from contracts performed under a pooled resources
arrangement between the Company and PMB Engineering, Inc. ("PMB"), a
subsidiary of Bechtel Corporation. See "Business--PMB Arrangement." Under this
arrangement, the Company's cost of revenue consisted primarily of direct and
indirect labor related charges. Gross profit, as a percentage of revenue,
under such arrangements was generally higher than under contracts performed
solely by the Company. For contracts performed solely by the Company, cost of
contract revenue includes charges related to materials purchased on which the
gross profit percentage realized by the Company is generally lower, resulting
in an lower overall gross profit percentage.
 
  SG&A expenses were $5.9 million in 1996 compared to $3.9 million in 1995.
SG&A expenses for 1996 and 1995 include bonuses of approximately $2.1 million
and $1.2 million, respectively, paid to the Stockholder Employees. SG&A
expenses for 1996 include $0.3 million of compensation expense related to the
issuance of stock to an employee of one of the Predecessors. Excluding such
bonuses from both years and the compensation expense related to the issuance
of stock, SG&A expenses increased by approximately $0.8 million. Such increase
is primarily the result of costs incurred by the Company related to increased
business development activities,
 
                                      26
<PAGE>
 
including the pursuit of alternatives to increase the Company's shipyard
capacity, the opening of a Houston sales office and an increase in charitable
contributions resulting from a one-time contribution of real property to a
college.
 
  Operating income declined by $2.4 million as a result of a slightly lower
gross profit margin combined with higher SG&A expenses. Excluding the effect
of the increase in bonuses and the issuance of stock discussed above,
operating income declined approximately $1.2 million, reflecting the change in
gross profit margin and the increase in SG&A expenses.
 
  Net interest expense increased to $0.4 million in 1996 from $0.2 million in
1995. Interest expense increased by $0.2 million as a result of increased
borrowings to finance capital expenditures and approximately $2.1 million in
increased brokerage margin account borrowings. Interest income remained
constant at approximately $0.4 million, representing primarily interest on
certificates of deposit pledged against borrowings and interest earned on a
sales-type lease.
 
  During 1996, the Company received approximately $3.5 million in proceeds
from the settlement of a lawsuit filed in 1992 related to a contract. In 1995,
the Company received $0.8 million in settlement proceeds related to a claim
against a general contractor for which the Company had served as a
subcontractor.
 
  The gain on the sale of assets in 1996 relates to the disposition of certain
nonoperating assets, primarily land, and, to a lesser degree, the sale of
certain marketable securities. The 1995 gain on sale of assets relates to the
sale, under a sales-type lease, of certain land, buildings and a dock facility
formerly operated by the Company.
 
  The pro forma provision for income taxes is the result of the application of
a combined federal and state tax rate (37%) to income before income taxes.
Prior to the consummation of the Offering, the Predecessors will terminate
their status as S Corporations, and, as a result, the Predecessors will become
tax paying entities.
 
 Comparison of the Years Ended December 31, 1995 and 1994
 
  During the year ended December 31, 1995, the Company generated revenue of
$19.9 million, a decrease of 16.7%, compared to the $23.9 million generated in
1994. This decrease was caused primarily by a decrease in demand for
conversion and retrofit services and a general decrease in the size of the
conversion and modification projects in 1995 as compared to 1994. In February
1994, the Company entered into a pooled resources arrangement with PMB which
resulted in a large contract that accounted for approximately $16.2 million in
contract revenues in 1994 and $8.7 million in contract revenues in 1995.
 
  Cost of revenue was $13.5 million in 1995 compared to $18.1 million in 1994,
resulting in an increase in gross profit from $5.8 million in 1994 to $6.4
million in 1995. This increase is primarily as a result of change orders and
contract renegotiations which occurred in 1995 during the later stages of a
major contract begun in 1994, thereby enabling the Company to realize a higher
gross profit than was realized in 1994 during the earlier stages of the
contract.
 
  SG&A expenses were $3.9 million in 1995 compared to $2.2 million in 1994.
SG&A expenses for 1995 include bonuses of approximately $1.2 million paid to
the Stockholder Employees whereas SG&A expenses for 1994 include only $0.2
million of such bonuses. Excluding such bonuses from both years, SG&A expenses
increased by approximately $0.7 million in 1995. Such increase is primarily
the result of increases in marketing and corporate travel, and the addition to
administrative personnel.
 
  Operating income declined by $1.1 million from 1994 to 1995 primarily as a
result of higher SG&A expenses. Excluding the effect of the increases in
bonuses discussed above, operating income declined approximately $0.1 million
reflecting the increase in gross profit and the increase in SG&A expenses
discussed above.
 
 
                                      27
<PAGE>
 
  Net interest expense decreased from $0.3 million in 1994 to $0.2 million in
1995. Interest expense increased by $0.3 million as a result of increased
borrowings to finance capital expenditures and to provide working capital.
Interest income increased by $0.4 million, representing primarily interest on
certificates of deposit pledged against borrowings and interest earned on a
sales-type lease.
 
  The gain on the sale of assets in 1994 resulted primarily from the sales of
nonoperating assets.
 
PRO FORMA RESULTS OF OPERATIONS
 
  On December 2, 1996, the Company completed the Friede Acquisition. On a pro
forma basis for 1996, giving effect to the Friede Acquisition as if completed
on January 1, 1996, the Company's revenues would have been $25.5 million,
gross profit would have been $6.9 million and operating income would have been
$2.6 million. See the Pro Forma Statement of Operations of the Company and the
related notes thereto included elsewhere in this Prospectus.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  Historically, the Company has financed its business activities through funds
generated from operations, a credit facility secured by accounts receivable,
and long-term borrowings secured by assets purchased with proceeds from such
borrowings. Net cash provided by operations was $3.1 million, $0.3 million and
$4.9 million for 1994, 1995 and 1996, respectively and $1.1 million and $5.4
million for the three months ended March 31, 1996 and 1997, respectively. Net
borrowings from all credit arrangements were $0.1 million, $4.8 million and
$4.0 million for 1994, 1995 and 1996, respectively, and $1.7 million for the
three months ended March 31, 1996. For the three months ended March 31, 1997,
the Company made net repayments on all credit arrangements of $3.6 million.
 
  The Company's capital requirements historically have been primarily for
improvements to its facilities and related equipment. During 1996, capital
expenditures were approximately $2.4, including $1.2 million for the purchase
of cranes, $0.3 million for the improvements to existing facilities and $0.6
million for equipment. Capital expenditures were approximately $2.7 million in
1995 and $1.1 million in 1994, primarily for real estate and shipyard
equipment.
 
  At March 31, 1997, the Company had approximately $9.5 million of outstanding
indebtedness, of which approximately $3.8 million was secured by certificates
of deposit or marketable securities. Management expects to repay $1.1 million
of such indebtedness upon maturity of the remaining certificates of deposit in
July 1997. Of the remaining debt, approximately $1.4 million is secured by a
sales-type lease under which the lessee makes payments directly to the lender.
 
  At March 31, 1997, the Company held marketable securities with a fair market
value of approximately $4.8 million that were considered available for sale.
At March 31, 1997, the Company also owed $2.7 million on brokerage margin
account borrowings.
 
  In March 1997, HAM Marine entered into a new credit facility (the "Credit
Facility") which provides for borrowings of up to $10.0 million, subject to a
borrowing base limitation equal to 80% of eligible receivables. The Credit
Facility is secured by contract-related receivables. In connection with
obtaining the Credit Facility, HAM Marine repaid all outstanding indebtedness
under the provisions of the existing credit facility and such facility was
terminated. At March 31, 1997, $2.6 million was outstanding under the Credit
Facility and the borrowing base amount was $6.7 million. Borrowings under the
Credit Facility bear interest equal to the lender's prime lending rate plus
1/2% per annum. At March 31, 1997, the interest rate under the Credit Facility
was 9.0% per annum. The Credit Facility contains a number of restrictions,
including a provision which would prohibit the payment of dividends by HAM
Marine to the Company in the event that HAM Marine defaults under the terms of
such facility.
 
  The Company currently intends to utilize the net proceeds of the Offering to
fund a portion of its anticipated capital requirements over the next 12 to 18
months of between $50 million and $65 million, including (i) approximately $29
million to construct and equip its new shipyard, (ii) approximately $3 million
for capital
 
                                      28
<PAGE>
 
expenditures to increase the productive capacity and efficiency of its
existing shipyard, (iii) approximately $3 million for research and development
expenditures related to the design of new, technologically innovative offshore
drilling rigs and floating production units, (iv) between $10 million and $20
million of additional working capital related to increased levels of
conversion, retrofit and repair activities and new construction of offshore
drilling rigs and floating production units and (v) $5 million to $10 million
for general corporate purposes, which may include the establishment of a
manufacturing operation, either at the Company's shipyards or at another
location, that would be capable of constructing and assembling components of
new-build jackups or the acquisition of one or more businesses that are
complementary to the Company's operations. The Company would expect to fund
the remaining portion of its anticipated capital requirements from cash flow
from operations, borrowings available under its existing revolving credit
facility or additional borrowings. Pending the Company's use of the net
proceeds of the Offering, the Company intends to repay borrowings under its
existing revolving credit facility ($2.6 million in principal amount of
borrowings outstanding as of March 31, 1997 and $7.2 million as of March 31,
1997 giving pro forma effect to borrowings to be incurred to fund a
distribution of proceeds to the stockholders of one of the Predecessors prior
to the closing of the Offering) and to invest the remaining net proceeds to be
received by it from the Offering in short-term, investment-grade, interest-
bearing instruments.
 
  As an additional source of borrowing capacity, the Company has filed an
application with the United States Maritime Administration ("MARAD") for up to
$24.8 million of Title XI financing ("MARAD financing") which, if approved,
would enable the Company to sell bonds guaranteed by the full faith and credit
of the United States. The MARAD financing, if obtained, may be used only for
capital expenditures relating to the costs of constructing and equipping the
Company's new shipyard. In May 1997, MARAD approved the Company's eligibility
for such amount of financing for purposes of constructing and equipping the
new shipyard. The company is in the process of completing the necessary
documentation for obtaining the MARAD guarantee to be used in connection with
such financing. If such guarantee is obtained, the terms of the MARAD
financing would permit the Company to issue and sell bonds in increments. Due
to the generally favorable interest rates and payment terms of MARAD
financing, the Company anticipates that, if the MARAD financing is approved,
it would sell bonds under the MARAD financing arrangement in increments as
capital expenditures are incurred with respect to the new shipyard. Any funds
obtained from the MARAD financing would result in the availability of other
sources of capital, including proceeds from the Offering, cash from operations
and other borrowings, for use to satisfy the Company's other capital
requirements described above. There can be no assurance that any such MARAD
financing will be obtained.
 
  Management believes that the net proceeds from the Offering, cash generated
by operating activities, and funds available under the Credit Facility will be
sufficient to fund the construction of the new shipyard and its working
capital needs at current levels of activity; however, additional debt
financing (such as the MARAD financing) or equity financing may be required in
the future if the Company increases its conversion, retrofit and repair
business or obtains orders to construct new drilling rigs or production units.
Although the Company believes that, under such circumstances, it would be able
to obtain additional financing, there can be no assurance that any additional
debt or equity financing will be available to the Company for these purposes
or, if available, will be available on terms satisfactory to the Company.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
  In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of"
("SFAS No. 121"). The Company adopted SFAS No. 121 on January 1, 1996 and
there was no material impact on the Company's financial statements.
 
  In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation." The disclosure
requirements of this Statement are effective for the Company's financial
statements beginning in fiscal 1996. The Company intends to apply the
accounting provisions of Account Principles Board Opinion 25, "Accounting for
Stock Issued to Employees." With the Company's plan of adoption, the impact
will be limited to additional footnote disclosure.
 
                                      29
<PAGE>
 
  In March 1997, the FASB issued Statement of Financial Accounting Standards
No. 128 ("SFAS No. 128"), "Earnings Per Share," which adopts a revised
methodology for computing earnings per share for publicly owned companies. The
Company will be required to adopt the new methodology in the fourth quarter of
1997 and could also be required to restate previously reported amounts. Early
adoption of SFAS No. 128 is not permitted. The Company does not expect the
application of SFAS No. 128 to materially change the Company's reported
earnings per share.
 
                                      30
<PAGE>
 
                                   BUSINESS
 
  Friede Goldman International Inc. is a leading provider of conversion,
retrofit and repair services for offshore drilling rigs, including jackups,
submersibles, semisubmersibles and drillships, and has entered the emerging
market for conversion of offshore drilling units and tankers into deepwater
FPSOs. In the last seven years, the Company has completed 47 offshore drilling
rig conversion or retrofit projects, which the Company believes is more than
any other shipyard company in the United States. The Company, through its
acquisition of Friede & Goldman in December 1996, is one of the world's
largest designers of offshore drilling rigs. The Company offers its customers
a full range of design, engineering, construction, conversion, retrofit and
repair services for offshore drilling rigs, including construction of new-
build offshore drilling rigs. The Company's customers consist primarily of
drilling contractors that drill offshore exploratory and development wells for
oil and gas companies throughout the world, particularly in the Gulf of
Mexico, the North Sea and areas offshore of West Africa and South America.
 
  The Company currently operates a 32-acre shipyard that is strategically
located in Pascagoula, Mississippi with direct access to the Gulf of Mexico.
The shipyard has the capacity to provide conversion, retrofit and repair
services on six offshore drilling rigs simultaneously. Due to increased demand
for its services, the Company has increased its backlog from $15.4 million at
March 31, 1996 to $65.5 million at March 31, 1997. To accommodate this
increased demand, the Company has recently leased additional dock space and
fabrication buildings adjacent to its existing shipyard in Pascagoula,
Mississippi and has increased its workforce from approximately 300 employees
at December 1, 1996 to approximately 800 employees at March 31, 1997.
 
  The Company plans to commence construction in the second quarter of 1997 of
a new state-of-the-art shipyard on a 105-acre site located approximately six
miles from the existing shipyard. The new shipyard has been designed
specifically to promote the most timely and efficient construction of new
offshore drilling rigs, and could also be used for conversion, retrofit and
repair services. The Company believes that the expected efficiencies of its
new shipyard, together with the Company's offshore drilling rig design
capabilities, its established relationships with its drilling contractor
customers and its extensive construction experience, will provide the Company
with competitive advantages in the developing market for new construction of
offshore drilling rigs. In addition, the Company may use its shipyards, or
establish a separate manufacturing facility, to construct and assemble various
components of Friede & Goldman designed jackups that it would sell as kits
that could be used in the construction of new-build jackups either at the
Company's shipyards or other shipyards. These kits would include such
manufactured components, including Friede & Goldman's patented rack chock leg
fixation system, and a Friede & Goldman jackup design.
 
OFFSHORE DRILLING INDUSTRY
 
 The level of worldwide offshore drilling activity has increased substantially
over the last two years, resulting in an increase in worldwide drilling rig
utilization to 99% in May 1997. Dayrates worldwide for cantilever jackups
capable of drilling in water depths of 300 or more feet have increased from an
average of $37,000 in May 1996 to an average of $61,000 in May 1997, with a
recently reported high of $116,000. Similarly, dayrates worldwide for third
and forth generations of semisubmersibles have increased from an average of
$81,000 in May 1996 to an average of $110,000 in May 1997, with a recently
reported high of $175,000. In addition, oil and gas operators have recently
begun to enter into multi-year contracts with drilling contractors for
offshore drilling rigs due to the tightness of supply for available units. In
deepwater areas where larger and more technically advanced drilling rigs are
needed, increased drilling activity has also increased demand for retrofitting
offshore drilling rigs to enhance their technical capabilities and improved
pricing levels for such services. In addition, increased drilling activity in
and around more mature fields in shallower waters has contributed to the
increase in demand for conversion, retrofit and repair services for jackups
and other offshore drilling rigs.
 
  The Company believes that these positive trends will continue due to (i) the
increasing percentage of worldwide oil supply being produced from offshore
areas, (ii) the large increases in cash flow experienced by many oil and gas
companies, (iii) the increases in capital expenditure budgets for offshore
drilling activity by oil
 
                                      31
<PAGE>
 
and gas companies, (iv) technological advancements relating to exploration,
development and production techniques, including three-dimensional seismic
mapping and geological interpretation, directional drilling and subsea
completions, that have increased drilling success rates and improved
efficiencies of development and production activities and (v) the increased
focus on deepwater exploration and production projects, particularly in the
Gulf of Mexico, as evidenced by significant increases in the number of
deepwater blocks under lease and the prices paid for deepwater leases during
each of the last five years and the record $1.25 billion paid for offshore
leases at the most recent lease sale held in March 1997.
 
  The Company believes that the current supply of offshore drilling rigs
worldwide is inadequate to satisfy increasing demand. From 1985 to 1996, there
has been a decrease in the total number of offshore drilling rigs worldwide
from 809 to 639 rigs. The Company believes that, of the 366 jackups currently
marketed worldwide, only 47 are capable of drilling in water depths greater
than 300 feet and, of the 139 semisubmersibles currently marketed worldwide,
only 25 are capable of drilling in water depths greater than 3,000 feet. In
addition, substantially all of the current fleet of offshore drilling rigs
were built more than ten years ago, and many of these rigs need to be
converted or modified in order to continue to operate economically or to meet
the requirements for deepwater drilling.
 
COMPETITIVE STRENGTHS
 
  The Company believes that one of its principal competitive strengths is its
capability to offer its drilling contractor customers a full range of design,
engineering, construction, conversion, retrofit and repair services for
offshore drilling rigs, including construction of new-build offshore drilling
rigs. The Company also believes that its reputation for quality and
reliability, its long-standing relationships with most of the large offshore
drilling contractors, its experienced management team, its existing skilled
labor force and its extensive fabrication and construction experience are
competitive strengths. In addition, the Company's existing shipyard and the
site for its proposed new shipyard are located in an area that has a long
history of shipyard activity due to its access to the Gulf of Mexico. As a
consequence of slowdowns in the construction of other types of marine ships
and vessels, particularly those used for military defense purposes, the
Company believes that there are currently additional skilled workers available
in this area whom the Company could employ to the extent necessary to satisfy
any increased demand for conversion, retrofit and repair services and to staff
the new shipyard.
 
CURRENT ACTIVITIES
 
  The following table sets forth certain information relating to the
conversion, retrofit and repair projects as to which the Company is currently
involved or recently completed.
 
<TABLE>
<CAPTION>
                                         NAME OF
          CUSTOMER   TYPE OF RIG      DRILLING RIG        NATURE OF PROJECT
          --------   -----------      ------------        -----------------
<S>                <C>               <C>              <C>
Noble Drilling      Jackup            Bill Jennings   Convert slot jackup to
 Corporation                                          cantilevered jackup
Noble Drilling      Jackup            Leonard Jones   Convert slot jackup to
 Corporation                                          cantilevered jackup
Sedco Forex S.A.    Semisubmersible   Bill Shoemaker  Retrofit semisubmersible
                                                      for deepwater capabilities
Noble Drilling      Semisubmersible   Paul Romano     Convert submersible to
 Corporation                                          semisubmersible with
                                                      deepwater capabilities
Marine Drilling     Jackup            Marine 15       Replace hull and quarters
 Companies, Inc.                                      damaged by fire
Diamond Offshore    Semisubmersible   Saratoga        Perform U.S. Coast Guard
 Drilling, Inc.                                       mandated 5-year inspection
</TABLE>
 
                                      32
<PAGE>
 
OVERVIEW OF OFFSHORE DRILLING EQUIPMENT
 
  The Company's primary customers are drilling contractors with operations in
the Gulf of Mexico, the North Sea, offshore West Africa and South America and
other offshore areas of the world. These drilling contractors generally own
and operate offshore drilling rigs and provide drilling services to oil and
gas companies. Several factors determine the type of rig most suitable for a
particular project, the more significant of which are the marine environment,
water depth and seabed conditions at the proposed drilling location, whether
the drilling is to be done over a production platform or other fixed
structure, the intended well depth, and variable deck load and well control
requirements. A brief description of the types of offshore drilling rigs and
production units currently serviced by the Company is set forth below.
 
  SEMISUBMERSIBLES. Semisubmersible rigs consist of an upper working and
living deck resting on vertical columns connected to lower hull members. Such
rigs operate in a "semi-submerged" position, remaining afloat, in a position
which places the water-line approximately half way between the top of the
lower hulls and bottom of the deck. The rig is typically anchored in position
and remains stable for drilling in the semi-submerged floating position.



                            [GRAPHIC APPEARS HERE]

 
 
          FRIEDE & GOLDMAN DESIGN PACESETTER - CLASS SEMISUBMERSIBLE
 
  There have been four generations of semisubmersible drilling rigs, with each
successive generation incorporating improvements which enable the rigs to
drill more efficiently and in increasingly harsh marine environments. Fourth
generation semisubmersibles are typically capable of operating in water depths
of up to 5,000 feet and, in some cases, greater depths. Certain fourth
generation semisubmersibles are equipped with computer controlled thrusters to
allow for dynamic positioning of the rig, which allows it to remain on
location over a drillsite in deep waters without the use of anchors.
 
  While the Company has performed some modification and repair work on fourth
generation semisubmersibles, the majority of the Company's work to date has
involved the retrofit and repair of earlier generation semisubmersibles which
generally operate in maximum water depths of between 1,000 to 2,000 feet. The
design of many of these semisubmersible rigs, including long fatigue-life and
advantageous stress characteristics, together with increasing demand for
deepwater drilling capabilities have made them well-suited for significant
retrofitting projects. The Company has completed 17 projects involving
semisubmersibles and is currently working on a conversion of a submersible rig
to a semisubmersible rig, the retrofit of a semisubmersible for deepwater
capabilities and one inspection of a semisubmersible required by U.S. Coast
Guard regulations.
 
  JACKUPS. Jackup rigs are mobile, self-elevating drilling platforms equipped
with legs that are lowered to the ocean floor until a foundation is
established to support the drilling platform. The rig hull includes the
drilling rig, jacking system, crew quarters, loading and unloading facilities,
storage areas for bulk and liquid materials,
 
                                      33
<PAGE>
 
heliport and other related equipment. Jackups are used extensively for
drilling in water depths from 20 feet to 400 feet. Some jackup rigs have a
lower hull (mat) attached to the bottom of the rig legs, while others have
independent legs.



                            [GRAPHIC APPEARS HERE]

 
 
                     FRIEDE & GOLDMAN DESIGN L-780 JACKUP
 
  Jackup rigs can be generally characterized by their design as either slot
jackups or cantilevered jackups. Slot jackups are generally of an older
vintage and are configured for drilling operations to take place through a
slot at the aft of the hull. A slot design is generally appropriate for
drilling exploratory wells in the absence of any existing permanent structure,
such as a production platform. A cantilevered jackup can extend its drill
floor and derrick and either drill exploratory wells or drill over an
existing, fixed structure, thereby permitting the rig to drill new wells or
work over existing wells through such a structure. Many slot-design rigs have
been converted to cantilever configurations. The Company has completed 27
projects involving jackups and is currently working on conversions of two slot
jackups to cantilevered jackups as well as replacing the hull and quarters of
a third jackup damaged by fire.
 
  DRILLSHIPS. Drillships, which are typically self-propelled, are positioned
over a drillsite through the use of either a mooring system or a computer
controlled thruster (dynamic positioning) system similar to those used on
certain fourth generation semisubmersible rigs. Drillships are capable of
operating in water depths ranging from 200 feet to 10,000 feet.



                            [GRAPHIC APPEARS HERE] 

 

                       FRIEDE & GOLDMAN DESIGN DRILLSHIP
 
                                      34
<PAGE>
 
  FLOATING PRODUCTION FACILITIES. A floating production facility ("FPF")
consists of a ship or semisubmersible vessel upon which drilling and
production equipment is mounted. In most cases, the hull is a converted tanker
(often referred to as a floating, production, storage and offloading, or FPSO,
unit). In addition, semisubmersible drilling units have been converted into
floating production units. In a few cases, a new hull has been purpose-built
as a FPF. For harsh weather locations, FPFs are designed with a mooring system
that provides weathervaning capability so that the FPF can be rotated on
location to minimize the effects of wave, wind and current actions. The
production risers in these FPFs are connected to the hull through a swivel
system that also accommodates the mooring system. The hull of an FPF is
typically used for on-board oil storage, which is an important feature for
remote locations where export pipelines are not available and fixed oil
storage availability is limited or nonexistent. The Company has been involved
in the conversion of a tanker into a FPSO and the conversion of a
semisubmersible into a FPS.
 


                             [PHOTO APPEARS HERE] 


 
                         FRIEDE & GOLDMAN DESIGN FPSO
 
DESCRIPTION OF OPERATIONS
 
  The Company's current operations consist primarily of conversion, retrofit
and repair projects for offshore drilling contractors. In the last seven
years, the Company has been involved in 47 conversion, retrofit or repair
projects, consisting of 27 jackup projects, 17 semisubmersible projects and
three submersible projects. Significant conversion or retrofit projects such
as these generally take eight to 14 months to complete, whereas certain repair
projects may require only one to three months to complete. A brief summary of
the types of projects the Company completes is set forth below.
 
  CONVERSIONS. Conversions consist generally of the conversion of one type of
drilling rig into a different type, such as the conversion of a slot jackup to
a cantilevered jackup, the conversion of a submersible rig to a
semisubmersible rig, or the conversion of a drilling rig or tanker into a FPF.
The Company has completed four conversions since 1988. Of these conversions,
three consisted of converting drilling rigs (jackups and semisubmersibles)
into FPFs and the other conversion consisted of the conversion of a
supertanker into a FPSO. FPF conversions typically require the demolition and
removal of all drilling equipment and substructure (including the derrick
system, rotary system, tubulars, mud treating and pumping units and well
control systems) and the reconfiguration of the decks to accommodate heavy
skid mounted processing modules and production risers and handling equipment.
This production equipment is then interconnected through the installation of
piping, electrical wiring and walkways. Because production, processing and
storage facility additions typically increase a rig's variable deck load, the
Company is typically required to complete hull reinforcements and buoyancy and
stability enhancements.
 
                                      35
<PAGE>

 
  The Company is currently in the process of converting two slot jackups to
cantilevered jackups and converting a submersible drilling rig into a
semisubmersible drilling rig.
 
  A description of selected conversion projects completed by the Company is
set forth below:
 
<TABLE>
<CAPTION>
            CUSTOMER                     PROJECT TYPE               TASKS COMPLETED
            --------                     ------------               ---------------
 <C>                             <C>                           <S>
 Oceaneering Production          Conversion of a tanker into a . fabrication and
  Systems                        FPSO                            installation of 770
                                                                 tons of structural
                                                                 steel
                                                               . replacement of 130
                                                                 tons of deteriorated
                                                                 tank steel
                                                               . installation of 27
                                                                 process modules
                                                               . installation of 24,000
                                                                 feet of 18" process
                                                                 piping
                                                               . installation of 5,000
                                                                 feet of 26" ship
                                                                 service, ballast and
                                                                 cargo pipe
 Oceaneering International, Inc. Conversion of jackup to a FPF . removal of 550 tons of
                                                                 drilling equipment and
                                                                 substructure
                                                               . replacement of 60 leg
                                                                 members and joints and
                                                                 bottom shell plate
                                                               . installation of
                                                                 foundations and hull
                                                                 reinforcement for
                                                                 skid-on modules
                                                               . installation of
                                                                 production modules,
                                                                 together with piping,
                                                                 wiring, walkways and
                                                                 platforms
                                                               . installation of new
                                                                 heliport
                                                               . renovation of crew
                                                                 quarters
                                                               . installation of hull
                                                                 ventilation system
                                                               . installation of 10-
                                                                 year anode system for
                                                                 leg protection
</TABLE>
 
  RETROFITS. Retrofits consist generally of improvements to the technical
capabilities, tolerances and systems of drilling and production equipment.
Retrofits performed on semisubmersible rigs include buoyancy and stability
enhancements (typically pontoon extensions and additional column sponsons) and
the addition or improvement of self-propulsion systems, positioning thrusters
and self-contained mooring systems. Jackup retrofits include strengthening and
extending the rig legs and reinforcing the spud cans on the existing legs.
 
  The Company is also capable of upgrading living quarters and facilities to
accommodate harsh environment drilling conditions and to meet North Sea
regulatory requirements, improving ventilation systems and strengthening or
replacing heliports to accommodate larger aircraft.
 
                                      36
<PAGE>
 
  A description of selected retrofit projects completed by the Company is set
forth below:
 
<TABLE>
<CAPTION>
           CUSTOMER                     PROJECT TYPE                TASKS COMPLETED
           --------                     ------------                ---------------
 <C>                           <C>                             <S>
 Sedco Forex S.A.              Semisubmersible retrofit        . dry dock of 12,000 ton
                                                                 rig
                                                               . modification and
                                                                 repair of pipe rack
                                                                 deck
                                                               . installation of 10-
                                                                 year anode system for
                                                                 leg protection
                                                               . installation of
                                                                 additional mud pits
                                                               . replacement of
                                                                 production piping
                                                               . fabrication and
                                                                 installation of hull
                                                                 sponsons
                                                               . fabrication and
                                                                 installation of third
                                                                 level quarters and
                                                                 helideck
 Hercules Offshore Corporation Jackup retrofit (legs and hull) . removal of existing
                                                                 lower legs
                                                               . repair and recondition
                                                                 at upper 140' of legs
                                                               . acquisition,
                                                                 fabrication and
                                                                 installation of new
                                                                 300 ton lower leg
                                                                 sections
                                                               . dry docking for
                                                                 replacement of 113
                                                                 tons of deteriorated
                                                                 steel in mat base
 Noble Drilling Corporation    Submersible retrofit and        . refurbishment of
                                                                 columns and footing
                               refurbishment                   . installation of
                                                                 permanent access and
                                                                 work platforms
                                                               . installation of water
                                                                 tight bulkhead and
                                                                 flats
                                                               . exterior blasting,
                                                                 cleaning and painting
 CONOCO, INC.                  TLP(1) retrofit                 . fabrication and
                                                                 installation of
                                                                 production manifolds
                                                               . installation of mud
                                                                 piping and completion
                                                                 fluid lines
                                                               . fabrication and
                                                                 installation of towing
                                                                 and mooring padeyes,
                                                                 production riser
                                                                 porches, drilling
                                                                 substructure landing
                                                                 guides
                                                               . exterior blasting,
                                                                 cleaning and painting
</TABLE>
--------
(1) Tension Leg Platform
 
  REPAIRS. The Company performs a broad range of inspection and repair work for
its clients. Necessary repairs are identified both in connection with retrofit
and conversion projects as well as in connection with periodic inspections
performed at the shipyard which are required by the U.S. Coast Guard and by
vessel classification societies such as the American Bureau of Shipping. Rigs
are typically inspected for systems operability and structural integrity, with
ultrasonic thickness gauge readings employed to detect structural fatigue or
aberrations. Repair work may include the repair or renewal of piping, spud
cans, electrical and drilling systems, removal and replacement of deteriorated
or pitted steel and blasting, coating and painting of exterior surfaces. The
Company's repair work has also included the refurbishment of drilling systems
as well as the overhaul of generators, boilers, condensers, ballast and cargo
valves, rig cranes and production compressors. The Company recently completed
the replacement of the hull and living quarters for a jackup.
 
PROPERTY AND EQUIPMENT
 
 PASCAGOULA SHIPYARD
 
  FACILITIES. The Company's principal shipyard is located on the Pascagoula
River in Pascagoula, Mississippi. The shipyard occupies 32 acres and includes a
1,000 foot long concrete cap pile reinforced dock with 38 feet of water depth
dockside. The shipyard is adjacent to the port's turning basin and has
unobstructed access to the Gulf of Mexico. The shipyard includes approximately
13,000 square feet of office space, a 4,500 square foot pipe shop, a 7,500
square foot structural shop and 24,000 square feet of fabrication platens. The
Company leases the shipyard from the Jackson County Port Authority pursuant to
a long-term lease which expires in May 2005
 
                                       37
<PAGE>
 
with two additional ten-year options for renewal. In December 1996, the
Company entered into a two-year lease for 522.5 additional feet of dockspace
and 160,000 additional square feet of covered fabrication areas adjacent to
its current facility. The Company is currently constructing a 20,000 square
foot building that will be used for engineering and administrative personnel,
which building is located on land covered by the long-term lease relating to
the main shipyard facility. This building is expected to be completed in July
1997.
 
  EQUIPMENT. The Company owns and has access to a broad range of material
handling, cutting and beveling, and blasting and painting equipment. Both the
fabrication shop and pipe shops at the existing shipyard are equipped with 10-
ton and 5-ton overhead gantry cranes. In addition, the Company has a 300-ton
barge mounted crane and one 600-ton, one 200-ton and three 150-ton mobile land
cranes. Other equipment includes six cherry pickers with capacities ranging
from 15 to 55 tons and three fork lifts.
 
  The Company utilizes a variety of oxy-gas cutting equipment for use in its
structural and piping work, including both manual hand-held equipment and
semi-automatic equipment. If appropriate for the work involved, the Company
also utilizes the services of numerous steel suppliers in the region who have
fully automatic multi-head equipment which produces materials which are fully
cut and beveled and ready for final assembly. The Company also owns a full
range of blasting and painting equipment capable of handling small and large
blasting and painting projects. The Company owns eight portable diesel
compressors ranging in size from 385 cubic feet per minute to 1,600 cubic feet
per minute totaling in excess of 9,000 cubic feet per minute for use in these
operations.
 
  The Company utilizes the services of local steel suppliers and vendors who
efficiently provide for the majority of the Company's plate forming and
rolling requirements.
 
 NEW SHIPYARD
 
  In December 1996, the Company entered into an agreement with the Port
Authority of Jackson County, Mississippi pursuant to which the Company will
develop a new shipyard on 105 acres located approximately six miles from the
Company's existing shipyard. The new shipyard will have approximately 40 feet
of water depth dockside and will have unobstructed access to the Gulf of
Mexico. The design for the state-of-the-art shipyard provides for extensive
use of automated construction equipment, floating and dockside cranes, panel
lines, launchways and 2,050 feet of reinforced bulkhead dockspace and an
additional 1,000 feet of dockspace that could be developed in the future.
Buildings planned to be constructed on the site include an assembly area
covering in excess of 100,000 square feet, a 45,000 square foot fabrication
building, a 15,000 square foot machinery building, a 10,000 square foot office
building and a 10,000 square foot pipe shop. Other planned buildings will
house a welding shop, paint storage, bulk gas storage, air compressor
facilities, a safety building and warehouse space. The new shipyard is
expected to cost approximately $29 million to construct and equip. In
connection with the construction of the new shipyard, the County of Jackson,
Mississippi has agreed to dredge the ship channel and build roads and other
infrastructure related to the new shipyard, at a total cost to the County of
approximately $6 million, under an economic incentive program. The Company
plans to commence construction of the new shipyard in the second quarter of
1997 and expects that the shipyard will be operational by early 1998 and
completed later that year.
 
 NEW MANUFACTURING OPERATION
 
  The Company is currently considering the establishment of a manufacturing
operation, either at its shipyards or at a separate location, that would be
capable of constructing and assembling various components of Friede & Goldman
designed jackups, including Friede & Goldman's patented rack chock leg
fixation system, the jacking system (gears, pinions, jacking motors and
jacking controls), leg racks, chords, tubular members and the jacking system
foundation structure. If the Company determines to pursue this operation, it
expects that it would sell these components, along with Friede & Goldman
jackup designs, as kits that could be used in the construction of new-build
jackups either at the Company's new shipyard or at other shipyards. The
Company anticipates that it would pursue the establishment of this operation
if it concludes that there is sufficient demand for these kits
 
                                      38
<PAGE>
 
and that such operation would be profitable in light of the necessary
expenditures involved and the anticipated revenues and costs associated with
such operation.
 
FRIEDE ACQUISITION
 
  In December 1996, a company owned by certain of the current stockholders of
the Company entered into an agreement, as amended (the "Purchase Agreement"),
with the Friede Predecessor and Jerome L. Goldman, the sole owner of Friede
Predecessor. Pursuant to the terms of the Purchase Agreement, the acquiring
company purchased all of the Friede Predecessor's assets used in the creation,
development, licensing and sale of engineering designs for mobile offshore
drilling units and mobile production vessels. Friede Predecessor retained all
assets used in the design of marine vessels such as river craft and oceangoing
ships. The purchased assets included the corporate name Friede & Goldman (and
variations thereof), certain patents as well as all completed and drilling
vessel designs under development, business methods, engineering, know-how,
blueprints, drawings and computer programs relating to drilling vessels. The
Purchase Agreement specifically excludes from the purchased assets Friede
Predecessor's Mod V and Mod VI drilling vessel designs. The Mod V and Mod VI
are jackup designs, commonly referred to as the "Monarch Class," "Galaxy
Class" or "Universe Class," and have been sold by Friede Predecessor under a
separate agreement to a Singapore shipbuilding company. Following the
completion of the Friede Acquisition, the acquiring company changed its name
to Friede & Goldman, Ltd., and the Friede Predecessor discontinued use of such
name as its company name.
 
  In conjunction with the execution of the Purchase Agreement, Friede
Predecessor entered into a non-competition agreement with Friede & Goldman
which prohibits Friede Predecessor from competing with Friede & Goldman (or
the Company) for a period of two years in Louisiana, Texas, Singapore, South
Korea, Japan, the United Kingdom, Norway and Brazil. Mr. Goldman likewise
entered into a ten-year consulting agreement with Friede & Goldman which
contains similar non-competition provisions. Friede & Goldman currently
employs most of Friede Predecessor's former employees.
 
  In addition to the cash consideration paid by Friede & Goldman to Mr.
Goldman, the Purchase Agreement requires Friede & Goldman, until December
2006, to pay Mr. Goldman certain licensing and design fees received by Friede
& Goldman from the designs of new-build independent leg jackups and
semisubmersible drilling rigs as well as a percentage of all amounts collected
from sales of a patented chocking system designed by Friede Predecessor, a
system which improves the strength of the connection between the legs and the
hull of a jackup drilling rig. Friede & Goldman is also required to make
payments to Mr. Goldman in the event that future sales of designs purchased
from Friede Predecessor and new designs developed by Friede & Goldman
constitute 20% or less of all new-build independent leg jackup and
semisubmersible drilling rigs for which construction has begun by domestic
drillers (other than any domestic driller that builds rigs for its own use
with its own shipyard) during any consecutive three-year period prior to the
end of the year 2006, with the first three-year period commencing at the time
construction begins with respect to a new-build drilling rig. In such an
event, Friede & Goldman is required to pay Mr. Goldman $300,000 (subject to
adjustment for inflation) for each drilling unit design sale by which Friede &
Goldman is short of the 20% threshold for any such three-year period, subject
to a maximum of $1 million for any such three-year period. In the event that
Friede & Goldman fails to make any of the payments described on a timely
basis, Friede Predecessor has the right to require that all of the assets
purchased from Friede Predecessor (other than the name "Friede & Goldman" and
derivatives thereof) be returned to Friede Predecessor and the right to
terminate the consulting and non-compete provisions of the Purchase Agreement.
 
MATERIALS
 
  The principal materials used by the Company in its fabrication business are
standard steel shapes, steel plate, pipe, welding wire and gases, fuel oil,
gasoline and paint. The Company believes that such materials are currently
available in adequate supply from many sources. The Company does not depend
upon any single supplier or source.
 
                                      39
<PAGE>
 
SAFETY AND QUALITY ASSURANCE
 
  Management is concerned with the safety and health of the Company's
employees and maintains a stringent safety assurance program to reduce the
possibility of accidents. The Company's safety department establishes
guidelines to ensure compliance with all applicable state and federal safety
regulations and provides training and safety education through orientations
for new employees and subcontractors, weekly crew safety meetings and first
aid and CPR training. The Company also employs a registered nurse as an in-
house medic. The Company has a comprehensive drug program and conducts
periodic employee health screenings. A safety committee, whose members consist
of management representatives and field supervisors, meet monthly to discuss
safety concerns and suggestions that could prevent future accidents. The
Company has contracted with a third party safety consultant to provide
training and suggestions and a licensed emergency medical technician in its
ongoing commitment to a safe and healthy work environment. The Company
believes that its safety program and commitment to quality are vital to
attracting and retaining customers and employees.
 
  The Company fabricates according to the standards of the American Bureau of
Shipping, Det Norski Veritas, American Petroleum Institute, the American
Welding Society, the American Society of Mechanical Engineers and specific
customer specifications. The Company uses welding and fabrication procedures
in accordance with the latest technology and industry requirements. Training
programs have been instituted to train skilled personnel and to maintain high
quality standards. In addition, the Company contracts with independent
contractors to perform x-ray inspections of steel and pipe welds. Management
believes that these programs enhance the quality of its products and reduce
their repair rate.
 
CUSTOMERS AND MARKETING
 
  The Company's customers are primarily offshore drilling contractors, many of
whom have been customers of the Company for more than 15 years, and the
Company believes that it has developed strong relationships with its customer
base. During the past five years, the Company has provided conversion,
retrofit and repair services to substantially all of the large offshore
drilling contractors. During such period, the Company's customers have
included Atwood Oceanics, Inc., Cliffs Drilling Company, Diamond Offshore
Drilling, Inc., ENSCO International Incorporated, Falcon Drilling Company,
Inc., Hercules Offshore Corporation, Marine Drilling Companies, Inc., Noble
Drilling Corporation, Reading & Bates Corporation, Sedco Forex S.A.,
Transocean Offshore Inc. and Oceaneering Production Systems. The Company has
recently commenced work on a project for Noble Drilling Corporation to convert
the Paul Romano submersible drilling rig into a semisubmersible drilling rig
capable of drilling in deeper water and to improve its technical drilling
capabilities.
 
  The Company's marketing efforts are conducted from its sales offices in
Pascagoula and Houston and target drilling contractors located primarily in
the Gulf Coast area and in Europe. The Company's sales staff attempts to
identify future contracts by contacting its clients on a regular basis (in
some cases weekly) in order to anticipate projects that will be competitively
bid or negotiated exclusively with the Company. The Company's sales force
often invites potential clients to the Pascagoula shipyard for a tour and
presentation.
 
  The Company is actively involved in strengthening its relationships with
drilling contractors through continuous interaction between the Company's
project managers and the customers' project supervisors with respect to
ongoing projects. To accommodate the needs of the customers' project
supervisors, the Company has established on-site office facilities that such
project supervisors may use during the duration of a major conversion or
retrofit project. In addition, the Company has established an advisory
committee, comprised of key management personnel from many of the largest U.S.
drilling contractors, that meets with the Company's management quarterly to
provide the Company with insight and advice with respect to both individual
current and future needs as well as broader industry trends that the Company
utilizes for planning purposes.
 
  A large portion of the Company's revenue has historically been generated by
a few customers although not necessarily the same customers from year-to-year.
For example, the Company's largest customers (those which individually
accounted for more than 10% of revenue in a particular year) collectively
accounted for 89%, 91%
 
                                      40
<PAGE>
 
and 87%, of revenue for fiscal 1994, 1995 and 1996, respectively. The Company
expects that a significant portion of the Company's revenues for 1997 will be
derived from one customer. Because the level of conversion, retrofit or repair
work that the Company may provide to any particular customer depends on the
size of that customer's capital expenditure budget devoted to such projects in
a particular year, customers that account for a significant portion of revenue
in one fiscal year may represent an immaterial portion of revenue in
subsequent years.
 
CONTRACT STRUCTURE AND PRICING
 
  The Company generally performs conversion, retrofit and repair services
pursuant to contracts that provide for a portion of the work to be performed
on a fixed-price basis and a portion of the work to be performed on a cost-
plus basis. In many cases, the Company commences work with respect to certain
portions of a drilling rig conversion, retrofit or repair project on a cost-
plus arrangement as soon as the drilling rig arrives in the Company's shipyard
and thereafter the scope and pricing arrangements with respect to other
aspects of the project are negotiated. In the interest of expediting the
completion of a conversion, retrofit or repair project, a drilling rig may
arrive in the Company's shipyard before the design work for such project is
finished or before all necessary budgetary approval for such project has been
received at the appropriate level of management of the customer. In many of
these cases, the portion of the project as to which no firm pricing
arrangement has been agreed to at the time the drilling rig arrives at the
Company's shipyard ultimately becomes a significant portion of the overall
project. In addition, the scope of the services to be performed with respect
to a particular drilling rig often increases as the project progresses due to
additional retrofits or modifications requested by the customer or additional
repair work necessary to meet the safety, environmental or construction
standards established by the U.S. Coast Guard or other regulatory or vessel
classification authorities.
 
  With respect to the fixed-price portions of a project, the Company receives
the price fixed in the contract for such aspect of the project, subject to
adjustment only for change orders placed by the customer. The Company
typically receives a significant number of change orders on each of its fixed-
price projects as to which the Company and its customer negotiate a separate
charge. With respect to fixed-price contracts, the Company generally retains
the ability to capture cost savings and must absorb cost over-runs. Under
cost-plus arrangements, the Company receives specified amounts in excess of
its direct labor and materials cost and so is protected against cost overruns
but does not benefit directly from cost savings. The Company generally prices
materials at a mark-up under its contracts.
 
COMPETITION
 
  The Company has two primary competitors for conversion, retrofit and repair
projects for drilling rigs that operate in the Gulf of Mexico. In
international markets, the Company competes with several companies located,
primarily in the United States, Europe and the Far East. The Company believes
it competes favorably against companies located in Europe or the Far East for
conversion, retrofit and repair projects relating to drilling rigs operating
in the Gulf of Mexico and, to a lesser extent, rigs operating offshore West
Africa and South America. The Company believes this is due to (i) generally
higher labor costs in Europe, (ii) costs associated with transporting drilling
systems, mud treatment systems and other equipment necessary to convert or
retrofit a drilling rig (which items are generally produced in the U.S. Gulf
of Mexico region) to Europe or the Far East, (iii) costs associated with
relocating supervisory personnel of the owner of the drilling rig to oversee
the conversion and retrofit project, (iv) costs to transport the drilling rig
to and from the shipyard and (v) the loss of revenues during the time
necessary to transport the drilling rig to or from such foreign locations. In
addition, the Company believes that these same factors will enable it to
compete favorably against companies located in Europe and in the Far East with
respect to the construction and outfitting of new drilling rigs to be used in
the Gulf of Mexico, offshore West Africa and South America.
 
  The Company believes that its reputation for quality and reliability, its
long-standing relationships with most of the large drilling contractors, its
experienced management team, its existing skilled labor force, its access to
additional skilled labor in the Pascagoula, Mississippi area and its extensive
fabrication experience with drilling rigs are its key advantages in competing
for projects. The Company also believes that its capabilities to design
 
                                      41
<PAGE>
 
new drilling rigs and production units will provide it with a competitive
advantage with respect to new rig construction business.
 
  The Company believes that certain barriers exist that prevent new companies
from competing with the Company for conversion, retrofit and repair
activities, as well as for new rig construction activity, including the
investment required to establish an adequate facility, the difficulty of
locating a facility adjacent to an adequate waterway due to environmental and
wetland regulations, and the limited availability of experienced supervisory
and management personnel. Although new companies can enter the market for
small projects more easily, management believes these factors will likely
prevent an increase in domestic competition for larger projects, especially
major conversions and retrofits and new rig construction.
 
BACKLOG
 
  As of March 31, 1997, the Company's backlog was approximately $65.5 million,
all of which management expects to be performed within the 12 months ending
March 31, 1998. The Company's backlog as of March 31, 1996 was $15.4 million.
Of the $65.5 million of backlog as of March 31, 1997, approximately 85% was
attributable to three projects.
 
  The Company's backlog is based on management's estimate of future revenue
attributable to (i) the remaining amounts to be invoiced with respect to those
projects, or portions of projects, as to which a customer has authorized the
Company to begin work or purchase materials and (ii) projects, or portions of
projects, that have been awarded to the Company as to which the Company has
not commenced work. Management's estimates are often based on incomplete
engineering and design specifications and as engineering and design plans are
finalized or changes to existing plans are made, management's estimate of the
total revenue for such projects is likely to change. In addition, all projects
currently included in the Company's backlog are subject to termination at the
option of the customer, although the customer in that case is generally
required to pay the Company for work performed and materials purchased.
 
GOVERNMENT AND ENVIRONMENTAL REGULATION
 
  OVERVIEW. Many aspects of the Company's operations and properties are
materially affected by federal, state and local regulation, as well as certain
international conventions and private industry organizations. These
regulations govern worker health and safety and the manning, construction and
operation of vessels. For example, the Company is subject to the jurisdiction
of the U.S. Coast Guard, the National Transportation Safety Board, the U.S.
Customs Service and the Maritime Administration of the U.S. Department of
Transportation, as well as private industry organizations such as the American
Bureau of Shipping. These organizations establish safety criteria and are
authorized to investigate vessel accidents and recommend improved safety
standards. In addition, the exploration and development of oil and gas
properties located on the outer continental shelf of the United States is
regulated primarily by the Minerals Management Service ("MMS"). The MMS has
promulgated federal regulations under the Outer Continental Shelf Lands Act
requiring the construction of offshore platforms located on the outer
continental shelf to meet stringent engineering and construction
specifications. Violations of these regulations and related laws can result in
substantial civil and criminal penalties as well as injunctions curtailing
operations. The Company believes that its operations are in compliance with
these and all other regulations affecting the fabrication of platforms for
delivery to the outer continental shelf of the United States.
 
  In addition, the Company depends on the demand for its services from the oil
and gas industry and, therefore, is affected by changing taxes, price controls
and other laws and regulations relating to the oil and gas industry. For
example, the U.S. Coast Guard regulates and enforces various aspects of marine
offshore vessel operations, such as certification, routes, drydocking
intervals, manning requirements, tonnage requirements and restrictions, hull
and shafting requirements and vessel documentation. U.S. Coast Guard
regulations require that all drilling and production vessels are drydocked for
inspection at least once within a five-year period, and such inspections and
resulting repair requirements constitute a significant portion of the
Company's revenues. In 1996,
 
                                      42
<PAGE>
 
approximately 35% of the Company's revenues were generated by inspections and
repairs required by applicable U.S. Coast Guard regulations. While the Company
is not aware of any proposals to reduce the frequency or scope of such
inspections, any such reduction could adversely affect the Company's results
of operations. In addition, offshore construction and drilling in certain
areas have been opposed by environmental groups and, in certain areas, has
been restricted. To the extent laws are enacted or other governmental actions
are taken that prohibit or restrict offshore construction and drilling or
impose environmental protection requirements that result in increased costs to
the oil and gas industry in general and the offshore construction industry in
particular, the business and prospects of the Company could be adversely
affected. The Company cannot determine to what extent future operations and
earnings of the Company may be affected by new legislation, new regulations or
changes in existing regulations.
 
  ENVIRONMENTAL. The Company's operations and properties are subject to a wide
variety of increasingly complex and stringent foreign, federal, state and
local environmental laws and regulations, including those governing discharges
into the air and water, the handling and disposal of solid and hazardous
wastes, the remediation of soil and groundwater contaminated by hazardous
substances and the health and safety of employees. These laws may provide for
"strict liability" for damages to natural resources and threats to public
health and safety, rendering a party liable for the environmental damage
without regard to negligence or fault on the part of such party. Sanctions for
noncompliance may include revocation of permits, corrective action orders,
administrative or civil penalties and criminal prosecution. Certain
environmental laws provide for strict, joint and several liability for
remediation of spills and other releases of hazardous substances, as well as
damage to natural resources. In addition, the Company may be subject to claims
alleging personal injury or property damage as a result of alleged exposure to
hazardous substances. Such laws and regulations may also expose the Company to
liability for the conduct of or conditions caused by others, or for acts of
the Company that were in compliance with all applicable laws at the time such
acts were performed.
 
  The Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, and similar laws provide for responses to and liability for
releases of hazardous substances into the environment. Additionally, the Clean
Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the
Safe Drinking Water Act, the Emergency Planning and Community Right to Know
Act, each as amended, and similar foreign, state or local counterparts to
these federal laws, regulate air emissions, water discharges, hazardous
substances and wastes, and require public disclosure related to the use of
various hazardous substances. For example, the Company's paint operations must
comply with a number of environmental regulations. All blasting and painting
is done in accordance with the requirements of the Company's air discharge
permit and disposal of paint waste is made in accordance with the National
Pollution Discharge Elimination System stormwater pollution plan. Lead based
paint is vacuum blasted and all blasting debris is contained for hazardous
waste disposal. Company policy requires that existing coating be sampled and
tested prior to blasting operations to eliminate the possibility of lead
contamination and to assure that lead based paint is appropriately treated.
The Company has been classified as a "small quantity hazardous waste
generator" and is registered with the State of Mississippi Department of
Environmental Quality as such. Compliance with these and other environmental
laws and regulations may require the acquisition of permits or other
authorizations for certain activities and compliance with various standards or
procedural requirements. The Company believes that its facilities are in
substantial compliance with current regulatory standards.
 
  The Company's compliance with these laws and regulations has entailed
certain additional expenses and changes in operating procedures. The Company
believes that compliance with these laws and regulations will not have a
material adverse effect on the Company's business or financial condition for
the foreseeable future. However, future events, such as changes in existing
laws and regulations or their interpretation, more vigorous enforcement
policies of regulatory agencies, or stricter or different interpretations of
existing laws and regulations, may require additional expenditures by the
Company, which expenditures may be material.
 
  The Company has recently entered into a bareboat charter providing for the
operation by the Company of a towable drydock vessel. Employees of the Company
who are engaged in offshore activities relating to such vessel may be covered
by the provisions of the Jones Act, the Death on the High Seas Act and general
maritime
 
                                      43
<PAGE>
 
law, which laws operate to make the liability limits established under state
workers' compensation laws inapplicable to these employees and, instead,
permit them or their representatives to pursue actions against the Company for
damages or job related injuries, with generally no limitations on the
Company's potential liability.
 
  HEALTH AND SAFETY MATTERS. The Company's facilities and operations are
governed by laws and regulations, including the federal Occupational Safety
and Health Act, relating to worker health and workplace safety. The Company
believes that appropriate precautions are taken to protect employees and
others from workplace injuries and harmful exposure to materials handled and
managed at its facilities. While it is not anticipated that the Company will
be required in the near future to expend material amounts by reason of such
health and safety laws and regulations, the Company is unable to predict the
ultimate cost of compliance with these changing regulations.
 
  In addition to government regulation, various private industry
organizations, such as the American Bureau of Shipping, the American Petroleum
Institute, the American Society of Mechanical Engineers and the American
Welding Society, promulgate technical standards that must be adhered to in the
fabrication process.
 
INSURANCE
 
  The Company maintains insurance against property damage caused by fire,
flood, explosion and similar catastrophic events that may result in physical
damage or destruction to the Company's facilities. The Company also maintains
commercial general liability insurance including ship repairers' legal
liability coverage and builders' risk coverage if required. Workers'
compensation and employers' liability is provided in accordance with the
Mississippi Workers' Compensation Act and includes the U.S. Longshore and
Harbor Workers Act and maritime and outer continental shelf endorsements. The
Company currently maintains excess and umbrella policies in addition to
primary liability insurance for up to a $20 million limit. Other coverages
currently in place include water pollution, aviation, automobile and
commercial crime coverage. Although management believes that the Company's
insurance is adequate, there can be no assurance that the Company will be able
to maintain adequate insurance at rates which management considers
commercially reasonable, nor can there be any assurance such coverage will be
adequate to cover all claims that may arise.
 
PMB ARRANGEMENT
 
  In February 1994, the Company entered into an agreement with PMB, a wholly-
owned subsidiary of Bechtel Corporation, in connection with the conversion of
an offshore drilling rig. The Company recognized revenue of $8.6 million and
$16.7 million in 1995 and 1994, respectively, from the 1994 joint venture. The
1994 arrangement terminated upon the completion of such project. In December
1995, the Company and PMB entered into a second agreement to jointly pursue
rig design, conversion and retrofit projects for a term of five years.
Revenues attributable to the 1995 arrangement were approximately $9.8 million
for the year ended December 31, 1996. The 1995 arrangement was terminated by
mutual agreement in April 1996.
 
LEGAL PROCEEDINGS
 
  The Company is a party to various routine legal proceedings primarily
involving commercial claims and workers' compensation claims. While the
outcome of these claims and legal proceedings cannot be predicted with
certainty, management believes that the outcome of all such proceedings, even
if determined adversely, would not have a material adverse effect on the
Company's business or financial condition.
 
EMPLOYEES
 
  The Company's workforce varies based on the level of ongoing fabrication
activity at any particular time. As of March 31, 1997, the Company had
approximately 800 employees. For the last several years, substantially all of
the Company's work force has been leased to the Company by employee leasing
companies serving the Company exclusively. In exchange for its leasing
services, these employee leasing companies charged the
 
                                      44
<PAGE>
 
Company an amount which covered wages paid to such employees, together with a
mark-up designed to cover health and workers' compensation insurance, the
provision of a 401(k) plan, payroll taxes, all other required insurance and a
nominal return to such companies. Payments for contract labor totaled
approximately $10.1 million in 1996. All contract leasing arrangements had
been terminated as of May 18, 1997, and the Company now directly employs its
employees at levels of wages and benefits substantially equivalent to those
formerly provided by the employee leasing companies. The Company believes that
the cost of directly employing its laborers will be essentially the same as
the historic cost of the employee leasing arrangement most recently
terminated. None of the Company's employees is employed pursuant to a
collective bargaining agreement, and the Company believes that its
relationship with its employees is good.
 
  The Company's ability to remain productive and profitable depends
substantially on its ability to attract and retain skilled construction
workers, primarily welders, fitters and equipment operators. In addition, the
Company's ability to expand its operations depends primarily on its ability to
increase its labor force. The Company believes that its location in Pascagoula
gives it a strategic advantage over many other Gulf of Mexico shipyards due to
the long history of sophisticated marine construction in the Pascagoula area
and the substantial excess capacity of skilled labor which is currently
available in this area. While the Company believes its relationship with its
skilled labor force is good, a significant increase in the wages paid by
competing employers or an increase in the activity of those employers could
result in a reduction in the Company's skilled labor force, increases in the
wage rates paid by the Company, or both. If either of these occurred, in the
near-term, the profits expected by the Company from work in progress could be
reduced or eliminated and, in the long-term, the production capacity of the
Company would be diminished and the growth potential of the Company could be
impaired.
 
  The Company has facilities to train its employees on productivity and safety
matters. The Company is committed to training its employees and offers
advancement through in-house training programs.
 
 
                                      45
<PAGE>
 
                                  MANAGEMENT
 
DIRECTORS AND EXECUTIVE OFFICERS
 
  The following table sets forth information concerning the Company's
directors and executive officers, and those persons who will become directors
and executive officers in connection with this Offering:
 
<TABLE>
<CAPTION>
                  NAME                    AGE              POSITION
                  ----                    ---              --------
 <C>                                    <C>     <S>
 J. L. Holloway........................   52    Chairman of the Board, Chief
                                                 Executive Officer and
                                                 President of the Company
 Carl M. Crawford......................   53    Executive Vice President of
                                                 the Company
 Ronald W. Schnoor.....................   43    President of HAM Marine and
                                                 Director of the Company
 James A. Lowe, III....................   39    General Counsel, Secretary and
                                                 Director of the Company
 John F. Alford........................   37    Senior Vice President, Chief
                                                 Financial Officer and
                                                 Director of the Company
 Bruce Malcolm.........................   49    President of Friede & Goldman
                                                 and Director of the Company
        (1)(2).........................         Director of the Company
        (1)(2).........................         Director of the Company
</TABLE>
--------
(1) Member of audit committee.
(2) Member of compensation committee.
 
  Directors are elected at each annual meeting of stockholders. All officers
serve at the discretion of the Board of Directors, subject to terms of their
employment agreements, if applicable. See "--Employment Agreements."
 
  J. L. Holloway has served as the Chairman of the Board, Chief Executive
Officer and President of the Company since the completion of the
Reorganization. In addition, Mr. Holloway has served as the Chairman of the
Board, Chief Executive Officer and President of HAM Marine since its formation
in 1982. Mr. Holloway also serves as a Director of Delta Health Group, a
company that operates and manages health care facilities in the South and as
President of State Street Properties, Inc., a commercial real estate
development firm headquartered in Mississippi.
 
  Carl M. Crawford has served as Executive Vice President of the Company since
May 1997. Mr. Crawford also serves as the Executive Vice President of HAM
Marine, a position he has held for more than the last five years. Prior to
joining HAM Marine in 1982, Mr. Crawford had been employed in management and
marketing positions with a number of equipment and manufacturing companies.
 
  Ronald W. Schnoor has served as President of HAM Marine since April 1997 and
a Director of the Company since May 1997. Previously, Mr. Schnoor served as
the Vice President, Manager of Operations of HAM Marine since 1992. Mr.
Schnoor joined HAM Marine in 1984 and previously served as both Senior Project
Engineer and as a Project Manager.
 
  James A. Lowe, III has served as General Counsel, Secretary and Director of
the Company since May 1997. Mr. Lowe joined HAM Marine on January 1, 1997 as
General Counsel. He has also served as Director of HAM Marine and Director and
Secretary of Friede & Goldman since February 1997. Prior to joining HAM
Marine, Mr. Lowe was an attorney with the firm of Watkins & Eager PLLC, a law
firm in Jackson, Mississippi, for seven years, the last four of which he was a
member of such firm.
 
                                      46
<PAGE>
 
  John F. Alford has served as Senior Vice President, Chief Financial Officer
and Director of the Company since May 1997. Mr. Alford joined HAM Marine in
1996. Mr. Alford began his career in banking and previously served as a member
of the Board of Directors and as Chief Operating Officer of Baton Rouge Bank
and Trust Company, and a related financial firm, for more than the past five
years.
 
  Bruce G. Malcolm was elected President of Friede & Goldman in May 1997. Mr.
Malcolm joined Friede & Goldman as Vice President of Operations in March 1997.
Prior to joining Friede & Goldman, Mr. Malcolm was a construction manager for
Bechtel Corporation from January 1996 to March 1997 and an Operations and
Technical Director for Dolphin Drilling, Ltd. from June 1993 to December 1995.
From May 1992 to June 1993, he was an independent consultant.
 
COMMITTEES OF THE BOARD
 
  The Board of Directors has established an Audit Committee and Compensation
Committee. The Audit Committee recommends the appointment of auditors and
oversees the accounting and audit functions of the Company. The Compensation
Committee determines executive officers' and key employees' salaries and
bonuses and administers the Equity Incentive Plan. Messrs.        and
will serve as members of the Company's Compensation Committee and Audit
Committee.
 
DIRECTOR COMPENSATION
 
  Each director receives a fee of $1,000 for attendance at each Board of
Directors meeting and $500 for each committee meeting, as well as stock
options to purchase 1,000 shares of Common Stock annually. See "--Equity
Incentive Plan." Directors of the Company are also reimbursed for out-of-
pocket expenses incurred in attending meetings of the Board of Directors or
committees thereof, and for other expenses incurred in their capacity as
directors of the Company.
 
EXECUTIVE COMPENSATION
 
  The following table sets forth for 1996 the cash compensation of (i) the
Company's chief executive officer and (ii) each executive officer of the
Company whose total annual salary and bonus during 1996 exceeded $100,000.
 
                          SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                      ANNUAL COMPENSATION
                               ----------------------------------
                                                                   LONG-
                                                    OTHER ANNUAL    TERM   ALL OTHER
                          YEAR  SALARY    BONUS    COMPENSATION(1) AWARDS COMPENSATION
                          ---- -------- ---------- --------------  ------ ------------
<S>                       <C>  <C>      <C>        <C>             <C>    <C>
J. L. Holloway..........  1996 $196,000 $1,626,687    $    --
 Chairman of the Board,
  Chief Executive
  Officer and President
  of the Company
Carl M. Crawford........  1996   70,540    333,668     84,213
 Executive Vice
  President of the
  Company
Ronald W. Schnoor.......  1996   93,400    157,889         --
 President of HAM Marine
</TABLE>
--------
(1) Other annual compensation for Mr. Crawford consists of sales commissions.
 
EMPLOYMENT AGREEMENTS
 
  The Company has entered into employment agreements with Messrs. Holloway and
Alford and HAM Marine has entered into employment agreements with Messrs.
Crawford, Schnoor and Lowe. Pursuant to the terms of such agreements, the
salaries of these persons in 1997 will be: Mr. Holloway, $275,000; Mr.
Crawford, $150,000; Mr. Schnoor, $138,000; Mr. Lowe, $120,000; and Mr. Alford,
$100,000.
 
                                      47
<PAGE>
 
  The employment agreements relating to Messrs. Holloway, Crawford and Schnoor
were effective on January 1, 1997, have initial terms of one year and, unless
earlier terminated pursuant to the terms thereof, continue thereafter on a
year-to-year basis. Each of such agreements is terminable by the employer for
"cause" upon ten days' written notice and without "cause" by either party upon
thirty days' written notice. In the event an officer's employment is
terminated by the employer without "cause," such officer will be entitled to
receive a lump-sum severance payment at the effective time of termination
equal to the base salary at the rate then in effect for one year. In addition,
the employment agreements restrict these individuals from competing with the
Company for a period of two years from the date of the Reorganization;
provided that, in the event of termination without "cause," the time period
during which such individual is restricted from competing with the Company
will be shortened from two years to one year.
 
  The employment agreements contain certain provisions concerning a change-in-
control of the employer, including the following: (i) in the event five days'
advance notice of the transaction giving rise to the change in control is not
given from the successor to the employer's business to the employer and such
officer wherein the successor agrees to assume performance of the employment
agreement, the change in control will be deemed a termination of the
employment agreement by the employer without "cause," and the provisions of
the employment agreement governing the same will apply, except that the
severance amount otherwise payable (discussed in the preceding paragraph)
shall be tripled and the provisions which restrict competition with the
employer shall not apply and (ii) in any change-of-control situation, such
officer may elect to terminate his employment by giving five days' written
notice prior to the anticipated closing of the transaction giving rise to the
change-in-control, which will be deemed a termination of the employment
agreement by the employer without "cause," and the provisions of the
employment agreement governing the same will apply, except that the severance
amount otherwise payable shall be doubled and except that the provisions which
restrict competition with the Company will apply for a period of two years
after such termination.
 
  HAM Marine has entered into an employment agreement with Mr. Lowe effective
January 1, 1997, which agreement is terminable by the Company at any time. In
the event the agreement is terminated by the Company for any reason, Mr. Lowe
will receive a lump-sum severance payment of $60,000. Pursuant to the
agreement, Mr. Lowe received shares of common stock in HAM Marine which will
be exchanged for 76,820 shares of the Company's Common Stock pursuant to the
Reorganization.
 
  The Company and HAM Marine entered into an employment agreement with Mr.
Alford on May 21, 1997, which agreement is terminable by the Company at any
time. Pursuant to the agreement, Mr. Alford received shares of common stock of
HAM Marine which will be exchanged for 38,410 shares of the Company's Common
Stock pursuant to the Reorganization. In addition, Mr. Alford was granted
options to purchase additional shares of common stock of HAM Marine effective
as of February 14, 1997 which, upon completion of the Reorganization, will be
converted into options to purchase an aggregate of 38,410 shares of the
Company's Common Stock, subject to a vesting schedule relating to the
exercisability of such options, at a purchase price of $2.39 per share.
 
CASH BONUSES
 
  The Company's Board of Directors has approved the payment of bonuses to key
employees of the Company for 1997 in an aggregate amount not to exceed five
percent of the Company's EBITDA (defined as operating income plus
depreciation, amortization and non-cash compensation expenses related to the
issuance of stock and stock options to employees). The Board of Directors will
determine the actual amount of the bonus pool, subject to the limitation
described above, and the key employees who would be recipients of any such
cash bonuses and the individual amount of the cash bonus for each such key
employee following a determination of EBITDA for 1997.
 
 
                                      48
<PAGE>
 
RETIREMENT PLAN
 
  The Company has adopted a 401(k) plan for its employees. Employees are
eligible to participate in the plan after one year of service with the
Company, provided they work at least 1,000 hours during that first year. Under
the plan, but subject to certain limitations imposed under the Internal
Revenue Code, eligible employees are permitted to contribute up to 15% of
compensation plus 100% of any cash bonus paid by the Company on a pre-tax
basis. The plan provides for the Company to provide matching contributions of
an amount equal to a percentage of employee contributions to be set by the
Company, in its sole discretion, prior to the end of each calendar year. The
Company is also permitted to make qualified non-elective and discretionary
contributions in proportion to each eligible employee's compensation as a
ratio of the aggregate compensation of all eligible employees. The amounts
held under the plan are invested in investment funds maintained under the plan
in accordance with the directions of each participant.
 
  All employees' contributions are immediately 100% vested. Contributions by
the Company vest at a rate of 20% a year beginning with the second year after
any such contribution. Upon attaining age 65, participants are automatically
100% vested, even with respect to Company contributions. Participants or their
designated beneficiaries are entitled to payment of vested benefits upon
termination of employment. On attaining age 65, participants are entitled to
distribution of the full value of their benefits even if they continue to be
employed by the Company. Such employees also have the option of deferring
payment until April 1 following the year they attain the age of 70 1/2. In
addition, hardship and other in-service distributions and loans to
participants from the plan are available under certain circumstances and
subject to certain conditions. The amount of benefits ultimately payable to a
participant under the plan depends on the level of the participant's salary
deferral contributions under the plan, the amount of Company discretionary and
matching contributions made to the plan and the performance of the investment
funds maintained under the plan in which participants are invested.
 
EQUITY INCENTIVE PLAN
 
  The Equity Incentive Plan was adopted by the Board of Directors of the
Company and approved by the Company's stockholders in May 1997. The Equity
Incentive Plan permits the granting of any or all of the following types of
awards ("Awards"): stock appreciation rights, stock options, restricted stock,
dividend equivalents, performance units, automatic director options, phantom
shares, limited stock appreciation rights ("LSAR's"), bonus stock and cash tax
rights. All officers and employees of, and any consultants to, the Company or
any affiliate of the Company will be eligible for participation in all Awards
under the Equity Incentive Plan other than director options with tandem
LSAR's. The non-employee directors of the Company will only receive automatic
grants of director options with tandem LSAR's.
 
   An aggregate of 1,150,000 shares of Common Stock have been authorized and
reserved for issuance pursuant to the Equity Incentive Plan. As of     , 1997,
options to purchase an aggregate of      shares of Common Stock have been
granted at an exercise price of $    per share. The Equity Incentive Plan is
administered by the Compensation Committee of the Company's Board of
Directors. The Compensation Committee will select the participants who will
receive Awards, determine the type and terms of Awards to be granted and
interpret and administer the Equity Incentive Plan. No Awards may be granted
under the Equity Incentive Plan after December 31, 2006.
 
CERTAIN TRANSACTIONS
 
  The Company has from time to time made loans to and paid expenditures on
behalf of its stockholders. At March 31, 1997, outstanding loans to such
stockholders were approximately $136,000. During 1996, stockholders made
payments to the Company of $209,013 on amounts previously advanced.
 
                                      49
<PAGE>
 
  In October 1996, Mr. Holloway, the Chairman of the Board, Chief Executive
Officer and President of the Company, and Carl M. Crawford, Executive Vice
President of the Company, entered into personal guarantees of $5 million each
to secure a credit facility of HAM Marine. In addition, as of December 31,
1996, Mr. Holloway guaranteed a note of HAM Marine to an individual with a
principal balance of $197,508. In March 1997, Mr. Holloway and Mr. Crawford
entered into personal guarantees of $2.5 million each to secure the Credit
Facility. In March 1997, HAM Marine made a distribution of property, including
real estate previously held for investment, along with the related debt
guaranteed by Mr. Holloway, and an airplane, to its stockholders, which
property, and related liability, was contributed by such stockholders into a
newly formed company. Subsequent to such distribution, the Company has
chartered the airplane from such company on a "when needed" basis and has paid
fair market charter rates for such use of the airplane. The Company intends to
continue to use such airplane on this basis following the Offering.
 
  At December 31, 1996, marketable securities owned by the Company with a
market value of approximately $1.4 million were pledged as collateral for a
loan to Mr. Holloway to finance the purchase of certain assets of Friede
Predecessor. In connection with the transfer of the purchased assets to Friede
& Goldman, Friede & Goldman recorded a $1.4 million payable to Mr. Holloway.
On March 31, 1997, the Company transferred the pledged marketable securities
to Mr. Holloway in payment of the obligation.
 
  In June 1997, the Company purchased a crane from a company owned by the
stockholders of one of the Predecessors. The Company paid the same price for
such crane as such other company paid to acquire the crane from an unrelated
party in April 1997.
 
                                      50
<PAGE>
 
                      PRINCIPAL AND SELLING STOCKHOLDERS
 
  The following table sets forth information with respect to beneficial
ownership of the Company's Common Stock before and after giving effect to the
Offering, by (i) all persons known to the Company to be the beneficial owner
of 5% or more thereof, (ii) each director, (iii) each executive officer, (iv)
all officers and directors as a group and (v) each Selling Stockholder. The
address of each such person is c/o Friede Goldman International Inc., 525 E.
Capitol Street, Suite 402, Jackson, Mississippi 39201. All persons listed have
sole voting and investment power with respect to their shares unless otherwise
indicated.
 
<TABLE>
<CAPTION>
                                     BENEFICIAL                  BENEFICIAL
                                   OWNERSHIP PRIOR             OWNERSHIP AFTER
                                   TO OFFERING(1)   NUMBER OF    OFFERING(1)
                                  -----------------  SHARES   -----------------
                                  NUMBER OF           BEING   NUMBER OF
                                   SHARES   PERCENT  OFFERED   SHARES   PERCENT
                                  --------- ------- --------- --------- -------
<S>                               <C>       <C>     <C>       <C>       <C>
J. L. Holloway................... 7,362,979   80.0% 1,215,750 6,147,229  53.5%
Carl M. Crawford................. 1,359,310   14.8%   224,400 1,134,910   9.9%
Ronald W. Schnoor................   362,481    3.9%    59,850   302,631   2.6%
James A. Lowe, III...............    76,820      *         --    76,820     *
John F. Alford...................    38,410      *         --    38,410     *
All officers and directors as a
 group (6 persons)............... 9,200,000  100.0% 1,500,000 7,700,000  67.0%
</TABLE>
--------
* Less than one percent.
 
(1) Excludes shares of Common Stock issuable pursuant to stock options not
    exercisable within 60 days following the date of the Prospectus. See
    "Management--Equity Incentive Plan."
 
                                      51
<PAGE>
 
                         DESCRIPTION OF CAPITAL STOCK
 
GENERAL
 
  The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred
Stock, par value $.01 per share. Immediately prior to the closing of the
Offering, there were 9,200,000 shares of Common Stock outstanding which were
held of record by five stockholders, and no shares of Preferred Stock
outstanding. After the closing of the Offering, 11,500,000 shares of Common
Stock will be issued and outstanding, assuming no exercise of the
Underwriters' over-allotment option, and 1,150,000 shares of Common Stock will
be reserved for issuance pursuant to the Equity Incentive Plan. The following
summary of the terms and provisions of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
Company's Charter and Bylaws, which have been filed as exhibits to the
Company's registration statement, of which this Prospectus is a part, and
applicable law.
 
COMMON STOCK
 
  VOTING RIGHTS. Each share of Common Stock entitles the holder to one vote on
each matter submitted to a vote of the Company's stockholders, including the
election of directors. There is no cumulative voting. After the Offering, the
current officers and director of the Company will hold approximately 67.0% of
the issued and outstanding Common Stock (63.8% of the Underwriters' over-
allotment option is exercised in full) and will hold the voting power to
determine the outcome of all matters upon which a majority vote of the
stockholders of the Company is required for approval. The Charter prohibits
the taking of any action by written stockholder consent in lieu of a meeting.
 
  DIVIDENDS. The holders of Common Stock are entitled to receive dividends if,
as and when such dividends are declared by the Board of Directors of the
Company out of assets legally available therefor after payment of dividends
required to be paid on shares of Preferred Stock, if any.
 
  LIQUIDATION OR DISSOLUTION. Upon liquidation or dissolution, holders of
Common Stock are entitled to share ratably in all net assets available for
distribution to stockholders after payment of any liquidation preferences to
holders of Preferred Stock.
 
  OTHER PROVISIONS. The Common Stock carries no conversion or preemptive
rights. All outstanding shares of Common Stock are, and the shares of Common
Stock to be sold by the Company in the Offering when issued will be, duly
authorized, validly issued, fully paid and nonassessable.
 
  TRANSFER AGENT AND REGISTRAR. The Transfer Agent and Registrar for the
Common Stock is      .
 
  LISTING. Application has been made to list the Common Stock on the NASDAQ
National Market under the trading symbol "FGII."
 
PREFERRED STOCK
 
  The Board of Directors of the Company is authorized, without approval of the
stockholders, to cause shares of Preferred Stock to be issued in one or more
series, to determine the numbers of shares of each series, to fix the rights,
powers, preferences and privileges of each series and any qualifications,
limitations or restrictions thereon and to increase or decrease the number of
shares of each such series. Among the specific matters that may be determined
by the board of directors are: the annual rate of dividends; the redemption
price, if any; the terms of a sinking or purchase fund, if any; the amount
payable in the event of any voluntary liquidation, dissolution or winding up
of the affairs of the Company; conversion rights, if any; and voting powers,
if any. Depending upon the terms of the Preferred Stock established by the
Board of Directors, any or all series of Preferred Stock could have
preferences over the Common Stock with respect to dividends and other
distributions and upon liquidation of the Company or could have voting or
conversion rights that could adversely affect the holders of the outstanding
Common Stock. The Company has no current plans to issue any shares of
Preferred Stock of any class or series.
 
                                      52
<PAGE>
 
  One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest,
merger or otherwise, and thereby to protect the continuity of the Company's
management. The issuance of shares of Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. If, in the exercise of its fiduciary obligations, the
Board of Directors were to determine that a takeover proposal was not in the
Company's best interest, such shares could be issued by the Board of Directors
without stockholder approval in one or more transactions that might prevent or
make more difficult or costly the completion of the takeover transaction by
diluting the voting or other rights of the proposed acquiror or insurgent
stockholder group, by creating a substantial voting block in institutional or
other hands that might undertake to support the position of the incumbent
Board of Directors, by effecting an acquisition that might complicate or
preclude the takeover, or otherwise. In this regard, the Company's Charter
grants the Board of Directors broad power to establish the rights and
preferences of the authorized and unissued Preferred Stock, one or more series
of which could be issued that would entitle holders (i) to vote separately as
a class on any proposed merger or consolidation, (ii) to cast a
proportionately larger vote together with the Common Stock on any such
transaction or for all purposes, (iii) to elect directors having terms of
office or voting rights greater than those of other directors, (iv) to convert
Preferred Stock into a greater number of shares of Common Stock or other
securities, (v) to demand redemption at a specified price under prescribed
circumstances related to a change of control or (vi) to exercise other rights
designated to impede a takeover. Accordingly, the issuance of shares of
Preferred Stock may discourage bids for the Common Stock at a premium or may
otherwise adversely affect the rights of holders of, or the market price of,
the Common Stock.
 
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS AND DELAWARE LAW
 
  Certain provisions of the Charter and Bylaws are intended to enhance the
likelihood of continuity and stability in the Board of Directors of the
Company and in its policies, but might have the effect of delaying or
preventing a change in control of the Company and may make more difficult the
removal of incumbent management even if such transactions could be beneficial
to the interests of stockholders. Set forth below is a summary description of
such provisions:
 
  NUMBER OF DIRECTORS; FILLING VACANCIES; REMOVAL. The Charter provides that
the number of directors constituting the Company's Board of Directors shall be
fixed by the Board of Directors, but shall not be less than three nor more
than 15. The Charter further provides that the directors shall be divided into
three classes, each class serving staggered three-year terms. The Board of
Directors of the Company, acting by a majority of the directors then in
office, may fill any vacancy or newly created directorship.
 
  ADVANCE NOTICE OF INTENTION TO NOMINATE A DIRECTOR. The Charter and Bylaws
permit a stockholder to nominate a person for election as a director only if
written notice of such stockholder's intent to make a nomination has been
given to the Secretary of the Company not less than 60 days or more than 90
days prior to the anniversary of the annual meeting held for the immediately
preceding year (subject to certain adjustments if the annual meeting date is
changed by more than 30 days from the date of the prior annual meeting) or, in
the case of a special meeting at which directors are to be elected, not less
than 40 days notice or prior public disclosure of the date of the meeting is
given, in which case notice by the stockholder must be received on the 10th
day after notice of the meeting or prior public disclosure of the date of the
meeting was given. This provision also requires that the stockholder's notice
set forth, among other things, a description of all arrangements or
understandings between the nominee and the stockholder pursuant to which the
nomination is to be made or the nominee is to be elected and such other
information regarding the nominee as would be required to be included in a
proxy statement filed pursuant to the proxy rules promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), had the
nominee been nominated by the Board of Directors of the Company. Any
nomination that fails to comply with these requirements may be disqualified.
 
  STOCKHOLDERS' RIGHT TO CALL SPECIAL MEETING. The Bylaws provide that a
special stockholders' meeting may not be called by stockholders.
 
 
                                      53
<PAGE>
 
  REMOVAL OF DIRECTORS; FILLING VACANCIES ON BOARD OF DIRECTORS. The Bylaws
provide that any director or the entire Board may be removed at any time for
cause by a vote of the holders of not less than a majority of the shares of
the Company entitled to vote in the election of directors. The Bylaws also
provide that any vacancies on the Board of Directors (including any resulting
from an increase in the authorized number of directors) may be filled by the
affirmative vote of a majority of the remaining directors.
 
  ADOPTION AND AMENDMENT OF BY-LAWS. The Bylaws provide that they may be
amended or repealed by either a majority vote of the Board of Directors or the
holders of at least 80% of the total voting power of all shares of stock of
the Company entitled to vote in the election of directors voting as one class.
Any provisions amended or repealed by the stockholders may be re-amended or
re-adopted by the Board of Directors.
 
  AMENDMENT OF CERTAIN PROVISIONS OF THE ARTICLES; OTHER CORPORATE ACTION.
Under Delaware law, unless a corporation's articles of incorporation specify
otherwise, a corporation's articles of incorporation may be amended by the
affirmative vote of the holders of a majority of the voting power of each
class of stock entitled to vote thereon. The Charter requires the affirmative
vote of not less than 80% of the total voting power of the Company to amend,
alter or repeal certain provisions of the Company's Charter with respect to
(i) the classification, filling of vacancies and removal of the Board of
Directors, (ii) amendments to the Bylaws, (iii) the application of certain
anti-takeover provisions of Delaware law to which the Company is currently
subject, (iv) changes to stockholder vote requirements, (v) limitation of
liability of directors and (vi) requirements for special meetings called by
stockholders.
 
  ANTI-TAKEOVER PROVISIONS. Delaware law permits the Company's board of
directors to adopt certain anti-takeover measures in response to proposals to
acquire the Company, its assets or its outstanding capital stock. Measures to
be adopted could include a shareholder rights plan or bylaw provisions
requiring supermajority shareholder approval of acquisition proposals.
 
  LIMITATION ON PERSONAL LIABILITY OF DIRECTORS. Delaware law authorizes
corporations to limit or eliminate the personal liability of directors to
corporations and their stockholders for monetary damages for breach of
director's fiduciary duty of care. The duty of care requires that, when acting
on behalf of the corporation, directors must exercise an informed business
judgment based on all material information reasonably available to them.
Absent the limitations authorized by Delaware law, directors are accountable
to corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Delaware
law enables corporations to limit available relief to equitable remedies such
as injunction or rescission. The Charter limits the liability of directors of
the Company to the Company or its stockholders (in their capacity as directors
but not in their capacity as officers) to the fullest extent permitted by
Delaware law. Specifically, directors of the Company will not be personally
liable for monetary damages for breach of a director's fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
 
  The inclusion of this provision in the Charter may have the effect of
reducing the likelihood of derivative litigation against directors and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefited the Company and its stockholders.
The Company's Bylaws provide indemnification to the Company's officers and
directors and certain other persons with respect to certain matters.
 
  INDEMNIFICATION ARRANGEMENTS. The Charter and Bylaws provide that, to the
fullest extent permitted by the Delaware General Corporation Law, the
directors and officers of the Company shall be indemnified and shall be
advanced expenses in connection with actual or threatened proceedings and
claims arising out of their status as such. The Company has entered into
indemnification agreements with each of its directors and executive officers
that provide for indemnification and expense advancement to the fullest extent
permitted under the Delaware General Corporation Law.
 
                                      54
<PAGE>
 
  NO ACTION BY WRITTEN CONSENT. The Charter prohibits the taking of any action
by written stockholder consent in lieu of a meeting. Such provisions may not
be amended or repealed without the affirmative vote of the holders of at least
80% of the capital stock of the Company entitled to vote on such matters.
 
STATUTORY BUSINESS COMBINATION PROVISION
 
  The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad range
of business combinations with a person or an affiliate, or associate of such
person, who is an "interested stockholder" for a period of three years from
the date that such person became an interested stockholder unless: (i) the
transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the Board of Directors of the corporation
before the person becomes an interested stockholder, (ii) the interested
stockholder acquired 85% or more of the outstanding voting stock of the
corporation in the same transaction that makes such person an interested
stockholder (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans), or (iii) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined as any person who is (i) the owner of 15%
or more of the outstanding voting stock of the corporation or (ii) an
affiliate or associate of the corporation and who was the owner of 15% or more
of the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
 
  A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its Charter or bylaws by action of its shareholders to
exempt itself from coverage, provided that such bylaw or charter amendment
shall not become effective until 12 months after the date it is adopted. The
Company has not adopted such a charter or bylaw amendment.
 
REGISTRATION RIGHTS
 
  Pursuant to the terms of a Registration Rights Agreement among the Company
and all of its current stockholders (the "Registration Agreement"), the
Company has provided such stockholders with certain registration rights,
including three demand registration rights and certain "piggy-back"
registration rights, with respect to Common Stock owned by such stockholders.
The Company's obligation is subject to certain limitations relating to a
minimum amount of Common Stock required for registration, the timing of
registration and other similar matters. For example, the Company will not be
obligated to register the Common Stock when, in the good faith judgment of its
Board of Directors, such registration would materially adversely affect a
pending or proposed public offering of the Company's securities, provided that
such delay may not extend for more than 180 days. The Company will indemnify
such stockholders for certain liabilities in connection with any such
offering, other than liabilities resulting or arising from untrue statements
or omissions made in conformity with information furnished to the Company in
writing by any such stockholder. The Company is obligated to pay all expenses
incidental to any such registration, excluding underwriters' discounts and
commissions and certain legal fees and expenses of such stockholders.
 
                                      55
<PAGE>
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
  The market price of the Common Stock could be adversely affected by the sale
of substantial amounts of Common Stock in the public market. Immediately prior
to the closing of the Offering, 9,200,000 shares of Common Stock were issued
and outstanding. All of the 3,800,000 shares sold in the Offering, except for
shares acquired by affiliates of the Company, will be freely tradeable.
 
  None of the 9,200,000 shares outstanding immediately prior to the closing of
the Offering was issued in a transaction registered under the Securities Act,
and, accordingly, such shares may not be sold except in transactions
registered under the Securities Act or pursuant to an exemption from
registration, including the exemption contained in Rule 144 under the
Securities Act.
 
  In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned his or her shares for
at least one year, or a person who may be deemed an "affiliate" of the Company
who has beneficially owned shares for at least one year, would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of the Common Stock or the
average weekly trading volume of the Common Stock during the four calendar
weeks preceding the date on which notice of the proposed sale is sent to the
Securities and Exchange Commission. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about the Company. A person who is not deemed to
have been an affiliate of the Company at any time for 90 days preceding a sale
and who has beneficially owned his shares for at least two years would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations, manner of sale provisions, notice requirements or the
availability of current public information about the Company.
 
  The Company has authorized the issuance of 1,150,000 shares of its Common
Stock in accordance with the terms of the Equity Incentive Plan. It is
anticipated that options to purchase        shares of Common Stock will be
granted upon closing of the Offering to certain officers and directors of the
Company. See "Management--Equity Incentive Plan." The Company intends to file
a registration statement on Form S-8 under the Securities Act registering the
issuance of shares upon exercise of options granted under the Equity Incentive
Plan. As a result, such shares will be eligible for resale in the public
market.
 
  For limitations on the ability of the Company, the Selling Stockholders and
the directors and executive officers of the Company to sell shares of Common
Stock during the period of 180 days from the date of this Prospectus, see
"Underwriting."
 
  Prior to this Offering, there has been no established trading market for the
Common Stock, and no predictions can be made as to the effect that sales of
Common Stock under Rule 144, pursuant to a registration statement, or
otherwise, or the availability of shares of Common Stock for sale, will have
on the market price prevailing from time to time. Sales of substantial amounts
of Common Stock in the public market, or the perception that such sales could
occur, could depress the prevailing market price. Such sales may also make it
more difficult for the Company to issue or sell equity securities or equity-
related securities in the future at a time and price that it deems
appropriate. See "Risk Factors--Shares Eligible for Future Sale."
 
  Certain officers, directors and stockholders, whose holdings immediately
following the closing of this Offering will aggregate 7,700,000 shares of
Common Stock, are entitled to certain rights with respect to the registration
of their shares of Common Stock under the Securities Act. If the Company
proposes to register any of its securities under the Securities Act, such
stockholders are entitled to notice of such registration and are entitled to
include, at the Company's expense, all or a portion of their shares therein,
subject to certain conditions.
 
                                      56
<PAGE>
 
                                 UNDERWRITING
 
  Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company and the Selling Stockholders have severally agreed to sell to the
underwriters named below (the "Underwriters"), for whom Jefferies & Company,
Inc. ("Jefferies"), Bear, Stearns & Co. Inc. and Johnson Rice & Company L.L.C.
are acting as representatives (the "Representatives"), and the Underwriters
have severally agreed to purchase, the number of shares of Common Stock set
forth opposite their respective names in the table below at the public
offering price less the underwriting discount set forth on the cover page of
this Prospectus:
 
<TABLE>
<CAPTION>
                                                                       NUMBER OF
          UNDERWRITERS                                                  SHARES
          ------------                                                 ---------
      <S>                                                              <C>
      Jefferies & Company, Inc........................................
      Bear, Stearns & Co. Inc.........................................
      Johnson Rice & Company L.L.C....................................
                                                                       ---------
        Total......................................................... 3,800,000
                                                                       =========
</TABLE>
 
  The Underwriting Agreement provides that the obligation of the Underwriters
to purchase the shares of Common Stock offered hereby is subject to certain
conditions. The Underwriters are committed to purchase all of the shares of
Common Stock offered hereby (other than those covered by the over-allotment
option described below), if any are purchased.
 
  The Underwriters propose to offer the Common Stock initially at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $        per share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $        per share to certain other dealers. After the initial
public offering of Common Stock, the public offering price, concession to
selected dealers and reallowance to other dealers may be changed by the
Representatives.
 
  The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase up to 570,000 additional shares
of Common Stock at the initial public offering price, less the underwriting
discount. The Underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, made in connection with the shares of Common
Stock offered by this Prospectus. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
additional shares of Common Stock proportionate to such Underwriters' initial
commitment as indicated in the preceding table.
 
  The Company, the Selling Stockholders and the directors and executive
officers of the Company have agreed not to offer for sale, sell or otherwise
dispose of any shares of Common Stock or options, rights or warrants to
acquire any Common Stock, or any securities convertible into or exchangeable
for Common Stock, for a period of 180 days from the date of this Prospectus,
without the prior written consent of Jefferies.
 
  The Representatives have informed the Company that they do not expect the
Underwriters to confirm sales of shares of Common Stock offered by this
Prospectus to any accounts over which they exercise discretionary authority.
 
  The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities that may be incurred in connection
with the Offering, including liabilities under the Securities Act, or
contribute to payments the Underwriters may be required to make in respect
thereof.
 
  Prior to the Offering, there has been no public trading market for the
Common Stock and there can be no assurance that an active trading market will
develop or be sustained upon the completion of the Offering. The initial
public offering price of the Common Stock will be determined by negotiations
among the Company, the Selling Stockholders and the Representatives. The
material factors considered in determining such public offering price will be
the history of and the prospects for the industry in which the Company
competes, an assessment of
 
                                      57
<PAGE>
 
the Company's management, the Company's past and present operations, the
Company's past and present earnings and the trend of its earnings, the general
condition of the securities markets at the time of the Offering and the price-
earnings ratio and market prices of publicly traded securities of companies
that the Company and the Representatives believe to be comparable to the
Company.
 
  In order to facilitate the Offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the Common Stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase, the
Common Stock in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an Underwriter or a dealer in
distributing the Common Stock in the Offering, if the syndicate repurchases
previously distributed shares of Common Stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriters are not required to
engage in these activities and may end any of these activities at any time.
 
                                 LEGAL MATTERS
 
  Certain legal matters in connection with the Common Stock being offered
hereby will be passed upon for the Company by Andrews & Kurth L.L.P., Houston,
Texas and for the Underwriters by Thompson & Knight, P.C., Dallas, Texas.
 
                                    EXPERTS
 
  The audited balance sheet of the Company, the audited financial statements
of the Predecessors to Friede Goldman International Inc. and the audited
statement of operations of Friede & Goldman, Ltd. included in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
 
                            ADDITIONAL INFORMATION
 
  The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto the "Registration Statement") under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which is included as part of the Registration Statement, does not
contain all the information contained in the Registration Statement, certain
portions of which have been omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules thereto. Statements made
in the Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete; with respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Registration Statement and the exhibits thereto may be
inspected, without charge, at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Citicorp
Center, 500 West Madison Street, Room 1400, Chicago, IL 60661, and 7 World
Trade Center, Suite 1300, New York, NY 10048 or on the Internet at
http://www.sec.gov. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
 
  The Company intends to furnish its stockholders with annual reports
containing audited financial statements examined by an independent public
accounting firm for each fiscal year.
 
                                      58
<PAGE>
 
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
Financial Statements of the Predecessors to Friede Goldman International
 Inc.:
  Report of Independent Public Accountants................................  F-2
  Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997
   (unaudited)............................................................  F-3
  Statements of Operations For the Years Ended December 31, 1994, 1995 and
   1996, and the Three Months ended March 31, 1996 and 1997 (unaudited)...  F-4
  Statements of Stockholders' Equity For the Years Ended December 31,
   1994, 1995 and 1996 and the Three Months Ended March 31, 1997
   (unaudited)............................................................  F-5
  Statements of Cash Flows For the Years Ended December 31, 1994, 1995 and
   1996 and the Three Months Ended March 31, 1996 and 1997 (unaudited)....  F-6
  Notes to Financial Statements...........................................  F-8
Financial Statements of Friede & Goldman, Ltd.:
  Report of Independent Public Accountants................................ F-20
  Statement of Income For the Eleven Months Ended November 30, 1996....... F-21
  Notes to Statement of Income............................................ F-22
Financial Statements of Friede Goldman International Inc.:
  Report of Independent Public Accountants................................ F-24
  Balance Sheet as of April 21, 1997...................................... F-25
  Notes to Balance Sheet.................................................. F-26
Pro Forma Statement of Operations (unaudited):
  Pro Forma Statement of Operations For the Year Ended December 31, 1996.. F-27
  Notes to Pro Forma Statement of Operations.............................. F-29
</TABLE>
 
 
                                      F-1
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Friede Goldman International Inc.:
 
  We have audited the accompanying balance sheet of the principal predecessor
to Friede Goldman International Inc., a Delaware corporation (the "Company"),
as of December 31, 1995 and the accompanying combined balance sheet of its
predecessors as of December 31, 1996, and the related statements of
operations, stockholders' equity, and cash flows for each of the years in the
three year period ended December 31, 1996. 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 generally accepted auditing
standards. 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 financial position of the principal predecessor
of Friede Goldman International Inc. as of December 31, 1995 and the combined
financial position of its predecessors as of December 31, 1996, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
 
                                          ARTHUR ANDERSEN LLP
 
Jackson, Mississippi,
March 7, 1997.
 
                                      F-2
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                            BALANCE SHEETS (NOTE 1)
 
<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                           ------------------------  MARCH 31,
                                              1995         1996        1997
                                           -----------  ----------- -----------
                  ASSETS
                  ------                                            (UNAUDITED)
<S>                                        <C>          <C>         <C>
Current assets:
  Cash and cash equivalents............... $ 1,207,206  $ 1,509,876 $ 2,095,555
  Restricted certificates of deposit......   4,456,267    4,651,964   1,107,030
  Marketable securities, at fair market
   value..................................   2,040,001    6,618,766   4,780,950
  Accounts receivable.....................   1,035,057    4,869,576  11,726,569
  Inventory and stockpiled materials......          --      577,904     753,181
  Investment in sales-type lease, current
   portion................................     381,352      457,710     394,249
  Costs and estimated earnings in excess
   of billings on uncompleted contracts...          --      284,052   1,101,142
  Prepaid expenses........................      49,346      644,482   1,187,452
                                           -----------  ----------- -----------
    Total current assets..................   9,169,229   19,614,330  23,146,128
Property, plant and equipment, net of
 accumulated depreciation.................   4,078,961    5,546,399   6,043,349
Investment in sales-type lease, less
 current portion..........................   1,628,915    1,171,205   1,049,477
Intangibles and other assets..............     103,182    1,250,121   1,216,620
                                           -----------  ----------- -----------
    Total assets.......................... $14,980,287  $27,582,055 $31,455,574
                                           ===========  =========== ===========
<CAPTION>
   LIABILITIES AND STOCKHOLDERS' EQUITY
   ------------------------------------
<S>                                        <C>          <C>         <C>
Current liabilities:
  Short-term debt, including current
   portion of long-term debt.............. $ 5,752,603  $10,235,349 $ 7,506,482
  Advance from stockholder................          --    1,400,000          --
  Accounts payable, trade.................     396,314    3,075,216   5,794,552
  Accrued expenses........................     305,949      537,786     590,215
  Billings in excess of costs and
   estimated earnings on uncompleted
   contracts..............................          --    3,262,168   6,868,230
                                           -----------  ----------- -----------
    Total current liabilities.............   6,454,866   18,510,519  20,759,479
Long-term debt, less current maturities...   3,270,173    2,852,649   1,978,806
                                           -----------  ----------- -----------
    Total liabilities.....................   9,725,039   21,363,168  22,738,285
                                           -----------  ----------- -----------
Commitments and contingencies
Stockholders' equity:
  Preferred stock, $0.01 par value; 2,000
   shares authorized, none outstanding....          --           --          --
  Common stock, $0.01 par value; 1,000
   shares authorized, 501.25 shares issued
   and outstanding at December 31, 1995
   and 1996 ..............................       5,013        5,013       5,013
  Additional paid-in capital..............     876,554    1,252,554   1,627,554
  Retained earnings.......................   4,531,924    3,352,649   6,180,111
  Unrealized gain (loss) on marketable
   securities.............................    (158,243)   1,608,671     904,611
                                           -----------  ----------- -----------
    Total stockholders' equity............   5,255,248    6,218,887   8,717,289
                                           -----------  ----------- -----------
    Total liabilities and stockholders'
     equity............................... $14,980,287  $27,582,055 $31,455,574
                                           ===========  =========== ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-3
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                       STATEMENTS OF OPERATIONS (NOTE 1)
 
<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED
                           FOR THE YEARS ENDED DECEMBER 31,            MARCH 31,
                          -------------------------------------  -----------------------
                             1994         1995         1996         1996        1997
                          -----------  -----------  -----------  ----------  -----------
                                                                      (UNAUDITED)
<S>                       <C>          <C>          <C>          <C>         <C>
Revenue.................  $23,890,885  $19,864,895  $21,758,715  $2,964,895  $18,654,636
Cost of revenue.........   18,063,371   13,509,781   15,768,980   2,426,160   12,799,897
                          -----------  -----------  -----------  ----------  -----------
  Gross profit..........    5,827,514    6,355,114    5,989,735     538,735    5,854,739
Selling, general and
 administrative
 expenses...............    2,202,569    3,861,564    5,869,371     942,297    2,522,411
                          -----------  -----------  -----------  ----------  -----------
  Operating income......    3,624,945    2,493,550      120,364    (403,562)   3,332,298
                          -----------  -----------  -----------  ----------  -----------
Other income (expense):
  Interest expense......     (369,819)    (650,171)    (891,458)   (199,832)    (201,360)
  Interest income.......       24,019      452,882      443,317     116,786       81,527
  Gain on sale or
   distribution of
   assets...............      807,611    1,868,885      348,793     230,029    1,378,842
  Litigation settlement.           --      750,000    3,466,635   3,466,635           --
  Other.................       22,973        5,760      104,487     (26,663)      66,249
                          -----------  -----------  -----------  ----------  -----------
    Total other income
     (expense)..........      484,784    2,427,356    3,471,774   3,586,955    1,325,258
                          -----------  -----------  -----------  ----------  -----------
    Net income..........  $ 4,109,729  $ 4,920,906  $ 3,592,138  $3,183,393  $ 4,657,516
                          ===========  ===========  ===========  ==========  ===========
Unaudited pro forma data
 (Note 2):
  Net income, reported
   above................                            $ 3,592,138              $ 4,657,516
  Pro forma provision
   for income taxes
   related to operations
   as
   S Corporation........                              1,329,000                1,810,000
                                                    -----------              -----------
  Pro forma net income..                            $ 2,263,138              $ 2,847,516
                                                    ===========              ===========
Unaudited pro forma per
 share data (Note 2):
  Weighted average
   shares outstanding...                              9,200,000                9,200,000
                                                    ===========              ===========
  Pro forma net income
   per share............                            $      0.25              $      0.31
                                                    ===========              ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-4
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE 1)
 
              FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                   AND THE THREE MONTHS ENDED MARCH 31, 1997
 
<TABLE>
<CAPTION>
                                                                             UNREALIZED
                          COMMON STOCK                                          GAIN
                          $10 PAR VALUE   ADDITIONAL                         (LOSS) ON       TOTAL
                          --------------   PAID-IN     RETAINED   TREASURY   MARKETABLE  STOCKHOLDERS'
                          NUMBER  AMOUNT   CAPITAL     EARNINGS     STOCK    SECURITIES     EQUITY
                          ------  ------  ----------  ----------  ---------  ----------  -------------
<S>                       <C>     <C>     <C>         <C>         <C>        <C>         <C>
Balance, December 31,
 1993...................  500.00  $5,000  $1,211,812  $  986,303  $(222,870) $      --    $1,980,245
  Retirement of treasury
   stock................  (18.75)   (187)   (222,683)         --    222,870         --            --
  Merger with Gulf Boat,
   Inc..................      --      --    (194,562)         --         --         --      (194,562)
  Distributions to
   stockholders.........      --      --           -  (3,258,877)        --         --    (3,258,877)
  Issuance of stock as
   compensation.........   20.00     200      81,987          --         --         --        82,187
  Unrealized loss on
   marketable
   securities...........      --      --          --          --         --    (37,467)      (37,467)
  Net income............      --      --          --   4,109,729         --         --     4,109,729
                          ------  ------  ----------  ----------  ---------  ---------    ----------
Balance, December 31,
 1994...................  501.25   5,013     876,554   1,837,155         --    (37,467)    2,681,255
  Distributions to
   stockholders.........      --      --          --  (2,226,137)        --         --    (2,226,137)
  Unrealized loss on
   marketable
   securities...........      --      --          --          --         --   (120,776)     (120,776)
  Net income............      --      --          --   4,920,906         --         --     4,920,906
                          ------  ------  ----------  ----------  ---------  ---------    ----------
Balance, December 31,
 1995...................  501.25   5,013     876,554   4,531,924         --   (158,243)    5,255,248
  Distributions to
   stockholders.........      --      --          --  (4,771,413)        --         --    (4,771,413)
  Capital contribution
   from stockholders....      --      --     100,000          --         --         --       100,000
  Stock granted to
   employees as
   compensation.........      --      --     276,000          --         --         --       276,000
  Unrealized gain on
   marketable
   securities...........      --      --          --          --         --  1,766,914     1,776,914
  Net income............      --      --          --   3,592,138         --         --     3,592,138
                          ------  ------  ----------  ----------  ---------  ---------    ----------
Balance, December 31,
 1996...................  501.25   5,013   1,252,554   3,352,649         --  1,608,671     6,218,887
  Distributions to
   stockholders.........      --      --          --  (1,830,054)        --         --    (1,830,054)
  Stock granted to
   employees as
   compensation.........      --      --     375,000          --         --         --       375,000
  Unrealized loss on
   marketable
   securities...........      --      --          --          --         --   (704,060)     (704,060)
  Net income............      --      --          --   4,657,516         --         --     4,657,516
                          ------  ------  ----------  ----------  ---------  ---------    ----------
Balance, March 31, 1997.  501.25  $5,013  $1,627,554  $6,180,111  $      --  $ 904,611    $8,717,289
                          ======  ======  ==========  ==========  =========  =========    ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-5
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                       STATEMENTS OF CASH FLOWS (NOTE 1)
 
<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                          FOR THE YEARS ENDED DECEMBER 31,             MARCH 31,
                        --------------------------------------  ------------------------
                           1994          1995         1996         1996         1997
                        -----------  ------------  -----------  -----------  -----------
                                                                      (UNAUDITED)
<S>                     <C>          <C>           <C>          <C>          <C>
Cash flows from
 operating activities:
 Net income............ $ 4,109,729  $  4,920,906  $ 3,592,138  $ 3,183,393  $ 4,657,556
 Adjustments to
  reconcile net income
  to net cash provided
  by operating
  activities:
  Depreciation and
   amortization........     347,190       425,445      695,551      173,903      215,080
  Compensation expense
   related to stock
   issued to employees.      81,987            --      276,000           --      375,000
  (Gain) loss on sale
   of assets...........    (807,611)   (1,868,885)    (348,793)      21,869   (1,430,969)
  Net increase
   (decrease) in
   billings related to
   costs and estimated
   earnings on
   uncompleted
   contracts...........    (534,891)      856,622    2,978,116           --    2,788,972
  Other................      (8,255)      (21,119)          --           --           --
  Net effect of changes
   in assets and
   liabilities:
    Restricted
     certificates of
     deposit...........  (1,004,940)   (3,451,327)    (195,697)     (23,306)   3,544,934
    Accounts
     receivable........   1,081,483      (402,360)  (3,834,519)  (2,928,210)  (7,022,369)
    Inventory and
     stockpiled
     materials.........          --            --     (571,000)          --     (175,277)
    Prepaid expenses
     and other assets..      11,072        41,338     (464,966)      26,921     (509,469)
    Accounts payable
     and accrued
     expenses..........    (181,704)     (231,444)   2,747,893      637,180    2,908,765
                        -----------  ------------  -----------  -----------  -----------
     Net cash provided
      by operating
      activities.......   3,094,060       269,176    4,874,723    1,091,750    5,352,223
                        -----------  ------------  -----------  -----------  -----------
Cash flows from
 investing activities:
 Capital expenditures
  for plant and
  equipment............  (1,149,725)   (2,669,855)  (2,356,999)  (1,596,430)  (1,555,450)
 Cash received upon
  acquisition..........          --            --      163,020           --           --
 Proceeds from sale of
  property, plant and
  equipment............   3,309,296     1,431,770      578,521      279,641      395,521
 Development costs of
  land held for resale.    (148,373)           --           --           --           --
 Payments received on
  sales-type lease.....          --       317,733      381,352      100,577      185,189
 Release of (investment
  in) long-term
  restricted cash......    (569,731)      569,731           --           --           --
 Investment in
  marketable
  securities...........  (1,115,717)   (2,058,910)  (2,631,756)  (1,011,978)          --
 Cash received in
  merger with Gulf
  Boat, Inc............      83,920            --           --           --           --
                        -----------  ------------  -----------  -----------  -----------
     Net cash provided
      by (used in)
      investing
      activities....... $   409,670  $ (2,409,531) $(3,865,862) $(2,228,190) $  (974,740)
                        ===========  ============  ===========  ===========  ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-6
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                     STATEMENTS OF CASH FLOWS--(CONTINUED)
 
<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                          FOR THE YEARS ENDED DECEMBER 31,          MARCH 31,
                          ----------------------------------  ----------------------
                             1994        1995        1996        1996        1997
                          ----------  ----------  ----------  ----------  ----------
                                                                   (UNAUDITED)
<S>                       <C>         <C>         <C>         <C>         <C>
Cash flows from
 financing activities:
  Net borrowings
   (repayments) under
   lines of credit......  $  (93,812) $3,924,059  $3,822,030  $1,141,526  $1,099,000
  Proceeds from
   borrowings under debt
   facilities...........     943,741   6,188,196   1,736,109     588,978      48,040
  Repayments on
   borrowings under debt
   facilities...........    (713,598) (5,304,775) (1,492,917)         --  (4,749,750)
  Distributions to
   shareholders.........  (3,258,877) (2,226,137) (4,771,413)   (851,276)   (189,094)
                          ----------  ----------  ----------  ----------  ----------
Net cash provided (used)
 in financing
 activities.............  (3,122,546)  2,581,343    (706,191)    879,228  (3,791,804)
                          ----------  ----------  ----------  ----------  ----------
Net increase (decrease)
 in cash and cash
 equivalents............     381,184     440,988     302,670    (257,212)    585,679
Cash and cash
 equivalents at
 beginning of year......     385,034     766,218   1,207,206   1,207,206   1,509,876
                          ----------  ----------  ----------  ----------  ----------
Cash and cash
 equivalents at end of
 year...................  $  766,218  $1,207,206  $1,509,876  $  949,994  $2,905,555
                          ==========  ==========  ==========  ==========  ==========
Supplemental disclosure
 of cash flow
 information--Cash paid
 during the period for
 interest...............  $  369,468  $  621,387  $  751,522  $  167,412  $  204,278
                          ==========  ==========  ==========  ==========  ==========
  Issuance of common
   stock as
   compensation.........  $   81,987  $       --  $  276,000  $       --  $  375,000
                          ==========  ==========  ==========  ==========  ==========
  Non-cash distributions
   to shareholders......  $       --  $       --  $       --  $       --  $1,641,000
                          ==========  ==========  ==========  ==========  ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                      F-7
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
          (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS:
 
  The principal predecessor to Friede Goldman International Inc. (the
"Company"), HAM Marine, Inc. ("HAM"), was formed in 1982 under the laws of the
State of Mississippi. HAM's primary business is to provide conversion, retrofit
and repair services for offshore drilling rigs. HAM's primary customers are
offshore drilling contractors who utilize the Company's services in connection
with the conversion and modification of existing drilling rigs in order to
increase their technical capabilities or to improve their efficiency. As of
March 31, 1997, substantially all of HAM's services were conducted at a
deepwater dock facility on land leased from the Port Authority in Pascagoula,
Mississippi.
 
 Acquisition of Friede & Goldman, Ltd.
 
  On December 2, 1996, a company related to HAM through identical equity
ownership, J.L. Holloway Holdings, Inc. ("Holdings"), purchased certain assets
and rights, including the rights to the trade name "Friede & Goldman" from an
unrelated third party ("Mr. Goldman"). Simultaneously with the closing of the
purchase, Holdings changed its name to Friede & Goldman, Ltd. ("Friede &
Goldman"). Prior to Holdings' purchase of assets and rights, Holdings had no
material assets, liabilities or operations. These transactions are accounted
for under the purchase method of accounting by the Company in the accompanying
financial statements. The operations of Friede & Goldman for the period from
December 2, 1996 to December 31, 1996, which were immaterial, are included in
the accompanying financial statements. For the eleven months ended November 30,
1996, revenues, gross profit and net income generated by the seller were $3.7
million, $1.1 million and $0.6 million, respectively.
 
  Assets acquired included property and equipment with a value of approximately
$216,000, and designs and patents which, at December 31, 1996, had a carrying
value of approximately $1,246,000.
 
  In addition to the cash consideration paid by Friede & Goldman to Mr.
Goldman, the Purchase Agreement requires Friede & Goldman, until December 2006,
to pay Mr. Goldman certain licensing and design fees received by Friede &
Goldman from the designs of new-build independent leg jackups and
semisubmersible drilling rigs as well as a percentage of all amounts collected
from sales of a patented rack chock system designed by Friede Predecessor, a
system which improves the strength of the connection between the legs and the
hull of a jackup drilling rig. Friede & Goldman is also required to make
payments to Mr. Goldman in the event that future sales of designs purchased
from Friede Predecessor and new designs developed by Friede & Goldman
constitute 20% or less of all new-build independent leg jackup and
semisubmersible drilling rigs for which construction has begun by domestic
drillers (other than any domestic driller that builds rigs for its own use with
its own shipyard) during any consecutive three-year period prior to the end of
the year 2006, with the first three-year period commencing at the time
construction begins with respect to a new-build drilling rig. In such an event,
Friede & Goldman is required to pay Mr. Goldman $300,000 (subject to adjustment
for inflation and certain maximum amounts) for each drilling unit design sale
by which Friede & Goldman is short of the 20% threshold for any such three-year
period, subject to a maximum of $1 million for any such three-year period. In
the event that Friede & Goldman fails to make any of the payments described on
a timely basis, Friede Predecessor has the right to require that all of the
assets purchased from Friede Predecessor (other than the name "Friede Goldman"
and derivatives thereof) be returned to Friede Predecessor and the right to
terminate the consulting and non-compete provisions of the Purchase Agreement.
 
  Friede & Goldman's primary business is the design of offshore drilling and
production units, including jackups, semisubmersibles, drillships and floating
production, storage and offloading vessels, for new construction and with
respect to upgrade and modification projects. Friede & Goldman's offices are
located in New Orleans, Louisiana.
 
                                      F-8
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
 Reorganization
 
  The Company was incorporated under the laws of the State of Delaware in
February 1997. In anticipation of the Company's proposed initial public
offering of its common stock (see Note 14), the stockholders of HAM and Friede
& Goldman will contribute all of their ownership in HAM and Friede & Goldman
to the Company in exchange for shares of common stock in the Company; and HAM
and Friede & Goldman will become wholly-owned subsidiaries of the Company (the
"Reorganization"). The accompanying financial statements include the accounts
of HAM for all dates and periods presented and of Friede & Goldman for the
period since December 2, 1996. All significant intercompany accounts and
transactions have been eliminated. References to the "Company" included herein
include HAM and Friede & Goldman, which are also sometimes collectively
referred to as "the Predecessors".
 
  The Company's certificate of incorporation established authority to issue
1,000 shares of $0.01 par value preferred stock and 2,000 shares of $0.01 par
value common stock. Preferred stock may be issued in one or more series and in
such amounts as may be determined by the Company's board of directors. The
voting powers, designations, preferences and relative, participating, optional
or other special rights, if any, and the qualifications, limitations or
restrictions, if any, of each preferred stock issue shall be fixed by
resolution of the board of directors providing for the issue. All shares of
common stock of the Company shall be identical, and, except as otherwise
provided in a resolution of the board of directors with respect to preferred
stock, the holders of common stock shall exclusively possess all voting power
with each share of common stock having one vote.
 
 Pro Forma Earnings Per Share
 
  In May 1997, in conjunction with the Company's plan to undertake an initial
public offering of its common stock (see Note 14), the Company authorized an
increase in the amount of authorized shares to 5,000,000 shares of $0.01 par
value preferred stock and 25,000,000 shares of $0.01 par value common stock.
Effective immediately prior to the public offering, the Company anticipates
issuing, pursuant to a stock exchange agreement, 9,200,000 shares of the
Company's common stock to the stockholders of HAM and Friede & Goldman as
described above. Therefore, for the pro forma per share data included in the
statement of operations, the weighted average number of common shares
outstanding is 9,200,000 shares for all periods presented.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
 Revenue Recognition
 
  The Company records revenue on contracts on the percentage-of-completion
method. Contract revenue is earned based upon the percentage that incurred
costs to date, excluding the costs of any purchased but uninstalled materials,
bear to total estimated costs, commencing when progress reaches a point where
experience is sufficient to estimate final results with reasonable accuracy.
As contracts extend over one or more years, revisions in costs and earnings
estimates during the course of the work are reflected in the accounting period
in which the facts which require the revisions become known. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Other changes, including those arising from contract
penalty provisions, and final contract settlements are recognized in the
period in which the revisions are determined.
 
  Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred.
 
  The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
 
                                      F-9
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
 Inventories and Stockpiled Materials
 
  Inventories and stockpiled materials consist primarily of materials
purchased for specific contracts and are stated at the lower of specifically
identified cost or market (replacement cost or net realizable value).
 
 Property, Plant and Equipment
 
  Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the assets, which range from 5 to 39 years. Ordinary
maintenance and repairs which do not extend the physical or economic lives of
the plant or equipment are charged to expense as incurred.
 
 Intangible Assets
 
  Intangible assets consist primarily of design and patents acquired in
connection with the acquisition of Friede & Goldman which are being amortized
over a 10 year period. Amortization expense for the period from December 2,
1996 to December 31, 1996 and for the three months ended March 31, 1997 was
immaterial.
 
INCOME TAXES
 
  The stockholders of the Predecessors have elected to have each entity taxed
as an S Corporation for federal and state income tax purposes, whereby the
stockholders are liable for individual federal and state income taxes on their
allocated portions of such entity's taxable income. Accordingly, the
accompanying financial statements do not include any provision for income
taxes. HAM has historically used distributions or bonuses, or a combination
thereof, to the stockholders, who are also employees, in order to provide a
means by which the stockholders can meet their income tax obligation. Included
in selling, general and administration expenses are bonuses of approximately
$223,000, $1,225,000 and $2,118,000 for the years ended December 31, 1994,
1995 and 1996, respectively, which were primarily intended to assist the
stockholders with their personal income tax liabilities resulting from HAM's
earnings.
 
  As discussed in Note 14, the Company is contemplating a public offering of
equity securities. Before the closing of the public offering, the stockholders
of the Predecessors will elect to terminate the status of each Predecessor as
an S Corporation, and the Company and the Predecessors will be subject to
federal and state income taxes. This will result in the establishment of a net
deferred tax liability calculated at applicable federal and state income tax
rates resulting primarily from temporary differences arising from differences
in depreciation rates for tax and financial reporting purposes, timing of gain
recognition related to sales-type lease and unrealized appreciation in
marketable securities. At December 31, 1996, and March 31, 1997, such net
deferred tax liability would have been approximately $1,410,000 and
$1,100,000, respectively.
 
  The pro forma provision for income taxes is the result of the application of
a combined federal and state rate (37%) to income before income taxes.
 
 Cash Equivalents and Restricted Certificates of Deposit
 
  For purposes of the statement of cash flows, the Company considers all
short-term cash investments with an original maturity of less than three
months to be cash equivalents. The restricted certificates of deposit are held
by financial institutions as collateral on debt facilities and are therefore
not considered a cash equivalent.
 
                                     F-10
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
 Compensation Expense Related to Stock issued to Employees
 
  In December 1996, HAM entered into an employment agreement with an
individual whereby the Company agreed to grant the employee shares of HAM's
common stock equal to 0.835% of the common shares outstanding as of January 1,
1997. As a result, HAM charged to selling, general and administrative expense
in 1996 of $276,000 representing the estimated fair value as of the date of
the agreement of the shares to be issued. In February 1997, HAM agreed to
grant another employee fully vested shares of common stock of HAM equal to
approximately 0.418% of the common shares then outstanding, and to grant that
employee options to purchase at $2.39 per share (on the pro forma share basis
described in Note 1) an equal amount of additional shares ratably over a three
year period, subject to forfeiture if the employee terminates employment.
Accordingly, HAM recognized selling, general and administrative expense in the
three months ended March 31, 1997 of $375,000 representing the estimated fair
value of the fully vested shares at the date of grant. HAM will recognize
compensation expense related to the options to purchase additional shares over
the three-year vesting period.
 
 Use of Estimates
 
  These financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements, the
Company is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the dates of the balance sheets and
the reported amounts of revenues and expenses for the years then ended. Actual
results could differ materially from those estimates.
 
 Fair Value of Financial Instruments
 
  The carrying amount of the Company's financial instruments at December 31,
1995 and 1996 and March 31, 1996 and 1997, including cash, restricted
certificates of deposit, marketable securities, contracts receivable,
investments in sales-type lease and notes payable, approximates fair value.
 
 Recently Issued Accounting Pronouncements
 
  In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of."
("SFAS No. 121") The Company adopted SFAS No. 121 on January 1, 1996 and there
was no material impact on the Company's financial statements.
 
  In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation." The disclosure
requirements of this Statement are effective for the Company's financial
statements beginning in fiscal 1996. The Company intends to apply the
accounting provisions of Accounting Principles Board Opinion 25, "Accounting
for Stock Issued to Employees." With the Company's plan of adoption, the
impact will be limited to additional footnote disclosure.
 
  In March 1997, the FASB issued Statement of Financial Accounting Standards
No. 128 ("SFAS No. 128"), "Earnings Per Share," which adopts a revised
methodology for computing earnings per share for publicly owned companies. The
Company will be required to adopt the new methodology in the fourth quarter of
1997 and will also be required to restate previously reported earnings per
share. Early adoption of SFAS No. 128 is not permitted. The Company does not
expect the application of SFAS No. 128 to materially change the Company's
reported earnings per share.
 
                                     F-11
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
3. MARKETABLE SECURITIES:
 
  At December 31, 1995 and 1996 and March 31, 1997, the Company held
marketable equity securities with historical costs of $2,198,244; $5,010,095
and $3,876,539, respectively. In accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," these securities are classified as available for sale. As
such, their carrying values are adjusted to fair market value with net
unrealized gains/losses included as separate component of stockholders'
equity. At December 31, 1995, the fair market value of marketable securities
was $2,040,001 resulting in net unrealized losses of $158,243. At December 31,
1996, the fair market value of marketable securities was $6,618,766 resulting
in net unrealized gains of $1,608,671. At March 31, 1997, the fair market
value of marketable securities was $4,780,950 resulting in net unrealized
gains of $904,611.
 
  During the years ended December 31, 1995 and 1996, the Company sold
securities classified as available for sale for proceeds of $216,770, and
$5,269,110, respectively, resulting in realized losses of $5,733 in 1995 and
realized gains of $180,095 in 1996. There were no significant sales of
securities during 1994. The cost basis of securities sold was calculated using
the specific identification method.
 
4. ACCOUNTS RECEIVABLE:
 
  A summary of accounts receivable follows:
 
<TABLE>
<CAPTION>
                 DESCRIPTION                       DECEMBER 31,
                 -----------                   ---------------------  MARCH 31,
                                                  1995       1996       1997
                                               ---------- ---------- -----------
<S>                                            <C>        <C>        <C>
Accounts receivable, contracts................ $  717,108 $4,318,999 $11,474,311
Due from employment contractor (Note 8).......    108,936    413,881     104,436
Due from stockholders (Note 12)...............    209,013    128,323     139,149
Other.........................................         --      8,373       8,673
                                               ---------- ---------- -----------
  Total accounts receivable................... $1,035,057 $4,869,576 $11,726,569
                                               ========== ========== ===========
 
5. PROPERTY, PLANT AND EQUIPMENT:
 
  A summary of property, plant and equipment follows:
 
<CAPTION>
                 DESCRIPTION                       DECEMBER 31,
                 -----------                   ---------------------  MARCH 31,
                                                  1995       1996       1997
                                               ---------- ---------- -----------
<S>                                            <C>        <C>        <C>
Land.......................................... $  249,836 $       -- $        --
Land held for investment......................    409,833    409,833          --
Buildings.....................................    639,213    333,694     771,758
Machinery and equipment.......................  4,013,739  6,115,284   6,295,106
Dock facility.................................  2,402,148  2,741,493   2,951,864
                                               ---------- ---------- -----------
  Total property, plant and equipment.........  7,714,769  9,600,304  10,160,549
Less accumulated depreciation.................  3,635,808  4,053,905   4,117,200
                                               ---------- ---------- -----------
  Property, plant and equipment, net.......... $4,078,961 $5,546,399 $ 6,043,349
                                               ========== ========== ===========
</TABLE>
 
  Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $347,190, $425,445 and $695,551, respectively. Depreciation expense for
the three months ended March 31, 1996 and 1997 was $119,483 and $215,080,
respectively.
 
                                     F-12
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
6. FINANCING ARRANGEMENTS:
 
  A summary of short and long-term debt follows:
 
<TABLE>
<CAPTION>
                 DESCRIPTION                      DECEMBER 31,
                 -----------                  --------------------- MARCH 31,
                                                 1995       1996       1997
                                              ---------- ---------- ----------
<S>                                           <C>        <C>        <C>
Borrowings under 1996 Credit Facility........ $       -- $1,501,000 $       --
Borrowings under 1997 Credit Facility........         --         --  2,600,000
Notes payable to banks bearing interest at
 rates ranging from 6.10% to 6.25%, maturing
 at dates ranging from February 1997 to July
 1997, secured by certificates of deposit....  2,025,000  4,475,000  1,100,000
Brokerage margin account bearing interest at
 7.75%, due on demand and secured by equity
 securities..................................    526,247  2,637,277  2,685,317
Note payable to a bank bearing interest at
 10%, repayable in monthly installments,
 maturing March 2005, secured by sales-type
 lease and related real estate (See Note 7)..  2,010,267  1,628,915  1,443,726
Notes payable to financial institutions and
 others bearing interest at rates ranging
 from 5% to 9.15%, payable in monthly
 installments, maturing at dates ranging from
 January 1998 to January 2000 and secured by
 equipment, lease and real property..........  2,221,262  2,845,806  1,656,245
Three revolving master notes with a bank
 providing for aggregate borrowings up to
 $3,000,000, bearing interest at rates
 ranging from 5.94% to prime plus 1.75%
 depending on amounts outstanding, secured by
 certificates of deposit totaling $2,063,848,
 accounts receivable and contract rights.....  2,240,000         --         --
                                              ---------- ---------- ----------
  Total......................................  9,022,776 13,087,998  9,485,288
  Less: short-term debt and current
   maturities of long-term debt..............  5,752,603 10,235,349  7,506,482
                                              ---------- ---------- ----------
  Long-term debt less current maturities..... $3,270,173 $2,852,649 $1,978,806
                                              ========== ========== ==========
</TABLE>
  As of December 31, 1996, the Company has a line of credit facility (the
"1996 Credit Facility") with a bank which permits borrowings of up to the
lesser of $5,000,000 or 80% of eligible receivables. Borrowings under the 1996
Credit Facility bear interest at prime plus 1% (9.25% at December 31, 1996)
and are secured by accounts receivable and personal guarantees of certain
stockholders of the Company. The 1996 Credit Facility, which expires in July
1997, requires the Company to maintain certain minimum net worth and working
capital levels and debt to equity ratios and also requires the Company to
maintain at least $500,000 in unrestricted cash or marketable securities. As
of December 31, 1996, the Company was in compliance with these requirements.
At December 31, 1996, additional borrowings of $1,610,990 were available to
the Company under the 1996 Credit Facility.
 
  On March 20, 1997, the Company entered into a new credit facility (the "1997
Credit Facility") which provides for accounts receivable and contract related
inventory based borrowings of up to $10,000,000 at prime plus 1/2% through
March 20, 1998. The 1997 Credit Facility contains similar provisions to those
required by the 1996 Credit Facility with respect to net worth and working
capital levels and debt to equity ratios. At March 31, 1997, additional
borrowings of $4,146,075 were available under the 1997 credit facility.
 
                                     F-13
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
  Short-term borrowings averaged $435,000 in 1994, $1,697,000 in 1995 and
$5,396,000 in 1996, . Such borrowings were at average interest rates of 8.5%,
7.0% and 7.6%, respectively. The weighted average interest rate on all of the
Company's short-term borrowings was 6.2% and 7.2% at December 31, 1995 and
1996, respectively.
 
  A summary of short and long-term debt maturities at December 31, 1996,
follows:
 
<TABLE>
<CAPTION>
      YEAR ENDING DECEMBER 31,                                         AMOUNT
      ------------------------                                       -----------
      <S>                                                            <C>
      1997.......................................................... $10,235,349
      1998..........................................................   1,327,776
      1999..........................................................     672,495
      2000..........................................................     131,015
      2001..........................................................     143,419
      Thereafter....................................................     577,944
                                                                     -----------
        Total maturities............................................ $13,087,998
                                                                     ===========
</TABLE>
 
  The Company expects to use the proceeds from maturing certificates of
deposit to repay the notes payable secured by such certificates, and to repay
the brokerage margin account upon the ultimate sale of the related marketable
securities.
 
7. ACQUISITION, LEASE AND SALE OF ASSETS:
 
  In November 1994, the Company merged with Gulf Boats, Inc. ("Gulf Boats"),
an entity with ownership identical to the Company's (See Note 12). In
connection with that acquisition, the Company assumed a long-term lease
obligation for certain land, buildings and a dock facility, as well as certain
other long term obligations to individuals affiliated with the owner of the
leased facilities. In February 1995, the Company purchased the leased assets
from the lessor for approximately $1.1 million and, in connection therewith,
was released from its obligations to the individuals.
 
  In March 1995, the Company entered into an arrangement with an unrelated
party (the "Lessee") for lease of the property for a term of ten years. The
lease provides for monthly payments from the Lessee of $50,000 during the
first thirty-six months and $17,425 per month during the remaining term. At
about the same time, the Company borrowed $2,328,000 from a bank with the
lease being assigned as security for the loan. The loan bears interest at 10%
with the monthly payments and term of the promissory note equal to the lease
payments receivable from the Lessee.
 
  The Company granted the Lessee an option to purchase the property at any
time for an amount equal to the outstanding principal balance, plus accrued
interest, of the bank loan.
 
  This lease has been accounted for as a sale-type lease by the Company.
Accordingly, proceeds of $2,328,000 were recorded as an investment in sales-
type lease. In connection with the purchase of the property, release of
obligations and subsequent sales-type lease, the Company realized a gain of
approximately $1.7 million which is included in gain on sale of assets in the
1995 statement of operations.
 
  During 1994, the Company sold 106 acres of real estate not used in the
Company's operations for proceeds of $3,260,000. The sale resulted in a net
realized gain of approximately $769,000 which is included in gain on sale of
assets in the 1994 statement of operations.
 
                                     F-14
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
8. CONTRACT LABOR ARRANGEMENT:
 
  In May 1997, the Company terminated its contract for craft labor with a
contract labor company. As a result, craft labor is directly employed by the
Company at levels of wages and benefits substantially equivalent to those
formerly provided. Prior to termination of the contract company, the Company's
craft labor was provided by a contract employment company which was owned by
the spouse of an employee of the Company and whose only contract was with the
Company. The Company was charged the actual labor rate paid to the employees
plus a markup for employment taxes and insurance and the employment company's
profit, which was intended to be nominal. The marked up rates were reviewed
periodically and adjustments were made as considered necessary. Payments for
contract employment labor totaled $12,981,786, $8,386,028 and $10,131,603 for
the years ended December 31, 1994, 1995 and 1996, respectively.
 
  The insurer who provides workmen's compensation coverage to both the Company
and the employment contractor has asserted that rates higher than those
charged during 1995 and 1996 may have been more appropriate, and that higher
rates may be assessed for future coverage. No specific claim has been asserted
against the Company, however, it is possible that the insurer may attempt to
impose retroactive premium adjustments on the contractor or the Company.
Management of the Company does not believe that the Company will be required
to pay any material amount of retroactive premiums.
 
9. POOLED RESOURCES ARRANGEMENT AND SIGNIFICANT CUSTOMERS:
 
  In February 1994, the Company entered into an agreement (the "1994 Joint
Venture") with an unrelated entity to jointly perform services in connection
with the modification and upgrade of a customer's offshore drilling rig. Under
the terms of the 1994 Joint Venture, both the Company and the unrelated entity
were compensated for services each provided in connection with the contract at
agreed upon rates. Any net profits from the 1994 Joint Venture were shared
equally. The contract was completed during 1995, and the 1994 Joint Venture
was terminated. The Company recognized as contract revenue the amounts charged
to the 1994 Joint Venture for services provided during 1994 and 1995, together
with the Company's share of the net profit from the 1994 Joint Venture, using
the percentage of completion method. Such amounts were approximately
$16,249,000 and $8,652,000 in 1994 and 1995, respectively.
 
  In December 1995, the Company and the same unrelated third party entered
into another agreement (the "1995 Joint Venture") to jointly pursue contract
opportunities and perform the related services. The 1995 Joint Venture was
originally for a term of five years; however, it was terminated by mutual
agreement in November 1996. The terms of the 1995 Joint Venture provided for
each party to be paid agreed upon rates for services performed in connection
with related contracts and for any net profits from the 1995 Joint Venture to
be shared equally. For the year ended December 31, 1995, activity conducted
through the 1995 Joint Venture was immaterial. For the year ended December 31,
1996, the Company recognized contract revenues of $9,838,000, together with
the Company's share of net profits from the 1995 Joint Venture. At December
31, 1996, the partners were involved in the dissolution of the joint venture
agreement.
 
  The nature of the conversion and modification projects undertaken by the
Company can result in an individual contract comprising a large percentage of
a fiscal year's contract revenues. Similarly, relatively few companies own
offshore rigs. As a result, contracts performed for an individual customer may
comprise a significant portion of a particular year's contract revenue. During
the year ended December 31, 1996, the largest single contract represented 15%
of contract revenues and contracts with four separate customers comprised 12%,
17%, 24% and 31% of contract revenues.
 
                                     F-15
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
10. EMPLOYEE BENEFIT PLANS:
 
  Effective July 1, 1995, the Company adopted a qualified 401(k) employee
savings and profit sharing plan for the benefit of substantially all eligible
employees, including those of the labor contractors (See Note 8). Under the
plan, employees can contribute and defer taxes on compensation contributed.
The Company matches 25% of the contributions of the employees up to a maximum
of 5% of salary. The Company also has the option to make an additional profit
sharing contribution to the plan. Employer contributions to the plan during
the years ended December 31, 1995 and 1996, amounted to $10,171 and $38,109,
respectively.
 
11. LEASES:
 
  The Company entered into a lease agreement in May 1985, with the Jackson
County Port Authority ("Port Authority") for the lease of land for its dock
facility. The primary lease agreement expires in May 2005, with two additional
ten-year options for renewal. Effective June 31, 1995, the original lease
agreement was revised to include additional land. The revised agreement
increased the annual lease payment from $29,870 to $49,331. The lease has been
recorded as an operating lease for financial reporting purposes. In addition
to the lease payment, the Company pays $30,000 annually to the Port Authority
in dredging fees related to this lease.
 
  In December 1996, the Company entered into another lease with the Port
Authority for additional dockspace and buildings adjacent to the Company's
existing shipyard facility. This lease agreement is for a period of two years
beginning in December 1996 and requires annual rental payments of $500,000.
The entire first year's rent was paid in December 1996 and is included in
prepaid expenses in the December 31, 1996 balance sheet, net of approximately
$26,000 amortized to lease expense.
 
  The Company is also committed to the lease of office space in two locations
at combined annual rentals of approximately $185,000.
 
  The Company also entered into a lease in March 1997 for additional
undeveloped land located near the Company's existing shipyard. This lease is
for a period of 2 years and requires minimum annual lease rentals of $41,000.
The Company has also recently entered into an arrangement that will give the
Company use of additional equipment for a period of 12 months. The
arrangement, which may be extended for an additional 12 month period by mutual
consent of the parties, requires minimum annual payments under the
arrangements of $1.2 million.
 
  Future minimum lease payments from all of the above arrangements are as
follows:
 
<TABLE>
<CAPTION>
           YEAR ENDING DECEMBER                      TOTAL
           --------------------                    ----------
           <S>                                     <C>
           1997................................... $1,998,982
           1998...................................    805,815
           1999...................................    271,648
           2000...................................    253,595
           2001...................................    219,935
           Thereafter.............................    282,765
                                                   ----------
                                                   $3,832,740
                                                   ==========
</TABLE>
 
  Lease expense was $29,870, $37,367 and $173,577, for the years ended
December 31, 1994, 1995 and 1996, respectively, and $32,640 and $464,594 for
the three months ended March 31, 1996 and 1997.
 
                                     F-16
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
12. RELATED PARTY TRANSACTIONS:
 
 HAM Industrial, Inc.
 
  The stockholders of the Company are also stockholders in HAM Industrial,
Inc. ("Industrial"). Prior to 1996, the Company paid certain common expenses,
such as officers' and administrative payroll which were allocated from
Industrial. These transactions between the Company and Industrial were
accounted for through a non-interest bearing intercompany loan account. There
were no transactions with Industrial during 1996, and, as of December 31,
1996, Industrial has no material assets or liabilities. A summary of
transactions between Industrial and the Company for the years ended December
31, 1995 and 1994, follows:
 
<TABLE>
<CAPTION>
                                                          1994        1995
                                                       ----------  -----------
   <S>                                                 <C>         <C>
   Balance due from Industrial, beginning of year..... $   19,207  $   310,836
   Activity during the year:
     Cash advanced to Industrial......................  2,042,791      995,340
     Repayment of advances by Industrial..............   (950,000)  (1,262,170)
     Payroll and administrative overhead paid by
      Industrial for the Company......................   (828,588)     (71,049)
     Other............................................     27,426       27,043
                                                       ----------  -----------
       Total activity, net............................    291,629     (310,836)
                                                       ----------  -----------
   Balance due from Industrial, end of year........... $  310,836  $       --
                                                       ==========  ===========
</TABLE>
 
 Modular Fabricators, Inc.
 
  Some of the stockholders of the Company are also stockholders in Modular
Fabricators, Inc. ("Modular"). During 1995, Modular advanced the Company
$1,113,934 which the Company repaid. Additionally, the Company advanced
Modular $103,610 with Modular repaying $56,416. The remaining amount due from
Modular was forgiven during 1995.
 
 Gulf Boats, Inc.
 
  As stated in Note 7, the stockholders of the Company were also stockholders
in Gulf Boats. The Company performed certain services for Gulf Boats totaling
$282,781 during the period from January 1, 1994 to November 30, 1994. On
November 30, 1994, Gulf Boats was merged into the Company, and Gulf Boats'
total assets of $955,655, including cash of $83,920, trade accounts receivable
of $174,299 and receivables from stockholders of $630,000, and total
liabilities of $1,150,217, including a payable to the Company of $282,781,
were recorded by the Company at Gulf Boats' historical cost basis.
 
 Transactions with Stockholders
 
  The Company has made loans to and paid expenditures on behalf of its
stockholders. These transactions are accounted for through a non-interest
bearing loan account. During the years ended December 31, 1994, 1995 and 1996,
the Company made advances to stockholders of $96,503, $209,013, and $128,323,
respectively. Additionally, the Company fully repaid a loan from a stockholder
in the amount of $55,797 during 1995. During the years ended December 31, 1995
and 1996, stockholders made payments to the Company of $177,941 and $209,013,
respectively. No amounts were repaid by stockholders during 1994. These
transactions resulted in receivables from stockholders of $209,013 and
$128,323 at December 31, 1995 and 1996, respectively. Two stockholders have
entered into personal guarantees of $5,000,000 each to secure a line of credit
with a bank. Additionally, a stockholder guarantees a note to an individual
with a principal balance of $197,508. See Note 6.
 
                                     F-17
<PAGE>
 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)
 
  At December 31, 1996, marketable securities owned by the Company with a
market value of approximately $1,390,000 were pledged as collateral for a
$1,400,000 loan from a financial institution to a stockholder which was used
to purchase the assets of Friede & Goldman, Ltd. (See Note 1). In connection
with the transfer of the purchased assets to Friede & Goldman, Friede &
Goldman recorded a $1,400,000 payable to the stockholder. On March 31, 1997,
the Company transferred the pledged marketable securities to the shareholder
in payment of the $1,400,000 payable and realized a gain of approximately
$237,868.
 
  On March 31, 1997, HAM distributed certain assets to its stockholders.
Assets distributed included real estate previously held for investment with an
estimated market value of $1,075,000 and a carrying value of approximately
$410,000, along with related debt of $198,000, an airplane with an estimated
market value of $566,000 and a carrying value of approximately $508,000. The
difference between the estimated fair market value and the carrying of the
distributed assets has been recognized as a gain in the Statement of
Operations for the three months ended March 31, 1997.
 
13. LITIGATION SETTLEMENTS AND CONTINGENCIES:
 
  In August 1992, the Company filed suit against a third party for breach of
contract in connection with a contract. In May 1994, the Company was awarded a
judgment totaling $3,725,000. The judgment was appealed to the United States
Court of Appeals, which, in December 1995, upheld a judgment for approximately
$3,517,000. The defendants in the suit petitioned the court for a rehearing.
The rehearing was ultimately denied, and, in February 1996, the Company
received $3,466,635 as settlement of this litigation. Because the ultimate
outcome of any litigation is uncertain, the Company recorded the settlement
proceeds as income in the period in which such proceeds were received.
 
  In 1995, the Company settled a lawsuit against a general contractor for
which Gulf Boats had served as a subcontractor prior to Gulf Boats' merger
into the Company. Settlement proceeds of $750,000 are included in the
statement of operations for the year ended December 31, 1995.
 
  The nature of the Company's activities relating to the conversion, retrofit
and repair of drilling rigs subjects its property and employees, along with
the property and employees of its customers and others to hazards which can
cause personal injury or damage or destruction of property. Although the
Company maintains such insurance protection as it considers economically
prudent, there can be no assurance that any such insurance will be sufficient
or effective under all circumstances or against all hazards to which the
Company may be subject. In particular, due to the high cost of errors and
omissions policies related to the design of drilling rigs and production
units, the Company does not carry insurance covering claims for personal
injury, loss of life or property damage relating to such design activity. A
successful claim for which the Company is not fully insured could have a
material adverse effect on the Company.
 
  The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
 
14. SUBSEQUENT EVENTS:
 
  In January 1997, the Company announced plans to build an additional shipyard
at a location approximately six miles from the Company's existing shipyard in
Pascagoula, Mississippi, that will have unobstructed deep water access to the
Gulf of Mexico. The new shipyard will be located on real estate leased from
the Port
 
                                     F-18
<PAGE>

 
                              THE PREDECESSORS TO
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
         (DATA WITH RESPECT TO MARCH 31, 1996 AND 1997 ARE UNAUDITED)

Authority, and is expected to be completed in 1998. The new shipyard is
expected to cost approximately $29 million to construct and equip. In
connection with the construction of the new shipyard, the County of Jackson,
Mississippi has agreed to dredge the ship channel and build roads and other
infrastructure related to the new shipyard, at a total cost to the county of
approximately $6 million, under an economic incentive program. In that regard,
the Company has filed an application with the United States Maritime
Administration ("MARAD") for Title 11 debt financing which, if approved and
utilized by the Company, would provide up to $24.8 million of the funds needed
for completion of the new shipyard. In May 1997, MARAD approved the Company's
eligibility for such amount of financing for purposes of constructing and
equiping the new shipyard. Specific terms of any such Title 11 debt financing
are not yet known. The Company's existing shipyard facility is expected to
remain in use by the Company.
 
  Management of the Company have indicated their intention to undertake an
initial public offering of the Company's common stock during 1997. Proceeds to
the Company are intended to be used for capital expenditures to construct and
equip the new shipyard, capital expenditures to improve the productive
capacity and efficiency of the existing shipyard, research and development
costs relating to the design of new offshore drilling rigs and floating
production units, working capital requirements and other general corporate
purposes. There can be no assurance, however, that the offering will occur or
that the proceeds, if any, will be sufficient for their intended use.
 
  Additionally, in early 1997, the Company began construction of a new Company
office building with an estimated total cost of approximately $1.2 million.
 
                                     F-19
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Friede Goldman International Inc.:
 
  We have audited the accompanying statement of income of Friede & Goldman,
Ltd., a Louisiana corporation, (the "Friede Predecessor") for the eleven-month
period ended November 30, 1996. This financial statement is the responsibility
of the Friede Predecessor's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of income is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of income. 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 provide a reasonable basis
for our opinion.
 
  In our opinion, the statement of income referred to above presents fairly,
in all material respects, the results of operations of Friede & Goldman, Ltd.
for the eleven-month period ended November 30, 1996, in conformity with
generally accepted accounting principles.
 
                                          ARTHUR ANDERSEN LLP
 
New Orleans, Louisiana,
February 28, 1997.
 
                                     F-20
<PAGE>
 
                             FRIEDE & GOLDMAN, LTD.
 
                              STATEMENT OF INCOME
 
                 FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1996
 
<TABLE>
<S>                                                                  <C>
REVENUES:
  Contract fees..................................................... $3,733,989
  Part sales........................................................     40,372
                                                                     ----------
    Total revenues..................................................  3,774,361
  Contract costs....................................................  2,653,710
                                                                     ----------
    Gross margin....................................................  1,120,651
GENERAL AND ADMINISTRATIVE EXPENSES:
  Depreciation......................................................     67,630
  Amortization......................................................      7,208
  Accounting and legal..............................................     32,661
  Automotive........................................................      9,372
  Books and periodicals.............................................      6,539
  Computer licenses and maintenance.................................     19,205
  Dues and registration fees........................................     10,900
  Office and drafting supplies......................................     32,180
  Postage and transportation........................................     13,374
  Rent..............................................................    172,858
  Taxes, payroll....................................................     78,060
  Taxes and licenses................................................     13,002
  Telephone.........................................................     42,023
  Repairs and maintenance...........................................      6,502
  Other.............................................................      8,133
                                                                     ----------
                                                                        519,647
INCOME FROM OPERATIONS..............................................    601,004
INTEREST AND DIVIDEND INCOME........................................     16,076
                                                                     ----------
NET INCOME.......................................................... $  617,080
                                                                     ==========
</TABLE>
 
 
         The accompanying notes are an integral part of this statement.
 
                                      F-21
<PAGE>
 
                            FRIEDE & GOLDMAN, LTD.
 
                         NOTES TO STATEMENT OF INCOME
 
                 FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1996
 
1. ORGANIZATION:
 
  Friede & Goldman, Ltd. (the "Friede Predecessor") is a closely-held company
formed in 1949. The Friede Predecessor engages in offshore design of offshore
drilling and production units, including jackups, submersibles,
semisubmersibles, drillships and floating production, storage and offloading
vessels, for construction and with respect to upgrade and modification
projects. In addition, the Friede Predecessor designs floating and bottom
supported platforms for drilling, pipelay and accommodation services. The
Friede Predecessor offices are located in New Orleans, Louisiana.
 
  On December 2, 1996 certain assets and rights of the Friede Predecessor,
including all rights to the trade name "Friede & Goldman," were sold to an
unrelated third party.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
 Basis of Accounting
 
  The accompanying statements have been prepared in accordance with generally
accepted accounting principles.
 
 Use of Estimates
 
  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reporting amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
 
 Revenue Recognition
 
  The Friede Predecessor records revenue on contracts on the percentage-of-
completion method. Contract revenue is earned based upon the percentage that
incurred costs to date, excluding the costs of any purchased but uninstalled
materials, bear to total estimated costs, commencing when progress reaches a
point where experience is sufficient to estimate final results with reasonable
accuracy. As contracts extend over one or more years, revisions in costs and
earnings estimates during the course of the work are reflected in the
accounting period in which the facts which require the revisions become known.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Other changes, including those
arising from contract penalty provisions, and final contract settlements are
recognized in the period in which the revisions are determined. There were no
contracts in progress at November 30, 1996.
 
  Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred.
 
 Depreciation
 
  Depreciation expense is calculated based on the following useful lives:
 
<TABLE>
<CAPTION>
                                                                        USEFUL
                                                                         LIFE
                                                                      ----------
      <S>                                                             <C>
      Furniture and fixtures.........................................    7 years
      Equipment and machinery........................................  5-7 years
      Computer software..............................................    3 years
      Leasehold improvements......................................... 5-19 years
</TABLE>
 
                                     F-22
<PAGE>
 
                            FRIEDE & GOLDMAN, LTD.
 
                   NOTES TO STATEMENT OF INCOME--(CONTINUED)
 
                 FOR THE ELEVEN MONTHS ENDED NOVEMBER 30, 1996
 
  Depreciation expense totaled $67,630 for the 11 months ended November 30,
1996.
 
 Income Taxes
 
  The Friede Predecessors is an S corporation for income tax reporting
purposes. As a result, income from the corporation is treated as taxable
income of the individual shareholder. Accordingly, no provision for income
taxes has been included in the accompanying financial statements.
 
 Amortization
 
  Patents are stated at cost less accumulated amortization and are amortized
over fifteen years. Original cost totaled $119,303, accumulated amortization
totaled $63,037 at November 30, 1996 and amortization expense totaled $7,208
for the 11 months ended November 30, 1996.
 
3. OPERATING LEASES:
 
  The Friede Predecessors leases office space and an automobile under
operating leases. Office lease expense was $175,191 and auto lease expense was
$1,954 for the 11 months ended November 30, 1996. Future minimum payments due
under non-cancellable operating leases for the next five calendar years are as
follows:
 
<TABLE>
           <S>                                       <C>
           1997..................................... $146,329
           1998.....................................  146,329
           1999.....................................  146,329
           2000.....................................  144,421
           2001.....................................  140,604
           Thereafter...............................   11,717
</TABLE>
 
                                     F-23
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Friede Goldman International Inc.:
 
  We have audited the accompanying balance sheet of Friede Goldman
International Inc. ( a recently formed Delaware Corporation) as of April 21,
1997. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of Friede Goldman International Inc.
as of April 21, 1997, in conformity with generally accepted accounting
principles.
 
                                          ARTHUR ANDERSEN LLP
 
Jackson, Mississippi,
April 22, 1997
 
                                     F-24
<PAGE>
 
                       FRIEDE GOLDMAN INTERNATIONAL INC.
                    (A RECENTLY FORMED DELAWARE CORPORATION)
 
                                 BALANCE SHEET
 
                                 APRIL 21, 1997
 
<TABLE>
<CAPTION>
                                 ASSETS
                                 ------
<S>                                                                      <C>
CURRENT ASSETS:
  Cash.................................................................. $1,000
                                                                         ------
    Total assets........................................................ $1,000
                                                                         ======
<CAPTION>
                  LIABILITIES AND STOCKHOLDERS' EQUITY
                  ------------------------------------
<S>                                                                      <C>
LIABILITIES                                                              $   --
                                                                         ------
STOCKHOLDERS' EQUITY:
  Preferred stock, $0.01 par value, 1,000 shares authorized; none issued
   or outstanding.......................................................     --
  Common stock, $0.01 par value, 2,000 shares authorized; 1,000 shares
   issued outstanding...................................................     10
  Additional paid-in capital............................................    990
                                                                         ------
    Total stockholders' equity..........................................  1,000
                                                                         ------
    Total liabilities and stockholders' equity.......................... $1,000
                                                                         ======
</TABLE>
 
 
       The accompanying notes are an integral part of this balance sheet.
 
                                      F-25
<PAGE>
 
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                            NOTES TO BALANCE SHEET
 
                                APRIL 21, 1997
 
1. ORGANIZATION AND NATURE OF BUSINESS:
 
  Friede Goldman International Inc. (the "Company") was incorporated under the
laws of the State of Delaware in February 1997. Through April 22, 1997, the
Company has had no operations other than receipt of initial capital.
 
  Management of the Company have indicated their intention to undertake an
initial public offering of the Company's equity securities during 1997. In
anticipation of the Company's proposed public offering, the stockholders of
the Company's predecessor entities, HAM Marine, Inc. ("HAM") and Friede &
Goldman, Ltd. ("Friede & Goldman"), will contribute all of their ownership in
HAM and Friede & Goldman to the Company in exchange for shares of common stock
in the Company; and HAM and Friede & Goldman will become wholly-owned
subsidiaries of the Company.
 
  The Company's certificate of incorporation established authority to issue
1,000 shares of $0.01 par value preferred stock and 2,000 shares of $0.01 par
value common stock. Preferred stock may be issued in one or more series and in
such amounts as may be determined by the Company's board of directors. The
voting powers, designations, preferences and relative, participating, optional
or other special rights, if any, and the qualifications, limitations or
restrictions, if any, of each preferred stock issue shall be fixed by
resolution of the board of directors providing for the issue. All shares of
common stock of the Company shall be identical, and, except as otherwise
provided in a resolution of the board of directors with respect to preferred
stock, the holders of common stock shall exclusively possess all voting power
with each share of common stock having one vote.
 
  In May 1997, in conjunction with the Company's plan to undertake an initial
public offering of its common stock, the Company authorized an increase in the
amount of authorized shares to 5,000,000 shares of $0.01 par value preferred
stock and 25,000,000 shares of $0.01 par value common stock. Effective
immediately prior to the public offering, the Company anticipates issuing,
pursuant to a stock exchange agreement, 9,200,000 shares of the Company's
common stock to the stockholders of HAM and Friede & Goldman as described
above.
 
  HAM, the principal predecessor to the Company, was formed in 1982 under the
laws of the State of Mississippi. HAM's primary business is to provide
conversion, retrofit and repair services for offshore drilling rigs. HAM's
primary customers are offshore drilling contractors who utilize the Company's
services in connection with the conversion and modification of existing
drilling rigs in order to increase their technical capabilities or to improve
their efficiency. Substantially all of HAM's services are conducted at a deep
water dock facility on land leased from the Port Authority in Pascagoula,
Mississippi.
 
  On December 2, 1996, a company related to HAM through substantially
identical equity ownership, J.L. Holloway Holdings, Inc. ("Holdings"),
purchased certain assets and rights, including the rights to the trade name
"Friede & Goldman" from an unrelated third party. Simultaneously with the
closing of the purchase, Holdings changed its name to Friede & Goldman, Ltd.
Friede & Goldman's primary business is the design of offshore drilling and
production units, including jackups, semisubmersibles, drillships and floating
production, storage and offloading vessels, for new construction and with
respect to upgrade and modification projects. Friede & Goldman's offices are
located in New Orleans, Louisiana.
 
  Proceeds of the public offering to the Company are intended to be used for
capital expenditures to construct and equip the new shipyard, capital
expenditures to improve the productive capacity and efficiency of the existing
shipyard, research and development costs relating to the design of new
offshore drilling rigs and floating production units, working capital
requirements and other general corporate purposes. There can be no assurance,
however, that the offering will occur or that the proceeds, if any, will be
sufficient for their intended use.
 
                                     F-26
<PAGE>
 
                       PRO FORMA STATEMENT OF OPERATIONS
                      OF FRIEDE GOLDMAN INTERNATIONAL INC.
                                  (UNAUDITED)
 
  The following pro forma condensed statement of operations of the Company for
the year ended December 31, 1996 reflects the combined historical financial
results of the Predecessors and gives effect to (1) the acquisition of the
Friede Predecessor as if such acquisition had occurred as of January 1, 1996,
(2) a reduction in selling, general and administrative expenses to reflect the
employment contracts entered into by J.L. Holloway, Carl Crawford and Ron
Schnoor in April 1997 as if such contracts had been in effect as of January 1,
1996, (3) the elimination of the compensation expense related to stock issued
to an employee, and (4) the change in tax status of each of the Predecessors
from an S Corporation to a C Corporation as if such change had occurred as of
January 1, 1996. The adjustments are described in more detail in the
accompanying notes. The pro forma condensed statements of operations should not
be considered indicative of the actual results that would have been achieved
had the events described above been consummated as of January 1, 1996, and do
not purport to indicate results of operations as of any date or for any future
period. The pro forma statements of operations should be read in conjunction
with the historical financial statements of the Company, the predecessors to
the Company and the Friede Predecessor, and the respective notes thereto,
include elsewhere in the Prospectus.
 
                                      F-27
<PAGE>
 
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                       PRO FORMA STATEMENT OF OPERATIONS
 
                     FOR THE YEAR ENDED DECEMBER 31, 1996
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                          FRIEDE &
                             COMBINED     GOLDMAN,
                           PREDECESSORS     LTD.     PRO FORMA       PRO FORMA
                            HISTORICAL   HISTORICAL ADJUSTMENTS      COMBINED
                           ------------  ---------- -----------     -----------
<S>                        <C>           <C>        <C>             <C>
Revenue..................  $21,758,715   $3,774,361 $        --     $25,533,076
Cost of revenue..........   15,768,980    2,653,710     240,000 (1)  18,662,690
                           -----------   ---------- -----------     -----------
  Gross profit...........    5,989,735    1,120,651     240,000       6,870,386
                                                     (2,012,397)(2)
                                                       (276,000)(3)
Selling, general and
 administrative expenses.    5,869,371      519,647     125,000 (4)   4,225,621
                           -----------   ---------- -----------     -----------
  Operating income.......      120,364      601,004   1,923,397       2,644,765
                           -----------   ---------- -----------     -----------
Other income (expense):
  Interest expense.......     (891,458)          --    (106,000)(5)    (997,458)
  Interest income........      443,317       16,076          --         459,393
  Gain on sale or
   distribution of
   assets................      348,793           --          --         348,793
  Litigation settlement..    3,466,635           --          --       3,466,635
  Other..................      104,487           --          --         104,487
                           -----------   ---------- -----------     -----------
  Total other income
   (expense).............    3,471,774       16,076    (106,000)      3,381,850
                           -----------   ---------- -----------     -----------
    Pro forma income
     before income tax
     expense.............    3,592,138      617,080   1,817,397       6,026,615
Income tax expense.......           --           --   2,230,000 (6)   2,230,000
                           -----------   ---------- -----------     -----------
Pro forma net income.....  $ 3,592,138   $  617,080 $  (412,603)    $ 3,796,615
                           ===========   ========== ===========     ===========
Pro forma net income per
 share(7)................                                           $      0.41
                                                                    ===========
</TABLE>
 
 
    The accompanying notes are an integral part of this pro forma financial
                                  statement.
 
                                     F-28
<PAGE>
 
                       FRIEDE GOLDMAN INTERNATIONAL INC.
 
                  NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
 
  The following are explanations of the Pro Forma Adjustments:
 
    (1) Reflect the amount which would have been paid to the former owner of
  the assets of Friede & Goldman for license and design fees as called for by
  the Purchase Agreement as if such agreement had been in place as of January
  1, 1996. See "BUSINESS--Friede Acquisition".
 
    (2) Adjusts compensation expense by the difference in actual amounts paid
  in 1996 and the amounts which would have been paid to J.L. Holloway, Carl
  Crawford and Ron Schnoor if the employment contracts entered into in 1997
  had been in effect as of January 1, 1996. This adjustment does not consider
  any bonuses or additional compensation which may be payable pursuant to the
  Company's Equity Incentive Plan. See "Management--Executive Compensation"
  and "--Equity Incentive Plan".
 
    (3) Eliminates compensation expense related to the issuance of stock to
  an employee because subsequent to the the Offering, the Company does not
  intend to use stock grants as a means of compensating employees. See
  "Management--Equity Incentive Plan".
 
    (4) Reflects amortization of the intangible assets which resulted from
  the Friede Acquisition using an amortization period of 10 years.
 
    (5) Reflects interest expense at 8.25% on the $1,400,000 advance form
  shareholder which was utilized to finance a portion of the purchase price
  as if the advance had been made on January 1, 1996.
 
    (6) Immediately prior to the consummation of the Offering, the Company
  will terminate its status as an S Corporation and will become subject to
  corporate income taxes. This adjustment reflects the pro forma provision
  for income taxes using a combined federal and state rate of 37% applied to
  pro forma income before income tax expense as if the Company had been
  subject to corporate income taxes during 1996.
 
    (7) Pro forma net income per share is based on common shares of the
  Company outstanding after the recapitalization discussed at elsewhere in
  this prospectus.
 
                                     F-29
<PAGE>
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
 
NO PERSON, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION
IN SUCH STATE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
 
                               ----------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Prospectus Summary........................................................    3
Risk Factors..............................................................   11
The Company...............................................................   16
Use of Proceeds...........................................................   18
Dividend Policy...........................................................   18
Capitalization............................................................   19
Dilution..................................................................   20
Selected Financial Data...................................................   21
Management's Discussion and Analysis of Financial Condition and Results of
 Operations...............................................................   24
Business..................................................................   31
Management................................................................   46
Principal and Selling Stockholders........................................   51
Description of Capital Stock..............................................   52
Shares Eligible for Future Sale...........................................   56
Underwriting..............................................................   57
Legal Matters.............................................................   58
Experts...................................................................   58
Additional Information....................................................   58
Index to Financial Statements.............................................  F-1
</TABLE>
 
                               ----------------
 
UNTIL      , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES OFFERED HEREBY,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
 
                               3,800,000 SHARES
 
                                    (LOGO)
 
                                FRIEDE GOLDMAN
                              INTERNATIONAL INC.
 
                                 COMMON STOCK
 
                               ----------------
 
                                  PROSPECTUS
 
                               ----------------
 
                           JEFFERIES & COMPANY, INC.
 
                           BEAR, STEARNS & CO. INC.
 
                         JOHNSON RICE & COMPANY L.L.C.
 
                                       , 1997
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
 
                                    PART II
 
                    INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(1)
 
<TABLE>
      <S>                                                               <C>
      SEC Registration Fee............................................. $18,540
      NASD Filing Fee..................................................   6,618
      NASDAQ Listing Fee...............................................      *
      Accounting Fees and Expenses.....................................      *
      Legal Fees and Expenses..........................................      *
      Printing Expenses................................................      *
      Transfer Agent's Fees............................................      *
      Miscellaneous....................................................      *
                                                                        -------
        Total.......................................................... $    *
                                                                        =======
</TABLE>
--------
(1) The amounts set forth above, except for the SEC and NASD fees, are in each
    case estimated.
 *To be completed by amendment.
 
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
  Subsection (a) of section 145 of the General Corporation Law of the State of
Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
 
  Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted
in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
 
  Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145 in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; that indemnification provided
for by Section 145 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators; and empowers the corporation to
 
                                     II-1
<PAGE>
 
purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities
under Section 145.
 
  Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a Charter may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit.
 
  Article Ninth of the Company's Charter states that:
 
  No director of the Corporation shall be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty by such
director as a director; provided, however, that this Article Ninth shall not
eliminate or limit the liability of a director to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of
this Article Ninth shall apply to, or have any effect on, the liability or
alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal. If the DGCL is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the DGCL, as so amended.
 
  In addition, Article VI of the Company's Bylaws further provides that the
Company shall indemnify its officers, directors and employees to the fullest
extent permitted by law.
 
  The Company intends to enter into indemnification agreements with each of
its executive officers and directors.
 
  Under Section    of the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, the Underwriters have agreed to indemnify, under
certain conditions, the Company, its officers and directors, and persons who
control the Company within the meaning of the Securities Act of 1933, as
amended, against certain liabilities.
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
  The only securities issued by the Company during the past three years that
were not registered under the Securities Act of 1933 consist of (i) 1,000
shares of Common Stock issued to J.L. Holloway in connection with the
Company's organization, (ii) the 9,200,000 shares of Common Stock issued in
connection with the Reorganization and (iii) options to purchase an aggregate
of    shares of Common Stock granted pursuant to the Equity Incentive Plan.
These transactions were completed without registration under the Securities
Act of 1933 in reliance on the exemption provided by Section 4(2) of the
Securities Act of 1933.
 
                                     II-2
<PAGE>

 
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
  (a) Exhibits
 
<TABLE>
<CAPTION>
 EXHIBIT
 -------
 <C>     <S>
   *1.1  --Form of Underwriting Agreement.
   3.1   --Amended and Restated Certificate of Incorporation.
   3.2   --Bylaws.
  *4.1   --Specimen Common Stock Certificate.
   4.2   --Form of Registration Rights Agreement.
  *5.1   --Opinion of Andrews & Kurth L.L.P. as to the legality of the
          securities being registered.
  10.1   --Form of Officer and Director Indemnification Agreement.
  10.2   --Form of Employment Agreement to be entered between Friede Goldman
          International Inc. and J.L. Holloway.
  10.3   --Form of Employment Agreement to be entered into between HAM Marine,
          Inc. and each of Carl M. Crawford and Ronald W. Schnoor.
 *10.4   --Form of Employment Agreement to be entered into between Friede
          Goldman International Inc. and John F. Alford.
 *10.5   --Form of Employment Agreement to be entered into between HAM Marine,
          Inc. and James A. Lowe, III.
  10.6   --1997 Equity Incentive Plan.
  10.7   --Revolving Credit Agreement, dated as of March 20, 1997, by and among
          HAM Marine, Inc., as borrower, Friede & Goldman, Ltd., J.L. Holloway
          and Carl Crawford, as guarantors, and Bank One, Louisiana, National
          Association, as the Bank.
  10.8   --Amended Lease Agreement, dated June 22, 1995, by and among the
          Jackson County Port Authority, the Board of Supervisors of Jackson
          County, Mississippi and HAM Marine, Inc. (Pascagoula shipyard).
  10.9   --Lease Contract, dated December 12, 1996, by and among the Jackson
          County Port Authority, the Board of Supervisors of Jackson County,
          Mississippi and HAM Marine, Inc.
  10.10  --Memorandum of Understanding, dated December 30, 1996, by and among
          the Board of Supervisors of Jackson County, Mississippi and HAM
          Marine, Inc. (New shipyard).
  10.11  --The Baltic and International Maritime Council Standard Bareboat
          Charter, dated February 28, 1997 between Pontwin N.V. and HAM Marine,
          Inc.
  10.12  --Form of Stock Exchange Agreement by and among HAM Marine, Inc. and
          each of Messrs. Holloway, Crawford and Schnoor.
  10.13  --Business Purchase Agreement, dated November 22, 1996, by and among
          J. L. Holloway Holdings, Inc., Friede & Goldman, Ltd. and Jerome L.
          Goldman.
  10.14  --Amendment to Business Purchase Agreement, dated December 3, 1996, by
          and among Friede & Goldman, Ltd. (f/k/a J.L. Holloway Holdings,
          Inc.), J.L. Goldman Associates, Inc. (f/k/a Friede & Goldman, Ltd.)
          and Jerome L. Goldman.
  10.15  --Second Amendment to Business Purchase Agreement, dated May 19, 1997,
          by and among Friede & Goldman, Ltd., J.L. Goldman Associates, Inc.
          and Jerome L. Goldman.
 *23.1   --Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1).
  23.2   --Consent of Arthur Andersen LLP.
  24.1   --Powers of Attorney (included in signature page).
  27.1   --Financial Data Schedule
</TABLE>
--------
* To be filed by Amendment
 
                                      II-3
<PAGE>
 
ITEM 17. UNDERTAKINGS
 
  Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
 
  The undersigned registrant hereby undertakes:
 
    (1) That for purposes of determining any liability under the Securities
  Act of 1933, the information omitted from the form of prospectus filed as
  part of this Registration Statement in reliance upon Rule 430A and
  contained in a form of prospectus filed by the registrant pursuant to Rule
  424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
  part of this Registration Statement as of the time it was declared
  effective.
 
    (2) That for the purpose of determining any liability under the
  Securities Act of 1933, each post-effective amendment that contains a form
  of prospectus shall be deemed to be a new registration statement relating
  to the securities offered therein, and the offering of such securities at
  that time shall be deemed to be the initial bona fide offering thereof.
 
    (3) To provide to the Underwriters at the closing specified in the
  underwriting agreement certificates in such denominations and registered in
  such names as required by the underwriters to permit prompt delivery to
  each purchaser.
 
                                     II-4
<PAGE>
 
                                  SIGNATURES
 
  Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on May 22, 1997.
 
                                          Friede Goldman International Inc.
 
                                                  /s/ J. L. Holloway
                                          By___________________________________
                                                      J. L. Holloway
                                             Chairman of the Board, President
                                                and Chief Executive Officer
 
  KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints J. L. Holloway, James A. Lowe III and John F.
Alford, and each of them, his true and lawful attorneys-in-fact and agents
with full power of substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement and any subsequent
registration statements filed by the Registrant pursuant to Rule 462(b) of the
Securities Act of 1933, which relates to this Registration Statement, and to
file same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or his or their substitutes, may lawfully do or cause to be done by
virtue hereof.
 
  Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
             SIGNATURE                           TITLE                    DATE
             ---------                           -----                    ----
<S>                                  <C>                           <C>
       /s/ J. L. Holloway
------------------------------------
           J. L. Holloway            Chairman of the Board,
                                      President and Chief
                                      Executive Officer
                                      (Principal Executive
                                      Officer)                        May 22, 1997
       /s/ John F. Alford
------------------------------------
           John F. Alford            Chief Financial Officer
                                      (Principal Financial
                                      Officer)                        May 22, 1997
   /s/ Robert C. Andrews, Jr.
------------------------------------
       Robert C. Andrews, Jr.        Treasurer (Chief Accounting
                                      Officer)                        May 22, 1997
     /s/ Ronald W. Schnoor
------------------------------------
         Ronald W. Schnoor           Director                         May 22, 1997
       /s/ James A. Lowe, III
------------------------------------
         James A. Lowe, III          Director                         May 22, 1997
      /s/ Bruce G. Malcolm
------------------------------------
          Bruce G. Malcolm           Director                         May 22, 1997
</TABLE>
 
                                     II-5
<PAGE>
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 EXHIBIT
   NO.                              DESCRIPTION
 -------                            -----------
 <C>     <S>     
   *1.1  --Form of Underwriting Agreement.
   3.1   --Amended and Restated Certificate of Incorporation.
   3.2   --Bylaws.
  *4.1   --Specimen Common Stock Certificate.
   4.2   --Form of Registration Rights Agreement
  *5.1   --Opinion of Andrews & Kurth L.L.P. as to the legality of the
          securities being registered.
  10.1   --Form of Officer and Director Indemnification Agreement.
  10.2   --Form of Employment Agreement to be entered between Friede
          Goldman International Inc. and J.L. Holloway.
  10.3   --Form of Employment Agreement to be entered into between HAM
          Marine, Inc. and each of Carl M. Crawford and Ronald W.
          Schnoor.
 *10.4   --Form of Employment Agreement to be entered into between Friede
          Goldman International Inc. and John F. Alford.
 *10.5   --Form of Employment Agreement to be entered into between HAM
          Marine, Inc. and James A. Lowe, III.
  10.6   --1997 Equity Incentive Plan.
  10.7   --Revolving Credit Agreement, dated as of March 20, 1997, by and
          among HAM Marine, Inc., as borrower, Friede & Goldman, Ltd.,
          J.L. Holloway and Carl Crawford, as guarantors, and Bank One,
          Louisiana, National Association, as the Bank.
  10.8   --Amended Lease Agreement, dated June 22, 1995, by and among the
          Jackson County Port Authority, the Board of Supervisors of
          Jackson County, Mississippi and HAM Marine, Inc. (Pascagoula
          shipyard).
  10.9   --Lease Contract, dated December 12, 1996, by and among the
          Jackson County Port Authority, the Board of Supervisors of
          Jackson County, Mississippi and HAM Marine, Inc.
  10.10  --Memorandum of Understanding, dated December 30, 1996, by and
          among the Board of Supervisors of Jackson County, Mississippi
          and HAM Marine, Inc. (New shipyard).
  10.11  --The Baltic and International Maritime Council Standard
          Bareboat Charter, dated February 28, 1997 between Pontwin N.V.
          and HAM Marine, Inc.
  10.12  --Form of Stock Exchange Agreement by and among HAM Marine, Inc.
          and each of Messrs. Holloway, Crawford and Schnoor.
  10.13  --Business Purchase Agreement, dated November 22, 1996, by and
          among J. L. Holloway Holdings, Inc., Friede & Goldman, Ltd. and
          Jerome L. Goldman.
  10.14  --Amendment to Business Purchase Agreement, dated December 3,
          1996, by and among Friede & Goldman, Ltd. (f/k/a J.L. Holloway
          Holdings, Inc.), J.L. Goldman Associates, Inc. (f/k/a Friede &
          Goldman, Ltd.) and Jerome L. Goldman.
  10.15  --Second Amendment to Business Purchase Agreement, dated May 19,
          1997, by and among Friede & Goldman, Ltd., J.L. Goldman
          Associates, Inc. and Jerome L. Goldman.
 *23.1   --Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1).
  23.2   --Consent of Arthur Andersen LLP.
  24.1   --Powers of Attorney (included in signature page).
  27.1   --Financial Data Schedule
</TABLE>
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* To be filed by Amendment